Lam Hong Leong Aluminium Pte Ltd v Lian Teck Huat Construction Pte Ltd and Another

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 10 March 2003
• Neutral Citation: [2003] SGHC 53
• Court: High Court (Singapore)
• Year: 2003
• Published date: 07 October 2003
• Plaintiff Counsel: Lek Yi Siang (Drew & Napier LLC)
• Defendant Counsel: Michael Por and Angeline Toh (Tan Lee & Partners)
• Subject Matter: Banking,Guarantee,Construction,Whether document constituted guarantee or letter of comfort,CourtÂ’s approach to guarantees,Reasonable business meaning,Contract,Building contract,Claim for progress payments for work done under sub-contract,Whether sub-contractor bound by terms and conditions in main contract although no sub-contract as such was executed
• Citation: [2003] SGHC 53

The facts

1. Lam Hong Leong Aluminium Pte Ltd (the plaintiffs) are specialist aluminium cladding contractors. Lian Teck Huat Construction Pte Ltd (the first defendants) are building contractors whose managing-director is Chew Joon Huat (Chew) the second defendant.

2. By a letter dated 6 April 2000 (the Letter of Award) from the first defendants to the plaintiffs, the first defendants agreed to employ the plaintiffs as subcontractors to design, supply, fabricate and install aluminium cladding to the external walls of a building situated at No. 80, Genting Lane, Singapore, known as Ruby Industrial Complex (the Building); the Building comprises of two (2) 11 storey blocks, one called Tannery and the other Genting. The Letter of Award accepted the plaintiffs' (revised) quotation dated 14 January 2000 (the quotation) save that the sum stated in the quotation was $1,228,155 whereas the four (4) sums stated in the Letter of Award totalled $1,102,875. Except for the first item ($918,675/-) which rate (at $135 per sq. m) was subject to ‘as built’ quantity measurements, the figures set out in the Letter of Award were stated to be lump sums. The plaintiffs in turn subcontracted fabrication of the panels to Vanson Engineering (S) Pte Ltd (Vanson), a company related to them by common shareholders; installation of the panels was subcontracted to yet another party. The first defendants had themselves been awarded the main contract for the refurbishment of the Building (the project) by the management corporation of the Building namely MCST No. 736 (the MC). The refurbishment work included changing/replacing the existing windows, plastering and painting works. The first defendants employed other subcontractors besides the plaintiffs. However, the plaintiffs' subcontract was by far the biggest portion (about 50%) of the project. The architects appointed by the MC for the project were Dang Design Architects & Associates (the Architects).

3. The main terms of the subcontract as reflected in the Letter of Award and quotation are as follows:

(i) the plaintiffs would abide by the master building programme (49 weeks) of the first defendants under the main contract, which commencement date was 3 March 2000;

(ii) the completion dates for the subcontract and main contract works were set at 10 February 2001 and 10 March 2001, respectively;

(iii) the plaintiffs would provide shop-drawings commencing four (4) weeks from the Letter of Award;

(iv) the defendants would pay the plaintiffs on progress claims within 30 days of submission less 5% retention monies which will only be released upon completion (2.5%) and upon expiry of the maintenance period (the balance 2.5%);

(v) if the first defendants were late in paying the progress claims, they would be liable to pay the plaintiffs an additional 1% of the claimed amounts;

(vi) the plaintiffs were required to enter into a subcontract with the first defendants on the same terms and conditions as those in the main contract between the MC and the first defendants;

(vii) in the event completion was delayed, the plaintiffs would pay to the first defendants liquidated damages at $500 per day;

(viii) any costs incurred by the first defendants in correcting defective works or in taking measurements to ensure performance of the works within the contracted period would be deducted from sums payable to the plaintiffs or charged to them in the event such costs exceed sums due and owing to the plaintiffs;

(ix) the first defendants would provide inter alia, external scaffolding, a crane and gondola(s) to enable the plaintiffs to hoist materials to designated areas at each storey;

(x) the plaintiffs' acceptance of the Letter of Award would be treated as the official instruction to proceed.

4. Notwithstanding item (vi) above, no subcontract as such was ever executed between the parties, let alone on the terms and conditions set out in the main contract. Neither were the plaintiffs shown the main contract or told its terms and or conditions. The main contract between the first defendants and the MC incorporated terms and conditions prescribed by the Singapore Institute of Architects (SIA).

5. The first defendants' master programme was faxed to the plaintiffs on 6 June 2000; the plaintiffs were required to commence work on that day itself (on the Genting block) and complete the works by March and April, 2001 respectively, for Genting and Tannery blocks. The plaintiffs responded (on 20 June 2000) with their own installation programme, which showed a starting date of 7 June 2000 for the Genting block. The plaintiffs received no response from the first defendants to their installation programme; neither did they receive any other installation programmes from the latter. Consequently, the plaintiffs commenced work on the Genting block in accordance with their own installation programme.

6. The plaintiffs commenced submission of shop drawings for the Genting block on 19 May 2000 followed by those for Tannery block on 5 June 2000. Final submissions for the Genting block were made on 18 October 2000. The plaintiffs submitted their colour chart on 11 May 2000 and the Architects selected four (4) colours on 7 July 2000, followed by another two (2) on 14 July 2000. The plaintiffs followed up with submission of colour samples (2) on 28 July 2000. The Architects confirmed the colour location of the panels on 6 September 2000 for Genting block. In the quotation (see 6AB 3 item [g]), the plaintiffs had estimated that submission of shop drawings would commence four (4) weeks after the award, procurement of materials would take 6-8 weeks after approval of shop drawings, followed by another 7-8 weeks for fabrication and installation.

7. According to the plaintiffs, they completed installing aluminium panels on the Genting block by end March 2001, save for those panels located at windows, tie-backs of the scaffolding and at the scaffolding's platform at the first storey. The plaintiffs were unable to install those panels due to the first defendants' outstanding rectification works at those areas. As for Tannery block, the plaintiffs completed installing the panels by end May 2001 except for those areas similar to Genting block, where the first defendants' rectification works were outstanding. The plaintiffs claimed they could install the remaining panels only after the first defendants had dismantled the obstructing scaffolding.

8. The plaintiffs submitted two applications for extensions of time (EOT) for the duration of the subcontract, the first by a letter dated 10 July 2001 (see 1AB 34) followed by a subsequent letter dated 31 October, 2001; however, the first defendants did not respond to either request and no EOT was granted to the plaintiffs. According to the plaintiffs, the EOT applications were necessitated by the first defendants' late approval of shop drawings, colour confirmation, confirmation of reference levels and setting-out data. In any case the plaintiffs contended, the completion dates were revised repeatedly at site meetings with the Architects so much so that up to the trial dates, no completion date was actually set. No delay certificates were ever issued to the plaintiffs for late completion.

9. Another factor which contributed to the delay encountered by the plaintiffs was the slow, irregular and haphazard inspections conducted on their completed works by the only clerk-of-works employed by the MC. The plaintiffs relied on the many letters they wrote to the first defendants in that regard, between September and November 2001.

10. Despite a term in the contract requiring progress claims to be paid to the plaintiffs within 30 days of submission, the plaintiffs complained that the first defendants did not pay promptly sums which were due. Indeed, the plaintiffs claimed, the first defendants failed to make any payment after 10 August 2001 when the 8^th progress claim was paid. Further, the the first defendants consistently failed to pay the progress claims in full. As at 25 December 2000, the plaintiffs' progress payments totalled $246,522.15 but the first defendants only paid $50,000; no further payments were made in January and February 2001. The plaintiffs' subsequent progress claims, namely 12^th (dated 27 August 2001), 13^th (dated 25 September 2001) and 14^th (dated 25 October 2001) were never paid on their due dates or at all.

11. As a result, See Choon Howe Jeffrey (See) a director of Vanson met the second defendant on 19 February 2001; the latter promised payment soon. When the promised payment did not materialize, the plaintiffs wrote to the first defendants on 7 March 2001 to request for payment of $150,000 by 9 March 2001. The deadline for payment came and went; the first defendants did not make any payment.

12. Concerned about the first defendants’ non-payment which was causing cash-flow problems for the plaintiffs/Vanson, See discussed with the plaintiffs the possibility of obtaining a guarantee of payment from Chew for the outstanding progress claims which, as at 21 March 2001, totalled $529,875. The plaintiffs agreed with his suggestion and See was tasked with obtaining the guarantee from Chew.

13. On or about 5 April 2001, See met Chew and requested a personal guarantee from him. Chew agreed and provided the plaintiffs with a guarantee (the first guarantee) on the first defendants' letterhead in the following terms:

5 April 2001

Dear Sir,

Proposed refurbishment works to Genting and Tannery blocks of Ruby Industry Complex, MCST No. 736, 80, Genting Lane, Singapore

I, Chew Joon Huat, NRIC No. S/1218091/H, the Managing Director of Lian Teck Huat Construction Pte Ltd, hereby guarantee the payment for the above-mentioned project will pay you accordingly as per our letter of award ref: LTH/GL/jo/2099-00, dated 6/4/2000.

Yours faithfully

Lian Teck Huat Construction Pte Ltd

Signed:…

Chew Joon Huat

14. Noticing that the document was on the first defendants' letterhead, See was afraid...