Lim Chin San Contractors Pte Ltd v LW Infrastructure Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 05 July 2011
• Neutral Citation: [2011] SGHC 162
• Citation: [2011] SGHC 162
• Docket Number: Originating Summons No 769 of 2010
• Published date: 14 July 2011
• Hearing Date: 08 February 2011,07 March 2011,29 October 2010
• Plaintiff Counsel: Alvin Yeo SC, Sean La'Brooy, Napolean Koh and Pamela Tan (WongPartnership LLP)
• Date: 2011
• Defendant Counsel: Tan Liam Beng and Soh Chun York (Drew & Napier LLC)
• Court: High Court (Singapore)
• Subject Matter: Building and Construction Law,Arbitration

Judith Prakash J: Introduction

This case (Originating Summons 769 of 2010 (“OS 769”)) is one of two cross-appeals on several questions of law which arise out of an arbitral award. The other is Originating Summons 759 of 2010 (“OS 759”). Two of the issues raised in the appeals are of considerable importance in the construction industry, and, so far as I am aware, have not yet been expressly decided.

The factual background

Topmost Industries Pte Ltd (“the Employer”) engaged AC Consortium Pte Ltd as the architect (“the Architect”) and E S Tang Consultants as the quantity surveyor (“the Quantity Surveyor”) in respect of a proposed project. On 15 January 2001, Lim Chin San Contractors Pte Ltd (“LCS”) was invited by the Architect, on the Employer’s behalf, to tender for the main contract for the design and construction of an industrial building known as “LW Technocentre” at 31 Toh Guan Road East, Singapore 608608 (“the Project”). During the final tender interview on 5 April 2001, LCS was informed that LW Infrastructure Pte Ltd (“LW”) would be interposed as the main contractor and that it would instead be the design and build sub-contractor.

On 8 May 2001, the Employer issued a letter of award to LW, appointing it as the main contractor of the Project for a lump sum price of $13,027,052.56. LW accepted the offer on 12 May 2001. In turn, LW issued a letter of award to LCS on 14 May 2001, appointing it as the design and build sub-contractor of the Project at a lump sum price of $9,451,780.80 (excluding Mechanical and Electrical Works (“M&E Works”)). On the same day, LW engaged Leun Wah Electric Co (Pte) Ltd (“Leun Wah”) as the sub-contractor for the M&E Works. Leun Wah in turn engaged LCS to carry out those works.

In relation to the main sub-contract works, LCS accepted the offer from LW on 18 May 2001 and the formal sub-contract document was subsequently executed on 30 November 2001. LCS was required to complete the sub-contract works within 15 months from the commencement date of the sub-contract. As this was 2 May 2001, LCS was required to complete the works by 2 August 2002. Clause 16.1 provided that the works would be deemed to have been practically completed upon receipt of a Temporary Occupation Permit (“TOP”) from the relevant authorities.

On 22 May 2002, both parties agreed that an extension of time of some three months would be given to LCS. The precise duration of the agreed extension was disputed before Mr Johnny Tan Cheng Hye (“the Arbitrator”): ie whether the completion date was extended to 31 October 2002, or to 2 November 2002. The Arbitrator held that the completion date was extended to 31 October 2002 and that this agreed extension was only for the delay caused by late and short payments by LW before 22 May 2002. He also found that LCS was entitled to four additional days of extension of time pursuant to cl 25 due to exceptionally adverse weather. This finding extended the completion date to 4 November 2002.

Clause 27.1.2 of the sub-contract provides that failure by the sub-contractor “to proceed regularly and diligently with the performance of [the sub-contractor’s] obligations” is a ground for termination of the sub-contract. On 2 January 2003, LW sent a notice to LCS notifying it of its failure to proceed regularly and diligently with its obligations, and in particular its obligation to complete the project by the contractual completion date. LCS had assured LW on numerous occasions that the TOP would be obtained by various target dates: 31 December 2002, 7 February 2003, 15 April 2003, and 10 May 2003. Due to the fact that the TOP had not yet been obtained despite these repeated assurances, LW was concerned with LCS’s ability to complete the sub-contract works. The final straw was when LW complained on 6 May 2003 that, despite a payment of $200,000 to LCS, many sections of the works were still incomplete. This complaint was met with silence until 12 May 2003 when a terse reply was sent:

I am sorry, my telephone and internet was temporarily disconnected due to non-payment and was only connected on 9th May 2003.

We are unable to continue to apply for TOP and are not capable to take delivery of FSB certificates.

LW immediately terminated the sub-contract pursuant to cl 27.1.2 After termination, various sub-contractors were engaged by LW to complete the Project. The TOP was eventually granted on 1 August 2003.

On 22 June 2004, LW served a notice of arbitration on LCS. The Arbitrator accepted appointment on 9 November 2007 and issued his award on 29 June 2010 (“the Award”). For completeness, it is noted that a supplementary award was issued on 15 July 2010 to correct typographical errors.

Leave to appeal

Appeals on questions of law arising out of an arbitral award pursuant to s 49 of the Arbitration Act (Cap 10, 2002 Rev Ed) (“the Act”) may only be brought with the leave of the court or with the agreement of all the parties to the proceedings: s 49(3). Initially, the parties applied for leave to appeal and their respective applications came on for hearing before me on 29 October 2010. During the hearing, both parties accepted that Art 5.5 of the sub-contract stipulated that either party may appeal to the High Court on questions of law. Art 5.5 is as follows:

The parties hereby agree and consent pursuant to sections 28 and 29 of the Arbitration Act (Cap 10, 1985 Ed), that either party

may appeal to the High Court on any question of law arising out of an award made in an arbitration under this Arbitration Agreement and

may apply to the High Court to determine any question of law arising in the course of the reference

and the parties agree that the High Court shall have jurisdiction to determine any question of law

As this satisfied the requirement in s 49(3)(a), I granted leave to both parties to amend their respective originating summons to include the necessary prayers for the appeal proper.

Two issues arise from Art 5.5. First, in Poseidon Schiffahrt GmbH v Nomadic Navigation Co Ltd (“The Trade Nomad”) [1998] 1 Lloyd’s Rep 57, Colman J had to determine the issue of whether parties to an arbitration agreement entered into before the occurrence of a dispute or the making of an award could, by that agreement, dispense with the need to obtain leave to appeal as a condition precedent to mounting an appeal pursuant to s 1(3) of the Arbitration Act 1979. It was argued that the phrase “parties to the reference” in s 1(3)(a), which is similar to the phrase “parties to the proceedings” in our s 49(3)(a), envisages that there already has been a reference to arbitration at the time when consent was given. Colman J rejected this argument because there was no policy reason why the requirement of consent would be satisfied only if it was given after the dispute was referred to arbitration.

Secondly, on its face Art 5.5 states that the parties agreed and consented “pursuant to sections 28 and 29 of the Arbitration Act (Cap 10, 1985 Ed)” that appeals on questions of law arising out of arbitral awards may be brought. The appeal in this matter and that in OS 759 are brought pursuant to s 49 of the present Act. This precise issue was dealt with by Clarke J in Taylor Woodrow Civil Engineering Ltd v Hutchinson IDH Development Ltd (1998) 75 Con LR 1. Clarke J held that the more sensible inference would be that the parties must have intended that either party would have a right to appeal to the court on a question of law arising out of an award regardless of whether the arbitration was governed by the Arbitration Act 1979. Thus, he held that there was a right of appeal where the arbitration was governed by the Arbitration Act 1996. This sensible approach was followed in Fence Gate Limited v NEL Construction Limited (2001) 82 Con LR 41.

Questions of law raised in this appeal

OS 759 was filed a day before OS 769. I am dealing with OS 769 first, however, because the decision in this appeal will affect the resolution of the issues raised in OS 759.

OS 769 was filed by LCS, the sub-contractor, in an appeal in the following questions of law: (a) where there were acts of prevention which caused delay in the progress of the works and which were not extendable [sic] under the sub-contract, whether it was necessary for LCS to have been prevented from completing the works by a prescribed date in order for time to be set at large (“the first question of law”); (b) where there were acts of prevention which caused delay in the progress of the works and which were not extendable [sic] under the sub-contract, whether LW was entitled to exercise its contractual right of termination under cl 27.1 of the sub-contract or if LW was so entitled, whether it could only do so by reference to a reasonable time for completion of the works (“the second question of law”); and (c) where there were acts of prevention which caused delay in the progress of the works and which were not extendable [sic] under the sub-contract, whether LW was entitled to exercise its contractual right under cl 27.4 of the sub-contract to claim for costs incurred in engaging other contractors to carry out the works under the sub-contract (“the third question of law”).

The first question of law The Arbitrator’s findings

The Arbitrator considered several distinct incidents which were relied upon by LCS to support its claim to an extension of time. As LCS has only raised two of these incidents before me to support its appeal, it will be unnecessary to deal with the others. First, it points out that the Arbitrator found that there was late and under-allocation of Man-Year Entitlements (“MYEs”). In order to deal with the dependency of contractors on workers from non-traditional source countries, the Ministry of Manpower (“the Ministry”) created a system of MYEs, in which each MYE would entitle an employer or contractor to bring in one worker from non-traditional source countries on a work permit...