Lim Chin San Contractors Pte Ltd v LW Infrastructure Pte Ltd

• Judgment Date: 05 July 2011
• Date: 05 July 2011
• Docket Number: Originating Summons No 769 of 2010
• Court: High Court (Singapore)

Lim Chin San Contractors Pte Ltd

Plaintiff

and

LW Infrastructure Pte Ltd

Defendant

[2011] SGHC 162

Judith Prakash J

Originating Summons No 769 of 2010

High Court

Arbitration—Award—Recourse against award—Appeal under Arbitration Act—Arbitration clause specifying Arbitration Act (Cap 10, 1985 Rev Ed) —Whether applicable to Arbitration Act (Cap 10, 2002 Rev Ed) —Section 49 (3) (a) Arbitration Act (Cap 10, 2002 Rev Ed)

Arbitration—Award—Recourse against award—Appeal under Arbitration Act—Arbitrator holding that time was not set at large whereas questions premised on fact that time was in fact set at large—Whether questions arose out of award—Section 49 (1) Arbitration Act (Cap 10, 2002 Rev Ed)

Arbitration—Award—Recourse against award—Appeal under Arbitration Act—Arbitrator not deciding effect of time being set at large because his finding was that time was not set at large—Whether court able to decide appeal on hypothetical basis—Section 49 (1) Arbitration Act (Cap 10, 2002 Rev Ed)

Arbitration—Award—Recourse against award—Appeal under Arbitration Act—Whether parties could agree in advance of dispute or arbitral proceedings to dispense with need to obtain leave to appeal—Section 49 (3) (a) Arbitration Act (Cap 10, 2002 Rev Ed)

Arbitration—Award—Recourse against award—Appeal under Arbitration Act—Whether questions of contractual interpretation were amenable to appeal on question of law arising out of award—Section 49 (1) Arbitration Act (Cap 10, 2002 Rev Ed)

Building and Construction Law—Damages—Liquidated damages—Time set at large—Consequences of time being set at large

Building and Construction Law—Damages—Liquidated damages—Time set at large—Subcontractor failing to prove delay to completion attributable to conduct of main contractor—Whether delay to completion of works was essential requirement for time to be set at large

Building and Construction Law—Damages—Liquidated damages—Time set at large—Whether juridical basis of time being set at large was presumed intention of contracting parties

Building and Construction Law—Damages—Main contractor causing disruption to progress of subcontract works—Whether subcontractor had remedy

A construction subcontract between the main contractor and subcontractor obliged the latter to complete the subcontract works by 2 August 2002. The works would be deemed to have been practically completed upon receipt of a temporary occupation permit (‘TOP’) . On 22 May 2002, both parties agreed that an extension of time of some three months would be given to the subcontractor. The arbitrator held that this extended the completion date to 31 October 2002. Four additional days were awarded by the arbitrator for exceptionally adverse weather, thus extending the completion date to 4 November 2002.

The main contractor terminated the subcontract on 12 May 2003 on the basis of the subcontractor's failure to proceed regularly and diligently with the performance of the latter's obligations. Other subcontractors were engaged by the main contractor to complete the project and the TOP was eventually obtained on 1 August 2003.

The main contractor served a notice of arbitration on the subcontractor in June 2004 pursuant to the arbitration clause in the subcontract. The subcontractor argued, inter alia, that it should have been granted an extension of time. The arbitrator found that there was late and under-allocation of Man-Year Entitlements (‘MY Es’) by the main contractor to the subcontractor. The system of MY Es was created by the Ministry of Manpower to deal with the dependency of contractors on workers from non-source countries. Each MYE would entitle an employer to bring in one worker from such countries on a work permit for a year, while two MY Es could be used to obtain a two-year work permit, and so on. The arbitrator also found that there were late interim payments by the main contractor.

Due to these incidents, the arbitrator found that there was delay in progress of the subcontract works. However, he found that the subcontractor had failed to prove that these incidents caused a delay in completion of the works. Because of this, he held that time for completion of the subcontract works was not set at large.

The subcontractor appealed to the court pursuant to s 49 of the Arbitration Act (‘the Act’) on three questions of law: (a) whether, for time to be set at large, it was necessary for there to be delay in completion; (b) where there were acts of prevention which caused delay in progress, whether the main contractor was entitled to terminate the subcontract and, if so, whether it could only do so by reference to a reasonable time for completion; and (c) where there were acts of prevention which caused delay in progress, whether the main contractor was entitled to claim the costs of engaging other subcontractors to carry out the works.

Held, dismissing the appeal:

(1) Parties to an arbitration agreement entered into before the occurrence of a dispute or the making of an arbitral award could, by that agreement, dispense with the need to obtain leave to appeal as a condition precedent to mounting an appeal on a question of law arising out of an award. There was no policy reason why the requirement of agreement in s 49 (3) (a) of the Act would be satisfied only if it was given after the dispute was in fact referred to arbitration: at [9].

(2) The parties had to 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 (Cap 10, 1985 Rev Ed) , or the Arbitration Act (Cap 10, 2002 Rev Ed) : at [10].

(3) The legal consequence of time being set at large was that the date for completion originally stipulated in the contract ceased to be the operating date for the completion of the works. The employer's right to claim or deduct liquidated damages was lost since there was no longer a valid date for completion from which such damages could be calculated: at [18].

(4) While the principle of time being set at large originated in the idea that liquidated damages for delay in completion should not be imposed where the person claiming those damages contributed to that delay, there was no reason to extend that principle to situations where there was a mere delay in the progress of the works which could not, by definition, give rise to a claim to or deduction of liquidated damages. In claiming or deducting liquidated damages, the employer would not be taking advantage of his own wrong because his conduct was not proven to have caused completion of the works to be delayed: at [28].

(5) Because the arbitrator found that the main contractor's breaches of contract had not been proved to have caused delay to completion, the subcontractor's remedy lay in damages for disruption of its progress (in which case it would have to prove its loss to obtain more than nominal damages) . Given the availability of a remedy in damages, its contention that the main contractor would be taking advantage of its own wrong appeared to be misconceived: at [36].

(6) The courts had adopted a common-sense approach and had presumed that the parties had intended that liquidated damages should not be available if the person claiming it had contributed to the delay in completion of the works. If a contract clearly provided that the date of completion would not be set at large even if the completion date of the works was delayed, this bargain would be upheld by the courts: at [38].

(7) Section 49 (1) required that the question of law had to be one ‘arising out of an award made in the proceedings’. The arbitrator held that time was not set at large. Therefore, the second and third questions of law could not have arisen out of the Award: at [48].

(8) A question of contractual interpretation was in principle a question of law which the court had jurisdiction to determine. It would be odd if questions of contractual interpretation, ie, of the meaning of particular contractual terms, were not questions of law which were amenable to appeal. Given that the obligations of contracting parties were generally governed by the terms of the contract, whether express or implied, party autonomy would be unduly infringed if the mere fact that an arbitrator had identified the correct principles of contractual interpretation (at a more general level) would prevent an appeal pursuant to s 49 if he had nonetheless failed to apply them correctly to ascertain the more specific obligations arising out of the contract. These more specific obligations, eg, whether a particular event qualified for extension of time under an extension of time clause, would invariably be viewed as being far more practically important by contracting parties: at [49] and [50].

(9) In relation to the second and third questions of law, the Arbitrator did not have the opportunity of deciding the effect of time being set at large on the main contractor's right to terminate the subcontract and to claim the costs of engaging other subcontractors for the simple reason that he found that time was not set at large. The court would not be in a position to decide these questions without having the benefit of the arbitrator's findings to determine whether the hypothetical error raised questions of law which were amenable to appeal: at [51].

[Observation: In reaching a conclusion on a pleaded issue, an arbitrator might make several findings along the way, whether of fact or of law (as properly understood) . If he made a finding of law which was necessary to enable him to reach the ultimate conclusion on the precise issue which was pleaded, there seemed to be no reason why that finding should not fall within the meaning of a ‘question of law’ in s 49 (1) : at [43].

There was nothing in the wording of s 49 (1) which indicated that the parties might alter by agreement the nature of questions which might be...