Mae Engineering Ltd v Dragages Singapore Pte Ltd (fka Dragages et Travaux Publics (S) Pte Ltd)

• Jurisdiction: Singapore
• Judge: S Rajendran J
• Judgment Date: 25 April 2002
• Neutral Citation: [2002] SGHC 86
• Date: 25 April 2002
• Subject Matter: Whether plaintiffs have undisputable claim against defendants,Arbitration agreement,Arbitration,s 7(2) Arbitration Act (Cap 10),Whether defendants have any basis for staying plaintiffs' claim,When court can sanction departure from such agreement,Stay of court proceedings,Burden on party opposing stay to show why arbitration agreement not to prevail
• Docket Number: Suit No 1291 of 2001 (Registrar's
• Published date: 19 September 2003
• Defendant Counsel: Wong Meng Meng SC, Paul Sandosham and Gandhi (Wong Partnership)
• Court: High Court (Singapore)
• Plaintiff Counsel: Tan Kok Quan SC and Karam Singh Parmar (Tan Kok Quan Partnership)

stay of proceedings and granted Mae’s application for summary judgment. This is an appeal by Dragages against both these decisions.

Held

: dismissing the appeal with costs

(1) Where parties have, by contract, agreed that any dispute between them is to be resolved by arbitration, the court will not sanction a departure from that agreement except for sufficient reason : s 7 Arbitration Act (Cap 10). The burden of satisfying the court that there is sufficient reason why the agreement between the parties to refer any dispute between them to arbitration should not prevail and why the court should, instead, assume jurisdiction is on the partying opposing the stay. ( 9)

(2) It is not appropriate for the court to use order 14 summary judgment principles to determine whether a stay on order 14 proceedings ought to be granted. This is because the purpose of order 14 summary judgment principles is to aid the court with determining whether a claim should be immediately allowed in very obvious cases whereas applications for a stay relate to a larger issue of jurisdiction. As such, it is not entirely safe to determine whether parties should be bound by their agreement to arbitrate according to principles established to deal with very obvious claims to which there is no defence. ( 10 & 11)

(3) While the presence of an arbitration clause prima facie entitles a defendant to have the dispute decided by arbitration, a plaintiff in very clear cases is no doubt entitled to his summary judgment notwithstanding the clause. To this end, care should be taken not to confuse a situation in which the defendant disputes the claim on grounds which the plaintiff is very likely to overcome, with the situation in which the defendant is not really raising any dispute at all. In this connection, the courts should adopt a holistic and common sense approach in determining whether the defendant has made out a prima facie case of disputes that would suffice for a matter to be stayed pending arbitration. ( 11 & 12)

(4) In the present case, the three claims for set-off raised by Dragages for making the deductions from Interim Certificates No. 27 & 28 were, upon closer examination of the evidence, without merit and failed to disclose any dispute whatsoever. In any case, even if Dragages had any rights of set-off, those rights ought to have been exercised before the Interim Certificate was issued. Not having done so, Dragages’ contractual obligation to pay had crystallised and it was no longer open to Dragages to unilaterally vary those contractual obligation by issuing revised Interim Certificates to replace those already issued. ( 27, 29 – 32)

Cases referred to

Channel Tunnel Group Ltd & Anor v Balfour Beatty Construction Ltd & Ors [1993] 1 All ER 664 (refd)
Ellis Mechanical Services Ltd v Wates Construction Ltd [1978] 1 LLR 33 (folld)
Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd [1990] 1 WLR 153 (refd)
Kwan Im Tong Chinese Temple v Fong Choon Hung Construction Pte Ltd [1998] 2 SLR 143 (folld)
Uni-Navigation Pte Ltd v Wei Loong Shipping Pte Ltd [1993] 1 SLR 876 (folld)

Legislation referred to

Arbitration Act (Cap 10) 7.

Judgment

GROUNDS OF DECISION

1. The plaintiffs, Mae Engineering Ltd ("Mae"), are a company incorporated in Singapore carrying out the business of mechanical and electrical ("M&E") engineering. The defendants, Dragages Singapore Pte Ltd ("Dragages"), are a company incorporated in Singapore carrying on the business of building contractors. Dragages was engaged by Precious Treasure Pte Ltd ("the Employer") for the conservation, fitting out and other related works relating to the restoration of the Fullerton Building. Dragages entered into a sub-contract with Mae to carry out certain M&E works for the sum of $22.77 million subject to variations

2. Clause 17 of the sub-contract with Mae laid down the procedure that was to be followed in making progress payments to Mae:

"17(3) The Contractor shall after having received the Employer’s/Architect’s certificate relative to the Main Contract, issue an Interim Certificate to the Sub-Contractor showing the amounts which have been accepted for payment by the Contractor taking into account the real progress achieved during the month less a deduction of retention money at the rate of ten percent (10%) of the value of the Interim Payment up to a maximum retention of five percent (5%) of the Sub-Contract Price and less any back charges due by the Sub-Contractor to the Contractor.

17(4) The Sub-Contractor shall raise an invoice in the amount stated on the Interim Certificate and forward this to the Contractor for payment together with a copy of the Interim Certificate.

17(5) Within thirty (30) days of his receiving from the Employer on account of the Main Works any payment which includes a sum in respect of the Sub-Contract Works properly executed, the Contractor shall pay to the Sub-Contractor the amount shown on the Interim Certificate providing the Sub-Contractor has provide (sic) his invoice as required under 17(4)."

(Emphasis added.)

Pursuant to the sub-contract, Dragages on 17 February 2001 issued to Mae an Interim Payment Certificate No. 27 certifying the total value of M&E works for November 2000 to be $2,058,742.73. Mae, on 17 February 2001, in accordance with cl 17(4), forwarded to Dragages their invoice No. 8150 for payment of that sum of $2,058,742.73 ($2,120,486.47 inclusive of GST). On 15 March 2001, Dragages issued to Mae Interim Payment Certificate No. 28 certifying the total value of M&E works for December 2000 to be $581,479.06. Based on Certificate No. 28, Mae, on 30 March 2001 in accordance with cl 17(4), forwarded their invoice No. 8470 for the said sum ($598,923.43 inclusive of GST). By the terms of cl 17(5), Dragages was obliged to pay Mae, within 30 days of receipt of amounts stated in the Employer’s/Architect’s Certificate, the amount stated in the Interim Certificate provided Mae has issued the invoice called for under cl 17(4).

3. Despite requests from Mae, Dragages did not pay the sums due under Interim Certificates No. 27 and 28 to Mae. Instead, Dragages, on 25 April 2001 and 18 May 2001, issued revised Interim Payment Certificates No. 27A and 28 (Revised) to replace Interim Certificates No. 27 and 28 respectively. In revised Interim Certificate No. 27A, Dragages deducted $1,191,061.28 from the amount certified as due and payable to Mae in Interim Certificate No. 27 and tendered to Mae the (balance) sum of $850,689.74 after such deduction. In Interim Certificate No. 28 (Revised), Dragages deducted $227,885.91 from the amount certified as due in Interim Certificate No. 28 and tendered to Mae the (balance) sum of $347,125.74 after such deduction. Mae accepted, under protest, the two sums tendered as part-payment of the amounts due to Mae under Interim Certificates No. 27 and 28. Based on Interim Certificates No. 27 and 28, there would still be a sum of $1,461,515.60 due to Mae. No explanation was given to Mae at that time for the deductions.

4. The sub-contract with Mae contained, in cl 31, an arbitration clause which read:

"31(1) If any dispute arises between the Contractor and the Sub-Contractor in connection with this Sub-Contract, it shall, subject to the provisions of this clause, be referred to the arbitration and final decision of a single arbitrator to be agreed upon between the parties or failing agreement by either party within twenty eight (28) days of being requested in writing by the other party to be nominated by the President of the Singapore International Arbitration Centre (SIAC) and any such references shall be a submission to arbitration in accordance with and subject to the provisions of the Arbitration Act (Cap 10) or any statutory modification thereof for the time being in force in Singapore and the rules of the SIAC."

(Emphasis added.)

Mae, on 24 July 2001, gave notice of arbitration under cl 31. It would be relevant to note that the disputes in respect of which Mae sought arbitration were very much broader in scope and involved very much larger sums of money than the claims Mae had against Dragages for the balance amount of $1,461,515.60 under Interim Certificates No. 27 and 28. Pursuant to the notice of arbitration, the parties agreed to the appointment of Mr Alan Thambiah as arbitrator and Mr Thambiah has given directions in respect of the arbitration.

5. The obligation, under cl 17(5), for Dragages to pay to Mae the amounts in respect of the M&E works due under the Interim Certificates would arise only upon Dragages receiving the said amounts from the Employer. At the time Mae commenced arbitration proceedings, Mae did not know whether or not Dragages had received payment of the said amounts. It was only in September 2001 that Mae learnt that Dragages had received that payment in full from the Employer.

6. Upon learning that Dragages had in fact been paid by the Employer for those M&E works, Mae instituted Suit No. 1291/01 in the High Court for the recovery of the amount of $1,461.515.60 remaining unpaid under Interim Certificates No. 27 and 28. In its Points of Claim filed thereafter in the arbitration proceedings, Mae adverted to that suit and stated that its claims in the arbitration under Interim Certificates No. 27 and 28 were "strictly without prejudice to [Mae’s] claim in Suit No. 1291 of 2001/E … and is without prejudice to [Mae’s] contention that the said monies are indisputably due and owing".

7. Following the commencement of the suit, Mae, by way of SIC No. 2571/01, commenced Order 14 proceedings against Dragages for the outstanding amount of $1,461,515.60 under Interim Certificates No. 27 and 28. Dragages, for its part, in SIC No. 2822/01 sought, under s 7 of the Arbitration Act (Ch 10), to have all further proceedings in Suit No. 1291/2001 stayed.

8. The applications in SIC No. 2571/01 and 2822/01 were heard by the Senior Assistant Registrar ("SAR") on 7 December 2001. The SAR...