MAE Engineering Ltd v Fire-Stop Marketing Services Pte Ltd

• Judge: Chao Hick Tin JA
• Judgment Date: 23 November 2004
• Neutral Citation: [2004] SGCA 54
• Subject Matter: Contract,Whether payment should be based on area of cladded or uncladded duct,Estoppel,Whether appellant estopped from contending that payment should be based on area of uncladded duct,Rules of construction,Whether court can look to subsequent conduct of parties to interpret written contract,Contractual terms,Estoppel by convention,Whether commercial sense of court can override words of contract,Whether evidence of antecedent agreement can be taken into account,Contract stating respondent to supply and install cladding to 5,000m2 of duct for $400,000,Equity
• Citation: [2004] SGCA 54
• Published date: 24 November 2004
• Year: 2004
• Defendant Counsel: John Chung and Tan Yeow Hiang (Kelvin Chia Partnership)
• Plaintiff Counsel: Tan Kok Quan and Karam Singh Parmar (Tan Kok Quan Partnership)
• Court: Court of Three Judges (Singapore)

23 November 2004

Lai Siu Chiu J (delivering the judgment of the court):

1 This was an appeal by a building sub-contractor against a decision of the High Court in interpreting a term in the sub-contract against the sub-contractor. At the conclusion of the hearing, we allowed the above appeal. We now give our reasons.

The background

2 The appellant, MAE Engineering Ltd (“MAE”), was the air-conditioning, mechanical and ventilation (“ACMV”) sub-contractor for The Esplanade – Theatres on the Bay (“the project”). The main contractor of the project was Penta-Ocean Construction Company Ltd and the project consultant was PWD Consultants.

3 Sometime in June 1999, MAE invited the respondent, Fire-Stop Marketing Services Pte Ltd (“Fire-Stop”), to tender for the supply and installation of fire-rated board cladding to the ACMV duct of the project. Based on MAE’s estimate that some 5,000m² of the ACMV duct required cladding, Fire-Stop quoted a price of $95 per m² for the supply and installation of two-hour fire-rated board cladding under the “Cape Monolux 40” board system and $185 per m² for the four-hour fire-rated option. At the request of MAE, Fire-Stop revised and lowered the prices to $85 per m² and $165 per m² respectively. However, MAE was still not satisfied. By a fax dated 30 June 1999 to MAE from its sales manager Tan Seng Huat (“S H Tan”), Fire-Stop further reduced its price for two-hour fire-rated board to $80 per m² (“the revised price”). The fax stated:

Base [sic] on information given, Total Area of ACMV Duct to be fire rate [sic] estimate at 5,000m²

Price for supply & install for 2 hour fire rating = $80/m²

4 MAE accepted the revised price and on 30 November 1999, two documents were signed, the first being form T/007, which was an agreement by Fire-Stop to keep its offer open until its appointment was approved by the owners and consultant of the project. The first paragraph of T/007 stated:

During our recent evaluation exercise re the above Project, M/s Fire Stop Marketing Services Pte Ltd represented by Mr S H Tan, the final lump sum offer price to MAE Engineering Pte Ltd (MAE) is S$400,000/- (Singapore Dollars Four Hundred Thousand Only) (5,000m² x $80/m²). In consideration of S$1 (the receipt of which you acknowledged) this offer price to MAE remains valid and irrevocable throughout MAE’s negotiations in seeking the approval and final decision from the customer and consultant. If final approval is given, you have agreed to enter into a contract with MAE.

5 The second document signed that day was form T/008 (although it was dated 23 June 1999). T/008 contained the revised price and the lump sum figure of $400,000. Both forms were subsequently referred to in the pre-award letter dated 2 December 1999 (“the pre-contract document”) from MAE to Fire-Stop. The fourth paragraph thereof stated:

… MAE accept [Fire-Stop’s] fully compliance [sic] offer for the supply, delivery, installation, warranty and endorsement of 2 Hours Fire-Rated Board Cladding to ACMV Duct with ‘Cape’ Monolux 40 Board System for a lump sum price of $400,000/- (SIN DLR Four Hundred Thousand Only). …

6 The pre-contract document was formalised in a sub-contract agreement dated 17 April 2000 (“the sub-contract”). Clause 1 of the sub-contract reads as follows:

SCOPE OF WORK AND CONDITIONS

1.1 This Sub-Contract Agreement is for the provision of Supply, Delivery, Installation, Warranty & Endorsement of 2 Hours Fire Rated Board Cladding to 5,000M² of ACMV Ductwork with ‘Cape’ Monolux 40 Board System in accordance with the specifications and drawings.

…

If the contract is as stated remeasurable then final payment shall be subject to final measurements which will be based on the as built drawings.

1.2 All qualifications made by the Sub-Contractor to the accepted sub-contract amount and scope of work are deemed to be withdrawn unless they have been previously accepted by MAE in writing. The Sub-Contractor has fully familiarized himself with all drawings and specifications necessary to execute the above works.

Method of cladding and mode of payment

7 Whenever a particular area of the duct required cladding, MAE would issue a works order to Fire-Stop, attaching therewith sketches of the area to be cladded. Upon receipt of the works order, Fire-Stop would deliver the cladding material and commence installation at the specified area. After the work was completed, a joint inspection and measurement exercise would be carried out by representatives of both MAE and Fire-Stop. The quantities of cladding material used would be verified and measurements of the external surface area of the cladded duct would be taken. These would be recorded in delivery orders (“DOs”) which were verified by MAE’s representatives. Once MAE confirmed that the quantities of materials and measurements were correct, its representatives would sign and stamp the DOs with the following remarks:

I/We … hereby acknowledge that the above quantities/measurements are certified correct as per measurement conducted on site.

This confirms delivery of Quantity Only. Quality and Performance subject to approvals by Consultant/Owner. Other additional terms in this DO are excluded.

The claim

8 Fire-Stop prepared interim payment claims based on the endorsed DOs and submitted a total of 17 claims altogether. MAE paid 14 of the claims amounting to $687,779.80 (excluding goods and services tax (“GST”)) and refused to pay the balance of $310,305.61 (excluding GST), prompting Fire-Stop to commence the present suit.

9 In defence, MAE claimed that Fire-Stop’s cladding work was defective and incomplete. It further alleged there were no outstanding payments due to Fire-Stop. MAE counterclaimed the sum of $168,664.29 (excluding GST) which it said it had overpaid Fire-Stop.

Proceedings below

10 In the court below, the parties had agreed, after the trial started, to confine their dispute in respect of the claim and counterclaim to the following agreed issue:

Whether on the true and proper construction of the sub-contract document and having regard to all the documents, affidavits and evidence before the court, payment to the plaintiffs should be based on the area of the cladded ACMV duct or the area of the uncladded ACMV duct ...

In the event the court decides that payment should be based on the area of cladded ACMV duct, the total amount payable by the defendants to the plaintiffs shall be $310,305.61 (excluding 3% GST).

In the event the court decides that payment should be based on the area of the uncladded ACMV duct, the total amount payable by the plaintiffs to the defendants shall be $168,664.29 (excluding 3% GST).

11 It was common ground that the total area of ACMV actually cladded by Fire-Stop exceeded 5,000m² which figure the parties agreed was only MAE’s estimate. At no time did MAE attempt to hold Fire-Stop to the ostensible lump sum contract price of $400,000 as it was willing to pay for the additional area cladded over and above 5,000m². What the parties disagreed on was the basis of measurement for the cladding work done by Fire-Stop,

12 Fire-Stop’s stand at the trial was that it should be paid based on the external surface area of the cladded ACMV duct. MAE, on the other hand, contended that payment to Fire-Stop should be based on the area of the uncladded ACMV duct. Since the cladding was attached to a thick layer of rockwool and it was wrapped around the external surface of the duct as well as the supports and hangers, the external area of a cladded duct was greater than that of an uncladded duct. Consequently, the value of cladding work based on the area of the cladded duct was therefore higher than that based on the area of the uncladded duct.

The decision below

13 The trial judge ruled in favour of Fire-Stop’s basis of measurement and accordingly awarded judgment to Fire-Stop in the agreed sum of $310,305.61 (excluding GST). He noted that the sub-contract was silent as to the mode of measurement for computing the payment due to Fire-Stop. As it was not disputed that the figure of 5,000m² of the ACMV to be cladded was only an estimate, he found that the ostensible lump sum price of $400,000 stated in the sub-contract did not have any significance. He was of the view that the parties had merely agreed that Fire-Stop would be paid the revised price for the work done and materials supplied. The only question that remained to be answered was whether the revised price should apply to the uncladded or the cladded areas.

14 In awarding judgment to Fire-Stop, the judge below rejected the argument put forward...