Min Hawk Pte Ltd v SCB Building Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Seng Onn J
• Judgment Date: 20 January 2020
• Neutral Citation: [2020] SGHC 13
• Court: High Court (Singapore)
• Hearing Date: 14 August 2019,24 October 2019,15 August 2019
• Docket Number: Suit No 790 of 2018
• Plaintiff Counsel: Ng Hweelon and Tay Ming Xun (Veritas Law Corporation)
• Defendant Counsel: Kris Chew Yee Fong and Su Hongling (Zenith Law Corporation)
• Subject Matter: Building and Construction Law,Sub-contracts,'pay when paid' provisions
• Published date: 23 January 2020

Chan Seng Onn J: Introduction

This is a dispute between a contractor and its sub-contractor on the interpretation of payment terms under a two-tranche payment agreement between both parties (“the Agreement”).

Facts

The plaintiff, Min Hawk Pte Ltd, was engaged by the defendant, SCB Building Construction Pte Ltd, to design, supply and install aluminium and glazing works in respect of a construction project (“the Project”).¹ Big Box Pte Ltd (“Big Box”) is the owner of the Project, with the defendant being the main contractor and the plaintiff being the sub-contractor of the Project.²

The witnesses involved in the trial are as follows: Mr Gao Xiang, a contract manager for the plaintiff (“Mr Gao”); Ms Fang Wenfeng, a quantity surveyor for the plaintiff (“Ms Fang”); and Mr Gan King Ann, a deputy executive director of the defendant (“Mr Gan”).

Payment issue between Big Box and the defendant

It is helpful to first lay out the background facts as regards the ongoing payment issue between the defendant and Big Box which resulted in the present dispute between the plaintiff and the defendant.

An agreement dated 27 March 2017 was reached between the defendant and Big Box for the resolution of all payment issues relating to the Project.³ The said agreement was subsequently breached as Big Box did not repay the defendant the sum of $4,707,688.45 owed to the defendant.⁴ On 18 August 2017, the defendant took out a court application under High Court Originating Summons No 947 of 2017 (“OS 947/2017”) to enforce the terms of the said agreement.⁵ On 25 January 2018, the court granted the application in terms pursuant to High Court Order of Court 720 of 2017 (“ORC 720/2017”) and Big Box was ordered to pay the defendant the sum of $4,707,688.45.⁶

On 25 July 2017, OCBC issued a letter of demand to Big Box referencing a loan facility agreement, demanding the payment of an outstanding amount of $111,305,749.96 by 5pm on 14 August 2017, reserving its rights to appoint a receiver and manager if payment was not received by that date.⁷ On 27 September 2017, OCBC appointed Ms Ee Meng Yen Angela and Mr Aaron Loh Cheng Lee as joint and several receivers and managers of all assets and properties of Big Box, pursuant to the loan facility agreement made by Big Box with OCBC.⁸

On 17 April 2018, the defendant enforced the order by way of a winding up application in High Court Companies Winding Up No 72 of 2018 (“CWU 72/2018”).⁹ The hearing of CWU 72/2018 was fixed on 11 May 2018 and subsequently adjourned to 29 June 2018.¹⁰ On 19 April 2018, the solicitors acting for the receivers and managers appointed by OCBC for Big Box informed the defendant that they would provide relevant updates in relation to the proposed sale of the building of Big Box.¹¹

TT International Limited (“TTI”), a creditor and contributory holding 51% of shareholdings in Big Box, proposed to adjourn the defendant’s winding-up application in CWU 72/2018 until the sale of the Big Box building had been completed in order to facilitate the search for a buyer.¹² The defendant acceded to TTI’s request for the adjournment in order to pave the way for the completion of sale of the Big Box building.¹³ With the defendant’s consent, on 28 June 2018, TTI’s solicitors made a request to the High Court to adjourn the hearing of CWU 72/2018 fixed on 29 June 2018.¹⁴ The request was allowed.¹⁵

Despite the defendant’s enquiries on the status of the sale of Big Box from December 2018 to April 2019, there were no further updates provided to the defendant by the solicitors of the receivers and managers of Big Box.¹⁶

The Agreement

It is undisputed that the plaintiff had completed the works that the defendant had sub-contracted to it. On 27 September 2017, the parties entered into the Agreement concerning payment of an outstanding amount of $486,641.56 owed by the defendant to the plaintiff.¹⁷ Pursuant to the Agreement, payment for the amount owed was to be made in two tranches as follows:¹⁸ 1. [The defendant] shall pay [the plaintiff] the SUM (comprising the amount of S$486,641.56 inclusive of GST in the following manner:- 1.1. First tranche of payment in the sum of $200,000.00 by 30 September 2017;; [sic] and 1.2 Second tranche of payment in the sum of $286,641.56 by 31 January 2018, which payment is subject to and/or conditional upon [the defendant’s] full resolution of all outstanding issues with Big Box Pte Ltd (“Big Box”), the employer for the Project, in relation to the work done by [the defendant] and to payment payable by Big Box to [the defendant] in connection with the said work. 2. Without prejudice to the generality of the foregoing provisions, and subject to clause 1.2 above, in the event that [the defendant] could not fully resolve with Big Box payment and/or other issues relating to the Project by 31st December 2017, the Parties shall review the terms and conditions set out herein and where necessary to extend the payment timeline and/or amend any of the said terms and conditions. Such revision and/or amendment, upon the Parties' agreement to the same, shall be binding on the Parties.

[emphasis added in italics, emphasis in original in bold]

The Agreement was drafted by the defendant, and signed by both Mr Gao (on behalf of the plaintiff) and Mr Gan (on behalf of the defendant), after the terms of the Agreement were read out in English and explained in Mandarin by Mr Gan to Mr Gao.¹⁹ The plaintiff was aware of and had contemplated the defendant’s payment issue with Big Box, (ie, that Big Box had still owed the defendant money) before signing the Agreement.²⁰ The defendant agreed to the two tranches of payment as the defendant was having difficulties making payment at the time and the parties had a long working relationship.²¹

It is undisputed that the first tranche of payment of $200,000.00 has been satisfied (“first tranche payment”). The parties are in contention over the payment date of the second tranche of payment of $286,641.56 (“second tranche payment”) based on cl 1.2 of the Agreement.²² The parties are also in dispute as to whether the parties had discharged their obligations to review the terms of the Agreement in accordance with cl 2 of the Agreement.²³

Phone Call 1 and 19 December 2017 Email

On 19 December 2017 at about 12.00pm, Mr Gan called Ms Fang (“Phone Call 1”) to (i) update her on the developments of OS 947/2017 (ie, the defendant’s legal action to pursue payment from Big Box); and (ii) extend the second tranche payment date to 30 June 2018.²⁴ Over the phone, Ms Fang informed Mr Gan that the plaintiff did not agree to the defendant’s proposal and told Mr Gan that her “superiors had the final say with regards to their proposal”.²⁵

At 12.50pm, the defendant sent an email dated 19 December 2017 (“19 December 2017 Email”) to the plaintiff:²⁶

As per our tele-conversation a while ago, please be informed that our legal action to pursuing payment [sic] from Big Box under case OS 947 had been again postpone to be hear [sic] on 19 Feb 2018, while we have appeal [sic] to the court for an earlier date which still pending from court’s reply [sic]. The date specified under clauses 1.2 of our Payment Agreement dated 27 September 2017 (the ‘Agreement’) will not be able to be achieve [sic]. Pursuant to clauses 2 [sic] of the Agreement, we hereby propose to tentatively extend the payment date to 30th June 2018 subject and/or conditional upon [the defendant’s] full resolution of all outstanding payment payable by Big Box Pte Ltd.

…

Thereafter, Ms Fang read the email and checked with her boss on the same day, who affirmed her decision to reject the proposal to extend the payment date to 30 June 2018.²⁷

It is Mr Gan’s testimony that the phone conversation took place approximately 50 minutes before the 19 December 2017 Email was sent.²⁸ On the contrary, it is Ms Fang’s initial testimony that the said phone conversation occurred after the email had been sent, although she could not recall the exact date of the phone conversation.²⁹ However, Ms Fang later changed her testimony, noting that Mr Gan did tell her about the contents of the email and “maybe” sent her an email recording the parties’ discussion over Phone Call 1 after Phone Call 1 had taken place.³⁰ On the balance of probabilities, I reject Ms Fang’s initial testimony on the timing of the phone conversation. The words “[a]s per our tele-conversation a while ago” in the 19 December 2017 Email squarely contradicts her averment that the phone conversation took place after the email. It is more likely than not that Mr Gan’s version of events is accurate (ie, the 19 December 2017 Email was sent after the Phone Call 1 and records the contents of the parties’ discussion in Phone Call 1).

Based on the above sequence of events, Ms Fang had essentially verbally rejected the defendant’s proposal for the time extension over Phone Call 1 before reading the 19 December 2017 Email and obtaining the confirmation from her boss. Thereafter, she retrospectively went to her boss to inform him about the defendant’s proposal for a time extension, who then affirmed her decision. Thereafter, the plaintiff did not reply to the 19 December 2017 Email and did not make further communications to the defendant in relation to the 19 December 2017 Email until 12 March 2018 (see below at [23]).³¹

Ms Fang was also of the understanding that Mr Gao would not have answered the email as Ms Fang was the one who had to attend to the 19 December 2017 Email for the plaintiff.³² Ms Fang testified that all she had done was to tell the defendant that the plaintiff did not agree to an extended deadline of 30 June 2018.³³ In essence, the plaintiff had communicated a plain rejection of the defendant’s proposal contained within the 19 December 2017 Email to extend the second tranche payment deadline to 30 June 2018 and provided no alternative dates or counter-proposals.³⁴ In...