National Skin Centre (Singapore) Pte Ltd v Eutech Cybernetics Pte Ltd

JurisdictionSingapore
JudgeLee Seiu Kin JC
Judgment Date07 December 2001
Neutral Citation[2001] SGHC 369
Docket NumberSuit No 271 of 2000
Date07 December 2001
Year2001
Published date19 September 2003
Plaintiff CounselChan Kia Peng, Carolyn Bava and Esther Ling (Khattar Wong & Partners)
Citation[2001] SGHC 369
Defendant CounselJohnny Cheo (Cheo Yeoh & Associates)
CourtHigh Court (Singapore)
Subject MatterFailure to commission system by original deadline,Election not to terminate,Reasonableness of notice,Time of the essence,Subsequent notice to make time of essence again,Contract to commission computer system with customised software,Discharge,Whether notice of terminated required,Contract,Breach,Validity of termination

Judgment

GROUNDS OF DECISION

1 The Plaintiff ("NSC") is the company that operates the National Skin Centre, a hospital specialising in skin diseases. The National Skin Centre is one of the government hospitals that has been "restructured", i.e. its operations managed by a private company. As the government is still the main beneficial owner of NSC, its management generally complies with the directives of the Ministry of Health

2 The Defendant ("Eutech") is a company in the business of developing computer software, especially in the field of healthcare and intelligent building infrastructure and automation.

3 Sometime in 1998, in compliance with the government policy of reviewing computer systems to ensure that they will be able to operate after 31 December 1999 ("Y2K compliance"), NSC decided to replace its existing system ("the SWi system"), which was not Y2K compliant, with a new system that would. NSC intended at the same time to incorporate the latest technology in this new system thereby getting a modern, state-of-the-art system. A closed tender was called in May 1998 and several vendors with experience in healthcare software were invited to bid. Eutech was one of them. After evaluating the proposals of the tenderers, which included a series of presentations and negotiations, NSC awarded the contract to Eutech. The parties entered into a written contract ("the Contract") on 30 December 1998 for a computer system with customised software ("the System") for the National Skin Centre. From that date Eutech began work on the Contract. The original completion date was sometime in October 1999, with the commissioning of the System to be carried out by 31 August 1999.

4 In the course of the performance of the Contract the parties encountered some differences. By a letter to Eutech dated 21 March 2000, NSC terminated the Contract. On 23 March, NSC called on the bankers guarantee procured by Eutech under the Contract. Pursuant to this, the bank paid NSC the sum of $109,300.

5 In this action, NSC sought damages against Eutech for breaches of various terms of the Contract. The following breaches are particularised in 7 of the Statement of Claim:

(a) Failing to provide a prototype and/or design prototype in accordance with the stipulated target date as stated in Annex 7 of the implementation plan as per the Agreement, that is, on or before 26 February 1999 or at all;

(b) Failing to install the application software on or by the stipulated target date as stated in Annex 7 of the implementation plan, that is, on or before the end of June 1999 or at all;

(c) Failing to provide a "live" System on 30 July 1999 or at any time thereafter pursuant to Annex 7 of the Agreement or at all;

(d) Failing to commission the application software by the stipulated target dates as stated in Annex 7 of the Agreement, that is, on or by 31 August 1999 or at all.

(e) Failing to complete the conversion of medical records and case notes before the end of October 1999.

6 Eutech denied it was in breach of the Contract and filed a counterclaim in which it pleaded that NSC was in breach. Eutech claimed that NSC had wrongfully terminated the Contract and claimed for the following:

(a) unpaid invoices in the sum of $581,868.00;

(b) repayment of $90,000 given as a discount;

(c) work done but as yet unbilled by Eutech at the time of termination;

(d) loss of profits or damages for wrongful termination; and

(e) repayment of $109,300.00 which had been paid over to NSC when it called on the bankers guarantee.


The witnesses

7 NSC called a total of seven witnesses to give evidence on its behalf, namely:

(i) Associate Professor Goh Chee Leok ("Prof. Goh") the Medical Director of the National Skin Centre and the person in charge of the project;

(ii) Loo Swee Cheng ("Loo"), the Financial Controller and Project Director;

(iii) Theresa Soon, the Executive at DSC;

(iv) Lawrence Quek, Deputy Operations Manager;

(v) Koh Yong Leng, Manager of Nursing and Clinic Operations;

(vi) Lim Lee Foon, Pharmacy Manager; and

(vii) Tan Seng Cheong, Pharmacist.

The principal witnesses were Prof Goh and Loo.

8 The witnesses for Eutech were:

(i) Sumeet Kumar ("Sumeet"), Vice President of Eutech (at the time of the Project);

(ii) Olaf Paul Frederik, ("Olaf") former Manager of Eutech's Healthcare Division;

(iii) Dr Hari Gunasingham ("Dr Hari"), Eutechs Chief Executive Officer; and

(iv) Prasad Raja ("Prasad"), Eutechs Chief Financial Officer.


The Plaintiffs Case

9 The case for NSC is briefly as follows. The Contract provides for Eutech to develop and deliver the System to the National Skin Centre for use in its Specialist Outpatient Clinic. Under the Contract, the System was to be commissioned by 31 August 1999. However Eutech failed to commission the System by that date due to its own default. Several extensions of time were given by NSC. However Eutech failed to commission the System even within the extended times. Finally on 11 February 2000 NSC issued a letter to Eutech stating that the project was already in delay for more than 5 months and that NSC expected the full system to be delivered within 3 months (i.e. by 11 May).

10 5 days later, on 16 February 2000, NSC informed Eutech orally at a meeting (which was later reduced to minutes) that it would monitor Eutechs progress over the next 2 months. If Eutech were unable to commission the System by 11 May 2000, then NSC would terminate the Contract. At this meeting NSC reminded Eutech that it would not accept the System being implemented in phases. After the meeting, Eutech submitted to NSC two implementation plans for approval:

(a) the first implementation plan, dated 20 February 2000, which showed a phased implementation with a final commissioning date of 28 July 2000; and

(b) the second implementation plan, dated 8 March 2000, which again showed a phased implementation and a final commissioning date of 28 July 2000.

11 NSC took this to be a clear expression by Eutech that it could not deliver the System by the deadline of 11 May 2000. Accordingly, NSC decided to terminate the Contract. NSC contended that by its letter to Eutech dated 21 March 2000, NSC had terminated the Contract in accordance with its terms.


The Defendants Case

12 Eutech denied that it was guilty of continuous delay or that it was in breach of any term of the Contract. Eutech claimed that the understanding of both parties was that the System would be largely based on the Copernicus system used in Changi General Hospital ("CGH") which NSC representatives had viewed before the Contract was entered into. Furthermore clause 11.3 of the Contract only entitles NSC to make minor modifications to the design and requirements during the prototyping/design stage. However Eutech was impeded by NSC from carrying out its works under the Contract in that:

(a) NSC had insisted on a complete change, or alternatively substantial changes, to the Copernicus system demonstrated to NSC. This amounted to a change of Eutechs scope of works as it required a re-design of the screens and a complete change in the manner in which Eutech had proposed to carry out the work.

(b) sometime in October 1999, NSC required Eutech to change the system at its sub-clinic, the Department of STD Control ("DSC") from a satellite site connected to the central server by leased line, as provided under the Contract, to a stand-alone site.

As a result of these changes, the time for completion of the works under the Contract was set at large and Eutech was entitled to a reasonable time to complete the Works.

13 Furthermore, Eutech alleged that the termination of 21 March 2000 was wrongful for the following reasons:

(i) After expiry of the various stipulated target dates under the Contract, NSC had not elected to terminate the Contract but instead had, by its conduct, elected to continue with the Contract;

(ii) NSC had agreed to the revised schedules, or alternatively had induced Eutech to work in accordance with these revised schedules; and

(iii) NSC had issued a letter to Eutech on 11 February 2000 giving Eutech a period of three months to "deliver" the System. Despite this, the letter of termination of 21 March 2000 was issued only one and a half months after the 11 February letter.

14 Additionally, clause 49.2 of the Contract gives Eutech 14 days after the termination notice to effect a remedy. In terminating the Contract immediately on 21 March 2001, NSC was in breach of this clause. Accordingly this wrongful termination, in itself, constitutes a repudiation which Eutech accepted on 23 March 2000.

15 In breach of the Contract, NSC had refused to make progress payments to Eutech and this had caused a serious cash flow problem for Eutech as Eutech had to pay third party contractors and suppliers.

16 NSC had refused to accept or commission the System at DSC although this was implemented and had been in use since 31 December 1999.


The Issues

17 The following are the issues to be considered:

(i) What is the proper construction of various terms of the Contract with regard to the scope of works of Eutech;

(ii) Whether there were changes made to the scope of works after the Contract was made;

(iii) Whether Eutech had breached the terms of the Contract by failing to keep to the Stipulated Target Dates;

(iv) If Eutech had been in breach of the Contract, whether NSC had nonetheless lost the right to terminate because:

(a) NSC had agreed to the revised schedules; and

(b) NSC had induced Eutech to carry on work in reliance on the revised schedules,

(v) Whether NSC had validly terminated the Contract in giving the proper notice by its letter of 21 March 2000;

(vi) Whether NSC had breached the Contract by: -

(a) failing to accept or commission the System which was implemented and in use at DSC from 31 December 1999; and

(b) failing to make progress payments to Eutech,

(vii) The following miscellaneous issues:

(a) whether NSC is liable to repay Eutech the discount given on account...

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    ...Stanley Goss v Laurence George Chilcott [1996] AC 788 (refd) National Skin Centre (Singapore) Pte Ltd v Eutech Cybernetics Pte Ltd [2001] 3 SLR (R) 801; [2002] 1 SLR 241 (distd) Ong Chay Tong & Sons (Pte) Ltd v Ong Hoo Eng [2009] 1 SLR (R) 305; [2009] 1 SLR 305 (refd) Oriental Investments (......
  • Aero-Gate Pte Ltd v Engen Marine Engineering Pte Ltd
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    • 31 Julio 2013
    ...address the decision of Lee Seiu Kin JC (as he then was) in National Skin Centre (Singapore) Pte Ltd v Eutech Cybernetics Pte Ltd [2001] 3 SLR(R) 801 (“Eutech”). The defendant cited a passage from that case in support of its third argument. In Eutech, the defendant (“Eutech”) contracted to ......
  • M.N. Construction Sendirian Berhad v Getrude Binti Taha, 24-09-2008
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    • High Court (Malaysia)
    • 24 Septiembre 2008
    ...reasonable notice to the plaintiffs and relies on the case of National Skin Centre (Singapore) Pte Ltd v. Eutech Cybernetics Pte Ltd (2002) 1 SLR 241; (v) the plaintiff by signing the Allocation Agreement the defendants have 16 abandoned their option to S-22-62-03;S-22-63-03; S-22-64-03;S-2......
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    • High Court (Malaysia)
    • 24 Septiembre 2008
    ...reasonable notice to the plaintiffs and relies on the case of National Skin Centre (Singapore) Pte Ltd v. Eutech Cybernetics Pte Ltd (2002) 1 SLR 241; (v) the plaintiff by signing the Allocation Agreement the defendants have 16 abandoned their option to S-22-62-03;S-22-63-03; S-22-64-03;S-2......
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1 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2002, December 2002
    • 1 Diciembre 2002
    ...Reference may also be made to the Singapore High Court decision of National Skin Centre (Singapore) Pte Ltd v Eutech Cybernetics Pte Ltd[2002] 1 SLR 241, which also involved, inter alia, the doctrine of estoppel. This decision was in fact dealt with in the previous review when the case had,......

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