New Civilbuild Pte Ltd v Guobena Sdn Bhd and Another

• Judge: Lai Siu Chiu J
• Judgment Date: 29 February 2000
• Neutral Citation: [2000] SGHC 30
• Citation: [2000] SGHC 30
• Defendant Counsel: Tan Woon Tiang and Karen Phua (Tan & Tan) and KS Chung and Michael Moey (Chung & Co),BR Rai and Edric Pan (Rajah & Tann)
• Published date: 19 September 2003
• Plaintiff Counsel: Lee Chin Seon (CS Lee)
• Date: 29 February 2000
• Docket Number: Suit No 46 of 1998 (Summons in Chambers No 614 of 1998),Suit No 46 of 1998
• Court: High Court (Singapore)
• Subject Matter: Contract,When judicial decision deemed final,Delay in completion,Whether plaintiffs can claim retention monies and progress payments,Building and construction related contracts,Payment by first defendants on behalf of plaintiffs to third parties,Whether declaration that first defendants' call on performance bond being fraudulent and/or unconscionable should be granted,Whether first defendants can claim expenses from plaintiffs,Res judicata,Building and Construction Law,Whether first defendants can claim liquidated damages,Court dismissing earlier application by first defendants to strike out plaintiffs' action on grounds of and res judicata issue estoppel,s 18 Supreme Court of Judicature Act (Cap 322), First Schedule para 14, O 15 r 16 Rules of Court,Declaration,Whether plaintiffs can claim for variation works and damages resulting from delay,Whether call on bond fraudulent and/or unconscionable,Building sub-contract,Sub-contracts,Performance bond,Whether sub-contract in SIA form,Claim for expenses,Liquidated damages,Whether doctrine of res judicata estoppel and/or applicable,Civil Procedure,Remedies,Issue of no delay certificate,Whether first defendants can retain sum received under bond,Unconscionability,Res judicata and or issue estoppel,Judgments and orders

: The first defendants Guobena Sdn Bhd (`Guobena`), a Malaysian-incorporated company, were the main contractors under a Design and Build Contract (`the main contract`) for a condominium project in Singapore known as the Tanglin Regency project (`the project`). The developers of the project were First Tanglin Land Pte Ltd (`First Tanglin`). Under the main contract awarded to Guobena on 17 July 1995, Guobena were required to design and complete the construction of the project by 31 July 1997. The main contract was valued at $38,534,000 and liquidated and ascertained damages (`LAD`) for the project were fixed at $10,000 for each day that the works remained uncompleted.

By a sub-contract dated 21 September 1995 (`the sub-contract`) awarded under a Letter of Award dated 2 November 1995 (`the letter of award`), Guobena contracted out to the plaintiffs, New Civilbuild Pte Ltd (`New Civilbuild`), a part of the works under the main contract. The scope of works of New Civilbuild under the sub-contract comprised the construction of the buildings including works within the building boundary, co-ordination with all other sub-contractors and suppliers appointed by Guobena under the sub-contract, completion (including commissioning and testing of all mechanical and electrical installations), application for and the obtaining of Temporary Occupation Permit and Certificate of Statutory Completion as well as maintenance and making good of defects, if any (see the letter of award at 1AB4-5). The works of New Civilbuild under the sub-contract constituted about 50% to 55% of Guobena`s obligations under the main contract. The value of the sub-contract was $16,413,047.88 (excluding Goods and Services Tax) and LAD was fixed at $20,000 per day. The sub-contract was stated to be in the standard form of the Singapore Institute of Architects (`SIA`) and it required New Civilbuild to provide a performance bond of 10% of the sub-contract value. The second defendants The Tai Ping Insurance Co Ltd (`Tai Ping`) had, at the request of New Civilbuild, issued a performance bond (`the bond`) for the sum of $1,642,045 in favour of Guobena.

New Civilbuild commenced construction on or about 21 September 1995; the project was originally scheduled to be completed by 21 April 1997 (1AB6) but it was not.

On 5 January 1998, Guobena`s solicitors issued a letter of demand to Tai Ping demanding payment of the full sum under the bond. This letter followed earlier letters of demand from Guobena to Tai Ping dated 17 and 30 December 1997. Guobena`s letter of demand dated 17 December 1997 did not contain any allegation that New Civilbuild had breached the sub-contract. On 18 December 1997, New Civilbuild replied to Guobena`s letter of demand dated 17 December 1997 and expressed their surprise at the demand. It transpired that in calling upon the bond, Guobena relied on New Civilbuild`s breach of their obligations under the sub-contract resulting in delays in the completion of the works under the sub-contract.

New Civilbuild asserted that there was no delay on their part in the completion of the project and that the delay was due to Guobena`s default. Guobena, however, claimed that the delay arose by reason of New Civilbuild`s own default. New Civilbuild therefore viewed Guobena`s demand under the bond as fraudulent and unconscionable.

In response to Guobena`s call on the bond, New Civilbuild commenced these proceedings and obtained an injunction to restrain Guobena from calling on or receiving payment under the bond and, to restrain Tai Ping from paying on Guobena`s call on the bond. On 23 April 1998, the injunction was discharged by Judicial Commissioner Lee Seiu Kin on Guobena`s application. New Civilbuild lodged an appeal (in CA 139/98) against the order setting aside the injunction but the appeal lapsed when New Civilbuild went into liquidation. As a result of its liquidation, New Civilbuild were ordered to furnish security ($15,000) for Guobena`s costs.

After the injunction was discharged, Guobena commenced an action (Suit 57/98) against Tai Ping and obtained summary judgment on the basis that the bond was payable on demand. Pursuant to the summary judgment, Tai Ping paid Guobena the sum of $1,642,045 with interest and costs; Tai Ping did not appeal against the summary judgment.

The pleadings

In this action, New Civilbuild claimed against Guobena for $2,122,743.29 arising from damages suffered and costs incurred as a result of the delay which, they contended, was caused by Guobena. New Civilbuild also sought to recover from Guobena retention moneys amounting to $335,511.33 and outstanding progress claims (Nos 23 and 26) of $1,478,470.62 for work already completed. In total, the amount claimed by New Civilbuild was $3,936,725.24.

In addition to their monetary claims, New Civilbuild also sought a declaration that Guobena`s call on the bond was fraudulent and/or unconscionable and prayed for repayment of the sum received by Guobena under the bond.

Guobena denied New Civilbuild`s claims and counterclaimed for expenses incurred in completing alleged uncompleted works, supplying materials to New Civilbuild and making payments on New Civilbuild`s behalf to suppliers, sub-contractors and other third parties. These expenses amounted to $5,702,309.41. After deducting the progress payments admitted to be owed to New Civilbuild and the amount received by Guobena under the bond, the amount counterclaimed by Guobena against New Civilbuild in respect of such expenses was $270,913.36. Guobena also counterclaimed $3m for liquidated damages for the delay in completion. As for their call on the bond, Guobena pleaded that it was proper and not fraudulent or unconscionable.

On its part, Tai Ping counterclaimed against New Civilbuild (and Guobena) repayment of the sum paid out on the bond (with interests and costs on an indemnity basis) and also sought declaratory relief that the call on the bond was fraudulent and or unconscionable and, that Guobena should refund to Tai Ping the judgment sum (totalling $1,694,457.10) the former received in Suit 57/98.

Issues

At the outset, I had informed the parties that I would only decide liability on the issues involved and, depending on my findings, the Registrar would assess damages at a later stage if necessary. The following issues arise for determination:

(i) was the delay in completion of the project caused by New Civilbuild or Guobena;

(ii) are Guobena liable to New Civilbuild for the variation works claimed;

(iii) are Guobena liable to pay New Civilbuild the retention moneys and progress claims Nos 23 and 26;

(iv) are Guobena entitled to claim from New Civilbuild the expenses allegedly paid on the latter`s behalf;

(v) are Guobena entitled to claim liquidated damages against New Civilbuild;

(vi) was Guobena`s call on the bond fraudulent and or unconscionable;

(vii) were Guobena entitled to retain the sum received under the bond without accounting for the same; and

(viii) should the court rule that Guobena`s call on the bond was fraudulent and or unconscionable or, that the sum received was overpaid, whether Tai Ping are entitled to be refunded the judgment sum received by Guobena.

I shall proceed to deal with each of the issues in turn.

The cause(s) of delay

In the course of the 15-day trial, New Civilbuild adduced evidence from four witnesses, namely, their executive-director cum project manager Gee Kim Fah (`Gee`), their contracts manager Foo Yoke Ching (`Foo`), their site engineer (`Lin Peide`) and their site foreman (`T Kathiravan`).

a The plaintiffs` case

New Civilbuild started work under the sub-contract on 21 September 1995 when they were given possession of the project site. The original completion date (21 April 1997) could not be adhered to due to numerous delays caused by Guobena. Gee (PW1) testified that the delays were due to:

(i) failure to provide a site ready for New Civilbuild to carry out the works;

(ii) repeated failures and/or delays on Guobena`s part in submitting the required structural or construction plans and drawings, rendering New Civilbuild unable to start and or to continue construction works. This was particularly true of the first storey deck - the complete set of plans were only submitted in August 1997, well after the completion date;

(iii) Guobena made various corrections and or amendments to the structural or construction plans and drawings, often with little or no prior notice, resulting in abortive works; and

(iv) amendments to construction plans and drawings which led to New Civilbuild having to carry out variation works, causing delay in the completion of the works.

Gee testified that between December 1995 and October 1997, he had made several written requests to Guobena for extensions of time under the sub-contract and Guobena had never indicated that they would reject those requests (NE 62D-E). Instead, New Civilbuild were asked to proceed and had various progress payments paid to them along the way; they were therefore led to believe that their requests for extensions of time had been acceded to or at least, that their requests would not be rejected. Guobena on the other hand (according to Foon Hoong Fatt), claimed that despite repeated reminders, New Civilbuild had failed to submit the critical path of their construction programme (highlighting the affected works) to substantiate their claim for and to warrant the granting of, extensions of time for the sub-contract works.

Gee asserted he had submitted a construction schedule (see 2AB263) in which New Civilbuild had outlined the various timeframes in which various items of work were to be completed. That construction schedule however, was prepared on the basis of certain underlying assumptions, which, inter alia, included: that the site would be ready for New Civilbuild to proceed without any hindrance, drawings would be complete with full details of beams, slabs and columns in terms of depth,...