Ohbayashi-Gumi Ltd v Kian Hong Holdings Pte Ltd

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 13 May 1987
• Neutral Citation: [1987] SGCA 11
• Docket Number: Civil Appeal No 63 of 1983
• Date: 13 May 1987
• Year: 1987
• Published date: 19 September 2003
• Plaintiff Counsel: David Gardam QC and CS Wu (Donaldson & Burkinshaw)
• Citation: [1987] SGCA 11
• Defendant Counsel: Patrick Garland QC and Cheng Tim Pin (Yap & Yap)
• Court: Court of Appeal (Singapore)
• Subject Matter: Building and Construction Law,Measurement contracts,Building and construction contracts,Interpretation,Measure and value contract,Correct method of measuring for payment,Sub-contract for land reclamation project work

Cur Adv Vult

The reclamation of land from the sea to which this appeal related required the erection of extensive granite bunds, which included the laying of filter cloth. The function of the bunds as built with the filter cloth was obviously to keep out the sea and to keep in the land fill. This appeal concerned the correct method of measuring for payment the quantity of granite stones used and the quantity of filter cloth laid. With regard to the filter cloth laid, the further and third question arose as to whether the respondent was liable to pay for the value of filter cloth used in excess of 20% over the designed area. The High Court answered in favour of the respondent all three questions which the arbitrator referred to it by the consent of both parties under the Arbitration Act and the appellant was ordered to pay the respondent the aggregate sum of $2,068,272.06 and costs. Against those answers this appeal was brought before us.

The building of the bunds was part and parcel of a major land reclamation project at the south-eastern foreshores of Singapore and known as the East Coast Reclamation Scheme, Phase V (Telok Ayer Basin) Contract No 4/22/74 which the appellant (hereinafter referred to as the main contractor) undertook to execute, complete and maintain for the Housing and Development Board (hereinafter referred to as the employer) for the lump sum of nearly $89m under the main building agreement dated 3 April 1974. The main contract was accepted by both parties before us as a lump sum contract.

By a sub-contract dated 13 July 1974 the main contractor engaged the respondent (hereinafter referred to as the sub-contractor) to supply and place the required quantity of granite stones of the type as specified, to place the filter cloth supplied by the Main Contractor and to build some temporary drainage works. We take care at this stage not to mention the consideration payable to the sub-contractor because its ascertainment shall provide the answers to the questions raised in this appeal.

So far as the nature of the sub-contract was concerned, it was common ground that it was a measure and value contract in contra-distinction to that of the main contract which, as we had earlier noted, was a lump sum contract. Accordingly, this distinction has to be borne in mind and great care has to be taken when one seeks to apply by incorporation any of the terms of the main contract to the sub-contract in pursuance of and so far as it is permitted by cl 2 of Pt II of the sub-contract. Under that clause, the terms and conditions of the main contract which were incorporated were those (1) which related to the sub-contract works; and (2) which were not repugnant or inconsistent with the sub-contract. The predominance of the sub-contract was emphasised by cl 20 of the sub-contract by which it was agreed that in a conflict the terms of the sub-contract shall prevail over the terms contained in the main contract.

It is necessary to recite the factual background in which the sub-contract was concluded and to describe in some detail the sub-contract works undertaken by the sub-contractor before we turn to, as we must, the relevant provisions of the sub-contract which we have to construe. As to the background, one Mr Kataoka of the main contractor met one Mr Toh Kian Chuan of the sub-contractor in January 1974. This meeting was followed by a quotation submitted by the sub-contractor. A number of meetings between their representatives followed and they resulted in the sub-contractor sending to the main contractor two revised quotations in the form of two letters dated 7 February 1974 and 15 April 1974. These letters were subsequently incorporated in the sub-contract. As a particular paragraph in the letter of 7 February 1974 is of pivotal importance to the outcome of this appeal, we will return to it when we set out the relevant terms of the sub-contract. At this stage, we need merely note that the second quotation was about 4% less than the first quotation, that the quantities of materials to be supplied and work to be done in both the quotations remained essentially the same, and that the sub-contractor began work in May 1974 with the parties proceeding and working on the basis of the sub-contractor`s letters of 7 February and 15 April 1974 until the sub-contract was signed on 13 July 1974.

With regard to the scope and nature of the sub-contract works, the layout of the extensive stone bunds to be built was marked out in a contract plan. Two sets of bunds were to be built. They were to be laid to the south-west of Clifford Pier where the fill site was described as Fill Site B and to the south-east of Clifford Pier where the fill site was marked as Fill Site A. One of the principal contract drawings showed the typical sections of the stone bunds and of the sea-bed immediately below and in the way of the bunds to be built for Fill Site A and Fill Site B. Before the sub-contractor could begin any work, the sea-bed supporting and in the way of the bases of the stone bunds had to be prepared. A trench in that portion of the sea-bed had to be dredged down to and just below the firm to stiff layer and filled with sand. The trench work was not the responsibility of the sub-contractor. The levels of the sand-filled channel would be measured by the employer. After the measurements, the sub-contractor was to place the filter cloth, which was a strong cloth made of polyvinylidene yarn of 0.553mm thickness, on top of the sand which would be more or less at sea-bed level except in the case of Fill Site B where the sand bed was elevated. The main contract required that the overlapping of the filter cloth shall not be less than one meter.

The next stage of the construction of the bunds would constitute the bulk of the sub-contractor`s work. It had to supply by pontoons or iron barges Class A stones (which were specified as granite rock between the sizes of 100kg and 200kg per piece) and place them on top of the filter cloth to the satisfaction of the Superintending Officer appointed by the employer until a bund was built and risen from the sea. To place these Class A stones, the pontoon loaded with these stones had to be positioned directly over the sea-bed where the stones were to be dumped. The stones were then pushed over the sides of the pontoon. When the bund was built up and it rose from the sea-bed to a height which got it in the way of the floating pontoon, the rest of the Class A stones were then placed in position by means of a floating crane.

The smaller Class B stones (which was specified as granite stones between the sizes of 0.2m and 0.1m) would then be placed on the landward slopes of the bunds on top of the Class A stones. After the placement of these Class B Stones on the landward slopes of the bunds, the filter cloth would be brought and placed round the landward toes of the bunds and placed over the top of the Class B stones. In this way when the land fill material was dumped within the fill sites and it covered the landward slopes of the bunds such fill materials would be laid over or against the filter cloth which would prevent leaching a process by which soluble matter from the fill sites coming into the bunds was removed by sea water.

As to the seaward slopes of the stone bunds the sub-contractor was required to place filter cloth on top of the Class A stones. And on top of the filter cloth, the sub-contractor was further required to supply and place stones referred to as rip rap which were uniformly graded facing stones of both Class A and Class B stones.

It has to be noted that the method of placing the stones to build the bunds from the sea-bed, which was adopted in this project, would have inevitably involved (1) the loss of stones which were carried away by sea currents; and (2) the dropping and placing of stones beyond or outside the design profiles of the bunds which could happen in spite of the sub-contractors exercise of due care and skill, given the underwater nature of the work. The amount of waste material, which is the sum of the gross amount used minus the design/nett quantity, was found by the Arbitrator to be due to four phenomena, namely (1) erosion of materials caused by high flows from the Stamford Canal; (2) settlement of the foundations; (3) erosion by action of sea waves; and (4) erosion caused by movement of the elevated sand bed. In these circumstances, it is understandable why a measure and value instead of a lump sum sub-contract was chosen. However, it has to be stated that, no person could reasonably be expected to pay for any callous or wanton overdumping of the granite stones nor for any performance which would be in breach of contract. The granite stones must be placed, as nearly as practicably possible, within the profiles of the bunds as designed and specified in the contract drawings. It is thus equally easy to understand, for example, the necessity for a provision such as the second paragraph of cl 46 of the main contract which read as follows:

Class A stones as specified shall be dumped on the filter cloth and shall be built up as evenly as possible to the lines, levels and slopes on the drawing.

It should also be noted that in this appeal no breach of contract has been even suggested against the sub-contractor. The main contractor has not in the course of the arbitration proceedings, in the High Court below or before us alleged any breach of any term of the sub-contract so far as the sub-contractor`s execution of the works was concerned. It is therefore not the case that the sub-contractor is criticised for any unlawful overdumping of the stones or, consequentially, for the excessive use of the filter cloth which might have been in breach of any term of the sub-contract.

We must now set out the relevant provisions of the sub-contract. The sub-contract was divided into five parts which were named Pts I to V (both inclusive). It had an Appendix which set out...