Rotol Projects Pte Ltd v CCM Industrial Pte Ltd

• Jurisdiction: Singapore
• Judge: Quentin Loh J
• Judgment Date: 15 April 2014
• Neutral Citation: [2014] SGHC 72
• Court: High Court (Singapore)
• Docket Number: Suit No 255 of 2011
• Year: 2014
• Published date: 17 April 2014
• Hearing Date: 12 August 2013,12 July 2013,26 August 2013,10 July 2013,11 July 2013,23 August 2013,09 July 2013
• Plaintiff Counsel: John Chung and Maurice Tan (Kelvin Chia Partnership)
• Defendant Counsel: Ng Hweelon (Legal Clinic LLC)
• Subject Matter: Building and Construction Law,Building and construction contracts,Lump sum contract,Terms
• Citation: [2014] SGHC 72

Quentin Loh J:

This judgment is for consolidated Suits No 255 and No 736 of 2011. As the proceedings have been bifurcated, quantum will be assessed at a later stage. This judgment deals solely with the question of liability. I gave oral judgment on 4 March 2014 and the defendant has appealed against my decision.

Background facts

Rotol Projects Pte Ltd (“the Plaintiff”) brought these proceedings to recover sums due to it under an aluminium and glazing sub-contract entered into with the defendant. CCM Industrial Pte Ltd (“the Defendant”) was the main contractor employed by Park Regis Investments Pte Ltd (“the Employer”) for the construction of a 7-storey block hotel/office development with a basement carpark on Lot 353X TS07 and Lot 462W TS08 at the intersection of Merchant Road and Keng Cheow Street, now known as the Park Regis Hotel (“the Project”). The Project architects were RSP Architects Planners & Engineers Pte Ltd (“the Architects”) and the quantity surveyors were WT Partnership (“WTP”).

The Defendant employed the Plaintiff to carry out the aluminium and glazing works for the Project pursuant to a lump sum sub-contract (“the Sub-contract”) priced at S$3.15m. I pointed out to parties that the opening paragraph of the Defendant’s works order dated 2 July 2009 (“the Defendant’s Works Order”) stated that parties “shall enter into a subcontract agreement … in accordance with the following terms and conditions”, ie, the terms and conditions of the Defendant’s Works Order and that there were some differences when compared to the terms and conditions in the Plaintiff’s quotation (Reference No RP010609) dated 8 June 2009 (“the Plaintiff’s Quotation”).¹ Parties nevertheless agreed that the Sub-contract consisted of both the Plaintiff’s Quotation, which included a bill of quantities (“BQ”) detailing the quantity of materials to be used for the Sub-contract works and rates chargeable, as well as the Defendant’s Works Order which the Plaintiff signed and accepted on 7 July 2009.² Parties further agreed that no oral terms were being alleged or relied on.³

The agreed issues

The parties have helpfully jointly put forward an agreed list of issues, as follows: whether the Plaintiff was entitled to be paid for variations to the subcontract over and above the Sub-contract sum of $3.15m as set out in Serial No A of Annex A of the amended consolidated statement of claim (“the CSOC”); whether the Plaintiff was entitled to be paid for the additional works carried out in accordance with the design drawings issued by the Architects, as set out in Serial No B of Annex A of the CSOC; whether the Plaintiff caused or contributed to the 145 days of delay (from June to October 2010) to the completion of the main contract works and if so, how many days of delay did the Plaintiff cause; whether the “main contractor’s master program” in cl 4 of the Defendant’s Work Order referred to the Master Program Revision 9 dated 13 June 2009 (“the Rev 9 Program”) or the Master Program Revision 11 dated 22 September 2009 (“the Rev 11 Program”); whether the Plaintiff was entitled to payment and/or in breach of contract in the supply of gypsum blocks; whether the Plaintiff was liable for the Defendant’s back-charges; and whether the Defendant was liable for the Plaintiff’s financing charges. Subsequently at trial, the Parties agreed that for the issue of back-charges, both liability and quantum will be dealt with at the quantum hearing.⁴

Analysis Issues (a) and (b), variations and additional works, Annex A, CSOC

It will be convenient to deal with these two issues together as there are some common issues and defences raised to the Plaintiff’s claims.

The meaning of a lump sum contract

In its pleadings and its opening statement, the Defendant’s contention was that this is a lump sum contract, ie, the Plaintiff is not entitled to any additional payment other than the agreed sum of $3.15m for all and any work done. There was to be no re-measurement and therefore no re-calculation of the Sub-contract sum payable by the Defendant to the Plaintiff. The Plaintiff contended that although this is a lump sum contract, if there were any changes to the design or work to be done, then the lump sum is subject to the usual additions and/or omissions, as the case may be.

The key terms of the Sub-contract as contained in the Plaintiff’s Quotation of three pages were as follows:⁵ Terms & Conditions 1. Any changes in the works & designs as per approved shop-drawings, shall be subject to variation order 2. Goods supplied will remain the property of [the Plaintiff] until the certified amount is fully paid 3. It’s [sic] shall be a Lump Sum Contract The third page of the Plaintiff’s Quotation contained items comprising the aluminium and glazing works based on approved shop drawings with quantities, unit rates and sub-total amounts which added up to $3,185,000 to which a discount of $35,800 was applied giving a rounded down cost of $3.15m.

The key terms in the Defendant’s Works Order, which was signed by the Plaintiff, were as follows:⁶

1 Scope of Works To [s]upply, fabricate and install external aluminium and glazing works for the abovementioned project with the total lump sum amount of S$3,150,000.00 (Singapore Dollar: Three Million One Hundred Fifty Thousand only). The breakdown of cost shall be referred to the quotation ref: RP010609 dated 08 June 2009.

…

3 Terms of Payment Monthly progressive payments in accordance to standard SOP.

LC For procurement of glass and aluminium extrusion.

There will be 10% retention of the contract amount. 5% retention sum will be released upon completion of work and balance 5% will be 6 months upon completion of work.

At this juncture, it is important to highlight the context in which the Sub-contract was entered into. The Sub-contract documentation was typical of an informal type of construction subcontract and did not follow any of the usual building contract standard forms. The parties were not overly sophisticated and the Sub-contract documentation was unfortunately wanting in clarity and incomplete in many respects. The testimonies of the Plaintiff’s former general manager Steven Chow Mun Poh (“Mr Chow”), the Defendant’s senior project manager Gan Chee Keong (“Mr Gan”) and chief executive officer, Liew Sen Keong (“Mr Liew”) clearly demonstrated imprecise usage of technical contractual terms within the construction industry.

During the trial, some confusion arose over the use of the terms “variations”, “additions” and “omissions” by the parties. In law, the term “variation” refers to a change to the work which a contractor was originally contracted to do for a lump sum price which could comprise (but is not restricted to) any increase or decrease in the quantity of any part of the works; any changes to the character, quality or nature of any part of the works as well as “additions” and “omissions”: Chow Kok Fong, Law and Practice of Construction Contracts (Sweet & Maxwell Asia, 4th Ed, 2012) at para 5.1. Additions and omissions are thus variations in the construction industry and in construction law. Moreover, most standard form construction contracts allow for variations within as well as outside the original scope of the works and set down a procedure for a variation.

However, whilst the Plaintiff used the terms “omissions” and “additions” to refer to those changes that fell within the Sub-contract, it used the term “additional works” to refer to those changes that fell outside the Sub-contract. As noted above though, in the context of building and construction law, all of these fell to be “variations” in law.

Proceeding on its understanding of the above terms, the Plaintiff averred that it had, in accordance with the Defendant’s instructions, carried out its work according to revised drawings issued by the Architects that, inter alia, changed the curtain walls and aluminium cladding designs of the external elevations of the building.⁷ The Plaintiff’s case is that it was entitled to payment for these variations to the Sub-contract works, as set out in Serial No A of Annex A of the CSOC, brought about by the aforementioned design changes. The Plaintiff claimed for the differences in quantities arising from the variation to its Sub-contract works, calculated on the Sub-contract unit rates, in a progress payment claim dated 29 September 2010 (“Progress Payment Claim No 11”) which to date remains unpaid.

The Plaintiff further claimed payment for ten items of additional works falling outside the scope of the Sub-contract which it alleges the Defendant had instructed it to carry out in accordance with design drawings issued by the Architects.⁸ These alleged items of additional work are set out in Serial No B of Annex A of the CSOC. The Plaintiff claims for these items of additional work as variation orders (“VOs No 1–10”).⁹

In my judgment, on a true and proper construction of the contract documents, this was not a lump sum contract as contended for by the Defendant but a lump sum contract as contended for by the Plaintiff, ie, it was subject to additions to and omissions from the lump sum for any changes made to the works and design, for the following reasons: It was clear that the price of $3.15m was based on approved shop drawings, of which the Plaintiff lifted their quantities and applied their unit rates. For this reason, the terms and conditions within the Plaintiff’s Quotation contained the following: “[a]ny changes in the works and designs as per approved shop drawings shall be subject to a variation order”. The meaning of the above provision is clear—measurement of any changes, by way of additions and omissions, was to be made and the contract sum would be accordingly reduced or increased thereby. The base line for measuring changes was the approved shop drawings upon which the Plaintiff’s Quotation was based. Mr Chow’s evidence...