San International Pte Ltd (fomerly known as San Ho Huat Construction Pte Ltd) v Keppel Engineering Pte Ltd

• Jurisdiction: Singapore
• Judge: Karthigesu JA
• Judgment Date: 16 September 1998
• Neutral Citation: [1998] SGCA 59
• Docket Number: Civil Appeal No 57 of 1998
• Date: 16 September 1998
• Year: 1998
• Published date: 19 September 2003
• Plaintiff Counsel: Christopher Chuah and Tan Liam Beng (Drew & Napier)
• Citation: [1998] SGCA 59
• Defendant Counsel: Menon Sundaresh And Desmond Ong (Rajah & Tann)
• Court: Court of Appeal (Singapore)
• Subject Matter: Main contractor terminates sub-contract,Whether main contractor has power to direct re-commencement of excluded works,Sub-contractor refuses to recommence works except on certain conditions,Main contractor reinstates excluded works and orders sub-contractor to recommence works,Breach,Repudiatory breach,Subsequent dispute,Whether repudiation justifies main contractor terminating sub-contract,Whether sub-contractor's conduct amounts to repudiatory breach,Main contractor and sub-contractor agree to exclude certain works from sub-contract,Building sub-contract,Contract

Judgment:

KARTHIGESU JA

Cur Adv Vult

(delivering the judgment of the court): This is an appeal from the decision of Kan Ting Chiu J on a preliminary issue of law, agreed between the parties, which arose in an action brought by the respondents (Keppel Engineering) as main contractors against their sub-contractors, the appellants (San International) for the construction of a two-storey warehouse with facilities known as W&T Distripark Phase II.

2.The sub-contract covered, inter alia, the PUB substation, transformer room and switch room, ancillary areas, repair shed and wash area, guard house and administrative office (phase A of the project), for which works the projected completion date was 29 May 1995 and other works (phase B) which included the architectural works of the office located in the main warehouse building (the main office works) the completion date for which was projected to 29 December 1995.

3.The letter of award issued after San International had commenced the sub-contract works was dated 17 April 1995. It provided that the form of contract shall be the `Conditions of Sub-Contract for use in conjunction with the Main Contract, First Edition 1980` (`the sub-contract`) and specified the following as the sub- contract documents: (a). tender submission dated 27 January 1995;

(b). revised tender submission dated 29 January 1995;

(c). revised tender submissions dated 4 February 1995;

(d). the main contract documents including the bills of quantities, specifications and construction drawings;

(e). the addendum issued by Keppel Engineering dated 19 January 1995;

(f). the letter of intent issued by Keppel Engineering dated 7 February 1995.

The letter of award also specified certain milestone dates to be achieved by San International in the execution of the sub-contract works and further provided that all sub-contract works related to applications for clearances by FSB/PUB/Sewerage Departments must be completed by 29 October 1995 so that applications to these departments may be made in time to enable the employer to obtain the temporary occupation permit (TOP) by 29 December 1995 failing which the liquidated damages provision provided for in the sub-contract would apply.

4.The preliminary issue for the court, it appears to us, was not framed and if it was, it was not framed with due particularity. It seems to have just arisen during the trial of the action. The learned judge referred to it in his judgment in these terms:

2 The action arose out of the defendants` (San International`s) refusal to complete the architectural works for the office located in the main warehouse building. The plaintiffs (Keppel Engineering) treated that as repudiation by the defendants, and terminated the sub-contract. The defendants denied that they had repudiated the sub-contract and counter-claimed on the basis that the plaintiffs were in breach.

3 The parties agreed that the question whether the plaintiffs were entitled to terminate the sub-contract be determined as a preliminary issue.

San International`s counsel in his submissions before us said:

This appeal arose (sic) from the judgment of Justice Kan Ting Chiu in respect of a preliminary issue, namely, whether the appellants had by their conduct repudiated the sub-contract with the respondents such that the respondents could lawfully rescind the sub-contract. The learned judge found in favour of the respondents. For the purposes of the trial of the preliminary issue, the parties had agreed on a statement of facts.

And Keppel Engineering`s case says this:

1 On 26 February 1998, the Honourable Justice Kan Ting Chiu delivered judgment on a preliminary issue. The preliminary issue raised was whether the appellants by their conduct, in particular the period between 17 and 29 November 1995, had repudiated their obligations under their sub-contract with the respondents, such that the respondents were entitled lawfully to rescind the sub-contract. The learned judge found in favour of the respondents and this appeal has been brought against that judgment.

5.The so called agreed statement of facts stated that four facts were agreed and that five further facts were not agreed but San International considered them relevant. The four agreed facts were: (i) that the bill value of the main office works was approximately $563,000; (ii) that the adjusted sub-contract sum was approximately $11.1m and that as at the date of termination the value of all outstanding work was approximately $2.3m in Keppel Engineering`s estimation and approximately $1.8m in San International`s estimation. Further that in Keppel Engineering`s estimation San International had completed about 79% in value of the adjusted sub-contract sum; (iii) that following the 28 October 1995 meeting between the parties Poh Jet had taken over the main office works and had worked on it from 1 November to 17 November; (iv) that at the date of termination of the sub-contract, the works were in delay but there was no admission of either party as to the cause of the delay - it could be caused by the other sub-contractors. Later the parties also agreed that Keppel Engineering could give directions or instructions to San International under the terms of the sub-contract and that an analysis on the claims submitted by San International was reflective of the proportion of the main office works left undone. Some photographs showing the state of construction of the main office works as at 10 November 1995 were also agreed. We will reserve our comments on the agreed statement of facts for later.

6.The circumstances leading to the termination of the sub-contract by Keppel Engineering began on 28 October 1995 when the parties were in discussions for Keppel Engineering to take over from San International the main office works. What actually transpired at that meeting has not been agreed upon and does not form part of the factual basis of the preliminary issue. It is however agreed that following that meeting Keppel Engineering instructed another of their sub-contractors, Poh Jet Construction Co (Poh Jet) to take over the main office works and to complete the same. Poh Jet commenced work on 1 November 1995 and continued until 17 November 1995.

7.Following the meeting of 28 October 1995 a dispute arose between the parties as to the basis on which the main office works were taken out of the sub-contract works. The dispute first manifested itself when Keppel Engineering wrote to San International on 6 November 1995, in connection with taking the final measurements of the sub-contract works done up to 28 October 1995. Keppel Engineering observed that:

it is agreed that Keppel Engineering will take back all the remaining architectural works for the main office from 30 October 1995. As confirmed by you during the meeting, (this refers to 28 October meeting) the reason for taking over the said works is due to the lack of manpower available from your company to complete the said works.

8.San International replied on 9 November 1995. They said that Keppel Engineering`s letter of 6 November was not a true reflection of the meeting of 28 October. They continued:

The reason for you to assume the remaining architectural works for the main office is the convenience you may have in liaison and co-ordination of your M&E works for which you are totally responsible for.

For the interest of the project and your desire to assume the remaining works for the sake of ease of liaison and co-ordination, we are in total agreement that you proceed as you desired. We have no qualms about it.

However, the omission of such works shall follow the working mechanism of variation clause as stipulated in the agreement.

9.The relationship between the parties deteriorated after this as the ensuing exchange of correspondence shows: (i). Keppel Engineering retaliated on 17 November 1995. They said that they were shocked that San International were disputing the agreement made on 28 October 1995; they had agreed to take over the main office works at the request of San International because San International did not have the resources to carry out and complete the works. Keppel Engineering`s intention was to mitigate the impact of San International`s breach on the progress of the works. Keppel Engineering said that since San International were now disputing the basis of the take over and asserted that they could carry out the works themselves, Keppel Engineering were not willing to continue to provide their assistance and would remove their workers (brought in to complete the works) from the site immediately. Finally Keppel Engineering said and we quote from their letter:

Accordingly, we hereby direct you to commence performance of the said works immediately. We also direct you to provide us with your revised work schedule within seven days hereof to show us how you intend to carry out the said works in order to comply with the contract completion date.

(ii). San International responded on 20 November 1995 stating

(a). that it was clear that Keppel Engineering had `reneged` on their decision to exclude the main office works from the sub-contract, an exercise Keppel Engineering clearly had the option to do by reason of cl 3 of Keppel Engineering`s letter of intent dated 7 February 1995, which formed part of the sub-contract documents;

(b). that Keppel Engineering had no express authority under the sub-contract to order San International to repossess the main office works;

(c). that San International had acted on Keppel Engineering`s decision on 28 October 1995 to exclude the main office works from the sub-contract by terminating their own sub-contractor for the execution of the works. Since engaging a new sub-contractor would take time `in view of the tight labour situation` and San International `would have to pay more than the market rate in order to get one urgently for the work you (Keppel Engineering) must undertake to reimburse us (San International)...