Sembawang Engineers and Constructors Pte Ltd v Covec (Singapore) Pte Ltd

• Jurisdiction: Singapore
• Judge: Nathaniel Khng AR
• Judgment Date: 10 December 2008
• Neutral Citation: [2008] SGHC 229
• Court: High Court (Singapore)
• Published date: 23 February 2009
• Year: 2008
• Plaintiff Counsel: Mohan Reviendran Pillay and Toh Chen Han (MPillay)
• Defendant Counsel: Lye Hoong Yip Raymond and Yeo Wen Si Cheryl-Ann (Pacific Law Corporation)
• Subject Matter: Arbitration,Contract
• Citation: [2008] SGHC 229

10 December 2008 Judgment reserved

Nathaniel Khng AR:

Introduction

1 This is an application by the plaintiff, Sembawang Engineers and Constructors Pte Ltd (“the Plaintiff”), for a stay of the counterclaim of the defendant, Covec (Singapore) Pte Ltd (“the Defendant”), pursuant to an arbitration agreement.

Background facts

2 The Plaintiff is a Singapore-registered limited exempt private company, which is in the business of, inter alia, mixed construction activities, including building construction and major upgrading works. The Plaintiff was at all material times the main contractor in a project awarded by the Land Transport Authority of Singapore (LTA) for the design, construction and completion of the works known as the “Kallang Paya Lebar Expressway C421–ECP to Nicoll Highway”.

3 The Defendant is a Singapore-registered limited private company, which is in the business of, inter alia, building construction. By a contract referred to as “Sub-Contract for Reinforced Concrete Works – Package 1” awarded on 26 April 2002 (“Sub-Contract 1”), the Plaintiff engaged the Defendant as a subcontractor to carry out reinforced concrete works ( “Sub-Contract Works 1”). During the progress of Sub-Contract Works 1, by a second contract referred to as “Sub-Contract for Reinforced Concrete Works – Package 2” awarded on 3 February 2005 (“Sub-Contract 2”), the Plaintiff engaged the Defendant to carry out further reinforced concrete works ( “Sub-Contract Works 2”).

4 Under Sub-Contract 1, the Defendant was obliged to complete Sub-Contract Works 1 within the period of 26 April 2002 to 1 November 2004. Pursuant to cl 27.4 of Sub-Contract 1, under certain circumstances, the Defendant was entitled to an extension of time upon application to the Plaintiff. Pursuant to cl 29 of the Sub-Contract 1, the Plaintiff was entitled to liquidated damages at the rate of S$41,000 for each day of delay by the Defendant in completing the whole of Sub-Contract Works 1. The Defendant was only able to complete Sub-Contract Works 1 on 20 September 2007. Prior to completion, no application had been made for an extension of time. On account of the 1,049 days of delay from 1 November 2004 to 20 September 2007, the Plaintiff commenced the present proceedings to recover liquidated damages of S$43,009,000 (ie, 1,049 days x S$41,000).

5 The gist of the Defendant’s version of events is that the delay had been caused by the Plaintiff’s own conduct. The Defendant was not able to commence work on Sub-Contract Works 1 immediately upon its appointment as a sub-contractor, as it was told by the Plaintiff’s Project Director, Mr Lim Kok Hin, that work was only to be commenced upon the instruction of the Plaintiff. The Plaintiff subsequently declined many of the Defendant’s requests to commence work and revised the schedule and sequence of the work to be done. The Plaintiff only gave the Defendant instructions to commence work in 2003 and work was commenced on or about 13 June 2003. Subsequent to the commencement of work, access to the site was given incrementally by the Plaintiff, and there were work stoppages caused by the Plaintiff and other restrictions on the work which could be done as imposed by the Plaintiff. These factors, and other delays, led to the progress of the work being impeded. In fact, the delay in completion had never been an issue between the parties. At no time was there any warning given that the work done was behind time. Indeed, there were representations made by representatives of the Plaintiff that Sub-Contract Works 1 had been completed on time and that the Defendant was not responsible for any delay in completion.

6 In the circumstances, the Defendant has contended that the Plaintiff’s conduct throughout the project amounted to either a variation of the contract as to the commencement date of Sub-Contract Works 1, a collateral contract, a partly written and partly oral contract, a waiver, or an estoppel under which there was detrimental reliance. In addition, the Defendant has sought to set-off any liability to the Plaintiff with the money owed to it by the Plaintiff and the losses caused to it by the Plaintiff, which is alleged to be as follows:

(a) S$3,715,015.46 for the actual works which had been completed under Sub-Contract 1;

(b) S$1,692,248.15 for the actual works which had been completed under Sub-Contract 2;

(c) a retention sum under Sub-Contract 1 amounting to $1,141,155.31 which had been withheld by the Plaintiff;

(d) a retention sum under Sub-Contract 2 amounting to $752,322.85 which had been withheld by the Plaintiff;

(e) losses amounting to S$21,184,900 which was sustained as a result of the delays to the progress of its works; and

(f) the damages and costs it incurred by accelerating the work in order to mitigate the delay.

7 All of the moneys, losses, damages and costs which are claimed in the set-off are also the subject of a counterclaim (“the Counterclaim”). The Plaintiff subsequently took out the present application to stay the Counterclaim, pursuant to arbitration agreements found in cl 40.1 of Sub-Contract 1 and Sub-Contract 2. The said sub-clause, which is identical in both Sub-Contract 1 and Sub-Contract 2, provides for the following:

In the event of any dispute or difference between the [Plaintiff] and the [Defendant], whether arising during the execution or after the completion or abandonment of the Sub-Contract Works or after the termination of the employment of the [Defendant] under the Sub-Contract (whether by breach or in any other manner), with regards [sic] to any matter or thing of whatsoever nature arising out of the Sub-Contract or in connection therewith, then either Party shall give to the other notice in writing of such dispute or difference and such dispute or difference shall be finally resolved by arbitration in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this Clause. The tribunal shall consist of one (1) arbitrator whose appointment as arbitrator shall be agreed by the Parties in writing, or failing such agreement as may be appointed on the request of either Party by the Chairman of the Singapore International Arbitration Centre and in either case, the award of such arbitrator shall be final and binding on the Parties. The arbitration proceedings shall be in the English language. Provided Always [sic] that the [Plaintiff] shall have the sole discretion to commence proceedings in the courts of Singapore and/or any other jurisdiction if the [Plaintiff] deems fit.

Plaintiff’s submissions

8 Counsel for the Plaintiff asserted that the Counterclaim would mostly be nothing more than bare assertions and should be regarded as frivolous and vexations. If they were genuine, the Defendant would have begun arbitration proceedings earlier, as Sub-Contract Works 1 was completed on 20 September 2007 and Sub-Contract Works 2 was completed on 7 July 2008. However, the Counterclaim was only brought after the Plaintiff commenced the present proceedings in court.

9 The bona fides of the Counterclaim aside, the language of cl 40.1 is such that the counterclaim would surely fall under the ambit of the arbitration agreement found therein. If the Counterclaim falls within the scope of the arbitration agreement, the Defendant would be in breach of the arbitration agreement, and it would follow that the proceedings should be mandatorily stayed. This would be because:

(a) the arbitration agreement in cl 40.1 states that the arbitration will be in accordance “with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force”;

(b) r 32 of the applicable rules of the Singapore International Arbitration Centre, viz, the SIAC Rules, 3rd Edition, 1 July 2007 (“the SIAC Rules 2007”), states that the applicable law of the arbitration will be the International Arbitration Act (Cap 143A, 2002 Rev Ed);

(c) the domestic arbitration legal regime which is set out in the Arbitration Act (Cap 10, 2002 Rev Ed) will not be applicable as s 5(1) of the International Arbitration Act stipulates that a domestic arbitration will be treated as an international arbitration where parties agree in writing that Part II of the International Arbitration Act or the United Nations Commission on International Trade law (UNCITRAL) Model Law on International Commercial Arbitration (“the Model Law”) is to apply to the arbitration;

(d) in the circumstances that a claim falls within the ambit of an arbitration agreement which contemplates an international arbitration, s 6 of the International Arbitration Act requires the court to mandatorily grant a stay where the application for a stay is made by the applicant “before delivering any pleading or taking any other step in the proceedings” and the arbitration agreement is not “null and void, inoperative or incapable of being performed”; and

(e) the application for a stay was made before the Plaintiff had delivered any pleading or taken any other step in the proceedings, and the arbitration agreement in cl 40.1 cannot be said to be null and void, inoperative or incapable of being performed.

Defendant’s submissions

10 Counsel for the Defendant submitted that it would be inaccurate to state that the Counterclaim is baseless as a substantive Defence and Counterclaim had been filed. Indeed, if there were any tactical shenanigans, it would be on the part of the Plaintiff, as the very first time the delay in completion was broached was 4 September 2008, which would be many months after work had been completed, when the parties were in the midst of settling their accounts. Having suddenly brought up the issue of the delay, the Plaintiff then commenced court proceedings barely two weeks later.

11 Since the two parties are local entities, the relevant statute would be the Arbitration Act, which gives the...