Soon Li Heng Civil Engineering Pte Ltd v Samsung C&T Corp and another

• Jurisdiction: Singapore
• Judge: Ang Cheng Hock J
• Judgment Date: 12 November 2019
• Neutral Citation: [2019] SGHC 267
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 439 of 2019
• Published date: 15 November 2019
• Year: 2019
• Hearing Date: 14 June 2019,09 May 2019,15 July 2019
• Plaintiff Counsel: Poon Guokun Nicholas (Breakpoint LLC)
• Defendant Counsel: Lee Peng Khoon Edwin and Er Hwee Lee Danna Dolly (Eldan Law LLP),The second defendant absent and unrepresented.
• Subject Matter: Credit and Security,Performance bond,Unconscionability
• Citation: [2019] SGHC 267

Ang Cheng Hock J: Introduction

The present dispute arises from the first defendant’s call on a performance bond (“PB”) which is provided by the second defendant, a bank. By this application, the plaintiff seeks to restrain the first defendant’s call on the PB on the ground that the call was unconscionable.

Facts Background

The first defendant was employed by the Land Transport Authority (“LTA”)¹ as the main contractor for the construction of the Marine Parade Station and Tunnels for the Thomson-East Coast Line (“the Project”).²

As the main contractor, the first defendant engaged the plaintiff as its subcontractor to carry out excavation and disposal works for the Project.³ A Re-Measurement Sub-Contract (“the Subcontract”) dated 22 April 2016 was entered into between the parties.⁴ The value of the Subcontract was about S$16.5m. Pursuant to the Subcontract, a performance bond was furnished as security for the performance and completion of the Subcontract by the plaintiff (“the PB”).⁵ By the PB, the second defendant, the first defendant’s bankers, covenanted to pay up to S$826,713.53 on the first defendant’s demand.⁶

As part of the Subcontract, the plaintiff excavated three categories of material, namely (a) soil; (b) hardcore material; and (c) ground improvement and mixed material. The site of disposal for each of the above three categories depended on the type of the material:⁷ soil was to be disposed directly to the LTA’s dumping ground, which is also referred to as the Marina East Staging Ground (“MESG”);⁸ hardcore material was to be disposed to another dumping ground sourced by the plaintiff (“plaintiff’s dumping ground”). This is because hardcore material would not be accepted by LTA at the MESG; and ground improvement and mixed material was to be disposed to an intermediate treatment site, which is referred to by the parties as “TOL” or the “plaintiff’s staging ground” (hereinafter the “TOL treatment area”), where the material would be treated. For example, ground improvement material was subjected to crushing to render the material suitable for disposal at the MESG.⁹

Payment Claim 20

On 31 August 2018, the plaintiff served Payment Claim No. 20 (“PC 20”) on the first defendant for the sum of S$3,278,935.95.¹⁰ The first defendant issued its Payment Response, in the form of a payment certificate no. 20 (“PR 20”) stating that the plaintiff should instead pay the first defendant the sum of S$167,848.99.¹¹ The dispute proceeded for adjudication proceedings (“SOP 372/2018”). The adjudicator determined that the first defendant was to pay the plaintiff S$2,473,295.20.¹² I will refer to the adjudication determination as “1AD”. It was issued on 9 November 2018.

On 15 December 2018, the first defendant issued a “Notice of Dispute” to the plaintiff on the basis that “[the plaintiff’s] claims in [SOP 372/2018] are without merit and that the adjudicator in that case has failed to consider the claims in light of the contractual provisions in the Subcontract.”¹³ This was followed shortly by a letter issued by the first defendant to the plaintiff dated 17 December 2018 where the first defendant informed the plaintiff that it was invoking its contractual right to terminate the Subcontract under clause 18.2 of the Subcontract,¹⁴ which provides that “[i]f the [first defendant] decides it is necessary for [its] convenience, then the [first defendant] may at any time by notice to the [plaintiff] forthwith terminate the Subcontract …”.¹⁵

Thereafter, on 26 December 2018, the adjudicated sum under 1AD was paid by the first defendant to the plaintiff.¹⁶

Payment Claim 24

On 31 December 2018, the plaintiff served on the first defendant its Payment Claim No 24 (“PC 24”).¹⁷

The first defendant raises an issue in relation to the final quantity of disposal

According to the first defendant, sometime in January 2019, it compared figures for the amount of materials disposed of as stated in emails sent by the plaintiff to the LTA with the contents of PC 24. The first defendant found that there were discrepancies.¹⁸

On 14 January 2019, the first defendant wrote to the plaintiff. It asserted that the plaintiff had claimed in PC 24 that the “final quantity of disposal as of 16 December 2018” was 175,978 m3. However, according to information that had been provided by the plaintiff to the LTA in an email dated 8 January 2019, the first defendant did some calculations and determined that the “final quantity of disposal” was only 136,462 m3.¹⁹ The calculations were based on certain assumptions made by the first defendant. For example, it was assumed that one could derive the volume of the disposed quantity from the weight figure used in the email to the LTA by using the conversion rate of “2000 kg/m3”. Hence, 226,875,130 kg of material which was stated by the plaintiff in its email to the LTA as having been sent from the site to the TOL treatment area as of 16 December 2018 was calculated to be equal to 113,438 m3of material. For quantities that had been transported from the site to the plaintiff’s dumping ground and the MESG, the first defendant calculated the volume of the quantities disposed of by reference to the lorry loads and an assumption that each lorry load carried 8 m3 of material.²⁰

On 29 January 2019, the plaintiff replied to the first defendant. It pointed out that the adjudicator in 1AD had already dealt with the disputes between the parties and determined the correct method of measurement to apply, as per the Subcontract, to assess the quantities of the different materials excavated and disposed of. The plaintiff asserted that its claims for payment in PC 24 was in accordance with these same methods of measurement. The plaintiff went on to describe the first defendant’s calculations in its letter of 14 January 2019 as being based on some “hitherto undisclosed” method of measurement and weight conversion formula, which was not in accordance with the terms of the Subcontract.²¹

On 7 February 2019, the first defendant replied to assert that it was entitled to “challenge in arbitration” the reasoning which the adjudicator in SOP 372/2018 had adopted in coming to his determination.²² The letter went on to state:²³

You have applied the wrong rates and/or quantity and claimed for items which you have no basis to claim for in Payment Claim No. 24 by misapplying the provisions in the Subcontract. Amongst others, you have arrived at your claim amount by mixing methods of calculation, using both drawings and lorry loads for the purpose of overlapped counting upon a single item. You have therefore consistently over-claimed in your payment claims. [emphasis in original]

In that letter, the first defendant went on to accuse the plaintiff of making a fraudulent over-claim. Further, it was stated:²⁴

We should point out that our final disposal quantity certified in Payment Certificate No. 24 is 135,850 m3, which is very close to the figure of 136,462 m3 that you have reported to the LTA. This would mean that if you have consistently applied a single method of calculation be it based on drawings (135,850 m3) or lorry (136,462 m3) there would have been no significant difference between the final quantity disposal figure reported by you to LTA and the figure claimed in your Payment Claim No. 24. [emphasis in original]

The plaintiff replied on 18 February 2019 to again point out that the first defendant was not adhering to the methods of measuring quantities that were set out in the Subcontract. The plaintiff also pointed out that the first defendant’s assertion that a figure of 136,462 m3 had been submitted by the plaintiff to the LTA was untrue because this figure had never appeared in any of the records or emails sent by the plaintiff to LTA.²⁵

The first defendant wrote on 27 February 2019 to state that it was relying on the plaintiff’s own data on the lorry loads and the weight of quantities reported to the LTA as being disposed of from the worksite. The first defendant also asserted that the conversion formula of 2000 kg/m3 was the same as that mentioned in the plaintiff’s email to LTA, that is, 16,000 kg per lorry, on the assumption that each lorry carried 8 m3.²⁶ The letter went on with the first defendant accusing the plaintiff of “persistent dishonest conduct of making inflated claims”.²⁷

The first defendant raises an issue in relation to the disposal of hardcore material

Around the same time when the first defendant raised the issue with the plaintiff in relation to the “final disposal quantity”, it also raised another issue in relation to “hardcore disposal”.

On 15 January 2019, the first defendant wrote to the plaintiff to request for clarification relating to “hardcore disposal”. It asserted that, from “official records” that the plaintiff had provided to the LTA, it could calculate that 109,365 m3 of non-hardcore material had been disposed to the MESG, with a remaining 4,073 m3 of hardcore material left at the plaintiff’s TOL treatment area. This was a far cry from the 47,040 m3 of hardcore material which, according to the first defendant, the plaintiff claimed in PC 24 had been processed by way of sieving and crushing at the TOL treatment area. One assumption used by the first defendant in this calculation, as with the issue in relation to the “final quantity disposal”, was a formula to convert weight into volume.²⁸

On 17 January 2019, the plaintiff replied to point out that volumes referred to by the first defendant were never reported to the LTA. The plaintiff also pointed out that it had never claimed that 47,040 m3 of hardcore material was processed at the TOL treatment area. It alleged that the first defendant had “cherry picked” parts of PC 24 and changed the “true meaning of [the plaintiff’s] claims.”²⁹

On 22 January 2019, the first defendant wrote to reiterate its position that there was a discrepancy with the hardcore disposal...