Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency

• Judge: Lai Siu Chiu J
• Judgment Date: 12 December 2006
• Neutral Citation: [2006] SGHC 229
• Plaintiff Counsel: Gopinath Pillai with Jacqueline Teo (Tan Peng Chin LLC)
• Published date: 14 December 2006
• Subject Matter: Tort,Plaintiff employed by employer to be main contractor on building project,Whether defendant liable for plaintiff's pure economic loss,Defendant appointed as superintending officer of building project and responsible for certifying works carried out by plaintiff on building project,Negligence,Defendant not party to contract between employer and plaintiff,Plaintiff suing defendant in negligence for breach of duty to accurately value and certify its works,Duty of care,Whether giving rise to sufficient degree of proximity such that defendant owing plaintiff duty of care,Nature of relationship between plaintiff and defendant
• Citation: [2006] SGHC 229
• Defendant Counsel: Tai Chean Ming, Chong Kuan Keong and Tan Joo Seng (Chong Chia & Lim LLC)
• Court: High Court (Singapore)
• Year: 2006

12 December 2006 Judgment reserved.

Lai Siu Chiu J

The facts

1 This case involves a dispute concerning a building contract. The plaintiff, Spandeck Engineering (S) Pte Ltd, was successful in a tender exercise called by the Government of Singapore (“the Employer”) and was awarded a contract dated 24 June 1999 (“the Contract”) at the lump sum price of $31.78m (“the contract price”). The Contract was to redevelop a medical facility (described as a medical group) in Nee Soon Army Camp (“the project”) for the Ministry of Defence (“Mindef”) consisting of two blocks. The Contract (see 1AB219) was preceded by a letter of award from Mindef to the plaintiff dated 26 May 1999 (see 1AB208) advising that the construction period would be 19 months commencing on 15 June 1999. The contractual completion date would therefore be 14 January 2001. The plaintiff was required to, and did, furnish a performance bond equivalent to 5% (viz $1,589,000) of the contract price to Mindef on behalf of the Employer.

2 The defendant, Defence Science & Technology Agency (“DSTA”), was formerly known as Land & Estate Organisation when it was a division of Mindef, before it was constituted under the Defence Science and Technology Agency Act (Cap 75A) on 15 March 2000. The defendant was appointed as the superintending officer (“the SO”) of the project by the Employer. Under the terms of the Contract, the SO was responsible for the administration and supervision of the project. In particular, the SO was responsible for inter alia certifying interim payments in respect of the plaintiff’s works under the project.

3 The architects who were appointed for the project were RDC Architects Pte Ltd (“RDC”), the structural engineers were TY Lin (SEA) Pte Ltd (“TY Lin”), the mechanical & electrical engineers were Parsons Brinckerhoff Consultants Pte Ltd (“Parsons”) while the quantity surveyors were KPK Quantity Surveyors (1995) Pte Ltd (“KPK”).

4 On 7 July 1999, Mindef advised the plaintiff that Quek Kheng Song and Huang Siong Hui were appointed the SO and SO’s Representative, respectively, with Peh Chew Seng as the alternate SO’s Representative in the absence of the SO’s Representative (see 1AB596-597). The letter added:

The following persons have been appointed to assist the SO’s Representative in the administration of the Contract:

Mr Ang Tok Teng Project Officer

Mr Huang Siong Hui/Mr Tan Shao Yen Project Architect

Mr Ng Kay Beng Civil/Structural Engineer

Ms Janet Ng M&E Engineering (Parsons)

Mr Soundararajah/Mr Loh Boon Theng Quantity Surveyor

The SO’s Representative is authorised to issue the SO Instructions involving variations and to act on behalf of the SO on all matters relating to the Contract.

In an emergency or in other exceptional circumstances where it is not practical to seek the prior written instruction of the SO’s Representative, the Contractor shall comply with the instructions.

Pursuant to clause 2.5 and clause 19.2 of the Public Sector Standard Conditions of Contract for Construction Works and further to item G of the particular conditions to the Public Sector Conditions of Contract for Construction Works, you shall response (sic) within the following time frame:

Clause 2.5 – confirm in writing within seven (7) days of receiving oral SO Instruction;

Clause 19.2 – notify in writing within fourteen (14) days of receiving written SO Instruction if it constitutes a variation; and

To notify the SO’s Representative in writing with estimated cost (substantiate with approximate quantity and rates) within 14 days of occurrence of event that you deem it is a variation and request the SO Instruction to be instructed. All letters pertaining to claims shall be copied to the Project QS.

You are reminded that the conditions listed above are conditions precedent to claims and no payment shall be made for variation works completed when no SO Instruction is issued.

You are to submit a monthly status report on variation claims (refer to attached sample) to the SO’s Representative and copy to the Project QS with each progress claim.”

5 Hence, RDC, KPK, TY Lin and Parsons (collectively referred to as “the consultants”) were appointed by the defendant to assist the SO Quek Kheng Song (“Quek”), the SO’s Representative Huang Siong Hui and the alternate SO’s Representative Peh Chew Seng in the administration of the Contract.

6 Quek (DW5) was at the material time an officer (now a Programme Manager) of the defendant while Peh Chew Seng and Ang Tok Teng were employees of the Employer. Huang Siong Hui and Tan Shao Yen (“Tan”) were from RDC, Ng Kay Beng was from TY Lin, Janet Ng was from Parsons while Soundararajah and Loh Boon Theng were from KPK. The Contract contained the following clause (1AB220):

3. The following documents shall be deemed to form and be read and construed as part of this Agreement, viz:-

(1) The Employer’s Letter of Acceptance;

(2) The said Tender;

(3) The Conditions of Contract comprising

(a) the Standard Conditions (PSSCOC);

(b) the Particulars Conditions; and

(c) the Appendix;

(4) The Specifications;

(5) The Drawings;

(6) The Schedule of Rates; and

(7) The Addenda Nos TWO (2) [original emphasis added]

7 The abbreviations PSSCOC in cl 3(3)(a) above refers to the Public Sector Standard Conditions of Contract. Clause 1 of the PSSCOC contained definitions and interpretations. The relevant definitions (see 1AB240-242) are listed hereunder:

1.1(c) “Contract” means the Conditions and Appendix, the Specifications, Drawings, Schedule of Rates (if any), Bills of Quantities (if any), the Tender, Letter of Acceptance, Agreement and such other letters and documents as the parties may expressly identify in writing and agree as forming part of the contract. [emphasis].

1.1(k) “Drawings” means the drawings referred to in the Contract including such drawings which have been prepared by the Contractor and accepted by the Superintending Officer pursuant to Clause 6.2 and such other drawings as may from time to time be issued or accepted in writing by the Superintending Officer.

1.1(q) “Permanent Works” means the works of a permanent nature (including Plant) to be executed in accordance with the Contract.

1.1(y) “Tender” means the Contractor’s offer to the Employer to design (to the extent provided for by the Contract), execute and complete the Works for a lump sum as accepted by the Letter of Acceptance. [emphasis added]

1.1(z) “Temporary Works” means all works of a temporary nature of every kind (other than Construction Equipment) required or provided in or about the execution of the Works and the remedying of any defects therein.

1.1(ab) “Works” means the Temporary Works and the Permanent Works, and where the context requires, a phase or part of the Works.

8 In the tender that it submitted, the plaintiff had provided an alternative design proposal (“the alternative proposal”) in addition to the original tender design (“the base tender”). The alternative proposal involved using pre-cast structures which the plaintiff represented to the consultants (who managed the tender exercise) would result in cost savings of $200,000 and shorten the construction time by two months, in comparison to the base tender. After reviewing the alternative proposal, the consultants recommended it to the Employer who accepted the recommendation. Hence, the plaintiff secured the Contract.

9 The plaintiff had initially submitted a Summary of Tender (“the original SOT”) with the base tender. A SOT is essentially a bill of quantities with an itemised breakdown of the price in a lump sum contract. After the Employer had accepted the plaintiff’s alternative proposal, KPK requested the plaintiff to submit a revised SOT to reflect the change in design. The plaintiff submitted the first revision to KPK on 24 May 1999. After further revisions by the plaintiff, the revised SOT and cost breakdown (“CBD”) for the contract price were finalised by KPK with the plaintiff and incorporated into the contract documents in October 1999. (Hereinafter the documents will be referred to as the “contract SOT” and “contract CBD” respectively).

10 The plaintiff duly commenced work under the Contract. However problems arose in the course of the project. The defendant complained that the plaintiff’s work was slow and its performance unsatisfactory, that the work on site was uncoordinated and the quality poor. On its part, in July 2000, the plaintiff alleged that KPK had under-certified its work for the months April to June 2000. KPK rejected the allegation as unfounded. Instead, KPK felt that the plaintiff’s progress claims were excessive as they were based on projected amounts for anticipated work that had not been carried out. KPK further noted that the plaintiff’s progress claims were often not properly substantiated by complete supporting documentation such as delivery orders.

11 On 29 September 2000, the plaintiff submitted a new SOT (“the new SOT”) to KPK addressed to its director Soundararajah. The plaintiff requested KPK to review and approve the new SOT for future assessment of the plaintiff’s progress claims.

12 KPK felt that the new SOT was nothing more than an attempt by the plaintiff to redistribute the entire costs of the project such that the plaintiff would receive more payment for works done in the earlier stages of the project, in order to alleviate the plaintiff’s then cash-flow problems. The new SOT was accordingly rejected by KPK.

13 At a meeting held on 16 November 2000 attended by representatives of the plaintiff, the defendant and the consultants to review the plaintiff’s performance, the plaintiff’s chairman Tony Chi (“Chi”) renewed the plaintiff’s request that the defendant accept a revised SOT. The defendant agreed to assist the plaintiff in two ways:

(a) it would make payments direct to the plaintiff’s sub-contractors and suppliers subject to certain conditions; and

(b) it would consider adjusting the contract SOT subject to KPK’s evaluation of the new SOT to ensure that...