Sun Fook Kong Construction Ltd (formerly known as Sung Foo Kee, Ltd) v Housing and Development Board

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 07 April 2004
• Neutral Citation: [2004] SGHC 69
• Plaintiff Counsel: Oommen Mathew (Haq and Selvam)
• Published date: 12 April 2004
• Court: High Court (Singapore)
• Defendant Counsel: Andre Maniam and Elly Tham (Wong Partnership)
• Subject Matter: Building and Construction Law,Building and construction contracts,Novation,Whether there had been valid novation at law.,Building and construction related contracts,Bonds,Endorsement on bonds reflecting novation of main contract,Whether endorsement required plaintiff's consent or signature when plaintiff no longer a party to the main contract,Whether plaintiff had locus standi to make any claims in respect of defendant's call on the bonds.,Whether defendant entitled to look to any or all of security bonds furnished by contractor for payment of sums due under any contract entered into with same contractor.,Civil Procedure,Parties,Joinder,Application to add new plaintiffs to action,Application outside limitation period,Lack of consent of party to be added as plaintiff,Whether joinder proper,ss 6(1)(a) & 6(7) of the Limitation Act (Cap 163, 1996 Rev Ed),O 15 r 4 Rules of Court (Cap 322, R5, 2004 Rev Ed).,Pleadings,Amendment,Application for leave to amend writ and statement of claim,Whether amendment should be allowed,O 20 r 5 Rules of Court (Cap 322, R5, 2004 Rev Ed).

7 April 2004

Lai Siu Chiu J:

The background

1 Sung Foo Kee, Limited, now known as Sun Fook Kong Construction Ltd (the plaintiff), was registered (in June 1999) as the Singapore branch of a Hong Kong based company known as Sun Fook Kong Holdings Limited (“the parent company”). On 2 July 1990, Sung Foo Kee Construction (Singapore) Pte Ltd was incorporated as a wholly-owned subsidiary of the plaintiff; the company subsequently changed its name to Winhouse Construction Pte Ltd (“Winhouse”). The Housing and Development Board (the defendant) is a body corporate with perpetual succession, established under s 3 of the Housing and Development Act (Cap 129, 1997 Rev Ed). The main task of the defendant is to provide low cost public housing for Singaporeans, by what are commonly known as HDB flats. Like the parent company, Winhouse is also a construction company.

2 In 1991–1992, the plaintiff entered into three contracts (“the SFK contracts”) with the defendant for the construction of HDB flats; one project was in Pasir Ris whilst the other two were in Tampines. The plaintiff provided to the defendant security bonds issued by American Home Assurance Company (“AHA”) for the SFK contracts, dated 31 October 1991, 26 June 1992 and 2 July 1992 respectively (“the SFK bonds”); the SFK bonds were issued pursuant to cl 14(2), in lieu of cash deposits required under cl 14(1), of the General Conditions of Contract applicable to the SFK contracts. The SFK bonds have a total value of $3,534,550.

3 On 29 February 1992, through its solicitors, the plaintiff requested the defendant’s agreement for Winhouse to take over the SFK contracts. By its letter dated 18 June 1993 to the plaintiff, the defendant gave its approval for the assignment of all rights and liabilities under the SFK contracts to Winhouse and requested the execution of the novation deed enclosed therewith. Following therefrom, the SFK bonds were amended on 2 July 1993 by AHA so that Winhouse was substituted as the name of the “Contractor” in place of the plaintiff with effect from 26 May 1993. The endorsement on the SFK bonds reads:

It is hereby declared & agreed that with effect from 26th May 1993, the Name of the contractor of this Security Bond is amended to read as:-

Sung Foo Kee Construction (Singapore) Pte Ltd

All other terms and conditions of the Policy remain unchanged.

ISSUED at Singapore on July 2, 1993.

Winhouse forwarded AHA’s endorsements on the SFK bonds to the defendant by its letter dated 9 July 1993. This was followed by the plaintiff’s letter dated 12 July 1993 to the defendant returning the novation deed which had been duly executed by itself and Winhouse, under their respective common seals. The defendant executed the deed of novation which was then dated 16 August 1993 (“the Deed”). In consequence thereof, the SFK contracts were thenceforth between Winhouse and the defendant.

4 The relevant clauses in the Deed are the following:

1 The Company [Winhouse] hereby unconditionally accepts and assumes with immediate effect all the rights, duties and liabilities of the Contractor [the plaintiff] under the Contracts [the SFK contracts] and undertakes in place of the Contractor to be bound thereby in every respect. Without prejudice to the generality of the foregoing, the Company undertakes to be responsible to HDB [the defendant] for all and any defects in the works arising out of the acts and/or omissions of the Contractor and to rectify the same.

2 The Contractor shall notwithstanding the agreement between themselves and the Company continue to be fully responsible and liable for the complete due and proper performance of the Contracts and fully indemnify HDB for the complete due and proper performance of the contract and against all actions, proceedings, claims, demands, costs, damages, penalties and expenses whatsoever under or in respect of the Contracts and this Deed.

5 Separately, Winhouse had its own contract no A/192/93 (“the Winhouse contract”) with the defendant to construct HDB flats at Woodlands, for which it furnished a security bond of $1,680,000 dated 11 May 1993 (“the Winhouse bond”), also issued by AHA. In addition, Winhouse had entered into four other construction contracts with the defendant between 1993 and 1995, for which security bonds were also furnished, again issued by AHA; these contracts were valued in excess of $22m.

6 Winhouse faced financial difficulties in 1996 and could not complete the four construction contracts referred to in the above paragraph. Winhouse was placed under judicial management on 5 January 1996 and was subsequently wound up in Companies Winding Up No 93 of 1996 (“the CWU”) on or about 17 May 1996. This was followed by Hong Kong & Shanghai Bank’s appointment of a receiver and manager over the company’s assets on 1 July 1996. The defendant filed its Proof of Provisional Debt in the CWU on 23 August 1996 in the sum of $22,778,711.29.

7 On 26 February 1997, the defendant wrote to AHA giving notice of the termination of the SFK and the Winhouse contracts (due to the inability of Winhouse to fulfil its contractual obligations) and that the defendant would shortly be making a formal call for payment of the full amount of the SFK and Winhouse bonds. I should mention at this juncture that the SFK and Winhouse bonds contained the exact same terms.

8 On 13 March 1997, the parent company wrote to the defendant contending that neither the parent company, nor the plaintiff nor Winhouse, could be liable on the SFK bonds as the same were furnished by the plaintiff who was no longer the contracting party on the SFK contracts whilst Winhouse did not execute the SFK bonds.

9 On 13 May 1997, the defendant formally demanded payment (by 27 May 1997) of $5,214,550 from AHA on the SFK and the Winhouse bonds. On 30 May 1997, AHA forwarded four cheques to the defendant totalling $5,214,550 in compliance with the defendant’s call on the four security bonds. The plaintiff has since indemnified AHA for the payments made.

10 Four years later, on 31 May 2001, the plaintiff commenced proceedings in Originating Summons No 6000768 of 2001 (“the OS”) for pre-action discovery in respect of the SFK contracts, to determine whether it had a good cause of action against the defendant. The defendant filed an affidavit to dispute the OS, as a result of which the plaintiff did not pursue the application.

11 On 13 June 2001, the defendant filed a revised Proof of Debt in the CWU in the sum of $20,659,791.29.

12 Six years to the date the defendant made a call on the four security bonds, the plaintiff commenced this suit, on 13 May 2003, disputing the defendant’s call on the SFK bonds for the SFK contracts and on the Winhouse bond for the Winhouse contract. The plaintiff prayed for a declaration that the defendant was not entitled to call for payment on all or any of the security bonds.

The applications

13 On 25 August 2003, the defendant applied to court by way of Summons in Chambers No 5356 of 2003 (“the defendant’s application”) for, inter alia, the following orders:

1 Pursuant to Order 18 Rule 19, Order 14 Rule 12 of the Rules of Court and/or the inherent jurisdiction of the Court, the Plaintiff’s claims be struck out and the action be dismissed.

2 Alternatively, pursuant to Order 33 Rules 2 and 5 of the Rules of Court and/or the inherent jurisdiction of the Court:

a. The following questions or issues be tried as preliminary issues before the trial of the action, namely:

i. Whether the Plaintiff, no longer being a party to the SFK Bonds, has a right to make any claim in respect of the Defendant’s call on the SFK Bonds.

ii. Whether the Plaintiff, who was never a party to the [Winhouse contract or bond], has a right to make any claim in respect of the Defendant’s call on the Winhouse Bond;

iii. Whether the time for making a demand on the SFK bonds had expired at the time of the Defendant’s call on 13 May 1997, as contended by the Plaintiff.

iv. Whether clause 3 of the SFK and Winhouse Bonds only allows the Defendant to call on the respective Bonds in satisfaction of monies due from the Contractor to the Defendant under other contracts “arising out of or relating to the same building project”, as contended by the Plaintiff.

b. Until the determination of the aforesaid preliminary issues, all further proceedings in the action be stayed.

14 On 22 September 2003, the plaintiff applied to court by way of Summons in Chambers No 5998 of 2003 (“the plaintiff’s application”) for, inter alia, the following orders that:

1. Sun Fook Kong Holdings Limited … and [AHA] be added as 2^nd and 3^rd Plaintiffs respectively in this action;

2. The [existing] Plaintiff be granted leave to amend the Writ of Summons and Statement of Claim dated 13 May 2003 in the manner ... shown in the copy annexed hereto.

3. The Defendant do serve on the Plaintiff … further and better particulars of the Defence [as specified].

15 Both the defendant’s and the plaintiff’s applications came up for hearing before me. I dealt with the defendant’s application first, answered prayers 2(a)(i), (ii) and (iv) thereof in the negative and instead of staying it, I dismissed the plaintiff’s action under prayer 2(b). Consequent thereon, I dismissed the plaintiff’s application. The plaintiff has now appealed (in Civil Appeal No 7 of 2004) against my decisions in both applications.

The proceedings

16 By the time the defendant’s application was filed, pleadings had closed or were deemed to have been closed as the plaintiff had (on 25 June 2003) filed its Reply. The plaintiff’s application first came up for hearing before Senior Assistant Registrar Toh Han Li (“SAR Toh”) on 24 September 2003. SAR Toh struck out para 14(a) of the statement of claim. The plaintiff’s allegation in para 14(a) of its claim (after referring in para 13 to the defendant’s call on the SFK and Winhouse bonds on 13 May 1997) states:

14. That demand was not permitted by the terms of SFK Bonds...