Teknikal dan Kejuruteraan Pte Ltd v Resources Development Corp (Pte) Ltd

• Jurisdiction: Singapore
• Judge: Warren Khoo L H J
• Judgment Date: 26 May 1994
• Neutral Citation: [1994] SGCA 80
• Date: 25 July 1994
• Docket Number: Civil Appeals Nos 202 of 1992
• Year: 1994
• Published date: 19 September 2003
• Plaintiff Counsel: G Sri Ram, Manjit Singh and Anil Sachdev (Manjit Singh and Pnrs)
• Citation: [1994] SGCA 80
• Defendant Counsel: Davinder Singh and Bonnie Lo (Drew & Napier) and John Ng (Tan Lee & Pnrs)
• Court: Court of Appeal (Singapore)
• Subject Matter: Discharge,Contract,Performance,Breach,Whether termination valid,Civil Procedure,Whether failure to give delivery of possession of site as required by contract prevented contractor from performing contract,Pleadings,Whether amended case supported by facts,Amendment,Appeals,Evaluation of evidence involving testing it against inherent probabilities or uncontroverted facts,Alleged repudiation and abandonment of work a result of breach of contract by party which terminated the contract,Appellate court in the same position as trial court,Findings of fact,Application to amend after hearing but before judgment

Cur Adv Vult

These appeals arise from a claim by the appellants against the respondents for wrongful termination of a contract to work a granite quarry on Pulau Ubin. One is on the substantive claim, and the other on a procedural matter.

There was a building boom in Singapore in the late 1970s and early 1980s This resulted in an increased demand for granite products for use in building construction. The respondents, Resources Development Corp (Pte) Ltd (RDC), who were suppliers of granite products, wished to expand their operations. They had quarries in various parts of Singapore, including one on Pulau Ubin. They were given a lease of another quarry site there by the government, and they contracted to buy a new crusher plant from a Japanese supplier for the purpose of turning granite blocks to be quarried from this quarry into granite products.

RDC had to look for experienced quarry contractors to develop the quarry site and then to extract the granite. Sykt Teknikal dan Kejuruteraan Sdn Bhd (hereinafter `STDK`), a company incorporated in Malaysia, had such experience in Malaysia. They were operating a quarry in Rawang at the time. By a letter of acceptance dated 8 May 1981, their tender was accepted by the RDC. The appellants, `TDK`, were incorporated in Singapore for the purpose of carrying out the contract. By a novation agreement dated 31 July, TDK were effectively substituted as the contractors.

The contract entailed heavy investments by TDK and their shareholders. The principal sum for the leasing of equipment from RDC by TDK alone was about $6.6m and interest payments were nearly as much. The leasing arrangements were secured by a debenture over 70% of the net worth of the company. Shareholders had to provide additional collaterals. In the end, because of the difficulties to which we shall refer, the contract was terminated almost a year to the day it was awarded, and the company was wound up and the shareholders also lost everything they had put into this venture.

The site, of about 35 acres, was a hill covered with rubber trees and thick undergrowth. The rock formation from which the granite was to be quarried lay under this cover, which is known in the trade as the overburden. The overburden would include boulders as well as earth and vegetation. The boulders, although of granite, are to be distinguished from the underlying rock formation which would form the quarry proper.

In order to get at the granite it was necessary for the overburden to be removed. The overburden had to be removed to create a bench - a working surface upon which operations could be carried out. It appears that the creation of a bench with sufficient proximity in depth to the granite was important for the drilling and blasting operations to remove the granite. The bench also facilitated the movement of men and machinery for these operations as well as the transportation of the granite out of the quarry to the crusher plant. Hence the location of granite deposits in terms of proximity to the surface was vital to the production of granite from the quarry.

Tenderers were offered two alternatives in respect of the removal of overburden. Alternative A provided for RDC to clear an initial area of 10 acres of overburden, and for the contractor to clear the remaining contract area as quarrying progressed. Alternative B provided for RDC to clear the initial area as well as the remaining area. Under either alternative, RDC were responsible for clearing the earth to within 1m of the rock surface as far as possible. It appears to be common ground that because of the undulating surface of the underlying rock, it was not expected that the overburden would be cropped to a uniform depth of 1m as that might hinder rather than help the establishment of benches. But on average, the depth should be about 1m. Hence the words `as far as possible`.

The contract area was referred to at the trial, and is referred to in this judgment, as area A. The initial area was and is referred to as such.

STDK opted for alternative A. That alternative, which was contained in cl 4 of the specification, provided as follows:

Alternative A

RDC will clear an initial area of overburden as shown in the drawing RDC/QO-PU/1A. As quarrying proceeds, TDK shall be responsible for the continual removal of overburden to a minimum distance of 10m back from the quarry face and form slopes of 1:1. The rock surfaces shall be kept bare and this condition must be maintained and kept well ahead of any rock extraction of the quarry face. TDK is also responsible to remove any boulders that may be encountered in the overburden removal. This condition of the overburden to be removed within 10m from the quarry face shall be maintained up to the end of the contract.

In the initial removal of overburden by RDC, RDC will clear the earth to within 1m of the rock surface as far as possible. TDK shall be responsible for the removal of whatever [is] left over and shall allow for the cost of such expenditure in his tender rate.

Other relevant provisions of the contract

The contract provided that TDK would carry out and be responsible for the following works:

(i) Development of quarry face.

(ii) The continual removal of overburden.

(iii) The quarrying of granite and transportation to the crusher plant.

(iv) The operation and maintenance of the 500 tonnes per hour granite crusher plant (including supply of spare parts).

(v) Stockpiling of the products as and when required by the company.

The duration of the contract was expressed to be for a term of three years from 1 June 1981 to 31 May 1984. The date for possession of the site was expressed to be from 1 June 1981.

The contract stated that the plant was expected to be commissioned in August 1981. It provided that before the plant was operational TDK should carry out preparations such as developing the quarry face, the roadway and the stockpiling of granite blocks. It provided that after the commissioning of the plant, the minimum production of the granite products, described as 20-6mm chips and -5mm granite dust, should be as follows:

First month: 30,000 tonnes per month

Second month: 50,000 tonnes per month

Third month: 70,000 tonnes per month

From fourth month onwards: 100,000 tonnes per month

The contract was expressed to be a rated contract; TDK were to be paid $8.40 per tonne of the product. The contract provided for the imposition of liquidated damages at the rate of $8 per tonne `for production volume of less than 100,000 tonnes`. The contract reserved to RDC the right to increase or reduce the quantity of granite produced, by giving to TDK one month`s advance notice.

Some relevant events

In March 1981, RDC awarded to Chuan Joo Pte Ltd a contract for the removal of the overburden in the initial area. Chuan Joo were to commence the work on 12 April and to complete it within 18 weeks. That would take it to about the middle of August. In June, TDK moved some equipment and men on site to do preparatory work. At this time, Chuan Joo`s sub-contractors were still doing their overburden removal work in the initial area. They remained there until September.

Soon after TDK moved on site, they complained about the state of the excessive amount of overburden left by the earth contractors and about the problem this had created for them in terms of planning of work. In their letter to RDC dated 17 August 1981, TDK said:

Stripping of overburden

We have noted that the stripping operations have not been completed to date and in view of the differences in depth of overburden indicated by seismic survey presented to us during time of tendering and actual depth encountered while stripping and tested by our drilling machines, we have found it very difficult to plan our quarry benching operations to date.

We feel we actually have to reorientate our initial extraction area to work in with levels established by the earthwork contractor in order to save time and to avoid causing hindrance to earthwork operation.

We also note with dismay by our drilling tests that overburden depths given by seismic indications are totally out and much greater depths have to be stripped before rock formation is encountered. This will definitely delay rock output production and much higher operating costs. We hope RDC will view this problem of ours with sympathy and due consideration for assistance.

It is clear from the contents of this letter and its date that TDK were referring to the overburden in the initial area.

Later in a letter dated 19 November 1981 to RDC, TDK elaborated on the matter further as follows:

It was a condition of the contract that initial stripping of overburden within an area indicated on the plan would cover approximately 10 acres to a depth of about 1m from rock surface.

This operation commenced in early June and when stopped in late September we were left with not an area of rock hill to work on but an area clustered and scattered with boulders of approximately 40ft in height and narrow. We need an average of three to four months to clear this area full of boulders whose total tonnage is estimated at 60,000 tonnes. The existence of these unusually huge and narrow boulders which we have never encountered anywhere in our quarry operations before, have completely upset our development plan for the area.

Also when the stripping operations stopped at the level indicated by seismic survey given to us during tender period, we were left with an area which needed a further stripping of overburden to be carried out to over 40ft within the stripped and also surrounding areas as tested by our random drilling to ascertain rock level.

Hence the contract condition of stripping the overburden to within 3ft of rock surface for us has never been fulfilled by RDC. We are in no position to strip this extra and excessive overburden.

We are now concentrating on blasting off the boulders which...