Lojan Properties Pte Ltd v Tropicon Contractors Pte Ltd

• Jurisdiction: Singapore
• Judge: Chua F A J
• Judgment Date: 03 April 1991
• Neutral Citation: [1991] SGCA 7
• Citation: [1991] SGCA 7
• Date: 03 April 1991
• Published date: 19 September 2003
• Plaintiff Counsel: Koh Juay Kherng (Lee & Lee)
• Docket Number: Civil Appeal No 55 of 1989
• Defendant Counsel: Warren Khoo and Susan Lim (Warren Khoo & Co)
• Court: Court of Appeal (Singapore)
• Year: 1991

Cur Adv Vult

The plaintiffs/respondents (Tropicon Contractors) were engaged by the defendants/appellants (Lojan Properties) as the main contractors in a condominium development of townhouses at Gilstead Road, Singapore (the project) under a contract in writing dated 23 June 1983 incorporating the standard terms and conditions of the Revised Standard Form of the Singapore Institute of Architects together with additional conditions and addendum (the contract). The standard terms and conditions of the Revised Standard Form of the Singapore Institute of Architects incorporated into the contract together with the additional conditions and addendum are referred to as ` the conditions of contract` .

Tropicon Contractors` claim as formulated by the statement of claim dated 9 September 1987, was for judgment under 12 interim certificates of payment, numbers 17 to 28 issued by the ` project architects` dated between 19 September 1984 to 16 January 1987. The amount due under these 12 interim certificates less a sum of $146,000 paid to account of the amount due under interim certificate no 17 amounted to $1,785,294.32. Tropicon Contractors also claimed a sum of $504,711.47 as contractual interest under the contract and continuing until the date of judgment or payment.

Lojan Properties applied for a stay of the proceedings pursuant to s 7 of the Arbitration Act (Cap 10) on the ground that the contract contained an agreement to arbitrate the matters in respect of which the action was brought whilst Tropicon Contractors applied for summary judgment of the amounts claimed. The assistant registrar who heard both applications together, by separate orders, dismissed Tropicon Contractors` application for summary judgment and granted Lojan Properties` application for a stay of the proceedings. Tropicon Contractors then appealed to the judge (LP Thean J) who allowed Tropicon Conractors` appeal; gave them judgment for $1,266,010.32 together with interest at 8% pa from the date of commencement of the action (9 September 1987) to the date of judgment (18 May 1989); and ordered a stay of the balance sum of $519,284 of Tropicon Contractors` claim ` which the parties may refer to arbitration` . The sum of $519,284 was made up of two sums, namely, $381,791 which Lojan Properties claimed to have expended on rectification of defective works which Tropicon Contractors failed to rectify under the terms of the contract and $137,493 which Lojan Properties claimed they had paid directly to the nominated sub-contractors, both of which, if established, would entitle Lojan Properties the right of deduction from the amounts due under the interim certificates of payment.

The judgment of LP Thean J is reported at [1989] 3 MLJ 216 .

Lojan Properties appealed against that part of LP Thean J` s judgment giving judgment to Tropicon Contractors in the sum of $1,266,010.32 and by a respondents` notice Tropicon Contractors sought to vary LP Thean J`s judgment. However, shortly before the hearing of this appeal, Lojan Properties filed a notice of withdrawal of their appeal. The appeal was heard by us with regard to the respondents` notice.

During the course of the hearing, Tropicon Contractors` counsel applied to us for leave to amend the respondents` notice. We granted leave. The respondents` notice as amended reads as follows:

Take notice that, on the hearing of the above appeal, the respondents above-named will contend that:

(A) That part of the decision of The Honourable Mr Justice LP Thean whereby he held that the defendants were entitled to deduct from the plaintiffs` claim the sum of $381,791 being alleged cost of alleged rectification of defective works, and the sum of $137,493 being alleged payment to nominated sub-contractors, should be varied so that no part of such sum is deducted from the plaintiffs`claim, and that judgment be entered for the plaintiffs in the sum of $1,785,294.32 with interest ascertained in manner contained below.

(B) That part of the decision of the learned judge whereby he awarded the plaintiffs interest at the rate of 8% per annum from the date of commencement of action to the date of the judgment should be varied so that interest at the said rate from the date each of the amounts certified in the interim certificate nos 17 to 28 was due to date of judgment.

Thus the issues which arise for our consideration are:

(1) Whether on the true interpretation of the contract provisions Lojan Properties are entitled to deduct from the amounts certified by the project architects as due and payable to Tropicon Contractors under an interim certificate(s) of payment,

(a) sums of money which Lojan Properties claim to have expended on the rectification of defective works which Tropicon Contractors have failed to rectify and which amounts are purportedly certified by the project architects, and

(b) sums of money which Lojan Properties claim to have paid to nominated sub-contractors directly and which amounts are purportedly certified by the project architects.

(2) Whether on the true interpretation of the contract provisions Tropicon Contractors are entitled to the payment of interest (the rate is no longer in issue) from the date each of the amounts certified in the interim certificates of payment was due to date of judgment and if not whether the learned judge exercised his discretion correctly in awarding interest only from the date of commencement of the action.

A curious feature of this case is that long after the practical completion of the project and indeed while the applications for summary judgment and stay were pending the project architects were ` persuaded` by Lojan Properties to review the interim certificates of payment and the ` extension of time` certificates previously issued. The project architects then revised interim certificate nos 12 to 28 by issuing replacement interim certificate nos 12A to 28A and a new interim certificate no 29. The consequence was that there now arose a massive liquidated damages claim of $792,000, when previously it was $362,000, a claim for the costs of remedying defects of $347,000 and a claim for $137,493 being a direct payment to nominated sub-contractors, the total of which would exceed the claim of Tropicon Contractors.

In a carefully considered judgment the learned judge held that the replacement interim certificate nos 12A to 28A as well as the new interim certificate no 29 were invalid; that the project architects` decision that the previous extensions of time for the main building works to 31 December 1984 were ` null and void` on the ground that Tropicon Contractors had not given the requisite notice under cl 23(2) of the conditions of contract was unsustainable; that the purported extension of time for the main building works to 31 May 1984 purportedly given under cl 23(3) of the conditions of contract was flawed and therefore invalid; that the delay certificate was not issued in compliance with cl 24(1) of the conditions of contract and was therefore invalid; that the issue of a valid ` delay certificate ` was an essential requirement of cl 24(2) of the conditions of contract to found a claim for liquidated damages and accordingly neither the earlier liquidated damages amount of $362,000 nor the latter one of $792,000 had been validly certified; that on the true interpretation of cl 31(1) and 31(11) `only the amounts expressly deductible under the contract may be set off against the amount due under the interim certificate` ; and accordingly `neither the amount of $362,000 nor the amount of $792,000 can be maintained as liquidated damages and be set off against the amount due to the plaintiffs` (ie to Tropicon Contractors).

With these findings and the reasoning leading to them we are in total agreement.

The conditions of contract as its very name suggests is a revised version of the former Singapore Institute of Architects Conditions of Contract and differs in many essential respects from it and from the RIBA and JCT forms of contract on which the former Singapore Institute of Architects Conditions of Contract was modelled. The unique features of the Conditions of Contract are that the contractor is assured of regular periodic payments during the period the contract works are in progress based on a retrospective revaluation of all work carried out under the contract (see cl 31(1) and (2)) and subject to the exceptions mentioned in cl 31(11) the contractor is put in a position to enforce payment if payment is not made on the due date by action in the courts. On the other hand the employer`s rights are equally protected in that he is entitled legitimately to deduct his legitimate claims against the contractor during the progress of the works provided that the claims themselves and the amounts due are certified by the architect. See cl 31(11) and cl 1(7) for defective works, cl 24(2) for liquidated damages and cl 30(4) for payment to nominated sub-contractors. Further the arbitration clause (cl 37) envisages that the courts and not an arbitrator may be seized of a dispute thus negativing a stay in the event an action is brought in the courts to recover payment under an interim certificate of payment. Both the courts and the arbitrator are given power to order repayment of moneys overpaid by either party to the other whether the overpayment was under a mistake of fact or of law (see cl 37(7)). The financial machinery under the conditions of contract is regulated by the certificates of the architect, the effectiveness of which until determined otherwise by a court or an arbitrator is preserved by cl 37(3)(g). Most important of all the conditions of contract read as a whole and cll 31(11), 1(7), 24(2) and 30(4) make it particularly clear that the common law defence of set-off or counterclaim is no longer available to the employer in a claim for payment of an interim certificate of payment.

The foregoing are but some of the unique...