Professional Documents
Culture Documents
Facts
The plaintiff wanted to build a new house on a parcel of land which he owned
with his wife. He approached the defendant, a building contractor, for this
purpose. The defendant provided a number of quotations for the construction
work: a first quotation dated 16 August 2011 (“the first quotation”) and two
subsequent quotations dated 20 October 2011 and 10 December 2011 (“the final
quotation”). At the time of the first quotation, the architectural design for the
property was not ready.
In September 2011, the defendant engaged an architectural firm to undertake
the design of the property. A schematic design of the property was sent to the
firm. In October 2011, three-dimensional drawings of the property were sent to
the plaintiff. The final quotation was presented to the plaintiff in December
2011, and the plaintiff formally executed it on 6 March 2012 after the
construction drawings, which had been prepared by the architect, were accepted
by the plaintiff. The final quotation contained the term “design and build” and
stated that the “estimated completion date” for the project was March 2013.
Work commenced on the project but appeared to have been abandoned around
September 2013 over payment issues. The plaintiff terminated the building
contract and employed replacement contractors to complete the construction
work. The defendant alleged that the termination was wrongful. The plaintiff
sued the defendant for breach of contract. The defendant counterclaimed for the
cost of variation works undertaken by him. The defendant also alleged in the
counterclaim that the plaintiff had breached the contract by failing to make
progress payments and terminating the contract without basis.
[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 293
do all that was necessary to achieve the contractual scope of works at the agreed
price. The additional feature of a “design and build” contract was that the
contractor was also responsible for formulating and implementing the design of
the project – including the engagement of professionals for that purpose –
within the brief that was given by the owner and turning that design into reality
by doing all that was reasonably necessary for that purpose at the agreed price.
Under a “design and build” contract, the contractor would have no recourse to
the owner for additional payments unless it could be shown that the works
undertaken were substantially different from the original design or that the
additional expense came about as a result of the owner’s breach: at [24], [28] and
[29].
(2) On the facts, the parties had intended to, and did, enter into a “design and
build” contract. In this regard, the contractual relationship between the plaintiff
and the defendant was delineated by the schematic design, the final quotation
and the construction drawings (“the Contract”). Under the Contract, the
functions of design and construction were entrusted to the defendant for an
agreed sum: at [22] and [32].
(3) The defendant could not claim for additional payment for variation work
unless that work was extraneous to the work contemplated under the Contract.
On the facts, none of the defendant’s counterclaims for variation work was
extraneous to, or deviated from, the scope of the Contract. In fact, some of the
items such as architectural fees and professional engineering services were not,
strictly speaking, variation works at all. The defendant’s counterclaims were
dismissed, save for items which the plaintiff had, by the terms of the final
quotation, agreed to pay. The defendant’s claim for the installation of a gate fell
outside the scope of the Contract and was also allowed: at [41], [43] and [45].
(4) The defendant had breached the Contract by failing to complete the works
by 31 March 2013. The evidence showed that it was agreed between the parties
that the completion date was 31 March 2013. Even if 31 March 2013 was not a
fixed completion date, the defendant nevertheless breached the contract by
failing to complete the construction by September 2013. On the facts, a six to
seven months delay in the completion works, bearing in mind that the estimated
contract period was 12 months, amounted to a breach of contract. There was no
basis for the defendant’s submission that the time for completion was set at
large. Moreover, the defendant had no general right in law to suspend work even
if payment was wrongfully withheld unless the parties had expressly conferred
such a right on the defendant or it could be established that the delay in payment
made it not possible for the defendant to continue with the contract works. On a
balance of probabilities, the defendant abandoned the works in October 2013,
thereby repudiating the Contract. The plaintiff was therefore entitled to
terminate the defendant’s services: at [48], [49], [50] and [51].
(5) The plaintiff was entitled to damages for incurring additional cost to
complete the work as well as for rental charges from the time the defendant
ought to have completed the works to the time the works were eventually
completed. The plaintiff’s claim for storage charges was also allowed as this was
the defendant’s responsibility under the “design and build” contract. The claim
for the cost of appointing an independent quantity surveyor was dismissed. The
quantity surveyor’s report did not appear to have played a role in the
[2016] 4 SLR 0292.fm Page 294 Monday, August 8, 2016 5:11 PM
formulation of the scope of the works for the replacement contractors and the
plaintiff had not relied on it either: at [52], [57], [58] and [60].
Case(s) referred to
Asia Star, The [2010] 2 SLR 1154 (folld)
Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners
[1975] 1 WLR 1095 (refd)
Jia Min Building Construction Pte Ltd v Ann Lee Pte Ltd [2004] 3 SLR(R) 288;
[2004] 3 SLR 288 (folld)
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR(R) 413;
[2007] 4 SLR 413 (folld)
Robinson v Harman (1848) 1 Exch 850; 154 ER 363 (refd)
Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193 (refd)
Yip Holdings Pte Ltd v Asia Link Marine Industries Pte Ltd [2012] 1 SLR 131
(refd)
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction
Pte Ltd [2008] 3 SLR(R) 1029; [2008] 3 SLR 1029 (refd)
Legislation referred to
Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 22A
Michael Por and Li Jiaxin (Michael Por Law Corporation) for the plaintiff;
Ho Chye Hoon and Ryan Tan Yang (Kel LLC) for the defendant.
2 June 2016
Kannan Ramesh JC:
Introduction
1 Is a lump sum contract a feature of a “design and build” contract?
This is the interesting legal issue that this case threw up. It was also the key
issue before me.
2 The plaintiff wanted to build a new house on a parcel of land which he
owned with his wife. He approached the defendant, a building contractor,
for this purpose. The quotation issued by the defendant, which the plaintiff
accepted, contained the term “design and build”. The plaintiff alleged that
the building contract was of the “design and build” variety, evidenced by
the use of the term in the quotation. The defendant joined issue with the
plaintiff on this critical issue. Work commenced on the project but
appeared to have been abandoned some 17 months later over payment
issues. The plaintiff terminated the building contract and employed a
replacement contractor to complete the construction work. The defendant
alleged that the termination was wrongful. In this action, the plaintiff sued
the defendant for recovery of damages and the defendant counterclaimed
for the cost of variation works undertaken by him. Strangely, the defendant
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[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 295
did not counterclaim for damages arising from the plaintiff’s alleged
wrongful termination of the building contract.
3 On 16 March 2016, I gave judgment, allowing most of the claims
made by the plaintiff and dismissing the bulk of the defendant’s
counterclaims. These are the grounds of my decision.
electrical consultancy service fees. This section on professional fees was not
present in the final quotation. The total contract price for the second
quotation was $841,300 while the total contract price for the final quotation
was $934,500. The salient terms and conditions in the final quotation are
reproduced here, as follows:
ACKNOWLEDGEMENT
PROPOSED NEW ERECTION OF A 3-STOREY SEMI-DETACHED
HOUSE WITH AN ATTIC AND SWIMMING POOL ON [THE
PROPERTY] (DESIGN & BUILD)
[emphasis in original in underline; emphasis added in bold italics]
10 The plaintiff agreed to accept the final quotation but refrained from
executing the same pending the preparation of construction drawings. On
the basis of the final quotation, the defendant proceeded to obtain a
construction loan from United Overseas Bank Ltd (“UOB”). By a letter
dated 19 January 2012, UOB agreed to furnish a loan in the sum of
$646,800. Sometime in February 2012, the construction drawings were
finalised and accepted by the plaintiff (“the Construction Drawings”). The
Construction Drawings were prepared by TAS in collaboration with JAL
Atelier. It was common ground that this was the only set of architectural
drawings for the works. The defendant conceded that the Construction
Drawings were “very similar” to the Schematics of 24 September 2011.
After the Construction Drawings were finalised, the plaintiff formally
accepted the final quotation on 6 March 2012 by executing the same. Prior
to the plaintiff’s formal acceptance of the final quotation, the plaintiff had
already paid the defendant a sum of $60,000 on 23 February 2012 to signify
his decision to proceed with the project.
11 Work commenced on the Property in March 2012. Under the final
quotation, it was stated that the “estimated completion date” was March
2013. It was not disputed that the defendant had not completed the
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[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 297
The arguments
20 The plaintiff contended that the parameters of the contract between
the parties were set by the Schematics, the final quotation and the
Construction Drawings, and that it was a “design and build” contract as
well as a lump sum contract. Hence, the defendant agreed to undertake and
complete the construction works for the contract sum of $934,500 as
defined in the Schematics, the final quotation and the Construction
Drawings. The works carried out by the plaintiff’s replacement contractors
were consistent with the Construction Drawings. There was no basis for the
defendant’s counterclaim as no additional or variation works were carried
out. Furthermore, the delay in the completion of the works was solely
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[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 299
The decision
and obligations, such as whether the defendant had performed the contract
works and was entitled to payment for the variation works claimed. I begin
by setting out a brief description of a “design and build” contract and the
rights and obligations of the respective parties thereunder, before turning to
consider whether the plaintiff and the defendant had entered into such a
relationship.
[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 301
Simply put, the contractor will have no recourse to the owner for additional
payments unless it can be shown that the works undertaken were
substantially different from the original design or that the additional
expense came about as a result of the owner’s breach. This is because a key
ingredient of the “design and build” contract is that it operates as a lump
sum contract.
29 In my view, a “design and build” contract, in the absence of any terms
to the contrary, necessarily incorporates a lump sum contract. A “design
and build” contract and a lump sum contract have in common the feature
that the contractor has to do all that is necessary to achieve the contractual
scope of works without an adjustment in price. The additional feature of a
“design and build” contract is that the contractor is also responsible for
formulating and implementing the design of the project – including the
engagement of professionals for that purpose – within the brief that is given
by the owner and turning that design into reality by doing all that is
reasonably necessary for that purpose at the agreed price. It is also noted in
Chow Kok Fong that “design and build” contracts by default give the owner
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little latitude to change or alter the design once the contract has been
awarded, without incurring additional cost (at para 2.35). The owner is
willing to bind himself to such limited latitude because he, inter alia, has the
advantage of price certainty that arises from the fact that the “design and
build” contract contemplates and incorporates a lump sum payment. In the
same vein, the contractor will insist on conforming strictly to the
contractual specifications because he has negotiated a lump sum payment
for the construction and delivery of a project in accordance with an agreed
design. In short, by entering into a “design and build” contract without
more, the owner and the contractor have agreed on a lump sum payment by
the former in return for the construction and delivery of a project by the
latter that is in accordance with an agreed design which has been
formulated by the contractor.
30 It follows from the above that the implications of finding that the
Contract was a “design and build” and therefore also a lump sum contract
were that (a) the defendant had no basis to counterclaim for professional
fees where these concerned the design of the Property (unless specifically
carved out), and (b) the defendant could not claim for additional payment
for variation work unless the variation work was extraneous to the work
contemplated under the Contract. It is to the issue of whether the Contract
was of the “design and build” variety that I now turn.
[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 303
it is clear from the evidence that both parties broadly understood and were
ad idem on the meaning of the term “design and build”. The plaintiff
intended that prescribed meaning and the defendant by including the term
in the final quotation accepted the same.
[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 305
paid in the construction industry where the main contractor supervises the
work of a subcontractor. This is usually contractually provided for in cases
where the subcontractor is nominated by the employer. The profit
component is a form of compensation to the main contractor for the lost
profit that would have otherwise been earned had the contractor appointed
the subcontractor, while the attendance element is provided to cover the
expenses incurred by the contractor in supervising and/or accommodating
the subcontractor. In the present case, I found that there was no legal basis
for the defendant’s claim for profit and attendance. Generally speaking,
many of the claims made by the defendant were not claims for profit and
attendance over work of such a nature. More importantly, as a “design and
build” contract, any claim for such sums would have been included in the
contract price. Neither was there any agreement between the parties that
the plaintiff would pay a 15% mark-up for profit and attendance generally,
a point which the defendant conceded.
43 I therefore dismissed the defendant’s counterclaim for variation
works and profit and attendance, save for the RTO fee, which the plaintiff
had, by cl 2 of the final quotation, agreed to pay (see [8] above). For the
avoidance of doubt, the defendant’s claim was only allowed with respect to
the RTO fee and not any claim from profit and attendance over and above
this fee.
44 The defendant’s claims for reimbursement for the air tickets and hotel
accommodation were rejected. The trip to China was made in early
November 2011. However, the defendant did not raise a claim for the cost
of the air tickets and accommodation until the commencement of the trial.
In my judgment, this was cost which the defendant had agreed to bear as
part of his effort in securing material for the construction of the Property
and was part of the defendant’s responsibility under a “design and build”
contract.
45 Finally, I come to the defendant’s claim for the installation of the gate.
The plaintiff’s case, as it was put during cross-examination, appeared to be
that the plaintiff had already paid the defendant $517.50 for the installation
of the gate. However, as there was no documentary proof of this payment,
and as these works did not fall within the scope of the Contract, I allowed
the defendant’s claim. Again, as there did not appear to be any agreement
between the parties as to the defendant’s entitlement to be paid profit and
attendance, I did not allow a claim for profit and attendance for this item.
46 To be clear, my decision on the defendant’s counterclaims dealt only
with liability and not quantum, which was to be proved at an assessment.
However, as regards the claim for the installation of the gate, it seemed that
as the plaintiff’s case was that he had already paid the sum of $517.50, the
quantum for this item was not in dispute. To that extent, there appeared to
be little or no basis for the parties to dispute the amount. Further, the
amount of fees incurred as regards the RTO could surely be established by
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[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 307
Quantification of damages
52 It is hornbook law that contractual damages are generally intended to
place the party who sustained the loss in the same situation as if the contract
had been performed (Robinson v Harman (1848) 1 Ex Rep 850 at 855). The
plaintiff’s claims were consistent with this general principle. It is also well
established that an innocent party to a breach of contract is required in law
to take steps to mitigate losses. In The Asia Star [2010] 2 SLR 1154, the
Court of Appeal summarised the general principles relating to the innocent
party’s requirement to mitigate as essentially imposing a bar to the recovery
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[2016] 4 SLR Goh Eng Lee Andy v Yeo Jin Kow 309
of “avoidable or avoided loss” with the burden being on the defaulting party
to prove that the innocent party had failed to mitigate. And this is a
reasonably taxing burden. As the Court of Appeal stated in The Asia Star
at [24], the burden on the defaulting party to prove that the plaintiff failed
to mitigate is one that is not easily discharged. It should also be observed
that the defendant did not plead that the plaintiff had failed to mitigate his
losses, which the defendant was required to (see Yip Holdings Pte Ltd v Asia
Link Marine Industries Pte Ltd [2012] 1 SLR 131 at [23]–[24]). With these
general principles and observations in mind, I now deal with each head of
the plaintiff’s claims.
respective parties. Therefore, I held that under the Contract, the plaintiff
had paid a net amount of $937,867.53 to the defendant as of October 2013.
The amount awarded to the plaintiff for additional cost incurred to
complete the work was $658,867.53. This sum was arrived at by subtracting
the original contract sum of $934,500 from the sum of (a) the total amount
paid by the plaintiff to the defendant under the contract and (b) the costs of
the replacement contractors.
Storage charges
57 I allowed the plaintiff’s claim for storage charges of $4,815 which were
the defendant’s responsibility under the “design and build” contract. The
materials stored were meant for performing the Contract. There was no
contrary agreement that the plaintiff would bear these costs. The fact that
the plaintiff was a director of Mega Metal was not relevant.
Rental charges
58 As stated above (at [13]), while the Property was under construction,
the plaintiff stayed at his sister’s place, allegedly incurring rental charges.
There was no evidence that the payment of $2,000 a month was
unreasonable or higher than the market rate, and the plaintiff would be
entitled to claim for the market rate had he rented accommodation from an
independent third party. I had no reason not to accept the evidence of the
plaintiff and his sister, Mdm Goh Bee Choo, that payment was made and
received. Therefore, the plaintiff’s claim for rental payable from April 2013
to June 2014 (ie, from the time the defendant ought to have completed the
works to the time the works were eventually completed) of $30,000 was
allowed.
59 I noted that the quantity surveyor’s report did not appear to have
played a role in the formulation of the scope of works for the replacement
contractors. Neither had the plaintiff relied on the quantity surveyor’s
report in this action. Thus, I did not grant this head of claim.
Conclusion
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