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Grounds publishedDecided 6 Apr 2022
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General Division of the High Court

Comfort Management Pte Ltd v OGSP Engineering Pte Ltd and another

[2022] SGHC 77Case no. Suit No 509 of 2017

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  1. Introduction

  2. [2] The subject matter of the action was the air conditioning ducting system and mechanical ventilation works (“the Works”) for a project in Jurong. Lead Management Engineering & Construction Pte Ltd (“Lead”) subcontracted the Works to the plaintiff under what I shall call “the Lead Contract”. The plaintiff in turn subcontracted the Works to the first defendant under what I shall call “the Comfort Contract”. The Comfort Contract was a lump-sum contract at a price of $1.25m. In all other respects, the Comfort Contract was back-to-back with the Lead Contract.

  3. [3] The second defendant was the plaintiff’s project manager for the Works. The plaintiff engaged the second defendant to supervise the Works on site.

  4. [4] The first defendant commenced the Works in October 2013. In October 2014, before completing the Works, the first defendant demobilised its team and withdrew from the site. Various disputes arose between the parties. Those disputes led to the claims and counterclaims in this action.

  5. [5] Following an 8½-day trial, I held that first defendant owed the plaintiff a net sum of $363,030.51 (Comfort Management at [195]), subject only to any adjustment necessary to account for the incidence of goods and services tax (“GST”).

  6. [6] I dismissed the plaintiff’s claim against the second defendant in its entirety.

  7. Consequential issues

  8. [7] The parties now address me on the following consequential issues:

  9. (a) the costs of the action as between the plaintiff and the first defendant;

  10. (b) the costs of the action as between the plaintiff and the second defendant; and

  11. (c) The incidence of GST on the sum of $363,030.51 which the first defendant owes the plaintiff.

  12. [8] Having considered the parties’ written and oral submissions, I hold as follows:

  13. (a) The plaintiff is entitled to recover its costs of this action from the first defendant. However, three of the plaintiff’s disbursements were not reasonable amounts for disbursements reasonably incurred. Further, given that the plaintiff failed on several of its claims and defences to the first defendant’s counterclaims, I have exercised my discretion to deprive the plaintiff of 50% of the costs of this action.

  14. (b) The second defendant is entitled to recover his costs of this action from the plaintiff. There is no basis to qualify the second defendant’s entitlement to recover his costs from the plaintiff or to hold the first defendant directly or indirectly liable to the plaintiff for any part of those costs.

  15. (c) The first defendant is obliged to pay GST at 7% on the net sum of $363,030.51 which it owes to the plaintiff.

  16. Costs as between the plaintiff and the first defendant

  17. The claims and issues in this action

  18. [10] In this action, the plaintiff sought to recover a total of just over $1.5m from the first defendant on four claims: (i) a claim that the first defendant had failed to complete the Works; (ii) a claim that the first defendant had been overpaid for the proportion of the Works it had actually completed; (iii) a claim that the first defendant was liable to the plaintiff for liquidated damages for delay; and (iv) a claim that the first defendant was liable to the plaintiff for defects in the Works.

  19. [12] The four claims and two counterclaims required me to decide six issues.

  20. [13] First, the percentage of the Works which the first defendant had completed before it withdrew from the site. I shall refer to this as “the Works Issue”. The plaintiff’s case was that the first defendant had completed only 65% of the Works before it withdrew. The first defendant’s case was that it had completed all or substantially all of the Works before it withdrew. I found that the first defendant had completed 95.29% of the Works before it withdrew (Comfort Management at [42]).

  21. [14] Second, taking into account the outcome of the Works Issue, whether the plaintiff had overpaid the first defendant by the sum of $417,320.06. I shall refer to this as “the Overpayment Issue”. The Overpayment Issue depended on whether the plaintiff’s progress payments to the first defendant (totalling $1,185,686.73) and its payment to the first defendant in compliance with an adjudication determination (“the AD”) ($832,020.78 net of GST) exceeded the value of the Works completed as found on the Works Issue. I dismissed the plaintiff’s claim that it had overpaid the first defendant. I found instead that the plaintiff owed the first defendant a further $121,138.27 for the Works (Comfort Management at [55]).

  22. [15] Third, whether the first defendant was liable to pay liquidated damages of $81,000 to the plaintiff for 162 days of delay. I shall refer to this as the “Delay Issue”. I found that the first defendant was indeed liable to pay liquidated damages to the plaintiff (Comfort Management at [76]).

  23. [16] Fourth, whether the plaintiff was entitled to recover from the first defendant back charges totalling $86,606.41 which Lead imposed on the plaintiff for alleged defects in the Works. I shall refer to this as “the Defects Issue”. I dismissed the plaintiff’s claim on this issue (Comfort Management at [88]).

  24. [18] Sixth, whether the first defendant was entitled to be paid for the work done under VO1 and VO2 and, if so, in what amount. I shall refer to this as “the Variation Orders Issue”. On VO1, the plaintiff had paid the first defendant $115,700 out of the $130,000 which the first defendant claimed. I found that the first defendant was entitled to recover the remaining $14,300 (Comfort Management at [94]). On VO2, the first defendant claimed $621,828.73. I found that the first defendant was not entitled to recover that amount in contract but was entitled to recover two-thirds of that amount, or $414,552, on a quantum meruit (Comfort Management at [153]).

  25. [19] As a result of my findings, and subject only to the incidence of GST, I found that the first defendant owed the plaintiff the net sum of $363,030.51 (Comfort Management at [195]). That net sum is computed as follows:

  26. The parties’ submissions on liability for costs

  27. The first defendant must pay costs to the plaintiff

  28. The general rule is that costs follow the event

  29. The starting point is to ascertain the event

  30. [28] The event is the outcome of the litigation overall. Ascertaining in whose favour the event went in litigation therefore requires asking which party in substance and reality won the litigation, looking at its outcome in a realistic and commercially sensible way (Kidsons at [10], cited at [26] above). As Sir Thomas Bingham MR (as he then was) put it in Roache v News Group Newspapers Limited and others [1998] EMLR 161:

  31. [29] In commercial litigation, where the dispute is ultimately about money, the event is typically in favour of the party whom the court has found is entitled to receive money (per Ward LJ in Burchell v Bullard [2005] EWCA Civ 358 (“Burchell”) at [33]; per Longmore LJ in AL Barnes Limited v Time Talk (UK) Limited [2003] EWCA Civ 402 (“Barnes”) at [28]). That is especially true where the litigation comprises both claims and counterclaims and each party claims a balance in his favour (per Jackson J (as he then was) in Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd and another [2008] EWHC 2280 (TCC) (“Multiplex”) at [72(i)]).

  32. [30] The decision of the English Court of Appeal in Barnes is particularly instructive. In that case, a contractor undertook and completed renovation works for an employer with no contract in place. The contractor sued the employer to recover a quantum meruit for the works. The employer brought a counterclaim alleging that the contractor’s employee had been dishonest in procuring the engagement and in performing the works.

  33. [31] The trial judge found that the contractor was entitled to recover £216,000 from the employer for the works on a quantum meruit. But he accepted that the contractor’s employee had indeed been dishonest. He therefore held that the employer was entitled to recover £87,000 from the contractor on the counterclaim. The employer therefore owed the contractor a net sum of £129,000 (Barnes at [24]).

  34. The event is in the plaintiff’s favour

  35. [36] I therefore start by identifying the successful party in this action. The critical feature of this action is that, after resolving and setting off the claims against the counterclaims, I found in Comfort Management that the plaintiff was entitled to receive a substantial sum from the first defendant. I therefore find that the plaintiff is the successful party in this action.

  36. [38] But, in my view, all of that is outweighed by the fact that the result of this litigation is that the first defendant must pay a substantial sum to the plaintiff. The plaintiff could not have recovered that or any other sum if it had not commenced action against the first defendant and succeeded. It is for that reason that I find that the plaintiff is the successful party in this litigation despite the entirely valid points which the first defendant advances about the qualified nature of the plaintiff’s success.

  37. Discretion to depart from the general rule

  38. Discretion to be exercised judicially

  39. [43] Parties will act on this reasonable expectation ex ante when deciding to litigate, whether to continue to litigate, how much of their resources to commit to the litigation and to which claims and issues in the litigation to commit those resources. Most importantly, parties will rely on this expectation when assessing whether to make or to accept offers of settlement under O 22A of the Rules or Calderbank offers at common law (see Calderbank v Calderbank [1976] Fam 93; Cutts v Head and another [1984] 2 WLR 349).

  40. The discretion at common law

  41. (a) first, costs are in the discretion of the court;

  42. (c) third, the general rule does not cease to apply simply because the successful party had raised issues or made allegations at trial that failed; but the successful party could be deprived of all or part of his costs where he had caused a significant increase in the length of the proceedings;

  43. [47] The Court of Appeal in Tullio Planeta v Maoro Andrea G [1994] 2 SLR(R) 501 (“Tullio”) endorsed the Elgindata principles (at [24]). These principles therefore bind me.

  44. The discretion under the Rules

  45. [48] In December 2001, seven years after Tullio, the Rules were amended to include a new O 59 r 6A:

  46. A Type II order is fundamentally different from a Type I order

  47. (1) Principle

  48. (A) The compensatory objective

  49. (B) The disciplinary objective

  50. (2) Pragmatism

  51. In Smithkline Beecham, Arden LJ (as she then was) cited this passage to support her agreement with Jacob LJ that it is impossible to achieve great precision in awarding costs and counterproductive to attempt to do so.

  52. [66] In this context, it appears that Jackson LJ’s criticism in Fox of departing too readily from the general rule (see [44] above) would apply equally to the court too readily making Type II orders.

  53. (3) An example

  54. Issue

  55. Reasonable amount for costs reasonably incurred

  56. Successful party

  57. By P

  58. By D

  59. First

  60. $50,000

  61. $50,000

  62. P

  63. Second

  64. $30,000

  65. $30,000

  66. P

  67. Third

  68. $20,000

  69. $20,000

  70. D

  71. Total

  72. $100,000

  73. $100,000

  74. Type II orders under O 59 r 6A of the Rules

  75. The English position

  76. Chadwick LJ expressed similar enthusiasm in Johnsey Estates (1990) Ltd v The Secretary of State for the Environment [2001] EWCA Civ 535 at [21]–[22].

  77. [84] I should note at this point that the English practice is different in intellectual property cases. The practice there appears to be to make Type II orders as far as reasonably possible. That is because the nature of typical intellectual property litigation lends itself more readily to Type II orders (see Smithkline Beecham at [25]–[26] per Jacob LJ for patent cases and Specsavers International Healthcare Ltd and others v Asda Stores Ltd [2012] EWCA Civ 494 at [30] per Kitchin LJ (as he then was) for trade mark cases).

  78. Conclusion

  79. (c) The fact that the successful party raised claims or issues in the litigation on which it failed is not, in itself, a reason for departing from the general rule (Elgindata (see [45(c)] above); Element Six at [30]).

  80. A Type I order is justified

  81. The six issues are sufficiently discrete

  82. [90] I accept the first defendant’s submission that the six issues which the claims and counterclaims raised in this action are sufficiently discrete.

  83. [93] The Works Issue dealt with the proportion of the Works which the first defendant had completed. Determining this issue required an analysis of a distinct set of documents and the evidence of the second defendant and Mr McGeoch.

  84. [94] The Overpayment Issue required me to construe cl 6.1(c) of the Lead Contract. I found that, because the Comfort Contract was back-to-back with the Lead Contract, that clause governed the plaintiff’s obligation to pay the first defendant. The outcome of the Overpayment Issue then applied the outcome of the Works Issue to the contract price under the Comfort Contract as a matter of arithmetic.

  85. [95] The Liquidated Damages Issue required me to analyse the first defendant’s submission that: (i) the liquidated damages clause was a penalty clause and therefore void and unenforceable; (ii) that, even if delay were proven, the plaintiff had suffered no actual loss because Lead had not imposed liquidated damages under the Lead Contract on the plaintiff for the delay; and (iii) that the delay was due to the substantial and extensive variations which the plaintiff required the first defendant to carry out.

  86. [96] The Variation Orders Issue comprised two discrete issues. The issue on VO1 was a pure question of fact, unrelated to the other issues. VO2 raised discrete questions of fact and law. On VO2, I found that the first defendant was not entitled to recover in contract because the first defendant had failed to prove that the contractual condition precedents for issuing VO2 had been satisfied. But I allowed a large part of the first defendant’s quantum meruit claim.

  87. [97] I therefore accept the first defendant’s characterisation of the issues in this action and of the plaintiff’s degree of success on each issue. To summarise:

  88. (a) The plaintiff failed partially on the Works Issue. The proportion of the Works which I found the first defendant had completed was far closer to the first defendant’s case that it had completed of all or substantially all of the Works than to the plaintiff’s case that the first defendant had completed only 65% of the Works.

  89. (b) The plaintiff failed on the Overpayment Issue. As such, I found that a sum was due to the first defendant despite the plaintiff’s progress payments and the payment under the AD.

  90. (c) The plaintiff succeeded on the Delay Issue.

  91. (d) The plaintiff failed on the Defects Issue.

  92. (e) The plaintiff failed partially on the Variation Orders Issue. The plaintiff failed entirely on VO1. And the plaintiff failed partially on VO2. It succeeded on the contractual claim but failed on the quantum meruit as to two-thirds.

  93. (f) The plaintiff succeeded on the Materials Issue.

  94. These issues added unnecessarily to the length and complexity of the proceedings

  95. [98] Considering the six issues in the round together with their outcomes, I consider that the plaintiff unnecessarily added to the length and the complexity of the proceedings by pursuing the Works Issue, the Overpayment Issue, the Defects Issue and the Variation Orders Issue.

  96. [99] For example, with respect to the Works Issue and the Overpayment Issue, a substantial amount of the factual and expert evidence in this action and of the time at trial was taken up with establishing just how much of the Works the first defendant had completed before it withdrew from the site in October 2014.

  97. A Type II order is not justified

  98. The quantum of the plaintiff’s costs reasonably incurred

  99. The parties’ cases on quantum

  100. [108] The first defendant’s case on quantum is that a reasonable amount for professional fees reasonably incurred by either party in this action would be $195,000, albeit that it is the first defendant’s case that that sum is to be paid by the plaintiff to the first defendant.

  101. Professional fees

  102. [115] Accordingly, I find that $195,000 is a reasonable amount for the professional fees which the plaintiff reasonably incurred in this action.

  103. Disbursements

  104. [116] In addition to its professional fees, the plaintiff is also entitled to recover from the first defendant a reasonable amount for the disbursements which the plaintiff reasonably incurred in this action. The plaintiff quantifies its disbursements as amounting to between $280,000 and $320,000. Out of that sum, the first defendant objects to three items: (i) $249,333.19 representing the professional fees paid to Mr McGeoch; (ii) $23,000 representing the hearing fees which the plaintiff paid for the trial of this action; and (iii) $24,686.24 representing transcription fees which the plaintiff paid for the trial of this action.

  105. [117] I accept the first defendant’s submissions that these figures are unreasonable in amount. I therefore do not allow these three disbursements in full.

  106. (1) Mr McGeoch’s fees

  107. [118] I allow the plaintiff to recover only 20% of Mr McGeoch’s fees. This amounts to $49,866.64.

  108. [119] In my decision on the Works Issue and the Overpayment Issue in Comfort Management at [48], I found that Mr McGeoch’s evidence that the first defendant had completed only 65% of the Works when it withdrew from the site did not assist me. This was because Mr McGeoch assumed in his report that all of the outstanding items when the first defendant withdrew were within the scope of the Works rather than variations: Comfort Management at [47]. My finding was contrary to that assumption. As a result, his report did not ultimately assist me on these two issues. However, I did find some parts of Mr McGeoch’s evidence of some assistance on the Materials Issue and the Variation Orders Issue.

  109. (2) Hearing fees and transcription fees

  110. [121] I can take the hearing fees and transcription fees together.

  111. [122] The first defendant’s submission is that it should not, in principle, be responsible for any part of the plaintiff’s disbursements which are referable to the plaintiff’s failed claim against the second defendant. The first defendant therefore asks for the hearing fees and the transcription fees to be disallowed in part.

  112. [123] I accept this submission. The plaintiff claims $23,000 for the hearing fees and $24,686.24 for the transcription fees. Taking a broad brush approach, I accept that 25% of the trial was taken up by the plaintiff’s unsuccessful claim against the second defendant. I therefore allow the plaintiff to recover only 75% of these two disbursements. This amounts to $35,764.68.

  113. Conclusion on disbursements

  114. [124] Leaving aside these three disputed items, the plaintiff’s claim for disbursements is $22,980.57 (being $320,000 less the total of $249,333.19, $23,000 and $24,686.24). The first defendant does not take any objection to the disbursements comprised in that figure of $22,980.57.

  115. [125] To that figure, I add back 75% of the hearing fees and transcription fees ($35,764.68) and 20% of Mr McGeoch’s fees ($49,866.64) to arrive at the figure of $108,611.89. That figure represents my finding as to a reasonable amount for disbursements which the plaintiff reasonably incurred in this action.

  116. Conclusion as against the first defendant

  117. Costs as between the plaintiff and the second defendant

  118. The plaintiff’s claim against the second defendant

  119. [128] The plaintiff’s claim against the second defendant was that he had breached his duties to the plaintiff in contract and in tort and had acted in conflict of interest by over-certifying the sum due from the plaintiff to the first defendant for the Works it had actually completed before it withdrew from the site (see Comfort Management at [4]). The plaintiff therefore sought to recover from the second defendant in this action the amount by which it had allegedly overpaid the first defendant.

  120. [129] I dismissed the plaintiff’s claim against the second defendant in its entirety.

  121. [130] First, I dismissed the plaintiff’s claim that the second defendant had over-certified the Works completed by the first defendant. This conclusion followed my findings on the Works Issue. Further, even if there was over-certification, I was satisfied that the plaintiff had not suffered any loss. I found that any payment made by the plaintiff to the first defendant was premised entirely on Lead’s certification. The plaintiff did not rely on the second defendant’s certification when paying the first defendant’s progress claims.

  122. [131] Second, I dismissed the plaintiff’s allegation that the second defendant was in conflict of interest by working with the first defendant to procure and supply ducting materials and manpower for the project. The plaintiff failed to prove that the second defendant had breached his duties or that he had caused the plaintiff to suffer loss in the sum of the alleged overpayment. I found that the plaintiff’s claims against the second defendant was “an ex post facto allegation of impropriety with no legal or factual basis” (see Comfort Management at [190]).

  123. The plaintiff must pay costs to the second defendant

  124. The quantum of the second defendant’s costs

  125. [136] I do not accept the plaintiff’s submission. The plaintiff has not characterised its claims against the second defendant correctly. In my view, the claims which the plaintiff asserted against the second defendant certainly included contractual issues. But those claims also included issues of tort and construction law.

  126. [137] Furthermore, I accept that the second defendant’s evidence was critical to the resolution of the claims and counterclaims as between the plaintiff and the first defendant. This included the Works Issue, the Overpayment Issue, the Delay Issue, the Defects Issue and the Variation Orders Issue. Much of the second defendant’s involvement in this action was therefore relevant both to the plaintiff’s claim against the first defendant as well as to the plaintiff’s claim against the second defendant. Thus, it was reasonable for the second defendant to be present and to be represented throughout the 8½ days of trial.

  127. [140] As for disbursements, the second defendant claims the sum of $12,438.40. This figure appears to me to be a reasonable sum for disbursements reasonably incurred. I therefore allow this figure in full.

  128. No recourse to the first defendant

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