Excalibur Land (S) Pte Ltd v Win-Win Aluminium Systems Pte Ltd and another

Kan Ting Chiu J:

[1] This case involved the development of a factory building, the aborted purchase of a unit in the building, and the disputes between the vendor/developer and the purchaser/sub-contractor.

[2] The facts and issues are set out under these headings: The Parties, The Suit, The Arbitration Proceedings and The Order of Court.

[3] The plaintiffs, Excalibur Land (S) Pte Ltd (“Excalibur”) were the developers of an industrial building at Ubi Avenue 1 Singapore, known as the Excalibur Centre.

[4] Tavica Design Pte Ltd (“Tavica”) was the main contractor for the construction of the Excalibur Centre. The first defendant, Win-Win Aluminium Systems Pte Ltd (“Win-Win”), entered into a sub-contract (“the Subcontract”) with Tavica to carry out aluminium works for the building.

[5] Win-Win purchased from Excalibur unit #08-13 in the Excalibur Centre (“the Property”) pursuant to an Option to Purchase which was exercised on 8 October 1998 and a Sale and Purchase agreement signed on 6 November 1998 (“the Agreement”).

[6] The second defendant, Leck Kim Koon (“Leck”), a director of Win-Win, issued a Letter of Guarantee dated 17 March 1999 (“the Guarantee”) to Excalibur whereby he guaranteed the payments of all amounts due from Win-Win to Excalibur under the Agreement and undertook to purchase the Property if Win-Win failed to complete the purchase.

[7] Win-Win failed to pay Excalibur the full balance of the progress payments due under the Agreement amounting to $154,049.39. Excalibur treated the Agreement as repudiated. Excalibur commenced this Suit against Win-Win (qua purchaser) and Leck (qua guarantor), for, inter alia, the sum of $94,107.05 which is the balance amount on the progress payments due upon the repudiation. The Suit was filed on 4 May 2001.

[8] Disputes also arose between Win-Win and Tavica in relation to the Subcontract. On 12 February 2001, Win-Win issued a notice of intention to refer the disputes to arbitration.

[9] Win-Win’s Points of Claim were lodged on 1 August 2001 and Tavica’s Points of Defence and Counterclaim were lodged on 25 September 2001. Win-Win claimed, inter alia, for work done; Tavica denied Win-Win’s claim and counterclaimed for damages arising from, inter alia, delay and defects.

[10] In the arbitration proceedings and the Suit, Win-Win raised common issues of fact. These centred on its assertion that the obligation to pay Excalibur under the Agreement had not yet arisen and/or was conditional upon other events.

[11] On 26 November 2001, when the trial for this Suit came up for hearing before me, I sought clarification on these common issues of fact in relation to the Agreement. It was also pointed out to me that technically, the only party in common in this Suit and the arbitration proceedings was Win-Win. However, I was concerned that there were common issues of fact and that it would not be desirable to have inconsistent findings of fact by the court and the arbitrator.

[12] I ordered that:

The parties did not appeal against the Order.

[13] Subsequent to the Order, the arbitration proceedings went ahead. Tavica applied for issues of fact common to the arbitration proceedings and the Suit to be bifurcated from the issues arising from the Subcontract (“the bifurcated issues”), and to be determined first.

[14] Counsel for Excalibur had explained that:

[15] It should be noted that the bifurcated issues were the common issues in the arbitration proceedings and the Suit. The corollary to that is that issues peculiar to one set of proceedings or the other were not covered by the bifurcated issues.

[16] The arbitrator, Mr Johnny Tan Cheng Hye (“the Arbitrator”), granted the application after hearing Win-Win’s objections and ordered that the following issues be bifurcated and determined first:

[17] On 19 May 2009, more than eight years after the commencement of the arbitration proceedings, and five changes of the solicitors who acted for Win-Win, the Arbitrator issued his “Interim Award (Bifurcated Issues)” in which he decided all four bifurcated issues in favour of Tavica (“the Interim Award”). In particular, he found that:

[18] Win-Win was not satisfied with the Interim Award and applied to court in Originating Summons No. 687/2009, Win-Win Aluminium Systems Pte Ltd v Tavica Design Pte Ltd (now known as Crescendas Pte Ltd), for leave to appeal against the Arbitrator’s findings on 2 October 2009. The application was dismissed by Judicial Commissioner Quentin Loh who found that no questions of law arose from the Arbitrator’s findings.

[19] After Win-Win’s application to appeal against the Interim Award was dismissed, Excalibur filed an application in the Suit on 4 November 2009 in SUM 5752/2009 under Order 33 rules 2 and 3 of the Rules of Court (Cap 322, R5, 2006 Rev Ed) for, inter alia, an order that there be a preliminary hearing before the trial whether in open court or in chambers for the Court to determine as preliminary issues:

[20] The application was heard on 30 December 2009 by Judicial Commissioner Steven Chong who made an order in terms of Excalibur’s application (“the 2009 Order”).

[21] After the 2009 Order was made, the Suit came back before me, and I had to decide on the preliminary issues.

[22] There were at this stage, three questions which were:

[23] Order 2 of the Order was that:

[24] Excalibur took the position that the Arbitrator’s findings are binding on the parties in this Suit. Win-Win and Leck, however, contended that they do not bind them in this Suit.

[25] Order 2 was framed in plain and broad terms. There was no doubt that the arbitration proceedings which were referred to in Order 2 of the Order had already commenced. The parties and the issues and disputes were identified when the Order was made.

[26] One may ask if there are circumstances where the Arbitrator’s decision will nevertheless not bind the parties in this Suit. That is possible. If the parties to the arbitration proceedings changed, eg, by the addition, removal or replacement of parties, or the issues in the proceedings changed, then a situation may arise where it can be said that the arbitration proceedings contemplated in the Order were not the proceedings that followed.

[27] Win-Win and Leck’s objections were not made on that basis. Their objections were three-fold:

[28] When the Order was made, the Arbitrator had not yet made the bifurcation order. That came later on 17 October 2008. Nevertheless, bifurcation per se did not affect the operation of Order 2. When the Order was made, the arbitration proceedings were in the early stages. It was entirely within the purview of arbitration proceedings to have bifurcated issues, and for an arbitrator to order them. For a bifurcation order to have any effect on Order 2, it must be such that it can be said that the bifurcation went against the contemplation of the Order, in that the Order would not have been made if it was foreseen that the arbitration proceedings would be bifurcated.

[29] The defendants also argued that the bifurcation order was not a decision for the purposes of Order 2 because:

This submission took liberties with the Order which was that the parties were to abide and be bound by the decision of the Arbitrator in the arbitration proceedings. The term “decision” is therefore not limited to the final decision of the Arbitrator. Hence, the order of the Arbitrator made on Tavica’s application for bifurcation came within Order 2. As the decision was final on the bifurcated issues which took place in the arbitration proceedings, the Arbitrator’s findings bind the parties even if the Arbitrator had not made his final decision on the whole arbitration proceedings.

[30] When the Order was made, it was known that the parties in the arbitration proceedings are the parties in the Subcontract, ie, Tavica and Win-Win, whereas the parties in the Suit were the parties to the Agreement, ie, Excalibur and Win-Win, and Leck as Win-Win’s guarantor.

[31] Excalibur, Win-Win and Leck were parties in the Suit in which the Order was made. Tavica was the only non-party in the Suit. Win-Win and Leck did not appeal against the Order. Tavica, which must have been aware of the making of the Order and was represented in the arbitration proceedings by the same solicitors as Excalibur, was content with the Order.

[32] Having accepted the Order without appealing against it, there was no merit in Win-Win’s and Leck’s contention that the Order should not apply against them because the parties in the arbitration proceedings and the Suit were not the same parties.

[33] The defendants submitted in their written submissions that:

[34] I make two observations on this submission. First, the Arnold exception is an exception to the doctrine of res judicata. In the present suit, however, the Arbitrator’s findings do not bind Win-Win and Leck by virtue of the operation of that doctrine, but by the force of the Order. This is a conceptually distinct base on which parties may be bound by the Arbitrator’s findings, and the Arnold exception has no application to the application of the Order.

[35] Secondly, even if it is assumed that the Arnold exception may apply in this context, the defendants had not shown that the Arbitrator had made such an egregious mistake that grave injustice would result if his findings were to bind Win-Win and Leck. Win-Win had fought long and hard to deny any liability towards Excalibur.

[36] I therefore found that the Arbitrator’s findings are binding in this Suit.

[37] On the basis that the bifurcated issues were the common issues in the arbitration proceedings and the Suit, the Arbitrator’s findings in the arbitration proceedings on the common issues are to be applied to the Suit pursuant to the Order. This, however, does not mean that the Arbitrator’s findings are to be taken to have addressed all questions of law and fact in the Suit.

[38] Consequently, I ruled that the answer in Question (ii) is in the affirmative.

Question (iii): If the Arbitrator’s findings are treated as binding, whether judgment may be entered against Win-Win and Leck

[39] It hardly needs mentioning that the rights and liabilities of Win-Win and Leck are not necessarily determined by the Arbitrator’s findings. If there are issues raised in the Suit that were not addressed in the bifurcated issues and dealt with in the Arbitrator’s findings, then those issues must be dealt with before Excalibur’s claims against Win-Win and Leck can be determined.

[40] Win-Win submitted that:

A reading of Win-Win’s defence confirmed that estoppel was pleaded. It was pleaded:

and

Both pleas of estoppel were founded on the alleged agreement that no payment would be due till the Subcontract was signed. There was no specific plea for relief against forfeiture or plea on other issues. However, the existence of even one issue in the Suit that is not covered by the bifurcated issues will suffice to answer the question.

[41] While it is correct that estoppel was not expressly mentioned in the bifurcated issues, the question should be viewed in a broader context. This is so because Win-Win’s liability to pay Excalibur under the Agreement was specifically raised in the third bifurcated issue, and the Arbitrator had found that Win-Win was not entitled to withhold from Excalibur payments due under the Agreement (see [16] and [17] supra).

[42] When Win-Win’s obligation to make payment under the Agreement came up in the arbitration proceedings, Win-Win contended that the payments were not due, and that led to the Arbitrator making his findings that Win-Win was not entitled to withhold payment to Excalibur pending the confirmation of the Subcontract. Win-Win should and would have put up its full case that payment was not due, including the pleaded defence of estoppel. Consequently, when the Arbitrator found that payment was due, the defence of estoppel was either abandoned, or had failed.

[43] Excalibur had sued Leck in his capacity as a guarantor. The document that Excalibur relied on was a letter from Leck to Excalibur dated 17 March 1999 which reads:

The letter was signed and sealed by Leck. There was no reference to this document in the Arbitrator’s findings.

[44] By this letter, Leck stood as guarantor for all payments due from Win-Win under the Agreement. It was argued that his undertaking to purchase the Property in the event that Win-Win failed to complete the purchase absolved him from the liability under guarantee as he was prepared to purchase the Property in place of Win-Win. This argument was flawed because Leck had no entitlement to purchase the Property. He was obliged to purchase it if Excalibur called on his undertaking, but Excalibur was acting within its rights to waive the undertaking, and to enforce the guarantee.

[45] In the circumstances, Question (iii) was answered in the affirmative, and judgment was entered against Win-Win and Leck.