Fongsoon Engineering (S) Pte Ltd v Kensteel Engineering Pte Ltd

Belinda Ang Saw Ean J:

[1] In the present action, the plaintiff, Fongsoon Engineering (S) Pte Ltd, claims moneys due to the plaintiff under a lump sum contract for the fabrication and erection of the main structure of the Su Tu Vang switchgear (hereafter referred to as “the Sub-Contract Works”). The other claim relates to variation or additional works requested by the defendant, Kensteel Engineering Pte Ltd. The defendant’s counterclaim against the plaintiff is for expenses incurred by the defendant in rendering assistance to the plaintiff to complete the Sub-Contract Works. Mohd Puad bin Md Isa (“Mohd Puad”), the plaintiff’s business manager, and Ng Chin Hong, commonly known as Francis Ng (“Francis Ng”), the defendant’s chief executive officer, were the only witnesses called to testify for the respective parties.

[2] The plaintiff’s pleaded case is based on a lump sum contract for the Sub-Contract Works. Whilst the defendant rejects in entirety the plaintiff’s claim in the sum of $403,072.74 for variation works, the defendant’s refusal to pay the outstanding progress claims in the sum of $121,621.16 was on account of its counterclaim against the plaintiff.

[3] In its Defence and Counterclaim, the defendant pleaded that the plaintiff was contractually obliged to complete the Sub-Contract Works by 6 May 2007. However, the plaintiff failed to meet the contractual deadline, and was therefore in breach of contract. The defendant, in adherence to its duty to mitigate following the plaintiff’s breach, proceeded to and did render assistance to the plaintiff to facilitate completion of the Sub-Contract Works as well as rectification of defective works. As a result, the defendant expended the sum of $201,649.53 and is, therefore, seeking payment in its counterclaim against the plaintiff. In addition, the defendant denies issuing any variation orders to the plaintiff. In any event, the defendant’s pleaded case is that the plaintiff was obliged to finish the Sub-Contract Works by a stipulated time, and changes to the work-plan, if any, were due entirely to plaintiff’s obligation to speed up its work after its initial delay. Accordingly, the defendant has denied any responsibility whatsoever.

[4] In its Reply and Defence to Counterclaim, the plaintiff denied that it was in breach. It contended that it had a period of ten weeks to complete the Sub-Contract Works, and that the period of ten weeks would not commence until the plaintiff had received all the steel required for the Sub-Contract Works. The defendant only completed its supply of steel sometime in mid April 2007.

[5] The debate is over the deadline by which the plaintiff was supposed to complete and hand over the Sub-Contract Works. Ordinarily, the applicable deadline can be easily ascertained from the terms of the contract. Unfortunately, the parties were unable to agree on the documents that evidenced the contract between them, or even the date on which a binding contract was formed. As such, the dispute became rather protracted.

[6] The defendant maintains that the contract gave the plaintiff a total of ten weeks to complete the Sub-Contract Works, and time would start to run from the commencement of the work. The plaintiff commenced work on 22 February 2007, and the Sub-Contract Works should have been completed by the end of April 2007. In contrast, the plaintiff’s case is premised on a different start date: the ten weeks to complete the Sub-Contract Works was to start from the total receipt of the steel. The defendant’s delivery of the steel material was completed on 20 April 2007. As such the period of ten weeks should start from that April date. In support of its contention, the plaintiff relied on a 3-page document dated 7 March 2007 which was signed and initialled by the parties. According to the plaintiff, this 3-page document is the contractual documentation governing the rights and obligations of the parties.

[7] This dispute came about because of the inclusion of an additional term shortly after the defendant had signed the 3-page document and then passed it on for the plaintiff’s execution. A good starting point is to examine the course of the correspondence between the parties to determine the date on which the contract between them was concluded, as well as the terms contained within that contract.

[8] On 24 January 2007, the defendant sent an e-mail to the plaintiff attaching the terms and conditions and the schedule of work. The plaintiff was specifically asked to review the terms and conditions and to revert with its comments, if any. The plaintiff’s witness, Mohd Puad, confirmed that the terms and conditions referred to in the e-mail of 24 January 2007 were attached to the e-mail and received by the plaintiff. He identified the documents exhibited in his affidavit of evidence-in-chief at pages 36 to 54 as the terms and conditions received by the plaintiff. The documents in question comprised “Exhibit A - Form of Agreement, Part II - Sub-contract terms and conditions (hereafter referred to as “the STC”). In reply, the plaintiff on 30 January 2007 quoted a total price of $480,000 excluding GST and wrote:

It is common ground that up to this point, there was no binding contract.

[9] On 9 February 2007, the defendant e-mailed its Letter of Intent to the plaintiff. The Letter of Intent read as follows:

[10] The e-mail of 9 February 2007 read as follows:

[11] I should mention that the usage of letters of intent that give rise to some limited rights and liabilities is common in the construction business. Typically, the employer states that it intends to enter into a contract with the contractor and requires the contractor to start work while the formal contractual documentation is being prepared. Ultimately, the full effect of any letter of intent depends entirely on the objective meaning of the language used as well as the context in which it was given.

[12] In my judgment, the Letter of Intent coupled with the defendant’s e-mail of 9 February 2007 make up the defendant’s offer for the Sub-Contract Works. The terms of the offer were those set out in the e-mail, Letter of Intent and the STC. I should add that the document entitled “Scope of Work” and dated 23 January 2007 was exhibited by Mohd Puad in his affidavit of evidence-in-chief at p58. The witness confirmed that it was provided to the plaintiff by the defendant via e-mail of 24 January 2007. Mohd Puad also confirmed that the Scope of Work mentioned in item 1 of the Letter of Intent was referable to the document at p58 of his written evidence. For present purposes, under the Scope of Work dated 23 January 2007, the defendant was to supply primary and secondary steel to the plaintiff.

[13] The plaintiff’s reply of 10 February 2007 indicated that it was accepting the contract but with additional terms:

[14] On 12 February 2007, the defendant replied to the plaintiff in the same e-mail thread with its comments. The defendant wrote:

[15] The text in blue was as follows:

[16] In my view, the plaintiff’s e-mail reply of 10 February 2007 was a counter-offer which was accepted by the defendant on 12 February 2007. The text in blue did not contain counter proposals, but rather the defendant’s attempts at stating its understanding of the ambiguous and imprecisely worded terms put forward by the plaintiff. In my judgment, a concluded and binding contract was therefore formed between the parties on 12 February 2007, the terms of which included:

(a) the defendant’s STC (see [8] above); and

(b) the Letter of Intent and e-mail of 9 February 2007 (see [9]-[10]).

[17] On 13 February 2007, the plaintiff in an e-mail attempted to change the payment terms. It also tried to add other conditions like liquidated damages for late completion, and incentives for early completion. The defendant did not reply to this e-mail.

[18] On 15 February 2007, the defendant sent the plaintiff an undated copy of the contract (“the Contract”) via e-mail. The e-mail read as follows:

[19] The original copy of the Contract was pre-signed by the defendant and forwarded to the plaintiff for execution. Shortly thereafter, the defendant by e-mail dated 17 February 2007 requested the plaintiff to send its workers to the worksite on 22 February 2007 for a safety induction, as well as to commence the cutting of steel. The plaintiff’s personnel showed up at the yard as instructed.

[20] The plaintiff signed the Contract, dated it 7 March 2007, and returned it to the defendant on a date which the defendant’s witness could not recall. Unbeknown to the defendant, the plaintiff’s Edmund See had handwritten against the provision in the Contract that the “delivery time” was to be “10 weeks end of April 2007”, the following:

[21] The plaintiff’s attempt to change the completion date to a later one was unilateral. It was ineffective as it was inserted well after the contract had been concluded, and without the prior knowledge and consent of the defendant. There is no evidence that after the Contract was returned, the defendant had by conduct subsequently agreed to the plaintiff’s revision.

[22] To summarise, the defendant’s e-mail of 9 February 2007 required “the Fabrication and erection schedule to be completed by 10 weeks”. There is no dispute that this referred to completion of the Sub-Contract Works within ten weeks from commencement of work, as Puad had candidly admitted to this during cross-examination. Accordingly, I hold that the plaintiff was contractually obliged to complete the Sub-Contract Works within ten weeks of commencement, starting from 22 February 2007. However, matters developed into the second dispute.

[23] The second dispute between the parties resolves around the issue of whether the plaintiff or the defendant was responsible for the delay in the plaintiff’s completion of the Sub-Contract Works. Although the defendant did not make any claim for damages for the plaintiff’s late completion of the construction works, a substantial part of its counterclaim against the plaintiff was for time and money expended in helping the plaintiff to speed up the Sub-Contract Works. Naturally, if I find that the defendant was responsible for the plaintiff’s late completion of the Sub-Contract Works, then that part of its counterclaim against the plaintiff would fail.

[24] I note that there was no extension of time clause in the contractual documents. In the absence of such a clause, an employer would not be allowed to insist on completion by the due date if he was responsible for part of the delay, and he would not be able to rely on any liquidated damages clause (see generally Dodd v Churton [1897] 1 QB 562; Trollope & Colls v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601). In common parlance, time is said to be “at large”.

[25] Even though time for completion is at large, the contractor has to complete the works within a reasonable period. If the contractor fails to do so, the employer will be able to sue to recover general damages resulting from the contractor’s breach (see per Salmon LJ in Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 114 at 121). What constitutes a reasonable time is a question of fact. As a guide, how the courts in some cases have determined the period of reasonable time is by simply adding the effect of the employer’s delay to the contractual deadline. This is usually regarded as a fair method because it is able to strike an appropriate balance between not allowing the employer to take advantage of its own fault, and not giving the contractor any other additional time other than that caused by the employer’s delay (see generally Balfour Beatty Construction Ltd v London Borough of Lambeth [2002] 1 BLR 288).

[26] The contractor has the burden of proving that the employer’s actions caused the delay in completing the works. In John Doyle Construction Ltd v Laing Management (Scotland) Ltd 2004 S.L.T. 678, the court held at [35]:

[27] As the passage quoted above made it clear, causation is not easy to prove. Even if the employer’s actions prevented the contractor from working on a certain part of the project, but the contractor was nevertheless still able to continue to work uninterrupted elsewhere, the courts might not find that the employer had caused any delay to the contractor. To succeed, the contractor would have to prove that the works had to be completed in a sequential manner, and that no work could be done until the employer’s default had abated or resolved. The difficulty with discharging the burden of proof explains why many construction contracts have provisions allowing a neutral party like an assessor to determine whether or not there has been delay by the employer, and its resulting effects. If the dispute ends up in court, expert evidence often plays an important part in determining whether the employer’s default has caused the delay which the contractor alleges.

[28] The plaintiff’s allegations of delay fall into four main categories. They are:

[29] The plaintiff’s allegation is that the quantity of steel on the worksite was insufficient for its workers to commence work on 22 February 2007. In addition, the supply of steel to the worksite was intermittent, and it was only until 21 April 2007 that the supply of steel was completed.

[30] For its part, the defendant conceded in its closing submissions that it was late in supplying some of the steel to the worksite. However, by 16 March 2007, at least, 80% of the steel was already been sent to the worksite. Hence, the defendant submits that the period of ten weeks to complete the Sub-Contract Works commenced from 16 March 2007.

[31] I now turn to examine the alleged delay caused by the defendant after 16 March 2007. I begin with the project schedule sent to the plaintiff on 24 January 2007. The relevant portion of the schedule states:

[32] In light of the defendant’s concession that the start date was 16 March 2007 (due to its own delay in sending the steel to the worksite), the various dates in the schedule would, logically, have to be adjusted further by one month with no change to the description of the Job scope. According to the first item on the schedule, the plaintiff was required to cut the primary steel available on the worksite. It is clear from the documented evidence that at least the following quantities of steel had been delivered to the worksite on various dates:

[33] During cross-examination, Mohd Puad admitted that by 16 March 2007, the plaintiff had only managed to cut 30% of the primary steel that was on the worksite. His testimony is borne out by the plaintiff’s own first progress claim of 20 March 2007, whereby the plaintiff invoiced the defendant the sum of $30,219.97 for 30% of work done on the 68.526 tons of primary steel. In light of this, and on account of the plaintiff’s inability to explain why its workers did not work on the remaining 70% of the primary steel that was available at the worksite by 16 March 2007, it is reasonable for the court to draw the inference that there is no correlation between the defendant’s late delivery of steel material and the plaintiff’s work progress. The evidence points to the plaintiff’s inability to complete the Sub-Contract Works seeing the quantities of primary and secondary steel available to the plaintiff on the worksite as at 16 March 2007. I therefore reject the plaintiff’s first complaint as baseless.

[34] The plaintiff blames the changes made to the construction plans many times during the Sub-Contract Works, thereby causing further delays in the work process and progress.

[35] The first set of project drawings was issued by the defendant to the plaintiff on 15 January 2007, and it related to the general scope of the plaintiff’s work. On 20 March 2007, the defendant issued a second set of drawings to the plaintiff, and it related to the floor beam details. The first and second sets of drawings were for different aspects of the Sub-Contract Works. Mohd Puad admitted in cross-examination that the second set of drawings did not change the instructions in the first set of drawings, and that the plaintiff could still use the first set of drawings to carry out the Sub-Contract Works.

[36] On 22 March 2007, the defendant issued a third set of drawings to the plaintiff which related to the lower floor framing and the floor beam details. Even at this stage, the changes to the construction plans did not affect or disrupt the plaintiff’s work progress because as Mohd Puad admitted at paragraph 20 of his affidavit of evidence-in-chief, the plaintiff only started the fabrication work on 22 March 2007.

[37] On 2 April 2007, a fourth set of drawings was issued to the plaintiff. Mohd Puad admitted in cross-examination that those drawings only required some minor changes to the entire floor beam details. Furthermore, there is no evidence that the plaintiff had even started work on the floor beam at the time the fourth set of drawings was issued.

[38] On 19 April 2007, a fifth set of drawings was issued to the plaintiff. It related to the roof beam details. Mohd Puad admitted during cross- examination that the plaintiff had not started work on the roof beam at the time the fifth set of drawings was issued.

[39] The last allegation was that the defendant required some amendments to the requirements for the padeye (lifting eye section) on 5 June 2007. This allegation turned out to be a red herring because Mohd Puad admitted during cross-examination that the amendments were actually given to the plaintiff on 18 April 2007, and as such, the plaintiff’s progress was not affected at all.

[40] In light of Mohd Puad’s evidence, the plaintiff’s allegation that the defendant’s changes to the construction plans caused delays to the plaintiff is unfounded and must fail.

[41] The plaintiff’s allegation that there was insufficient equipment on the worksite is entirely bereft of details. No details were given as to the kind of equipment that were supposedly lacking, the time period in which they were lacking, and to what extent the plaintiff’s work was held up and, hence, delayed as a consequence.

[42] Again the allegation assumes that the defendant was contractually obliged to supply the equipment. The contractual documents do not stipulate the type and number of equipment to be supplied by the defendant. One finds some hints in the copy of the Contract sent to the plaintiff on 9 Feb 2007:

Beyond that list headed “Work exclude”, nothing more was stipulated elsewhere after 9 February 2007. It is not unreasonable to construe every item listed there as the responsibility of the defendant to supply at its cost when so required by the plaintiff for the Sub-Contract Works. The other list of items under “Work scope” was to be provided by the plaintiff.

[43] Throughout the period of March to May 2007, Mohd Puad agreed during cross-examination that there was sufficient material and equipment on- site for the plaintiff’s work. In fact, the plaintiff issued three progress claims in respect of the following areas of Sub-Contract Works:

[44] I was referred to the plaintiff’s e-mail of 24 May 2007 as proof that the defendant did not provide the plaintiff with equipment at the worksite. The e-mail read as follows:

[45] Taking the e-mail at its face value, what seems to have happened is that the plaintiff had fallen behind in the progress of its work and the defendant proposed a recovery plan that was supposed to help the plaintiff speed up its work. The equipment that the defendant promised to give to the plaintiff by 10 May 2007 was pursuant to the proposed recovery plan, and not based on the original contract. Accordingly, this e-mail does not assist the plaintiff.

[46] In conclusion, the plaintiff’s allegation that the defendant had failed to provide it with sufficient equipment at the worksite is without merit and baseless.

[47] The plaintiff’s allegation is that the defendant’s client had issued a stop order due to safety issues on the worksite. Details of the stop order were not given in Mohd Puad’s affidavit of evidence-in-chief. However, an e-mail from him to the defendant dated 19 June 2007 read as follows:

[48] The plaintiff did not give evidence on how long the stop order lasted, what aspects of the work the stop order related to, or what impact the stop order had on the plaintiff’s work. Accordingly, I reject the plaintiff’s complaint for being too sketchy and vague to merit serious consideration.

[49] In conclusion, I find that the defendant was responsible for the delay arising from the fact that the steel materials to be supplied were sent to the worksite on 16 March 2007. The contractual deadline of ten weeks beginning from 22 February 2007 was no longer binding on the plaintiff. In its place, I hold that the plaintiff was obliged to complete the construction work within a reasonable time, which would be ten weeks starting from 16 March 2007 through to end May 2007. However, the Sub-Contract Works were only completed on 11 August 2007. In the premises, the plaintiff was in breach of its obligation to complete the Sub-Contract Works within a reasonable time.

[50] The plaintiff is claiming a substantial amount for variations works requested by the defendant. They were oral variation orders for the completion of certain works. Details of the variation works were particularised in:

[51] The defendant denies the claim for several reasons. First, there was no variation order issued to the plaintiff. Second, the items which the plaintiff had billed the defendant fell within the scope of works which the plaintiff had agreed to complete under the lump sum contract. I will deal with the first reason now. A determination in favour of the defendant disposes of the liability issue completely.

[52] Clause 5 of the Contract (see [18] above) states:

[53] In addition, clause 3.8 of the STC (see [8] above) provides as follows:

[54] The plain wording of clause 3.8 requires a variation order to be in writing. Clause 5 as a matter of construction also contemplates, from the use of the word “issue”, the existence of a written variation order from the defendant. The plaintiff has not produced any written variation order issued by the defendant. A written variation order is a condition precedent for any claim by the plaintiff for payment of any additional or varied work done. The plaintiff is not entitled to payment of any of its claims for variation works since there were no written instructions from the defendant. As an aside, the plaintiff did not establish any verbal instructions for variation works in any case. In the premises, the claim for variation works is fails.

[56] In relation to the defendant’s first counterclaim for $69,911.13, it is noteworthy that the plaintiff has accepted this claim as justified. The statement of account sent by the plaintiff to the defendant on 1 October 2007 showed the plaintiff’s acceptance of the defendant’s claim, and had even used the said amount to set off the sums which it said were owed by the defendant (or so it thought). In the circumstances, the defendant’s first counterclaim of $69,911.13 against the plaintiff is allowed.

[59] Turning now to the rectification works, the plaintiff’s position, as stated in paragraph 21 of Mohd Puad’s affidavit of evidence-in-chief, was that although the floor framing was uneven, it did not constitute a breach of contract. It backed up its position with a survey report prepared by one of the defendant’s employees, Yuly Satiawan, where the said employee had mentioned that the calculation was adequate for presentation to the defendant’s client. Furthermore, even if the defendant had conducted some rectification work to even out the unlevel or sagging floor framing, it was voluntary and had nothing to do with the plaintiff.

[60] On the other hand, the defendant’s stance was that the survey report prepared by its employee had been made purely for the purpose of showing that the fabrication structure could be lifted to the quay side of the defendant’s yard. It did not, however, show that the fabrication structure had been satisfactorily constructed. Furthermore, the plaintiff did not dispute that the defendant had carried out some rectification work to the floor framing.

[61] From the contemporaneous correspondence between the parties, I have no doubts that the defendant had recorded its dissatisfaction with the uneven floor framing and its intention to rectify the defects on multiple occasions. On 17 August 2007, the defendant had sent a letter by fax to the plaintiff complaining about the unevenness of the floor framing. The letter was written in the following terms:

The plaintiff did not reply to the defendant’s letter.

There was no reply from the plaintiff to this second e-mail.

[63] Mohd Puad admitted in cross-examination that the defendant had carried out substantial rectification work to the floor framing. I agree that the defendant would have no reason to undertake such works if there were no defects to the floor frame at all. For instance, shimp plates were added to fill the gaps between floor and equipment supports due to uneven floor framing. All in all, there was credible evidence of the existence of defects, and rectification of the same by the defendant. The uneven floor framing was due to the plaintiff’s defective or shoddy workmanship.

[65] On 24 February 2011, counsel for the defendant filed an affidavit which was affirmed by the managing director of the defendant, Tsai Heng Een (“Tsai”), in respect of the expenses incurred by the defendant in rectifying the defective floor framing. In his written statement, Tsai deposed that he was able to locate documentary evidence in support of $78,023.71 and not $90,720.00. The plaintiff did not file any reply affidavit nor sought leave to cross-examine Tsai.

[66] The documents attached to Tsai’s affidavit included cheques paid out by the defendant to third parties for work done, as well as the time sheets to show the period when the work was done. The time sheets were for work done in the period stretching from as early as 22 May 2007 up to 6 September 2007. On reviewing the documents, it was clear to me that not all the documents were for the rectification work. The survey report prepared by Yuly Satiawan on the adequacy of the calculations relating to the floor of the building structure was dated 11 August 2007. Any rectification work done by the defendant to the floor must have been done after 11 August 2007, or more precisely, after 17 August 2007, when notice of the defects were first brought to the attention of the plaintiff.

[67] Given this state of affairs, the best case for the defendant would be for me to accept that all the expenses incurred by the defendant after 17 August 2007 (as shown by the cheques and the timesheets) were for the purpose of rectifying the uneven floor. Based on the documents produced by Tsai, there are 4 sets of expenses that were incurred by the defendant in respect of work done after 17 August 2007. These are

(a) Amount of $3,313.08 paid as salary to Yip Wing Koo and Leong Sek Khan for 406 hours of casual labour supplied;

(b) Amount of $2,295.00 paid as salary to Yu Chee Hoe and Fong Kun Fatt for 165 hours of casual labour supplied;

(c) Amount of $3,400.00 (UOB Cheque No.383217) paid to Express Engineering Pte Ltd for 340 hours of labour supplied; and

(d) Pro-rated amount of $18,947.50 [(2056.5-161.75)/2056.5 x $20,565] paid to Express Engineering Pte Ltd for 1,894.75 hours of labour supplied.

These four sets of expenses add up to $27,955.58.

[68] Accordingly, I find that the plaintiff is liable to the defendant for the sum of $27,955.58 in respect of the expenses incurred by the defendant in rectifying the defective flooring.

[69] For the reasons given, I hold:

(a) the defendant is liable to pay to the plaintiff the balance of the contract sum of $121,621.16; and

(b) the plaintiff is liable to the defendant under its Counterclaim for the sums of $69,911.13, $32,400.00, and $27,955.58 (being the cost of providing extra workers to make up for the delay caused by the plaintiff’s slow progress, the cost of welding 12 lifting padeye box stiffeners, and the cost of rectifying the defective flooring, respectively). This adds up to a total figure of $130,266.71.

After setting off the figures in (a) and (b), the plaintiff has to pay the defendant a sum of $8,645.55. Accordingly, there be judgment for the defendant in the sum of $8,645.55. I make no order on interest.