Shanghai Tunnel Engineering Co Ltd v Econ-NCC Joint Venture

Judith Prakash J:

[1] This originating summons is one of two appeals arising out of arbitration proceedings between Shanghai Tunnel Engineering Co Ltd (“STEC”) and Econ-NCC Joint Venture (“ENJV”) which resulted in a partial award dated 29 December 2008 (“Partial Award”) and a correction award dated 28 January 2009 (“Correction Award”). Both parties were dissatisfied with certain aspects of the arbitrator’s decision, albeit on different grounds, and therefore agreed pursuant to s 49(3)(a) of the Arbitration Act (Cap 10, 2002 Rev Ed) (“the Act”) to appeal to the court on the questions of law they considered to arise from the decision. This originating summons (“OS 226/2009”) is STEC’s appeal and ENJV’s appeal is encompassed in Originating Summons No 235 of 2009 (“OS 235/2009”).

[2] STEC is a Chinese public company which carries out engineering and construction activities. At all material times during its dealings with STEC, ENJV was a joint-venture registered in Singapore as a partnership between a Singapore construction company, Econ Corporation Pte. Ltd (now known as Econ Piling Pte Ltd) (“ECON”), and a Swedish company, NCC International Aktiebolag. By the time OS 235/2009 was filed, the joint-venture had been terminated. As both sets of proceedings relate to events that occurred during the subsistence of the joint-venture, however, it is convenient to refer to ENJV rather than to the individual partners.

[3] The parties were engaged in works relating to the construction of part of the Circle Line of the Mass Rapid Transit System. ENJV was the main contractor employed by the Land Transport Authority (“LTA”) and it in turn employed STEC as a sub-contractor for part of the works. The disputes that arose subsequently were, in accordance with the contract, referred to arbitration by a sole arbitrator, Mr George Tan (“the Arbitrator”). STEC was the claimant in the arbitration but ENJV both defended the proceedings and put in a counter-claim.

[4] The main contract between LTA and ENJV was dated 1 August 2002 (“Main Contract”). It was ENJV’s task to construct and complete the MRT stations at MacPherson and Upper Paya Lebar as well as the tunnels at this section of the Circle Line (“Main Contract works”). There were 13 phases under the Main Contract. In Phase 3, the basic structure of the rail tunnels should have been completed. The completion date stipulated in the Main Contract for Phase 3 was 31 December 2004.

[5] By a Letter of Award dated 5 December 2002 (“LA”), STEC was awarded a sub-contract by ENJV for the bored tunnelling works in Phase 3 of the Main Contract at the price of $20,172,966.00 (“Sub-Contract”). By virtue of cl 2.0 of the LA, the following documents were incorporated into the Sub-Contract:

Broadly speaking, the works under the Sub-Contract (“the Sub-Contract works”) comprised tunnelling works for both north-bound (“NB”) and south-bound (“SB”) tunnels, including the installation of precast reinforced concrete segments in strict compliance with, inter alia, the 22B3 Programme.

[6] The commencement and completion dates for the Sub-Contract works were stipulated at cl 4.0 of the LA as 15 December 2002 and 31 December 2004 respectively. In particular, STEC was to complete the installation of tunnelling works including First Stage Concrete by 16 November 2004. As the issues arising in this appeal relate to the completion of the Sub-Contract works, the clauses in the LA and GTC which are pertinent to completion are reproduced below.

(a) Clause 4.0 of the LA states:

(b) Clause 17.0 of the LA provides for completion, delay and time extension as follows:

(c) Clauses 17 and 18 of the GTC impose the following terms for completion:

[7] Pursuant to cl 9.0 of the LA and Appendix V of the GTC, ENJV was to complete preparatory works before STEC could carry out the boring works. These preparatory works included:

[8] Based on the 22B3 programme, the dates for handing over of the SB and NB launch shafts to STEC for commencement of work were 24 April 2003 and 8 May 2003 respectively. Tunnelling works for SB and NB tunnels were to be carried out concurrently. The sequence of works was to be as follows:

[9] For various reasons, ENJV could not complete the requisite preparatory works according to schedule. The SB launch shaft was handed over to STEC on 27 June 2003 whilst the NB shaft was handed over on 11 August 2003.

[10] STEC alleged that the late handover of the launch shafts by ENJV entitled it to 84 days of extension of time. This was disputed by ENJV, which claimed that despite the late handover of the launch shaft, STEC had not commenced installation of its site offices and had not mobilised the necessary labour and resources to commence the Sub-Contract works as at the date of actual handover of the launch shafts. Thus, the late commencement of the Sub-Contract works could not be wholly attributable to the delay in the handover of the launch shafts.

[11] Ostensibly to alleviate these problems, STEC and ENJV entered into an agreement on 26 July 2003 which both parties referred to as the second supplemental agreement (“2 SA”). Under the 2 SA, ENJV was to advance to STEC $1,008,648.30 as an out-of-sequence progress payment for sums invoiced by STEC’s sub-contractors in respect of equipment procured from such sub-contractors (eg, locomotives, gantry cranes, liquid grout, ventilation equipment and muck cars) as well as for general expenses incurred by STEC. Clause 1.2 (ix) stated that the 2 SA did not relieve STEC of its obligation to furnish a performance bond as required under the Sub-Contract.

[12] Two clauses of the 2 SA bear quoting:

[13] On 20 May 2005, STEC gave notice to ENJV of its intention to commence arbitration proceedings pursuant to cl 32 of the GTC. STEC’s position was that it was not at fault for failing to meet the contractual deadlines but was entitled to extensions of time while ENJV disputed this and claimed that the delay in the completion of the Sub-Contract works had caused it substantial loss for which STEC should be held liable. There was also a dispute over whether ENJV was entitled to withhold certain monies from STEC.

[14] On 6 December 2005, STEC made an application to the Arbitrator for an interim award to be made summarily in its favour. This application was dismissed on 3 April 2006 by the Arbitrator’s interim award (“Interim Award”). Following this decision, STEC re-amended its statement of case.

[15] In its final pleadings (“Final Statement of Claimant’s Case”) and closing submissions, STEC claimed the following:

[16] In its amended pleading (“Counterclaim”), ENJV made a counterclaim against STEC for the following:

[17] The hearing of the arbitration commenced in March 2007. Further hearings took place in April and May 2007 and oral evidence was completed on 24 May 2007. Thereafter, both parties filed closing submissions and written replies to the same. The Arbitrator subsequently granted the parties leave to make further submissions and the fifth and final set of submissions from ENJV was received on 14 August 2008. On 15 December 2008, the Arbitrator denied ENJV’s request to put in a sixth set of submissions and declared the close of the hearing of the arbitration. He issued the Partial Award on 29 December 2008.

[18] In January 2009, solicitors for both STEC and ENJV wrote to the Arbitrator to seek clarification and correction on various points of the Partial Award. On 28 January 2009, the Arbitrator issued the Correction Award.

[19] Apart from the various claims and counterclaims, the Arbitrator also made determinations on the following:

(a) Submissions on costs for interlocutory applications relating to:

(i) STEC’s application for discovery against ENJV which was allowed;

(ii) STEC’s application to amend the Statement of Claimant’s Case which was allowed; and

(b) ENJV’s submission that the scheme of arrangement concerning ECON approved by the court on 27 October 2004 (“the Scheme”) had the effect of discharging ENJV from all its liabilities to STEC owing to STEC’s failure to file a proof of debt pursuant to the Scheme.

[20] The Arbitrator’s determinations are summarised in the following table:

[21] The questions of law raised by STEC in OS 226/2009 relate to the following findings of the Arbitrator:

(a) Substantial completion of the Sub-Contract works was effected on 8 March 2005;

(b) STEC was allowed 44 days extension of time;

(c) DLP (i.e. the Defects Liability Period) commenced on 8 March 2005, 112 days after 16 November 2004; and

(d) That he would make no order in respect of ENJV’s claim for reimbursement of $10,682,000 being ENJV’s alleged liability to LTA for delay.

These questions have been described by STEC as the “Complete Decision” question and the “Commercial Purpose – Reciprocity” question.

[22] The Complete Decision question is whether the Arbitrator was obliged to and has rendered a complete decision in respect of all issues which were referred to him for resolution. It arises in relation to ENJV’s claim for damages allegedly caused by STEC’s delay in completing the Sub-Contract works. It is STEC’s position that the Arbitrator has not rendered a complete decision in relation to this claim notwithstanding the fact that this was a matter which the parties had referred to him for his determination.

[23] The Commercial Purpose – Reciprocity question is whether in relation to the 2 SA, the Arbitrator has considered all relevant factors permissible in law in arriving at his decision and whether the principles in the cases of Yamashita Tetsuo v See Hup Seng Ltd [2009] 2 SLR(R) 265 (“Yamashita”) and Gay Choong Ing v Loh Sze Ti Terence Peter and Another Appeal [2009] 2 SLR(R) 332 (“Gay Choong Ing”) have any application in determining the intent and true effect of the 2 SA which was to reach a compromise between the parties arising from the late handover of the Sub-Contract works by ENJV to STEC.

[24] As stated, the Complete Decision question arises in relation to ENJV’s counterclaim. It had sought the following reliefs pursuant to cll 17 or 18 of the GTC:

ENJV’s claim therefore was for $10,682,000 to be paid immediately and a declaration that STEC was liable for sums above that amount in the event that further liquidated damages were imposed by LTA in the future. ENJV did not include as part of its pleading an alternative prayer that the quantum of loss and damage under this head of claim be assessed by the Arbitrator or deferred for determination by another forum or tribunal.

[25] ENJV’s claim for $10,682,000 was premised on its own liability to LTA under the Main Contract in liquidated damages for 218 days of delay (from 11 January 2005 to 16 August 2005) at the rate of $49,000 per day. ENJV had obtained 10 days’ extension of time from LTA, so the date of completion for Phase 3 was extended to 10 January 2005. Its position in the counterclaim was that STEC had only substantially completed the Sub-Contract works on 16 August 2005.

[26] The Arbitrator found (at para 447 of the Partial Award) that in order to hold STEC liable under this counterclaim, the following requirements had to be satisfied:

He was satisfied on the evidence that (a), (b) and (c) had been satisfied (he found STEC liable for 68 days of delay).

[27] He then went on to consider the loss and damage allegedly suffered by ENJV. At para 474 of the Partial Award, the Arbitrator held that although actual payment to LTA or deduction by LTA was not necessary before ENJV could recover the same against STEC, it was still necessary to establish what the loss or damage suffered or incurred by ENJV had been; it was not enough to show that LTA had a “viable claim” against ENJV in liquidated damages. Therefore, it was necessary for ENJV to establish its liability to LTA first.

[28] He rejected ENJV’s argument that ENJV’s liability to LTA was established since liquidated damages were payable once the contract completion date had passed. Such an argument, he held, ignored consideration of any extension of time that may be given by LTA or that ENJV may be entitled to. He found that ENJV had not placed any evidence before him as to whether it had asked for any extension of time or of the duration asked for in relation to the Phase 3 works or the Main Contract works. In particular, there was no evidence of any contract supervisor’s or superintending officer’s evaluation or assessment of the quantum of liquidated damages supposedly payable to LTA by ENJV under the Main Contract. Therefore, the Arbitrator was not persuaded that ENJV had established its liability to LTA for liquidated damages. In particular, he found that on the evidence before him, ENJV had failed to establish the loss or damages amounting to $10,682,000 that it sought to recover from STEC.

[29] The Arbitrator noted (at para 480 of the Partial Award) that ENJV, perhaps anticipating the outcome, had proposed that what it described as “an assessment of the quantum of liability” could be “reserved until such time” as the Arbitrator thought fit and in the meantime, he should nevertheless rule in favour of ENJV and declare STEC liable to compensate ENJV for ENJV’s liability to LTA in respect of delays to the completion of the Main Contract works. The Arbitrator refused to do this. He held it was necessary for ENJV’s liability to LTA for liquidated damages and the amount of such damages to be established before it could recover the same from STEC. This was not an assessment of quantum but an establishment of liability. Failing this, ENJV may well be entitled to only nominal damages. Secondly, he was not convinced he had the same jurisdiction as the court to defer an inquiry as to damages to an indefinite date in the future.

[30] Having said this, the Arbitrator did not award nominal damages or dismiss the counterclaim. Instead, he proposed that ENJV’s counterclaim be resolved by another forum or tribunal. He said at para 486 of the Partial Award:

He further held at para 584.2 of the Partial Award that:

[31] It is these paragraphs of the Partial Award that have aroused STEC’s ire. It submitted that it is a basic principle that a tribunal must determine all issues raised for its determination and may not leave any claim unresolved or delegate the same to a third party for consideration. An award should be “final” insofar as parties ought to be able to discern their respective obligations and liabilities from it without having to go to any other source.

[32] Responding to these arguments, ENJV emphasised that the Arbitrator had found STEC to be in delay and that such delay must have caused delay to the Main Contract works. It cited para 448 of the Partial Award which reads:

[33] ENJV pointed out that under cl 17 of the GTC, if delay in the Sub-Contract works resulted in delay to the completion of the Main Contract works, then STEC would have to pay or allow to ENJV a sum equivalent to any loss or damage incurred by ENJV which was attributable to the delay caused by the Sub-Contract works. In its counterclaim, ENJV had only claimed damages from STEC on the liquidated damages payable to LTA due to delay in completion of Phase 3 of the Main Contract works which was calculated at the rate of $49,000 per day. It had not claimed damages for delay in completion of the Main Contract works which were calculated at the rate of $66,000 per day.

[34] Regarding liability to LTA, ENJV repeated the submission that it had made to the Arbitrator that such liability for liquidated damages had accrued once the extended Phase 3 Basic Structure Completion Date, ie,10 January 2005, had passed. It asserted that it had sufficiently pleaded the relief sought by asking for a ruling by the Arbitrator that STEC be ordered to pay ENJV the sum of $10,682,000 “being a reasonable assessment” of ENJV’s liability to LTA arising out of STEC’s delay. The substantive relief having been claimed, it did not matter whether the assessment took place or was deferred; STEC would still have to pay damages to ENJV. Even if STEC was correct ie, that the deferment of the assessment of damages ought to be prayed for, the Arbitrator was not precluded from ordering further relief. Under s 34 (2) of the Act, the arbitral tribunal may award any relief or remedy that could have been ordered by the court in civil proceedings before it and, as noted in Jeffrey Pinsler, Civil Practice in Singapore and Malaysia (LexisNexis, 2009) at para [138], “[t]he court is not restricted in its power to grant relief by the remedies pleaded, and may grant alternative or additional relief if this is justified by the facts”.

[35] ENJV submitted that after the Arbitrator made his declaration that STEC was liable for 68 days of delay, he was empowered to make a direction for any loss and damages incurred by reason of STEC’s delay to be assessed at a later date. This power came from s 34 (2) of the Act as well as from Rule 22.3 of the Domestic Arbitration Rules of the Singapore International Arbitration Centre (2 Ed, 1 September 2002) (“SIAC Rules”) (which, as agreed by the parties, applied to the arbitration) which reads:

[36] In my opinion, ENJV’s submissions do not deal with the essential point of this part of the Partial Award. The Arbitrator had, correctly in my view, directed himself that it was not sufficient to find STEC in delay and that such delay resulted in the delay of the Main Contract works. In order for ENJV’s counterclaim to succeed, it had to show that its potential liability to LTA arising from such delay had been translated into an actual liability. The Arbitrator found as a matter of fact that the evidence before him did not establish such actual liability. Therefore, he could not award ENJV any relief for the same whether in the amount of $10,682,000 or in the amount of $3,332,000 (representing 68 days of delay at $49,000 per day) or in any other amount. The powers of the Arbitrator under s 34 (2) of the Act and Rule 22.3 of the SIAC Rules relate to reliefs that can be granted after liability has been established. Since the Arbitrator could not establish liability on the evidence before him, there was no question of granting any relief whether deferred or otherwise and therefore these provisions do not assist ENJV. The question of law that STEC had raised was whether the Arbitrator was entitled to allow ENJV another bite of the cherry by not dismissing its claim but instead stating that ENJV could pursue a further action before a different tribunal or forum to establish its liability to LTA and therefore STEC’s liability to it. This question was not really dealt with by ENJV. I now turn to it.

[37] In David Sutton et al, Russell on Arbitration (Sweet & Maxwell, 23 Ed, 2007), the authors write (at para 6-078):

[38] In Ronly Holdings Ltd v JSC Zestafoni G Nikoladze Ferroalloy Plant [2004] 1 CLC 1168 (“Ronly Holdings”), the claimant applied for relief against an arbitral award in which the respondent was ordered to pay to the claimant a sum less than the amount claimed as due and payable under the agreement in question. The arbitrator had taken account of amounts for which the claimant had previously been willing to give credit under other contracts with the respondent (“the shortfall amount”). The respondent objected, with the claimant’s agreement, to the arbitrator’s consideration of these other contracts and the pleadings were amended to delete all references to the same. Despite finding that the respondent was liable to pay the full sum due under the agreement forming the subject-matter of the arbitration, the arbitrator directed that the sum immediately payable to the claimant should be the contractual sum less the shortfall amount. On appeal, Gross J granted the application, holding that the arbitrator had wrongly left the matter of the shortfall amount in limbo. The exact terms of the arbitrator’s determination were as follows (quoted in Ronly Holdings, at [17]):

Gross J (at [23]) referred to the principles set out in Russell on Arbitration (see [35] above) and held that the arbitral award could not stand (at [26]):

[39] On the present facts, as the Arbitrator had decided not to make any order or direction on ENJV’s counterclaim for $10,682,000, he has effectively left the determination of that head of counterclaim to be resolved by some future forum or tribunal. This is despite his finding at para 484 of the Partial Award that:

Although he found that he had no power to defer the inquiry or assessment of STEC’s liability to ENJV for $10,682,000, he also found that until such assessment is carried out to establish and quantify the loss and damages (if any), ENJV had suffered no loss or damages for which it needed to be compensated. This went against his decision not to make any order or direction on ENJV’s counterclaim for $10,682,000. Since he had found that, on the evidence before him, ENJV had failed to establish any loss or damage for which it should be compensated by STEC, he should have dismissed the counterclaim instead of making no order or direction with respect to this head of ENJV’s counterclaim.

[40] Accordingly, I find in relation to the first question of law that the Arbitrator did not render a complete decision in respect of all issues that were referred to him for arbitration.

[41] The parties entered into the 2 SA to vary the terms of the Sub-Contract. The question raised by this issue of law relates to the true construction of the 2 SA and whether the Arbitrator should have construed it as a compromise agreement.

[42] In the Partial Award, the Arbitrator found that under the terms of the 2 SA, STEC had waived its claims against ENJV for, inter alia, extension of time. Therefore, he found that STEC was not entitled to the 84 days’ extension of time which STEC had claimed in respect of ENJV’s late handover of the launch shafts. STEC had claimed that the late handover was one of the delaying events which should entitle it to an extension of time.

[43] STEC contended that the 2 SA is in effect a compromise agreement between STEC and ENJV. Thus, it submitted, the Arbitrator had failed to give proper consideration to the commercial purpose of such a compromise agreement. According to STEC, if the 2 SA resulted in its waiving its claim for 84 days’ extension of time against ENJV, then the 2 SA should also have the reciprocal result that ENJV had waived its claims against STEC for damages in respect of 84 days’ delay to the completion of the Sub-Contract works.

[44] In response, ENJV maintained that as the language of the 2 SA was clear and unambiguous, the factual matrix leading up to the execution of the agreement was not a relevant consideration. In any event, the factual matrix would show that the 2SA was not meant to be a compromise agreement. Thus, the Arbitrator was correct in finding that in entering into the 2 SA, STEC had assumed the risks of any delay to the Sub-Contract works by events prior to the date of the 2 SA, viz, 26 July 2003.

[45] In view of my finding on the Complete Decision question, the second question of law has been rendered academic. Even if I decided the second question in favour of STEC, it would not be necessary for the Arbitrator to reconsider the issue and hold that ENJV had waived its claims against STEC for the 84 days’ delay since ENJV’s counterclaim has to be dismissed in any case. However, in view of the lengthy submissions made by both sides, I will consider the issue.

[46] STEC’s submissions are based on the principles enunciated in the cases of Yamashita and Gay Choon Ing which it argued should have been applied by the Arbitrator in determining the effect and intent of the 2 SA. Yamashita was a case concerning the construction of a deed of settlement entered into between the respondent and one of its major shareholders and creditors, SHS Holding (Pte) Ltd (“SHSH”). The appellant was the assignee of certain rights of SHSH under the deed. In a judgment for the majority of the Court of Appeal, V K Rajah JA set out the following principles on the interpretation of contracts:

(a) The court’s fundamental task in interpreting a contract is to ascertain the objective intention of the parties (at [62]);

(b) The court should adopt a “contextual approach” to the interpretation of contracts. Rajah JA adopted (at [63]) the following passage from the Court of Appeal judgment of Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 (“Zurich Insurance”), at [122]:

The contextual approach involves, in appropriate cases, a consideration of, inter alia, the commercial purpose of the contract in question (at [64]);

(c) Extrinsic evidence is admissible under proviso (f) to s 94 of the Evidence Act (Cap 97, 1997 Rev Ed) to aid in the interpretation of written words. Such extrinsic evidence is admissible so long as it is relevant, reasonably available to all contracting parties and relates to a clear or obvious context. However, the principle of objectively ascertaining contractual intention(s) remains paramount. Thus, such admissible extrinsic evidence must always go towards proof of what the parties, from an objective viewpoint, ultimately agreed upon. Where extrinsic evidence in the form of prior negotiations and subsequent conduct is concerned, there should be no absolute or rigid prohibition against such evidence although in the normal case such evidence is likely to be inadmissible for non-compliance with the requirements of relevance, ready availability to parties, and clarity and obviousness of the context of the contract (at [65]); and

(d) A court should always be careful to ensure that extrinsic evidence is used to explain and illuminate the written words, and not to contradict or vary them (at [65]).

[47] In Gay Choon Ing, the Court of Appeal dealt with the question of whether there was a valid compromise agreement between the parties by virtue of the contemporaneous execution of points of agreement and a waiver letter by both parties. In his judgment, Andrew Phang JA set out the principles on the law of compromise as follows:

(a) Compromise can be defined as the settlement of dispute by mutual concession, its essential foundation being the ordinary law of contract (at [41]);

(b) Where parties have demonstrated that they intend to dispose of their dispute by reaching an amicable resolution agreeable to both parties, this compromise or settlement will be recognised and given effect to by the courts (at [42]);

(c) Before a compromise can be reached between two parties, there must, of necessity, be an actual or potential dispute between parties that can be disposed of (at [43]); and

(d) A compromise will not arise unless the following requirements are fulfilled (at [46]):

[48] STEC contended that applying the principles governing the interpretation of contracts to the 2 SA, it can be seen that the commercial purpose of the 2 SA was to effect a compromise agreement between STEC and ENJV such that both parties would release each other from their liabilities to each other as at the date of the 2 SA in the spirit of reciprocity that necessarily accompanied compromise agreements. STEC claimed that it had submitted a claim to ENJV for an extension of time because ENJV had handed over the SB and NB launch shafts 95 days later than planned whilst the Phase 3 tunnelling works had already been in delay by 117 days according to the target dates in the 22B3 Programme. Thus, according to STEC, by the time the 2 SA was executed, there was a difference between ENJV and STEC which both parties had agreed to resolve by way of a compromise arrangement. ENJV denied that the commercial purpose of the 2 SA was to effect a compromise arrangement between the two parties.

[49] Although STEC sought to rely on certain “contemporaneous documents” to show that the 2 SA was intended to be a compromise agreement, such extrinsic evidence can only be resorted to when words of the contract are not clear and unambiguous or when the circumstances make ambiguous what would otherwise be plain. I must therefore look first at the language of the 2 SA.

[50] Under the 2 SA, ENJV’s basic obligation was to advance to STEC the sum of $1,008,648.30 (“Advance Payment”). Clause 1.0 of the 2 SA provides for this obligation as follows:

[51] In consideration of the Advance Payment, STEC was to waive all current claims (ie, up to the date of the 2 SA) related to the Sub-Contract works. It can be seen from the language of cl 4.0 (at [12] above) that there is absolutely no mention of any waiver of claims on ENJV’s part. Only STEC had agreed to waive its claims for, inter alia, extension of time.

[52] The next clause which is relevant to the current inquiry is cl 7.0 (also at [12] above) which provides that the 2 SA should take precedence in the event of any conflict between it and any other document comprising the Sub-Contract. This means that the parties had agreed that to the extent that other provisions of the Sub-Contract concluded prior to the 2 SA were contrary to the provisions of the 2 SA, they would be superseded by and subject to the provisions of the 2 SA.

[53] Looking at the 2 SA in its entirety, it seems reasonably clear that it was not intended as a compromise agreement. First, one obvious indicator of lack of such intention to compromise is the fact that only STEC was obliged to waive its claims against ENJV in respect of extension of time. There is nothing in the plain unambiguous wording of the 2 SA that provides for a similar waiver of claims against STEC by ENJV. This is quite different from the facts of Gay Choon Ing.

[54] In that case, the points of agreement provided that (at [30]):

On the “exact same day” (Gay Choon Ing, per Andrew Phang JA at [31]), a waiver letter was sent by the plaintiff to the defendant, stating as follows:

[55] Unlike the 2 SA, the words of the waiver letter in Gay Choon Ing indicated clearly and unambiguously that each party to the compromise arrangement had agreed that he had no claims against the other party to the same. Certainly, the Court of Appeal in Gay Choon Ing had thought it necessary to consider not just the words but the context of the points of agreement and the waiver letter; this was clear from Phang JA’s observations that (at [39]):

[56] Secondly, it is expressly stated in the preamble that the 2 SA was entered into out of a “desire to amend the Domestic Sub-contract”. The main amendment is as to the provision of a performance bond by STEC to ENJV and the sequence of progress payments by ENJV to STEC. Under cl 11.0 of the LA, STEC was supposed to furnish ENJV with a performance bond equivalent to 5% of the Sub-Contract sum within 4 weeks from the date of the LA. Under cl 7.0 of the LA, ENJV was supposed to make an advance payment of 5% of the Sub-Contract sum within 14 days of the presentation of the performance bond.

[57] Thus, contractually, STEC was obliged to furnish ENJV with a performance bond by 2 January 2003, being 4 weeks from the date of the LA. This bond was not furnished by then and was still outstanding when the 2 SA was concluded (26 July 2003). Therefore, ENJV’s obligation to pay the 5% advance payment to STEC had not arisen and no monies at all were due from it to STEC. These facts support ENJV’s submission that the 2 SA was intended to vary the terms of the LA in order to provide financial assistance to STEC so that it could fund procurement of labour and materials to commence the Sub-Contract works. The fact that STEC had not managed to provide the performance bond by the time of the 2 SA is a further indication that it was facing some financial difficulty at that time.

[58] It was stated in the 2 SA at cl 1.2(i) that part of the Advance Payment was to pay for sums recently invoiced by STEC’s sub-contractors for individual items of equipment procured from them. Under cl 1.2(iv) STEC was also to assign its rights and benefits to ENJV for those equipment under the STEC sub-contractors’ scope of works. In particular, the equipment referred to specifically included (at cl 1.2(v)) locomotives, gantry cranes, liquid grout, ventilation equipment and muck cars. These were items which STEC was under the obligation to provide as part of the Sub-Contract works (per cl 3.0 of the LA). That part of the Advance Payment would go towards paying STEC’s sub-contractors for individual items of equipment and that in consideration of such payment ENJV would enjoy the rights and benefits for those equipment under the various sub-contract scope of works indicate that STEC needed financial assistance in order to procure the equipment necessary for its commencement of the Sub-Contract works.

[59] With regard to the effect of cl 7.1 of the 2 SA, STEC contended that since cl 4.0 of the LA had not been amended by the 2 SA, it was entitled to the benefit of the portion of cl 4.0 of the LA which states that:

However, this does not aid STEC in forwarding its argument that the 2 SA was a contract effecting a compromise arrangement. ENJV acknowledged that it had handed over the launch shaft areas late. However, STEC had not shown that there was any corresponding revision to the Main Contractor’s Programme, ie, the 22B3 Programme. Delay in the handing over of the launch shaft site cannot by itself without other evidence imply that there was a consequent revision of the 22B3 Programme.

[61] In its appellant’s case, STEC also referred to four other letters from ENJV which purportedly showed ENJV’s consistent acknowledgment that STEC should keep to the Contract Duration provided in the 22B3 Programme. The first, ENJV’s letter dated 4 April 2003, in essence showed that ENJV had reservations as to whether STEC would be able to complete the Sub-Contract works on time because of lack of experienced workers and insufficient detail in the schedule that it had provided. The next letter, dated 16 June 2003, asked STEC to explain why its programme was longer than the contract duration; for example, STEC’s programme showed that 41 days were required to assemble the tunnel boring machine whilst the contract duration for this task was 35 days. The letter also showed ENJV’s continuing dissatisfaction with STEC’s proposed schedule for the tunnelling works. In its letter of 17 June 2003, ENJV indicated that it was not willing to accept any claims or extension of time due to the late handover of the SB launch shaft. Finally, ENJV made the following complaints on 21 June 2003:

[62] The overall impression given by these letters was not that ENJV had consistently asserted that the Contract Duration should be adhered to. Rather, they show that STEC had consistently been remiss in its obligations to provide a proper method statement or detailed programme to ENJV’s satisfaction that it could in fact complete the Sub-Contract works according to the 22B3 Programme. ENJV also pointed out in the respondent’s case that the first three letters that STEC had cited only referred to the Drive B1 tunnels and not to the rest of the Sub-Contract works. Therefore, these letters did not show ENJV’s willingness to compromise on its claims against STEC for the delay in completion of the Sub-Contract works. Instead, much of the correspondence exhibited in support of ENJV’s witness statement of Choo Ket Weng served to justify ENJV’s position that the 2 SA was intended as a record of the arrangements by which ENJV would provide financial assistance to STEC for the procurement and continued maintenance of the equipment needed to commence the Sub-contract works.

[63] It is not necessary to cite all the correspondence. Only two further letters need to be referred to. First, in a letter from STEC to ENJV dated 30 June 2003, STEC had submitted a payment request for $864,806.77 in respect of tunnelling work including installation of segment lining. ENJV was requested to “treat this request as part of the staged payment in accordance with Clause 6.0 of the Letter of Award”. STEC further stated:

Second, ENJV’s response of 9 July 2003 stated:

The 2 SA was concluded 17 days later.

[64] The evidence thus supported ENJV’s submission that the purpose of the 2 SA was to give financial assistance to STEC and was not to effect a compromise arrangement between the parties. The commercial purpose of the 2 SA was not what STEC tried to make it out to be. Therefore it would be wrong to interpret the agreement to mean that ENJV had waived its claims against STEC for delay in completion of the Sub-Contract works. There is no express provision in the 2 SA to that effect and it should not be implied into that agreement because the factual matrix in which the 2 SA was concluded makes it plain that the objective intention of the parties had nothing to do with effecting a compromise.

[65] If STEC’s interpretation of the 2 SA is correct, that ENJV had released STEC from its liabilities under the Sub-Contract for delay in the completion of the works under the Sub-Contract, then STEC’s waiver of claims for extension of time under cl 4.1 of the 2 SA would have no real effect. In respect of any delay caused to the completion of the Sub-Contract works, either STEC was responsible for the delay or it was not. If it was not responsible for the delay, it would be entitled to an extension of time for the duration of that delaying event. Since it had waived its claim for extension of time under the 2 SA, no extension of time was claimed and none was given so it should be held responsible for any delay that may have arisen through events that occurred prior to and up to 26 July 2003.

[66] The Arbitrator’s findings on this issue cannot therefore be criticised. He held that:

(a) STEC had waived its claim for 84 days of delay under cl 4.1 of the 2 SA (at para 130 of the Partial Award);

(b) One consequence of such waiver was that STEC was not entitled to any delay related expenses or additional compensation for the 84 days of delay (at para 131 of the Partial Award);

(c) STEC’s waiver of a claim for extension of time must mean that STEC was conceding any argument that ENJV (or its related parties such as agents, or sub-contractors) could have caused the delay or that there were any neutral events for which it had not assumed any risks of delay. In other words, STEC’s waiver resulted in its assumption of any risks of delay (at para 462 of the Partial Award);

(d) The effect of a waiver of a claim for extension of time was the same as the effect of a failure to obtain an extension of time (at para 463 of the Partial Award); and therefore

(e) STEC was responsible for the 84 days of delay that were waived by the 2 SA, subject to the adequate establishment of ENJV’s loss or damages (at para 464 of the Partial Award).

[67] The Arbitrator had, therefore, considered the relevant legal factors in arriving at his decision. Even if he had applied Yamashita and Gay Choon Ing, he would have come to the conclusion that the objective intention of the parties in executing the 2 SA had nothing to do with a compromise and that there was no compromise to which he could give effect. It is also important, as ENJV submitted, that STEC’s present argument that the 2 SA was meant to be a compromise was never put forward at the arbitration proceedings. In fact Yamashita was decided on 30 December 2008 while Gay Choon Ing was decided on 8 January 2009, so neither of these authorities could have been included in the parties’ closing submissions before the Arbitrator, the last of which was submitted in October 2008. The argument on a compromise agreement was a belated one. In the events that happened, STEC may have considered that it made a bad bargain by entering into the 2 SA but this was not its view point at the time when it needed ENJV’s assistance. If the 2 SA had the effect that STEC contended, it would have made even less commercial sense for ENJV to enter into an agreement which obliged it to make an advance to STEC to which STEC was not entitled and in exchange absolve STEC from possibly being liable for damages for delay when ENJV could be asked to pay LTA $49,000 a day for delays arising from STEC’s default. In this context, the following observation of the Court of Appeal in MAE Engineering Ltd v. Fire-Stop Marketing Services Pte Ltd [2005] 1 SLR(R) 379 at [27], which was also cited by the Arbitrator, is apposite:

[68] In the event, I am satisfied that there is no merit in the second question of law raised by STEC.