SKK (S) Pte Ltd v Management Corporation Strata Title Plan No 1166

Elaine Liew AR:

[1] The proceedings in Notice of Appointment for Assessment of Damages No 39 of 2012 (“the assessment proceedings”) were conducted pursuant to the order of the High Court in SKK (S) Pte Ltd v Management Corporation Srata Title Plan No 1166 [2011] SGHC 215 (“the SKK decision”).

[3] The findings of the trial Judge, Justice Lai Siu Chiu, in the SKK decision which are pertinent to the assessment proceedings are reproduced below:

[4] According to counsel for the Plaintiff, Ms Sunita Parhar (“Ms Parhar”), the premise of the Plaintiff’s case for the assessment proceedings was a fairly simple one, viz, loss and expenses of the various heads of claim were to be computed with reference to 19.42 weeks.

[5] The Plaintiff also drew the Court’s attention to the fact that it had subcontracted the works to ACS Amview Contract Services Pte Ltd (“ACS Amview”) on a back-to-back basis. Thus, the bulk of the documents evidencing loss and expenses were those of ACS Amview.

(a) The Plaintiff suffered no loss as loss and expenses (if any) were borne by ACS Amview under the subcontract;

(b) Despite the back-to-back nature of the subcontract, ACS Amview was not entitled to a corresponding right for an extension of time, thereby precluding it from claiming prolongation costs as:

(i) ACS Amview had not complied with the contractual requirement to put in a written notification for an extension of time to the Plaintiff (see [16] below); and

(ii) The “pay when paid” provision in the subcontract was unenforceable by virtue of s 9 of the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”) (see [21] below);

(c) Even if ACS Amview was entitled to claim for prolongation costs, it was only entitled to loss and expenses incurred during the 6.42 week time frame (see [25] below); and

(d) In any event, ACS Amview had not proven its loss.

[7] In response, Ms Parhar urged this Court to disregard the preliminary contentions on the ground that they pertained to issues of liability which had been determined by Lai J and affirmed by the Court of Appeal in Civil Appeal No 129 of 2011 (“CA 129”) (collectively, “the two courts”). Further, she argued that the preliminary contentions were essentially a rehash of the Defendant’s submissions which had been placed before the two courts.

[8] Given its position that the Defendant was precluded from re-opening these issues by virtue of res judicata, the Plaintiff did not address the merits of the preliminary contentions.

[9] Although the Plaintiff had not specifically identified whether the preliminary contentions were caught by cause of action estoppel, issue estoppel or abuse of process, ie, the three distinct principles which come under the umbrella of the doctrine of res judicata (see Goh Nellie v Goh Lian Teck and others [2007] 1 SLR(R) 453 (“Goh Nellie”)), I am of the view that Ms Parhar’s objection grounded in the doctrine of res judicata is misplaced.

[10] The bulk of the preliminary issues (see [6] above) did overlap substantially with those advanced before the two courts. However, I note that the SKK decision made no mention or reference to ACS Amview and CA 129 was dismissed in its entirety. In this respect, I do not think that the mere submissions by the Defendant and/or the passive or non-treatment per se of these issues by Lai J and in CA 129 suggest that they are res judicata in the sense that the two courts had conclusively dealt with these issues and “[left] nothing else to be judicially determined” (at [28] of Goh Nellie). This is not to suggest that every issue raised by parties, material or otherwise, needs to be expressly accepted or rejected by the court before one can invoke the doctrine of res judicata. Instead, one should determine “whether the decision in question is a final and conclusive judgment on the merits [which in turn] may be ascertained from the intention of the judge as gathered from the relevant documents filed, the order made and the notes of any evidence taken or arguments made” (at [28] of Goh Nellie).

[14] The characterisation of the Plaintiff’s liability to compensate ACS Amview’s during the prolongation period as a form of loss suffered by the Plaintiff is not altogether controversial. In Keith Pickavance, Delay and Disruption in Construction Contracts, 4 Ed, Sweet & Maxwell (“Delay and Disruption in Construction Contracts”) at paras 21-009 and 21-012, it was envisaged that where the work on site is not carried out by the contractor but by the subcontractors, the contractor may prove its case against the employer, including the amount of damages incurred, by relying on information provided by the subcontractors.

[15] Given the above, I am of the view that the preliminary contentions fall within the scope of determination of the assessment proceedings and are not barred by res judicata given that the SKK decision and CA 129 made no judicial determination on them.

[17] Clause 23(2) of the SIA conditions stipulates:

[18] It is common ground that the main contract is subject to the SIA conditions, see [9] of the SKK decision. The salient clauses of the document comprising the subcontract, viz, the Details of Contract, Sub-Contract No P/08/008/RO (“the Details of Contract”), which purportedly incorporated the terms of the main contract are reproduced below:

Mr Tan submitted that by virtue of the terms above, cl 23(2) of the SIA conditions was imported into the subcontract thereby mandating ACS Amview to put in a written notification for an extension of time to the Plaintiff.

[19] I disagree with this line of argument for the reasons below:

(a) As rightly observed in Chow Kok Fong, Law and Practice of Construction Contracts, 4 Ed, Sweet & Maxwell (“Law and Practice of Construction Contracts”), Vol 2 at para 15.32, “[t]he operative terms of the contract between the main contractor and the subcontractor remain those actually agreed by the parties” [emphasis added]. Save for the purported wholesale incorporation of the SIA conditions into the subcontract, there is nothing before me which suggests that the Plaintiff and ACS Amview had agreed, expressly or otherwise, to put in place between them a mechanism similar, if not identical, to cl 23(2); and

(b) Even taking Mr Tan’s case at its best, the entity to which ACS Amview has to submit a written notification is the Architect and not the Plaintiff. This runs contrary to the Defendant’s own case.

[22] Section 9 of SOPA reads:

[23] On a plain reading, the relevant term is in substance a “pay when paid” provision caught by s 9 of SOPA. Although Mr Tan is correct on this point, with respect, I do not think that it aids in advancing the Defendant’s case in the assessment proceedings. In my judgment, s 9 of SOPA renders void and unenforceable payment structures which are of “pay when paid” nature but does not absolve a party of its payment obligations owed to the other. In fact, s 9 of SOPA was designed to prevent the avoidance of payment obligations by contractors who took advantage of the imbalance inherent in the “pay when paid” provisions by withholding payments to subcontractors for reasons unrelated to the latters’ performance, see Singapore Parliamentary Debates, Official Report (16 November 2004) vol 78, col 1116. Thus, although the payment structure contained in the Details of Contract is unenforceable at law, the Plaintiff remains contractually liable to compensate ACS Amview for its loss and expenses incurred during the prolongation period.

[24] Having addressed the Defendant’s preliminary contentions, I now turn to the assessment proper.

[26] Based on the SKK decision, read together with the papers filed in CA 129, I made the preliminary determination that the period of prolongation for the Plaintiff’s claim was pegged to 19.42 weeks. This was upheld on appeal in Registrar’s Appeal No 365 of 2012 on 4 October 2012 (“RA 365”).

[27] According to the Plaintiff, the time frame of 19.42 weeks had consistently been held to be correct for the purposes of assessment by four courts to date. The Plaintiff was critical of the Defendant’s stance that the assessment should be referenced to 6.42 weeks and described its persistence as a “continued and repeated disregard for the finding of this Court”.

[29] Mr Nunns filed two affidavits of evidence-in-chief (“AEIC”) for the assessment proceedings:

[30] In his first and second reports, Mr Nunns opined that the correct period for the assessment of the various heads of claim was 6.42 weeks. This was premised on his view that the period of 19.42 weeks ought to be apportioned into two parts, ie¸ 6.42 weeks for the period of actual delay and 13 weeks for the period of deferred works. This, in my view, is consistent with Mr Szetho’s computation as summarised at [100] of the SKK decision:

[31] During the assessment proceedings, Mr Nunns sought to reconcile his computation (which was referenced to 6.42 weeks) with the preliminary determination and explain the flaw in the Plaintiff’s premise:

[32] The terms “delay” and “prolongation” are oftentimes used interchangeably. It is thus apposite to differentiate between the two, as far as possible, to avoid semantic confusion.

[33] As noted at para 1-033 of Delay and Disruption in Construction Contracts, the term “delay” connotes at least 23 different meanings to those who are in the construction and engineering industry. For instance, the 6.42 week “delay” in the Defendant’s approval of the repair lists pertained to “a critical shift in timing of the start of a discrete activity” but was not “delay” in the sense that it was “an increase in the duration of a discrete activity”.

[36] As a matter of causation, there is much force in Mr Nunns’ analysis in distinguishing the two periods, namely, the period of actual delay (ie, 6.42 weeks) and the period of deferred works (ie, 13 weeks) as it brings into focus the following:

It therefore becomes clear that the costs and expenses incurred by ACS Amview during the deferred works period (ie, 13 weeks) would have had to be incurred in any event, even without the occurrence of the delay, see para 18-113 of Delay and Disruption in Construction Contracts. To award the Plaintiff/ACS Amview an additional sum for what it was supposed to have performed under the existing subcontract, ie, the works, would result in it gaining a windfall.

[38] For completeness, I would add that there is no prejudice to either party consequent to this finding. The Plaintiff’s computation is based on a linear approach, ie, by multiplying the average weekly rates by 19.42 weeks. In the event this Court decides to adopt its average weekly rates, the individual heads of claim can easily be computed with reference to 6.42 weeks. As for the Defendant, it is its case that each head of claim be referenced to the 6.42 week time frame.

[40] The Plaintiff claimed for three on-site supervisors (for safety, spalling and painting purposes respectively) and also for two drivers. According to Mr Tan Puay Ann (“Mr Peter Tan”), managing director of ACS Amview, the supervisors and drivers were engaged for the Mandarin Gardens project on a full time basis. The payment vouchers issued to the supervisors and the drivers were exhibited to support these claims.

(a) The daily site records prepared by Mr Neo Poh Low (“Mr Neo”), the Plaintiff’s project and sales manager at the relevant time, did not record the attendance of ACS Amview’s three supervisors and two drivers;

(b) The payment vouchers did not appear to have been generated contemporaneously with the time of payment. In other words, the payment vouchers were fabricated; and

(c) Since ACS Amview had other ongoing projects at the material time, the supervisors and the drivers might have been assigned to these other projects.

[42] According to Mr Neo, the daily site records were prepared for his own consumption to trace the progress of works at the Estate and for him to account to the Defendant and/or residents of the Estate in the event of complaints made in respect of the works. He also explained that the number of workers recorded in the daily site records was based on supervisors’ input given to him on each morning. Mr Neo conceded that the number of workers recorded in his daily site records might be inaccurate given that the number fluctuated quite frequently, even within the same day itself.

[43] Despite the above, Mr Neo was confident that ACS Amview had three on-site supervisors and two drivers present at the site at the material time. He explained that they were not recorded under specific/separate entries in his daily site records because he treated them as “workers” and therefore lumped their numbers under the generic term:

[44] Although Mr Neo was firm in his stance, he conceded that his recollection of events might be inaccurate due to the passage of time. For instance, although he had initially indicated that he did not record his own presence in the daily site records, Mr Tan pointed him to entries where he did so.

[45] As alluded to at [41] above, Mr Tan disputed the authenticity of the payment vouchers produced by ACS Amview. The exchange below took place during cross examination of Mr Peter Tan:

[46] At the assessment hearing, Mr Lee expressed his preference for payment vouchers to daily site records for the purposes of ascertaining loss and expenses. He found the daily site records to be less reliable and stated that in his experience, they usually document only the number of workers present without specific references to their designations such as “supervisors”.

[47] On this note, I agree with Mr Lee’s observation that the reliability of the contents of the daily site records should be viewed with a certain degree of circumspect and thus should not be assigned too much evidential weight. As made clear by Mr Neo at the outset, the daily site records were not designed to document with high accuracy the number and type of workers present at site on one given day. I accept Mr Neo’s explanation that he had subsumed the number of supervisors and drivers employed by ACS Amview under the category for “workers”, as he perceived them to be working site-wide and taking on multiple roles. The multi-tasking nature of the job scopes of the supervisors and drivers was corroborated by Mr Lee and Mr Peter Tan.

[48] In respect of the Defendant’s assertion that the supervisors and drivers had been assigned to ACS Amview’s other projects during the prolongation period, I note that it is not denied that ACS Amview had other ongoing projects at the material time. I find Mr Lee’s testimony below pertinent as it highlighted the working climate at the Estate in which ACS Amview had to operate during the prolongation period:

As there was no complete standstill at the Estate, with work still ongoing (albeit on a slower pace) during the prolongation period, I do not think that the Defendant had shown, on balance, that these workers had been deployed at ACS Amview’s other project sites at the material time.

[49] As for the Defendant’s contention that the payment vouchers were fabricated, Mr Tan was invited to substantiate this allegation by obtaining the opinion of a handwriting expert. This, however, was not done and Mr Tan sought to persuade this Court to infer from the manner the signatures were appended on the payment vouchers to draw the conclusion that these documents were generated after the event.

[50] An allegation of fabrication of evidence is a serious one. As noted by the Court of Appeal in Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and others [2005] 3 SLR(R) 263 at [14]:

Thus, in alleging that ACS Amview was guilty of forging documents, the Defendant bears the onus of adducing cogent evidence to meet the standard of proof. However, as mentioned above, the Defendant did no more than to appeal to the Court to draw an inference against ACS Amview. Further, in spite of the gravity of its allegation, the Defendant did not see it fit to seek production of the originals of the payment vouchers prior to the assessment proceedings. In fact, the request for originals was made rather belatedly during the hearing itself.

[51] A related point raised by Ms Parhar was that although the Defendant had engaged a clerk of works, it had curiously chose not to call him as witness, despite his attendance at the Estate at the material time. No explanation was given as to why the clerk of works was omitted from the Defendant’s witness list.

[52] Based on the totality of evidence, I am of the view that the claim for the three supervisors and the two drivers is established. I will adopt the weekly rates provided by the Plaintiff’s expert and award a global sum of $12,192.18 for the three supervisors and $3,792.70 for the two drivers.

[60] The Plaintiff initially claimed for a total of six riggers for the operation of the gondolas. According to Mr Peter Tan, he had constantly insisted that a minimum of six workers be on standby as any number below that would not be enough to operate the 16 gondolas stationed at the Estate.

[61] This was, however, contradicted by Mr Neo’s daily site records which consistently recorded the presence of only three riggers at the Estate in the following manner: MEGA (ie, the supplier of the riggers) 3 technicians shifting gondolas at lobby N&M.

[62] Given the above, the Plaintiff conceded on this point at the assessment proceedings and revised its claim to three riggers instead. I also note that Mr Tan only disputed this head of claim in respect of the number of riggers claimed, viz, his position was that based on Mr Neo’s records, only three riggers should be allowed. As such, I allow $13,482 for the claim for three riggers.

[64] Mr Lee testified that it was a requirement by the relevant authority that the gondolas were periodically checked by a professional engineer and due to the prolongation, this had to be renewed. Mr Tan suggested that there should be a proportionate apportionment of these claims, given that the sixth-monthly period expired after the completion date of 8 May 2009. In this regard, Mr Lee pointed out that the fees for the six-month period had been paid upfront. Notably, Mr Tan did not challenge Mr Lee’s position any further.

[68] Indeed, Mr Lee admitted that other than him being orally informed of these expenses, no documentary evidence of these items were given to him. Nevertheless, he testified that from his experience, these two items would have been incurred during the prolongation period:

[69] The Plaintiff in its reply submissions filed on 18 February 2013 urged the Court to take judicial notice that these two items had been incurred by the Plaintiff:

(a) Based on information relating to factory licences which was available on the website of the Ministry of Manpower (“MOM”), the Plaintiff submitted that the main contract between the Plaintiff and Defendant which was entered into prior to 28 February 2010 fell under the old regime where renewal of Certificate of Registration was required. As the works were originally scheduled to end on 5 December 2008 but was extended to 8 May 2009, the Plaintiff submitted that it can be inferred that it had to incur the requisite fees to renew its Certificate of Registration; and

(b) The Court can take judicial notice of the claim for the additional premium for the extension of the performance bond and highlighted that the sum claimed amounted “to only $758.43”.

[70] The Defendant did not directly address the Plaintiff’s submissions on the taking of judicial notice, though it maintained that these heads of claim should fail for want of proof.

[71] It is trite that the Plaintiff bears both the legal and evidential burden in proving the expenses incurred for the renewal of the factory licence fees and for the extension of performance bond. In this regard, the Plaintiff chose to demonstrate proof of these two items through the invocation of judicial notice.

[72] As noted in Halsbury's Laws of Singapore vol 10 (LexisNexis, 2006 Reissue) at para 120.267:

[73] It was held in Plaza Singapura (Pte) Ltd v Cosdel (S) Pte Ltd [1990] 2 SLR(R) 22 that the court should be cautious in invoking the doctrine of judicial notice. In ascertaining whether judicial notice ought to be taken of a fact, the court should carefully consider whether it is of unassailable character, bearing in mind that any doubt as to the public notoriety of any fact which is alleged to be judicially noticeable ought to be resolved against the party seeking to rely on that fact, see Zheng Yu Shan v Lian Beng Construction (1988) Pte Ltd [2009] 2 SLR(R) 587 at [83]–[84].

[74] With these considerations in mind, it is clear that the fact of extension of performance bond cannot be a matter of public notoriety which warrants the taking of judicial notice. The regulatory requirement by MOM, on the other hand, may arguably warrant the taking of judicial notice. However, it should be noted that the fact of renewal of factory licence as required by MOM which may be proven by the taking of judicial notice is different from the fact of payment of a specified amount for the renewal of the licence which, in my view, may not be proven in the same manner.

[75] The Plaintiff’s claims for the sum paid for the extension of performance bond and the renewal of factory licence could have been easily substantiated by documentary proof. The relative ease of obtaining documentary evidence of these payments was alluded to by Mr Lee in the course of cross-examination (though I would highlight that no explanation was proffered as to why this was not done):

[76] I also do not agree with the Plaintiff’s position that the court should nonetheless allow these claims as they were of relatively small sum. A smaller sum claimed is no excuse to having a lax attitude towards proof – the onus remains on the Plaintiff to prove these heads of claims on a balance of probability. As the Plaintiff has failed to discharge its burden, I disallow these claims.

[77] Mr Lee relied on the Emden’s formula to compute the head office overheads of ACS Amview. The Defendant’s main objections to this were twofold:

(a) As ACS Amview was a small set up, Mr Lee could have computed the head office overheads based on first principles with reference to its actual costs and expenses, without having to resort to using the Emden’s formula;and

(b) The information applied to the Emden’s formula was flawed as it was based on only one year’s worth of accounts.

[78] Mr Lee explained that the Emden’s formula was preferred to the Eichleay or Hudson’s formulae (viz, the two other formulae widely used for computing head office overheads) in this case as it reflected more closely the calculated loss in the event of prolongation of a contract. He also highlighted the deficiencies of the other two formulae should they be applied to the present assessment proceedings. When asked whether he agreed with the Defendant’s proposition that an assessment of head office overheads should have been done based on “first principles” before one turns to one of the formulae, Mr Lee replied as follows:

[79] On this issue, Mr Nunns conceded that it was common to use a formula to compute the head office overheads. He also accepted that the Emden’s formula is appropriate for the present assessment.

[80] It is recognised that contractors find it convenient to advance a claim for profits and overheads based on the formulae proposed by writers of standard textbooks, see para 10.120 of Law and Practice of Construction Contracts, Vol 1. In principle, I see no objection to the use of the Emden’s formula (or Eichleay or Hudson’s, as may be appropriate) even to smaller organisations given the inherent difficulties associated with assessing head office overheads. Although each formula has its own conceptual limitations (see para 10.128 of the Law and Practice of Construction Contracts, Vol 1), it is nonetheless the more economical and practical way of computing such claims.

[81] At this juncture, parties should be reminded that the formulae themselves do not constitute proof of loss, see Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 69 LGR 1. I would also add that parties seeking to assess head office overheads by using one of the formulae should be diligent in ensuring the accuracy and integrity of the data/information applied to the formula of choice. This, as I observed, was lacking on the part of the Plaintiff. During the assessment proceedings, it transpired that the Plaintiff did not ascertain whether the individual items (eg, insurance, legal and professional fee, interest and late payment, etc) which formed the constituent components of the Emden’s formula, were in fact related to the Mandarin Gardens project. This necessitated a round of verification with Mr Peter Tan on whether the specific items were directly attributable to the Mandarin Gardens project. Although the Plaintiff’s claim for head office overheads was subsequently revised to eliminate items which were not attributable to the Mandarin Gardens project (and therefore should not have been included in the Emden’s formula), the verification process could and should have been done prior to the assessment proceedings.

[82] In mounting a claim for head office overheads, the learned author of Law and Practice of Construction Contracts, Vol 1 at para 10.117 opined as follows:

[83] From the above, one may deduce that ACS Amview needs to demonstrate that (a) there were reasonable prospects for it to be engaged in other project(s) but for the delay; and (b) such other project(s) may contribute to its profit and overheads. In demonstrating the latter, historical data evidencing the average profit and overheads contributions may be relied on by it.

[84] In my judgment, the Plaintiff has failed to overcome the hurdles in proving the claim for head office overheads. It has not shown that ACS Amview had reasonable prospects of taking up other projects at the material time. As admitted by Mr Lee, he did not ascertain with ACS Amview whether there were job offers made during the prolongation period. Further, there is insufficient proof in respect of the turnover yielded from ACS Amview’s other and/or past projects to reflect its average profit and overheads contribution. The limited information in this regard included only the following:

[85] As pointed out by Mr Nunns, ACS Amview had only produced its audited accounts for the year ended September 2009 for the assessment proceedings. Notably, no reason was given as to why it had not provided its accounts for the preceding years. This is unsatisfactory as it provides a distorted snapshot of its financials. In this respect, I agree with Mr Nunns observations below:

[86] In the light of the foregoing, I disallow the claim for ACS Amview’s head office overheads for want of proof.

[94] For ease of reference, the table below is a summary of the amount allowed for the Plaintiff’s various heads of claims: