Hiap Tian Soon v Hola Development: Equitable Set-Off, Performance Bonds & Construction Delays

In a dispute between Hiap Tian Soon Construction Pte Ltd and Hola Development Pte Ltd, the High Court of Singapore addressed issues of equitable set-off, performance bonds, and construction delays. Hiap Tian Soon sued Hola for non-payment under interim certificates, while Hola counterclaimed for defective work and delays. The court found Hiap Tian Soon's termination of the contract valid due to Hola's invalid set-off claim. The court allowed Hola's counterclaim for delays but limited their claim on the performance bond to the revised contract sum. Interlocutory judgment was awarded to Hiap Tian Soon on their claim and to Hola on part of their counterclaim. The assessment of the claim and counterclaim will be done by the Registrar.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Interlocutory judgment for the first plaintiffs’ claim and part of the first defendants’ counterclaims.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Construction dispute involving equitable set-off, performance bond revision, and delays. Judgment for Hiap Tian Soon on claim; Hola's counterclaim allowed in part.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Lonpac Insurance BhdDefendantCorporationWithdrawnWithdrawn
Hiap Tian Soon Construction Pte LtdPlaintiffCorporationJudgment for PlaintiffWon
Goh Kim HockPlaintiffIndividualNeutralNeutral
Hola Development Pte LtdDefendantCorporationPartial Judgment for Defendant on CounterclaimPartial

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
David Ong Lian MinDavid Ong & Co.
Yak Jinq WeeDavid Ong & Co.
Eugene TanLee & Lee
Yang Yung ChongLee & Lee

4. Facts

  1. Hiap Tian Soon contracted with Hola to construct a light industrial flatted factory.
  2. Excavation works by Hiap Tian Soon damaged installed piles, causing delays.
  3. Hola withheld payment due to the defective work, claiming a right of set-off.
  4. Hiap Tian Soon terminated the contract due to non-payment.
  5. The original contract price was revised downwards from $10,090,000 to $7,995,000.
  6. Hola called on the performance bond for the original contract sum.
  7. Hiap Tian Soon's work consistently lagged behind the construction program.

5. Formal Citations

  1. Hiap Tian Soon Construction Pte Ltd and Another v Hola Development Pte Ltd and Another, Suit 1328/2001, [2002] SGHC 258

6. Timeline

DateEvent
Contract signed
Piling works commenced
Contract period commenced
Piling works completed
Hiap Tian Soon terminated the Contract
Hiap Tian Soon applied for an injunction
Injunction granted
Hiap Tian Soon discontinued action against Lonpac Insurance Bhd
Lau Yaw Seng orally informed Hiap Tian Soon of intention to set off amounts
Decision Date

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court found that Hiap Tian Soon breached their obligation to proceed regularly and diligently, but Hola was not entitled to damages for delay in handing over the site.
    • Category: Substantive
    • Sub-Issues:
      • Failure to proceed regularly and diligently
      • Invalid termination of contract
      • Delay in handing over project site
    • Related Cases:
      • [1999] 3 SLR 667
  2. Equitable Set-Off
    • Outcome: The court held that Hola's right to equitable set-off was not excluded by the contract, but they failed to quantify their losses by means of a reasonable assessment, rendering their set-off invalid.
    • Category: Substantive
    • Sub-Issues:
      • Exclusion by contract
      • Reasonable assessment of losses
      • Requirement to inform of intention to set-off
    • Related Cases:
      • [1999] 2 SLR 376
      • [1995] 3 SLR 1
      • [1978] 1 QB 927
      • [1974] AC 689
  3. Performance Bond
    • Outcome: The court determined that it was unconscionable for Hola to call on the performance bond based on the original contract sum, and they were only entitled to call on the bond in the sum of $799,500, based on 10% of the revised contract sum.
    • Category: Substantive
    • Sub-Issues:
      • Revision of contract sum
      • Unconscionability
    • Related Cases:
      • [1999] 4 SLR 604
      • [2000] 1 SLR 657

8. Remedies Sought

  1. Monetary Damages
  2. Injunction to restrain Hola from receiving monies under the performance bond

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Construction Law
  • Commercial Litigation

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Aurum Building Services (Pte) Ltd v Greatearth Construction Pte LtdHigh CourtYes[1994] 3 SLR 330SingaporeCited regarding the exclusion of equitable set-off by contract.
Dauphin Offshore Engineering & Trading Pte Ltd v The Private Office of HRH Sheikh Sultan bin KhalifaCourt of AppealYes[2000] 1 SLR 657SingaporeCited regarding the definition of unconscionability in the context of performance bonds.
GHL Pte Ltd v Unitrack Building Construction Pte LtdCourt of AppealYes[1999] 4 SLR 604SingaporeFollowed regarding the principle that the sum payable under a performance bond should be based on the revised contract sum and that it would be unconscionable to demand payment based on the original contract sum.
Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) LtdHouse of LordsYes[1974] AC 689England and WalesFollowed regarding the presumption that parties intend to retain all legal remedies for breach of contract unless expressly excluded.
Jurong Engineering Ltd v Paccan Building Technology Pte LtdCourt of AppealYes[1999] 3 SLR 667SingaporeFollowed regarding the determination of 'reasonable diligence' by pacing progress against the subcontract program and the right to damages for breach of the obligation to proceed with reasonable diligence.
Kum Leng General Contractor v Hytech Builders Pte LtdHigh CourtYes[1996] 1 SLR 571SingaporeCited regarding the exclusion of equitable set-off by contract, but the court disagreed with the application of the expressio unius principle in that case.
Lojan Properties Pte Ltd v Tropicon Contractors Pte LtdCourt of AppealYes[1991] SLR 80SingaporeCited regarding the exclusion of the right of set-off by contract provisions, but distinguished based on the absence of a 'temporary finality' clause in the present contract.
OCWS Logistics v Soon Meng Construction Pte LtdHigh CourtYes[1999] 2 SLR 376SingaporeFollowed regarding the principle that an unliquidated claim for damages could be set-off if it arose from the same transaction or was closely connected with the subject matter of the claim.
Pacific Rim Investments Pte Ltd v Lam Seng Tiong & AnorCourt of AppealYes[1995] 3 SLR 1SingaporeFollowed regarding the exercise of equitable set-off being permitted only if equitable considerations support it and the loss is quantifiable by means of a reasonable assessment made in good faith.
Pembanaan Leow Tuck Chui & Sons Sdn Bhd v Dr Leela’s Medical Centre Sdn BhdSupreme Court of Kuala LumpurYes[1995] 2 MLJ 57MalaysiaDistinguished regarding the express enumeration of permitted set-offs implying a limitation to those set-offs, as the court disagreed with the reasoning in that case.
The Nanfri; Federal Commerce & Navigation Co. Ltd v Molena Alpha IncQueen's BenchYes[1978] 1 QB 927England and WalesCited regarding the principle that equitable set-off is part of the general law and can only be excluded by clear provisions to that effect.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

  • Equitable Set-Off
  • Performance Bond
  • Interim Payment Certificates
  • Defective Piles
  • Construction Programme
  • Reasonable Diligence
  • Unconscionability
  • Revised Contract Sum
  • Termination of Contract

15.2 Keywords

  • construction contract
  • equitable set-off
  • performance bond
  • building contract
  • construction delay
  • defective work

17. Areas of Law

Area NameRelevance Score
Building and Construction Contracts90
Construction Law90
Contract Law85
Equitable Set-Off75
Breach of Contract70
Performance Bond70
Guarantees and bonds70
Estoppel60
Chancery and Equity60
Corporate Law10
Property Law10

16. Subjects

  • Building and Construction Contracts
  • Construction Dispute
  • Equitable Set-Off
  • Performance Bonds