Schindler Lifts v Paya Ubi: Novation, 'Pay When Paid' Clauses & Defective Work in Construction Sub-Contracts

In a suit before the High Court of Singapore, Schindler Lifts (Singapore) Pte Ltd sued Paya Ubi Industrial Park Pte Ltd and Tekken Corporation regarding a sub-contract for lift installation in the Paya Ubi Industrial Park project. Schindler claimed against Paya Ubi based on an implied novation and, alternatively, against Tekken for sums due under the sub-contract. Tekken disputed the claim, citing conditions precedent and a 'pay when paid' clause. The court dismissed Schindler's claim against Paya Ubi, finding no novation, but ruled in favor of Schindler against Tekken for certain amounts due under the Final Certificate, adjusting deductions for alleged non-performance and defective works. Tekken's counterclaim against Paya Ubi was partially upheld, with the court disallowing certain deductions made by the Architect.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Schindler Lifts against Tekken Corporation in part; Schindler Lifts' claim against Paya Ubi Industrial Park dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Schindler Lifts sues Paya Ubi and Tekken over a lift installation sub-contract dispute. The court addresses novation, 'pay when paid' clauses, and deductions for defective work.

1.7 Decision Date

23 February 2004

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Schindler Lifts (Singapore) Pte Ltd	Plaintiff	Corporation	Claim against Paya Ubi Industrial Park dismissed	Lost	Loh Jen Wei of Rodyk and Davidson Paul Wong of Rodyk and Davidson
Paya Ubi Industrial Park Pte Ltd	Defendant	Corporation	Claim against Paya Ubi Industrial Park dismissed	Won	Stanley Wong of Jing Quee and Chin Joo
Tekken Corporation	Defendant	Corporation	Claim against Tekken Corporation allowed in part	Partial	Christopher Chuah of Drew and Napier LLC Michael Chia of Drew and Napier LLC

3. Judges

Judge Name	Title	Delivered Judgment
Judith Prakash	Judge	Yes

4. Counsels

Counsel Name	Organization
Loh Jen Wei	Rodyk and Davidson
Paul Wong	Rodyk and Davidson
Stanley Wong	Jing Quee and Chin Joo
Christopher Chuah	Drew and Napier LLC
Michael Chia	Drew and Napier LLC

4. Facts

Paya Ubi appointed Tekken as the main contractor for the Paya Ubi Industrial Park project.
Schindler was the nominated sub-contractor for lift installation.
Disputes arose between Paya Ubi and Tekken, leading to a Settlement Agreement where Tekken ceased work.
No formal novation agreement was signed between Tekken, Paya Ubi, and Schindler.
The Architect issued a Final Certificate certifying deductions for omitted work and alleged non-performance/defective works.
Schindler commenced action to recover retention moneys and amounts due for variations/outstanding works.
Tekken assigned the performance bond that Schindler had provided to Tekken to Paya Ubi pursuant to the terms of the Sub-Contract.

5. Formal Citations

Schindler Lifts (Singapore) Pte Ltd v Paya Ubi Industrial Park Pte Ltd and Another, Suit 457/2002, [2004] SGHC 34

6. Timeline

Date	Event
1998-07-13	Tekken's letter of award to Schindler
1999-03-01	Sub-Contract between Tekken and Schindler made
2000-08-21	Settlement Agreement made between Tekken and Paya Ubi
2000-09-01	Completion certificate for the project issued by the Architect
2000-09-23	First temporary occupation permit obtained
2000-10-18	Tekken and Schindler acknowledged pending novation negotiations
2001-02-01	Second temporary occupation permit obtained
2001-02-01	Paya Ubi shut down the power supply to the lift motor room for blocks C and D
2001-02-26	Alpha Engineering Consultant informed Schindler that all batteries provided should be fit for their purpose
2002-03-18	Schindler commenced action against Tekken and Paya Ubi
2002-08-01	Date of the issue of the amended writ
2002-12-17	Final Certificate issued
2003-09-01	Trial date
2004-02-24	Judgment reserved

7. Legal Issues

Implied Novation
- Outcome: The court held that there was no implied novation of the Sub-Contract between Schindler and Tekken.
- Category: Substantive
"Pay When Paid" Clause
- Outcome: The court found that the 'pay when paid' provision in the Sub-Contract was an integral part of the agreement and applied to the release of retention moneys.
- Category: Substantive
Deductions for Defective Work
- Outcome: The court determined that the Architect was only entitled to deduct a portion of the amount claimed for defective works, finding the original deduction excessive.
- Category: Substantive

8. Remedies Sought

Monetary Damages
Declaration

9. Cause of Actions

Breach of Contract
Recovery of Debt

10. Practice Areas

Construction Law
Commercial Litigation

11. Industries

Construction

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
A Building Contract Dictionary	N/A	Yes	A Building Contract Dictionary (2nd Ed, 1990)	N/A	Cited for the definition of 'defective work' in the context of standard forms of building contract.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
No applicable statutes

15. Key Terms and Keywords

15.1 Key Terms

Nominated Sub-Contractor
Novation
Retention Moneys
Final Certificate
Pay When Paid Clause
Defective Work
Maintenance Period
Settlement Agreement
Architect's Certificate
ARD Batteries

15.2 Keywords

Schindler Lifts
Paya Ubi
Tekken
Construction Law
Subcontract
Novation
Retention Monies
Defective Work
Singapore High Court

17. Areas of Law

Area Name	Relevance Score
Construction Law	90
Sub-contracts	80
Novation	70
Breach of Contract	70
Building and Construction Contracts	70
Contract Law	70
Pay when paid	60
Arbitration	30

16. Subjects

Construction Dispute
Contract Law
Sub-contracts
Building and Construction Law