Engineering Construction v Sanchoon Builders: Subcontract Payment Dispute & Set-Off Rights

In Engineering Construction Pte Ltd v Sanchoon Builders Pte Ltd, the Singapore High Court dismissed Engineering Construction's application for leave to appeal an arbitration award. The dispute arose from a subcontract agreement where Engineering Construction, the subcontractor, alleged that Sanchoon Builders, the main contractor, had unjustifiably withheld payments. Sanchoon Builders counterclaimed for rectification of defective works and losses incurred. The arbitrator ruled in favor of Sanchoon Builders, and the High Court upheld this decision, finding that Sanchoon Builders had the right to set off unliquidated claims against certified progress payments.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application for leave to appeal refused.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Engineering Construction's appeal for leave to appeal an arbitration award was dismissed. The dispute concerned subcontract payment delays and set-off rights.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Sanchoon Builders Pte LtdDefendantCorporationCosts AwardedWon
Engineering Construction Pte LtdPlaintiffCorporationApplication DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Quentin LohJudgeYes

4. Counsels

Counsel NameOrganization
Tan Joo SengChong Chia & Lim LLC
Philip JeyaretnamRodyk & Davidson LLC
Benjamin YamRodyk & Davidson LLC
Chan Chun Hwee AllanC H Chan & Co

4. Facts

  1. Defendant secured a contract from the Town Council for improvement works at $572,000.
  2. Defendant subcontracted the works to Plaintiff for $543,400.
  3. Plaintiff alleged Defendant unjustifiably withheld interim monthly payments.
  4. Defendant alleged Plaintiff had insufficient labor, was behind schedule, and lacked a project manager.
  5. Plaintiff terminated the subcontract, alleging repudiatory breach by non-payment.
  6. Defendant alleged Plaintiff repudiated the contract by stopping work without justification.
  7. Arbitrator ruled Plaintiff wrongfully terminated the subcontract and owed Defendant $268,223.23.

5. Formal Citations

  1. Engineering Construction Pte Ltd v Sanchoon Builders Pte Ltd, Originating Summons No 321 of 2010, [2010] SGHC 293

6. Timeline

DateEvent
Subcontract agreement signed.
Subcontract period began.
Project consultant complained about slow progress.
Town Council paid Certificate No. 3 to the Defendant.
Defendant informed Plaintiff they would be charged $3,000 per month for supervisor's services.
Plaintiff terminated subcontract and abandoned works.
Original subcontract period ended.
Disputes referred to arbitration.
Arbitrator appointed by SIAC.
Arbitration hearing began.
Written closing submissions made.
Reply submissions made.
Arbitration award published.
Judgment reserved.

7. Legal Issues

  1. Right of Set-Off
    • Outcome: The court held that the main contractor had the right to set off unliquidated claims against certified progress payments to the subcontractor.
    • Category: Substantive
    • Sub-Issues:
      • Unascertained damages
      • Unquantified damages
      • Bona fide contra accounts
    • Related Cases:
      • [1974] AC 689
  2. Wrongful Termination of Subcontract
    • Outcome: The arbitrator found that the Plaintiff had wrongfully terminated the subcontract.
    • Category: Substantive
  3. Breach of Contract
    • Outcome: The arbitrator found that the Plaintiff was in breach of the subcontract by failing to proceed with the works diligently and with due expedition and had delayed the progress of the works.
    • Category: Substantive
    • Sub-Issues:
      • Failure to proceed with works diligently
      • Failure to proceed with due expedition
      • Delays to the works

8. Remedies Sought

  1. Leave to appeal arbitration award
  2. Damages

9. Cause of Actions

  • Breach of Contract
  • Wrongful Termination

10. Practice Areas

  • Commercial Litigation
  • Arbitration
  • Construction Law
  • Subcontracts
  • Construction Disputes

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Gilbert-Ash (Norton) Limited v Modern Engineering (Bristol) LimitedHouse of LordsYes[1974] AC 689England and WalesCited for the principle that a main contractor can set off sums claimed for damages against certified progress payments to a subcontractor, provided there is a bona fide claim.
Dawnays Limited v F G Minter Limited and Trollope and Colls LimitedEnglish Court of AppealYes[1971] 1 WLR 1205England and WalesCited as a case that was overruled by Gilbert-Ash, regarding the ability of a main contractor to set off sums against certified payments to a subcontractor.
Axel Johnson Petroleum AB v MG Mineral Group AGCourt of AppealYes[1992] 1 WLR 270England and WalesCited for its discussion on the historical development and complexities of set-off laws.
Hua Khian Ceramics Tiles Supplies Pte Ltd v Torie Construction LtdHigh CourtYes[1991] 2 SLR(R) 901SingaporeCited as authority for the application of the doctrine of abatement in building contracts.
OCWS Logistics Pte Ltd v Soon Meng Construction Pte LtdHigh CourtYes[1998] 3 SLR(R) 888SingaporeCited for the principles of legal and equitable set-off.
Pacific Rim Investments v Lam Seng TiongCourt of AppealYes[1995] 2 SLR(R) 643SingaporeCited for its summary of the development of common law and equitable set-off and the doctrine of abatement.
The NanfriCourt of AppealYes[1978] QB 927England and WalesCited for the principle that cross-claims must arise out of the same transaction or be closely connected to it to be deductible.
Jia Min Building Construction Pte Ltd v Ann Lee Pte LtdHigh CourtYes[2004] 3 SLR(R) 288SingaporeCited for the principle that the exercise of set-off rights must be bona fide and reasonably made.
Hiap Tian Soon Construction Pte Ltd v Hola Development Pte LtdHigh CourtYes[2003] 1 SLR(R) 667SingaporeCited as authority that Gilbert-Ash is good law in Singapore.
A L Stainless Industries Pte Ltd v Wei Sin Construction Pte LtdHigh CourtYes[2001] SGHC 243SingaporeCited for the principle that set-off must represent a bona fide known present loss or entitlement.
SL Sethia Liners Ltd v Naviagro Maritime Corp (The Kostas Melas)Commercial CourtYes[1981] 1 Lloyd’s Rep 18England and WalesCited for the principle that the exercise of a right of deduction or set-off is an act of self-help that must be exercised in good faith on reasonable grounds.
Morley v InglisCourt of Common PleasYes[1837] 4 Bing NC 58England and WalesCited for the principle that a demand can be the subject of a set-off if it is capable of being liquidated or ascertained with precision at the time of pleading.
Hanak v GreenCourt of AppealYes[1958] 2 QB 9England and WalesCited for the principle of equitable set-off.
Morgan & Son Ltd v Martin Johnson & Co LtdKing's Bench DivisionYes[1949] 1 KB 107England and WalesCited for the principle of equitable set-off.
Northern Elevator Manufacturing Sdn Bhd v United Engineers (Singapore) Pte LtdCourt of AppealYes[2004] 2 SLR(R) 494SingaporeCited for accepting the principles in The Nema regarding leave to appeal arbitration awards.
Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema)House of LordsYes[1982] AC 724England and WalesCited for the principles governing leave to appeal arbitration awards.
CMA CGM SA v Beteiligungs-KG MS “Northern Pioneer” Schiffahrtsgesellschaft mbH & Co & Others (The Northern Pioneer)Court of AppealYes[2003] 1 WLR 1015England and WalesCited for the interpretation of section 69(3)(c)(ii) of the English Arbitration Act 1996, regarding leave to appeal arbitration awards.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Arbitration Act (Cap 10, 2002 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Subcontract
  • Set-off
  • Arbitration
  • Progress payments
  • Wrongful termination
  • Repudiatory breach
  • Contra accounts
  • Unliquidated claims
  • Defective works
  • Due diligence
  • Due expedition

15.2 Keywords

  • construction
  • arbitration
  • subcontract
  • set-off
  • payment
  • breach of contract

17. Areas of Law

Area NameRelevance Score
Breach of Contract90
Construction Law85
Contract Law80
Arbitration75
Construction Contracts70
Set-off70
Subcontracting65

16. Subjects

  • Construction Dispute
  • Arbitration
  • Contract Law
  • Civil Procedure