Zhong Kai Construction v Diamond Glass: Liquidated Damages & SOPA Dispute

In Zhong Kai Construction Co Pte Ltd v Diamond Glass Enterprise Pte Ltd, the General Division of the High Court of Singapore heard a case involving a claim by Zhong Kai Construction against Diamond Glass for liquidated damages due to delays, costs for replacement and rectification works, and to overturn an adjudicated amount under the Building and Construction Industry Security of Payment Act (SOPA). Diamond Glass counterclaimed for payments due under variation orders, unpaid sums under the subcontract, and legal costs associated with the adjudication determination. The court allowed Zhong Kai's claims for liquidated damages and replacement/rectification works in part, set aside three of the variation orders, allowed one of Diamond Glass's claims for a variation order, and dismissed Diamond Glass's other claims.

1. Case Overview

1.1 Court

General Division of the High Court

1.2 Outcome

Plaintiff's claims for liquidated damages and replacement/rectification works allowed in part; three variation orders in the adjudication determination set aside; one of the defendant's claim for variation order allowed; defendant's other claims dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case involving Zhong Kai Construction and Diamond Glass over liquidated damages, rectification works, and SOPA adjudication.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Diamond Glass Enterprise Pte LtdDefendant, Plaintiff in counterclaimCorporationCounterclaim Allowed in PartPartial
Zhong Kai Construction Co Pte LtdPlaintiff, Defendant in counterclaimCorporationAppeal Allowed in PartPartial

3. Judges

Judge NameTitleDelivered Judgment
Kwek Mean LuckJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Luo Ling LingLuo Ling Ling LLC
Sharifah Nabilah Binte Syed OmarLuo Ling Ling LLC
Kris Chew Yee FongZenith Law Corporation
Su Hongling IsabelZenith Law Corporation

4. Facts

  1. Zhong Kai Construction engaged Diamond Glass as a subcontractor for aluminium cladding works at Changi Airport.
  2. The Subcontract Sum was a Provisional Sum of $558,055 excluding GST.
  3. Diamond Glass abandoned the worksite around 6 June 2018 due to payment disputes.
  4. Zhong Kai Construction claimed liquidated damages for Diamond Glass's delays and costs for replacement/rectification works.
  5. Diamond Glass counterclaimed for payments due under variation orders and unpaid sums under the Subcontract.
  6. An Adjudication Determination was issued on 15 November 2019, awarding $197,522.83 to Diamond Glass under SOPA.
  7. Zhong Kai Construction commenced Suit No 1282 of 2019 to overturn the adjudicated amount.

5. Formal Citations

  1. Zhong Kai Construction Co Pte Ltd v Diamond Glass Enterprise Pte Ltd, Suit No 1282 of 2019, [2021] SGHC 277
  2. Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd, , [2021] SGCA 61

6. Timeline

DateEvent
Subcontract signed between Zhong Kai Construction and Diamond Glass
Zhong Kai Construction noted delays in Diamond Glass meeting the schedule
SCB Building Construction sent email regarding Diamond Glass not placing order for cabin glass
Diamond Glass sent letter cancelling purchase order for cabin glass
Diamond Glass demanded payment of $149,436.99 by 5 June 2018
Diamond Glass abandoned the worksite
Diamond Glass sent letter terminating the contract
Diamond Glass served a progress claim on Zhong Kai Construction
Zhong Kai Construction commenced Suit No 917 of 2019
Diamond Glass commenced Adjudication Application No 339 of 2019 under SOPA
Adjudication Determination issued
Zhong Kai Construction commenced Suit No 1282 of 2019
Diamond Glass obtained a court order to enforce the AD as a judgment debt
Diamond Glass served a statutory demand on Zhong Kai Construction
Diamond Glass commenced Companies Winding Up Originating Summons No 95 of 2020
Court of Appeal upheld the decision to stay CWU 95 in Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd [2021] SGCA 61
Judgment reserved

7. Legal Issues

  1. Liquidated Damages
    • Outcome: The court found that the completion dates in clause 6 of the Subcontract applied for the purposes of the liquidated damages clause. The court found that there were no justifiable reasons for reducing the period of delay. The court found that the liquidated damages quantum in clause 6 of the Subcontract was not a penalty.
    • Category: Substantive
    • Sub-Issues:
      • Applicability of completion dates
      • Justifiable reasons for reducing delay period
      • Penalty clause
  2. Repudiatory Breach
    • Outcome: The court found that the defendant wrongfully terminated the Subcontract and that there was no basis for the defendant to reduce the period of delay on account of alleged repudiatory breach by the plaintiff.
    • Category: Substantive
    • Sub-Issues:
      • Non-payment
      • Delay of payment
  3. Replacement and Rectification of Defective Works
    • Outcome: The court allowed some of the claims for replacement and rectification of defective works, finding that the invoices fell within the exception under s 32(1)(b) of the Evidence Act. The court found that the defendant did not discharge the burden of proving that losses have not been mitigated properly.
    • Category: Substantive
    • Sub-Issues:
      • Mitigation of losses
      • Administration charge
  4. Adjudication Determination under SOPA
    • Outcome: The court set aside three of the variation orders in the adjudication determination, finding that there was no agreement from CAAS or SJ as required under clause 2 of the Subcontract. The court dismissed the plaintiff’s claim for overturning the main works allowed by the adjudicator in the AD.
    • Category: Procedural
    • Sub-Issues:
      • Variation orders
      • Agreement by principal

8. Remedies Sought

  1. Monetary Damages
  2. Setting Aside Adjudication Determination

9. Cause of Actions

  • Breach of Contract
  • Recovery of Debt

10. Practice Areas

  • Construction Disputes
  • Commercial Litigation
  • Arbitration

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte LtdCourt of AppealYes[2021] SGCA 61SingaporeUpheld the decision to stay the winding-up application, adding the condition that the plaintiff pay a sum into court as security. Cited for legal principles on when payment delays amount to repudiation of a contract.
Hewlett-Packard Singapore (Sales) Pte Ltd v Chin Shu Hwa CorinnaCourt of AppealNo[2016] 2 SLR 1083SingaporeCited for the principle that the contra proferentem rule applies only if the contract contains ambiguity that cannot be resolved by ordinary interpretation.
The “Asia Star”N/ANo[2010] 2 SLR 1154N/ACited for the principle that a plaintiff must take all reasonable steps to mitigate losses arising from a breach.
Jia Min Building Construction Pte Ltd v Ann Lee Pte LtdN/AYes[2004] 3 SLR(R) 288N/ACited for the principle that a contractor/subcontractor has no general right at common law to suspend work unless this is expressly agreed upon, even if payment is wrongly withheld. Also cited for principles on mitigation of losses.
Lian Soon Construction Pte Ltd Guan Qian Realty Pte LtdN/ANo[1999] 3 SLR(R) 518N/ACited for the principle that SCB and the plaintiff committed “acts of prevention” which prevented the defendant from completing the works on time.
Denka Advantech Pte Ltd and another v Seraya Energy Pte Ltd and another and other appealsCourt of AppealYes[2021] 1 SLR 631SingaporeCited for the principle that a clause will be a penalty if the sum stipulated for is extravagant and unconscionable in comparison with the greatest loss that could conceivably be proved to have followed from the breach, such that the sum stipulated for is not a genuine pre-estimate of the likely loss.
AL Stainless Industries Pte Ltd v Wei Sin Construction Pte LtdHigh CourtNo[2001] SGHC 243SingaporeCited for the principle that there may be instances in which a persistent course of payment delays, or a protracted delay in the payment of a very substantial sum amounts to a repudiation of the contract.
GA Engineering Pte Ltd v Sun Moon Construction Pte LtdHigh CourtNo[2020] SGHC 167SingaporeCited for the principle that Section 30(4) of SOPA allows a party in principle to recover the costs of an adjudication application as damages.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)Singapore
Evidence Act (Cap 97, 1997 Rev Ed) s 32(1)(b)Singapore
SOPA s 30(4)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Liquidated Damages
  • Subcontract
  • Variation Order
  • Adjudication Determination
  • Repudiatory Breach
  • SOPA
  • Retention Sum
  • Cabin Glass
  • Rockwool
  • BCA Submission

15.2 Keywords

  • construction
  • liquidated damages
  • SOPA
  • adjudication
  • breach of contract
  • Singapore

17. Areas of Law

Area NameRelevance Score
Construction Law95
Building and Construction Industry Security of Payment Act85
Liquidated Damages80
Breach of Contract70
Contract Law70
Damages60
Scope of Works60
Variations50
Termination50
Adjudication40
Repudiation of contract40
Arbitration30
Civil Procedure20
Evidence20

16. Subjects

  • Construction Dispute
  • Contract Law
  • Arbitration
  • Building and Construction Law