United Overseas Land Ltd

- vs -

Loke Hong Kee (S) Pte Ltd

Judgment

CJ Wee CJ

(delivering the judgment of the court)

1. This is an appeal from the decision of D’Cotta J on a special case stated for the decision of the High Court pursuant to s 28 of the Arbitration Act (Cap 16, 1970 Ed) in relation to a dispute between the parties which has arisen in connection with a building contract for the erection of two blocks of flats by the respondents.

2. By an agreement in writing dated 8 April 1974 between the respondents, Loke Hong Kee (S) Pte Ltd and the appellants, United Overseas Land Ltd, the respondents agreed to carry out and complete certain building works comprising the erection of two blocks of flats together with ancillary works at Cairnhill under the supervision and to the satisfaction of the appellants’ architect.

3. By a supplemental agreement made between the same parties and dated 23 March 1976 it was, inter alia, provided:

   1. Under art V cl 1 that the respondents should adhere to the progress of works specified in the third schedule annexed to the supplemental agreement to ensure the completion of the works on or before the dates specified therein.

   2. Under art V cl 2 that the respondents should carry out the works expeditiously and with every diligence and complete the same.

   3. Under art V cl 3 that in the event of the progress of the works being in the opinion of the architect unsatisfactory and/or in the event of respondents failing to adhere or maintain the progress of works as specified in the said third schedule and/or upon any breach of the supplemental agreement by the respondents then upon the recommendation of the architect in writing and in addition to the appellants’ rights under the main contract the appellants should be at liberty to determine the employment of the respondents under the main contract forthwith by notice in writing.

   4. Under art V cl 6 that upon the appellants regaining possession of the site the firm of Pakatan International Suckling McDonald should within two weeks measure the works as completed by the respondents and the valuation of the said Pakatan should be binding on both parties and should be final.

   5. Under art VIII that notwithstanding the provisions contained in the supplemental agreement the time for completion of the works unless extended by the architect under the main contract should remain as at 4 May 1976 and that nothing in the supplemental agreement should affect or modify or diminish any right of the appellants and the respondents of whatever kind against each other arising out of the act or default of either party under the main contract the terms and conditions of which should remain valid and binding on the parties to the supplemental agreement subject to the provisions thereof particularly the additional rights and benefits of the appellants provided therein.

4. On 1 March 1977 the architect, pursuant to the provisions of art V cl 3 of the supplemental agreement, by a letter to the appellants stated that he was of the opinion that progress of the works was unsatisfactory; that it was obvious that the respondents had failed to adhere or maintain the progress of work as specified in the schedule to the supplemental agreement; that the respondents were not making serious attempts to adhere or maintain the progress of works; and that the respondents were not carrying out the works expeditiously and with every diligence; and accordingly recommended that the appellants ought to determine the employment of the respondents under the main contract.

5. By a letter also dated 1 March 1977 the appellants determined the respondents’ employment under the main contract forthwith.

6. Disputes and differences having arisen between the parties, such disputes and differences were referred to arbitration before a sole arbitrator. One main dispute or difference was whether the appellants had lawfully determined the respondents’ employment as aforesaid.

7. After pleadings were delivered the arbitrator commenced the hearing of the arbitration. After hearing the evidence in chief of the first witness, the managing director of the respondents, the hearing was adjourned for the purpose, inter alia, of considering whether points of law had arisen during the reference. Subsequently the parties agreed that the arbitrator should state certain points of law for the opinion of the High Court. 

   Accordingly, the arbitrator stated the following questions in the form of a special case stated for the decision of the High Court:

   A1	Whether I am entitled to open up review or revise an opinion of the Architect under Article V cl 3 of the Supplemental Agreement pursuant to the powers conferred upon me by cl 34 of the Main Contract.
   A2	Whether for the purposes of Article V cl 3 of the Supplemental Agreement and the recommendation of the Architect given in pursuant thereto it is sufficient that the Architect should have formed an opinion in good faith on the information available to him at the time.
   A3	Whether or not by virtue of the powers conferred upon me as Arbitrator under cl 34 of the Main Contract I am entitled to direct that the Claimant’s claims under paras 4 and 4A in their Points of Claim be measured and/or valued as may in my opinion be desirable in order to determine the rights of the parties and/or to open up, review or revise the valuation of the Works executed and materials supplied by the Claimants and carried out by Pakatan purportedly pursuant to the provisions of Article V cl 6 of the Supplemental Agreement.
   A5	In determining whether or not the Claimants have failed: (i) To adhere to the progress of Works specified in the schedules to the Supplemental Agreement, and/or (ii) To carry out the Works expeditiously and with every diligence, and/or (iii) To make satisfactory progress (pursuant to Article V cll 1, 2 and 3 of the Supplemental Agreement), I am entitled to take into consideration any delay on the part of nominated subcontractors (other than any such delay which may be shown to have been caused by any breach of contract on the part of the Respondents).
   A5	Whether on the true construction of the Supplemental Agreement I am entitled to open up review or revise the extension of time already granted (to 4 May 1976) in respect of causes arising and/or occurring and/ or known to the Claimants and/or arising from instructions given before the date of the Supplemental Agreement.
   B1	(a) Whether the Claimants are entitled to adduce evidence without amendment of the pleadings to establish that the dates for the issue of drawings recorded in the schedules attached to the respondents’ letter to the Claimants of 1 April 1976 had been agreed as alleged by the Claimants. (b) In the event of the preceding question being answered in the negative then whether in all circumstances an amendment to allege such foregoing agreement should be allowed.
   B2	Whether William Chen’s certification that in his opinion the Works as defined by the Building Contract are reasonably to have been completed by the Claimants by 4 May 1976 contained in his letter to the Claimants of 18 July 1977: (a) has binding effect, and (b) subject to opening up review or revision by me pursuant to the powers conferred on me under cl 34 of the Main Contract.
   B3	Whether the Claimants are precluded from relying on para 3 of their Points of Reply and Defence to Counterclaim by virtue of their failure to claim for an extension of time at the appropriate time or times.

8. D’Cotta J answered the said questions as follows:

   A1	Affirmative.
   A2	Not answered as counsel for both parties had agreed that this question would only arise if question A1 was answered in the negative.
   A3	Affirmative.
   A4	Affirmative.
   A5	Affirmative.
   B1	(a) Affirmative. (b) Affirmative.
   B2	(a) Negative. (b) Affirmative.
   B3	Negative.

9. From this decision the appellants appealed but before the hearing of the appeal, they have abandoned their appeal in respect of the answers to questions B1 and B2. During the hearing of the appeal the appellants have intimated that as questions A4, A5 and B3 relate to claims made by them against the respondents for liquidated damages, which claims they do not intend to further prosecute if they are successful in this appeal on questions A1, A2 and A3, they are seeking the court’s leave to adjourn the hearing of the appeal on questions A4, A5 and B3 pending the decision of the court on questions A1, A2 and A3 on their undertaking that if they ask the court to restore the hearing on these remaining questions they would in any event pay all costs thrown away by reason of the hearing of these remaining questions being adjourned at the first hearing. We granted the application.

   QUESTIONS A1 and A2

10. These two questions relate to one of the issues which the arbitrator has to decide, namely, whether or not the termination on 1 March 1977 of the respondents’ engagement was lawful or was a breach of contract.

11. The appellants contend that on a true construction of the main contract and the supplemental agreement, in particular art V cl 3, they are entitled to terminate the respondents’ engagement if the architect was of the bona fide opinion that the progress of the works was unsatisfactory and that such an opinion is not subject to opening up, review or revision by the arbitrator.

12. The respondents contend that the arbitrator is entitled to open up, review or revise the opinion of the architect by virtue of the powers conferred on him by cl 34 of the main contract which provides as follows:

    (1)

    Provided always that in case any dispute or difference shall arise between the Employer or the Architect on his behalf and the Contractor, either during the progress or after the completion or abandonment of the Works, as to the construction of this Contract or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith (including any matter or thing left by this Contract to the discretion of the Architect or the withholding by the Architect of any certificate to which the Contractor may claim to be entitled or the measurement and valuation mentioned in cl 30(5)(a) of these Conditions or the rights and liabilities of the parties under cll 25, 26, 31 or 32 of these Conditions), then such dispute or difference shall be and is hereby referred to the arbitration and final decision of a person to be agreed between the parties, or, failing agreement within 14 days after either party has given to the other a written request to concur in the appointment of an Arbitrator, a person to be appointed on the request of either party by the President or a Vice-President for the time being of the Singapore Institute of Architects.

    .... (3)

    Subject to the provisions of cll 2(2), 30(7) of these conditions the Arbitrator shall, without prejudice to the generality of his powers, have power to direct such measurements and/or valuations as may in his opinion be desirable in order to determine the rights of the parties and to ascertain and award any sum which ought to have been the subject of or included in any certificate and to open up, review and revise any certificate, opinion, decision, requirement or notice and to determine all matters in dispute which shall be submitted to him in the same manner as if no such certificate, opinion, decision, requirement or notice had been given.

13. We accept the appellants’ contention. The plain, clear and indeed the only meaning of art V cl (3) is that the appellants have a right to terminate the respondents’ engagement if the architect was of the bona fide opinion that progress of the works was unsatisfactory. The construction for which the respondents contend not only robs the words ‘in the opinion of the architect’ of any meaning and effect whatsoever and renders these words a nullity, but completely ignores the distinction in art V cl 3 between the first event, which is an opinion, and the second and third events which are an actual failure or breach.

14. It is a primary principle of construction that effect must be given to all the words in a contract unless by doing so damage is done to the rest of the contract. The jurisdiction or power conferred on the arbitrator by cl 34 of the main contract is to decide all matters in dispute between the parties, and in doing so he is not bound by any prior certificate or opinion of the architect upon the matter in dispute.

15. The matter in dispute before the arbitrator is whether or not there existed a ground for determining the respondents’ engagement. Article V cl 3 expressly provided one such ground, namely, that the architect was of the opinion that the progress of the works was unsatisfactory. The matter in dispute which the arbitrator has to decide is whether or not such an opinion existed and, if so, was it a bona fide opinion. Under cl 34 of the main contract the arbitrator has the power and has to determine this issue and the architect has given no certificate, opinion or decision upon the issue which required to be opened up or reviewed.

16. In our judgment, on a careful consideration of the terms of the supplemental agreement, the intention of the parties to it was that the appellants could determine the respondents’ employment under the main contract if, inter alia, the architect was of the bona fide opinion that the progress of the works specified in the third schedule annexed to the supplemental agreement was unsatisfactory and the architect recommended in writing to the appellants to determine the employment. It appears to us to be not unreasonable and indeed, in our opinion, it is plain that the parties put faith in the architect to act responsibly in relation to art V cl 3 and have accepted and agreed on the architect, as a sensible and independent person, to protect the interest of each, relying on his judgment, good sense and independence.

17. However stringent such a term may be, when it comes to be enforced the courts have always declared that their duty is in such cases to ascertain and give effect to the intention of the parties as evidenced by the agreement and if a term is clear and unambiguous the court is bound to give effect to it without stopping to consider how far it may be oppressive or not.

18. In our judgment so long as the architect’s opinion was reached bona fide the appellants were entitled to act on the written recommendation of the architect and to determine the respondents’ employment under the main contract on that ground. Accordingly, the answer to question A1 should be in the negative and the answer to question A2 should be in the affirmative.

19. In the course of his argument, counsel for the respondents contends that even if the answers to these two questions are not in the respondents’ favour, there is a principle of law known as the common law principle of prevention that (we quote) ‘if the arbitrator is satisfied on the evidence that the owner’s own actions (e.g. late issue of drawings and issue of variation orders) had prevented the contractor from maintaining satisfactory progress of the works, then the owner is precluded from relying on the architect’s opinion and recommendation under Article V cl 3 of the supplemental agreement as a ground for termination of the building contract’.

20. In our judgment this common law principle does not arise on the special case and is not a question stated for the court’s consideration in the special case stated. This common law principle clearly has nothing to do with questions A1 and A2 which are questions of construction of the contract between the parties and events subsequent to the contract cannot alter its true construction.

21. The respondents relied on Roberts v Bury Improvement Commissioners (1870) LR 5 CP 310 in support of this contention. In our opinion that case is distinguishable. In that case the owners admitted on the record that the alleged failure by the contractor to use such diligence and to make such progress as to enable him to complete the works by the day specified was caused by the failure of the owners and their architect to supply plans and set out the land necessary to enable the contractor to commence the works. On that admission the common law principle was held applicable, the principle being that one of two contracting parties is exonerated from the performance of a contract when the performance of it is prevented and rendered impossible by the wrongful act of the other contracting party. The majority of the Court of Exchequer Chamber held that on its true construction a particular clause in the contract relied on by the owners did not confer upon the architect the power to determine whether the delay of the contractor to proceed with the works so as to complete them by the day specified had or had not been caused by the failure of the owners to supply the necessary plans and set out the land.

    QUESTION A3

22. This question arises under art V cl 6 of the supplemental agreement which provides that in the event of a determination of the respondents’ employment the firm of Pakatan International Suckling McDonald ‘shall measure the works as completed by the contractor and the valuation of the said Quantity Surveyor shall be binding on both parties and shall be final’. The respondents are claiming that the said Quantity Surveyor’s valuation is too low and they contend that the arbitrator has power under cl 34(3) of the main contract to open up the valuation and then to direct such measurements and/or valuation as may in his opinion be desirable.

23. This question is likewise a question of construction of the contract between the parties and for the same reasons we have given on questions A1 and A2 we are of the opinion that the answer to this question must be in the negative. Furthermore, it is clear that the powers of the arbitrator under cl 34(3) are limited to opening up, reviewing or revising any opinion or decision of the architect and the arbitrator is given no power under that clause to open up a valuation given by a third party as a result of a separate contract between the parties in which they have expressly agreed that the valuation shall be final and binding on them.

24. Accordingly, the appellants succeed in their appeal on questions A1, A2 and A3 and we reserve the question of costs until the hearing and determination of the appeal on the remaining questions.

Cases

Roberts v Bury Improvement Commissioners [1870] LR 5 CP 310

Legislations

Arbitration Act (Cap 16, 1970 Ed): s.28

Representation

Christopher Bathurst QC and Winston Chen (Shook Lin & Bok) for the appellants.

CS Wu (Donaldson & Burkinshaw) for the respondents.