Engineering Construction Pte Ltd v. Sanchoon Builders Pte Ltd [2011] 1 SLR 681
Keywords: Arbitration – Leave to Appeal- Set-Off- Counterclaims.
Introduction
This arose from an application to High Court by Engineering Construction Pte Ltd (“ECPL”) for leave to appeal against an arbitration award made in favour of Sanchoon Builders Pte Ltd (“SBPL”). ECPL’s application was dismissed.
Facts
SBPL was the main contractor of the West Coast Town Council for upgrading works. It sub-contracted the whole of the works to ECPL. Disputes arose. ECPL stopped work and abandoned the site. ECPL alleged that it was entitled to stop works as SBPL had repudiated the sub contract by failing to make progress payments to ECPL. On the other hand, SBPL claimed that the abandonment of work was an unjustified repudiation of the sub-contract which it accepted. SBPL further alleged that ECPL was in serious delay and had failed to rectify their defective works.
ECPL commenced arbitration proceedings to claim for the value of work done and damages for wrongful termination. SBPL counterclaimed for damages for defective work and wrongful termination. Eventually, SBPL succeeded. The Arbitrator determined that ECPL had wrongly repudiated the sub- contract. ECPL sought to leave to appeal against the arbitration award on questions of law. The main question of law before the court was whether the SBPL had a right to make deductions of unascertained and unquantified damages from payments due to ECPL.
Decision
The High Court decided, amongst others, that a main contractor had a right in equity to set off any bona fide unliquidated claims. Building contracts and claims fulfilled the criterion of contra claims that were so closely connected with the subject matter of the claim that it would be unjust to allow a sub contractor’s claims without considering the main contractor’s set-offs. However, a party intending to exercise his right of set-off must have valid reasons in exercising his right and must exercise it in a bona fide manner. It did not matter if the at the time of exercising his rights, he was unable to quantify his set off.
In a building contract dispute, if it was clear that there was an entitlement or justification to raise a claim in set-off against the claiming party, and that sum was likely to be so large as to exceed its claim, the lack of an exercise to estimate the amount of the set-off or quantify the same was not fatal nor a disqualification to exercise the self-help remedy. In such an event, the lack of an estimate to satisfy the bona fides or reasonableness fell away.
Consequently, the High Court held that based on the facts and evidence before him, the Arbitrator was not obviously wrong in determining that SBPL were justified in setting off their claims against payments that were due to ECPL.
This arose from an application to High Court by Engineering Construction Pte Ltd (“ECPL”) for leave to appeal against an arbitration award made in favour of Sanchoon Builders Pte Ltd (“SBPL”). ECPL’s application was dismissed.
Facts
SBPL was the main contractor of the West Coast Town Council for upgrading works. It sub-contracted the whole of the works to ECPL. Disputes arose. ECPL stopped work and abandoned the site. ECPL alleged that it was entitled to stop works as SBPL had repudiated the sub contract by failing to make progress payments to ECPL. On the other hand, SBPL claimed that the abandonment of work was an unjustified repudiation of the sub-contract which it accepted. SBPL further alleged that ECPL was in serious delay and had failed to rectify their defective works.
ECPL commenced arbitration proceedings to claim for the value of work done and damages for wrongful termination. SBPL counterclaimed for damages for defective work and wrongful termination. Eventually, SBPL succeeded. The Arbitrator determined that ECPL had wrongly repudiated the sub- contract. ECPL sought to leave to appeal against the arbitration award on questions of law. The main question of law before the court was whether the SBPL had a right to make deductions of unascertained and unquantified damages from payments due to ECPL.
Decision
The High Court decided, amongst others, that a main contractor had a right in equity to set off any bona fide unliquidated claims. Building contracts and claims fulfilled the criterion of contra claims that were so closely connected with the subject matter of the claim that it would be unjust to allow a sub contractor’s claims without considering the main contractor’s set-offs. However, a party intending to exercise his right of set-off must have valid reasons in exercising his right and must exercise it in a bona fide manner. It did not matter if the at the time of exercising his rights, he was unable to quantify his set off.
In a building contract dispute, if it was clear that there was an entitlement or justification to raise a claim in set-off against the claiming party, and that sum was likely to be so large as to exceed its claim, the lack of an exercise to estimate the amount of the set-off or quantify the same was not fatal nor a disqualification to exercise the self-help remedy. In such an event, the lack of an estimate to satisfy the bona fides or reasonableness fell away.
Consequently, the High Court held that based on the facts and evidence before him, the Arbitrator was not obviously wrong in determining that SBPL were justified in setting off their claims against payments that were due to ECPL.