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ICOP Construction (SG) Pte Ltd v Tiong Seng Civil Engineering (Pte) Ltd [2024] SGHC(A) 1

1. EXECUTIVE SUMMARY  

1. An innocent party is entitled to treat a contract as discharged as a result of the other party’s breach in one of the four situations set out in RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and Another Appeal [2007] SGCA 39 (“RDC Concrete”), either because of an express contractual entitlement, the wrongdoer’s renunciation of the contract, or because the wrongdoer by its breach has breached a condition of the contract or has deprived the innocent party of substantially the whole benefit which it was intended that it should obtain from the contract.
2. The issue of contract termination was a subject of appeal in ICOP Construction (SG) Pte Ltd v Tiong Seng Civil Engineering (Pte) Ltd [2024] SGHC(A) 1 (“ICOP Construction”), where the appellant subcontractor appealed against the decision of the General Division of the High Court finding that it had not been entitled to terminate its subcontract under the subcontract’s termination clause, and was therefore liable for wrongful termination.
3. In the appeal before the Appellate Division, the appellant raised additional matters to justify the contractual termination, and raised additional arguments on the basis of the main contractor’s alleged repudiation of contract. These additional arguments had not been raised at the time that the appellant purported to terminate the subcontract, and had not been pleaded in the proceedings prior to the appeal.
4. The Appellate Division rejected the appellant’s case on termination and held that the appellant was not entitled to raise new points on appeal as they fell outside its pleaded case and had not been raised in the proceedings below before the General Division. The Appellate Division also found that even if the appellant could raise these new points on appeal, there were no merits in these arguments.

2. FACTS

5. The appellant, ICOP Construction (SG) Pte Ltd (“ICOP”), is a Singapore incorporated company in the business of constructing water, gas and sewage pipelines. The respondent, Tiong Seng Civil Engineering (Private) Limited (“TSCE”), is a Singapore incorporated company in the business of providing infrastructure engineering design, consultancy services, and the construction of civil engineering projects.¹
6. Sometime on or around June 2016, TSCE was engaged as main contractor to carry out construction of a portable water pipeline in a project known as “Proposed 1600mm Diameter Pipeline from AYE/Henderson Road to River Valley Road” (“Project”). ²
7. Pursuant to a subcontract (“Sub-Contract”), TCSE engaged ICOP around May 2017 to carry out micro tunnelling works (“Sub-Contract Works”) at the Project.³ The Sub-Contract envisaged that ICOP would carry out tunnel boring and install pipes in four sequential sections or “drives” i.e. Drive 1 to Drive 4.⁴
8. The Sub-Contract provided for ‘tentative’ commencement dates and completion dates for each Drive, with the actual commencement and completion dates subject to the parties’ mutual agreement. Subsequently, the actual timeline of the Sub-Contract Works substantially deviated from the ‘tentative’ timelines in the Sub-Contract, and during the works for Drive 2, the parties faced tensions and disagreements. After ICOP completed Drive 2 in early 2019, ICOP considered itself justified in terminating the Sub-Contract and did so on 13 March 2019.⁵
9. The parties subsequently brought various claims and counterclaims against each other in Suit HC/S 1086/2019 in the General Division of the Singapore High Court. One of the issues before the General Division was whether ICOP had lawfully terminated the Sub-Contract under a termination clause.
10. The General Division found that ICOP was not entitled to terminate the Sub-Contract and was liable for wrongful termination. ICOP appealed against the General Division’s decision on the issue of contract termination, amongst other issues.

3. 4 SITUATIONS IN RDC CONCRETE

11. In the landmark decision of RDC Concrete, the Court of Appeal summarised the 4 situations at common law under which an innocent party to a contract may elect to terminate the contract as a result of the other party’s breach. These 4 situations are:

1. Situation 1: where the contract clearly states that, in the event of a certain event or events occurring, the innocent party will be entitled to terminate the contract.⁶
   Where the contract does not expressly reference the right to terminate the contract and what will entitle a party to do so:
2. Situation 2: where a party, by its words or conduct, simply renounces the contract inasmuch as it clearly conveys to the other party to the contract that it will not perform its contractual obligations at all, that other party (viz, the innocent party to the contract) is entitled to terminate the contract.⁷
3. Situation 3(a): the condition-warranty approach, where the party in breach has breached a condition of the contract (as opposed to a warranty), which based on the intention of the parties to the contract, was to designate that term as one that is so important that any breach, regardless of the actual consequences of such a breach, would entitle the innocent party to terminate the contract.⁸
4. Situation 3(b): the Hongkong Fir approach, where the party in breach has committed a breach, the consequences of which will deprive the innocent party of substantially the whole benefit which it was intended that the innocent party should obtain from the contract.⁹

4. ICOP’S PLEADED CASE ON TERMINATION 

12. ICOP’s pleaded case on termination relies exclusively on the contractual termination mechanism found in Clause 6 of the Sub-Contract (“Clause 6”):¹⁰
    “6. Payment conditions
    Work progress has to be stated every month in a document called Validated Monthly Progress Report (VMPR). VMPR has to be signed by the parties within the first 15 days of the following month. ICOP will prepare the invoices on a monthly base accordingly or to be agreed upon contract award. The payment could also be form as accordance to Work done fully remeasureable (Shaft inner wall to wall). The invoice has to be paid after 30 days from the invoice date. 
    • 10% Advance payment 30 days after signing the final contract (To be discussed)
    • 87% monthly based on VMPR (To be discussed)
    • 3% as Retention by receipt of completion certificate (To be discussed)
    In case ICOP has fulfilled its obligation under the contract and can for reasons which are beyond the control of ICOP not start or continue with the work in a timely manner, ICOP shall have the right to terminate the work and rendering of services. TSC has to fully reimburse ICOP for all its cost for bringing, repatriating and maintain all the equipment and staff. All payments shall be made in SGD given the above payment schedule[.] The payment schedule is structured to be cash neutral, hence no financing costs are assumed in the above prices.”

(emphasis added)

13. ICOP was therefore required to satisfy the two cumulative requirements for termination under Clause 6, which the Appellate Division termed as the Performance Requirement and Prevention Requirement:¹¹
    (a) Performance Requirement: “ICOP has fulfilled its obligation under the contract”.
    (b) Prevention Requirement: “ICOP … can for reasons which are beyond the control of ICOP not start or continue with the work in a timely manner”.
14. In the proceedings below before the General Division, ICOP asserted two alternative bases that prevented it from “continu[ing] with the work in a timely manner” (i.e. the Prevention Requirement). Both ICOP’s bases were rejected by the General Division. The General Division held further that ICOP had not “fulfilled its obligation under the contract” (i.e. the Performance Requirement) in view of the various delays attributable to ICOP.¹²
15. The General Division therefore found that ICOP was not entitled to terminate the Sub-Contract (pursuant to Clause 6) and was liable for wrongful termination.¹³

5. ICOP’S CASE ON TERMINATION BEFORE THE APPELLATE DIVISION

1. Additional points raised by ICOP during the appeal

16. In its appeal before the Appellate Division, ICOP raised an additional ground for termination i.e. that TSCE had repudiated the Sub-Contract by deliberately and wrongfully withholding certified payments; and relied on additional matters to justify its termination of the Sub-Contact i.e. that it had “no option” but to terminate the Sub-Contract due to TSCE’s unreasonable conduct (i.e. collectively, the “Additional Points”).¹⁴
17. The Additional Points had not been pleaded and/or raised in submissions in the proceedings below before the General Division.¹⁵
18. The Appellate Division held that ICOP was not entitled to raise the Additional Points on appeal as they fell outside ICOP’s pleaded case and/or had not been raised in the proceedings below before the General Division. Even accepting that ICOP could raise the Additional Points on appeal, the Appellate Division held that the Additional Points had no merits and would not assist ICOP’s case on termination.¹⁶
19. The Appellate Division highlighted that ICOP’s pleaded case on termination was based on its entitlement to terminate the Sub-Contract pursuant to Clause 6. This is known as a Situation 1 termination in RDC Concrete, where the contract clearly and unambiguously states that, in the event of a certain event of events occurring, the innocent party will be entitled to terminate the contract.¹⁷
20. ICOP has never based its termination on repudiatory breach by TSCE, whether in the proceedings below before the General Division nor in its contemporaneous position at the time it purported to terminate the Sub-Contract. ¹⁸
21. Instead, ICOP’s contemporaneous position supported its pleaded basis of contractual termination (i.e. pursuant to Clause 6).¹⁹

1. When ICOP first gave notice of its intention to terminate the Sub-Contract in its letter dated 27 February 2019, ICOP relied on “clause 6 read with clauses 4.1(p) and (s) of Appendix F” as its basis for potential termination. 
2. When ICOP formally purported to terminate the Sub-Contract on 13 March 2019, its termination letter was framed on the language of Clause 6 i.e. that ICOP had fulfilled its obligations under the Sub-Contract but was unable to continue the work in a timely manner for reasons beyond its control.

22. ICOP also could not establish that any of TSCE’s non-payments were of such severity as to amount to a repudiation of the Sub-Contract.²⁰
23. The Appellate Division held that while non-payment could conceivably support a case of termination based on renunciation or repudiation, this was not ICOP’s pleaded nor contemporaneous position. In this regard, the Appellate Division framed the material question to be whether TSCE’s non-payments rendered ICOP unable to “continue with the work in a timely manner” as provided in Clause 6. The Appellate Division found that this was not the case.²¹
24. The Appellate Division also found the additional matters raised by ICOP to justify termination to be a non-starter insofar as most of them did not bear any logical relation to ICOP’s inability to continue works (as relevant to the Prevention Requirement).²² 

B. The Appellate Division’s analysis on ICOP’s pleaded case on termination

25. The Appellate Division further considered the grounds of termination raised by ICOP in the proceedings below before the General Division.

1. The Performance Requirement in Clause 6

26. The Appellate Division affirmed the decision of the General Division that ICOP had not satisfied the Performance Requirement due to its delays, which required ICOP to have “fulfilled its obligation under the contract”. ²³
27. ICOP had taken the position that the Performance Requirement (i.e. “ICOP has fulfilled its obligation under the contract”) only required it to fulfil some but not all of its obligations. ICOP argued that the Performance Requirement was “prospective looking in nature”, in that if ICOP had completed the earlier drives, any prior delays caused then (particularly de minimis delays or delays that no longer impact the Project’s critical path) should not deprive it of its right to terminate under Clause 6. Applying this interpretation, ICOP argues that it has “fulfilled its obligation” despite its delays.²⁴ 
28. The Appellate Division addressed ICOP’s case on termination on two levels.

1. First, the Any Delay argument – whether ICOP’s delays would generally not amount to a failure to “fulfil its obligation under the contract” under Clause 6.
2. Second, the Spent Delay argument – in respect of delays that had become de minimis or no longer affected the critical path (assessed at the time of termination) i.e. spent delays, whether parties had intended for such spent delays to fall within Clause 6.

(i) Any Delay argument

29. On the Any Delay argument, ICOP relied on the decision of Jia Min Building Construction Pte Ltd v Ann Lee Pte Ltd [2004] 3 SLR(R) 288 (“Jia Min”) for the proposition that a temporary slowdown in the progress of works will not invariably be viewed as contractual repudiation. ²⁵
30. At the outset, the Appellate Division expressed difficulty in applying the proposition in Jia Min as that decision concerned repudiation and not termination under Situation 1 of RDC Concrete (as with ICOP’s contractual termination of the Sub-Contract). ²⁶
31. In Jia Min, the court applied the well-recognised rule that delay in making progress payments does not ordinarily amount to a repudiation. There will be instances where a failure to pay can be grave enough to amount to a repudiation, for instance, where non-payment is accompanied by the clear evincing of an intention not to make further payments or where payment is made subject to conditions that would amount to the re-writing of the terms of the contract.²⁷ This underscores the need to examine the facts of each case carefully to ascertain whether these legal principles are applicable or not.
32. In the present case, ICOP had been the cause of significant delay events that followed one after the other, adversely affecting the next construction activity and exacerbating the problematic progress at site. Each delay event was also found to have been caused by ICOP either insisting on something it was not entitled to insist upon, or due to ICOP’s failure to comply with its contractual obligations. In view of the significant delay events caused by ICOP and also taking into account delay arising from TSCE’s failure to obtain the necessary approvals from the authorities on time, the Appellate Division affirmed the decision of the General Division that ICOP had not fulfilled its obligations under the contract.²⁸
33. The Appellate Division rejected ICOP’s argument that damages were intended as the sole remedy (for TSCE) in respect of ICOP’s delays on the basis that the Sub-Contract included a liquidated damages clause. In rejecting ICOP’s arguments, the court held that Clause 6 did not provide a remedy for TSCE in relation to ICOP’s delays, but rather an entitlement for ICOP to terminate the Sub-Contract. The court further observed that while it is trite that a liquidated damages clause excludes unliquidated damages for the same risk, there was no basis to say that a liquidated damages clause excludes other clauses from governing the same risk. Rather, the court’s judgment was that the parties had addressed the same risks in multiple ways. ²⁹ 

(ii) Spent Delay argument

34. On the Spent Delay argument, the Appellate Division rejected ICOP’s argument that its delays did not disentitle it of its right of contractual termination, as these were not continuing breaches of obligations in the nature of a condition precedent. As the court held in Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd [2009] 4 SLR(R) 602 (“Alliance Concrete”), where both parties are in breach of contract, a contracting party may not be entitled to rely on the other party’s breach as a repudiation of contract where it itself is in breach of an obligation in the nature of a condition precedent. ³⁰
35. The Appellate Division found that Alliance Concrete did not address the issue in the instant case, that is, whether ICOP was entitle to terminate the Sub-Contract in the first place. Whether or not it might then lose its right to terminate at general law, as was contemplated in Alliance Concrete, was a distinct inquiry. Alliance Concrete contemplated a scenario where both parties were in breach of contract, and the applicable pre-requisites for one party to be held to have lost its right to terminate the contract; however, ICOP did not demonstrate how these prerequisites in Alliance Concrete could be applied where one party was relying on an express termination clause to terminate the contract. ³¹
36. ICOP also argued that the spent delays did not disentitle it from its right to terminate the Sub-Contract. However, the Appellate Division further held that a breach is not necessarily “spent” simply because it occurred in the past, and the query was whether the said breach has the real and continuing consequence of pushing back the start and end dates for TSCE’s subsequent activities. Further, ICOP’s delays could not be considered “minor delays” given the findings of the court below.³²
37. Ultimately, the Appellate Division found it difficult to square the Spent Delay argument with the manner in which parties had structured their contractual arrangements. The Sub-Contract contemplated the installation of pipes in four sequential or consecutive “drives” as a matter of operational works. However, these works were governed under a single contract, and as these were to be carried out by a single micro tunnel boring machine, a delay in the scheduled completion date of an earlier drive would necessarily push back the scheduled completion dates for the subsequent drives.³³

2. The Prevention Requirement in Clause 6

38. The Appellate Division then turned to consider the Prevention Requirement in Clause 6, which required ICOP to show that it “can for reasons which are beyond the control of ICOP not start or continue with the work in a timely manner”.
39. The Appellate Division upheld the General Division’s rejection of ICOP’s arguments on the Prevention Requirement and held that ICOP’s case on termination “also fails decisively on the Prevention Requirement”. The Appellate Division found that ICOP failed to prove that it was unable to “continue with the work in a timely manner” and/or that its inability to continue was due to reasons “beyond the control of ICOP”.³⁴
40. ICOP asserted that it could not continue with works for reasons “beyond [its] control” – implicit in this assertion is that ICOP would have wanted to continue with the works but could not because of reasons beyond its control. This was not the case. In the judgment of the Appellate Division, the facts showed that ICOP simply had no intention to continue with the Sub-Contract Works.³⁵ ICOP had decided to ship its micro tunnel boring machine to Malaysia on 28 January 2019, and refused to ship it back to the worksite thereafter despite TSCE’s requests.³⁶ On the facts, the court took the view that ICOP intended not to return the micro tunnel boring machine to the worksite in preparation for its termination of the Sub-Contract on 15 March 2019, and that any resulting delay to Drive 3 could not be said to be beyond ICOP’s control. 

6. CONCLUSION / KEY TAKEAWAYS

41. The decision of ICOP Construction serves as a reminder for parties contemplating termination of a contract to consider whether the factual bases for termination are made out, whether the entitlement is said to arise at law or under the express terms of contract, and whether and to what extent the grounds for termination ought be provided in notifications of termination or other correspondences to serve as an evidential contemporaneous records.

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Footnotes

¹ ICOP Construction at [3].

² ICOP Construction at [4].

³ ICOP Construction at [5].

⁴ ICOP Construction at [8].

⁵ ICOP Construction at [10] – [11].

⁶ RDC Concrete at [91].

⁷ RDC Concrete at [92].

⁸ RDC Concrete at [97] and [113].

⁹ RDC Concrete at [99] and [113].

¹⁰ ICOP Construction at [244].

¹¹ ICOP Construction at [247].

¹² ICOP Construction at [246].

¹³ ICOP Construction at [246].

¹⁴ ICOP Construction at [250] and [251].

¹⁵ ICOP Construction at [252].

¹⁶ ICOP Construction at [256] and [262].

¹⁷ ICOP Construction at [257].

¹⁸ ICOP Construction at [257] and [258].

¹⁹ ICOP Construction at [258].

²⁰ ICOP Construction at [259].

²¹ ICOP Construction at [260].

²² ICOP Construction at [261].

²³ ICOP Construction at [263].

²⁴ ICOP Construction at [264] to [266].

²⁵ ICOP Construction at [275].

²⁶ ICOP Construction at [276].

²⁷ ICOP Construction at [276].

²⁸ ICOP Construction at [276]

²⁹ ICOP Construction at [277].

³⁰ ICOP Construction at [279].

³¹ ICOP Construction at [272] and [279].

³² ICOP Construction at [280].

³³ ICOP Construction at [280].

³⁴ ICOP Construction at [284], [285] and [289].

³⁵ ICOP Construction at [304].

³⁶ ICOP Construction at [301].