Articles

28 April 2023

1. In Vim Engineering Pte Ltd v Deluge Fire Protection (S.E.A.) Pte Ltd [2023] SGHC(A) 2 (“Vim Engineering AD”), the Appellate Division of the High Court reversed the High Court’s decision in Vim Engineering Pte Ltd v Deluge Fire Protection (SEA) Pte Ltd [2021] SGHC 63 (“Vim Engineering HC”), holding that a clause stipulating that variation works shall only be carried out with the written instructions of the main contractor’s project manager does not require the presence of a written instruction as a condition precedent to a valid variation claim.

1. BACKGROUND

2. In Vim Engineering, the main contractor, Samsung C&T Corporation (“Samsung”), engaged a subcontractor, Deluge Fire Protection (S.E.A.) Pte Ltd (“Deluge”), for the design, supply and installation, engineering, project management and testing and commissioning of plumbing, sanitary and gas work of a building at 5 Shenton Way.¹ Deluge in turn engaged Vim Engineering Pte Ltd (“Vim”) to carry out certain plumbing and sanitary works^.2
3. In the contract between Vim and Deluge, clause 16 (“Cl. 16”) provides as follows:³

“16 VARIATIONS

Any variation works such as addition[s] or omission[s] or modification[s], shall be on a back-to-back basis with the Main Contract. Such variation shall be carried out only with written instruction[s] from [Deluge’s] Project Manager and the unit rates are in accordance with the agreed SOR for this Subcontract.

[Vim] shall be entitled to ninety percent (90%) or shall or shall [sic] allow a discount of 10% (Profit & Attendance) for [Deluge], on any approved variation claim for additional work orders.

Where rates are not contained therein or are not applicable then the amount shall be such sum as in all circumstances be reasonable and agreed by the parties. Notwithstanding any disputes in the [sic] as to the adjustments, [Vim] shall immediately carry out all variations, as instructed by [Deluge] pending valuation of the variation order.”

(emphasis added)

4. Vim left the project site on 5 February 2018 and did not complete any further works.⁴ Subsequently, Vim commenced a High Court suit against Deluge, claiming for (among others) $697,130.58 for alleged variation works.⁵

2. NO WRITTEN INSTRUCTIONS

5. Vim did not plead that there were written instructions from Deluge to support its variation claims.⁶ Indeed, Vim’s witnesses admitted that Vim did not have written instructions from Deluge.⁷
6. So, is a written instruction from Deluge’s Project Manager a condition precedent to a successful variation claim from Vim?

3. FIRST INSTANCE

7. At first instance, the High Court held that Vim’s claim for variations failed because the “contractual conditions for a successful variation claim were not satisfied”.⁸

1. Mansource

8. The High Court referred to the decision of Mansource Interior Pte Ltd v CSG Group Pte Ltd [2017] 5 SLR 203 (“Mansource”).
9. In Mansource, the variation clause provided as follows:⁹

 “17) Variation Claim

This Sub-contract shall be on a back-to-back basis to the contract between [the plaintiff] and [the main contractor] and there shall be no claim whatsoever unless it is a variation work authorised and approved by [the main contractor] only.”

10. The High Court in Mansource held that as there was “an express term conditioning the defendant’s entitlement to recover payment for variations on the main contractor’s authorisation and approval”, the absence of any such authorisation or approval meant that the contractual conditions for a successful variation claim were not satisfied.¹⁰

2. Different sides of the same coin?

11. Reading Vim Engineering HC in light of Mansource, it appears that the High Court in Vim Engineering HC viewed the phrase “Such variation shall be carried out only with written instruction[s] from [Deluge’s] Project Manager” as being analogous to the phrase in Mansource, i.e., “there shall be no claim [for variation] unless it is a variation work authorised and approved by [the main contractor] only”.

12. In other words, it appears that the provision in Vim Engineering HC is the different side of the same coin to the provision in Mansource: where one contract says that there shall be no claim except where authorised, the other contract says that there shall be only authorised claims. Two different wordings, same result.

4. ON APPEAL

13. But on appeal, the Appellate Division reversed Vim Engineering HC. Quentin Loh SJ held that “[Cl. 16] is not drafted in a stringent manner requiring strict compliance failing which a variation claim will fail”.¹¹

14. Why?

1. Not sufficiently stringent

15. Loh SJ first alluded to what would be “sufficiently stringent”:

15.1.  A clause that “… expressly state[s] that a written authorisation of work done or written confirmation of an oral order is a condition precedent for any right to additional payment”;¹² or

15.2.  A clause which “… specif[ies] a time within which the contractor is to inform the architect or owner in writing that it considers the instruction or direction or request to do certain work, as a variation with time and cost consequences”.¹³

16. Loh SJ also distinguished Cl. 16 at Vim Engineering AD [35] from standard form contracts containing provisions allowing the main contractor to provide written confirmation of verbal instructions for variation works.

17. In Vim Engineering, Cl. 16 neither expressly says that a written instruction is a condition precedent, nor does it specify any time frame. Cl. 16 also “…does not state that if there are no written instructions for variations from Deluge’s project manager, Vim will forfeit the right to any payment or is otherwise barred from claiming payment for work that it considered a variation”,¹⁴ nor were there any provisions allowing Deluge to confirm oral instructions given to Vim.¹⁵

18. As such, Loh SJ held that Cl. 16 does not create a condition precedent. 

2. Not different sides of the same coin

19. What about Mansource?
20. Loh SJ addressed Mansource in Vim Engineering AD [36]. There, among others, Loh SJ stated that cl. 17 of Mansource is “quite specific and quite different” from Cl. 16, setting out cl. 17 as follows:

“This Sub-Contract shall be on a back-to-back basis to the contract between [the plaintiff] and [the main contractor] and there shall be no claim whatsoever unless it is a variation work authorised and approved by [the main contractor] only.

[emphasis in bold italics added]”

(emphasis in original)

21. This suggests that there is a substantive difference between Cl. 16 versus cl. 17 in Mansource due to the emphasised wording.

5. DIFFERENCE BETWEEN PRECLUDING CLAIMS, AND PERMITTING CLAIMS

22. What is the difference?
23. The answer perhaps is found in Vim Engineering AD [33] – [34].

1. Preclusive effect
   

24. At Vim Engineering AD [33], Loh SJ referred to para 5-047 of Nicholas Dennys and Robert Clay, Hudson’s Building and Engineering Contracts (Sweet & Maxwell, 13^th, 2015) (“Hudson’s”) as follows:

“A clause as to orders in writing may be so worded that such orders will in any event not be a condition precedent to the Contractor’s right to payment. For example, where a clause provides that the Contractor shall execute such alterations as the Architect may direct in writing, but does not expressly exclude any claim for work not so ordered. In such a case there is clearly nothing to prevent the Employer being liable under general law on a separate contract express or implied.

… ”

(emphasis in original in italics; our emphasis added in bold)

25. So, if a clause provides that a contractor shall execute variation works when directed in writing, it does not preclude the parties agreeing to carry out variation works even in the absence of written instructions. It has no “preclusive” effect.
26. But if a clause provides that there shall not be any variation works except when directed in writing, it precludes any variation works unless there are written instructions.¹⁶ It has a “preclusive” effect.

2. Preventing injustice

27. At Vim Engineering AD [34], Loh SJ referred to Hudson’s and Stephen Furst and Sir Vivian Ramsey, Keating on Construction Contracts (Sweet & Maxwell, 10^th, 2021), where the learned authors observed that courts have recognised exceptions to the rule that recovery for variations is not permitted unless there is an order in writing, with the underlying reason being “the anxiety of the courts to avoid injustice to contractors”.

28. So, when a clause has a “preclusive” effect,¹⁷ the risk of no written instructions has shifted to the contractor.¹⁸ But if the clause does not clearly have a “preclusive” effect, then it is unclear that parties have agreed that risk of no written instruction has shifted to the contractor. If so, an interpretation that will prevent “injustice” to the contractor should be favoured.¹⁹

4. SIGNIFICANCE

29. As Loh SJ stated in Vim Engineering AD [35], the decision in Vim Engineering AD is based on the facts of the case itself and the provision in question. Just because Cl. 16 was not stringent enough does not mean that all similar clauses would be insufficiently stringent.
30. Thus, in our view, the result in Vim Engineering AD may be different if there were provisions like those in the Singapore Institute of Architects’ Articles and Conditions of Building Contract, which provide that the subcontractor can request confirmation of verbal instructions for variation works.
31. Nonetheless, Vim Engineering poses food for thought.
32. Consider cases such as Fongsoon Engineering (S) Pte Ltd v Kensteel Engineering Pte Ltd [2011] SGHC 82 (“Fongsoon”). In Fongsoon, the defendant denied the plaintiff’s claim for variations on the basis that there were no variation orders issued. The relevant contractual provisions governing the claim for variations are:

32.1.  Clause 5, providing that “… In the event there are variations to the aforesaid work, the Main Contractor shall issue new variation order to Sub-Contractor and Sub-Contractor shall comply with the new variation order in an appropriate and diligent manner”;²⁰ and

32.2.  Clause 3.8, as excerpted below:²¹

“SUB-CONTRACTOR shall submit such variations to the SUB-CONTRACT WORK whenever by way of additions, modifications or omissions the variation may be:

a) Ordered by JRMAP under the Main Contract and confirmed in writing to SUB-CONTRACTOR by CONTRACTOR; or

b) Agreed to be made by JRMAP and CONTRACTOR and confirmed in writing to SUB-CONTRACTOR by CONTRACTOR; or

c) Ordered in writing by CONTRACTOR”

33. In Fongsoon, notwithstanding the absence of the phrase “condition precedent” in the said clauses, the High Court held that a “written variation order is a condition precedent for any claim by the plaintiff for payment of any additional or varied work”, such that in the absence of any written instructions from the defendant, the plaintiff was not entitled to payment of any of its claims for variations.²²
34. In light of Vim Engineering AD, will provisions such as those in Fongsoon be treated as being similar to Cl. 16 (since they do not expressly preclude claims like cl. 17 of Mansource nor do they specify any particular time limit), or will they be treated as falling within the type of clauses as envisaged in Vim Engineering AD [35] (since, arguably, Cl. 3.8 contains a mechanism for the confirmation of oral instructions)?
35. Nonetheless, at the end of the day, as highlighted by Loh SJ in Vim Engineering AD, a contractor may arrive at a similar result (of being paid for additional / varied works) by relying on other sources of relief (such as, e.g., claims for quantum meruit in unjust enrichment).
36. As such, while this issue of whether a contractual provision for variation works contains a condition precedent in the form of a written instruction is an important one, it is important not to lose sight of the wood for the trees.

Contributed by:

Tan Xian Ying - Associate Director, Chancery Law Corporation; Yap Xuan Wei - Counsel, Chancery Law Corporation

^[1] Vim Engineering AD [1] – [2]

^[2] Vim Engineering HC [3]

^[3] Vim Engineering HC [18]; Vim Engineering AD [11]

^[4] Vim Engineering HC [4]

^[5] Vim Engineering HC [5]

^[6] Vim Engineering HC [22]

^[7] Vim Engineering HC [23]

^[8] Vim Engineering HC [28]

^[9] Mansource [7]

^[10] Mansource [101]

^[11] Vim Engineering AD [32]

^[12] Vim Engineering AD [32]

^[13] Vim Engineering AD [32]

^[14] Vim Engineering AD [33]

^[15] Vim Engineering AD [35]

^[16] Of course, any such preclusion can be subject to waiver / estoppel. However, it is beyond the scope of this brief commentary to address these issues.

^[17] On an objective interpretation of the clause.

^[18] See Comfort Management Pte Ltd v OGSP Engineering Pte Ltd [2018] 1 SLR 979 at [89] – [90]. See also Charles Lim Teng Siang and another v Hong Choon Hau and another [2021] 2 SLR 153.

^[19] Such to the other contractual provisions.

^[20] Fongsoon [52]

^[21] Fongsoon [53]

^[22] Fongsoon [54].