1 This application for determination of the various questions of law set out in the originating summons herein (No 242/82) is made pursuant to ss 28 and 28A of the Arbitration Act (Cap 16).

2 Ohbayashi-Gumi Ltd, the defendants/respondents in these proceedings, were a partner of the consortium which entered into an agreement dated 3 April 1974 (hereinafter called `the main contract`) with the Housing and Development Board (hereinafter called `the employer`) to construct certain reclamation works known as the East Coast Reclamation Scheme, Phase V, Telok Ayer Basin. Part of the main contract was let out by the respondents to Kian Hong Holdings Pte Ltd the plaintiffs/claimants herein. The sub-contract between the claimants and the respondents is dated 13 July 1974. The disputes concerning matters in the sub-contract between the two parties arising out of work carried out under the main contract were referred to the arbitrator nominated by the Council of the Institution of Engineers, Singapore but at an early stage of the arbitration proceedings the parties expressed their wish to refer the following questions of law to the High Court for determination. Question 1 (as amended by respondents` counsel):

3 Whether on a proper construction of the sub-contract, the price for this item should be based on pontoon load measurement as KH contends, or on design volume measurement (ie measurement of the works done in accordance with contract drawings and specifications) as OG contends.

4 Mr Garland for the claimants submitted that Class A stones were to be dumped on the filter cloth placed on the surface of the sand in the trench dug in the sea bed and Class B stones were to be placed on the inside slope of the stone bund according to cl 46 of the specifications of the main contract. As the main contract was a lump sum contract there was no need to provide a method of measuring the stones required for the aforesaid work (apart from variations). In the sub-contract there were two clauses which referred to the supply of Class A and B stones to be placed on the stone bund as follows:

5 Mr Garland then referred to item 7 of the appendix attached to the sub-contract and made reference to a letter dated 7 February 1974 from the claimants to the respondents which contains the claimants` revised quotation for the works to be carried out under the sub-contract and on p 2 thereof appear the following conditions relevant to this cases:

6 Mr Garland added that as condition (i) in p 2 of the letter dated 7 February 1974 contained the only reference to the method of measuring the volume of Class A and B stones to be dumped on the filter cloth it could not be said to be inconsistent with any other conditions in the sub-contract. According to Mr Garland, the revised quotation and all the other terms and conditions in the claimants` letter dated 7 February 1974 were accepted by the respondents during the negotiations between the representatives of the claimants and the respondents. The respondents should have crossed out with a red pencil condition (i) in p 2 of this letter if this condition was not acceptable to them. But the respondents did not object and sent this letter on to their solicitors to be incorporated into the sub-contract. Now it was too late for the respondents to claim that they did not accept the condition that the Class A and B stones should be measured by the pontoon loads.

7 Mr Gardam for the respondents replied that the claimants` letter dated 7 February 1974 had not been accepted by an unqualified `I accept`. There is a note under item 7 in the appendix which referred to this letter and which states:

8 Mr Gardam added that condition (i) in p 2 of this letter was inconsistent with various provisions in the sub-contract and the main contract. According to him, cl 1 of Pt I of the sub-contract provided that Class A and B stones were to be supplied and placed according to all contract drawings and as specified. This meant that the respondents were only liable to pay for Class A and B stones on design volume measurements, ie measurement of the works done in accordance with the contract drawings and specifications. He added that design volume measurements did not include waste caused by over-dumping or loss owing to subsidence or the action of currents, etc. Mr Gardam said that to agree to pay for the stones by pontoon loads would be an invitation for careless work. In this case the claimants were guilty of a technical breach of contract by wasting stones by over-dumping.

9 When asked why cl 1 of Pt I of the sub-contract gave approximate figures of the stones to be supplied, Mr Gardam replied that the exact figures would be calculated after the level of the sand-filled channel had been determined pursuant to cl 1 of Pt V of the sub-contract. Mr Gardam was then asked to explain cl 2 of Pt I of the sub-contract which reads:

10 He said that this clause meant that the claimants had to complete the sub-contract works not withstanding that the design volumes had been exceeded but the respondents would not be liable to pay for the additional stones which the claimants would have to supply to complete the works. This was because of the wording of cl 16 of Pt IV of the sub-contract read with cl 46 of the specifications of the main contract, the relevant portions of which read as follows:

11 Mr Gardam added that as the claimants were bound by all the terms and conditions relating to the sub-contract works contained in the main contract by virtue of cl 2 of Pt II of the sub- contract, they should have allowed in their quotation for losses due to settlement, waive action, etc and if they did not do so they could not complain now as they should have been fully aware that no extra payment could be entertained for such losses. According to Mr Gardam this again illustrated how condition (i) in claimants` letter dated 7 February 1974 conflicted with the terms and conditions in the main contract and sub-contract.

12 Clause 2 of Pt II and cl 20 of Pt IV of the sub-contract read as follows:

13 These two clauses are important in view of the fact that the main contract is a lump sum contract and the sub-contract is a unit rate contract. Therefore unless it is clearly stated in the sub-contract one must not assume that the sub-contractor agreed to undertake the risks that the contractor accepted under the main contract. Even greater caution should be exercised when it is apparent that the sub-contractor has indicated in writing that he wished to avoid such risks, as in this case, by requiring to be paid for the stones by pontoon loads. So I am not prepared to accept the hidden meanings given to the wording. of the sub-contract by Mr Gardam.

14 Does condition (i) in p 2 of the claimants` letter dated 7 February 1974 conflict with other terms and conditions of the sub-contract? I do not think so. The representatives of the claimants and the respondents held several meetings between January and April 1974. On 26 January 1974 the claimants sent to the respondents a first quotation with which we are not concerned. According to the Arbitrator (p 28 of the award) there were subsequent meetings which culminated in an agreement described in the claimants` revised quotations of 7 February and 15 April 1974 - letters which were subsequently accepted and incorporated in the sub-contract agreement of 13 July 1974.

15 According to Mr CS Wu, junior counsel for the respondents, the claimants` letters dated 7 February 1974 and 15 April 1974 were forwarded at the conclusion of the negotiations to the claimants` solicitor to be incorporated into the sub-contract.

16 The claimants` solicitor then drafted the sub-contract in his own brand of English, inserting therein certain items from these two letters which he thought should appear in the body of the sub-contract and listing other matters which should form part of the sub-contract in the appendix attached thereto. The claimants` letter of 7 February 1974 is listed as item 7 of the appendix.

17 In my opinion, the respondents should have stated clearly during the negotiations that condition (i) in p 2 of the claimants` letter of 7 February 1974 regarding the measurement of Class A and B stones by pontoon loads was not acceptable to them, in which event the claimants would no doubt have revised again their quotations contained in p 1 thereof to allow for losses due to over-dumping, subsidence, wave action, etc. By keeping quiet and giving the claimants the impression that all the conditions in their letter of 7 February 1974 were acceptable, the respondents were, in fact, denying the claimants an opportunity to revise again their quotations. The respondents cannot now claim that they did not accept the conditions relating to pontoon loads measurements of Class A and B stones. I would be condoning a fraud on the claimants if I accepted the respondents` contention that they had not agreed that the Class A and B stones should be measured by the pontoon loads before discharge.

18 The claimants were given by the respondents the approximate quantities of Class A and B stones they were required to supply and place on the filter cloth and in their revised quotations the prices they quoted were $34.60 per cubic metre for Class A stones and $39.40 per cubic metre for Class B stones. Obviously if the quantities of Class A and B stones were significantly less than the approximate figures given, the claimants would have charged more for the stones they were required to supply and place. The claimants` revised quotations were based on the condition that the Class A and B stones supplied should be measured by the pontoon loads. This condition is not inconsistent with the language of Pt I of the sub-contract in view of cl 2 thereof which specifically provides that the quantities stated in cl 1 shall not be taken to define or limit the extent of any work to be done by the sub-contractor to complete the sub-contract works. Under cl 2, the sub-contractor agrees to execute or omit to execute any of the items of the works mentioned in cl 1 and any such works executed by the sub-contractor under the orders of the contractor or employer shall be paid for as a measured variation at the unit rate prices stated in cl 1; and cl 2 of Pt III of the sub-contract explains this matter further by stating that all authorized variations of the sub-contract works shall be valued in the manner provided therein, ie in accordance with the unit rate prices set out in Pt I, and the value thereof shall be added to or deducted from the sum specified in Pt I of the sub-contract. It should be noted that the only deduction from the sums set out in Pt I authorized by this sub-contract is when the sub-contractor has been ordered to omit to do any item of the works mentioned in cl 1 thereof - not when the design volume measurements are found to be less than the approximate figures given in cl 1, as alleged by Mr Gardam. In the above premises, it is my view that the words `according to all contract drawings and as specified` in paras (1) and (2) of cl 1(a) of Pt I of the sub-contract only apply to the word `place` and do not refer to the word `supply` appearing at the beginning of the said paragraphs, otherwise these two paragraphs cannot be reconciled with other provisions in the sub-contract as well as with the agreement between the parties to measure the stones by pontoon loads.

19 For the above reasons, my answer to Question 1 is that on a proper construction of the sub-contract, the prices for the supply and placing of Class A and B stones should be based on pontoon loads measurements as contended by the claimants. Question 2

20 Whether on a proper construction of the sub-contract, the price for the laying/placing of filter cloth should be based on the actual quantity of filter cloth supplied by the defendants (respondents) to the plaintiffs (claimants) as the plaintiffs (claimants) contend, or on design area as the defendants (respondents) contend. Question 3

21 Whether on a proper construction of Pt V cl 1 (iii)(b) of the sub-contract the plaintiffs (claimants) have to pay for the cost of the filter cloth used in excess of 20% over the `designed` area.

22 Mr Garland for the claimants submitted that the claimants laid the filter cloth in accordance with the shop drawings issued by the respondents` engineers and that the price for laying the filter cloth should be based on the actual quantity of the filter cloth required to be laid under the said shop drawings measured net. In the original contract drawings the design area measured net was approximately 208,000 sq metres. However, there was a certain amount of overdumping of Class A stones during the placing of the stones and to prevent leaching the overdumped stones had to be covered with filter cloth before the reclamation material was placed on the landward slope of the stone bund. This was provided for by the shop drawings under which the net quantity of filter cloth required to be laid was 272,000 sq m. Several clauses in the main contract required the filter cloth to overlap by not less than one metre in every direction. The amount of filter cloth which had to be laid was bound to exceed the design area for another reason ie the level of the sand fill in the trench was uneven necessitating more filter cloth to be laid over the surface of the sand. So the actual quantity of filter cloth used was 303,000 sq m.

23 As regards Question 2, Mr Garland said that the claimants were entitled to be paid for laying the actual quantity of filter cloth required to be laid under the shop drawings, measured net. As regards Question 3, as the respondents in Pt V cl 1(iii)(b) of the sub-contract had given a 20% allowance for accidental loss of filter cloth, the claimants were not required to make good any loss of filter cloth because such loss was minimal and well below the aforesaid 20% allowance.

24 Mr Gardam for the respondents submitted that under cl 1 of Pt I of the sub-contract, the claimants undertook to place approximately 210,840 sq metres of filter cloth according to all contract drawings and as specified @ $2.50 per sq metre. The design area to be covered by filter cloth according to the contract drawings measured 208,000 sq metres net. The respondents were not liable to pay for any extra filter cloth required to be laid because of the uneven nature of the level of the sand bed and on account of the overlap and the necessity to cover the overdumped Class A stones. The claimants should have allowed in their revised quotation for the cost of having to place extra filter cloth for the above reasons and should not now come to claim a variation of the sub-contract based on the shop drawings.

25 As regards Question 3, Mr Gardam said that the 20% allowance for accidental loss covered the losses sustained as a result of the need for overlapping, for covering completely the uneven surface of the sand bed and the overdumped Class A stones. So the claimants would have to pay for the filter cloth used in excess of the design area of 208,000 sq metres plus the 20% allowance given for accidental loss.

26 Clause 2 of Pt I of the sub-contract states clearly that the quantities stated in cl 1 shall not be taken to define or limit the extent of any work to be done by the sub-contractor to complete the sub-contract works. The quantities stated in cl 1 were varied by the shop drawings issued by the respondents` engineers and with which the claimants had to comply and such variations of the work which the respondents required the claimants to do must be paid for at the unit rate prices stated in cl 1. This is provided for by cl 2 of Pt I and by Pt III of the sub-contract. Therefore the claimants are entitled to be paid for placing 272,000 sq metres of filter cloth according to the shop drawings.

27 As regards Question 3, as I have decided that the shop drawings issued by the respondents` engineers to the claimants in respect of the filter cloth constituted a variation of the work to be carried out by the claimants and were requirements which the claimants had to comply with, the respondents were obliged to supply the claimants with 272,000 sq metres of filter cloth plus 20% more to cover accidental loss.

28 For the above reasons my answer to Question 2 is that on a proper construction of the sub-contract the price for laying the filter cloth should be based on the actual quantity of filter cloth required to be laid under the shop drawings measured net.

29 My answer to Question 3 is that on a proper construction of Pt V cl 1(iii)(b) of the sub-contract, the claimants do not have to pay for any filter cloth used by them in excess of the quantity they were required to lay in accordance with the shop drawings issued by the respondents` engineers as such excess is less than the 20% allowance given by cl 1 of Pt V of the sub-contract to cover accidental loss. Question 4

30 Whether on a proper construction of specification 152 of the main contract and Pt V cl 4 of the sub-contract the plaintiffs` (claimants) claim for wage escalation is limited to the maximum value of the original net sub-contract sum, ie S$15,513,979 as the defendants (respondents) contend.

31 Mr Garland submitted that the words `original net tender sum` appearing in cl 152 of the specifications of the main contract did not apply to the sub-contract as the sub-contract claim was based on a measured value of the work actually done. So for the purposes of the sub-contract, cl 152 of the specifications in the main contract should read as follows:

32 Mr Gardam in his reply pointed out that the claimants` letter of 7 February 1974 referred to the escalation clauses in the main contract but did not try to vary cl 152 of the specifications. He therefore submitted that for the purposes of the sub-contract the relevant part of cl 152 of the specifications in the main contract should read as follows:

33 I am of the opinion that Mr Garland`s submission is not supported by any clause in either the main contract or the sub-contract.

34 For the above reason, my answer to Question 4 is that on a proper construction of specification 152 of the main contract and Pt V cl 4 of the sub-contract, the claimants` claim for wage escalation is limited to the maximum value of the original net sub-contract sum, ie S$15,513,979. Question 5

35 Whether on a proper construction of Pt V cl 16 of the sub-contract, the plaintiffs (claimants) are precluded from recovering the sum of $47,971.06 as the defendants (respondents) contend.

36 Mr Garland for the claimants submitted that as the claimants had been asked by the respondents to do the extra 7 cm Rip-Rap facing, the claimants should be paid for it as a variation of the sub-contract.

37 Mr Gardam in reply said that the letter from the Housing and Development Board to the respondents dated 13 July 1976 reproduced below was clearly an approval of the respondents` proposals and could not be regarded as a variation order; as the main contract works had not been varied it could not be said that the sub-contract works had been varied by the approval contained in the aforesaid letter. This letter dated 13 July 1976 reads as follows:

38 Page 14 of the arbitrator`s award contained the following facts: Addition of 7 cm of Rip-Rap Facing (Claim for $47,971.06)

39 In my view, as the claimants had agreed to provide Rip-Rap stones to make up for the loss due to settlement of fill they cannot now claim to be entitled to be paid for the extra 7 cm of Rip-Rap facing.

40 In the above circumstances, my answer to Question 5 is that the claimants are precluded from recovering the sum of $47,971.06 as they had agreed to allow for loss of Rip-Rap stones due to settlement of fill. Question 6

41 Whether on a proper construction of the provisions of the sub-contract, the plaintiffs (claimants) are precluded from recovering the sum of $149,477.61 as the defendants (respondents) contend.

42 In a letter dated 24 November 1973 to the Housing and Development Board the respondents undertook to change the facing stone work of the stone bund to armouring stones between certain chainages and also confirmed that the facing stones would be placed evenly to the lines, levels and slopes as shown on the drawings. Paragraph 10 of the aforesaid letter reads as follows:

43 We also undertake to place the facing stones for stone bund between 0 m ACD and + 1.50 m ACD evenly to the lines, levels and slopes as shown on our drawings from A-chainage 1200 metres to A-chainage 1740.29 metres and from B-chainage 128.98 metres to B-chainage 795.92 metres.

44 This letter was subsequently incorporated in the main contract at pp 228 and 229 thereof. The claimants were given a copy of the main contract on the 20 May 1974. The only reference to the armouring stones made by the claimants is contained in the claimants` letter dated 15 April 1974 which forms part of the sub-contract. The relevant portion of claimants` letter of 15 April 1974 reads as follows:

45 Mr Garland for the claimants referred to p 50 of the arbitrator`s award where the arbitrator found that the finish of the facing stones was of a higher standard than was required by the contract documents. According to Mr Garland, the arbitrator found on a balance of probabilities that there was an oral variation requiring this better finish. If there was such an oral request to provide a better finish than was required by the sub-contract, the claimants should be paid for this extra work.

46 In reply, Mr Gardam for the respondents said that the claimants in their letter dated 15 April 1974 proposed that a new rate should be agreed upon for additional work in the event the quantity of armouring stone works exceeded 10,000 cubic metres. The claimants did not ask for extra payment for the work required to place Class A stones evenly as agreed upon in the respondents` letter of 24 November 1973 which forms part of the main contract. The claimants` letter dated 8 July 1977 claiming for extra payment for placing Class A stones evenly did not set out any ground in support of their claim. There was no evidence of any oral variation of the sub-contract. In any case, Pt III of the sub-contract only dealt with variations ordered in writing by the contractor or confirmed in writing to the sub-contractor by the contractor and it was not disputed there was no variation order in writing in this connection.

47 In my view, the claimants are not entitled to be paid any additional sum for the extra work they carried out to change the facing stones of the stone bund with armouring stones because there is no evidence of any variation order, oral or in writing in connection therewith.

48 In the above premises, my answer to Question 6 is that on a proper construction of the provisions of the sub-contract the claimants are precluded from recovering the sum of $149,477.61.

49 Accordingly, I order that judgment be entered for the plaintiffs/claimants in the sums of $1,646,010.01 for the supply and placing of Class A and B stones, of $160,386.10 for the placing of filter cloth and of $261,875.95 in respect of the cost of filter cloth.

50 The claimants to get 70% of the taxed costs of the arbitration proceedings as well as of this application. Costs for two counsel allowed in the hearing of this application. Order accordingly