Case Summaries

Sandy Island Pte Ltd v Thio Keng Thay [2020] SGCA 86

SUPREME COURT OF SINGAPORE

28 August 2020

Case summary

Sandy Island Pte Ltd v Thio Keng Thay [2020] SGCA 86
Civil Appeal No 169 of 2019

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Decision of the Court of Appeal (delivered by Justice Quentin Loh):

Outcome: CoA dismisses the appeal.

Pertinent and significant points of the judgment

  • Defects liability clauses benefit both the employer and the contractor.
  • In the absence of express and clear language, defects liability clauses are in addition to and not in substitution for the employer’s common law rights and do not operate to exclude the contractor’s liability for breach of contract.
  • An employer’s refusal to allow the contractor access to perform rectification works does not operate to extinguish the employer’s common law rights to recover damages for defects but would be relevant for the quantum damages recoverable pursuant to the employer’s duty to mitigate damage.

Introduction

1 The appellant was the developer of Sandy Island, a collection of 18 waterfront villas located in Sentosa Cover. By way of a Sale and Purchase Agreement (“the SPA”), the respondent purchased a four-storey detached bungalow at Sandy Island (“the Property”).

2 The SPA was in the standard form prescribed by r 12(1) of the Housing Developers Rules (Cap 130, R1, 2008 Rev Ed). Under cl  17.1, the appellant had to make good at his own cost and expense any defects that became apparent within a defects liability period of 12 months. Clause 17.2 provided that upon being notified of a defect, the appellant had to make good the defect within one month of its receipt of such notice; and if the appellant failed to carry out the rectification works within the specified time, the respondent had the right to cause the rectification works to be carried out by a third party and to recover from the appellant the cost of those rectification works.

3 Soon after entering into possession, the respondent complained of numerous defects in the Property. Following a joint inspection of the Property by the parties, the appellant asked for access to investigate the defects, establish the causes of the same and propose rectification steps. However, the respondent refused to grant the appellant permission to carry out rectification works.

4 Eventually, as the parties remained at an impasse, the respondent, after conducting two tender exercises, engaged a new contractor to carry out the rectification works.

Background to the appeal

5 On 10 October 2016, the respondent instituted High Court Suit No 1073 of 2016 against the appellant on the basis that the latter had breached certain express and implied terms of the SPA. It was not in contention that although the respondent had initially sought to invoke cl 17 of the SPA, his suit was premised on claims under the common law. The respondent sought damages for, inter alia, the costs of engaging its new contractor to rectify a total of 492 defects in the Property. The appellant admitted to 222 defects in full and 85 defects in part, but emphasised that it had been prevented by the respondent from accessing the Property to carry out rectification works.

6 The parties had agreed that the trial would be held in two tranches with the first tranche centring on the appellant’s liability for defects in the Property, and the second tranche determining the extent and severity of these defects, after the taking of expert evidence.

7 During the first tranche, the High Court Judge (“the Judge”) considered that the central issue before him was whether, notwithstanding the appellant’s breach, the respondent was precluded from claiming damages against the appellant as a result of his obligations under cl 17. The Judge found that the appellant had breached its obligations under cl 10 (which provided for constructing the building in a good and workmanlike manner according to the contract) as manifested by the many defects but also held that the respondent had breached his duty in refusing to grant access to the appellant to rectify the admitted defects. The Judge held that despite the respondent’s breach, the respondent continued to possess a common law right to claim damages for defects in the Property, but his breach was relevant to the quantum of damages recoverable pursuant to his duty to mitigate damages.

The decision on appeal

8 Contrary to the appellant’s claim, the Judge had properly identified and addressed the key issue before him. In the proceedings before the Judge, the appellant had argued that given the existence of the defects liability clause, as well as the respondent’s breach of said clause, the respondent would not be able to pursue any claim against the appellant for the defects under common law. In the proceedings before the Court of Appeal the appellant changed its position and accepted that the respondent was not precluded from pursuing his common law claims for those defects that the appellant did not admit were defects: at [31] - [32] and [38].

9 The Court of Appeal emphasised that defects liability clauses are, ultimately, for the benefit of both employer and contractor. Prior to the introduction of these kinds of clauses, contractors had no right to return to site to rectify defects; by the same token, an employer had no right to require the contractor to return to site to rectify defects: at [43] - [44].

10 Defects liability clauses do not and cannot cater for some of the defects that can arise in building and construction cases. Clause 17 made no provision for circumstances involving recurring defects that stemmed from underlying problems with the Property or for serious rectification works that required the employers to move out of the property: at [45] - [46].

11 The defects liability clause contained in cl 17 was merely an option for the respondent to invoke. The provisions of cl 17.2, which required the appellant to rectify any defect within one month of his receiving a notice, dealt only with defects that could be rectified within a fairly short space of time. There were also no words in cl 17 suggesting that, upon notification of defects to the appellant, a condition precedent, based upon the right of the appellant to be given an opportunity to rectify defects, had to be fulfilled before the respondent had a right to claim common law damages: at [55] - [58].

12 The Court of Appeal held that the defects liability clauses contained in the various standard form construction contracts in Singapore had consistently treated their respective defects liability clauses as merely offering an alternative procedure for rectifying construction defects: at [84] - [88].

13 The relevant Parliamentary material surrounding the standard form contract upon which the SPA was based emphasised avenues of redress for rectification of defects during the defects liability period and specifically noted that for defects beyond the defects liability period, homeowners could sue the developers for latent defects on grounds of negligence or breach of contract. There was no suggestion that the homeowners’ rights at common law would be replaced by a defects liability clause: at [89].

14 The Court of Appeal held that the respondent’s act of disallowing the appellant to conduct rectification works could not be said to be of such significance that it would displace the appellant’s legal responsibility for defective works: at [94].

15 However denying access to or preventing the appellant from carrying out rectification works would be relevant to the quantum of damages recoverable from the appellant pursuant to the respondent’s duty to mitigate his loss: [100].

 

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

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