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

Introduction

This appeal deals with a question of law arising out of a sale and purchase agreement (“the SPA”) for the construction and sale of a bungalow at Sentosa Cove between the appellant-developer, Sandy Island Pte Ltd (“the appellant”), and the respondent-purchaser, Thio Keng Thay (“the respondent”).

The SPA contained a defects liability clause (see [6] below), which required the appellant to make good any defects in the bungalow which became apparent within 12 months from the date the respondent received the notice of vacant possession. The learned trial judge (“the Judge”) held that despite the respondent’s unreasonable acts, which in effect denied the appellant access to perform the rectification works, the respondent’s right to recover damages for the defects at common law was not extinguished, but it would be relevant for the assessment of the quantum recoverable.

The central question before this court is whether the Judge had erred in reaching this decision.

Facts

Background to the dispute

The relevant facts for the purposes of this appeal are not in dispute, and the exchanges between the parties in relation to the defects were comprehensively set out by the Judge (see the High Court’s decision in Thio Keng Thay v Sandy Island Pte Ltd [2019] SGHC 175 (“the Judgment”)). We shall therefore only set out the salient facts for the purposes of our decision.

The appellant was the developer of Sandy Island, a collection of 18 waterfront villas located in Sentosa Cove. By way of the SPA, the respondent purchased a four-storey detached bungalow at 7 Sandy Island, Singapore 098243 in Sentosa Cove at the price of $14.32m (“the Property”) from the appellant. The appellant’s main contractor for the development was YTL Construction (S) Pte Ltd (“YTL”).

The SPA was in the standard form prescribed by r 12(1) of the Housing Developers Rules (Cap 130, R1, 2008 Rev Ed) (“Housing Developers Rules”). The relevant clauses of the SPA, viz, the appellant’s obligations in relation to the building and the defects liability period (“DLP”), were as follows:

The respondent received notice of vacant possession from the appellant on 28 February 2012 and took possession of the Property on 15 March 2012. Soon after entering into possession, the respondent complained of numerous defects in the Property. On 5 April 2012, the respondent, through his personal assistant, sent to the appellant an email that included a table listing some 277 defects which he had discovered in the Property. This table referred to numbered photographs of each defect but the photographs were not sent with the email. The respondent sent an additional email to the appellant on 19 April 2012, alleging the existence of some fundamental defects, including extensive leaks which were concealed by coats of paint, failures of design, workmanship, materials and/or supervision and requested that rectification works be carried out. The appellant replied, seeking access to the Property in order to inspect the defects.

Eventually, the parties carried out a joint inspection of the Property on 3 May 2012. In an email dated 15 May 2012, the appellant replied that from its information, most of the alleged defects in the respondent’s list of defects were not truly defects and were capable of rectification within a reasonable period of time. Whilst it made no admissions as to the respondent’s allegations and reserved all its rights, the appellant nonetheless asked for access to investigate the defects, establish the causes of the same and propose rectification steps. However, despite the appellant’s provision of numerous method statements to the respondent, the latter refused to grant the appellant permission to carry out rectification works, on the basis that the proposed works were unsatisfactory and insufficient. Eventually, as the parties remained at an impasse, on 16 July 2014, the respondent, after conducting two tender exercises, engaged a new contractor, JTA Construction Pte Ltd (“JTA Construction”), to carry out the rectification works.

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. He sought:

(a) damages for the costs of engaging JTA Construction to rectify a total of 492 defects in the Property (excluding the lifts) (“the general defects”) in the sum of S$894,688.10;

(b) damages for the costs incurred in engaging independent third parties to investigate the defects in the Property in the sum of S$129,372.29;

(c) damages for the loss of the use of Property from 15 March 2012 to 28 May 2015 in the sum of S$867,519.64; and

(d) damages for the costs of engaging contractors to rectify the lifts in the Property (“the lift defects”), to be assessed.

The respondent alleged a total of 492 defects. 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.

Proceedings below

The parties agreed that the trial would be held in two tranches with the first tranche centring on the appellant’s liability for the general defects and lift defects, and the respondent’s liability in respect of the appellant’s counterclaim for defamation. The extent and severity of the general defects, including the question whether they were defects or not, would remain to be decided at the second tranche of the trial, after the taking of expert evidence.

By the end of the first tranche of the trial, the Judge found that the appellant had breached its obligations under cl 10 but that the respondent had acted unreasonably in preventing the appellant from carrying out repairs in respect of the general defects (see the Judgment at [82]). We note that there was ample evidence to support this finding, and the respondent has, quite rightly in our view, not appealed against this finding.

In reaching his decision, the Judge formulated the key question he had to decide as follows (see the Judgment at [82]):

After analysing a number of English and Singapore authorities, the Judge found that the respondent continued to possess a common law right to claim damages for the general defects despite there being a defects liability clause under the SPA.

He relied on the English case of Pearce and High Ltd v Baxter and Baxter [1999] BLR 101 (“Pearce”), which was cited with approval in Management Corporation Strata Title Plan No 1993 v Liang Huat Aluminium Ltd [2001] 2 SLR(R) 91 (“Liang Huat Aluminium”), for the legal proposition that a plaintiff’s departure from the requirements of a defects liability clause will affect the quantum of damages he is entitled to recover (under the principle of duty to mitigate), rather than exclude his right to claim damages altogether (see the Judgment at [112]). This was consistent with the principle that a common law right cannot be abrogated in the absence of clear express wording (see the Judgment at [114]).

As cl 17 of the SPA did not contain clear words excluding the respondent’s right to claim damages at common law, the Judge held that the respondent’s breach would only affect the amount of damages he would be entitled to, which would be determined in the second tranche of the trial (see the Judgment at [117]).

The parties’ arguments on appeal

The appellant’s first submission is that the Judge, in reaching his decision, had mischaracterised the key issue before him. According to the appellant, the court should have addressed the question whether, “having invoked and breached cl 17, [the respondent] is entitled to recover damages”.

The appellant’s second submission is that on a proper construction of cl 17, the respondent would be precluded from claiming for defects that were admitted by the appellant, whether pursuant to cl 17 or under common law. According to the appellant, the respondent would only be able to pursue a common law action against the appellant for defects that the appellant did not admit to (“non-admitted defects”). In support of this, the appellant mounts the following arguments:

(a) Clause 17 is a self-contained clause that, once invoked, results in the respondent losing his right to recover damages for the defects under common law – the only remedy that the respondent may avail himself of is performance by the appellant of his obligation to rectify the defects. The parties had pre-agreed a self-contained set and hierarchy of rights and remedies that would take effect once cl 17 was invoked. Reliance was placed on the decisions of Yap Boon Keng Sonny v Pacific Prince International Pte Ltd and another [2008] 1 SLR(R) 285 (“Sonny Yap”) and Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302 (“Bitannia”).

(b) Once cl 17 has been invoked but is thereafter breached by the appellant, the sum that cl 17 permits the respondent to recover is the amount that the respondent loses because of the appellant’s failure to rectify the defects, not an amount arising from the original breach of cl 10. If, having invoked cl 17, the respondent had complied with his obligations thereunder and given the appellant the opportunity to rectify the defects, the defects would have been rectified at no cost to the appellant. The invocation and breach of cl 17 by the respondent constitutes a novus actus interveniens (“novus actus”) that breaks the chain of causation between the appellant’s breach of cl 10 and the costs incurred by the respondent for the rectification works (“the Causation Argument”).

(c) By seeking common law damages after refusing to give the appellant the opportunity to rectify the admitted general defects, the respondent’s actions constituted a breach of the prevention principle (“the Prevention Argument”).

(d) Allowing the respondent to sue the appellant would result in a circuity of action (“the Circuity Argument”).

The respondent disagrees with the appellant’s contentions. According to the respondent, the Judge properly considered the relevant issues before him. Moreover, the appellant had impermissibly shifted its position on appeal.

The respondent also submits that the Judge’s decision was correct because:

(a) In the absence of clear express wording, defects liability clauses in contracts do not create an exclusive remedy which displaces the purchaser’s common law right to damages for defective work.

(b) Any breach of cl 17 by the respondent would only affect the issue of mitigation, rather than his entitlement to damages at common law.

Issues to be determined

The following issues rise for determination:

We shall deal with each issue in turn. In so doing, we note the following findings made below and from which no appeal has been brought. First, the appellant was in breach of the SPA, in particular cl 10, as the Property contained numerous defects. Secondly, the respondent invoked cl 17 by notifying the appellant of defects in the bungalow. Thirdly, the respondent complained of 492 defects but the appellant admitted to only 222 of those as defects in full. Fourthly, the respondent behaved unreasonably in not granting the appellant access to the Property and by preventing the appellant from remedying the defects.

Analysis

Whether the Judge had mischaracterised the key issue before him

As stated above at [17], the appellant claims that the Judge had failed to address the key issue in this case. This was:

In order to determine the veracity of the appellant’s claim, it is important to first examine the case that the appellant ran below, before considering the Judge’s characterisation of the key issue before him.

The appellant’s case in the proceedings below

In the proceedings before the Judge, the appellant sought to establish four key points:

(a) that cl 17 provides a right to the developer to rectify defects in the Property, just as it provides a right to the respondent to require the appellant to do so;

(b) that the respondent had to act reasonably in accordance with the contract, and not prevent the appellant from exercising this right to rectify;

(c) that to the extent that the respondent prevented the appellant from rectifying the defects in the Property, the respondent was in breach of cl 17 of the SPA; and

(d) that the consequence of the respondent’s breach is that the respondent is unable to claim for those defects that the appellant was prevented from rectifying.

Taking the above points in totality, it is clear that the appellant was essentially taking the position that the respondent, having prevented the appellant from carrying out any rectification works in relation to the defects, could no longer pursue any claims against the appellant. Specifically, the appellant had argued that the respondent’s loss of his right to common law damages was by virtue of the defects liability clause in the SPA (cl 17). This was made clear during trial, when the Judge sought to clarify the primary position adopted by then counsel for the appellant, Mr Joseph Lee (“Mr Lee”):

As seen from the above exchange, (putting to one side the probable transcription error of the words “prescribe” and “prescription” instead of “proscribe” and “proscription” and “reservation” instead of “resolution”), counsel for the appellant at that stage had adopted the position that given the existence of the defects liability clause, the respondent could not have recourse to any common law right pertaining to the defects. This point is of some significance.

Counsel for the respondent naturally contended that the appellant was mistaken in law, and that cl 17 did not displace the respondent’s common law right to claim damages for breach of contract in respect of the defects.

The Judge’s characterisation of the key issue

The Judge had observed that the appellant’s arguments essentially pertained to the legal effect of the defects liability clause. He stated, at [69] of the Judgment:

Following this, he framed the appellant’s argument pertaining to the significance of the defects liability clause in the SPA as the following:

We do not think that the Judge had misunderstood the appellant’s arguments, or that he had mischaracterised the key issue before him. As may be seen above from [25] - [27], the appellant had sought to establish 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.

There is thus no merit to the appellant’s contention that the Judge had mischaracterised the key issue before him. In our view, the Judge had correctly considered and addressed the appellant’s case below.

Whether the appellant had shifted its case on appeal

Having reviewed the appellant’s arguments before the Judge, we find it pertinent to note that the appellant had, on appeal, departed from the arguments it made below. This was in two material aspects: first, the legal significance of the defects liability clause as providing a condition precedent; and secondly, the defects liability clause as only precluding claims in relation to admitted defects.

This is in contrast to the position adopted by the appellant in the proceedings below, where it contended that the mere existence of the defects liability clause was sufficient to altogether exclude the employer’s right to claim under the common law.

The appellant’s concession and shift in stance demonstrates, with respect, the flaws in its case. During oral argument, counsel for the appellant, Mr Davinder Singh SC (“Mr Singh”), was asked to comment on the following hypothetical, with facts similar to the present circumstances:

(a) an owner enters into a SPA with a developer, which contains a defects liability clause;

(b) after inspecting the property, the owner produces a defects list comprising 100 defects and invokes the defects liability clause; and

(c) the developer reviews the defect list and agrees only to repair two of the 100 listed defects.

Departing from the appellant’s case below, Mr Singh agreed that the owner would not be prevented from pursuing a claim against the developer under the common law in respect of the remaining 98 defects. There is little reason why the right to claim under common law cannot exist alongside the rights of the parties under the defects liability clause. There should not be an artificial distinction drawn between the right to claim under common law for admitted and non-admitted defects, save for situations where the wording of the parties’ defects liability clause expressly provides so. As we explain below (see [46]) many building defects that first manifest themselves within the defects liability period (“DLP”) may appear to be simple defects but later turn out to be more complex. For example, a stained wall that is rectified with some touching up by painting, may in fact have been caused by water ingress some distance away which underlying cause remains undetected and unrectified. Secondly, there are also defects of a serious nature that make living in the house impossible, eg, defects in the structure of the staircase that require demolition and reconstruction. Clause 17 clearly does not make provision for this kind of defect.

There are also several problems with the appellant’s assertion that cl 17 is meant to function as a condition precedent – this is simply not supported by the wording of cl 17 or the nature of defects liability clauses.

Whether cl 17 of the SPA precluded the respondent from any common law claims for damages

As stated above, the appellant argues that cl 17, having been invoked but breached by the respondent, disentitles him from seeking common law damages for the admitted defects; the decisions of Sonny Yap and Bitannia purportedly make this clear.

The respondent disagrees with this contention, arguing that the decisions of Sonny Yap and Bitannia are inapplicable. Instead, the decision of Liang Huat Aluminium, which was central to the Judge’s holding that the respondent’s common law rights were preserved, should be followed.

We will first consider the nature of a defects liability clause generally, before examining the specific wording of cl 17, as well as the applicable judicial, academic, and legislative authorities surrounding defects liability clauses. This kind of clause is commonly found in standard form contracts and espouses a principle commonplace in the building and construction industry. It is also closely tied to another principle regarding delivering possession of a building to a purchaser even though there are minor outstanding works. Hence, certificates of practical completion or handing over possession to a purchaser or employer often come with a list of outstanding minor works. It is common practice to allow completion of these minor outstanding works within a reasonable time from the commencement of the DLP. How long they can extend into the DLP will depend on the terms of the contract and the unique circumstances of each case.

Nature of a defects liability clause

As a preface to our discussion of defects liability clauses, we must not lose sight of the important fact that before any such clause becomes operative there will have been a breach or breaches by the contractor of its obligations to construct the building in a good and workmanlike manner according to the contract, the specifications and approved plans. It would be this breach or breaches that has given rise to the defects. 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 (see I.N. Duncan Wallace, Hudson’s Building and Engineering Contracts (Sweet & Maxwell, 11th Ed, 1994) (“Hudson 1994”) at para 5-050). As observed in Pearce at 104, while an employer may have a right to recover damages under common law from his contractors for defects, absent a defects liability clause, the employer “would have no right to require the contractors to rectify the defect, apart from the theoretical and speculative possibility that in certain circumstances the court might order specific performance of the contractor’s obligation which had been broken”. This was clearly not a practical state of affairs. It is important to emphasise that a defects liability clause is, ultimately, for the benefit of both employer and contractor. In a well-recognised standard text, the learned author of Hudson’s Building and Engineering Contracts (Sweet & Maxwell, 13th Ed, 2015) (“Hudson 2015”) states, at para 4-094:

However, we should not lose sight of the fact that there is an enormous range of defects that can appear in a building. The types of defects or combinations thereof that can arise in building and construction cases are as myriad as the different kinds of buildings, structures, construction methods and materials used. Defects are unsurprisingly one of the major components of almost all building and construction disputes. We need only raise a few hypothetical examples to illustrate that a defects liability clause, including cl 17, even with a 12-month duration, does not and cannot cater for some of these defects that can arise.

As noted at [38] above, a discoloured patch in the wall which has not yet blistered, appears to be a simple “touch-up” paint job. But it can mask the real problem – water ingress behind the surface of the wall which may originate from a location that may be quite distant from the manifestation of the problem. It may be some time before the discolouration re-appears or the water ingress causes other problems. One can consider the following scenario. The owner has “invoked” cl 17 by noting and informing the developer/contractor of the presence of discoloured paint. The developer/contractor touches up the patch with paint and the owner signs off on the apparent rectification. A few months later, the discolouration reappears and soon turns into blistered paintwork. How does that problem fit into cl 17 and do the provisions of cl 17 resolve that problem? Clause 17 clearly makes no provision for the reappearance of the discoloured paint and/or blistering within or outside the DLP or the rights of the parties in such a situation. The same kind of difficulty may occur in a staircase with wooden steps anchored onto a reinforced concrete beam. Cracks in the beam are thought to be plaster or surface cracks – they are patched and painted over and the owner signs off on rectification. In actual fact, there are construction and design (reinforcement) defects in the staircase. Fifteen months later, cracks re-appear and the defects are discovered to be due to structural deficiencies requiring the demolition and re-building of the staircase beam. Again, cl 17 does not cater for this scenario. There is yet another kind of issue where the defects are of such a nature that the purchaser or owner has, with good reason, lost confidence in the contractor’s ability to rectify the defect (see eg, Hudson 1994 at para 5-051). This can happen with widespread leaks and waterproofing issues. It surely cannot be the case that the purchaser or owner must continue to allow the developer/contractor multiple opportunities over the course of the DLP to attempt to rectify such defects. Clause 17 also makes no provision for the situation where the owner or purchaser has to vacate the premises for the repairs to be carried out, as in the example of the defective staircase which requires demolition and the subsequent re-construction of the beam and staircase.

We note that a defects liability clause certainly does not cover latent defects or defects that will manifest after the DLP. Factually, it is therefore not correct to say cl 17 is a complete code that will cater for all defects.

Whether cl 17 is a complete code

We now turn to examine the provisions of cl 17 and the construction advocated for by the appellant. For the sake of convenience, we reproduce cl 17 in full:

In contrast, the respondent submitted that cl 17 merely provided an additional remedy by which the respondent could require the appellant to rectify defects.

Additionally, he submitted that reading cll 17.2 and 17.3 in totality would demonstrate that the respondent’s common law rights had been abrogated by cl 17. Otherwise, if the respondent’s common law rights were preserved alongside the procedure in cl 17, the latter would not have any significance.

Thus, the timelines in cl 17.2 demonstrate why the procedure in the defects liability clause is merely an option for the respondent to invoke, and why the word “may” is used. Further, as Mr Singh had to accept, if the appellant did not accept an alleged defect as a defect, then the strictures in cl 17 which Mr Singh sought to apply, would be of no application. Similarly, it is evident that if the respondent did not avail himself of the procedure under cl 17, the clause would not apply but could still potentially affect the damages that the respondent would recover from the appellant. There is nothing in cl 17 which even remotely suggests that if the appellant had breached any of its obligations under cl 10, then the only path the respondent could take was rectification under cl 17 and no other. As we have noted above, first, Mr Singh had to concede that cl 17 only covered admitted defects, and secondly, with certain kinds of defects, cl 17 would not be a viable procedure to adopt. We need hardly add that at times, whether something is a defect or not, is not straightforward. This case is itself a good example because in the next tranche, experts will assist the court in determining whether the defects alleged by the respondent were truly defects, and whether the rectification methods that were adopted by JTA Construction were reasonable. We should point out that nothing we have said here prevents an employer and contractor from agreeing to a longer period to rectify defects. That again is outside cl 17.

There are therefore no words in cl 17 suggesting that, upon notification of defects to the vendor, a condition precedent, based upon the right of the vendor to be given an opportunity to rectify defects, must be fulfilled before the purchaser has a right to claim common law damages. On the contrary, there are conditions of time within which the rectification must be done that are imposed on the vendor in cl 17 and, as discussed above, there are some kinds of defects that fall outside the operation of cll 17.2 and 17.3. Clause 17 also does not make provision for the situation where a purchaser gives notice of a defect and the vendor does not complete the rectification within the stipulated time periods. It would appear to be the case that under cl 17 a purchaser can require a vendor’s contractor to stop work, pack up and leave the premises at the end of the stipulated period and proceed to employ his own contractor to rectify the defect. However a final decision on this exact point can await a suitable case where this issue arises.

Judicial and academic authorities on defects liability clauses

Both the appellant and respondent referred us to various cases concerning defects liability clauses in order to bolster their arguments on the construction of cl 17. As stated above at [18(a)], Mr Singh relied chiefly on the decisions of Sonny Yap and Bitannia to argue that cl 17 served as a condition precedent and a complete code, while counsel for the respondent, Mr Cavinder Bull SC, submitted that we should follow the Court of Appeal’s decision in Liang Huat Aluminium, which opined that cl 17 merely provided an additional avenue for dispute resolution and did not affect the respondent’s rights under the common law.

After completion of the works, the MC discovered certain defects in the aluminium windows and glazing of the condominium and gave formal notice of these defects to Liang Huat, and later to Comtech as well. Despite these notices, the defects remained unrectified and the MC commenced legal action against Liang Huat and Comtech for breach of contract. Before trial, Comtech went into liquidation. The trial judge found there were defects and Liang Huat was liable to make good these defects under the Deed. As the Deed was in the nature of an indemnity, the MC was entitled to go ahead with the repairs and claim reimbursement under the Deed from Liang Huat. However, since the MC had not proceeded to rectify and make good the defects and had not expended any moneys therefor, the claim for an indemnity had not arisen. He therefore dismissed their claim. The Court of Appeal, in allowing the appeal, rejected Liang Huat’s argument that the MC’s right against them was confined only to a claim for reimbursement under cl 4 of the Deed (see Liang Huat Aluminium at [16]). The Court framed the crucial issue before it as follows (see Liang Huat Aluminium at [19]):

The Court of Appeal held instead that cll 2 and 3 of the Deed constituted an agreement or undertaking to make good defects and a breach of either of these clauses gave rise to an action for damages at law. The MC had the right to claim for damages for breach of contract under common law, a right which continued to subsist.

Evans LJ found that that any failure to comply with the procedure set out in cl 2.5 would not affect the purchaser’s common law right for damages. In doing so, he disagreed with the decision reached by the Recorder (see 104):

Evans LJ also cited with approval the judgment of HHJ Stannard in William Tomkinson and Sons Limited v The Parochial Church Council of St Michael and others [1990] 6 Const LJ 319, at 326:

The Court of Appeal in Liang Huat Aluminium thus endorsed the position in Pearce on the need for either clear and express wording or a clear and strong implication from the express words used before a purchaser’s right to common law damages could be excluded.

It is important to note that Liang Huat Aluminium and Pearce (see [61] - [66] above) were not cited to the learned judge in Sonny Yap. Counsel for the Contractor instead relied on a text that pre-dated those authorities. Furthermore, the Court was not referred to the relevant standard practitioner’s building and construction textbooks at the time like Hudson 1994 and Stephen Furst, Keating on Construction Contracts (Sweet & Maxwell, 8th Ed, 2006) (“Keating 2006”), which would have provided useful guidance as to the applicable state of law. Hudson 1994 stated, at para 5-053, that in the absence of express provision, the remedies under maintenance clauses were in addition to, and not in substitution of the common law rights:

Similarly, Keating 2006 made clear at para 10-023 that:

These passages remain valid propositions even today, and are reflected in the modern editions of Hudson and Keating (see Hudson 2015 at para 4-095 and Stephen Furst, Keating on Construction Contracts (Sweet & Maxwell, 10th Ed, 2016) (“Keating 2016”) at para 11-033.

Clause 6.11 provided for the giving of instructions to rectify defects during the DLP and provided as follows (see Bitannia at [25]):

It was not in dispute that the plaintiffs had denied access to the defendants to carry out rectification works (see Bitannia at [55]). The defendants argued that cl 6.11 was a code determining the rights and obligations of both parties in respect of the making good of defective work – it relied on the case of Turner Corporation Pty Ltd v Austotel Pty Ltd (1994) 13 BCL 378 (“Turner”). The plaintiffs disagreed, contending that clear and express words were needed to rebut the presumption that the plaintiffs retained all remedies available to them for breach of contract (see Bitannia at [72]).

The Supreme Court first noted that the contract before it contained clauses that were the same, or materially the same, as the standard form building contract considered in the earlier decision of Turner. In particular, the defects liability clause was the same. In that decision, Cole J had found that the parties’ contract provided a comprehensive code that governed their respective rights and obligations (see Turner at [394] - [395]):

In our respectful view, the Supreme Court’s decision in Bitannia must be limited to its own special facts. The decision of the Supreme Court did not make clear which specific words were sufficiently “clear” as to disentitle the plaintiffs from their common law claims. That being said, we note that the parties’ contract in Bitannia contained more prescriptive language in cl 3.05, which expressly provided for access to the contractor during the DLP to make good defects. The contract also went into more detail regarding the applicable procedure should defects be discovered in the property. For example, the contract in Bitannia called for the architect to make the decision on the defects and issue an instruction which had to state in what respect there were defects in the works, as well as specify a reasonable time within which the contractor had to complete the making good of defects. There were also provisions providing for the contractor to notify the architect in writing if the architect’s instructions were either given in error or involved a variation of the works (cl 5.05) or where a defect occurred even though the materials and/or workmanship were in accordance with the contract, in which case it would fall to be treated as a variation (cl 6.11.04). In fact, we find it pertinent to note that other Australian decisions suggest that Bitannia ought to be confined to its specific facts.

Prior to Bitannia, the New South Wales Supreme Court in SAS Trustee Corporation v Scott Carver Pty Limited & others [2003] NSWSC 1097 (“SAS Trustee”) had emphasised the principle that a defects liability clause merely confers an additional right to the purchaser. In SAS Trustee, it was argued that the deed between the parties contained a condition precedent to liability, and that the plaintiff had to give notification in accordance with the requirements of the deed before it would be permitted to claim for any defective work. The Court disagreed, stating at [47]–[48] that:

It is also important to consider the later decision of Sun Building Services Pty Ltd v Minh & another [2015] QCAT 134 (“Sun Building Services”) by the Queensland Civil and Administration Tribunal, which noted that Bitannia had to be seen in its proper context. The tribunal noted that both Bitannia and Turner concerned the use of JCC (Joint Contracts Committee) standard form contracts and that the clauses in those contracts removed a principal’s common law rights to sue for damages given the “detailed allocation of rights” (see Sun Building Services at [128]). The tribunal subsequently distinguished both Bitannia and Turner, holding that there were no clear or express words in the contract before it to justify the exclusion of a common law right to damages (see Sun Building Services at [131]).

As explained in Hudson 2015 at para 4-096:

The same view can be found in Keating 2016 at para 11-033:

We endorse both these views in Hudson 2015 and Keating 2016.

Defects liability clauses in standard form construction contracts

It is also useful to consider the defects liability clauses contained in the various standard form construction contracts in Singapore – the aforementioned REDAS Conditions, the Public Sector Standard Conditions of Contract for Construction Works (7th Edition July 2014) (“PSSCOC”), and the Singapore Institute of Architects Conditions of Building Contract (9th Edition September 2010) (“SIA Conditions”). In our view, the PSSCOC, REDAS Conditions and SIA Conditions have consistently treated their respective defects liability clauses as merely offering an alternative procedure for rectifying construction defects.

A perusal of the REDAS Conditions demonstrates that cl 20 (the defects liability clause therein) does not affect an owner’s common law rights. They state:

We note cl 20.3 uses the same words “may… instruct the Contractor to remedy any defects” as well as short time periods in cl 20.4. Academic commentaries affirm that an owner’s right under common law to sue in relation to latent defects especially (which are unlikely to be adequately covered by defects liability clauses) continue to operate under the REDAS conditions (see Eugenie Lip and Christopher Chuah, Contract Administration Guide: to the REDAS Design and Build Conditions of Contract (LexisNexis, 2012) at para 2.065).

Clause 18.5 of the PSSCOC states explicitly that “[t]he provisions of [cl] 18.1 to 18.4 shall not derogate in any way whatsoever from the Contractor’s liability under the Contract or otherwise for defective work at common law.” This has been described as an “avoidance of doubt provision”, which confirms that “the Employer retains all his other rights under common law to proceed against the Contractor in respect of any defective work” (see Chow Kok Fong, The Singapore Public Sector Construction Contract: Commentary on the Public Sector Standard Conditions of Contract 7th Edition (LexisNexis, 2015) at p 329).

The SIA Conditions of Contract are similar to the REDAS Conditions. Clause 27(1), which concerns “maintenance following completion” states that during the defects maintenance period, the contractor “shall complete” any outstanding work, and that an owner “may at any time” following the Completion Certificate give directions or instructions for the making good of defects. The use of the term “may” in relation to the owner suggests that this is merely an option that he may wish to exercise. There is, again, academic authority supporting such a reading of the SIA Conditions (see Eugenie Lip and Choy Chee Yean, Contract Administration Guide to the SIA Conditions of Building Contract (LexisNexis, 2009) at para 2.156).

Conclusion on defects liability clauses

We finally consider the applicable legislative material surrounding the standard form contract that the SPA was based upon. As stated above at [6], the parties’ SPA was in the standard form prescribed by r 12(1) of the Housing Developers Rules. When the Housing Developers (Control & Licensing) Act (Cap 130, 1985 Rev Ed) (“HDA”) was first enacted, the then Minister of National Development, Mr Lim Kim San explained that the main purpose of the Act was to “…give a certain amount of protection to the innocent house purchaser by preventing the excesses of the building developers” (see Singapore Parliamentary Debates, Official Report (19 November 1964) vol 23 at col 789). The policy’s aim of protecting home purchasers was reiterated in 1993 when the then Minister of State for National Development, Mr Lim Hng Kiang, explained that the “[Housing Developers Rules] are intended to regulate the practices of housing developers so that the interests of home buyers are protected” (see Singapore Parliamentary Debates, Official Report (28 May 1993) vol 61 at cols 262-263). The relevant Parliamentary material surrounding the standard form upon which the SPA was based (the Housing Developers Rules) shows no change in this underlying policy of protecting home buyers; it emphasises avenues of redress for rectification of defects during the DLP and specifically notes that for defects beyond the DLP, homeowners can sue the developers for latent defects on grounds of negligence or breach of contract. There is no suggestion that the DLP provision would replace the homeowners’ rights at common law. During the Second Reading of the Consumer Protection (Fair Trading) (Amendment) Bill, then Minister of State for Trade and Industry, Mr Teo Ser Luck clarified that the standard form SPA under the HDA would not preclude purchasers from pursuing claims pursuant to breach of contract (see Singapore Parliamentary Debates, Official Report (9 March 2012) vol 88 at pp 3-4). He explained:

We therefore align ourselves with the ruling of the Judge that in the present case, cl 17 of the SPA did not preclude the respondent from commencing any common law claim for damages against the appellant. However, having given the appellant a notification of defects under cl 17, insofar as the respondent failed to grant access to the appellant for rectification of the admitted defects, such failure may affect the quantum of damages the respondent is able to recover at common law as a consequence of a failure to mitigate damages.

The Causation Argument

Before addressing the appellant’s remaining arguments, we find it useful to first make clear that the Judge had found two distinct breaches in the present case. First, the appellant’s breach of cl 10.1 by failing to build the Property in a good and workmanlike manner. Secondly, the respondent’s breach of cl 17 by unreasonably denying the appellant the opportunity to rectify the admitted defects. The appellant’s remaining arguments are premised on the second breach.

The test for determining whether an intervening event would amount to a novus actus was explained by the Court of Appeal in Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 3 SLR(R) 782 at [54]:

There is thus no merit in the Causation Argument.

The Prevention Argument

The appellant argues that to allow the respondent to pursue a claim for common law damages despite having invoked cl 17 would be to allow him to “take advantage” of his own breach of cl 17. According to V K Rajah J (as he then was) in Evergreat Construction Co Pte Ltd v Presscrete Engineering Pte Ltd [2006] 1 SLR(R) 634 at [51], the prevention principle prescribes that “no man can take advantage of his own wrong, so that one party may not be allowed to rely on such a provision where the occurrence of the event is attributable to his own act or default”.

The appellant agrees that for it to invoke the prevention principle, “it must be shown that the contractual right or benefit that a party is asserting or claiming is a direct result of that party’s prior breach of contract”.

The Circuity Argument

At the risk of belabouring the point, the effect of an employer’s denial of access to the contractor, while amounting to a breach of contract under the defects liability clause, does not result in a free-standing cause of action for the contractor. After all, it is undeniable that the defective works are attributable to the contractor, rather than the employer. There is also the not inconsiderable number of alleged defects which the appellant did not accept as defects. We should not pre-judge this issue in any way as exactly how many of these non-admitted defects were in fact defects will be investigated and assessed at the next tranche of the trial. The effect of such an employer’s denial of access is that the court may make a finding that the employer had acted unreasonably in failing to properly mitigate his losses.

As stated by the English Court of Appeal in Pearce at 104:

As we have said before, we should not be seen to form any binding views on this matter given that it will only be fully addressed at the next tranche of the trial.

Conclusion