Case Note: ESTABLISHING A DUTY OF CARE: SINGAPORE’S SINGLE, TWO-STAGE TEST
| Author | A L R JOSEPH MA, LLB; Barrister of Gray’s Inn, Advocate & Solicitor (Singapore & Malaya); Legal Counsel, BoardEx (UK). |
| Published date | 01 December 2008 |
| Date | 01 December 2008 |
Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR 100
In this case the Chief Justice concluded that, in Singapore, there should be a single test to determine the imposition of a duty of care in all claims arising out of negligence, irrespective of the type of the damages claimed including claims for pure economic loss, whether they arise from negligent misstatements or acts/omissions; and that the single test shall be a two-stage test, comprising of, first, proximity and, second, policy considerations. Regrettably, however, the judgment clings too heavily to the discredited and discarded notion of proximity as a legal doctrine and an underpinning which has, elsewhere, been relegated to the position of a mere label and artificial tag of convenience, inhabiting more appropriately the realm of questions of fact.
1 In the recent judgment of the Singapore Court of Appeal1 in Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency,2 Chan Sek Keong CJ concluded two significant matters in respect of the law of negligence as it applies to Singapore:
A single test is preferable in order to determine the imposition of a duty of care in all claims arising out of negligence, irrespective of the type of
the damages claimed [including] claims for pure economic loss, whether they arise from negligent misstatements or acts/omissions.3
…
The single test shall be a two-stage test, comprising of, first, proximity and, second, policy considerations.4
2 In a wide-ranging and in-depth judgment that traversed the law of negligence and specifically the test to be applied to determine whether a defendant owed a claimant a duty of care, Chan CJ extensively surveyed the development of this area of the common law in England (and to some extent Australia) and authoritatively propounded the law as it should apply in Singapore. In respect of the development in England, His Honour observed that “the search for clarity and certainty in a single formula has proved to be elusive even some 60 years after the first articulation of the ‘neighbour’ principle in Donoghue v Stevenson5”.6
3 His Honour also found that the common law of negligence as it applied in Singapore, as regards both liability in negligence for pure economic loss and physical damage, was “not entirely satisfactory”.7 It is, nevertheless interesting8 that the Court of Appeal preferred a test akin to the two-stage test as enunciated by Lord Wilberforce in Anns v Merton London Borough Council9 (and indeed Chan CJ reinterpreted it contextually10 which itself has been overruled by the House of Lords in Murphy v Brentwood District Council11).
4 There is so much meat in the judgment of Chan CJ in Spandeck Engineering that generations of law students and practitioners of the law
of negligence (especially in Singapore) can munch on it for a long time to come. Significantly, the judgment answers the central question of how duty of care can be found to exist between defendants and claimants who do not have contractual or other legal connection. Even so, it invites the criticism that it clings too heavily to the discredited and discarded notion of proximity as a legal doctrine and an underpinning, which leading members of the House of Lords and the High Court of Australia over the last two decades have relegated to the position of a mere label and artificial tag of convenience, inhabiting more appropriately the realm of questions of fact. Accordingly, it is appropriate that this important judgment needs to be reviewed which is the purpose of this case note.
5 Whether any real distinction of substance (other than policy) can be made between what is referred to as physical damage, on the one hand, and “pure” economic loss, on the other, is debatable. Nevertheless, it is possible to describe them differently. In D’Amato v Badger,12 the Supreme Court of Canada described pure economic law as “loss suffered by an individual that is not accompanied by physical or property damage”.13 In other words, pure economic loss generally refers to damages other than physical damage to persons or property. It follows, therefore, that physical damage can simply be described as cases involving claims of personal injuries and physical damage.
6 In 1931, in Ultramares Corporation v Touche,14 Cardozo CJ warned of the dangers of there arising “liability in an indeterminate amount for an indeterminate time to an indeterminate class”.15 This warning has haunted courts throughout the common law world in the area of the law of negligence ever since. And the fear of imposing indeterminate liability and the consequential effect of that on the economy has been the perennial problem associated with pure economic loss, not that the amount of economic loss cannot be determined. It is the fear that “… a decision to allow recovery for [pure economic] loss can create huge potential liability. The problem is conceptual, rather than factual, indeterminacy. The question is how to draw the line in a principled way”.16 The competing interests, in this connection are, on the one hand, the proper desire of the courts to want to do justice to the claimant in a particular case and, on the other, to avoid any unforeseen
economic cost to the public.17 And so in few other areas of the law has policy played such an important part in judicial decisions.
7 In 2002, Laws LJ18 said that the position of the common law development then, in this connection, was that where damage is carelessly caused to another’s person or property, as a matter of pragmatic reality, the rule (not the exception) where there is no third agency which constitutes the immediate cause of the damage, there will be recovery. However, where there is such a third agency (for example, the acts or omissions of another person or something less specific like the movements of markets), recovery is the exception not the rule. His Lordship also observed:19
In the latter class of case, where a third agency is the immediate cause of the damage, the act or omission of the defendant is by definition at one removed (at least one, maybe more) from the outturn events of which the claimant comes to complain. A duty of care imposed on the defendant in those circumstances would be very open-ended.
8 It is for this reason (that is, the “very open-endedness” of liability or, put another way, “liability in an indeterminate amount for an indeterminate time to an indeterminate class”20) that in cases of pure economic loss, the courts have consistently demanded more stringent substantiation of causative link between the defendant and claimant.
9 Nonetheless, it has long been recognised that there was no real or logical distinction between physical damage and pure economic loss. In duty terms, it became that the defendant owes the claimant a duty of care with regard to damage to property but not in respect of unconnected loss of profit. In some respects, this is absurd, as was pointed out by Lord Devlin in Hedley Byrne & Co Ltd v Heller & Partners Ltd,21 when his Lordship observed that:
This is why the distinction is now said to depend on whether financial loss is caused through physical injury or whether it is caused directly. The interposition of the physical injury is said to make a difference of principle. I can find neither logic nor common sense in this.
10 That being so, the Court of Appeal brought rationality and logic into this area of the law by decreeing that henceforth there will be a single test to determine the imposition of a duty of care in all claims arising out
of negligence, irrespective of the type of the damages claimed including claims for pure economic loss, whether they arise from negligent misstatements or acts/omissions.22
11 As to the role of the court in this regard, Chan CJ confirmed that, Like in England,23 liability for pure economic loss is a matter “that imposes on the courts a great responsibility as this is an area of law where the determination of liability has been and will continue to be … the exclusive domain of the Judiciary”.24 So it is incumbent on the courts to ensure that they keep within the bounds of what is proper recovery that can be had for claims of pure economic loss and the courts have done this by introducing control mechanisms — like reasonable foreseeability, proximity and policy — the purpose of which is limitation of liability.25 These control mechanisms were clearly artificial in creation primarily to put hurdles (even though not insuperable, in appropriate circumstances) even before a claimant goes past stage one of his litigation journey.26
12 The early days of negligence liability following Donoghue v Stevenson was premised, for the purposes of exerting control over too wide an expansion of the recovery field, on the adherence to the foreseeability doctrine. That is to say, a claim could succeed only if it is
sufficiently foreseeable and not too remote, which was a sine qua non to the establishment of a duty of care.27 The doctrine of reasonable foreseeability was always a forced concept with conceptual and intellectual limitations. It was the mechanism by which the area of liability in negligence was generally limited, for it was always absolutely necessary to limit potentially unlimited liability, even though such limits needed to be transparent and reasonably certain.
13 The context in which the tort of negligence operates is the same as all torts, that is, it determines, where a loss has befallen a person, whether that loss should be left where it fell or shifted to someone else. The reasonable foreseeability concept declared that if the loss suffered by the claimant was caused by an act or omission of the defendant and that loss was reasonably foreseeable by the defendant, it should be shifted to be borne by the...
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