NTUC Foodfare Co-operative Ltd v SIA Engineering Co Ltd and another

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 19 July 2018
• Neutral Citation: [2018] SGCA 41
• Plaintiff Counsel: N Sreenivasan SC, Palaniappan Sundararaj, N K Rajarh and Cheong Wei Yang, Daryl (Straits Law Practice LLC)
• Docket Number: Civil Appeal No 207 of 2017
• Date: 19 July 2018
• Hearing Date: 08 May 2018
• Subject Matter: Tort,Negligence,Causation,Duty of care
• Published date: 25 July 2018
• Defendant Counsel: Kwek Yiu Wing Kevin, Tan Yiting Gina and Charmaine Elizabeth Ong Wan Qi (Legal Solutions LLC))
• Court: Court of Appeal (Singapore)
• Citation: [2018] SGCA 41
• Year: 2018

Steven Chong JA (delivering the judgment of the court):

In Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR(R) 100 (“Spandeck”), this court laid down a single test for the establishment of a duty of care in tort. In doing so, we departed from English law which applies a general exclusionary rule against recovery for pure economic loss. We also eschewed the approach taken in some earlier Singapore cases, where our courts had applied different tests for a duty of care depending on the nature of the loss suffered by the plaintiff: see Spandeck at [58] and [69].

It is vital to recall why we rejected the exclusionary rule in Spandeck. The basis of that holding was the recognition that there is nothing intrinsically objectionable about recovery for pure economic loss. It is not the nature of such loss, but the circumstances in which it arises, which underpins the exclusionary rule. Unlike physical damage, economic losses are not constrained by the laws of nature: they often ripple out from a negligent act due to human responses to the same. This gives rise to the concern of indeterminate liability: that to allow recovery for pure economic loss might lead to liability for an indeterminate amount to an indeterminate class.

It was to address this concern that the common law barred recovery for economic loss unless such loss was consequent upon physical damage to person or property. Yet in Spandeck, we recognised that the exclusionary rule is a blunt tool for this purpose. In some cases, the concern of indeterminate liability it was designed to address will never arise. In such cases, there may be scant reason to disallow recovery for pure economic loss: see Spandeck at [68]–[69]. Applying the exclusionary rule may thus lead to injustice. Accordingly, in Spandeck, we rejected the exclusionary rule in favour of a single test for a duty of care in tort, premised on proximity and policy considerations.

After Spandeck, therefore, it is no longer necessary to characterise the nature of the plaintiff’s loss before examining whether a duty of care arises in tort. Regrettably, it appears that old habits die hard. Parties continue to approach the issue of whether a duty of care arises through the lens of the nature of the plaintiff’s loss. We have found it necessary to reiterate that the precise classification of the loss is immaterial: see Animal Concerns Research & Education Society v Tan Boon Kwee [2011] 2 SLR 146 (“Animals Concerns Research”) at [32] and ACB v Thomson Medical Pte Ltd and others [2017] 1 SLR 918 (“ACB”) at [82]. Nonetheless, in this appeal, both parties again proceeded on the basis that the classification of the loss was critical to whether a duty of care arose.

It is our hope that this judgment will serve as a reminder that the question of whether a duty of care arises in tort does not turn on whether the plaintiff’s loss is properly characterised as consequential economic loss or pure economic loss. We also seek to demonstrate that the Spandeck test – in particular, the requirement of proximity – addresses the concern of indeterminate liability and permits recovery for pure economic loss in deserving cases.

Facts The parties

The appellant, NTUC Foodfare Co-operative Ltd (“NTUC Foodfare”), is a registered society that operates food and beverage establishments including the Wang Café franchise in Singapore. NTUC Foodfare was insured by NTUC Income Insurance Cooperative Ltd (“NTUC Income”) under an “Industrial All Risks Policy” (“the Policy”) from 1 April 2013 to 31 March 2014, in respect of material damage to property and business interruption.¹

The first respondent, SIA Engineering Company Ltd (“SIAEC”), is a Singapore-incorporated company in the business of the maintenance, repair and overhaul of aircraft. SIAEC employed the second respondent, Yap Tee Chuan (“Mr Yap”), as an equipment operator.² Mr Yap operated airtugs for “aircraft towing and pushback operations”.³ It is important to note that these airtugs were heavy vehicles powerful enough to move an aircraft. Unsurprisingly, Mr Yap was required to undergo several tests before he was allowed to operate them. He was first required to obtain a Class 5 driving licence as a pre-requisite to obtaining an airfield driving permit (“ADP”) from Changi Airport Group (Singapore) Pte Ltd (“CAG”). The ADP was, in turn, a pre-requisite to in-house airtug training by SIAEC, after which Mr Yap received his permit to operate airtugs.⁴

The leased premises

By a tenancy agreement dated 2 March 2012 (“the Agreement”), NTUC Foodfare took a three-year lease of 20.5m2 of the transit lounge (“the Lounge”) on the second level of the Terminal 2 building of Changi Airport (“the T2 Building”) from CAG.⁵ We will refer to this leased area as “the Premises”. The term of the lease was from 1 May 2012 to 30 April 2015. On appeal, the respondents contend that the Agreement did not create a lease but rather conferred on NTUC Foodfare a mere licence to occupy the Premises.⁶ For the reasons given at [33] below, we are satisfied that the Agreement created a lease of the Premises. However, we will also explain below why this holding is inconsequential to the outcome of the appeal.

The Premises were located on the cantilevered portion of the floor of the Lounge, directly above the underpass baggage handling area (“the UBHA”) of the T2 Building.⁷ NTUC Foodfare operated an outlet of Wang Café in the form of a food kiosk at the Premises (“the Kiosk”). The Kiosk was pre-fabricated off-site, and had its own fittings, furnishings, and cement screed flooring.⁸ A waterproofing membrane was applied beneath the screeded floor of the Kiosk.

The key events The accident and the imposition of the Closure Order

On 13 February 2014, Mr Yap was driving an airtug (“the Airtug”) in the vicinity of the T2 Building. Notably, Mr Yap operated airtugs in a relatively confined area: the airside area of Changi Airport. He drove airtugs on various roadways in the airport, including one running through the UBHA. The UBHA was therefore part of Mr Yap’s fairly circumscribed theatre of operations. As we have noted, the UBHA was located directly below the cantilevered portion of the floor of the Lounge, where the Kiosk was situated (see [9] above).

At the material time on 13 February 2014, Mr Yap was driving on the roadway running through the UBHA when he failed to keep a proper lookout. It was not in dispute at the hearing of the appeal that Mr Yap was negligent in this regard. As a result, the Airtug collided into a pillar (“the Pillar”) leading up to and supporting the floor of the Lounge (“the Accident”). The Pillar extended up to the second level of the T2 Building, where it was situated near the Kiosk.⁹

The Accident caused damage to the Pillar and to the cantilevered portion of the floor of the Lounge. In particular, there was settlement movement of the floor slabs next to the Pillar and near the Kiosk, ie, part of the floor subsided.¹⁰ However, it is undisputed that the Kiosk itself did not sustain material damage, eg, in the form of cracks: counsel for NTUC Foodfare, Mr N Sreenivasan SC (“Mr Sreenivasan”), confirmed this before us. Mr Sreenivasan also did not contend that the Premises, where the Kiosk was situated, suffered any material damage.

The Building and Construction Authority (“the BCA”) issued a Closure Order dated 14 February 2014 (“the Closure Order”) in respect of the affected area of the Lounge.¹¹ The Kiosk was situated within the affected area. NTUC Foodfare was hence unable to operate the Kiosk while the Closure Order was in force. CAG did not collect rent from NTUC Foodfare during this period.¹²

CAG cut off the electricity supply to the Kiosk while the Closure Order was in force. Some of the equipment at the Kiosk – chillers, boilers, an ice maker and a toaster – were damaged due to dust, rust and lack of electricity arising from the closure.¹³

Events after the imposition of the Closure Order

On 18 March 2014, CAG held a meeting with NTUC Foodfare.¹⁴ During this meeting, CAG expressed concern that the waterproofing membrane beneath the floor of the Kiosk (see [9] above) had been damaged and requested NTUC Foodfare to retrofit the Kiosk to address this concern. CAG initially indicated that it would bear the cost of the works. However, after NTUC Foodfare submitted a quotation for the works to CAG, the loss-adjusters appointed by CAG’s insurers (“Insight”) wrote to NTUC Foodfare stating that CAG did not cause the incident and should not be held liable for it.¹⁵ Insight sent NTUC Foodfare’s quotation to the loss-adjusters appointed by SIAEC’s insurers (“Crawford”).

On 3 June 2014, Crawford informed NTUC Foodfare that it would have to prove that the waterproofing membrane had been damaged (to recover the cost of the works to the Kiosk from SIAEC or its insurers).¹⁶

By an email dated 17 July 2014, NTUC Foodfare requested that CAG provide a report stating the reasons why it required the Kiosk to be rebuilt.¹⁷

By an email dated 23 July 2014, CAG replied to state that it would permit NTUC Foodfare to resume operations at the Kiosk even if it did not rebuild it, provided a qualified person (“QP”) or professional engineer (“PE”) endorsed the safety and operational readiness of the Kiosk.¹⁸ However, NTUC Foodfare did not obtain such an opinion from a QP or a PE. NTUC Foodfare’s position is that no QP or PE was willing to certify the safety of the Kiosk without information on the damage to the T2 Building, the rectification works to the same and how the Kiosk was built (and this information was not forthcoming).¹⁹ However, the respondents dispute this. At the trial, the respondents called an expert who testified that he would have been able to assess the safety of the Kiosk based on a visual inspection of the Kiosk alone.²⁰ His evidence on this point was unchallenged.

The lifting of the Closure...