Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 08 August 2007
• Neutral Citation: [2007] SGCA 37
• Citation: [2007] SGCA 37
• Defendant Counsel: Tai Chean Ming, Chong Kuan Keong and Tan Joo Seng (Chong Chia & Lim LLC)
• Published date: 21 August 2007
• Plaintiff Counsel: Mohan R Pillay (MPillay) and Gopinath Pillai (Tan Peng Chin LLC)
• Date: 08 August 2007
• Docket Number: Civil Appeal No 3 of 2007
• Court: Court of Appeal (Singapore)
• Subject Matter: Applicable test to determine existence of duty of care,Duty of care,Whether policy considerations negating finding of duty of care,Damages,Incremental approach as methodological aid in applying specific criterion of two-stage test,Tort,Negligence,Whether type of damage claimed should result in different test,Application of single (two-stage) test irrespective of type of damage claimed,Application of two-stage test comprising first proximity and second policy considerations with threshold consideration of factual foreseeability,Whether there was proximity between contractor and certifier given no direct contractual relationship between contractor and certifier,Whether pure economic loss recoverable in Singapore,Single test to apply notwithstanding damage claimed as pure economic loss,Pure economic loss,Whether different test applying in relation to pure economic loss to determine duty of care,Relationship between two-stage test and incremental approach,Whether there was proximity between contractor and certifier given that contractor could submit disputes for arbitration

8 August 2007

Chan Sek Keong CJ (delivering the grounds of decision of the court):

Introduction

1 This was an appeal against the decision of the trial judge, who dismissed the claim of Spandeck Engineering (S) Pte Ltd (“the appellant”) in the tort of negligence against the Defence Science & Technology Agency (“the respondent”). Her judgment is reported in Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 1 SLR 720 (“the Judgment”). At the end of the hearing, we unanimously dismissed the appeal. We now give our reasons.

2 Apart from the substantive rights and liabilities of the parties, which must surely form the primary focus of any judicial decision, this case was also about an intensely practical problem in the law of negligence: How does one ascertain whether a duty of care exists in law between one person and another where there is no pre-existing contractual or legal relationship between them? The common law is rudderless and surprisingly fraught with difficulties and uncertainties in relation to this deceptively simple and yet important question. The courts in Singapore are no less spared from this problem which we will now address. We turn first to the facts of the present case.

Background facts

Award of the contract for the project

3 The appellant’s claim stemmed from a dispute relating to the building project known as “The Proposed Redevelopment of Medical Camp in Nee Soon Camp Lot 212 PT MK 13 at Transit Road – Project LE(D) 1068 C08 MINDEF/DSTA” (“the Project”). As its name suggests, the Project was to redevelop a medical facility at Nee Soon Army Camp for the Ministry of Defence (“Mindef”). The Government of Singapore (“the Employer”) put the Project out for tender to which the appellant submitted a “base tender” and an “alternative tender”. In relation to this “alternative tender”, which was submitted on 15 March 1999,[note: 1] the appellant offered an alternative pre-cast/structural design. This alternative design consisted of a change in the original cast-in-situ design to the pre-cast structure design which would result in cost savings of about $200,000 and a shortening of the construction time by two months.[note: 2] The Employer accepted the alternative design and awarded the appellant a contract dated 24 June 1999 (“the Contract”) at a lump sum price of $31.78m to execute and complete the Project. The agreed commencement date of the Contract was 15 June 1999 and the completion date was 14 January 2001.

Salient terms of the Contract

4 The Contract incorporated the terms of the Public Sector Standard Conditions of Contract (“PSSCOC”), by which an appointed superintending officer (“SO”) was responsible for the administration and supervision of the Project, including certifying interim payments in respect of the appellant’s work for the Project. In particular, the Contract provided in cl 2.8(1) that:

The Superintending Officer, the Superintending Officer’s Representative or any assistant appointed … shall at no time be under any obligation or duty to the Contractor [ie, the appellant] either on behalf of the Employer or his own account to exercise or not to exercise any of his powers under the Contract, nor shall any failure to do so on his own part in any way prejudice the rights of the Employer against the Contractor or render the Employer liable to the Contractor.

5 In relation to the settlement of disputes relating to the Project, cl 34 was the governing clause. Its provisions, in so far as they are material, are set out below:

34.1 Reference to the Superintending Officer

(1) If a dispute or difference of whatsoever kind shall arise between the Employer or the Superintending Officer or the Superintending Officer’s Representative and the Contractor in connection with or arising out of the Contract or the execution of the Works … including any dispute or difference as to any … certificate or valuation of the Superintending Officer or the Superintending Officer’s Representative, it shall in the first place be referred by either party in writing to the Superintending Officer for his decision. …

…

34.2 Reference to Arbitration

(1) If either the Employer or Contractor is dissatisfied with the decision of the Superintending Officer made pursuant to Clause 34.1 hereof, … then the Employer or the Contractor may … give notice to the other party with a copy for information to the Superintending Officer of his intention to refer the decision or the dispute or difference that had not been decided to an arbitrator. …

However, the amount of damages for which the Employer might be liable to the appellant was qualified by cl 32.8 of the Contract, which provided as follows:

32.8 Delay in Certification

Under no circumstances shall the Employer be liable to pay to the Contractor [ie, the appellant] any damages, whether by way of interest or otherwise, for any failure or delay by the Superintending Officer in certifying any payment due or payable to the Contractor.

[emphasis added]

Appointment of the SO and consultants

6 On 7 July 1999, Mindef advised the appellant by letter that Quek Kheng Song (“QKS”) and Huang Siong Hui were appointed the SO and SO’s representative respectively, with Peh Chew Seng as the alternate SO’s representative in the absence of the SO’s representative. At that time, QKS was employed by the Employer as an officer in the Land & Estate Organisation in Mindef. In addition, various individuals and entities were also appointed as consultants to provide professional services for the Project (“the Consultants”). Among the Consultants appointed was KPK Quantity Surveyors (1995) Pte Ltd (“KPK”), which was appointed the quantity surveyor for the Project. In addition, RDC Architects Pte Ltd (“RDC”) was appointed the architect for the Project.

7 Subsequent to that, the respondent was constituted under the Defence Science and Technology Agency Act (Cap 75A, 2001 Rev Ed) in March 2000 and it was around that time that the respondent assumed the role of the SO. QKS was no longer the SO for the Project by this time but continued to represent the respondent at the Project after his employment was transferred from the Employer to the respondent.

Summary of tender and cost breakdown

8 The tender documents for the Project required the appellant to submit a summary of tender (“SOT”) as well as a cost breakdown (“CBD”). The SOT and CBD were documents prepared by KPK listing out all the items of work required for the Project being tendered. It required the contractors who were tendering for the Project to price this itemised list as a cost breakdown of the lump sum contract tender price, in the form of the CBD. The SOT was a summary of the detailed cost itemisation set out in the CBD.

Original SOT and CBD

9 As alluded to earlier (at [3] above), as part of its bid, the appellant had offered an alternative tender in addition to the base tender. The SOT and CBD which the appellant had submitted with its tenders were based on the base tender and did not reflect the breakdown under the alternative tender. This meant that the original SOT and CBD did not accurately reflect the scope and actual value of the works to be carried out by the appellant under the alternative tender.

SOT and CBD incorporated into the Contract

10 As such, on the basis of the Employer accepting the appellant’s alternative tender, KPK requested the appellant to submit a revised SOT and CBD to reflect the change of the design. Pursuant to this request, the appellant submitted a revised SOT and CBD dated 24 May 1999,[note: 3] which it alleged was incorporated into the Contract without any further revision. On the other hand, the respondent contended that there were further revisions to the SOT and CBD dated 24 May 1999 and that the final SOT and CBD were finalised by KPK with the appellant and incorporated into the Contract in or about October 1999.

11 In the Judgment at [9], the trial judge resolved this issue in favour of the respondent, where she said:

After the Employer had accepted the plaintiff’s alternative proposal, KPK requested the plaintiff to submit a revised SOT to reflect the change in design. The plaintiff submitted the first revision to KPK on 24 May 1999. After further revisions by the plaintiff, the revised SOT and cost breakdown (“CBD”) for the contract price were finalised by KPK with the plaintiff and incorporated into the Contract documents in October 1999. [emphasis added]

We agreed with the trial judge’s finding. It was clear to us that the SOT bound into the Contract documents[note: 4] was not the same as the appellant’s revised SOT dated 24 May 1999. That the SOT bound into the Contract was not a version prior to the SOT dated 24 May 1999 was supported by the fact that the total cost and contract period were based on the alternative tender. Given that the revised SOT dated 24 May 1999 was the first SOT based on the alternative tender, it must follow that any other SOT based on the alternative tender must have come after the SOT dated 24 May 1999. Accordingly, contrary to the appellant’s contention, the SOT dated 24 May 1999 was indeed revised before it was incorporated into the Contract. This will henceforth be referred to as “the Contract SOT” while the CBD incorporated into the Contract will be known as “the Contract CBD”.

Exercise to revise the Contract SOT and the Contract CBD

12 The appellant contended that, in the course of submitting its progress claims, it discovered that numerous items related to the alternative tender were omitted from the Contract SOT and the Contract CBD and this in turn allegedly led to the under-certification of the progress payments to the appellant. This had occurred even though the Contract SOT and the Contract CBD were bound into the Contract documents after revisions by the appellant itself. These alleged deficiencies in the Contract SOT and the Contract CBD were highlighted by the appellant by a letter dated 29 September 2000, in...