Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric

• Judge: Chan Sek Keong CJ
• Judgment Date: 26 July 2007
• Neutral Citation: [2007] SGCA 36
• Citation: [2007] SGCA 36
• Defendant Counsel: Lai Yew Fei (Rajah & Tann)
• Published date: 30 July 2007
• Plaintiff Counsel: Cheong Yuen Hee and Lee Nyet Fah Alyssa (East Asia Law Corporation)
• Date: 26 July 2007
• Docket Number: Civil Appeals Nos 104 and 105 of 2006
• Court: Court of Appeal (Singapore)
• Subject Matter: Tort,Applicable test to determine imposition of duty of care,Whether different tests of causation in fact applying in contract and tort,Contractual terms,Damages,Pure economic loss,Whether architect owing duty of care to developer in respect of additional duties beyond his statutory duties as qualified person under Building Control Act (Cap 29, 1999 Rev Ed),Distinction between causation and remoteness,Whether clauses in deed imposing additional duties on architect beyond his statutory duties as qualified person under Building Control Act (Cap 29, 1999 Rev Ed),Architect hired by contractor signing deed of indemnity with developer,Distinction between causation in fact and causation in law,Remedies,Applicable test to determine causation in fact in contract,Causation,Rules of construction,Negligence,Contract

26 July 2007

V K Rajah JA (delivering the grounds of decision of the court):

Introduction

1 Both Sunny Metal & Engineering Pte Ltd (“SME”) and Ng Khim Ming Eric (“Eric Ng”) appealed against the decision of the trial judge in Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 1 SLR 853 (“Sunny Metal”). Briefly, the trial judge had found Eric Ng, the project architect for a building project developed by SME, liable for breaches of his (a) contractual obligations, which arose from cl 1 (but not cl 4) of a deed of indemnity signed between SME and Eric Ng dated 21 October 1996 (“the Deed”); and (b) tortious duties owed to SME. Consequent upon this finding, SME was awarded judgment for the sum of $1,243.20, being damages of $447,473.50 less two items of set-offs amounting to $446,230.30: Sunny Metal at [167]. SME was also allowed to recover 70% of its costs.

SME’s appeal in Civil Appeal No 104 of 2006

2 SME’s appeal in Civil Appeal No 104 of 2006 (“CA 104/2006”) was, in the main, against the trial judge’s decision on the quantum of damages. Specifically, there were four main grounds of appeal, viz:

(a) on the issue of liability, whether cl 4 of the Deed applied to attach contractual obligations of, inter alia, supervision on Eric Ng;

(b) on the issue of damages, whether the contractual test of remoteness of damages should apply where there was concurrent liability in both contract and tort;

(c) still on the issue of damages, whether certain claims by SME were too remote; and

(d) whether the set-offs taken into account by the trial judge could in fact be so utilised.

Eric Ng’s appeal in Civil Appeal No 105 of 2006

3 On the other hand, Eric Ng’s appeal in Civil Appeal No 105 of 2006 (“CA 105/2006”) was against the trial judge’s findings on liability, damages and costs. Specifically, on the main issue of liability, there were four main grounds of appeal, viz:

(a) whether, on a proper construction of cl 1 of the Deed, Eric Ng had agreed to undertake certain duties to SME beyond his statutory duties as a qualified person (“QP”) under the Building Control Act (Cap 29, 1999 Rev Ed);

(b) whether Eric Ng owed certain duties in tort to SME to prevent economic loss; and

(c) if either ground (a) or (b) is answered in the affirmative, whether Eric Ng had breached the said duties.

Our decision at the end of the hearing

4 Since Eric Ng’s appeal in CA 105/2006 concerned the issue of liability, and it would be academic to consider the further issues on the quantum of damages should liability not be established, we decided to hear his appeal first. In the result, we allowed Eric Ng’s appeal against the trial judge’s decision on liability and dismissed SME’s appeal in CA 104/2006 accordingly. We now give detailed reasons for our decision.

Facts

Events leading up to the design-and-build contract and the Deed

The first design-and-build contract

5 The facts of this case are relatively uncontroversial. The unhappy saga began sometime in mid-1994, when SME desired to construct and complete a three-storey factory with an ancillary office (“the Factory”) to accommodate its expanding business. Towards the end of 1994, SME was introduced to Lim Chor Hua (“Lim”) of Pierre Marc Design (“PMD”). After a series of discussions, SME agreed to engage PMD as its design-and-build (“D&B”) contractor pursuant to an agreement dated 12 October 1994 (“the first D&B contract”), which terms were in turn embodied in a letter sent by PMD to SME on 10 October 1994. Although SME contended that the first D&B contract was in fact a consultants’ services agreement, the terms of the first D&B contract show quite clearly that it was meant to engage PMD as the D&B contractor for SME. In this connection, it is pertinent to note that SME’s Sunny Pang signed and embossed SME’s stamp on the letter dated 10 October 1994 beneath the words:

We, the undersigned hereby confirm to appoint you [PMD] as a [sic] Architects, Consultant Engineers as well as Tunkey [sic] Contractor in accordance with the content of the above [meaning the letter from PMD to SME dated 10 October 1994]. [emphasis added]

The term “turnkey contractor” is often used to describe D&B contractors. It has been said that it is intended to indicate that upon completion the key can be turned and everything will be ready: Stephen Furst & Sir Vivian Ramsey, Keating on Construction Contracts (Sweet & Maxwell, 8th Ed, 2006) at para 1‑029. It was thus clear from the terms of the first D&B contract that SME engaged PMD as its D&B contractor. Furthermore, it was also clear that the parties proceeded on the basis that the first D&B contract was valid and binding. For example, on 16 February 1995, after the said contract was entered into, PMD issued an invoice to SME based on the professional fee of 6.5% mentioned in the contract.

6 Sometime in early 1995, PMD applied to Jurong Town Corporation (“JTC”) for a plot of land for the purpose of constructing the Factory. On 14 January 1995, JTC granted to SME a two-year licence for a plot of land at Changi South Avenue 2. SME then applied for a bank loan, which required a cost estimate from PMD. In a letter dated 20 January 1995, Lim submitted his cost estimate under the letterhead of Pierre Marc Corporation Pte Ltd (“PMC”). PMC was the construction arm of PMD, and the total development cost quoted in this cost estimate was $4,631,415.40.

The second design-and-build contract

7 Subsequently, on 21 November 1995, Lim submitted a revised cost estimate (at $3,926,400) to SME. A detailed breakdown of the scope of works and services was enclosed with this cost estimate and it was also specifically stated that the estimated costs did not include, inter alia, the Temporary Occupation Permit (“TOP”) certificate clearance. At around the same time, SME engaged a quantity surveyor, Ng Boon Cheng (“NBC”), to evaluate the prices submitted by PMC to SME. This was apparently required for the purpose of SME’s loan application with its bank. NBC’s preliminary cost report was submitted to SME in November or December 1995.

8 In a letter dated 6 December 1995, SME accepted PMC’s cost estimate dated 21 November 1995 “based on [the] design and build concept” under its own letterhead. Although Eric Ng contended that SME “unequivocally accepted PMC’s offer”, it is clear that SME specifically stated in its letter dated 6 December 1995 that “[y]our [ie, PMC’s] scope of work include [sic] obtaining Temporary Occupation permit”. As such, this “acceptance” by SME was more properly a counter-offer, which was in turn accepted by PMC when it signed the acceptance at the end of the letter on 12 December 1995. This was the second D&B contract and what the parties had agreed to was evidently embodied within the terms of PMC’s cost estimate dated 21 November 1995 modified by SME’s letter dated 6 December 1995. Indeed, such an interpretation is supported by a statement contained in the latter letter, viz:

Your letter ref. PMC/SME/111/95 dated 21st Nov 1995 shall form as integral part of the award. Unless and until a formal contract is executed, this letter and your acceptance of the terms and conditions stated herein [referring to SME’s letter dated 6 December 1995] shall constitute a binding contract between us. [emphasis added]

New tenders

9 On about 12 March 1996, SME decided to hold back the project “[d]ue to the over budget for the … development”. This was recorded in the minutes of a meeting which had taken place between SME, PMC and other parties on 12 March 1996. By this time, the piling works had already been completed (they were in fact so completed on 15 January 1996) and the building permit for the Factory was received on 16 February 1996. PMC was thus ready to carry out the substantive construction works but this was halted as SME deferred its final decision to commence the construction works.

10 Subsequent to this temporary cessation of works fresh tenders were invited from other contractors. The reason for the fresh tenders is unclear. Whatever the reason, PMC submitted a lower revised quote of about $3,591,600 in a letter dated 27 August 1996, and this was similar to the quotation dated 23 April 1996 received from one Erecon Construction Co Pte Ltd, save for some additional items.

Further meetings and Eric Ng’s responsibilities

11 At a meeting between SME, PMC and other parties on 11 September 1996, SME expressed its doubts about PMC’s ability to undertake the construction and provided a counter-offer on various items in PMC’s offer in the letter dated 27 August 1996. At the meeting, it was further stated that Eric Ng was expected to obtain the TOP within two months of the completion of the Factory. A further meeting between the parties, including Eric Ng, took place on 24 September 1996. At this meeting, it was stated that Lim was “expected to sign [SME’s letter dated 11 September 1996] … [which] will become an integral part of the construction contract”. Further, it was also stated that “Eric Ng will from now chair all the meetings and will be responsible for monitoring the work of [PMC] and all the sub-contractors involved in the project … [and] will be responsible for noting all the minutes of the meetings” [emphasis added]. Subsequent to this meeting, PMC accepted in writing SME’s counter-offer on 30 September 1996 by signing the acknowledgement portion of SME’s letter dated 11 September 1996.

12 Between 6 December 1995 and 21 October 1996, Eric Ng performed various acts which amounted, according to SME, to the acknowledgement of his duties of supervision over PMC. For example, when the issue of a potential conflict of interest of the engineer employed by PMC was raised, it was decided at a meeting on 4 October 1996 that “the Structural engineer will now take instruction and receives [sic] his professional fee from Mr Eric Ng”. Further, on 14 October 1996, Eric Ng wrote to PMC warning PMC that its “failing to meet up [...