Sunny Metal and Engineering Pte Ltd v Ng Khim Ming Eric

Judgment Date15 December 2006
Date15 December 2006
Docket NumberSuit No 396 of 2004
CourtHigh Court (Singapore)
Sunny Metal & Engineering Pte Ltd
Ng Khim Ming Eric (practising under the name and style of W P Architects)

[2006] SGHC 222

Andrew Phang Boon Leong J

Suit No 396 of 2004

High Court

Civil Procedure–Costs–Principles–Plaintiff awarded sum much less than that originally claimed due to set-offs–Whether such outcome may be characterised as failure on plaintiff's part to prove its claim–Whether plaintiff entitled to costs–Contract–Remedies–Remoteness of damage–Applicable rules and principles of remoteness where concurrent liability in contract and tort existing–Limitation of Actions–When time begins to run–Plaintiff suing defendant in tort and in contract–Whether circumstances such that time beginning to run from contractual date of completion–Section 6 (1) (a) Limitation Act (Cap 163, 1996 Rev Ed)–Tort–Negligence–Damages–Pure economic loss–Applicable test for liability in negligence for pure economic loss

The main contractor of a construction project failed to perform up to expectations pursuant to a design-and-build contract it had with the plaintiff, resulting in delays and defects in construction. As the main contractor went into liquidation, the plaintiff brought an action against the defendant, the architect employed by the main contractor, based on a deed of indemnity (“the Deed”) entered into by the plaintiff and defendant, and also on the tort of negligence for pure economic loss. The plaintiff argued that the Deed established the requisite legal nexus between itself and the defendant.

As grounds for its action against the defendant, the plaintiff alleged a breach of cll 1 and 4 of the Deed. Clause 1 of the Deed stated that “the [defendants] warrant that they shall exercise reasonable skill, care and diligence in the performance of their duties to the Contractor and/or the [plaintiff]”. Clause 4 of the Deed stated that “the [defendants] shall indemnify and keep indemnified the [plaintiff] from and against all claims, demands, proceedings, damages, costs, charges and expenses arising out of or in connection with any breach of duty, whether in contract, in tort or otherwise”.

Held, allowing the claim in part:

(1) The court ought to give effect to the terms of the contract between the parties and to interpret such terms in the light of the surrounding circumstances as a whole. The plaintiff clearly intended the Deed to give it extra legal protection by subjecting the defendant, on a personal level, to legal duties that the defendant would not otherwise have had under the then existing build-and-design contract, under which the defendant owed no legal duties to the plaintiff. There was no other logical reason for the plaintiff insisting on the defendant signing the Deed in general and agreeing to cl 1 therein in particular: at [32].

(2) Clause 1 of the Deed could not be worded more clearly. The defendant owed the plaintiff a contractual duty of care under cl 1 of the Deed to assist in ensuring that the main contractor fulfilled its obligations under the design-and-build contract. Clause 4 of the Deed, however, did not give rise to a similar duty of care as it was an indemnity clause that necessarily presupposed liability incurred by the plaintiff toa third party. Clauses 1 and 4 of the Deed were separate and independent of each other, and dealt with different legal obligations. There had been a breach of cl 1 of the Deed on the facts of the present case: at [32] to [35].

(3) In so far as liability in negligence for pure economic loss was concerned, the applicable test was the “two-stage process” which, in substance and effect, was the same as the “two-stage test” laid down by Lord Wilberforce in Anns v Merton London Borough Council [1978] AC 728: at [87].

(4) The “two-stage test”, in turn, was the same as the “three-part test” in substance and effect. In fact, by confining the duty of care to its strictly legal form by incorporating only the two most essential elements, ie legal proximity qualified by policy, the “two-stage test” was superior to the “three-part test” which tended to complicate matters unnecessarily by introducing the first element of a factual conception of reasonable foreseeability. This factual requirement was redundant because it was almost always satisfied: at [52]to [55].

(5) The complementary concepts of “voluntary assumption of responsibility” and “reasonable reliance” aided the court's application of the test of proximity. The assumption of responsibility by the plaintiff was not only voluntary; it was contractual by virtue of the Deed. Given the fact that a defendant would not be allowed to be better off in tort than it would have been in contract where concurrent liability existed, then depending on the precise contractual terms, it was more likely than not that legal proximity was established when there was a contractual relationship between the parties concerned: at [63], [109] and [120].

(6) There was established, on the facts, both a duty of care as well as a breach of that duty: at [122] and [125].

(7) In the absence of direct authority as to when time may be said to have begun to run in the circumstances, the focus ought to be on the nature and scope of the duty agreed to be undertaken by the defendant, rather than merely on the form of the building agreement or arrangement between the relevant parties. The defendant owed the plaintiff a continuing duty to exercise reasonable care in the supervision of the project work carried out by the main contractor and the defendant's argument to the effect that time began to run from the date of contractual completion had to be rejected. The defendant's legal duty extended beyond the contractual completion date - if nothing else, because the main contractor was itself woefully derelict in its duties under its contract with the plaintiff and pursuant to the duty of care it owed the plaintiff under the law of tort. Such a duty continued up to the date when the main contractor had either practically or finally completed its work on the project itself: at [129], [131] and [132].

(8) The tortious principles of remoteness were broader than the corresponding contractual principles. Indeed, it would conduce towards more clarity if the phrase “reasonable foreseeablity” was utilised to describe the tortious principles of remoteness, and the phrase “reasonable contemplation” was utilised to describe the contractual principles of remoteness. This was simply because, apart from situations where there was concurrent liability in both tort and contract, a situation involving tortious liability would relate to parties who have had no prior relationship with each other; while in a situation involving contractual liability, there would, ex hypothesi, have been an existing (contractual) relationship between the parties. In such a situation, the parties would be expected to have provided for any reasonable contingencies that might have been expected to arise. Therefore, stricter rules and principles of remoteness obtained in the contractual - as opposed to the tortious - sphere: at [138].

(9) Where there was concurrent liability in both contract and tort, the stricter rules and principles of remoteness in contract ought to prevail: at [139] and [140].

(10) There would be judgment for the plaintiff, excluding claims for, respectively, the loss of use of the subject premises, the loss from the sale of the old factory, the loss of use of plant and machinery for the period between December 1997 and July 1999, the claims with respect to storage charges for the machines and container, as well as claims with respect to certain defects in the property. Two sums were also to be taken into account by way of set-off in ascertaining the amount of damages to be awarded to the plaintiff: at [142] to [156], [162] to [167].

(11) Although the plaintiff, as a result of set-offs, was awarded a sum much less than what it set out to claim, this could not be characterised as a failure on the part of the plaintiff to prove its claim - still less that it constituted nominal damages only. The final sum awarded did not reflect the actual loss or damage caused to the plaintiff. Having succeeded on all but one argument with respect to liability, and although the plaintiff failed on certain heads of loss, the plaintiff was still entitled to 70 per cent of its costs: at [170] and [173].

[Observation: The doctrine of consideration might be outmoded even outside the context of purely commercial transactions, even though commercial transactions constituted the paradigm example where the doctrine ought to be abolished. There were other possible alternatives available that could perform the tasks that the doctrine of consideration was intended to effect. These included the requirement of writing, as well as the doctrines of promissory estoppel, economic duress and undue influence: at [29] and [30].]

Alcock v Chief Constable of South Yorkshire Police [1992] 1 AC 310 (refd)

Anns v Merton London Borough Council [1978] AC 728 (folld)

Caparo Industries plc v Dickman [1990] 2 AC 605 (refd)

CHS CPO GmbH v Vikas Goel [2005] 3 SLR (R) 202; [2005] 3 SLR 202 (folld)

Chua Kwee Chen v Koh Choon Chin [2006] 3 SLR (R) 469; [2006] 3 SLR 469 (refd)

Chwee Kin Keong v Pte Ltd [2004] 2 SLR (R) 594; [2004] 2 SLR 594,HC (refd)

Chwee Kin Keong v Pte Ltd [2005] 1 SLR (R) 502; [2005] 1 SLR 502,CA (refd)

Cooper v Hobart (2001) 206 DLR (4th) 193 (refd)

Customs and Excise Commissioners v Barclays Bank plc [2005] 1 WLR 2082, CA (not folld)

Customs and Excise Commissioners v Barclays Bank plc [2006] 3 WLR 1, HL (not folld)

D v Kong Sim Guan [2003] 3 SLR (R) 146; [2003] 3 SLR 146 (refd)

Development Bank of Singapore Ltd v Yeap Teik Leong [1988] 2 SLR (R) 201; [1988] SLR 796 (refd)

Donoghue v Stevenson [1932] AC 562 (refd)

Foakes v Beer (1884) 9 App Cas 605 (refd)

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39 cases
13 books & journal articles
  • Tort Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2007, December 2007
    • 1 December 2007
    ...economic loss and based his decision largely on the restated duty of care test in Sunny Metal & Engineering Pte Ltd v Ng Khim Meng Eric[2007] 1 SLR 853, which was subsequently endorsed by the Court of Appeal in Spandeck Engineering (S) Ptd Ltd v Defence Science & Technology Agency[2007] 4 S......
  • Contract Law
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    • Singapore Academy of Law Annual Review No. 2018, December 2018
    • 1 December 2018, Chwee Kin Keong v Pte Ltd [2004] 2 SLR(R) 594 at [139] and Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 1 SLR(R) 853 at [29]. 9 [2018] SGHC 169. 10 See para 12.1 above. 11 Tan Kok Yong Steve v Itochu Singapore Pte Ltd [2018] SGHC 85 at [68]. 12 Tan Kok Y......
  • Contract Law
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    • Singapore Academy of Law Annual Review No. 2015, December 2015
    • 1 December 2015, Chwee Kin Keong v Pte Ltd[2004] 2 SLR(R) 594 at [139] and Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric[2007] 1 SLR(R) 853 at [29]). Certainty and completeness 12.11 It is trite law that a contract must be certain and complete before it can be enforceable. Anoth......
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    • Singapore Academy of Law Journal No. 2008, December 2008
    • 1 December 2008 was incorporated as the stage one test in the Caparo three-stage test. 78 See Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric[2007] 1 SLR 853. 79 Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR 100 at [76]. 80 Spandeck Engineering (S) Pte Ltd v D......
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