SCL Singapore Essay Competition 2018 - 1st Prize Winner
Residential properties represent “a significant, if not the most significant, investment in an individual's lifetime.”1 This is especially so in Singapore, where “land is not only scarce but expensive.”2 Unfortunately, these properties frequently suffer from defects caused by the negligence of construction professionals.3 Recognising that homeowners should be protected from such negligence, Singapore courts have previously allowed claims in negligence for construction defects.4 However, this pro-purchaser stance has faced its demise following the Court of Appeal’s decision of MCST No 3222 v Tiong Aik Construction5 (‘Tiong Aik’). This essay will explain how Tiong Aik has neutered negligence claims for construction defects and explore measures that can be adopted to protect homeowners’ rights.
Part II briefly explains the law before Tiong Aik and the key takeaways from the case, while
Part III evaluates the current legal regime. Part IV then looks at how other jurisdictions protect homeowners before Part V proposes measures that can be adopted locally to ensure adequate protection for homeowners.
As a preliminary note, the following analysis concerns only private residential properties. Public housing is governed under a distinct statutory regime,6 while negligence claims are less pertinent for purchasers of commercial buildings because they are more capable of protecting themselves through contracts.7
II. Tiong Aik and its impact on negligence claims for construction defects
(A) The law pre-Tiong Aik
The existence of negligence liability for construction defects was confirmed by Singapore’s apex court in the 1990s, when it held that developers8 and architects9 owe a duty of care to avoid economic losses caused by construction defects. This duty similarly applies to contractors.10 Significantly, this duty is owed to parties who have no direct contractual relationships with these construction professionals,11 which includes management corporations and subsequent purchasers of residential properties.
Unsurprisingly, the law was designed to ensure greater recovery for homeowners. Without tortious recovery, liability for construction defects would only arise out of contract. This means that developers would be liable only to original purchasers, while contractors and architects would be liable only to developers. The rationale behind the court’s pro-purchaser stance is thus not difficult to fathom: as ‘real estate is … the most important class of assets held by the public, … a re-shaping of the law affecting purchaser rights [is necessary].’12
However, the Court of Appeal subsequently retreated from this stance in its 2005 decision of MCST Plan No 2297 v Seasons Park13 (‘Seasons Park’). It held that a developer may rely on the “independent contractor” defence to escape tortious liability if the defects can be attributed to the negligence of an “independent contractor”, such as the contractor or the architect.14 The developer need only show that the independent contractor was appointed with reasonable care.15 As the developer’s job scope differs vastly from that of the contractor or the architect,16 it is not difficult for the developer to show that it reasonably appointed the independent contractor.
Practically speaking, Seasons Park has made it difficult to hold developers liable in negligence for construction defects. Despite the strength of the independent contractor defence, its applicability to contractors and architects remained curiously unexamined until 2017, when Tiong Aik confirmed the broad applicability of the independent contractor defence to all parties involved in a construction project.
(B) What happened in Tiong Aik?
In Tiong Aik, the management corporation of Seaview condominium (‘Seaview’) had sued the developer (‘MV’), the main contractor (‘TA’) and the architect (‘RSP’) for defects in the condominium. The defendants all pleaded the independent contractor defence.
(1) The High Court decision
The High Court held that the independent contractor defence applied not only to MV qua-developer, but also to TA and RSP qua-main contractor and architect. As TA and RSP exercised reasonable care in appointing their own independent sub-contractors and sub-architects, they were not liable in negligence.17 In deciding so, the Court reiterated the foundational principle that negligence liability is fault-based, and thus a party should generally not be liable for the negligence of another.18 It also recognised that with increasing specialisation in the construction industry, a contractor should not be expected to be well-versed in, and responsible for, the work done by its sub-contractors.19
Notably, the Court rejected Seaview’s argument that TA and RSP owed a non-delegable duty to avoid causing economic losses for any defective works even when they had reasonably appointed independent contractors.20 It held that there was no non-delegable common law duty owed to Seaview because such a duty is exceptional and there are already non-delegable statutory duties under the Building Control Act.21 Nevertheless, the scope of these statutory duties did not extend beyond compliance with safety regulations.22
(2) The Court of Appeal decision
On appeal, it was reiterated that the facts were not sufficiently exceptional to warrant the imposition of a non-delegable common law duty.23 In particular, as the contracts that MV entered into with TA and RSP expressly contemplated the engagement of sub-contractors and sub-architects, the imposition of a non-delegable duty would undermine this contractual matrix.24 Additionally, given the increasing trend towards specialisation in the construction industry which necessitates sub-contracting, the imposition of a non-delegable duty would also be “excessively onerous”25.
Therefore, tortious liability no longer travels upstream following Tiong Aik. Aggrieved homeowners and management corporations can only effectively claim against the negligent sub-contractors or sub-architects directly responsible for property defects.
III. Is the current law satisfactory?
Tiong Aik is correct in affirming the cardinal principle that negligence liability is fault-based and in treating the contractor and the architect on the same footing as the developer. This is consistent with other jurisdictions: the UK has recognised the broad applicability of the independent contractor defence in 1989 with the House of Lords decision of D&F Estates v Church Commissioners for England and Wales26 ; and Australia has followed suit in 2009 with the High Court decision of Leighton Contractors v Fox.27
However, the reasoning behind the refusal to create a new non-delegable duty is less watertight. The reliance on the contractual matrix to defeat the non-delegable duty is rather curious, as a non-delegable duty by definition cannot be delegated away by contract.28 Additionally, the observation that increasing specialisation in the construction industry militates against a non-delegable duty is equally surprising. Increasing reliance on independent contractors can lead to greater systemic risks due to gaps in communication and management.29 In this context, greater specialisation ought to support, and not oppose, the creation of a non-delegable duty.30
Additionally, Tiong Aik may have undermined tort law’s focus on distributive justice.31 Negligence claims for construction defects can now be effectively made only against sub-contractors who are directly responsible for the defective works. However, these sub-contractors are often poor, under-insured and likely unable to meet these claims.32 On the other hand, the pool of affected claimants is considerable: the Singapore second-hand property market is substantial,33 and there are roughly 3000 management corporations in Singapore.34 Therefore, the unavailability of recovery against contractors and developers may subvert tort law’s role as “a tool for the redistribution of economic wealth fairly”.35
Admittedly, the reluctance to expose developers and contractors to liability is understandable given the difficulties plaguing the construction sector.36 However, this concern should not be exaggerated, as contractors can always obtain indemnities from their sub-contractors.37
The 2015 amendments to the standard sale and purchase agreement prescribed in the Housing Developers Rules38 are also insufficient to justify restricting tortious recovery. While the amendments allow a subsequent purchaser to sue a developer in contract during the defects liability period for faulty construction, this liability period only lasts one year after the property is sold to the original purchaser.39 This is inadequate, since newly-bought properties are usually not resold within a year and defects may take more than one year to be detectable. Moreover, these amendments do not allow claims against the contractor or the architect.
Lastly, Tiong Aik may encourage poor practices in the construction industry. The independent contractor defence incentivises developers and contractors to escape liability by outsourcing work. An increasing trend towards outsourcing risks a race to the bottom in terms of pricing, as tenders are generally awarded to the lowest bid.40 As contractors begin to cut costs, there is a knock-on effect on the quality and safeness of the completed works.41
In summary, homeowners should not be asked to bear the brunt of construction defects, especially when these defects are caused by circumstances beyond their control. In this regard, foreign jurisdictions provide pertinent examples of the measures that can be taken to ensure that homeowners are adequately protected.
IV. How do other jurisdictions protect homeowners?
An examination of the law in the UK, the US and Australia reveals that these countries have surpassed Singapore in protecting homeowners’ rights. This examination involves three questions: Who can claim? What can they claim for? How long do they have to claim?
(A) United Kingdom
In the UK, recovery for construction defects is governed by the Defective Premises Act42 (“DPA”), which adopts a statutory duty of care model.
The duties under the DPA are owed to subsequent purchasers: under s 1(1)(b), the DPA applies to anyone who “acquires an interest in the dwelling”. Section 1(1)(b) clearly includes a subsequent purchaser; however this provision arguably does not include management corporations, since management corporations have no proprietary interest in the common property under Singapore law.43 As a corollary, under s 1(1) these duties are owed by any person “taking on work for or in connection with the provision of a dwelling”. This includes, but is not limited to, contractors, architects and sub-contractors.44 Significantly, these duties are expressly non-delegable.45
Regarding the contents of these duties, s 1(1) requires work to be done “in a workmanlike manner … so that … the dwelling will be fit for habitation when completed”. “Workmanlike manner” refers to the carrying out of work with “proper skill and care”,46 which is to be judged by the standards prevailing at the date of completion.47 On the other hand, a dwelling that is “fit for habitation” must be capable of occupation for a reasonable time without risking the health and safety or the convenience of the occupants.48
The limitation period for these duties is six years from the time when the dwelling was completed,49 far exceeding Singapore’s one-year period.
(B) United States
The US has adopted the judicial warranties model: in every contract for the sale of a property, there are implied warranties that the property is fit for habitation and that the property was built in a reasonably workmanlike manner.50 However, these warranties are imposed not by statute, but through judicial pronouncements.51
Notably, the law differs in the different states regarding to whom these warranties are owed to. Where these warranties have a basis in contract, subsequent purchasers are excluded from protection owing to an absence of privity52. As a corollary, where these warranties are treated as independent of contract (i.e based on torts), subsequent purchasers are afforded protection.53
Regarding the content of these warranties, the warranty of fitness for habitation requires that basic shelter from the elements and reasonable comfort be provided.54 The standard of ‘workmanlike manner’ is also objective and can be determined with reference to industry standards in construction.55
Lastly, these warranties have a limitation period of between two to six years, depending on the statutes of limitation in individual states.56
In New South Wales, recovery for construction defects is governed by the 1989 Home Buildings Act57 (“HBA”), which adopts a statutory warranty model.
The HBA imposes certain warranties in every contract for residential buildings. Section 18D(1) provides that a “successor in title” to an original purchaser - subsequent purchasers - also enjoys the benefits of the warranties. These warranties are owed by developers and anyone doing work on behalf of the developer, i.e the contractor and the architect.58
Regarding the content of these warranties, in addition to warranties of fitness for occupation59 and reasonable workmanship60, the HBA also impose warranties that work will be done with due diligence61, with suitable materials62 and in compliance with the regulations.63 These warranties cannot be contractually excluded.64
The HBA also adopts a tiered system regarding limitation periods: warranties last for 2 years starting from the completion of the work unless there is a breach that results in major defects, in which case the limitation period is 6 years.65 Major defects are defects that are likely to cause the physical destruction of the building.66
V. The way forward
Singapore is clearly trailing behind in terms of homeowner protection. While greater protection is imperative, determining the contours of these protective mechanisms will not be straightforward.
Preliminarily, should these mechanisms be implemented legislatively or judicially? The legislative route seems to be more popular, and it is arguably more appropriate given that purchaser protection is primarily an issue of policy to which the legislature is more equipped to deal with.67 In particular, these statutory mechanisms can supplement provisions in the Building Control Act68 dealing with safety regulations.
Should the statutory duty of care or the statutory warranty model be adopted? As the statutory duty of care model has been criticised for being vague,69 A statutory warranty model that enumerates the responsibilities of contractors and developers in greater detail is preferable. The general warranties of habitability and fitness for purpose should be kept as a residual category, to capture situations beyond the ambit of the specific warranties.
Moreover, a tiered system similar to that of New South Wales should be adopted where longer limitation periods are given to breaches of warranties that lead to major defects. Such a nuanced approach would avoid exposing contractors and developers to excessive liability.
In conclusion, requiring purchasers to bear the risk of construction defects would not “mesh with the reality and the legitimate expectations of purchasers”.70 It is hoped that measures would be taken to ensure that residential properties do not become another cause for concern for Singaporeans.
Nguyen Sinh Vuong