Case: Sandy Island Pte Ltd v Thio Keng Thay [2020] SGCA 86 – defects liability clause does not extinguish rights to claim damages in common law

Significance: Singapore Court of Appeal held that unless there are clear words or strong implication from express words in the contract, a defects liability clause in a property construction or development contract does not cause the owner/employer to lose its right to claim damages at common law for defects.

The Court held at [80] that unless there are clear words or a clear and strong implication from the express words used in a defects liability clause or in the contract, an owner or employer in a building and construction contract containing a defects liability clause does not thereby lose the right to a claim for damages at common law for defects in the building.

This right includes, where applicable, his common law right to claim for consequential damages like costs of alternative accommodation and associated expenses.

A defects liability clause typically confers a right on the contractor to return to site, to rectify defects at his own cost as well as the obligation to do so if called upon by the owner or employer.

There is the concomitant right of the owner or employer to require the contractor to return to site and rectify defects in the building.

These rights and obligations are dictated by considerations of practicality in dealing with such problems.

In addition, they confer on both contractor and owner or employer certain advantages.

Accordingly, if the owner or employer does not, without good reason, exercise this option to call for the contractor to return to site and rectify defects or having exercised that right, without good reason, prevents the contractor from carrying out such rectification, then such omissions or acts will impact on the owner’s or employer’s duty to mitigate and will be relevant to the amount of damages the owner or employer may recover from the contractor at common law.

What does or does not amount to good reason will depend on all the facts and circumstances of each case and it is not desirable to lay down any hard and fast rule.

The Court considered at [89] relevant Parliamentary material to come to its view that for defects beyond the defects liability period (DLP), homeowners can sue the developers for latent defects on grounds of negligence or breach of contract.

The Court also observed at [45]-[46] that there are many possible types of defects or combinations thereof that can arise in building and construction cases. It cannot be the case that the property purchaser or owner must continue to allow the developer or contractor multiple opportunities over the course of the defects liability period (DLP) to attempt to rectify such defects. Neither does the clause make provision for the situation where the owner or purchaser has to vacate the premises for the repairs to be carried out, for example, in the case of a defective staircase which requires demolition and the subsequent re-construction of the beam and staircase.

A Singapore Supreme Court summary of the case is found here.

If you need the services of a Singapore lawyer regarding defects in the construction of your property, feel free to contact me.

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