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The Seaview Decisions: Exploring the Independent Contractor Defence and the Scope of Non-Delegable Duties

Introduction

In Singapore, private developments such as condominiums which have multiple units and shared public common facilities (i.e. swimming pools) are managed by a body known as the management corporation strata title (the "MCST"). All registered owners of the development are members of the MCST. After the first Annual General Meeting, the property owners will appoint a management council, usually from the existing property owners or their nominees. They usually appoint a management agent as well from a professional property management firm. The management council and management agent will carry out the duties of the MCST, the key duty being to manage and upkeep the common property of a development. The MCST is a legal entity, and can sue or be sued.

Litigation commenced by the MCST for defects in the common property of a development has in the past few years been on the rise in Singapore, and accounts for a significant proportion of the current construction litigation in Singapore.

The earlier Court of Appeal decision of Management Corporation Strata Title Plan No 2297 v Seasons Park Ltd [2005] 2 SLR(R) ("Seasons Park") confirmed that a developer could avail itself to the independent contractor defence in a claim brought by the MCST for building defects.

However, the Singapore courts did not have the opportunity to explore whether other parties in a construction project could also avail themselves of this defence until the landmark decisions in the High Court case of Management Corporation Strata Title Plan No 3322 v Mer Vue Developments Pte Ltd and others (King Wan Construction Pte Ltd and others, third parties) [2016] 2 SLR 793 and the appeal in Management Corporation Strata Title Plan No 3322 v Tiong Aik Construction Pte Ltd and another [2016] 4 SLR 521 (collectively the "Seaview Decisions"). The Seaview Decisions have confirmed that the main contractor and architect can similarly rely on the independent contractor defence in a claim for building defects. In another significant aspect of the Seaview Decisions, the Singapore courts also rejected the imposition of a statutory and/or common law non-delegable duty of care on the main contractor and architect to build and design the condominium development with reasonable care.

Brief background

The MCST of "The Seaview Condominum" brought claims against the developer, the main contractor, the architect and the mechanical and electrical engineer in respect of building defects in the common property of the development. The developer, main contractor and architect had all pleaded the independent contractor defence (i.e. that they were not vicariously liable for the negligence of their independent subcontractors). This was tried as a preliminary issue along with, inter alia, the MCST's claim that the developer, main contractor and architect owed them a non-delegable duty of care to supervise, build and design the condominium development with reasonable care.

The Seaview Decisions

A. The Independent Contractor Defence

In line with the English approach, the High Court held that the overarching and fundamental test in determining whether a party is an independent contractor is whether the contractor "was performing services as a person of business on his own account" ("Independent Business Test"). The High Court also held that it would be easier to establish that a contractor is an independent contractor if he performs services in the course of an already established business of his own.

On the facts, the High Court held that the main contractor and architect were independent subcontractors vis-à-vis the developer, and the subcontractors engaged by the main contractor and architect were independent subcontractors on the basis of the Independent Business Test and the fact that the employer did not control the manner in which the work was to be executed. The court also found that parties had engaged their independent contractors with proper care after ensuring their competence and experience.

The High Court's findings in respect of independent contractors were not challenged on appeal.

B. Statutory Non-Delegable Duties

Both courts examined the issue of non-delegable duties which are personal duties owed by the employer for which responsibility cannot be delegated.

For statutory non-delegable duties, the High Court examined the provisions of the Building and Control Act (Cap. 29) ("BCA") as well as the Parliamentary debates on the BCA. The High Court found that the whole purpose of the BCA was to ensure safe building standards and practices. The extent of statutory non-delegable duties imposed on the main contractor and architect is limited to the responsibility to ensure building safety and construction in accordance with the relevant approved plans and building regulations and provisions of the BCA. It did not extend to workmanship or aesthetic defects. The High Court therefore did not allow the MCST's claim based on statutory non-delegable duties. The Court of Appeal upheld the High Court's decision.

C. Common Law Non-Delegable Duties

The Court of Appeal examined the issue of common law non-delegable duties. It endorsed the UK Supreme Court decision of Woodland v Swimming Teachers Association [2014] AC 537 ("Woodlands"). In order to find a non-delegable duty, there is a threshold requirement of showing that the facts fell within one of the established categories or had the features set out in Woodlands. The court will then take into account the fairness and reasonableness of imposing a non-delegable duty in the particular circumstances, as well as the relevant policy considerations in the Singapore context.

On the facts of the case, the Court of Appeal held that the degree of proximity and assumption of responsibility was not sufficient to establish a non-delegable duty of care. First, the MCST was never in the custody, care and charge of the main contractor and architect. Second, the MCST was not especially vulnerable or dependent on the protection of the main contractor and architect against the risk of injury as the MCST had other avenues of recourse. Third, the MCST as the successor to the developer could not be better than the developer's position – the main contractor and architect could avail themselves to the defence of an independent contractor if the developer had claimed against them in tort.

Comments

A. Clarifying the scope of duties of a main contractor and architect

The Seaview Decisions would be welcomed by the upstream players in the construction industry as it is now clear that the main contractor and architect are not subject to a non-delegable duty of care to build and design a development with reasonable care. They are able to rely on the independent contractor defence in tortious claims for building defects.

Subcontracting is the norm in the Singapore construction industry and specialist subcontractors are often required in a construction project. Given that the subcontractors are usually small and medium enterprises with an established business, most would fall within the definition of an independent contractor. It would therefore not be too difficult for main contractors to rely on the independent contractor defence.

There is still a duty to ensure that parties exercise proper care and due diligence in appointing an independent contractor. However, in the Singapore construction context, it would be difficult to find a breach of such a duty given that in most big construction projects, there is usually a formal tender exercise as well as a pre-qualification exercise to appoint subcontractors.

B. MCSTs will face more difficulty in commencing proceedings

The Seaview decisions have put more hurdles in the way of a MCST looking to commence an action for building defects. In particular, given that the MCST may need to bring claims directly against the relevant subcontractors, there will be a problem of identifying the correct defendants and the MCST may need to incur additional costs to take up additional applications (e.g. pre-action discovery) to establish the right party to sue. There will also be concerns as to whether the subcontractor has deep enough pockets to ensure that any judgment obtained is not merely a paper judgment.

While the MCST still has alternative recourses for breaches of contract and contractual warranties against the developer and main contractor respectively, contractual claims have their own set of problems. In particular, contractual claims are only available to proprietors who have purchased their units directly from the developer, and would not be available to sub-purchasers. Even if the MCST recovers damages for breaches of contract, the damages awarded would be proportionate to the share value of the units of the proprietors with direct sale contracts who have authorised the proceedings.

These difficulties are likely to discourage MCST from commencing proceedings for defects in the common property particularly where the sums claimed are not substantial.