4 April, 2016
In a landmark decision that affects the entire construction industry, the Singapore High Court has held in Management Corporation Strata Title Plan No 3322 v Mer Vue Developments Pte Ltd & Ors [2016] SGHC 38 (“MCST No. 3322 v Mer Vue”) that the Developer, Architect and Main Contractor of a construction project could rely on the defence of being independent contractors in a claim in tort against them for building defects, such that they were not liable for the alleged defects in tort.
The Management Corporation of The Seaview Condominium (the "MCST") claimed against the developer, Mer Vue Developments Pte Ltd ("Mer Vue") in respect of a list of defects in the development's common property. The main contractor and architect were joined in the suit, together with the mechanical and electrical engineer. Mer Vue argued that it could rely on the defence of "independent contractor" to the claim in tort by MCST, as it could show that it had delegated or entrusted the duties of design and construction to independent competent contractors to design and build the development. The High Court agreed that this defence was available to Mer Vue as developer, and the Court clarified for the first time that the architect and main contractor could also rely on the independent contractor defence.
The practical implications of this ruling mean that the MCST would have to pursue its claim in tort against the sub-consultants or sub-contractors responsible for the design or construction. This finding by the Court has far-reaching consequences on condominium owners and their management corporations, as well as on developers, main contractors and architects.
WongPartnership LLP acted for Mer Vue in the proceedings. This Update takes a closer look at the High Court's decision.
Proceedings brought on behalf of subsidiary proprietors
Independent contractor defence considered as preliminary issue
Principle of "independent contractor" previously applied in the context of a developer
Two main tests to distinguish between independent contractor and employee
Background
MCST brought proceedings on behalf of subsidiary proprietors of a condominium known as "The Seaview Condominium" (the "Development") against the developer Mer Vue, the main contractor Tiong Aik Construction Pte Ltd ("Tiong Aik"), the architect RSP Architect Planners & Engineers (Pte) Ltd ("RSP"), and the mechanical and electrical engineer Squire Mech Private Limited ("Squire Mech") (collectively, the "Defendants").
The action was based on contract and tort, and for breach of statutory duty under the Building Maintenance and Strata Management Act ("BMSMA"). Before the main hearing regarding the alleged defects in the Development, the High Court allowed the question of the applicability of the independent contractor defence as pleaded by Mer Vue, Tiong Aik and RSP, and the question of the existence of a private right of action for breach of statutory duty under the BMSMA to be tried as preliminary issues.
The Defence of "Independent Contractor"
The High Court reiterated the general principle that an employer is not vicariously liable for the negligence of an independent contractor, his workmen or agents in the execution of his contract. The Court further noted that the principle of "independent contractor" was authoritatively applied by the Singapore Court of Appeal in Management Corporation Strata Title Plan No 2297 v Seasons Park Ltd [2005] 2 SLR(R) 613 ("Seasons Park") in the context of a developer delegating its duty to build a condominium in a good and workmanlike manner to an independent contractor.
The Court noted that there were two main tests that should be used to distinguish an independent contractor from an employee/servant. The first was the "Control Test", which looked at the extent of the control exercised by the employer over the servant. However, the overarching and fundamental test in the inquiry was the "Independent Business Test", which looked at whether the contractor was performing services as a person of business on his own account. The Court noted that, generally, if a contractor performing services does so in the course of an already established business of its own, it was easier to apply the Independent Business Test as this pointed strongly to the contractor being an independent contractor performing a contract for services, as opposed to a contract of service.
Duty to exercise proper care in appointing independent contractor
Non-delegable duties in exceptional circumstances
No previous ruling on whether defence of "independent contractor" applied to other sub- contractors in the construction context
Architect was clearly an independent contractor with an established business of its own
The Court held that, even if it could be established that an independent contractor had been appointed, an employer still had a duty to exercise proper care in making such an appointment as liability may still arise due to the employer's negligence in selecting and appointing an independent contractor.
The High Court in the present case noted that in Seasons Park, the Court of Appeal had set out some "exceptions" to the general rule of independent contractors. These were premised on a primary and personal non-delegable duty owed by the employer to the claimant and included such situations as extra-hazardous acts commissioned by employers who have the non-delegable duty imposed on them to ensure care is taken, and non-delegable duties of employers for the safety of employees.
There were also non-delegable duties that arose by statute. However, the Court noted that non-delegable duties were exceptional and the categories of such should not be readily or easily expanded.
Whilst the Court noted that the availability of the independent contractor defence to a developer in the construction context had been affirmed by the Court of Appeal in Seasons Park, it observed that the application of the defence as pleaded by various parties involved in the development process with various levels of sub-contracting had not yet been explored. The Court noted that commercially, the complexities of modern buildings and the growth of specialisation had necessitated reliance on specialist sub-contractors, even by construction professionals such as architects. However, the Court noted that it would naturally follow that there must be extensive communication, discussions and coordination of work between the various parties, which may cause certain problems with the Control Test, particularly for main contractors who would exercise a high degree of supervisory control on site.
In applying the tests for distinguishing between an employee and independent contractor to the present case, the Court found that RSP was an independent contractor of Mer Vue. The Court first looked at the level of control exercised by Mer Vue as developer over the architect RSP's performance of its work. In this regard, the MCST had argued that the Architect Agreement between Mer Vue and RSP expressly provided for a situation where RSP could engage other consultants with the prior written approval of Mer Vue, and Mer Vue had expressly approved five named consultants to provide specialist services to RSP. The Court held that it was crucial to note that in the construction context, the owner developer was entitled to tell its architect what to do in terms of setting the project brief, defining its requirements and making certain aesthetic decisions that affected the development's commercial value and strategic positioning in the market. This did not go to establishing control over the manner of execution of RSP's design and supervision responsibilities. Based on the evidence, the Court held that RSP was clearly an independent contractor of Mer Vue as it was performing architectural and consultancy services in the course of an established business of its own, as a body corporate, with its own employees and taking on separate financial risks and responsibility for its own management.
Main contractor also independent contractor as developer had no control over the manner of performance of work
No private right of action where criminal sanctions or alternative remedies existed
Similarly, the Court found that Tiong Aik was also an independent contractor of Mer Vue, as on the facts, Mer Vue had no control over the manner in which Tiong Aik performed its work. Further, the Court held that Tiong Aik's sub-contractors were also independent contractors of Tiong Aik. Whilst the Court found that Tiong Aik would not be liable for the tortious acts of its independent contractors with respect to the alleged defects, the Court noted that this was barring any evidence that may arise in the upcoming trial establishing that Tiong Aik had condoned negligence on the part of any sub-contractor after coming to know that the sub-contractor's work was done in a defective way.
Was There A Breach of Statutory Duty By Mer Vue?
The Court also addressed the question of whether an alleged breach of the statutory duty to maintain the common property of developments by a developer under the BMSMA gave rise to a civil right of action against Mer Vue as the owner developer of the Development. The Court held that the general rule was that where criminal sanctions were provided in the event of a breach of statutory duty, there was no private right of action. Referring to the provisions of the BMSMA, the Court held that in the event of breaches of statutory duties, the BMSMA provided for criminal sanctions as well as alternative remedies to enforce the owner developer's duty to maintain the common property of the development. Therefore, the Court declined to find that there existed a private right of action against Mer Vue.
Our Comments / Analysis
The decision of the High Court in MCST No. 3322 v Mer Vue has far-reaching implications on condominium owners and their management corporations as well as on developers, main contractors and architects, the key professionals in the construction industry and all building projects. Following from the High Court’s decision, the “independent contractor” defence, which was previously available only to developers, has now been extended to main contractors and architects as a defence to a claim brought by an MCST in tort for alleged building defects. As such, where a main contractor and the architect are entitled to rely on the independent contractor defence to the MCST’s claim in tort, the MCST would have to pursue its claim against the sub- contractors or sub-consultants responsible for the design or construction.
Further, the High Court also clarified the scope of a developer’s liability where it is in breach of a statutory duty to maintain a development. MCST No. 3322 v Mer Vue makes it clear that no civil liability will arise where there is an alleged breach of statutory duty under the BMSMA on the developer’s part to maintain the common property of a development.
For further information, please contact:
Christopher Chuah, Partner, WongParntership
christopher.chuah@wongpartnership.com
