Building and Construction Contracts: Airforce Officer Lieutenant Colonel Ng Boo Han Wins Appeal against Neighbour for Renovation Defects

Air Force Lieutenant-Colonel Ng Boo Han House

Singapore High Court: Ng Boo Han & Koo Oi Lian Audrey-Ann v Teo Boon Hiang Edward [2014] SGHC 267*

Ng Boo Han, a former Lieutenant Colonel in the Airforce, and his wife, Mdm Audrey-Ann Koo Oi Lian, have substantially won their appeal in the High Court against the decision of a District Judge who had substantially dismissed their renovation defects claim against their neighbour.

Ng Boo Han and his wife (the “Appellants”) had asked their neighbour Edward Teo Boon Hiang (the “Respondent”) to renovate / rebuild their home. The Appellants entered into a simple 2-page contract, drafted by the Respondent, where they gave the Respondent “free-hand rights” clause in the construction. Subsequently, the Respondent sued for inter alia unpaid balance sums while the Appellants counterclaimed for defective works. The District Judge (“DJ”) substantially found in favour of the Respondent, and held inter alia that the Appellants had agreed to give him a free hand to build a rustic, English-country type house, and could not complain that the Respondent’s work and the materials used were not up to industry standards, insofar as these reflected the parties’ agreed “rustic” style.

On appeal, the Singapore High Court (the “Judge”) overturned many of the DJ’s findings. The Judge held inter alia that: (1) the Appellants were impressed not so much by the rusticity of the Respondent’s house but by its unique façade and its efficient use of space. In other words, there was no agreement to build the house in a “rustic” manner; (2) however, because the contract gave the Respondent a “free-hand” in designing and building the Appellants’ house, it was open to him to build the house in a rustic manner if he so wished; (3) notwithstanding any such wide discretion, “the argument in relation to rusticity cannot be used to whitewash every flaw in the Respondent’s work”; (4) the Appellants did not act unreasonably in not signing the Respondent’s daughter’s defects list; (5) some of the DJ’s critical comments about the Appellants’ conduct (including accusations that they were “squeezing” the Respondent for more) appeared to be “rather excessive and unnecessary”, and were “best avoided”. In this regard, the Judge held that there was no evidence of bad faith or unconscionable behaviour on the Appellants’ part.

[* Characterist LLC’s Dominic Chan and Jenna Law, who were instructed by the Appellants at the appeal stage, successfully acted for the Appellants in this appeal.]

Decision Below

As stated above, the DJ substantially found in favour of the Respondent. He considered that the Appellants must have engaged the Respondent to build their house as they wanted to replicate his house. The Appellants gave the Respondent a free hand and cannot complain that the work and materials were not up to industry standards. Thus, the DJ ignored the expert evidence adduced by the Appellants stating that various aspects of the Respondent’s work were defective.

The DJ also found that the Appellants had failed to prove their claim for alleged rectification works because, amongst other reasons, their counterclaim was based on a quotation rather than actual invoices. Consequently, the DJ disallowed the Appellants’ claim for rectification costs save for the replacement of the zinc roof (because this was specified to be made of clay tiles).

The DJ rejected the Appellants’ claim for rental, storage and moving costs as he took the view that the Appellants’ refusal to sign the defects list offered by the Respondent’s daughter was unreasonable and prevented the Respondent from rectifying the defects.

Grounds of Appeal

On appeal, the Appellants contended inter alia that the DJ had erred in:

  • finding that the parties had agreed on building a rustic country-type house like the Respondent’s;
  • dismissing expert evidence on what constituted a defect;
  • finding that the Appellants had substantially failed to prove that the rectification works were carried out;
  • finding that the rectification works may have been more than rectification;
  • holding that the Appellants, by refusing to sign the defects list, had unreasonably prevented the Respondent from rectifying the defects.

The Appellants also applied for leave to adduce further evidence seeking to explain the inconsistency in the Appellants’ evidence regarding the cost of rectification works, which was the main reason why the DJ rejected their claim for rectification works.

Holding

The Judge dismissed the Appellants’ application to adduce further evidence. However, the Judge held that this ultimately did not affect the Appellants’ claim for the cost of rectifying defects.

In relation to whether the Appellants had in fact contracted for a “rustic” house like the Respondent’s, the Judge disagreed with the DJ’s finding. Even though the Judge declined to question the DJ’s assessment of the Appellants’ credibility as witnesses, he was of the view that the Appellants’ evidence, that they were impressed not so much by the rusticity of the Respondent’s house but by its unique façade and its efficient use of space, was corroborated by other objective facts.

First, the contract made no mention of the fact that the Appellants’ house was to be built in a “rustic” manner. Since it was drafted by the Respondent, he could have included this important point in the contract if it was indeed part of the parties’ agreement. Second, the “rustic” argument was only raised belatedly after the Respondent’s lawyers came into the picture. If the parties had indeed agreed to build a rustic house, one would have expected the Respondent to immediately point this out when the Appellants found fault with his work during the site inspections. But there is no evidence that he did so; instead he appeared to have accepted the Appellants’ criticisms and attempted to rectify the defects they pointed out.

That said, the Judge held that the contract did give the Respondent a “free-hand” in designing and building the Appellants’ house. Thus, even if this was not expressly stipulated, it was open to the Respondent to build the house in a rustic manner if he so wished. However, there is a limitation to such wide discretion. The Judge was of the view that “the argument in relation to rusticity cannot be used to whitewash every flaw in the Respondent’s work”. Items which were in breach of building regulations, were flawed on a functional level or which were a result of poor workmanship rather than a conscious aesthetic decision would clearly constitute defects which should have been rectified.

With the above principle in mind, the Judge went on to consider which items constituted defects. In considering this issue, the Judge noted that the Respondent failed to call his own expert witnesses to rebut the Appellants’ experts. Nor was the credibility of the Appellants’ experts seriously challenged under cross-examination. The Judge held that he must accept their evidence unless they are “obviously lacking in defensibility”.

The Judge allowed as damages two-thirds of the amount paid by the Appellants (S$99,250 out of S$150,000) to a third party contractor to rectify the defects. He also held that there has never been any rule that damages for defective works may only be awarded if the claimant proves that rectification works had in fact been carried out and paid for. Therefore, it was not essential that the Appellants had carried out the rectification works, and even if the DJ had disbelieved them on that score, he could still have gone on to award them damages based on the estimated cost of rectification. In any event, the Judge saw no reason to disbelieve the evidence of the Appellants’ third party contractor that he did carry out the rectification works and was paid S$150,000 by the Appellants.

The Judge further held that the Appellants had refused to sign the Defects List because “they considered it to be incomplete and did not want to bind themselves to an incomplete list of defects.” The DJ’s observation that the Appellants could have asked to amend the defects list before signing it flies in the face of the Respondent’s own evidence that he wanted to “tie down” the Appellants to the defects listed. Indeed, when the Appellants subsequently sent the Respondent a new defects list, the Respondent’s son replied stating that they were not willing to proceed with any additional works outside those listed in the original defects list. In the Judge’s view, the Appellants did not act unreasonably in not signing the defects list. The Judge awarded the Appellants costs of a lease extension for alternative accommodation, and removal and storage costs, due to inter alia the Respondent’s delay in completing the works.

Comments

This is an important decision which lays down the principles for construing the extent and limitation of a “free-hand” clause which appears to grant a contractor extremely wide discretion in a building and construction contract. Such wide discretion is in fact not unlimited, and cannot be used to “whitewash” items which “were in breach of building regulations, were flawed on a functional level or which were a result of poor workmanship rather than a conscious aesthetic decision.” Insofar as future contracting parties or customers wish to trust or empower their builder / contractor with such wide discretionary powers (e.g. for design and/or materials used), it would be imperative to expressly provide for the “style” of building, and to also expressly state that any works which breach building regulations, were functionally flawed, or were a result of poor workmanship, would constitute defects and must be rectified.

Another important point of law laid out or reiterated in this case is the principle that the normal measure of damages, in the case of defective construction works, is the cost of rectifying or completing the work. It was not essential that rectification works had in fact been carried out and paid for, and damages may still be awarded based on the estimated cost of rectification. To strengthen any defects claim (at least from an evidential point of view), it would be important for a building surveyor or an expert to properly and diligently document the defects as early as possible, as such documentation / record would form part of their expert report to justify the estimated cost of rectification. Generally, the estimated costs of repairs as provided by building surveyors or experts (typically backed up by one or more quotations from repair contractors) are preferred, rather than the estimates of non-expert repair contractors. Insofar as the repairs are carried out, it is important that the repairs works and invoices be properly documented by the repair contractor, as such evidence would be intensely scrutinized in Court.

Finally, the Judge laid down a good guiding principle for decision-makers in the future when they are writing or delivering their grounds of decision. In this case, he cautioned against the making of excessive or unnecessary comments or remarks [by the DJ] against the losing party. He opined that such “remarks are, in [his] view, best avoided as they simply serve to compound the losing party’s sense of grievance, and might compel them to lodge appeals to vindicate themselves even though the cost of appealing is out of proportion to the sums at stake.”

The usual disclaimer: All opinions expressed on www.singaporelitigationlawyer.com are entirely my own. Importantly, my opinions do not constitute legal advice and you should definitely formally engage a lawyer to confirm, vary or refute my views.

To Sue or Not to Sue: Demystifying Litigation in Singapore@www.singaporelitigationlawyer.com © Dominic Chan, a Singapore litigation lawyer. All rights reserved.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s