7 December 2023

Defects And Damages

In Terrenus Energy SL2 Pte Ltd v Attika Interior + MEP Pte Ltd [2023] SGHC 333, the High Court dealt with a variety of commonly encountered issues in construction disputes.
Singapore Real Estate and Construction
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In Terrenus Energy SL2 Pte Ltd v Attika Interior + MEP Pte Ltd [2023] SGHC 333, the High Court dealt with a variety of commonly encountered issues in construction disputes. This blog sets out a quick discussion on the portion of the judgment related to defects and damages.

Background. The plaintiff, Terrenus Energy SL2 Pte Ltd ("Terrenus") employed the defendant, Attika Interior + MEP Pte Ltd ("Attika") as the main contractor to construct a "Ground Mount Solar Energy Facility" (the "Solar Farm") and "Linkway Solar Generation Facility" (the "Linkway") at Changi Business Park (the "Project") ([1]).

Disputes arose, and Terrenus sued Attika for damages allegedly arising from defects and for liquidated damages and general damages arising from delay, while Attika claimed that it was entitled to extension of time and counterclaimed for payment of the balance of the Contract price ([1]).

The defect. One of the defects alleged by Terrenus was that Attika had failed to install certain supporting rods ("PEG Rods") to a depth of at least 500mm below ground, and that Attika had therefore breached the contract ([13]). For the purposes of this blog, we will discuss this aspect of the case.

Terrenus submitted that as long as there was a departure from contractual specification, there would be a defect ([14]).

To prove the extent of non-compliance, Terrenus relied upon ([15]):

  1. An estimation by its structural expert, Mr David Satchell ("Mr Satchell") for the total number of affected panels;
  2. Certain photographs taken by Mr Bong Eng Yueh ("Mr Bong"), the Deputy Head of Engineering, Project & Operations of Terrenus Energy at Mr Satchell's request; and
  3. Certain reports (the "Joint Inspection Records") and on-site photographs taken by Mr Bong.

And Terrenus sought to claim for a measure of loss based on rectification for the alleged insufficient embedment and submitted that "the burden is on Attika to prove that damages based on complete reinstallation is unreasonable or disproportionate" ([20]).

The Issue. While the High Court agreed that the minimum depth was a contractual specification which Attika was obliged to comply, the High Court observed that "What is in dispute is whether the extent of non-compliance and the consequence of such non-compliance is that alleged by Terrenus, such that Terrenus is entitled to substantial damages, and whether the measure of damages based on the rectification costs of complete reinstallation of the solar panels is reasonable." (emphasis in original)

Whose Burden. The High Court then held that the burden fell on Terrenus, as the claimant, to prove:

  1. The extent of non-compliance;
  2. That the non-compliance resulted in the alleged structural risks such that Terrenus is entitled to substantial damages; and
  3. That the measure of damages claimed by Terrenus is reasonable.

In doing so, the High Court relied upon s. 103(1) of the Evidence Act 1893 (the "EA"), as well as the cases of Gimpex Ltd v Unity Holdings Business Ltd and others and another appeal [2015] 2 SLR 686, Ser Kim Koi v GTMS Construction Pte Ltd and others and another appeal [2023] 1 SLR 1097, and Robertson Quay Investment v Steen Consultants Pte Ltd [2008] 2 SLR(R) 623 ([32]).

Why was this important?

This was important because the High Court observed that Terrenus had sought to bolster its claim by pointing to the lack of contrary measurements or evidence from Attika ([33]).

The High Court held that these submissions by Terrenus were "misconceived" as Terrenus had the burden to prove its case ([33]).

And the High Court held at [34] that Terrenus failed to discharge its burden of proving its claim for substantial damages for Attika's non-compliance as Terrenus had not proven the extent of non-compliance and could not show actual loss, and Terrenus could not prove that the non-compliance resulted in structural risks.

We now turn our focus to the High Court's holding on the extent of non-compliance, as there are issues raised there which are important to note.

Extent of non-compliance. The High Court found that Terrenus failed to prove the extent of non-compliance due to "numerous difficulties" with Terrenus's evidence.

Among others, the High Court noted the following:

  1. At [35(a)], the High Court noted that the Joint Inspection Reports were not in fact "joint inspections" at all, and were produced by Terrenus acting alone. As such, while they formed part of Mr. Bong's evidence, "there is no basis for the veneer of impartiality that was put forward by presenting it as having been derived from "joint inspections"."
  2. At [35(b)], there was an issue with the photographs as Terrenus had photographed both compliant and non-compliant PEG rods.
  3. At [35(c)], Terrenus was unable to match the photograph to any specific PEG Rod for the solar panels that were alleged to the affected. As the High Court stated at [35(c)], "Mr Bong accepted that it is unclear which photograph relates to which solar panel, and that such matching could have been done for all 71 solar arrays, and that matching ought to have been done, so that there can be reliable evidence for the court." (emphasis in original).
  4. At [35(d)], the method of measurement casted doubt on the accuracy of measurements as they failed to show the starting point for the measurement, resulting in it being unclear if the starting point was corrected placed. The High Court noted that "[t]his is exacerbated by the cumulative effect of other methodological issues", such as some measurements being taken in a slanted manner, rather than flush with the PEG Rod.

When it comes to construction disputes, photographs are commonly taken and relied upon to prove defects. While generally, most photographs are relatively clear on what they show, the High Court's observations are an important reminder that you should check your photographs and see if they can be relied upon to prove what you want them to show.

For example, as in this case, if the photograph is meant to prove a measurement, an extreme "close-up" may perhaps be inappropriate if it does not show the starting point or how the measurement was taken.

Further, if you cannot link the photograph to the alleged defect, then perhaps if it is worth considering if the photograph should be ­re-taken.

Sampling? Terrenus also submitted that a "sampling approach" would discharge Terrenus's burden of proving the extent of non-compliance and that there was no requirement to have a photograph for each defect.

However, the High Court was not convinced that a "sampling approach" would have been appropriate.

Contrasting the present case with that in Ramo Industries Pte Ltd v DLE Solutions Pte Ltd [2020] SGHC 4 and Millenia Pte Ltd (formerly known as Pontiac Marina Pte Ltd) v Dragages Singapore Pte Ltd (formerly known as Dragages et Travaux Publics (Singapore) Pte Ltd) and others (Arup Singapore Pte Ltd, third party) [2019] 4 SLR 1075, the High Court observed that "... the defects in those cases arose in relation to standardised, manufactured products. In contrast, the defects in this case are alleged to arise from installing solar panels on a flat gradient notwithstanding a slope profile (above at [16]) and Mr Satchell admitted that the type of slope, and whether there is even a slope to begin with, depends entirely on the specific location of each solar array. Consequently, it is questionable whether Mr Satchell's estimation can even be properly regarded as an instance of the "sampling approach"." (at [37]).

The High Court further stated that even if a sampling approach was accepted, "the samples relied on in the estimation itself were ridden with extensive measurement and identification problems" (at [38]).

As such, "... even within what Terrenus claims to be a "sample", there is insufficient assurance that the measurements are sufficiently accurate for any extrapolation to even be made ... if a claimant seeks to rely on a more flexible approach to proof, the law nevertheless requires that the claimant demonstrate that it has attempted its level best to prove its loss and that the available evidence is cogent ... Crucially, the fundamental assumption that Mr Satchell's estimate is based upon, that there is non-compliance within a given area because the solar arrays rest on sloping ground (above at [16]), was not supported by any other evidence such as a topological survey. The foundational basis of Mr Satchell's estimate therefore rests on unstable ground." (emphasis in original; [38]).

Conclusion. This is an important reminder that a claimant seeking to claim damages for a defect must not only prove that there was a defect, but that the defect resulted in a loss for the claimant which entitles the claimant to claim for substantial damages.

Further, a claimant must properly muster evidence to prove its case.

While it may be tempting to adopt a "more flexible" approach when it comes proving damages such as via adopting sampling, it is important to bear in mind that the High Court has cautioned that the claimant bears the burden of convincing the Court of the cogency of such an approach.

If there are issues with the evidence relied upon in the sampling exercise, or a problem with the foundational premise or methodology adopted by the sampling exercise, a claimant may find that it has failed to prove its case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

7 December 2023

Defects And Damages

Singapore Real Estate and Construction


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