Employers' Right To Recover Costs Of Rectification Works Dented But Not Demolished By Defects Liability Clause

The English common law trend of allowing the recovery of damages for rectification of defects even where the defects liability period remains ongoing has been followed in a recent judgement from the High Court of Singapore in Thio Keng Thay v Sandy Island Pte Ltd [2019] SGHC 175. It is likely this approach would be mirrored by the Scottish and English courts and so this decision serves as a valuable reminder to UK-based employers that if they unreasonably prevent the contractor from carrying out rectification, and engage an alternative contractor to carry out the works, the quantum of damages recoverable will be limited.

Facts

Thio Keng Thay (the plaintiff) purchased a luxury residential property from Sandy Island Pte Limited (the defendant). After taking possession of the property, the plaintiff discovered a total of 492 alleged defects, including significant water damage, of which approximately 200 were accepted by the defendant. The plaintiff elected to employ a second contractor to remedy the defects and then sought damages for the cost of the works from the defendant. It was the defendant's position that under the sale and purchase agreement (the SPA) it had a right to remedy the defects during the defects liability period and that it had been prevented from exercising that right by the plaintiff. Therefore, the defendant submitted that the plaintiff was precluded from claiming damages in respect of the defects that they would have rectified if given the opportunity.

Decision

The High Court of Singapore found the defendant had breached the SPA due to the numerous and significant defects. Likewise, it found the plaintiff had breached the defects liability clause of the SPA by unreasonably preventing the defendant from carrying out the rectification works. Although the Court held that this did not preclude the plaintiff from recovering damages for the defects, it did find it relevant in assessing the quantum of damages. The judgement follows the Court of Appeal's approach in Pearce and High Ltd v Baxter [1999] EWCA Civ 789 and more recently in the Technology & Construction Court in MUL v Hutton Construction Limited [2014] EWHC 1797 (TCC) by limiting the amount of damages that can be recovered to the hypothetical amount...