RSP Architects Planners & Engineers (formerly known as Raglan Squire & Partners FE) v Management Corporation Strata Title Plan No 1075 and another [1999]_2_SLR(R)_0134

134 SINGAPORE LAW REPORTS (REISSUE) [1999] 2 SLR(R)

RSP Architects Planners & Engineers (formerly known as Raglan Squire & Partners FE)

v Management Corporation Strata Title Plan No 1075

and another

[1999] SGCA 30

Court of Appeal — Civil Appeal No 246 of 1998Yong Pung How CJ, M Karthigesu JA and L P Thean JA9 March; 30 April 1999

Professions — Architects — Negligence — Standard of care expected of architects

Tort — Negligence — Duty of care — Falling bricks and tiles damaging one unit inanother block — Management corporation rectifying works — Whether architectsowe duty of care to management corporation — Whether architects liable formanagement corporation’s pure economic losses

Facts

Falling bricks and brick tiles from a wall of a condominium block damaged oneof the units in another block. The first respondent, Management CorporationStrata Title Plan No 1075 (“MCST”), incurred costs in carrying out rectificationworks to the damaged property and to all wall claddings (which had not fallen)to avoid any future injury to persons and/or damage to property. It sued theappellant RSP Architects Planners & Engineers (“RSP”) for negligence in thedesign and supervision of the construction of the condominium walls. RSPasserted that as there was no proximate relationship between RSP and MCST,RSP owed no duty of care to MCST resulting in their liability for the pureeconomic loss suffered by MCST. RSP, alternatively, claimed that the failure ofthe wall claddings was due to the bad workmanship of the second respondentEngineering Construction Pte Ltd, the main contractor, and sought anindemnity and/or contribution from it in third party proceedings. The maincontractor argued that the failure was due to the lack of movement joints in thestructure of the walls and not any lapse in its workmanship. The High Courtallowed MCST’s claim and dismissed RSP’s claim against the main contractor.RSP appealed.

Held, dismissing the appeal:

(1) To establish duty of care, the approach should be as follows: the court firstexamines and considers the facts and factors to determine whether there wassufficient degree of proximity in the relationship between the party who hadsustained the loss and the party who was said to have caused the loss whichwould give rise to a duty of care on the part of the latter to avoid the kind of losssustained by the former. Having found such degree of proximity, the court nextconsidered whether there was any material factor or policy which precludedsuch duty from arising: at [31].

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[1999] 2 SLR(R)RSP Architects Planners & Engineers v

MCST Plan No 1075 135

(2) There was sufficient degree of proximity in the relationship between thearchitects and MCST resulting in the architects owing a duty to exercisereasonable care to avoid the loss sustained by MCST. They knew that MCSTwhich would be in charge of the common property would rely on their care andskill in the design and supervision of the construction of the common property.There was an assumption of responsibility of professional competence on thepart of the architects. MCST depended on the architects to get the design of thebuilding right: at [38] and [39].

(3) The amount recoverable was determinate, the person to whom thearchitects were liable was definable and the time span was not indeterminate:at [41].

(4) The investment in real property was likely to represent a significant, if notthe most significant, investment in an individual’s lifetime (as opposed to thepurchase of a mere chattel). Also, the permanence of the structure may give riseto a greater expectation than a chattel. The above arguments applied a fortiori inSingapore where land was not only scarce but expensive: at [43].

(5) The architects were, however, in breach of their duty in the design of thewalls and not in the supervision as the causes for the failure of the wall claddingswere inadequacies in the design. Even if the walls had been built to the utmostquality, they would still have collapsed because of the poor design: at [47] and[57].

Case(s) referred toAnns v Merton London Borough Council [1978] AC 728 (refd)Bryan v Maloney (1995) 128 ALR 163 (refd)Caparo Industries plc v Dickman [1990] 2 AC 605 (distd)Council of the Shire of Sutherland, The v Heyman (1984–1985) 157 CLR 424

(refd)D & F Estates Ltd v Church Commissioners for England [1989] AC 177 (not folld)Dutton v Bognor Regis Urban District Council [1972] 1 QB 373 (refd)Governors of the Peabody Donation Fund v Sir Lindsay Parkinson & Co Ltd

[1985] AC 210 (refd)Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (refd)Invercargill City Council v Hamlin [1996] AC 624; [1994] 3 NZLR 513 (refd)Junior Books Ltd v Veitchi Ltd [1983] 1 AC 520 (refd)Murphy v Brentwood District Council [1991] 1 AC 398 (not folld)Portsea Island Mutual Co-operative Society Ltd v Michael Brashier Associates

(1990) 6 PN 43; (1990) 6 Const LJ 63 (refd)RSP Architects Planners & Engineers v Ocean Front Pte Ltd [1995] 3 SLR(R) 653;

[1996] 1 SLR 113 (folld)Winnipeg Condominium Corporation No 36 v Bird Construction Co (1995)

121 DLR (4d) 193 (refd)Yuen Kun Yeu v Attorney-General of Hong Kong [1988] AC 175 (refd)

Legislation referred toDefective Premises Act 1972 (c 35) (UK)



Wong Meng Meng SC, Mohan R Pillay and Lawrence Tan (Wong Partnership) for the appellant; Woo Bih Li SC and Rodney Keong (Bih Li & Lee) for the first respondent; Philip Jeyaretnam and Samuel Lee (Helen Yeo & Partners) for the second respondent.

[Editorial note: This was an appeal from the decision of the High Court in [1998]SGHC 302.]

30 April 1999

L P Thean JA (delivering the grounds of judgment of the court):

1 This appeal arose from an action instituted by the first respondents,the Management Corporation Strata Title Plan No 1075 (“MCST”), againstthe appellants, RSP Architects Planners & Engineers (Raglan Squire &Partners FE) (“RSP”), claiming damages for negligence in the design andsupervision of the construction of a condominium called Eastern Lagoon IIsituate at East Coast Road. RSP while denying liability took out third partyproceedings against the second respondents, Engineering Construction(Pte) Ltd (“EC”), who were the main contractors of the condominium,claiming against them an indemnity or contribution. The action was heardbefore Judith Prakash J. She allowed the claim of MCST against RSP anddismissed RSP’s claim against EC. Against her decision RSP appealed. Wedismissed the appeal and now give our reasons.

Facts

2 The Eastern Lagoon II and another condominium called EasternLagoon I, are two separate developments forming the Eastern Lagooncondominium which was developed by the developers, Eastern Lagoon PteLtd. The developers appointed RSP as the architects and engineers and ECas the main contractors for the development.

3 The Eastern Lagoon II condominium comprises two separate 19-storey apartment blocks, the Virgo and Gemini blocks. Flanking each sideof the Virgo block is a three-storey block of walk-up apartments,maisonettes and townhouses, known as the Taurus and Capricorn blocks.Similarly the Gemini block is flanked on either side by three-storey blocks,named Libra and Aquarius. Design of the project commenced in 1973 andwas completed in 1981. Following the grant of written permission by theDevelopment Control Division of Public Works Department (“PWD”),construction commenced in July 1982 and was completed inSeptember 1984. The certificate of fitness for occupation was granted on20 July 1985. MCST, the management corporation of the condominium,was constituted on 5 April 1986.

4 Some six years later, on 20 November 1992, bricks and brick tilesforming part of a gable end wall of the Gemini block fell onto unit #03-01 of




the Libra block causing damage to the roof and contents of that unit.Shortly thereafter, MCST appointed M/s Murray North (SEA) Pte Ltd(“Murray North”), who are the structural engineers and chartered buildingsurveyors, to investigate and report on the damage and potential dangersarising from this incident.

5 In May 1993, PWD having been informed of the failure of the wallcladdings considered that the condition of the external walls of the twotower blocks was likely to be dangerous and issued an order dated29 May 1993 requiring MCST, among other things, to appoint aprofessional engineer to inspect the condition of the walls and execute suchrectification works as were necessary.

The walls

6 The external walls of the high-rise blocks were constructed as follows.The skeleton of each high-rise block consisted of horizontal concrete slabs,demarcating each storey of the block. The slabs were supported by concretepillars. Together, the vertical columns and horizontal beams constituted areinforced concrete frame. The spaces between the columns and beamswere then filled up with panels of brickwork to form what are known as“gable end walls”. Originally the brickwork panelling was designed as solidwalls, but subsequently owing to a design change, the brickwork wasdesigned as a cavity wall which was made up of an inner and an outer layers(or “leaves”) of brickwork with a cavity being present in between the twolayers. To achieve a uniform external appearance, the faces of the verticalcolumns and horizontal beams of the reinforced concrete frame werecovered with brick tiles. These brick tiles were laid over and affixed to theconcrete slabs and pillars with a sand and mortar paste. In order for theexternal bricks to be made flush with the brick tiles, it was necessary to laythe bricks with some “overhang”, ie the laid bricks jutted out over theprecipice of the concrete slab to the measurement of the thickness of thebrick tiles. For our purpose, the bricks and brick tiles of the external wallsare referred to as “wall claddings”.

7 The external walls and brick tiles are common property over whichMCST has the management and control. The wall claddings failed at onlyone location, namely, the fifth storey of one of the gable end walls ofGemini block. MCST, however, carried out rectification works to all gableend walls of both the tower blocks. They also repaired the roof of unit #03-01 of Libra block and made good the damage there. The bulk of their claimwas for the costs and expenses incurred in carrying out the rectificationworks. It was their case that although there was only one incident of fallingtiles and bricks, the wall claddings had failed throughout the gable end wallsand had to be repaired before any further injury or damage occurred. Theyasserted that the main cause of the failure was the absence of movementjoints in the structure of the walls and that the failure was contributed to by



the inadequacy of wall ties, the inadequate roughening of the concretesurfaces and the inadequate support of brickwork, and that theseinadequacies were caused by the negligence of RSP in the design andsupervision of the construction of the walls.

8 In their defence, RSP asserted that they owed no duty of care to MCSTin respect of either the design or the supervision. This was because thedamage sustained by MCST by reason of the failure of the claddings waspurely economic loss, and RSP did not stand in such a relationship ofproximity to MCST that they could be made responsible for pure economicloss. RSP’s alternative stand was that the failure of the claddings was due tobad workmanship on the part of EC, the main contractors, and that as theyhad supervised the works adequately they could not be made responsiblefor sheer bad workmanship. They said that the absence of movement jointsin the claddings had nothing to do with the failure and, in any event, theywere not negligent in failing to provide for such joints in the design as theyhad acted in accordance with local architectural practice at the time ofconstruction in deciding that movement joints were not necessary for thetower blocks of the condominium.

9 RSP’s claim against the third party was based on their allegation thatthe failure of the claddings was caused or contributed to by badworkmanship for which EC were responsible. Accordingly, EC were liableto indemnify RSP against their liability, if any, to MCST. EC’s stand wasthat the failure was due to the absence of movement joints and not to anylapse in their workmanship and, in any event, the tiling works were carriedout by independent subcontractors for whom they have no responsibility intort.

10 Judith Prakash J allowed the MCST’s claim against RSP and dismissedRSP’s claim against EC. Firstly, she held that the architects owed a duty ofcare to the MCST to avoid the loss sustained. Secondly, she found as a factthat the architects’ design had fallen short of the requisite standard of care.Thirdly, she exonerated EC from liability, holding firstly that the architects’design was so flawed that the quality of the construction was irrelevant, andsecondly, that EC having delegated the task of constructing the walls toindependent contractors could not be held liable for any failure or badworkmanship in such construction.

The appeal

11 Before us, the learned trial judge’s decision was challenged on threemain grounds. Firstly, RSP, as architects, owed no duty of care to the MCSTin respect of the design of the condominium in so far as purely economicloss was concerned. Secondly, it was contended that even if they owed aduty of care to the MCST, they had met the standard of care demanded ofthem. In other words, they claimed that their design was sound and thattheir supervision of the construction was adequate. Thirdly, the appellants




contested the learned trial judge’s determination that no order for anindemnity or contribution should be made against EC, the third party.

Duty of care

12 Although the falling bricks and brick tiles caused physical damage tothe roof and contents of the unit #03-01 of the Libra block, which MCSThad made good, the main expenses incurred by them were in respect ofrectification of the wall claddings, which had not fallen, so as to avoid anyfuture injury to persons and/or damage to property. These were theexpenses which MCST sought to recover from RSP and they were not losssustained in consequence of injury to person or damage to property. Theywere pure economic loss. The first issue in this appeal was one of law, andthat was whether RSP owed a duty of care to MCST to guard against sucheconomic loss.

13 The question whether a duty of care is owed by the developers of acondominium (as contradistinct from the architects) to the managementcorporation of the condominium was considered by this court at length andwas decided in the affirmative in RSP Architects Planners & Engineers vOcean Front Pte Ltd [1995] 3 SLR(R) 653. In the instant case, the learnedtrial judge applied a similar line of reasoning in Ocean Front in analysingthe relationship between the architects, RSP and the managementcorporation, MCST, and held that the architects owed a duty of care toMCST to avoid the loss sustained. She reasoned thus (MCST Plan No 1075 vRSP Architects Planners & Engineers [1998] SGHC 302 at [14]–[15]):

14 I have, therefore, as a first step, to consider the relationshipbetween the defendants [RSP] as architects for the condominium andthe plaintiffs [MCST] who as its management corporation arestatutorily entrusted with the maintenance, upkeep and repair of itscommon property. Although the two situations are obviously notidentical, many of the factors which the Court of Appeal foundestablished a very close relationship between the developers and themanagement corporation in Ocean Front also exist in this case.

15 The factual situation is as follows. The decision to construct acondominium was made by the developers. They, however, broughtthe defendants into the project at a very early stage and it was thedefendants who bore the responsibility for the design of thecondominium and who also undertook to supervise its construction inaccordance with the general responsibilities of architects in Singapore.It was the defendants who decided what the tower blocks should looklike and chose the type of wall cladding to be used for its external walls.They undertook the obligation to design the condominium so as toensure that it was a safe structure and were alone responsible for thedesign. They were involved in the project almost every step of the wayup to completion of construction and issue of the certificate of fitnessfor occupation. They would have been aware that the developers haddecided to apply for subdivision of the condominium and that



accordingly each lot in the subdivided building would have a separatesubsidiary strata certificate of title. They would have been aware alsothat the consequence of this decision was that in due course amanagement corporation would be formed comprising the varioussubsidiary strata title proprietors and that this managementcorporation would succeed the developers as the person responsiblefor the control, management and administration of the commonproperty and having the obligations of up-keeping and maintainingthe common property. The performance of the aforesaid obligationswould be affected by whether there had been reasonable care in thedesign and supervision of the project. The defendants knew or ought tohave known that if they were negligent in their design and/orsupervision the resulting defects would have to be made good by themanagement corporation. I would add that it was obviouslyforeseeable by the defendants that if they were negligent in the designof the condominium, this could result in expensive rectification workand therefore economic loss for either or both the subsidiaryproprietors and the management corporation.

She then concluded at [16]:

16 I consider that the factors which I have enumerated above doresult in a sufficient proximity in the relationship between thedefendants as architects of a condominium and the plaintiffs as themanagement corporation of that condominium so as to give rise to aduty on the part of the defendants to the plaintiffs to exercisereasonable care in the design and supervision of the construction of thecommon property so as to guard against the plaintiffs sustaining thedamage complained of in this case, ie rectification of defects caused bynegligent design and/or supervision. Although the relationship is notas close as that of the developers and the management corporation, it issufficiently close in my judgment for the requirements of proximity tobe satisfied and the duty of care to be imposed.

14 Having found that there was sufficient proximity in the relationshipbetween MCST and RSP and following the approach adopted by this Courtin Ocean Front, she went on to consider whether there was any good reasonof public policy to avoid the imposition of such a duty on the architect andcame to the conclusion that there was none. She said ([13] supra at [17]):

[T]he amount recoverable is determinate, the class of persons isdefinable and the time span is not indeterminate because of theprovisions of the Limitation Act (Cap 163). As for the second questionrelating to the objection that recovery for economic loss would resultin an indefinitely transmissible warranty, this is not applicable since,under the scheme of the relevant legislation, until termination of thestrata subdivision plan, the management corporation will always be theperson having responsibility for the common property.




RSP’s contention on the duty of care

15 RSP put at the forefront of their case the contention that Ocean Frontwas wrongly decided and should now be overruled. In support, theircounsel advanced three arguments. His first argument was that this court inarriving at that decision was wrong in following the decision of the Houseof Lords in Junior Books Ltd v Veitchi Ltd [1983] 1 AC 520 and rejecting thetest laid down by the subsequent decision of the House of Lords in Murphyv Brentwood District Council [1990] 1 AC 398. Secondly, counsel arguedthat this court wrongly applied Junior Books in that the “crucial element ofreliance” which was present in that case was absent in Ocean Front. Thethird argument was that even if Ocean Front was correctly decided, itshould be read in conjunction with Caparo Industries plc v Dickman [1990]2 AC 605 and in consequence should not be applied in a situation such asthe present one which involved a relationship between the managementcorporation of the condominium and the architects who were engaged bythe developers in the construction of the condominium.

Two-stage test

16 Counsel’s first argument was twofold. Firstly, Junior Books, thoughnot expressly overruled by the House of Lords in their subsequent decisionin D & F Estates Ltd v Church Commissioners for England [1989] AC 177,was “obviously no longer good law”. This court in following Junior Books,in effect, adopted the two-stage test enunciated by Lord Wilberforce inAnns v Merton London Borough Council [1978] AC 728 which was rejectedby the High Court of Australia in The Council of the Shire of Sutherland vHeyman (1984–1985) 157 CLR 424 and was overruled by the House ofLords in Murphy v Brentwood District Council [1991] 1 AC 398. Secondly,this court referred extensively to Australian and New Zealand cases, andrelied in particular on the Australian High Court’s decision in Bryan vMaloney (1995) 128 ALR 163 which, though it did not reject, was certainlynon-committal with reference to, the two-stage test as laid down in Anns.By implication, it was suggested that the approach adopted in Ocean Front(being based on Junior Books) was inconsistent with the reasoning in Bryanv Maloney. Thus, Ocean Front was wrongly decided and should now beoverruled.

17 In order to deal with this argument in full and in the properperspective it is necessary to traverse again some of the grounds which wereconsidered and dealt with in Ocean Front ([13] supra). We examine firstlywhat precisely was said by Lord Wilberforce in laying down the two-stagetest in Anns, and secondly whether the test was applied in Ocean Front. Thefacts in that case have been sufficiently stated in Ocean Front and it isunnecessary to repeat them. Suffice here to set out what Lord Wilberforcesaid with reference to the two-stage test at 751–752:



Through the trilogy of cases in this House — Donoghue v Stevenson[1932] AC 562, Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964]AC 465 and Dorset Yacht Co Ltd v Home Office [1970] AC 1004, theposition has now been reached that in order to establish that a duty ofcare arises in a particular situation, it is not necessary to bring the factsof that situation within those of previous situations in which a duty ofcare has been held to exist. Rather the question has to be approached intwo stages. First one has to ask whether, as between the allegedwrongdoer and the person who has suffered damage there is asufficient relationship of proximity or neighbourhood such that, in thereasonable contemplation of the former, carelessness on his part may belikely to cause damage to the latter — in which case a prima facie dutyof care arises. Secondly, if the first question is answered affirmatively, itis necessary to consider whether there are any considerations whichought to negative, or to reduce or limit the scope of the duty or theclass of person to whom it is owed or the damages to which a breach ofit may give rise … [emphasis added]

18 It seems to us that what is objectionable in that passage is firstly hisLordship’s sweeping proposition of a single general rule or principle whichcan be applied in every situation to determine whether a duty of care arisesand secondly the fact that the test propounded by his Lordship in the firststage was based on foreseeability of damage alone. In Governors of thePeabody Donation Fund v Sir Lindsay Parkinson & Co Ltd [1985] AC 210 at240, Lord Keith of Kinkel in his speech after quoting the above passage ofLord Wilberforce’s speech said:

There has been a tendency in some recent cases to treat these passagesas being themselves of a definitive character. This is a temptationwhich should be resisted. The true question in each case is whether theparticular defendant owed to the particular plaintiff a duty of carehaving the scope which is contended for, and whether he was in breachof that duty with consequent loss to the plaintiff. A relationship ofproximity in Lord Atkin’s sense must exist before any duty of care canarise, but the scope of the duty must depend on all the circumstances ofthe case.

In the subsequent case of Yuen Kun Yeu v Attorney-General of Hong Kong[1988] AC 175 at 191 that came before the Privy Council on an appeal fromthe Hong Kong Court of Appeal, Lord Keith who delivered the judgment ofthe Board after quoting the passage of Lord Wilberforce’s speech,elaborated his earlier reservation as follows:

Their Lordships venture to think that the two-stage test formulated byLord Wilberforce for determining the existence of a duty of care innegligence has been elevated to a degree of importance greater than itmerits, and greater perhaps than its author intended. Further, theexpression of the first stage of the test carries with it a risk ofmisinterpretation. As Gibbs CJ pointed out in Council of the Shire ofSutherland v Heyman 59 ALJR 564, 570, there are two possible views of




what Lord Wilberforce meant. The first view, favoured in a number ofcases mentioned by Gibbs CJ, is that he meant to test the sufficiency ofproximity simply by the reasonable contemplation of likely harm. Thesecond view, favoured by Gibbs CJ himself, is that Lord Wilberforcemeant the expression ‘proximity or neighbourhood’ to be a compositeone, importing the whole concept of necessary relationship betweenplaintiff and defendant described by Lord Atkin in Donoghue vStevenson [1932] AC 562, 580. In their Lordships’ opinion the secondview is the correct one. [emphasis added]

19 Similar observation was made by Lord Bridge of Harwich in CaparoIndustries plc v Dickman ([15] supra) at 617–618:

But since the Anns case a series of decisions of the Privy Council and ofyour Lordships’ House, notably in judgments and speeches deliveredby Lord Keith of Kinkel, have emphasised the inability of any singlegeneral principle to provide a practical test which can be applied toevery situation to determine whether a duty of care is owed and, if so,what is its scope: see Governors of Peabody Donation Fund v SirLindsay Parkinson & Co Ltd [1985] AC 210, 239F–241C; Yuen KunYeu v A-G of Hong Kong [1988] AC 175, 190E–194F; Rowling v TakaroProperties Ltd [1988] AC 473, 501D– G; Hill v Chief Constable of WestYorkshire [1989] AC 53, 60B–D. What emerges is that, in addition tothe foreseeability of damage, necessary ingredients in any situationgiving rise to a duty of care are that there should exist between theparty owing the duty and the party to whom it is owed a relationshipcharacterised by the law as one of ‘proximity’ or ‘neighbourhood’ andthat the situation should be one in which the court considers it fair, justand reasonable that the law should impose a duty of a given scopeupon the one party for the benefit of the other. [emphasis added]

Hence, the criticisms directed at Lord Wilberforce’s two-stage test werefirstly, that a single general principle cannot be applied in determining theduty of care and its scope and secondly, that the test at the first stageconfined the determinant of the existence of a duty of care and its scope toforeseeability of damage alone.

20 Anns was followed by the House of Lords in Junior Books ([15] supra).There, the plaintiffs engaged contractors to construct a factory for them.The contractors, being required to lay special flooring to the plaintiffs’specifications, delegated that task to the defendants, who were specialistflooring contractors. The flooring as laid by the subcontractors wasdefective and cracked, and the plaintiffs incurred expenses and carried outthe rectification works. They claimed the cost of relaying the floor and otheritems of loss, such as the cost of removing the machinery and the loss ofprofits while the floor was being relaid. The House of Lords, by a majoritywith Lord Brandon of Oakbrook dissenting, held that the plaintiffs wereentitled to recover the expenses from the subcontractors. Lord Fraser ofTullybelton who delivered the first speech of the majority said at 533:



The proximity between the parties is extremely close, falling only justshort of a direct contractual relationship. The injury to the respondentswas a direct and foreseeable result of negligence by the appellants. Therespondents, or their architects, nominated the appellants as specialistsub-contractors and they must therefore have relied upon their skilland knowledge. It would surely be wrong to exclude from probation aclaim which is so strongly based, merely because of anxiety about thepossible effect of the decision upon other cases where the proximitymay be less strong. If and when such other cases arise they will have tobe decided by applying sound principles to their particular facts. Thepresent case seems to me to fall well within limits already recognised inprinciple for this type of claim, and I would decide this appeal strictlyon its own facts. I rely particularly on the very close proximity betweenthe parties which in my view distinguishes this case from the case ofproducers of goods to be offered for sale to the public.

Lord Keith of Kinkel also delivered a speech of the majority and he said at535:

There undoubtedly existed between the appellants [the subcontractors]and the respondents [the plaintiffs] such proximity of relationship,within the well known principle of Donoghue v Stevenson [1932] AC562, as to give rise to duty of care owed by the former to the latter. Asformulated in Donoghue v Stevenson, the duty extended to theavoidance of acts or omissions which might reasonably have beenanticipated as likely to cause physical injury to persons or property.The scope of the duty has, however, been developed so as to cover thesituation where pure economic loss is to be foreseen as likely to besuffered by one standing in the requisite degree of proximity: HedleyByrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 … the case isnot in point here except in so far as it established that reasonableanticipation of physical injury to person or property is not a sine quanon for the existence of a duty of care. It has also been established thatwhere a duty of care exists through the presence of such reasonableanticipation, and it is breached, then even though no such injury hasactually been caused because the person to whom the duty is owed hasincurred expenditure in averting the danger, that person is entitled todamages measured by the amount of that expenditure: Anns v MertonLondon Borough Council [1978] AC 728, 759, per Lord Wilberforce …

So in the present case I am of the opinion that the appellants in thelaying of the floor owed to the respondents a duty to take reasonablecare to avoid acts or missions which they ought to have known wouldbe likely to cause the respondents, not only physical damage to personor property, but also pure economic loss. Economic loss would becaused to the respondents if the condition of the floor, in the course ofits normal life, came to be such as to prevent the respondents fromcarrying out ordinary production processes on it, or, short of that, tocause the production process to be more costly than it would otherwisehave been. In that situation the respondents would have been entitled




to recover from the appellants expenditure incurred in relaying thefloor so as to avert or mitigate their loss.

Lord Roskill, who delivered the main speech of the majority, after referringto the passage of Lord Wilberforce’s speech in Anns (which we havequoted) said at 542:

Applying those statements of general principles as your Lordships havebeen enjoined to do both by Lord Reid and by Lord Wilberforce ratherthan to ask whether the particular situation which has arisen does ordoes not resemble some earlier and different situation where a duty ofcare has been held or has not been held to exist, I look for the reasonswhy, it being conceded that the appellants owed a duty of care to othersnot to construct the flooring so that those others were in peril ofsuffering loss or damage to their persons or their property, that duty ofcare should not be equally owed to the respondents.

Lord Roskill then proceeded to apply the two-stage test and said at 545:

The first is ‘sufficient relationship of proximity’, the second anyconsiderations negativing, reducing or limiting the scope of the duty orthe class of person to whom it is owed or the damages to which abreach of the duty may give rise. My Lords, it is I think in theapplication of those two principles that the ability to control the extentof liability in delict or in negligence lies.

and having referred to two New Zealand cases and Dutton v Bognor RegisUrban District Council [1972] 1 QB 373 and Anns, his Lordship then said at546:

Turning back to the present appeal I therefore ask first whether therewas the requisite degree of proximity so as to give rise to the relevantduty of care relied on by the respondents. I regard the following facts asof crucial importance in requiring an affirmative answer to thatquestion. (1) The appellants were nominated sub-contractors. (2) Theappellants were specialists in flooring. (3) The appellants knew whatproducts were required by the respondents and their main contractorsand specialised in the production of those products. (4) The appellantsalone were responsible for the composition and construction of theflooring. (5) The respondents relied upon the appellants’ skill andexperience. (6) The appellants as nominated sub-contractors musthave known that the respondents relied upon their skill andexperience. (7) The relationship between the parties was as close as itcould be short of actual privity of contract. (8) The appellants must betaken to have known that if they did the work negligently (as it must beassumed that they did) the resulting defects would at some timerequire remedying by the respondents expending money upon theremedial measures as a consequence of which the respondents wouldsuffer financial or economic loss.

Turning to the second test, his Lordship found nothing whatsoever torestrict or preclude the duty of care from arising. It is significant to observe



that, notwithstanding that he followed the two-stage test in Anns, LordRoskill did not premise the first test on foreseeability of damage alone tofound the duty of care.

21 The House of Lords retreated from this broad statement on therecoverability of economic loss in claims for defective building in thesubsequent case of D & F Estates Ltd v Church Commissioners for England([16] supra). A differently constituted House from that which heard JuniorBooks rejected the plaintiffs’ claim for pure economic loss. There, the firstdefendants owned a piece of land, and engaged the third defendants as themain contractors in the construction of a block of flats. The plaster workwas performed by the third defendants’ subcontractors. The firstdefendants then granted a lease of the flat to the first plaintiffs, who allowedthe second and third plaintiffs to occupy the flat. It was then discovered thatsome of the plaster having been incorrectly applied by the subcontractorshad become loose, and in consequence fell off. The plaintiffs brought anaction seeking to recover not only the cost of remedial work but also thecost of cleaning carpets and other possessions damaged by the fallingplaster, loss of rent during the carrying out of the works, and damages fordisturbance to the second and third plaintiffs. The House of Lords held thatthe plaintiffs were not entitled to recover. Lord Bridge of Harwich whodelivered one of the main speeches of the House said at 207:

It seems to me clear that the cost of replacing the defective plaster itself,either as carried out in 1980 or as intended to be carried out in future,was not an item of damage for which the builder of Chelwood Housecould possible be made liable in negligence under the principle ofDonoghue v Stevenson or any legitimate development of that principle.To make him so liable would be to impose upon him for the benefit ofthose with whom he had no contractual relationship the obligation ofone who warranted the quality of the plaster as regards materials,workmanship and fitness for purpose.

Lord Oliver of Aylmerton delivered the other main speech of the House andhe said at 213–214:

A cause of action in negligence at common law which arises only whenthe sole damage is the mere existence of the defect giving rise to thepossibility of damage in the future, which crystallizes only when thatdamage is imminent, and the damages for which are measured, not bythe full amount of the loss attributable to the defect but by the cost ofremedying it only to the extent necessary to avert a risk of physicalinjury, is a novel concept.

22 About one year later came Murphy v Brentwood District Council ([16]supra), which RSP urged us to adopt. It was a decision of a speciallyconstituted panel of seven Law Lords which expressly overruled Dutton andAnns and specifically approved the Australian High Court’s decision in TheCouncil of the Shire of Sutherland v Heyman ([16] supra). There, the




plaintiff purchased a pair of semidetached houses constructed on afoundation approved by the local council’s consulting engineer. Thefoundation proved faulty and serious cracks appeared in the house. Unableto repair the house at the cost of £45,000, the plaintiff sold the house withthe defects unremedied at £35,000 below what its market value wouldotherwise have been. He claimed against the council damages, alleging thathis family had been subjected to an imminent risk to health and safetybecause gas and soil pipes had broken and there was a risk of further breaks.The House of Lords departed from Anns and held that the scope of the dutyof care of the council did not extend to the kind of economic loss sustainedby the plaintiff. Lord Keith of Kinkel in holding that the damage in Annswas purely economic loss said at 468:

It being recognised that the nature of the loss held to be recoverable inAnns was pure economic loss, the next point for examination iswhether the avoidance of loss of that nature fell within the scope of anyduty of care owed to the plaintiffs by the local authority. On the basis ofthe law as it stood at the time of the decision the answer to thatquestion must be in the negative. The right to recover for pureeconomic loss, not flowing from physical injury, did not then extendbeyond the situation where the loss had been sustained throughreliance on negligent mis-statements, as in Hedley Byrne.

Lord Bridge said at 480:

All these considerations lead inevitably to the conclusion that abuilding owner can only recover the cost of repairing a defectivebuilding on the ground of the authority’s negligence in performing itsstatutory function of approving plans or inspecting buildings in thecourse of construction if the scope of the authority’s duty of care iswide enough to embrace purely economic loss. The House has alreadyheld in D & F Estates that a builder, in the absence of any contractualduty or of a special relationship of proximity introducing the HedleyByrne principle of reliance, owes no duty of care in tort in respect ofthe quality of his work. As I pointed out in D & F Estates, to hold thatthe builder owed such a duty of care to any person acquiring aninterest in the product of the builder’s work would be to impose uponhim the obligations of an indefinitely transmissible warranty of quality.

Lord Oliver said at 485–486:

The critical question, as was pointed out in the analysis of Brennan J inhis judgment in Council of the Shire of Sutherland v Heyman 157 CLR424, is not the nature of the damage in itself, whether physical orpecuniary, but whether the scope of the duty of care in thecircumstances of the case is such as to embrace damage of the kindwhich the plaintiff claims to have sustained: see Caparo Industries plc vDickman [1990] 2 AC 605. The essential question which has to beasked in every case, given that damage which is the essential ingredientof the action has occurred, is whether the relationship between theplaintiff and the defendant is such, or, to use the favoured expression,



whether it is of sufficient ‘proximity’, that it imposes on the latter aduty to take care to avoid or prevent that loss which has in fact beensustained. That the requisite degree of proximity may be established incircumstances in which the plaintiff’s injury results from his relianceupon a statement or advice upon which he was entitled to rely andupon which it was contemplated that he would be likely to rely isclearly from Hedley Byrne and subsequent cases, but Anns [1978] AC728 was not such a case and neither is the instant case.

23 Before we revert to Ocean Front ([13] supra) it is necessary to revisitBryan v Maloney ([16] supra) which was relied in Ocean Front. As it wassuggested by counsel for RSP that this court’s decision in Ocean Front wassomewhat inconsistent with the approach in Bryan v Maloney it isnecessary to deal with the latter in some detail. There, Mr Bryan, a builder,built a house for one Mrs Manion who sold it to a couple, Mr and MrsQuittenden, who later in turn sold it to Mrs Maloney. About six monthsafter the purchase, cracks began to appear in the walls of the house and thedamage to the fabric of the house became apparent and was extensive. Itwas found that the reasons for the cracks and other damage was that thehouse had been built on inadequate footings. Mrs Maloney sued Mr Bryanin negligence for pure economic loss, ie the amount which wouldnecessarily be expended in remedying the inadequate footings and damageto the fabric of the house. She succeeded at first instance and on appeal theFull Court of the Supreme Court of Tasmania dismissed the appeal. MrBryan then appealed to the High Court which, by a majority, dismissed theappeal. In a joint judgment, Mason CJ, Deane J and Gaudron J held thatthere was a relationship of proximity between Mr Bryan and Mrs Maloneywhich gave rise to a duty of care on the part of Mr Bryan to avoid the kindof damage suffered by Mrs Maloney. Their Honours opined that arelationship of proximity existed between Mr Bryan and persons other thanthe original owner, including Mrs Maloney, who might suffer personalinjury or damage to property as a consequence of a collapse of the house onaccount of inadequate footing. In that context, the relationship between MrBryan and Mrs Maloney was examined and their Honours said at 171:

[T]he relationship between them [Mr Bryan and Mrs Maloney] ismarked by proximity in a number of important respects. Theconnecting link of the house is itself a substantial one. It is a permanentstructure to be used indefinitely and, in this country, is likely torepresent one of the most significant, and possible the most significant,investment which the subsequent owner will make during his or herlifetime. It is obviously foreseeable by such a builder that the negligentconstruction of the house with inadequate footings is likely to causeeconomic loss, of the kind sustained by Mrs Maloney, to the owner ofthe house at the time when the inadequacy of the footings firstbecomes manifest.

They went on and held that upon analysis the relationship between MrBryan and Mrs Maloney was marked by “the kind of assumption of




responsibility and known reliance” commonly present “in the categories ofcases in which a relationship of proximity exists with respect to pureeconomic loss”. They said at 172:

In ordinary circumstances, the builder of a house undertakes theresponsibility of erecting a structure on the basis that its footings areadequate to support it for a period during which it is likely that therewill be one or more subsequent owners. Such a subsequent owner willordinarily have no greater, and will often have less, opportunity toinspect and test the footings of the house than the first owner. Such asubsequent owner is likely to be unskilled in building matters andinexperienced in the niceties of real property investment. Any buildershould be aware that such a subsequent owner will be likely, ifinadequacy of the footings has not become manifest, to assume that thehouse has been competently built and that the footings are in factadequate.

24 The learned Chief Justice and his brother judges then compared therelationship between the builder and the first owner with that between thebuilder and the subsequent owner as regards the particular kind ofeconomic loss sustained by Mrs Maloney and said at 172:

[F]rom the point of view of proximity, the similarities between therelationship between builder and first owner and the relationshipbetween builder and subsequent owner as regards the particular kindof economic loss are of much greater significance than the differencesto which attention has been drawn, namely, the absence of directcontact or dealing and the possibly extended time in which liabilitymight arise. Both relationships are characterized, to a comparableextent, by assumption of responsibility on the part of the builder andlikely reliance on the part of the owner. No distinction can be drawnbetween the two relationships in so far as the foreseeability of theparticular kind of economic loss is concerned: it is obviouslyforeseeable that that loss will be sustained by whichever of the first orsubsequent owners happens to be the owner at the time when theinadequacy of the footings becomes manifest.

and held (at 173) that in all the circumstances, the relationship betweenbuilder and subsequent owner as regards the particular kind of economicloss should be accepted as possessing comparable degree of proximity tothat possessed by the relationship between the builder and the first ownerand as giving rise to the duty to take reasonable care on the part of thebuilder to avoid such loss. Their Honours found further support for suchrelationship of proximity at 173:

The conclusion that a relationship of proximity existed between MrBryan, as the builder, and Mrs Maloney, as subsequent owner, withrespect to the particular kind of economic loss is also supported byanalogy with the relationship which would have existed between MrBryan, as the builder, and any person who suffered physical injury toperson or property in the event that the house or part of the house had



collapsed at the time when the inadequacy of the foundations firstbecame manifest. It is difficult to see why, as a matter of principle,policy or common sense, a negligent builder should be liable forordinary physical injury caused to any person or to other property byreason of the collapse of a building by reason of the inadequacy of thefoundations but be not liable to the owner of the building for the costof remedial work necessary to remedy that inadequacy and to avertsuch damage.

25 In coming to the decision that there was sufficient degree of proximityin the relationship between Mr Bryan and Mrs Maloney, Mason CJ, Deane Jand Gaudron J also considered whether there was any factor or any policyconsiderations which precluded the recognition of such relationship andsaid at 171:

The only factor which arguably precludes the recognition of a relevantrelationship of proximity between builder and subsequent owner forthe purposes of the present case is the kind of damage involved,namely, mere economic loss. As has been seen, a relevant relationshipof proximity would have existed between the builder and Mrs Maloneywith respect to ordinary physical injury to her person or other propertycaused by a partial collapse of the house due to its inadequate footingseven if she had not been the owner. Here again, it is important to bearin mind the particular kind of economic loss involved. As has beensaid, the distinction between that kind of economic loss and ordinaryphysical damage to property is an essentially technical one. Indeed, theeconomic loss sustained by the owner of a house by reason ofdiminution in value when the inadequacy of the footings first becomesmanifest by consequent damage to the fabric of the house is, at leastarguably, less remote and more readily foreseeable than ordinaryphysical damage to other property of the owner which might be causedby an actual collapse of part of the house as a result of the inadequacyof those footings. Again, the policy considerations underlying thereluctance of the courts to recognise a relationship of proximity and aconsequential duty of care in cases of mere economic loss are largelyinapplicable to the relationship between builder and subsequent owneras regards that particular kind of economic loss. There can be noquestion of inconsistency with the builder’s legitimate pursuit of his orher own financial interests since, as has been seen, the builder owed aduty of care to the first owner with respect to such loss.

26 We now turn to Ocean Front ([13] supra). In that case, themanagement corporation brought an action against the developers forexpenses incurred in making good the common property which wasoccasioned by bad workmanship in the construction of the condominium,and the developers brought third party proceedings against the architectsand the main contractors of the condominium. Among other things, apoint of law was raised as a preliminary issue, namely: whether thedevelopers owed a duty of care to the management corporation to avoidcausing such economic loss and the answer to this question was decided in




the affirmative. In coming to this conclusion this court considered therelevant authorities in England, Australia, New Zealand and also aCanadian authority, and opined ([13] supra at [63]–[68]) that there is nosingle rule or set of rules for determining, first, whether a duty of care arisesin particular circumstances and the scope of that duty, and, second, that indetermining the existence of a duty of care and scope of such duty all therelevant circumstances would have to be examined. This court said at [69]:

But the approach of the court has been to examine a particularcircumstance to determine whether there exists that degree ofproximity between the plaintiff and the defendant as would give rise toa duty of care by the latter to the former with respect to the damagesustained by the former. Such proximity is the ‘determinant’ of theduty of care and also the scope of such duty. In Burnie Port Authority vGeneral Jones Pty Ltd (1994) 179 CLR 520, at pp 542–543, in a jointjudgment, Mason CJ, Deane, Dawson, Tookey and Gaudron JJ said:

The “general conception” of a relationship of proximity wasidentified (Donoghue v Stevenson [1932] AC 580) by Lord Atkinas the “element common to the cases where [liability innegligence] is found to exist” and as the basis of the duty of carewhich is common to all such cases. It has been stressed anddeveloped in judgments in recent cases in the court. As Deane Jpointed out in Stevens v Brodribb Sawmilling Co Pty Ltd (1986)160 CLR, at p 53: that common element of a relationship ofproximity “remains the general conceptual determinant and theunifying theme of the categories of case in which the commonlaw of negligence recognises the existence of a duty to takereasonable care to avoid a reasonably foreseeable risk of injury toanother”. Without it, the tort of negligence would be reduced toa miscellany of disparate categories among which reasoning bythe legal processes of induction and deduction would rest onquestionable foundations since the validity of such reasoningessentially depends upon the assumption of underlying unity orconsistency.

27 With this in mind the court turned to consider and examine the factsbefore it (at [70]–[73]) and came to the following conclusion (at [74]):

Bearing all these considerations in mind, if we may respectfully adoptthe methodology and the words used by Lord Roskill in Junior Books([33] supra), we regard the following facts of crucial importance indetermining that there is sufficient proximity between the developersand the management corporation which gives rise to the duty of care:(a) the management corporation was an entity conceived and createdby the developers; (b) the developers were the party who built anddeveloped the condominium including the common property andundertook the obligations to construct it in good and workmanlikemanner and were alone responsible for such construction; (c) aftercompletion of the condominium the developers were the party solelyresponsible for the maintenance and upkeep of the common property;



(d) the management corporation as the successor of the developerstook over the control, management and administration of the commonproperty and has the obligations of upkeeping and maintaining thecommon property; (e) the performance of these obligations is verymuch dependent on the developers having exercised reasonable care inthe construction of the common property; (f) the developers obviouslyknew or ought to have known that if they were negligent in theirconstruction of the common property the resulting defects would haveto be made good by the management corporation. The relationshipbetween the developers and management corporation is as close itcould be short of actual privity of contract. In our judgment, there is aduty on the part of the developers in the construction of the commonproperty a duty to take reasonable care to avoid the kind of damagesustained by the management corporation.

28 Having found that there was sufficient degree of proximity giving riseto the duty of care on the part of the developers, the court then proceeded toconsider whether there was any policy consideration negativing such duty.The court said ([13] supra at [75]):

We now turn to consider whether there is any policy consideration innegativing such duty of care. Firstly, there is the question whether thiswould result in imposing liability ‘in an indeterminate amount for anindeterminate time to an indeterminate class’. The amount recoverableis the cost of repair and making good the defects in the commonproperty and in no way can it be said to be indeterminate. The class ofpersons is finite and definable. As for the duration, the time span isalso not indeterminate, as the maximum period of time in which thedevelopers can possibly be exposed to liability is limited by theLimitation Act (Cap 163): see s 24B. Secondly, there is also a relatedobjection that recovery for economic loss would result in anindefinitely transmissible warranty. The common property has beenand will continue to remain in the control and under the managementof the management corporation. There is no question of anytransmissible warranty to any other party.

29 It is abundantly clear that in Ocean Front this court did not follow thebroad proposition laid down by Lord Wilberforce in Anns. True, the courtreached its conclusion by a two-stage process. In principle, there is noobjection to such approach. It depends on what is involved and consideredin each stage. The court certainly did not apply the first test in Anns. Thecourt’s finding that there was sufficient degree of proximity giving rise to aduty on the part of the developers to avoid the loss sustained by themanagement corporation was not premised on foreseeability of damagealone, but on the consideration of other relevant facts. Nor did the courtaccept Lord Wilberforce’s proposition that in any given situation a singlegeneral rule or principle can be applied to determine whether a duty of carearises.




30 It does not follow from the mere fact that the court in the course oftheir determination examined the facts by the two-stage process that thecourt in effect followed Anns. In the Australian case of The Council of theShire of Sutherland v Heyman ([16] supra), which rejected Anns, Gibbs CJsaid at 441:

In deciding whether the necessary relationship exists, and the scope ofthe duty which it creates, it is necessary for the court to examine closelyall the circumstances that throw light on the nature of the relationshipbetween the parties. The judgment of Lord Roskill in Junior Books Ltdv Veitchi Ltd [1983] AC 520, at p 546, provides an example of theprocess. If a relationship of neighbourhood or proximity is found toexist, then it will be necessary to proceed to the second stage of theinquiry.

31 Similarly, in Bryan v Maloney ([16] supra) Mason CJ, Deane J andGaudron J in determining the existence of the relevant duty of care alsoproceeded by a two-stage process. Their Honours arrived at the conclusionthat there was a relationship of proximity between Mr Bryan and MrsMaloney giving rise to the duty of care on the part of Mr Bryan to avoid thekind of loss sustained by Mrs Maloney in the following manner. Theyconsidered the relevant facts and the connections between the parties andon the basis of their consideration determined that there was sufficientdegree of proximity in that relationship giving rise to such duty of care.Having found that, they then considered whether there were factors orpolicy considerations which precluded the recognition of such relationshipof proximity and arrived at the conclusion there were none. The approachthis court adopted in Ocean Front was the same as that, or at least was notinconsistent with that, adopted in Bryan v Maloney. Stripped of theverbiage, the crux of such approach is no more than this: the court firstexamines and considers the facts and factors to determine whether there issufficient degree of proximity in the relationship between the party who hassustained the loss and the party who is said to have caused the loss whichwould give rise to a duty of care on the part of the latter to avoid the kind ofloss sustained by the former. This court in Ocean Front ([13] supra) said at[69]:

… the approach of the court has been to examine a particularcircumstance to determine whether there exists that degree ofproximity between the plaintiff and the defendant as would give rise toa duty of care by the latter to the former with respect to the damagesustained by the former. Such proximity is the ‘determinant’ of theduty of care and also the scope of such duty.

Next, having found such degree of proximity, the court next considerswhether there is any material factor or policy which precludes such dutyfrom arising. Both on principle and on authority, we do not see why such anapproach should not be taken in Ocean Front and in a case such as the onebefore us.



32 In coming to the conclusion as the court did in Ocean Front, the courtdeclined to follow the decisions of the House of Lords in D & F Estates andMurphy. In this case, we have not been persuaded not to depart from theseauthorities.

The element of reliance

33 We now turn to the second argument advanced on behalf of RSP. Itwas argued before us that this court fell into error in applying Junior Booksin that there was absent in Ocean Front the element of “reliance” which wascrucial to the imposition of a duty in Junior Books. It was suggested that thiscourt considered only the foreseeability of damage in determining the issueof proximity. In support, counsel relied on the following passage of thejudgment ([13] supra at [70]):

… the management corporation was in fact the creation of thedevelopers. Historically there existed a very close proximity inrelationship between the developers and the management corporation.It was therefore clearly foreseeable by the developers that if in theconstruction of the common property they failed to exercisereasonable care and skill, the burden of making good any defectsarising from their failure would inevitably rebound on their successor,the management corporation.

34 We were unable to accept this argument. Counsel, in our view, readthis passage out of the proper context. The element of foreseeability wasonly one of the several ingredients the court took into account. True it isthat the court did not use the word “reliance”, but there were present therethe very close relationship between the parties and the elements of“assumption of responsibility” and “known reliance” in the sense stated inBryan v Maloney. In discussing the relationship between the parties thiscourt said, at [74]:

(b) the developers were the party who built and developed thecondominium including the common property and undertook theobligations to construct it in a good and workmanlike manner andwere alone responsible for such construction; (c) after completion ofthe condominium the developers were the party solely responsible forthe maintenance and upkeep of the common property; (d) themanagement corporation as the successor of the developers took overthe control, management and administration of the common propertyand has the obligations of upkeeping and maintaining the commonproperty; (e) the performance of these obligations is very muchdependent on the developers having exercised reasonable care in theconstruction of the common property; (f) the developers obviouslyknew or ought to have known that if they were negligent in theirconstruction of the common property the resulting defects would haveto be made good by the management corporation.




Quite clearly, therefore, the court took the view that the developersassumed the responsibility of constructing the common property withreasonable care and skill and that the developers knew that themanagement corporation being their successor depended (or relied) ontheir competence in the construction.

Caparo

35 We now come to the third argument of counsel. It was contended thatassuming Ocean Front was rightly decided, it should be read in conjunctionwith Caparo Industries plc v Dickman ([15] supra), and in consequenceshould not be applied in a situation as the present one in which therelationship was between MCST as the management corporation and RSPas the architects, as no reliance was placed by MCST on the professionalskills of the architects. The reasoning, as we understand it, is this. In OceanFront ([13] supra) the relationship was between the developer and themanagement corporation and that relationship was as close as it could beshort of privity of contract. The management corporation did not comeinto effect until the registration of the strata title plan, and it was nothingmore than a body corporate succeeding to the common property rights ofthe individual purchasers of the units comprised in the development. Tothat extent, the management corporation was to all intents and purposesthe same party who bought from the developers as far as the commonproperty was concerned. However, the same could not be said of thearchitects who were engaged by the developers for the construction of thedevelopment. Firstly, the relationship between the architects and themanagement corporation was nowhere near that close as between thedevelopers and the management corporation. The contract was between thedevelopers and the architects and it was not a situation where there could bea contract between the management corporation and the architects.Secondly, applying Junior Books there was no reliance by the managementcorporation on the skills of the architects. Thirdly, applying the second testin Anns, to make the architects liable would be to make them liable for anindeterminate amount to an indeterminate class for an indeterminate time.In support, counsel relied on Caparo.

36 In Caparo, the plaintiffs were a public limited company which hadtaken over another public limited company, Fidelity plc. The defendantswere the auditors of Fidelity plc. The plaintiffs claimed that in making thedecision to do so, they relied upon the defendants’ audit of Fidelity plc as setout in the latter company’s annual accounts. The defendants’ audit wasallegedly performed negligently, and it was claimed that Fidelity’s profitswere not as high as the defendants had projected, a projection upon whichthe plaintiffs relied. The end result was that the share price paid by theplaintiffs exceeded their true value. The plaintiffs sued the defendants fornegligent misstatement on the basis of Hedley Byrne & Co Ltd v Heller &Partners Ltd [1964] AC 465, and sought to recover damages representing



the shortfall in the value of the shares. The judge at first instance held thatthe auditors owed no duty to the plaintiffs as the investors, and that whilstthey owed a duty to the shareholders as a body they did not owe any duty toany individual shareholders such as would enable shareholders to recoverdamages for the loss sustained by them in acting on the auditors’ report.The Court of Appeal allowed the appeal holding that, whilst there was norelationship of proximity between potential investors and the auditors,there was such relationship of proximity between shareholders and theauditors giving rise to a duty of care such that the shareholders wereentitled to recover damages for the loss they sustained by acting on theaccounts negligently prepared by the auditors. On further appeal, theHouse of Lords allowed the auditors’ appeal. It was held that liability foreconomic loss due to negligence misstatement on the basis of Hedley Byrneis confined to situations where the statement is given by the maker to aknown recipient for a specific purpose of which the maker was aware andthe recipient had relied on that statement to his detriment. Lord Roskill inhis speech said at 628–629:

No doubt it can be said to be foreseeable that those accounts may findtheir way into the hands of a person who may use them for suchpurposes or indeed other purposes and lose money as a result. But toimpose a liability in those circumstances is to hold, contrary to all therecent authorities, that foreseeability alone is sufficient, and to ignorethe statutory duty which enjoins the preparation of and certification ofthose accounts.

I think that before the existence and scope of any liability can bedetermined, it is necessary first to determine for what purposes and inwhat circumstances the information in question is to be given. If awould-be investor or predator commissions a report which he will use,and which the maker of the report knows he will use, as a basis for hisdecision whether or not to invest or whether or not to make a bid, itmay not be difficult to conclude that if the report is negligentlyprepared and as a result a decision is taken in reliance upon it andfinancial losses then follow, a liability will be imposed upon the makerof that report.

37 Caparo must be understood in the context of the statutoryrequirements of audited accounts of a company. On this we can do betterthan quote the following passage from the speech of Lord Oliver at 630:

My Lords, the primary purpose of the statutory requirement that acompany’s accounts shall be audited annually is almost self-evident.The structure of the corporate trading entity, at least in the case ofpublic companies whose shares are dealt with on an authorised StockExchange, involves the concept of a more or less widely distributedholding of shares rendering the personal involvement of eachindividual shareholder in the day-to-day management of the enterpriseimpracticable, with the result that management is necessarily separatedfrom ownership. The management is confided to a board of directors




which operates in a fiduciary capacity and is answerable to andremovable by the shareholders who can act, if they act at all, onlycollectively and only through the medium of a general meeting. Hencethe legislative provisions requiring the board annually to give anaccount of its stewardship to a general meeting of the shareholders.This is the only occasion in each year upon which the general body ofshareholders is given the opportunity to consider, to criticise and tocomment upon the conduct by the board of the company’s affairs, tovote upon the directors’ recommendation as to dividends, to approveor disapprove the directors’ remuneration and, if thought desirable, toremove and replace all or any of the directors. It is the auditors’function to ensure, so far as possible, that the financial information asto the company’s affairs prepared by the directors accurately reflectsthe company’s position in order, first, to protect the company itselffrom the consequences of undetected errors or, possibly, wrongdoing(by, for instance, declaring dividends out of capacity) and, secondly, toprovide shareholders with reliable intelligence for the purpose ofenabling them to scrutinise the conduct of the company’s affairs and toexercise their collective powers to reward or control or remove those towhom that conduct has been confided.

Thus, such audited accounts are not intended to be used and relied upon byshareholders for their own investment in the purchase or disposal of sharesof the company, and Hedley Byrne was held not to have such wideapplication. Lord Oliver said at 638:

What can be deduced from the Hedley Byrne case, therefore, is that thenecessary relationship between the maker of a statement or giver ofadvice (‘the adviser’) and the recipient who acts in reliance upon it(‘the advisee’) may typically be held to exist where (1) the advice isrequired for a purpose, whether particularly specified or generallydescribed, which is made known, either actually or inferentially, to theadviser at the time when the advice is given; (2) the adviser knows,either actually or inferentially, that his advice will be communicated tothe advisee, either specifically or as a member of an ascertainable class,in order that it should be used by the advisee for that purpose; (3) it isknown either actually or inferentially, that the advice so communicatedis likely to be acted upon by the advisee for that purpose withoutindependent inquiry, and (4) it is so acted upon by the advisee to hisdetriment.

38 In our opinion, Caparo has no application here. As the learned judgeheld and we agree, RSP were involved in the development of thecondominium right from the start. They were engaged by the developers todesign and supervise the construction of the condominium including thecommon property and the developers relied on the exercise of reasonablecare and skill of their architects and they (the architects) undertook suchresponsibilities. RSP as the architects were aware at that time that thedevelopers would apply for subdivision of the units and upon completion ofthe construction of the units they would apply to register a strata title plan



and apply for the issue of separate subsidiary strata certificates of title to theunits. They were also aware that upon the registration of the strata titleplans the management corporation would come into existence. Vis-à-visthe developers there was an assumption of responsibility of professionalcompetence on the part of the architects and the architects knew that thedevelopers would be relying on their exercising reasonable care and skill.The management corporation which later came into existence was merely astatutory creation and was a successor to the developers with respect to thecommon property. In respect of such common property the architects knewthat the management corporation would be in charge and would bemanaging the common property and would depend on their care and skillin the design and supervision of the construction of the common property.In such a situation there was sufficient degree of proximity in therelationship between the management corporation and the architects aswould give rise to a duty on the part of the architects to avoid the loss assustained by MCST in this case.

39 With regard to the element of reliance which was regarded by RSP ascritical, we think that it was also present in the relationship between themanagement corporation and the architects. The management corporationdepends on the developer, inter alia, to unite resources and to co-ordinatethe execution of the project, and on the architects, inter alia, to get thedesign of the building right.

40 In this we are reinforced by Portsea Island Mutual Co-operativeSociety Ltd v Michael Brashier Associates (1990) 6 PN 43; (1990) 6 Const LJ63, a decision preceding the House of Lords’ decision in Murphy. JudgeNewey QC there held that the architect who was responsible for the designand supervision of a supermarket was liable for the expenses for removingcertain brick slips which posed a danger to customers. The basis of the dutyowed to the supermarket was the reliance on the special skill of thearchitect, who knew that the supermarket was the intended occupier.

41 Relying on Caparo and presumably also on Hedley Byrne counsel forRSP submitted that professionals like architects should only be liable innegligence to a “known recipient” in respect of works carried out by themfor a “known purpose”. Otherwise, they would be made liable in effect “inan indeterminate amount for an indeterminate time to an indeterminateclass”. The short answer to this is that for the reasons given in [38] aboveMCST, as the management corporation of the condominium, was a “knownrecipient” and the work carried out by RSP for the condominium was for a“known purpose”. For the same reason as this court gave in Ocean Front,the amount recoverable is determinate, the person to whom RSP is liable isdefinable and the time span is not indeterminate.

42 It is important to understand that the concept of “economic loss”, justlike the concept of “reliance” does not run uniformly through the law ofnegligence. It may not be considered in abstraction, but must be considered




together with all the other “labels” of liability, such as “foreseeability”,“reliance”, and “reasonability”; Thus, where the loss is economic in nature,different requirements are necessary – depending on the nature of thenegligent act or omission – to give rise to liability. As this court emphasisedin Ocean Front, the question is not whether a duty was owed by A to B, butwhether a duty was owed by A to B to avoid the loss incurred by B.

43 The House of Lords in Murphy ([16] supra) appeared to consider thatthere were no special factors distinguishing negligence in the constructionof a building from negligence in the manufacture of a consumer good. In sodoing, their Lordships accepted the analogies painted by Lord Brandon inJunior Books between building construction and product manufacture. AsMason CJ, Deane J and Gaudron J held in Bryan v Maloney ([16] supra),however, there are, in our opinion, two distinguishing factors. Firstly, theinvestment in real property is likely to represent a significant, if not themost significant, investment in an individual’s lifetime (as opposed to thepurchase of a mere chattel). The scale of the investment in money terms isfar greater than what is involved in the acquisition of a chattel. Secondly,the permanence of the structure may give rise to a greater expectation thana chattel. We think those arguments apply a fortiori in Singapore, whereland is not only scarce but expensive. We think that to treat houses andconsumer goods alike would be to ignore simple realities, realities which, toour mind, are instrumental in dictating the expectations and degree ofreliance placed upon the persons developing, building or designing thestructure which stands upon it.

44 In considering D & F Estates and Murphy, it is important to bear inmind that in England there was passed in 1972 the Defective Premises Actwhich provided for consumer protection in respect of building defects. Itseems to us that considerable weight was given to this legislation by theHouse of Lords in their deliberations. In particular, in D & F Estates ([16]supra), Lord Bridge of Harwich (at 193–195) referred to this Act and therecommendations of the Law Commission report on “Civil Liability ofVendors and Lessors for Defective Premises” (Law Com No 40) dated15 December 1970 following which that Act was enacted. In Murphy ([16]supra), Lord Mackay of Clashfern L C said at 457:

I am of the opinion that it is relevant to take into account thatParliament has made provisions in the Defective Premises Act 1972imposing on builders and others undertaking work in the provision ofdwellings obligations relating to the quality of their work and thefitness for habitation of the dwelling. For this House in its judicialcapacity to create a large new area of responsibility on local authoritiesin respect of defective buildings would be in my opinion not be aproper exercise of judicial power.



Reference to this Act was also made by Lord Keith of Kinkel at 472 andLord Oliver of Aylmerton at 491. And Lord Jauncey of Tullichettle said at498:

Parliament imposed a liability on builders by the Defective PremisesAct 1972 — a liability which falls far short of that which would beimposed upon them by Anns. There can therefore be no policy reasonfor imposing a higher common law duty on builders, from which itfollows that there is equally no policy reason for imposing such a highduty on local authorities. Parliament is far better equipped than thecourts to take policy decisions in the field of consumer protection.

45 It bears mentioning that D & F Estates and Murphy have not beenfollowed in New Zealand: see Invercargill City Council v Hamlin [1994]3 NZLR 513, and in Canada: see Winnipeg Condominium Corporation No36 v Bird Construction Co (1995) 121 DLR (4d) 193. Both these cases werediscussed and considered in Ocean Front. Since then, there has been afurther development in Invercargill City Council. It went on appeal from theNew Zealand Court of Appeal to the Privy Council: see [1996] AC 624, andthe Privy Council refrained from overturning the decision of the Court ofAppeal and applying D & F Estates and Murphy. Lord Lloyd of Berwickdelivering the judgment of the Board said at 640:

But in the present case the judges in the New Zealand Court of Appealwere consciously departing from English case law on the ground thatconditions in New Zealand are different. Were they entitled to do so?The answer must surely be ‘Yes’.

… the Court of Appeal of New Zealand should not be deflected fromdeveloping the common law of New Zealand (nor the Board fromaffirming their decisions) by the consideration that the House of Lordsin D & F Estates Ltd v Church Commissioners for England [1989] AC177 and Murphy v Brentwood District Council [1991] 1 AC 398 havenot regarded an identical development as appropriate in the Englishsetting.

Later his Lordship referred to Canadian cases and Australian cases and saidat 642:

Their Lordships cite these judgments in other common lawjurisdictions not to cast any doubt on Murphy’s case [1991] 1 AC 398,but rather to illustrate the point that in this branch of the law morethan one view is possible: there is no single correct answer. In Bryan vMaloney 69 ALJR 375 the majority decision was based on the twinconcepts of assumption of responsibility and reliance by thesubsequent purchaser. If that be a possible and indeed respectableview, it cannot be said that the decision of the Court of Appeal in thepresent case, based as it was on the same or very similar twin concepts,was reached by a process of faulty reasoning, or that the decision wasbased on some misconception: see Australian Consolidated Press Ltd vUren [1964] 1 AC 590, 644.




Remaining issues

46 We now turn to the remaining issues in the appeal which were:

(a) whether the trial judge erred in fact in attributing the failure ofthe claddings to RSP’s faulty design; and

(b) whether the trial judge erred in finding the third party not liable.

Design of the claddings

47 The learned judge classified the breaches of duty complained of intotwo categories: breach with respect to the design of the gable end walls andbreach in the supervision of the construction of the walls. The learned judgeconsidered that the responsibilities of RSP were those of design andsupervision generally. With regard to design, the learned judge found thatRSP were in breach in three areas: in failing to provide the movement jointsin the gable end walls; in failing to provide adequate wall ties between theinner and outer leaves of the cavity brickwork; and in failing to provide anadequate method of adhesion in the claddings. As for the supervision, thelearned judge found that RSP were not in breach of duty.

48 The issue turned on the evidence adduced. Evidence for MCST wasgiven by Mr Paul Crispin Casimir of Casimir-Mrowczynski, who is achartered building surveyor and at the material time was in the employ ofMurray-North. He carried out most of the investigations into the incidentand supervised the rectification works. There was also the evidence of MrJohn Philip Jones, a chartered structural engineer and building surveyor, ofMessrs Harris and Sutherland, who were appointed by the insurers. ForRSP the evidence was given by Mr Alan Choe, a partner of the firm, and MsWong Meng Heng, the project architect for Eastern Lagoon II. RSP also ledexpert evidence given by Mr Yang Soo Suan, a local architect, and Dr YSLau, a chartered civil and structural engineer.

49 It was common ground before the learned judge that the buildingindustry follows the British Codes of Practice and there must be specificreasons for any departure from the Codes. Such Codes state, inter alia, thatconsideration should be given at the design stage to the provision ofmovement joints in claddings along the walls. There was also produced acircular dated 13 September 1984 from the President of the SingaporeInstitute of Architects to its members enclosing a letter from the PWD tothe President reminding members of prior instances of external tile failureand emphasising the need for good practice on the part of architects inexternal tiling works which included, inter alia, the provision of movementjoints where the tile surface was large and continuous.

50 The evidence of Mr Jones was that the predominant cause for thefailure of the claddings was the absence of movement joints and that if therewere movement joints a lack of wall ties would not cause the failure



provided that there were bonding ties between the outer leaf of thebrickwork and the reinforced concrete frame. Mr Casimir’s evidence wasthat the complete absence of the movement joints in the gable end walls wasone of the main causes for the failure. The learned judge accepted theevidence of Mr Jones and Mr Casimir.

51 Turning to the evidence in support of RSP the learned judge did notfind it satisfactory. It was accepted by Mr Yang and Mr Choe that followingthe British Codes of Practice movement joints should be provided alongstretches of wall, such as the walls in the tower blocks of the condominiumin question. However, in a supplemental affidavit Mr Yang testified that itwas an accepted and normal practice among the architects in Singapore notto provide movement joints for the external fair face brick and tiling worksand he quoted numerous instances of multi-storey buildings in Singaporewhere no movement joints were provided. As for Dr Lau, initially hisevidence was to the effect that the absence of the movement joints was oneof the principal causes for the failure of the brick tiles. Subsequently, in hissupplemental affidavit he said that the primary cause of the failure was theinadequate surface preparation of the concrete background, resulting indebonding of the tiles. The learned judge found that there was a shift in theevidence of these two witnesses. She said ([13] supra at [40]):

I am persuaded by the evidence that both these witnesses changed theirpositions because the defendants themselves, having seen the affidavitof evidence-in-chief filed by Mr Casimir which referred to theinterrogatory whereby Mr Lai confirmed that the defendants did notprovide movement joints in the design, changed their stand from oneaccepting that the absence of movement joints was the or a principalcause but blaming the third party for such absence to one acceptingthat it was their responsibility that there were no movement joints butclaiming that such absence was not contributory or only marginallycontributory to the failure. This change in position was confirmed bythe defendants’ opening statement filed on 25 September 1997.

52 With regard to the letter of PWD, the witnesses for RSP gave variousinterpretations to the “large and continuous area”. According to Ms Wong,such area normally meant an area of 20ft by 20ft, and according to Mr Choesuch area would be anything beyond 6m by 12m. Mr Choe, however,conceded that at the Keck Seng Tower, which was constructed during theperiod between 1981 and 1984, movement joints were at storey heightintervals of less than 6m height. As for Mr Yang, he said that the externalcladdings in this case were not so large and continuous as to requiremovement joints, but he conceded that the PWD letter was a reminder toarchitects that for projects like the condominium movement joints shouldhave been provided for the brick tiles. The evidence of Mr Yang showedthat in the early 1980s there were at least two high rise office buildingsdesigned by his firm and built during the period 1981 to 1984 wheremovement joints for the brick/tile claddings were provided. One was NOL




Building and the other was Keck Seng Tower. Clearly, RSP were unable toestablish that there was an established practice not to incorporatemovement joints into the architectural designs at the time of constructionof Eastern Lagoon II. The learned judge came to the following conclusion([13] supra at [54]):

I have come to the conclusion that the weight of the evidence points tothe absence of movement joints as being one of the main causes of thefailure of the wall cladding in the condominium and that the failuremechanism was that put forward by the plaintiffs. I have beeninfluenced in particular by the factors set out in paras 29 to 31 above aswell as the twists and turns in the testimony of the defendants’witnesses (excluding, of course, the neutral HDB witnesses) whichconvinced me that whatever the validity of the technical points theymade for other factors being contributory to the failure, each of themat heart believed that the absence of the movement joints played asignificant part in creating the problem. I was also impressed by theobjectivity and impartiality of the plaintiffs’ expert witnesses. Theyconducted their respective investigations and prepared their reportsindependently of each other. Their objectives were to ascertain thecauses of the failure and at the time the investigations were undertakenneither had any reason to assign blame to any particular party. Theywere investigating not explaining nor excusing.

53 The learned judge also found that RSP had failed to provide adequatewall ties between the inner and the outer leaves of the cavity walls whichcontributed to the failure. On this she relied on the evidence of Mr Casimirwho had conducted an extensive and detailed inspection of the gable endwalls of the condominium and his findings were that there were negligiblewall ties to the cavity brick that failed and that there were few ties to restrainthe outer leaf or to allow the leaves to act as one. This evidence wascorroborated by Mr Jones. There was evidence that the ties used were inaccordance with the specifications. It was common ground between theexperts on both sides that the untreated mild steel wall ties were inadequatefor the purpose of bonding the internal and external walls together. Thelearned judge found at [62]:

The effect of insufficient or inadequate ties was explained by Mr Jones.He stated that had the two leaves been adequately tied together, thenthe load due to differential movements could have been sharedbetween them thereby improving the strength of the wall undervertical loading by improving its buckling resistance. As it was, theinadequately tied outer leaf bore the entire load itself and thiscontributed to the bricks falling. In so far as the bricks which fell areconcerned, Dr Lau’s view was that the lack of wall ties was one of themain causes of the bricks falling. The two structural engineers being inagreement that a lack of ties had a causative effect in relation to thefalling of the bricks and there being no credible evidence to contradictthis opinion, I accept it and make a finding to that effect.



54 MCST also emphasised that the trial judge’s findings that the wall tieshad corroded was reinforced by Mr Casimir’s visual inspection of the walls,including the opening up of areas in the walls and the inspection of thecavities. The sufficiency of this alleged inspection was challenged by theappellants, in that Mr Casimir’s notes, which he claimed to have left in thepossession of Murray-North, were not disclosed, and their disappearanceremained unexplained by the MCST when we heard the appeal. The MCST,however, emphasised that it was common ground, and agreed to by RSP’sexperts, that the use of untreated mild steel was patently unsatisfactory, andthat corrosion would have rendered those ties ineffective even if present.RSP failed to require that the ties to be used had to be of the quality andmaterial specified in the British code.

55 The learned judge also found that the general failure of the claddingswas contributed by the method of adhesion adopted, ie a simple cement andsand mortar base without the use of a reinforcement mesh or additives inthe mortar. In coming to this conclusion she relied on the evidence of MrCasimir. She found ([13] supra at [74]):

I accept that as far as the failed panel was concerned, the substrate inthat area was probably inadequately roughened. But that does notindicate an overall failure to prepare the substrate properly. It is muchmore likely that the generalised failure of the tiles was caused by themethod of adhesion adopted, ie a simple cement and sand mortar basewithout the use of a reinforcement mesh or additives in the mortar. MrCasimir as a building surveyor opined that failure is more probablethan success when such a mortar mix is used for tile adhesion and MrYang, the defendants’ expert, accepted this opinion as correct.

56 On the evidence before her, the learned judge was justified in makingthe findings of fact as she did, and we could find no grounds for disturbingher findings.

The third party’s position

57 We now turn to the position of EC. As the learned judge found thatthe causes for the failure of the claddings were inadequacies in the design,EC as the contractors could not be made liable for such failure. The learnedjudge said at [98]–[99]:

98 I have found that the primary causes of the failure were designinadequacies, ie the non-provision of movement joints and the non-specification of the use of reinforcement mesh and wall ties protectedfrom corrosion. Bad workmanship in the sense of inadequate numbersof wall ties being used in the brick panels was not contributory tofailure in the sense that even if adequate ties had been inserted theywould have corroded anyway and would not have served their purpose.As far as inadequate roughening of the substrate is concerned, myfinding was that there was insufficient evidence of this and, in any case,the method of adhesion chosen by the defendants was inadequate and




likely to fail. The third party cannot be held responsible for suchfailure.

99 In these circumstances, the third party is not a joint tortfeasorand the defendants cannot claim any indemnity or contribution fromthe third party. …

We agree with the trial judge that even if the walls had been built to theutmost quality, they would have still collapsed because of the poor design.In the circumstances, it is unnecessary for us to consider whether there wasany bad workmanship in the construction of the gable end walls. We alsodo not propose to deal with the arguments on the issue whether EC wereliable for any bad workmanship in the works carried out by theirsubcontractor.

58 In the result, the appeal failed and was dismissed.

Headnoted by Agnes Tan.


Documents

RSP Architects Planners & Engineers (formerly known as Raglan Squire & Partners FE) v Management Corporation Strata Title Plan No 1075 and another [1999]_2_SLR(R)_0134