Salcon Ltd v United Cement Pte Ltd: Damages for Negligence and Breach of Contract in Silo Construction

In Salcon Ltd v United Cement Pte Ltd, the Court of Appeal of Singapore heard an appeal regarding an arbitrator's ruling on damages owed by Salcon Ltd to United Cement Pte Ltd for negligence and breach of contract in the construction of a cement silo. The silo collapsed due to a third party's actions (TEPP), considered a novus actus interveniens. The court allowed the appeal in part, disallowing claims for consequential losses during a notional repair period and for the depreciated replacement cost, but allowing a claim for diminution in value measured by discounted cash flow, provided it did not exceed the cost of repairs.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal allowed in part.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Salcon Ltd was found liable for negligence and breach of contract in constructing a defective silo. A subsequent collapse due to a third party's actions impacted damage claims.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Salcon LtdAppellantCorporationAppeal allowed in partPartial
United Cement Pte LtdRespondentCorporationPartial LossPartial

3. Judges

Judge NameTitleDelivered Judgment
Chao Hick TinJustice of AppealNo
Tan Lee MengJudgeYes
Yong Pung HowChief JusticeNo

4. Counsels

Counsel NameOrganization
Jimmy YimDrew and Napier LLC
Paul WongRodyk and Davidson
Philip JeyaretnamRodyk and Davidson
Goh Peng FongRodyk and Davidson

4. Facts

  1. UCL engaged Salcon to construct a reinforced concrete silo.
  2. The silo was neither well designed nor well constructed, leading to defects.
  3. Cheang advised that the silo should not be operated beyond 70% capacity.
  4. TEPP advised UCL to shut down the silo for repairs.
  5. UCL loaded Cell 4 to full capacity against advice, leading to the silo's collapse.
  6. The arbitrators found TEPP's advice to load Cell 4 to full capacity was a novus actus interveniens.

5. Formal Citations

  1. Salcon Ltd v United Cement Pte Ltd, CA 3/2004, [2004] SGCA 40

6. Timeline

DateEvent
UCL appointed Cheang Jen Boon to design the silo.
UCL appointed Salcon as the main contractor for the construction of the silo.
Construction work was substantially completed.
The silo was fully operational.
A number of defects appeared.
Cheang issued the Certificate of Completion of Work and the Defects Liability Certificate.
Chunks of concrete and rebars were flushed through the discharge valves of Cell 4.
Chunks of concrete and rebars were flushed through the discharge valves of Cell 4.
A site inspection was carried out by officers from the Building Control Division.
Cheang advised that the silo should not be operated beyond 70% of its capacity.
TEPP recommended that the silo be shut down for repairs.
TEPP recommended that the silo be shut down for repairs.
The silo ceased operating.
Cell 4 was loaded to full capacity.
A large vertical crack appeared around Cells 3 and 4, after which the whole silo collapsed.
The dispute was referred to a panel of three arbitrators.
Parties jointly framed preliminary questions of law for the arbitrator’s decision.
Judgment reserved.

7. Legal Issues

  1. Breach of Contract
    • Outcome: Salcon was found to be in breach of contract due to defective workmanship.
    • Category: Substantive
    • Sub-Issues:
      • Defective workmanship
      • Failure to meet design specifications
  2. Negligence
    • Outcome: Salcon was found to be negligent in the construction of the silo.
    • Category: Substantive
    • Sub-Issues:
      • Failure to exercise reasonable care in construction
      • Defective design implementation
  3. Novus Actus Interveniens
    • Outcome: The court found that TEPP's negligent advice to load Cell 4 to full capacity was a novus actus interveniens that broke the chain of causation.
    • Category: Substantive
  4. Measure of Damages
    • Outcome: The court disallowed claims for consequential losses during the notional repair period and for the depreciated replacement cost, but allowed a claim for diminution in value measured by discounted cash flow, provided it did not exceed the cost of repairs.
    • Category: Substantive
    • Sub-Issues:
      • Consequential losses
      • Diminution in value
      • Discounted cash flow
      • Depreciated replacement cost

8. Remedies Sought

  1. Damages for defective design and workmanship
  2. Consequential losses during the rectification period
  3. Consequential loss due to the loss of capacity of the silo
  4. Consequential loss measured by discounted cash flow
  5. Consequential loss measured by the depreciated replacement cost

9. Cause of Actions

  • Breach of Contract
  • Negligence

10. Practice Areas

  • Commercial Litigation
  • Construction Dispute

11. Industries

  • Construction
  • Cement Manufacturing

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
The Haversham GrangeEnglish Court of AppealYes[1905] P 307England and WalesCited and distinguished regarding consequential losses, noting that actual repairs were done in the cited case, unlike the present case where repairs were impossible due to collapse.
The GlenfinlasNot specifiedYes[1918] P 363England and WalesApproved regarding the principle that consequential loss stands on a different footing from the cost of repairs.
The YorkEnglish Court of AppealYes[1929] P 178England and WalesApproved the reasoning in The Glenfinlas regarding damages for detention.
Baker v WilloughbyHouse of LordsYes[1970] AC 467England and WalesCited and distinguished regarding the effect of a supervening event on liability for damages, noting its limited applicability to commercial disputes.
Jobling v Associated Dairies LtdHouse of LordsYes[1982] AC 794England and WalesCriticized Baker v Willoughby, regarding the effect of supervening events on liability for damages.
Carslogie Steamship Co Ld v Royal Norwegian GovernmentHouse of LordsYes[1952] AC 292England and WalesCited regarding the principle that the plaintiff must prove that damages resulted from the defendant's wrongful act.
Beoco Ltd v Alfa Laval Co LtdEnglish Court of AppealYes[1994] 4 All ER 464England and WalesCited regarding responsibility for damages when a subsequent event exacerbates the initial damage.
Payton v BrooksNot specifiedYes[1974] RTR 169England and WalesCited regarding the possibility of awarding damages for diminution in market value in addition to the cost of repairs.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Arbitration Act (Cap 10, 1985 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Cement Silo
  • Novus Actus Interveniens
  • Consequential Loss
  • Diminution in Value
  • Discounted Cash Flow
  • Depreciated Replacement Cost
  • Rectification Period
  • Defective Workmanship
  • Negligence
  • Breach of Contract

15.2 Keywords

  • construction
  • contract
  • negligence
  • damages
  • silo
  • singapore
  • arbitration

17. Areas of Law

Area NameRelevance Score
Damages90
Novus Actus Interveniens85
Negligence80
Breach of Contract75
Causation70
Construction Law65

16. Subjects

  • Construction Dispute
  • Contract Law
  • Damages
  • Arbitration