Spandeck Engineering v Defence Science: Negligence & Pure Economic Loss

In Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency, the Singapore Court of Appeal heard an appeal by Spandeck Engineering against the decision of the trial judge, who dismissed their negligence claim against the Defence Science & Technology Agency. The claim arose from a building project where Spandeck alleged under-certification of payments. The Court of Appeal dismissed the appeal, holding that the Defence Science & Technology Agency did not owe Spandeck Engineering a duty of care to avoid causing pure economic loss. The court established a single two-stage test for determining the existence of a duty of care in negligence claims, irrespective of the type of damage claimed.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal addresses negligence claim for pure economic loss, establishing a single test for duty of care.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Spandeck Engineering (S) Pte LtdAppellantCorporationAppeal DismissedLost
Defence Science & Technology AgencyRespondentGovernment AgencyAppeal DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Chan Sek KeongChief JusticeYes
Andrew Phang Boon LeongJustice of the Court of AppealNo
V K RajahJustice of the Court of AppealNo

4. Counsels

Counsel NameOrganization
Gopinath PillaiTan Peng Chin LLC
Mohan R PillayMPillay
Chong Kuan KeongChong Chia & Lim LLC
Tan Joo SengChong Chia & Lim LLC
Tai Chean MingChong Chia & Lim LLC

4. Facts

  1. The appellant claimed negligence against the respondent for under-certifying payments.
  2. The appellant submitted an alternative tender that was accepted by the Employer.
  3. The contract incorporated the Public Sector Standard Conditions of Contract (PSSCOC).
  4. The contract included a clause (34) for dispute resolution via the Superintending Officer and arbitration.
  5. The appellant alleged that items were omitted from the Contract SOT and CBD, leading to under-certification.
  6. The appellant requested a revision of the Contract SOT and CBD, which was initially rejected.
  7. The appellant eventually decided not to proceed with the implementation of the KPK-revised SOT and CBD.
  8. The contract was novated to Neo Corporation Pte Ltd.

5. Formal Citations

  1. Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency, CA 3/2007, [2007] SGCA 37

6. Timeline

DateEvent
Appellant submitted an alternative tender.
Agreed commencement date of the Contract.
Contract awarded to the appellant.
Mindef advised the appellant of the appointment of the SO and SO’s representative.
Final SOT and CBD incorporated into the Contract.
Respondent constituted under the Defence Science and Technology Agency Act.
Appellant submitted a revised SOT and CBD to KPK.
Consultants rejected the request to revise the SOT and CBD.
Meeting held between representatives of the appellant and respondent.
KPK completed its assessment.
KPK sent the proposed revised SOT and CBD to the appellant.
Appellant agreed to adopt the KPK-revised SOT and CBD.
RDC reminded the appellant of the discussion at the meeting in November 2000.
Meeting held between representatives of the appellant and the respondent; appellant decided not to proceed with the implementation of the KPK-revised SOT and CBD.
Meeting where appellant informed the respondent that it was considering novating the Contract.
Appellant informed the respondent that it was considering novating the Contract via letter.
Novation agreement signed between the appellant, the Employer and NeoCorp.
Court of Appeal dismissed the appeal.

7. Legal Issues

  1. Duty of Care
    • Outcome: The court held that the respondent did not owe a duty of care to the appellant to avoid causing pure economic loss.
    • Category: Substantive
    • Sub-Issues:
      • Proximity
      • Policy Considerations
      • Factual Foreseeability
    • Related Cases:
      • [1978] AC 728
      • [1990] 2 AC 605
      • [2007] 1 SLR 720
  2. Pure Economic Loss
    • Outcome: The court addressed whether pure economic loss is recoverable in Singapore and established a single test to apply regardless of the type of damage claimed.
    • Category: Substantive
    • Related Cases:
      • [1991] 1 AC 398
      • [1996] 1 SLR 113
      • [1999] 2 SLR 449

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Negligence

10. Practice Areas

  • Construction Law
  • Commercial Litigation

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Anns v Merton London Borough CouncilHouse of LordsYes[1978] AC 728England and WalesCited for the two-stage test to determine the existence of a duty of care.
Caparo Industries Plc v DickmanHouse of LordsYes[1990] 2 AC 605England and WalesCited for the three-part test to determine the existence of a duty of care.
Spandeck Engineering (S) Pte Ltd v Defence Science & Technology AgencyHigh CourtYes[2007] 1 SLR 720SingaporeThe trial judge's decision that was being appealed.
South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations LtdCourt of AppealYes[1992] 2 NZLR 282New ZealandCited for the principle that any approach to determining duty of care is only a framework and the outcome is determined by judicial judgment.
Donoghue v StevensonHouse of LordsYes[1932] AC 562ScotlandCited as the foundation of the modern law of negligence and the 'neighbour principle'.
Spartan Steel & Alloys Ltd v Martin & Co (Contractors) LtdCourt of AppealYes[1973] QB 27England and WalesCited for the principle that courts draw a line to limit the responsibility of the defendant as a matter of policy.
Dorset Yacht Co Ltd v Home OfficeCourt of AppealYes[1969] 2 QB 412England and WalesCited for the principle that duty is a matter of public policy.
Governors of the Peabody Donation Fund v Sir Lindsay Parkinson & Co LtdHouse of LordsYes[1985] AC 210England and WalesCited to show that the passages in Anns should not be treated as definitive.
Sutherland Shire Council v HeymanHigh CourtYes(1985) 60 ALR 1AustraliaCited for the principle that the law should develop novel categories of negligence incrementally.
Leigh and Sillavan Ltd v Aliakmon Shipping Co LtdHouse of LordsYes[1986] AC 785England and WalesCited to show that the propositions laid down by Lord Wilberforce in Anns do not provide a universally applicable test.
Yuen Kun Yeu v Attorney-General of Hong KongPrivy CouncilYes[1988] AC 175Hong KongCited for the principle that a duty of care depends on foreseeability and proximity, and occasionally public policy.
Murphy v Brentwood District CouncilHouse of LordsYes[1991] 1 AC 398England and WalesCited for overruling the two-stage test in Anns and for the exclusionary rule regarding pure economic loss.
Smith v Eric S BushHouse of LordsYes[1990] 1 AC 831England and WalesCited for the three-part test of foreseeability, proximity, and fairness.
Marc Rich & Co AG v Bishop Rock Marine Co LtdCourt of AppealYes[1994] 1 WLR 1071England and WalesCited for the principle that the words 'fair, just and reasonable' are criteria to be adopted in considering whether the necessary degree of proximity exists.
Elguzouli-Daf v Commission of Police of the MetropolisCourt of AppealYes[1995] QB 335England and WalesCited for the principle that some overlapping or merging of the three criteria will occur according to the particular circumstances.
Customs and Excise Commissioners v Barclays Bank plcHouse of LordsYes[2007] 1 AC 181England and WalesCited for the principle that the incremental test is of little value as a test in itself.
Sunny Metal & Engineering Pte Ltd v Ng Khim Ming EricCourt of AppealYes[2007] 1 SLR 853SingaporeCited to show that the position in England continues to be in a state of flux and confusion.
RSP Architects Planners & Engineers v Ocean Front Pte LtdCourt of AppealYes[1996] 1 SLR 113SingaporeCited for the principle that pure economic loss is recoverable in tort and for applying the two-stage test in Anns.
RSP Architects Planners & Engineers v MCST Plan No 1075Court of AppealYes[1999] 2 SLR 449SingaporeCited for rejecting the two-stage test in Anns but adopting a similar test and for the rationale for allowing claims of pure economic loss in relation to immovable property.
Junior Books Ltd v Veitchi Co LtdHouse of LordsYes[1983] 1 AC 520England and WalesCited in Ocean Front for finding the developer liable in negligence for economic loss.
The Sunrise CraneCourt of AppealYes[2004] 4 SLR 715SingaporeCited for the principle that the 'two-stage process' is limited to pure economic loss situations and that the three-part test in Caparo is to be applied in all other situations.
Man B&W Diesel S E Asia Pte Ltd v PT Bumi International TankersHigh CourtYes[2004] 2 SLR 300SingaporeCited for the principle that the 'two-stage process' is limited to pure economic loss situations.
United Project Consultants Pte Ltd v Leong Kwok OnnCourt of AppealYes[2005] 4 SLR 214SingaporeCited for the principle that courts have consistently adopted a more restrictive approach in determining whether to impose a duty of care in cases of pure economic loss.
Ikumene Singapore Pte Ltd v Leong Chee LengCourt of AppealYes[1993] 3 SLR 24SingaporeCited for endorsing the three-part test in Caparo.
Standard Chartered Bank v Coopers & LybrandHigh CourtYes[1993] 3 SLR 712SingaporeCited for endorsing the three-part test in Caparo.
Pang Koi Fa v Lim Djoe PhingHigh CourtYes[1993] 3 SLR 317SingaporeCited for endorsing the three-part test in Caparo.
Mohd bin Sapri v Soil-Build (Pte) LtdHigh CourtYes[1996] 2 SLR 505SingaporeCited for endorsing the three-part test in Caparo.
D v Kong Sim GuanHigh CourtYes[2003] 3 SLR 146SingaporeCited for endorsing the three-part test in Caparo.
TV Media Pte Ltd v De Cruz Andrea HeidiHigh CourtYes[2004] 3 SLR 543SingaporeCited for endorsing the three-part test in Caparo.
Bryan v MaloneyHigh CourtYes(1995) 69 ALJR 375AustraliaCited for the principle that policy considerations underlying the reluctance of courts to recognize a relationship of proximity in cases of mere economic loss are inapplicable in certain relationships.
Hedley Byrne & Co Ltd v Heller & Partners LtdHouse of LordsYes[1964] AC 465England and WalesCited for grounding liability for negligent misstatements causing pure economic loss on an assumption of responsibility and reliance.
Customs and Excise Commissioners v Barclays Bank plcCourt of AppealYes[2005] 1 WLR 2082England and WalesIdentified three separate and independent tests in England to find a duty of care.
Ho Soo Fong v Standard Chartered BankHigh CourtYes[2007] 2 SLR 181SingaporeCited for the principle that foreseeability of the kind of losses is properly the test for the remoteness of damages in tort, and not the test for factual foreseeability in relation to the duty of care.
Pacific Associates Inc v BaxterCourt of AppealYes[1990] 1 QB 993England and WalesCited for the principle that it would not be reasonable to impose a Hedley Byrne duty on the engineer because it would cut across and be inconsistent with the structure of relationships created by the contracts.
John Holland Construction and Engineering Pty Ltd v Majorca Projects Pty LtdSupreme CourtYes(2000) 16 Const LJ 114AustraliaFollowed Pacific Associates and thought that the lowest common denominator in Pacific Associates, which prevented the court from finding a duty, was the arbitration clause.
Leon Engineering & Construction Co Ltd v Ka Duk Investment Co LtdHigh CourtYes(1989) 47 BLR 139Hong KongFollowed Pacific Associates and refused to impose a duty on the professional on the ground that there was an adequate machinery under the contract for the contractor to pursue grievances.
Edgeworth Constructions Ltd v ND Lea & Associates LtdSupreme CourtYes(1993) 107 DLR (4th) 169CanadaHeld that there might be situations where a negligent statement by the professional in preparing the tender documents would lead to liability under Hedley Byrne.
J Jarvis and Sons Ltd v Castle Wharf Developments LtdCourt of AppealYes[2001] EWCA Civ 19England and WalesDistinguished Pacific Associates and held that the professional agent of an employer could be liable to a contractor for negligent misstatements made by that agent to the contractor with the aim of inducing the contractor to tender.
Cooper v HobartSupreme CourtYes(2001) 206 DLR (4th) 193CanadaCited as an example of a Commonwealth jurisdiction that applies the two-stage test in Anns, tempered by the preliminary requirement of factual foreseeability.
Rolls-Royce New Zealand Ltd v Carter Holt Harvey LtdCourt of AppealYes[2005] 1 NZLR 324New ZealandCited as an example of a Commonwealth jurisdiction that applies the two-stage test in Anns, tempered by the preliminary requirement of factual foreseeability.
Alcock v Chief Constable of South Yorkshire PoliceHouse of LordsYes[1992] 1 AC 310England and WalesCited for the principle that the concept of 'proximity' is an artificial one which depends more upon the court’s perception of what is the reasonable area for the imposition of liability than upon any logical process of analogical deduction.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Defence Science and Technology Agency Act (Cap 75A, 2001 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Duty of Care
  • Pure Economic Loss
  • Superintending Officer
  • Certification
  • Proximity
  • Policy Considerations
  • Factual Foreseeability
  • PSSCOC
  • SOT
  • CBD
  • Novation

15.2 Keywords

  • Negligence
  • Duty of Care
  • Pure Economic Loss
  • Construction
  • Singapore
  • Court of Appeal
  • Spandeck Engineering
  • Defence Science & Technology Agency

17. Areas of Law

Area NameRelevance Score
Negligence95
Pure Economic Loss85
Torts75
Damages60
Contract Law40
Commercial Disputes30
Arbitration25

16. Subjects

  • Tort Law
  • Negligence
  • Contract Law
  • Construction Law
  • Civil Procedure