Case Commentary
Crescendas Bionics Pte Ltd v Jurong Primewide Pte Ltd and other appeals [2023] SGHC(A) 9
By Leonard Loh (Selvam LLC)
Takeaway: The issues of remoteness and what is in the reasonable contemplation of parties is a fact-sensitive exercise. Employers are thus encouraged to share with their main contractors (or main contractors with their sub-contractors) on the nature of the project and the potential knock-on effects of delay.
On 9 February 2023, the Appellate Division of the Singapore High Court issued its decision in Crescendas Bionics Pte Ltd v Jurong Primewide Pte Ltd and other appeals [2023] SGHC(A) 9. While multiple issues relating to causation, remoteness, quantification and apportionment were discussed, one significant finding was the adoption of the multi-year model by the Appellate Division in quantifying the amount of damages payable by the main contractor to the employer for delay.
The dispute arose over delays in the construction of Biopolis 3, a seven-storey multi-tenanted business park development in One-North envisaged as a research and development hub for biomedical sciences institutes and organisations, offering specialised facilities such as wet laboratories, chemistry laboratories and an animal facility (at [3]). Following a trial and appeal on issues of liability, it was adjudged that the construction of Biopolis 3 was deemed to be delayed, with the Employer being responsible for 173 days of delay and the Main Contractor being responsible for 161 days of delay. One of the delay claims asserted by the Employer against the Main Contractor was for post-completion net rental revenue loss sustained even after Biopolis 3 was completed.
Key principles relating to damages
Before its discussion of the multi-year model, the Appellate Division affirmed various key principles relating to damages.
First, it set out the difference between a claim for loss simpliciter and a claim for loss of chance. This issue arose since the Employer appeared to conflate both types of claims, characterising its claim as a loss of chance to earn net rental revenue when, in fact, it was pursuing a claim for the loss of net rental revenue. The key difference is that the loss of chance doctrine allows a claimant to claim for the loss of chance of a favourable outcome, rather than loss of the favourable outcome itself, where the favourable outcome is contingent on the action of a third party. In a loss of chance claim, a claimant does not need to show on balance of probabilities that the third party would have acted in a manner to confer the favourable outcome; it is sufficient to show that the chance of the third party doing so was real and substantial. Since the Employer ran its case on the basis that but for the Main Contractor’s breach, it would (and not simply could) have earned the net revenue rental.
The Appellate Division also stated that issues faced by a claimant in precisely quantifying its loss does not transfer a claim for loss simpliciter to that of a loss of chance (at [35]-[46]). While it is a principle of law that a claimant must satisfy the court “as to the fact of damage and its amount” (at [160]), once the fact of damage is shown and the claimant has “attempted its level best to prove its loss and the evidence is cogent, the court should allow it to recover the damages claimed” (at [161]). In this case, the Employer had adduced the “copious amount of empirical data relating to Biopolis 3”, including market data of comparable buildings and island-wide market trends, which eventually led to a positive award on damages.
Second, it affirmed the principle that when the breach of contract was one of two causes, the contract-breaker is liable for damages so long as his breach was an effective cause of the plaintiff’s loss – the Main Contractor was thus liable to pay damages even though the length attributable to the Employer and the Main Contractor were evenly balanced, and the delays were interspersed between one another (at [58]-[63]).
Third, it affirmed the long-standing principle of Hadley v Baxendale, that compensation is awarded for damage seen as in the reasonable contemplation of both parties at the time they made the contract, given that the damage in question (a) arose naturally from the breach of contract or in the usual course of things (termed as “ordinary damage”) and (b) was in the reasonable contemplation of parties given the state of parties’ actual knowledge (termed as “extraordinary damage”). It was helpfully clarified that both ordinary and extraordinary damages are premised upon the “overarching criterion of the loss being in ‘reasonable contemplation’” (at [86]-[87]).
It was significant that the Appellate Division found that post-completion net revenue rental loss was ordinary damage, i.e., damage that arose naturally from the breach of contract or in the usual course of things. In reaching this conclusion, the Appellate Division found that (a) both parties were aware that Biopolis 3 was a multi-tenanted development at the time of contracting, (b) it was within parties’ reasonable contemplation that Biopolis 3 would take multiple years to fill up its rental capacity, (c) it was within parties’ reasonable contemplation that a substantial delay would cause potential tenants to walk away and (d) tenancies in the relevant industry span several years due to substantial fitting out and relocation costs. It is clear that the Appellate Division adopted a commercial and realistic approach in deciding what matters were within parties’ reasonable contemplation in the ordinary course of affairs – this was perhaps motivated by the fact that both parties in question were commercial parties and experienced in the industry.
Multi-year model for computation of post-completion net rental revenue loss
After considering the expert evidence, the Appellate Division adopted the multi-year model, awarding the Employer post-completion net rental revenue loss over multiple years, accepting the evidence led that (a) Biopolis was a multi-tenanted development which would have taken several years to fill up, (b) the reasonable time taken for Biopolis to reach stabilised occupancy would have been 4 years and (c) the lost prospective leases would have been for multiple years (at [105]-[106]). The Appellate Division also found that the multi-year loss would not be stemmed even if the Employer took reasonable mitigatory steps by securing another tenant, since the length of time needed to reach stabilised occupancy meant that even if new tenants were sourced by the Employer, they were not truly replacement tenants since the Employer would still have empty spaces for lease even after completion (at [149]). This conclusion was consistent with the Employer’s expert that Biopolis 3 was a specialised building and the Employer would need multiple years to source for tenants to fill up the building; this is in contrast to HDB flats or private condominiums which can be fully occupied once the delay ends (at [140]).
Flowing from the multi-year model, the net rental revenue loss was quantified. A compounded discount rate of 8%, as well as apportionment based on the number of days of delay that the Main Contractor was responsible for out of the total days of delay, was applied. The Main Contractor was eventually ordered to pay S$4,185,802.60 for this head of claim.
Significance of decision
This decision is significant for a number of reasons. First, while it is clear that the Singapore courts will adopt a commercial approach towards issues of quantification, the issues of remoteness and what is in the reasonable contemplation of parties is a fact-sensitive exercise. Employers are thus encouraged to share with their main contractors (or main contractors with their sub-contractors) on the nature of the project and the potential knock-on effects of delay. In a dispute situation, it would then be easier for the innocent party to establish damage (and more difficult for the contract breaker to defend such claims based on remoteness). Second, in construction claims, it is vital that the innocent party obtains adequate (and in fact, early) support in terms of legal representation and expert witnesses. The Employer in this case had put before the court below and the Appellate Division a “copious” amount of evidence to support its claim for post-completion net revenue loss, and had 3 expert witnesses to support its multi-year modelling. Both exhortations are especially important for industry-specific or purpose-built infrastructure projects.
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