The Singapore High Court recently rejected a developer’s claim for damages against purchasers for causing delay in issuing the Certification of Statutory Completion (CSC) due to timber decks in their unit not compliant with Building and Construction Authority’s (BCA) regulations.

The High Court decision is very factcentric.

Nonetheless, the case provides useful guidance for developers in similar situations.

This case note takes a look at Macly Assets Pte Ltd v Loke Yew Kong Andrew & Anor [2014] SGHC 145.

Relevant Clauses

The Sale and Purchase Agreement between the Purchasers and the Developer in this case was in the prescribed format under the Housing Developers Rules.

The following relevant clauses are appended below:

10.2 Where the Certificate of Statutory Completion has not been issued for the Unit, the Purchaser shall not, without the prior written consent of the Vendor, carry out or cause to be carried out any alterations or additions to the Unit which result in the Unit not having been constructed according to the plans and specifications approved by the Commissioner of Building Control.

15.3      If the issue of a Certificate of Statutory Completion in respect of the Unit is refused, withheld or delayed owing to any alteration or addition carried out or caused to be carried out by the Purchaser without the Vendor’s prior written consent, or some other act or omission by the Purchaser, the Vendor may by notice in writing require the Purchaser to take such measures within 30 days of that notice as are necessary to enable the Vendor to obtain the Certificate of Statutory Completion.

15.4      If the Purchaser does not comply with the Vendor’s notice under clause 15.3, the Vendor and his workmen or agents have the right to enter the Unit to make such necessary alterations and additions to the Unit as may be required by the Commissioner of Building Control, and to recover from the Purchaser the cost of the alterations and additions.

Facts

The Purchasers bought a condominium unit at Thomson V Two (the Development) from the Developers in May 2007.

After the temporary occupation permit was granted, the Purchaser obtained vacant possession of the Unit sometime in July 2012 and submitted an application to the Developer to renovate the Unit and was issued a permit by the Developer.

Renovation of the Unit proceeded and the works included the construction of 2 timber decks, which were completed by August 2012.

During the renovation works, the Purchasers complained to the Developer about certain defects in the Unit and these complaints somehow led to an inspection of the Unit by officers from the BCA in January 2013.

The BCA officers noticed the timber decks and pointed out to the Purchasers that these might not be in compliance with statutory requirements.

On 15 March 2013, the Developer through its solicitors gave notice to the Purchasers under clause 15.3 of the Sale and Purchase Agreement to take such measures as are necessary within 30 days to enable the Developer to obtain CSC for the Development as this was held up due to the timber decks.

The Purchasers met representatives from BCA and the Developer to try to resolve the matter but the efforts were futile.

The Developer’s solicitors wrote to the Purchasers on 18 April 2013 stating the following:

1. the 30-day period had lapsed;
2. the Purchasers’ failure to rectify had caused the Developer to suffer and continue to suffer losses arising from the delay in the issuance of the CSC;
3. the Developer’s right under clause 15.4 of the Sale and Purchase Agreement to enter the Unit to make such necessary alterations and additions to the Unit as required by BCA and recover the costs from the Purchasers; and
4. inquiry if the Purchasers were prepared to cooperate.

The Developer’s architect certified on 3 May 2013 that, save for the timber decks in the Unit, the Development was ready for issuance of CSC.

On 14 May 2013, the Developer filed a suit against the Purchasers and sought a mandatory injunction to remove the timber decks.

What followed was a series of communications between the parties, Urban Redevelopment Authority (URA) and BCA.

The situation became murky when URA wrote to the Purchasers on 28 May 2013 stating that it was prepared to permit the timber decks subject to certain conditions including payment of development charge while BCA issued a demolition order on 30 May 2013 for the timber decks to be removed by 30 June 2013.

The Purchasers proceeded with some works to the timber decks which finally satisfied BCA and BCA’s demolition order was withdrawn on 23 September 2013.

The Developer unfortunately did not obtain the CSC at that juncture and in the course of making their case to BCA, the Purchasers pointed out to BCA the existence of similar timber decks in other units in the Development.

This led to BCA issuing demolition orders to owners of those units.

It took a while for BCA to be finally persuaded that these timber decks were not in breach of relevant regulations and the Developer finally obtained CSC for the Development on 13 November 2013.

The Developer sought an indemnity from the Purchaser for the loss arising from the delay in obtaining the release of the final payment upon the grant of CSC for the period up to 13 November 2013.

Parties’ Positions

The Developer alleged that the Purchasers had breached clause 10.2 of the Agreement and that the timber decks which caused the delay in the issuance of CSC were added without its prior written consent.

The Developer sought an indemnity from the Purchaser for the loss arising from the delay in obtaining the release of the final payment upon the grant of CSC for the period up to 13 November 2013.

The Purchasers however took the position that the Developer had granted written consent for the timber decks and were stopped from asserting that there was no written permission.

In addition, the Developers had waived clause 15.3 and failed to mitigate damages and that the delay was also caused by other units.

The Purchasers also counterclaimed for costs of the works to the timber decks to render them in compliance with BCA’s requirements to withdraw the demolition order.

Decision

The evidence before the learned Judge in the case includes an application form entitled “Application For Additions & Alterations”.

In the “Description of Works”, the Purchasers stated “Loft floors above kitchen and half of living room…” and attached plans which showed the timber decks.

The Purchaser testified that he was told by the Developer’s representative to amend the words “loft floors” in the form to “storage area” and the Purchaser amended the form accordingly.

In addition, there was a “Renovation Permit” constituting consent granted by the Developer under clause 10.2 of the Agreement while the issue was whether written consent was granted for the construction of the timber decks.

The Renovation Permit made no mention of the timber decks and the Judge found in favour of the Purchaser notwithstanding and ruled that the Developer had given consent within the meaning of clause 10.2 of the Agreement even though there was no specific mention of the “loft floor” or “timber deck” in the Renovation Permit.

The decision was made on the basis that, firstly the Purchasers had submitted the application with plans clearly showing the timber decks.

These plans were accepted by the Developer and more importantly, the Developer’s representatives had not at any point stated that the Purchasers’ application to construct the timber decks was rejected and had seen the timber decks in the Unit and did not raise any objection.

The Judge made it clear that the onus is still on the Purchaser to ensure that any renovation the Purchasers carry out would comply with the relevant regulations.

While clause 10.2 of the Agreement imposed an obligation on the Purchasers to obtain prior written consent from the Developer before carrying out any renovation, clause 10.2 should not be interpreted to mean that a purchaser may carry out non-compliant renovation to his unit once he obtains the Developer’s consent.

The Judge took the position that there is no duty on a Developer to ensure that a purchaser’s proposed renovation is compliant with the relevant regulations.

However, once consent is granted by the Developer, the Purchaser is absolved of liability to the Developer should such renovation turns out to be non-compliant.

Lessons

It is interesting for developers to note the learned Judge’s remarks on the steps that the Developer ought to have taken upon learning of BCA’s objection to the timber decks.

It is an established principle in contract law that the party, who claims damages for a breach, has a duty to mitigate its own loss.

The Judge decided that the Developer in this case had failed to do so and did not exercise its rights, under clause 15.4 of the Agreement, to enter the Unit and proceed with the rectification work upon expiry of the 30-day notice under clause 15.3 of the Agreement.

In addition, developers in similar situations should seek, as early as possible, certification from the architects that the development would have been ready for grant of CSC if not for the non-compliant renovations.

In this case, such certification was only given on 3 May 2013 although the Developer had notice of BCA’s objection to the timber decks in January 2013, possibly as independent confirmation to the Purchasers that their timber decks were holding up the issue of CSC, though not evident in the case.

While the Developer might attempt to resolve the issue with BCA, in March 2013 when the Developer decided to serve a written notice to require the Purchaser to take such measures within 30 days as are necessary to enable the Developer to obtain CSC, it should have procured and furnished the architect’s certification that the Development would have been CSCready if not for the timber decks.

The date of issue of the architect’s certificate became relevant in this case as the commencement of the period of delay caused by the timber decks.

Developers may also wish to look closely at their process for granting consent for Purchasers’ renovation of their units to avoid “inadvertent consent” being granted for works which may run foul of regulatory requirements.

In this case, although the Renovation Permit did not mention the timber decks at all, the Developer was deemed to have granted consent to the timber decks since:

1. the plans submitted in application for consent reflected the timber decks and the Developer had not indicated at any time to the Purchasers that permission is not granted for their construction; and
2. the Developers’ representatives had notice of the timber decks, and did not object to them.

Being silent, in this case, meant consent.