The SEa view condominium dispute: who are independent contractors and why is this important

THE SEA VIEW CONDOMINIUM DISPUTE: 
WHO ARE INDEPENDENT CONTRACTORS AND WHY IS THIS IMPORTANT.

Introduction
 
The long running legal battle between the MCST of the Sea View Condominium (MCST) and the Developers, Main Contractors, Architects and M&E Consultants of the development is keenly watched and known to many in the construction and real estate industry.

 It has spawned two appeals to the Singapore Court Of Appeal; even before the final trial on the merits of the claim.
 
The subject of this post is the independent contractor defence that was considered by the High Court in MCST 3322 v Mer Vue Development Pte Ltd & Ors [2016] SGHC 38. The appeal against the High Court’s decision was dismissed in early May 2016.
 
 
Background
 
The MCST sued all the Defendants in the tort of negligence.
 
Three of the Defendants, namely the Developer; the Architect and the Main Contractor; raised the independent contractor defence.
 
These Defendants pleaded that they had engaged competent independent contractors were not responsible in tort for the tortious conduct of their respective independent contractors.
 
The Developer said that the Main Contractors; Architects and all other consultants were its independent contractors.
 
The Main Contractors said that its specialist nominated and domestic sub-contractors were its independent contractors.
 
The Architects said that its sub consultant, who was the M&E Consultants were its independent contractors.
 
The MCST disagreed and the issue of whether the three Defendants could raise the independent contractor defence was heard as preliminary issue by the High Court.
 
 
Decision.
 
After a nine-day trial, the High Court agreed with the three Defendants.
 
In respect of the Developers’ defence, the Court was of the view that the Main Contractors and Architects were the Developers’ independent contractors and it had exercised proper care in selecting and appointing them in light of their respective track records and reputation. As such, the Developers would not be liable for the tortious actions of the Main Contractors and Architects. A similar finding was made in relation to the Main Contractors and the Architects.
 
The Control and Independent Business Test
 
The Court relied principally on two “tests” to assess the “independence” of the engaged party – the “Control Test” and the “Independent Business Test”.
 
Under the “Control Test”; the focus was on the “right to control how the work was done i.e., the manner in which the work was to be actually executed by the contractor”.
 
Under the “Independent Business Test”; the key lies in “whether the contractor was performing services as a person of business on his own account”. Factors which can be taken into consideration include – whether the contractor provides his own equipment and hires its own helpers; and the degree of financial risk undertaken.
 
On the facts of this case, the Court found that the “Control and Independent Business Test” were satisfied.
 
The Developers’ involvement in specifying and making decisions on the design brief; and aesthetics of the development; communicating directly with the main contractors and sub-contractors; and having staff with overlapping expertise did not amount to sufficient control under the “Control Test”.
  
The Main Contractors’ general supervisory control in terms of the co-ordination of its sub-contractors did not establish the necessary control under the “Control Test”. “The nature of the work sub contracted was largely specialist and dependent on the subcontractor’s proprietary system”.
 
The Architects’ role as the lead consultant was akin to that of the Main Contractors. Its control of the the sub-consultants was only administrative in nature. It had no expertise in the sub-consultants’ area of practice.
 
The requirements of the “independent Business Test” was easily fulfilled as all the sub-contractors and sub-consultants were operated as separate businesses without any links to the Developers; Main Contractors or Architects.
 
 
Comments
 
This decision may have far reaching implications in the arena of construction disputes, in particular disputes arising from defective premises.  
 
Specialist sub-contractors and sub-consultants will now be in direct line of fire from building owners and/or MCSTs in relation to tortious claims for defects arising from their area of specialty. For example, if a lift is defective, the MCST may seek recourse directly from the lift specialists and/or the M&E Consultants instead of merely suing the Developers and Main Contractors. Further, main contractors may now put up their specialist sub-contractors as a shield to deflect MCST claims.
 
From the MCST and/or owners’ perspective, a blunderbuss approach to defects litigation where all the key players in the development are named as defendants may not be feasible. A more specific targeted approach may be needed where specific parties are lined up for specific defects in accordance to their area of expertise. Failure to identify and take action against the proper defendant in time may be costly. For instance, in the Sea View case, at the time of the High Court’s decision, it might not have been feasible for the MCST to add the specialist sub-contractors as defendants as the claim against them would have been time barred.
 
 
 
Warmest Regards
 
Tan Joo Seng
10 June 2016