DAISHO DEVELOPMENT SINGAPORE PTE LTD V ARCHITECTS 61 PTE LTD [2020] SGHC 16
In Daisho Development Singapore Pte Ltd v Architects 61 Pte Ltd [2020] SGHC 16 (“Daisho v Architects”), the High Court dismissed the plaintiff’s claim for losses allegedly resulting from negligent misrepresentations made by the defendant. This article will focus on some of the reasons why the High Court found that the defendant did not owe a duty of care to the plaintiff.
I. Background
The plaintiff is a company engaged in the acquisition and operation of assets such as hotels and restaurants and the defendant is an architectural firm ([4] Daisho v Architects).
The dispute was centred around restrictions by the URA on how the maximum permissible gross floor area of a hotel was to be split for office use, hotel use and other permitted uses (“the Use Restrictions”) ([6] Daisho v Architects). This meant that certain facilities such as the food and beverage facilities on the 32nd and 33rd floors (“the Facilities”), which were classified for hotel use could only be used by hotel guests and staff and not by the public ([8] and [10] Daisho v Architects).
The background to the relationship between the parties are as follows; the plaintiff and Asia Square Tower 2 Pte Ltd (“AST2”) had entered into a sale and purchase agreement dated 16 December 2013 (“the SPA”) for the Westin Hotel of which the defendant was the project architect. Subsequently, the plaintiff commenced arbitration against AST2 for false and fraudulent misrepresentations that the public could access certain hotel facilities even though the Urban Redevelopment Authority (“URA”) had stipulated otherwise. In the arbitration, the tribunal handed down an award ruling against the plaintiff ([1] Daisho v Architects).
After multiple unsuccessful attempts to obtain recourse against AST2, the plaintiff sought another bite of the cherry by suing the defendant. The plaintiff relied on similar facts but alleging negligent misrepresentation regarding the restricted use of the hotel facilities ([2] Daisho v Architects).
In essence, the plaintiff’s case was that the defendant was negligent in providing advice to AST2 regarding the Use Restrictions and AST2 had in turn conveyed that advice to the plaintiff ([21] Daisho v Architects). As a result, the plaintiff paid a higher purchase price than they would otherwise have ([28] Daisho v Architects).
II. The Decision of the High Court
Caveat Emptor. The High Court did not think that the defendant owed the plaintiff a duty of care to inform them of the Use Restrictions. The High Court observed that it was not the defendant’s responsibility to bring the Use Restrictions to the plaintiff’s attention, but that of the plaintiff’s advisers, who had been engaged to conduct a thorough due diligence check on the hotel. The purchase of the hotel was conducted on the basis of caveat emptor and the plaintiff was fully aware of the implications and responsibilities of contract entered into on this basis as they had their own advisers ([44] and [65] Daisho v Architects).
The High Court also accepted the defendant’s argument that as the plaintiff had denied they were aware of the Use Restrictions before entering into the SPA, they could not possibly be aware of any purported advice given by the defendant on how to circumvent those restrictions ([39] Daisho v Architects). Thus, the plaintiff’s case failed in any event as they could not have acted on the defendant’s advice ([66] Daisho v Architects).
Duty of care. Nevertheless, the High Court proceeded to address the issue of whether the defendant owed a duty of care to the plaintiff on the assumption that the defendant did render the advice. The High Court affirmed the principles set out in Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency [2007] 4 SLR(R) 100 that “to establish a duty of care the plaintiff must show that the harm is factually foreseeable, the relationship between the parties is sufficiently proximate, and that there are no policy considerations that negate the finding of a duty of care” ([67] Daisho v Architects).
Proximity. On the requirement of proximity, the High Court found that it was inconceivable that the plaintiff, the buyer of the hotel, would believe the defendant owed any duty or responsibility towards them, particularly because the SPA was conducted on an arm’s length and caveat emptor basis ([77] Daisho v Architects).
Second, there was no voluntary assumption of responsibility by the defendant. The High Court observed that architects give advice within the confines of their relationship with their client, tailored to the facts and at a specific point in time. While the client is free to pass the advice to a third party, that does not mean that the architect assumes responsibility to parties to whom that advice is conveyed by the client, without first being consulted or giving further input. Seen in this light, a claim for economic loss arising from negligent misstatement differs materially from a claim for physical damage arising from negligent construction, or even economic loss arising from negligent construction ([78] Daisho v Architects).
Policy considerations. Finally, the High Court also observed that policy considerations would have negated any prima facie duty of care in any case. According to the High Court, the court must guard against the spectre of imposing liability in an indeterminate amount for an indeterminate time to an indeterminate class and that imposing a duty of care on the defendant would undermine the rule of caveat emptor ([84] – [85] Daisho v Architects).
III. Observations of Daisho v Architects
As observed by the High Court, this was an unfortunate case where the plaintiff at every opportunity overlooked the Use Restrictions leading to their present predicament ([107] Daisho v Architects).
Parties should note that caveat emptor is the general rule in contracts for the sale of land save for a vendor’s duty to disclose latent defects of title ([85] Daisho v Architects). Where this general rule applies, parties should take extra precaution to exercise adequate due diligence to avoid being placed in the same unenviable position as the plaintiff ([92] Daisho v Architects).
Tags: Fraudulent misrepresentation; Negligent misrepresentation; Duty of care; Voluntary assumption of responsibility; Proximity; Policy considerations; Sale and purchase; Caveat Emptor.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.