[Case-study] The Centennial Tower litigation: Important lessons to learn from.

25-May-2021

Millenia Pte Ltd v Dragages Singapore Pte Ltd and others [2018] SGHC 193

Introduction

This short note considers some important aspects of construction law raised in the decision of Millenia Pte Ltd v Dragages Singapore Pte Ltd and others [2018] SGHC 193, which are generally relevant to anyone in the construction industry.

What happened in this case?

The matter concerned defects found on the façade of Centennial Tower, a prominent 35-storey Grade A office skyscraper in the Marina Centre downtown area. The façade was originally clad in over 16,000 granite stone panels of around 1m (width) x 1.6m (height) x 30mm (thickness), each weighing over 100kg. The design life of the building was 50 years.

The building was commissioned by Millenia Pte Ltd (formerly known as Pontiac Marina Pte Ltd)(“Millenia”) in 1995. The main contractor for the project was Dragages Singapore Pte Ltd (“Dragages”), which contracted with Millenia in December 2015 (“Contract”), under a modified version of the Joint Contracts Tribunal Standard Form of Building Contract with Contractor’s Design (1981). The sub-contractor in charge of the façade installation was Builders Shop Pte Ltd (“Builders Shop”).  The parties were also advised by façade consultants, namely Arup Singapore Pte Ltd (“Arup”) for Millenia and Meinhardt Façade Technology (“Meinhardt Façade”) for Dragages.

Practical completion of the building was achieved in September 1997. At the same time, Millenia, Dragages and Builders Shop executed a deed of warranty (“Deed”) under which, for a period of 15 years, Dragages and Builders Shop were obliged to remedy any defects in the works.

In September 2004, a stone panel fell from the 29th storey of Centennial Tower. No one was injured, but the Building and Construction Authority (“BCA”) ordered an investigation and asked Millenia to propose rectification. This led to a series of disputes between the parties, which eventually concluded in a settlement in 2007. Under the terms of the Settlement Agreement, Dragages and Builders Shop agreed that there would be an inspection and rectification of the façade. The rectification works were completed in October 2009, although the parties were subsequently unable to agree that the said works were done satisfactorily.

On 10 February 2011, a second stone panel fell from the 25th storey of Centennial Tower. This time, two passers-by were injured by the debris and significant property damage was caused. Consequently, Millenia decided to reclad the entire façade on the advice of Arup, and sued Dragages and Builders Shop for their breaches of duty resulting in serious and substantial defects on the façade of the building. Millenia also sued Meinhardt Façade and Arup, the parties’ consultants, for their role in the inspection process.

The Court found that Dragages and Builders Shop had breached their duties under the Deed and the Settlement Agreement; and that Millenia was entitled to recover the costs of recladding the façade from them. Although the Court agreed that Dragages and Builders Shop had also breached their duties in tort and under the Contract, such claims were time-barred and compromised by the Settlement Agreement. The claims against Meinhardt Façade and Arup were dismissed.


Why is this case important?

Many significant legal issues were raised in the suit. This article focuses on two.


The definition of “defects”

One key clarification given by the Court that a defect is work that does not comply with contractual requirements (at [226]). However, it is important to distinguish between two types of defects.

  • First, if there is a specific contractual requirement, e.g. for the size of materials to be installed, then all that a complainant needs to show is a departure from these specifications to demonstrate that the works are defective. There is no further requirement that such work has to compromise the safety and structure integrity of the structure, or its fitness for purpose, in order to be considered a defect.
     
  • Second, if there are no specifications, drawings, or other material given in the contract to spell out these requirements, then a different standard applies. Such works will be considered defective only if they do not comply with general contractual requirements such as safety risks (which must be real and non-speculative) and fitness for purpose.


Design life of the building

The purpose of the building was to serve as an office building that allowed its occupants to enter and exit safely. The Court agreed that under the Contract, the Deed and the Settlement Agreement, Dragages and Builders Shop had the obligation to exercise care and skill in designing and constructing the building, and to ensure that the works were fit for purpose.

To decide whether those obligations had been met, the Court extensively relied on the fact that the design life of the building was meant to be 50 years. This was evident in two key aspects.

First, the technical experts who testified in Court, including from Meinhardt Façade and Arup, gave the view that many of the panels that Millenia alleged to be defective were not in immediate danger of falling, and therefore did not pose a safety risk. The Court disagreed and held that it was not necessary that there should be an immediate danger of falling for a safety risk to arise, because the design life of the building was 50 years (at [246]).



 

Second, Dragages argued that the defects found on the façade were due to vibrations generated by nearby MRT works. The Court disagreed and made several important observations:
 
  • The applicable vibration threshold is found in the German standard, DIN 4150: Part 3 (1999) as adopted by the BCA and Land Transport Authority, and that because the MRT works had taken place over some years, the standard for long-term vibrations was appropriate. As the building was for commercial use, Line 1 of the DIN standard was applicable – notwithstanding that certain elements such as the cladding may have been more sensitive to vibration.
     
  • Objective data, such as vibration meters, will be given greater weight than subjective evidence, such as complaints from tenants – because human perception is not a reliable metric for assessing vibrations that occurred.
     
  • In a dense city state such as Singapore, a building should be designed to have a certain degree of robustness, and the warranties given by the builder did extend to ensuring that the building would be able to withstand foreseeable vibrations generated by construction activity in the vicinity.
     
  • Although the Court did not explicitly refer to the design life of the building when making such observations, it is evident that a building meant to last 50 years, and situated in an area where neighbouring construction activity was to be expected, should be sufficiently “robust” to withstand ordinary levels of vibrations not exceeding the applicable DIN standards.
     

Conclusion

The Centennial Tower litigation is a critical decision by the Singapore Court that deserves careful attention from the construction industry. Not only does it define what constitutes a defect, it also clarifies what constitutes a “safety risk”, and the considerations to be borne in mind when designing a building to be sufficiently robust in the eyes of a Singapore Court.

One final point is this. Because of the comments made about the design life of the building (i.e. 50 years), some questions have been raised as to whether – as a result of this decision – contractors are now on the hook for defects even after the statutory or contractually agreed defects liability period. That is not the correct reading of this decision. The limitation period for claims is unchanged by the decision, and the Court also recognised that the usual limitation periods of 6 and 15 years (as agreed under the Deed) applied to bar Millenia’s claims.

The only relevance of the design life is confined to the question of whether the building was fit for purpose – at the time that the dispute arose, and not afterwards. The Court referred to the design life of 50 years as the benchmark by which it assessed the safety of the façade. This meant that if there is evidence, for example, that a panel is in danger of falling after 5 – 7 years, i.e. in the medium or long term, then that panel could well be considered defective because the design life was for much longer. But that is not to say that Millenia was free to wait for another decade before it decides to sue. If it did, then its claim may well have been thrown out, regardless of whether latent defects in the panels are later discovered.


Article contributed by:

Zhuo Jiaxiang, Director
Jiaxiang is a specialist in handling complex commercial disputes. He has handled disputes stemming from diverse industries such as energy, telecommunications, oil and gas, steel, commodities, pharmaceuticals, water and chemical processing, signal and defence technology.