Defects
| Author | Julian Bailey |
| Pages | 1273-1354 |
1273
CHAPTER 14
DEFECTS
What is a defect? 1275
Temporary disconformity 1277
Compliance with the contractual specication 1280
(i) Generally 1280
(ii) Choice of materials 1281
(iii) Absence of specication 1281
(iv) Testing and commissioning 1281
(v) Price and tolerances 1282
(vi) Early deterioration 1282
Fitness for purpose 1282
(i) Warranty of tness 1282
(ii) Statutory misrepresentation 1283
Duty to warn 1283
(i) Before work is performed/during the works 1283
(ii) After work has been performed 1286
(iii) Causation 1288
(iv) Duty to warn a third party? 1289
(v) Degree of knowledge 1290
(vi) Adequacy of the warning 1290
Design responsibility 1291
(i) As between owner and contractor 1291
(ii) Obligation of consultant 1294
Instruction to correct defects 1295
Defects liability period 1296
(i) Generally 1296
(ii) Contractor’s liability during defects liability period 1299
(iii) Contractor’s liability after the expiration of the defects liability period 1300
Warranty in respect of defects 1301
(i) Temporal warranty 1301
(ii) General warranty 1302
(iii) Interpretation of warranty 1302
Latent defects 1302
(i) Denition 1302
(ii) Liability for latent defects 1303
(iii) General application of limitation statutes 1305
(iv) Time limitations for commencing proceedings: England 1305
DEFECTS
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(v) Time limitations for commencing proceedings: Australia 1310
(vi) Time limitations for commencing proceedings: Hong Kong 1312
(vii) Time limitations for commencing proceedings: Singapore 1312
(viii) Damages 1313
(ix) Fraudulent concealment 1313
(x) Res judicata 1315
Payment for work performed 1317
Waiver and cognate doctrines 1317
(i) Introduction 1317
(ii) Positive conduct 1317
(iii) Acquiescence 1318
Remedial options for defective works 1319
Damages for correction to the contractual standard 1320
(i) Generally 1320
(ii) Design errors and omissions 1327
(iii) Mitigation 1328
(iv) Cost of investigating a defect and devising a solution 1334
(v) Supervision/preliminaries/contingency/warranty 1334
(vi) Loss of prot 1335
(vii) Temporary relocation costs and loss of rent 1336
(viii) Subcontractor and supplier warranties 1336
(ix) Betterment 1337
(x) Early replacement 1341
(xi) Residual diminution in value 1341
(xii) Credit if contractor not paid 1342
(xiii) Proof of loss 1342
Correction of defects by the contractor 1343
(i) Generally 1343
(ii) Order of court or tribunal to correct defects 1343
No remedial work undertaken 1344
(i) Generally 1344
(ii) e reasonableness of repair 1346
(iii) Supervening event 1348
(iv) Sale of property 1348
(v) Assessment of damages 1349
Rejection of contractor’s work 1350
Other issues 1350
(i) Time with reference to which damages are assessed 1350
(ii) Burden of proof 1351
(iii) Increase in property value 1352
(iv) Correction of defects by third party at no cost to owner 1352
(v) Set-o and abatement 1352
(vi) Strata title 1352
(vii) Legal costs 1354
DEFECTS
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What is a defect?
14.01 ere is no precise denition, in law, of what constitutes a defect.1 Defects may
relate to design, construction, or both. e word “defect” may refer to the quality of
goods supplied.2 A defect may be patent, in the sense of being known or detectable upon
reasonable observation, or latent, in which case its existence is unknown and it is not
reasonably discoverable. In everyday parlance a “defect” is something that is faulty, or
not built correctly. is is also true insofar as the law is concerned with building defects.
But the legal connotation of the word “defect” is probably a little broader than that. It is
broader if, as is suggested, we use the word “defect” to denote an element in the design
and/or construction of a structure (or other asset), or other delivery of goods or services,
which in qualitative terms falls short of what should have been supplied.3 e emphasis
in this description is upon there being a discrepancy or shortcoming – whether major or
minor – in supply, in the sense of there having been a breach of obligation by the supplier
of goods and/or services, rather than a lack of functional utility (if there be any at all)
in what was supplied.4 Hence, goods may be regarded as defective where they were not
supplied in accordance with a contractual specication,5 even if those goods are capable
of being used adequately for ordinary purposes.6
1 Compare Lancashire & Cheshire Association of Baptist Churches Inc v Howard & Seddon Partnership [1993] 3 All ER
466 at 469, per Judge Kershaw QC. See also Lenz, “Guide to Identication of Construction Defects” (2000) 16 BCL
423. e question of what constitutes, and what does not constitute, a “defect” is not necessarily an arid or academic
one. For example, an insurance policy may be expressed to cover – or not cover – the cost of repairing “defective” works,
and the categorisation of works as “defective” or as “defects” will be vital to the question of whether the policy responds.
2 Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 at 90, per Lord Morris.
3 In Pearson Education Ltd v e Charter Partnership [2005] EWHC 2021 (TCC) at [122], HHJ ornton QC
held: “In the context of an architectural design, a defect is a aw” (armed [2007] BLR 324). In the context
of a contract to develop and supply computer software, a “bug” in the software may be regarded as a “defect”:
SAM Business Systems Ltd v Hedley & Co [2002] EWHC 2733 (TCC) at [20], per HHJ Bowsher QC. See also
Schindler Lifts (Singapore) Pte Ltd v Paya Ubi Industrial Park Pte Ltd [2004] SGHC 34 at [83], per Judith PrakashJ;
Longyuan-Arrk (Macao) Pte Ltd v Show and Tell Productions Pte Ltd [2013] SGHC 160 at [54], per Belinda Ang
Saw EanJ; Millenia Pte Ltd v Dragages Singapore Pte Ltd [2018] SGHC 193 at [226], per Quentin Loh J.
4 Compare Manufacturers’ Mutual Insurance Ltd v Queensland Government Railways (1968) 118 CLR 314, where it
was held, for the purposes of interpreting a clause in an insurance policy that excluded insurers’ liability for “loss or
damage arising from faulty design”, that “faulty design” included a design which was actually defective, even if the
defect was not present through the negligence of the designer. See also Simaan General Contracting Co v Pilkington
Glass Ltd (No 2) [1988] 1 QB 758 at 781–782, per Bingham LJ; Canadian National Railway Co v Royal & Sun
Alliance Insurance Co of Canada [2008] 3 SCR 453.
5 British Fermentation Products Ltd v Compair Reavell Ltd [1999] BLR 352 at 358 [26], per HHJ Bowsher QC. It
is even possible for goods to be regarded as “defective”, in a technical sense, where the quality or features of those
goods in fact exceed what the contract called for, such as where supplied metal is coated in such a way to make it less
susceptible to corrosion, and therefore more durable, than the requirements of the particular contract specication:
see Dymocks Books Arcade Pty Ltd v Capral Ltd [2013] NSWSC 343 at [93], per McDougall J.
6 Take, eg, the construction of a swimming pool. A landowner may desire a swimming pool of maximum depth 7
ft 6 in to be constructed on his land. If he engages a contractor on terms that the contractor is to build such a pool,
but in breach of this stipulation the contractor only builds a pool that is 6 ft deep, the pool will be defective, even
though it will be capable of good use, and the demolition of the pool and its reconstruction to a depth of 7 ft 6 in
would be wholly unreasonable and disproportionate: Ruxley Electronics and Construction Ltd v Forsyth [1996] AC
344. Likewise where a construction contract requires the contractor to build a structure of certain dimensions
(internal area), and the dimensions in the structure built by the contractor are smaller (this, incidentally, being an
issue that has arisen on many occasions in Hong Kong: see Lin, “On saleable area” (2013) 29 Const LJ 284, and is
also the subject of at least one Singaporean judgment: Yap Boon Keng Sonny v Pacic Prince International Pte Ltd
[2008] SGHC 161 at [122]–[129], per Judith Prakash J). e position may be dierent where a person agrees not
to provide a product but to maintain it so that it is “defect free”. A maintenance contract to that eect will require
the contractor to ensure that the product in question is functional and suciently operative, which is dierent from
requiring the contractor to ensure that the product is kept in “brand new” condition: see Kone Elevator (HK) Ltd v
Citybase Property Management Ltd [2012] HKCFI 1022 at [44]–[50], per Mr Recorder H Wong SC.
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