Introduction
1. On 28 February 2022, the General Division of the High Court and the District Court separately released a judgment involving very similar claims by a Management Corporation against its managing agent for breach of contractual duties, but each leading to a different outcome.
2. The claim at the District Court by the Management Corporation Strata Title Plan No. 4375 (MCST 4375) against its managing agent was successful, whereas the claim at the General Division of the High Court by the Management Corporation Strata Title Plan No 3724 (MCST 3724) against its managing agent was not.
3. Given the difference in outcome, a review of the judgments can provide some learning points not only for Management Corporations, but also for professional managing agents, on how to put forward the best possible case when prosecuting or defending such a claim in future.
The cases
4. The first case for review is The Management Corporation Strata Title Plan No. 4375 v. Smart Property Management (Singapore) Pte Ltd [2022] SGDC 38 (the DC case). In the DC case, the MCST 4375 sued its managing agent in the District Court for breach of four separate contractual duties: (a) the failure to supervise the landscaping contractor; (b) the provision of wrongful advice; (c) the failure to conduct a full and proper handover; and (d) the failure to bank in cheques received from the subsidiary proprietors.
5. The defendant managing agent did not dispute that the aforesaid duties were part of its contractual duties; but it raised the following defences:
- on the failure to supervise, the defendant managing agent disputed that the landscape was damaged. The defendant managing agent further contended that even if the landscape was truly damaged: (i) the landscaping contractor was a “recalcitrant” contractor that was difficult to manage; and (ii) the MCST 4375 should have been alert to it and should in this regard, at least bear some responsibility for any losses;
- on the provision of wrongful advice, the defendant managing agent disputed that the following two advices it gave to the MCST 4375 were wrongful: (i) first, the defendant managing agent advised the MCST 4375 that based on a resolution passed at a general meeting which empowered the Management Council to “draft and implement a new by-law regarding the hoarding up of vacant units”, the MCST 4375 could go ahead to install certain hoarding works, pay for it through its sinking fund and then recover the costs of the installation from the subsidiary proprietors; and (ii) second, the defendant managing agent advised the MCST 4375 to install certain electro-magnetic door locks at entry and exit points of the mall which turned out to be unnecessary; and
- on the failure to conduct a full and proper handover to the MCST 4375’s incoming managing agent, the defendant managing agent contended that it performed a proper handover, and alleged that if the incoming managing agent required “further documents or information, it could have approached the defendant managing agent directly”.
6. The District Court disagreed with each of the defendant managing agent’s defences. It held that:
- the MCST 4375 had established that the landscape was indeed in a state of disrepair during the defendant managing agent’s tenure; this was proven through photographic evidence, contemporaneous documentary evidence (including an email from the managing agent’s own employee admitting the landscape condition, and the managing agent’s failure to disavow the incoming managing agent’s email containing its observations on the bad landscape condition at the time of handover) and oral testimony by the MCST 4375’s chairperson and property manager who each gave evidence as a witness in the DC case;
- the MCST 4375 had further established a prima facie case that the defendant managing agent did not discharge its duty to monitor the maintenance of the landscape and supervise the discharge of the contractor’s landscaping duties. However, the defendant managing agent chose not to lead any credible evidence to the contrary. The District Court then rejected the defendant managing agent’s contention that the landscape contractor was a “recalcitrant” contractor that was difficult to manage as it reasoned that even if that was the case, the defendant managing agent should have but did not terminate the contractor and engage a replacement. The Court likewise rejected the defendant managing agent’s contention that the MCST 4375 had to bear some responsibility for the damaged landscape as the defendant managing agent did not plead contributory negligence, and did not otherwise show how else the MCST 4375’s own actions, if any, was relevant to the breach of the defendant managing agent’s own duties. In the circumstances, the District Court ordered the defendant managing agent to pay the MCST 4375 the costs of rectifying the landscape;
- with respect to the wrongful advice, the resolution in question when properly interpreted simply did not support the defendant managing agent’s advice to the MCST 4375 that it could go ahead to install the hoarding works, pay for it through the sinking fund and then recover the costs of the installation from the subsidiary proprietors. On the electromagnetic locks, the District Court observed that it was unrefuted evidence that the defendant managing agent had chosen not to activate the locks even though it was the one who recommended its installation in the first place. This led to the irresistible inference that the defendant managing agent had prematurely and wrongfully recommended the installation of the locks to the MCST 4375. The District Court thus held that the defendant managing agent should be liable to the MCST 4375 for the installation costs of both the hoarding and the electromagnetic locks that it had incurred in reliance of the defendant managing agent’s advice; and
- with respect to the handover, the MCST 4375 led sufficient evidence to prove that the defendant managing agent was unresponsive and uncoordinated during the hand over process, even though it had given the defendant managing agent ample opportunity to do a proper hand over. Notwithstanding this, the defendant managing agent did not call any of its staff who were based on-site as witnesses to contradict this state of affairs. Accordingly, the District Court agreed that the defendant managing agent had fallen short of the standard required in handing over the management to the incoming managing agent.
7. In light of the District Court’s findings outlined above, the District Court ordered the defendant managing agent to pay the MCST 4375 damages assessed at S$120,948.70 and legal costs and disbursements fixed at an additional S$51,179.
8. The second case for review is Management Corporation Strata Title Plan No 3724 v Exceltec Property Management Pte Ltd [2022] SGHC 44 (the HC case). In the HC case, the MCST 3724 sued its managing agent in the General Division of the High Court for breach of contract on the ground that during the managing agent’s contract period from 1 May 2013 to 8 July 2014, it did not maintain the grease interceptor system located at the basement of the development (the Grease Trap) resulting in frequent blockages and flooding of the Grease Trap pit.
9. The MCST 3724’s case against its managing agent was framed as follows:
- The Grease Trap was frequently blocked and the accumulation of the blockage was so bad that on one occasion the Grease Trap pit became flooded. The MCST 3724 asserted that its managing agent was slow to address the issue, and its proposals did not provide a permanent solution.
- When the MCST 3724’s incoming managing agent Vinco took over in July 2014, the incoming managing agent engaged a contractor Goodwill to flush the flooded Grease Trap and it was during this time that Goodwill found that the Grease Trap installation had been disconnected resulting in the regular blockage, corrosion, and generally, the entire system comprising of the ejector pumps, sump pumps and grease tanks to malfunction. This was later confirmed by the MCST 3724’s building surveyor in his expert report, and according to the MCST 3724 was the reason why significant rectification works were needed.
- The MCST 3724 asserted that since the damage to the Grease Trap took place under its managing agent’s watch, and access to the room where the Grease Trap was located was locked with access only available by a key kept by its managing agent, the managing agent should under these circumstances be responsible for the disconnection.
- The MCST 3724 also asserted that had its managing agent performed its contractual duties properly including inspecting the Grease Trap at 6-weekly intervals, it would have been alerted to the fact that the Grease Trap system was not functioning sooner and if so, the MCST 3724 could have taken immediate remedial action to prevent further damage to the Grease Trap system.
- The MCST 3724 thus claimed the total sum of S$360,329.50 comprising of S$118,533.50 being the costs of manual removal and maintenance of the temporary grease trap installation for the period January 2013 to April 2108 and S$241,796 being the costs of installing a new grease trap interceptor from the managing agent.
10. The defendant managing agent did not dispute that it had a contractual duty to among other things manage, service and maintain the Grease Trap but it contended that it did not disconnect or cause the disconnection of the Grease Trap installation. The defendant managing agent also contended that the MCST 3724 should have arranged for the Grease Trap system to be repaired before carrying out a full replacement.
11. The defendant managing agent called its managing director, its then building manager, and an independent chartered engineer to give evidence. Notably, the independent chartered engineer opined that the cause of the Grease Trap blockage was likely due to an undersized tank capacity coupled with insufficient frequency of desilting, and the cause of the flooding was likely due to the ejector pump’s failure to empty the ejector tank which then caused the sump pump to be unable to pump out the overflow of waste water into the ejector pit. The independent chartered engineer also opined that the disconnection of the grease separator tanks most likely occurred during the period 6 August 2014 to January 2015, after the managing agent’s contract had been terminated.
12. The High Court found that even though the managing agent’s then building manager was generally incompetent and/or derelict in his duties, it nevertheless held solely for the purposes of the MCST 3724’s claim in the HC case that the managing agent did not breach its duty in maintaining the Grease Trap because: (i) it was not expected to discharge the obligation to maintain the Grease Trap personally; and (ii) the defendant managing agent had discharged this duty by engaging the services of the specialist contractor JOL.
13. Additionally, the High Court reasoned that the defendant managing agent could not have been the party that had disconnected the Grease Trap installation because there was no mention in the specialist contractor’s service reports during the defendant managing agent’s time that the system had ever been disconnected and there was also no record of such a disconnection at the time of the handover.
14. The High Court further reasoned that even though access to the room in which the Grease Trap was located was only by a key to be held by the managing agent, the lack of a precise timeframe in which this could have occurred meant it could equally have been accessed and disconnected by the incoming managing agent Vinco and its replacement contractor Goodwill. The High Court then noted that the MCST 3724 failed to call a representative from Vinco and Goodwill as witnesses.
15. Finally, the High Court found that the MCST 3724 had failed to prove that the flooding of the Grease Trap pit was due to managing agent’s dereliction of duty and/or failure to maintain. The High Court accepted the independent chartered engineer’s evidence that other possible causes are the undersized capacity of the Grease Trap and the lack of preventing maintenance, and given the lack of evidence, it could not determine the effective cause of the flooding incident.
16. In the circumstances, the High Court dismissed the MCST 3724’s claim, and allowed the managing agent’s counter-claim for outstanding management fees of S$24,161.30 with legal costs and disbursements fixed at S$92,000.
The learning points
17. From our review of the two cases, we consider there to be at least three key takeaways: (i) the importance of witnesses; (ii) the importance of contemporaneous documents; and (iii) the importance of identifying the cause of the damage.
18. On the importance of witnesses, we stress that in order to put forward the best possible case, the right witnesses who can provide the necessary evidence to aid the case must be called. In most cases, the person with the most knowledge should be called to give evidence of what factually occurred and if this person is not also at the right seniority, then a separate senior representative should also be called to affirm that other witness’ actions.
19. It is notable that in both the DC case and the HC case, the managing agent’s team head in charge of the site who had personally managed the building did not give evidence on behalf of the managing agent. This soon became a major weakness of the managing agents’ defences.
20. In the DC case, the managing agent’s only witness was its managing director. But his evidence was incredibly unhelpful to the defendant’s case because the managing director “had no personal knowledge of the material allegations”. Similarly, in the HC case, the managing agent’s managing director gave evidence but could not provide any further factual insight into the case (to support the building manager who was later found to be a questionable witness) because he had never visited the site and delegated all matters relating to its management to the team head.
21. On the importance of contemporaneous documents, we likewise stress that while oral testimony of the right witnesses are important, contemporaneous documents that can corroborate such oral testimony are equally, if not more, important.
22. Contemporaneous documents help the Court determine what had transpired at material time. In the DC case for example, the District Court regarded the defendant managing agent’s email to be an admission of the bad landscape condition. Similarly in the HC case, the High Court agreed that the disconnection of the Grease Trap could not have occurred during the managing agent’s time because connection works were never included in any earlier quotations issued by the MCST 3724’s own contractors Everrise and Goodwill during that period and only appeared between 6 August 2014 and January 2015, after the managing agent was terminated.
23. Finally, on the importance of identifying the cause of the damage, we stress that if the loss suffered by the Management Corporation may be due to several different causes, it is paramount for the claimant to trace and identify the effective cause.
24. In the DC case, it was undisputed that the bad landscape condition was a result of the landscape contractor’s failure to perform its contractual duties. This correspondingly meant that the defendant managing agent would ordinarily be in breach of its contractual duty to supervise the contractor unless it could show otherwise. But in the HC case, there were at least three different potential causes of the flooding in the Grease Trap pit. In the circumstances, the MCST 3724 had to prove the effective cause and it was this failure that eventually resulted in the dismissal of the claim.
Conclusion
25. It is important to keep in mind the three key takeaways mentioned above when faced with a similar case in future.
26. In closing, we should add that the two cases also illustrate that the modern marketing adage “any publicity is good publicity” does not apply to litigation. This is especially the case in a litigation brought by a Management Corporation against a managing agent where the prospect of negative publicity and potential damage to reputation is very real.
27. In the DC case, the District Court issued a sharp rebuke to the defendant’s managing agent’s strategy of blame-shifting when it remarked: “here, we have a defendant who rather than proactively lead evidence to rebut the allegations, incredulously chose to pin the blame on the plaintiff for not leading evidence to rebut the very allegation it was making against the defendant”.
28. In the HC case, even though the managing agent was able to successful defend the claim, the High Court nevertheless observed that the building manager assigned by the managing agent to the development was “incompetent” and “derelict in his duties”, and indeed left unsupervised because “the defendant did not have any other employee who had oversight of (the building manager) as the other onsite representative of the defendant was a technician who was his subordinate”.
29. These judicial statements all have an impact on the managing agent’s reputation moving forward. To avoid such negative publicity, managing agents should consider resolving the disputes through a confidential dispute resolution mechanism such as mediation or arbitration as far as practicable.
30. Dentons Rodyk successfully acted for the MCST 4375 in the DC case.
* Please note that the DC case is still subject to an appeal. Depending on the outcome of the appeal, we may update this article accordingly.*
