Fit for what purpose? Singapore High Court rejects implied term of fitness for purpose for data centre design

Singapore
This article is produced by CMS Holborn Asia, a Formal Law Alliance between CMS Singapore and Holborn Law LLC.

Introduction

Does a consultant engineer owe an implied obligation to an owner to ensure that its designs would be fit for their intended purposes? This is what the Singapore High Court (the “Court”) had to consider in Global Switch (Property) Singapore Pte Ltd v Arup Singapore Pte Ltd [2019] SGHC 122.

Following from an earlier English High Court decision in 2018 (where the court similarly considered whether a civil engineer undertook an obligation to ensure that a retaining wall was fit for purpose – see Williams Tarr Construction Limited v Anthony Roylance Limited, Anthony Roylance [2018] EWHC 2339 (TCC)), we examine the Court’s reasoning for rejecting the owner’s submission that it was an implied term of the contract for the consultant engineer to ensure that its designs were fit for their intended purposes, and provide some key takeaways.

The parties

The plaintiff, Global Switch (Property) Singapore Pte Ltd (“GSS”), is part of the Global Switch Group of companies (“Global Switch”) which owns and operates data centres in London, Paris, Amsterdam, Frankfurt, Madrid, Sydney, and Singapore.

The defendant, Arup Singapore Pte Ltd (“Arup”), is a firm of consultant engineers who provide, inter alia, design engineering consultancy services for mechanical and electrical (“M&E”) engineering systems.

Background

GSS commenced Suit No. 1147 of 2014 (the “Suit”) against Arup in respect of alleged breaches of contract committed by Arup, including in relation to Arup’s design for an extension to an existing data centre.

The dispute concerned GSS’ project (the “Project”), embarked on sometime around 2008, to construct an extension (the “Extension”) to its existing data centre facility (the “Existing Facility”) at No 2, Tai Seng Avenue, Singapore. GSS appointed Arup as its M&E consultant for the Extension for an agreed fee of $595,000.

Arup denied, inter alia, that it was obliged to ensure that the electrical and mechanical systems it designed supported the operation of a data centre and were fit for their intended purposes. The Court affirmed that Arup would not have agreed to guarantee more than the use of reasonable care and skill, considering its modest fee and the fact that it was to develop the design in close consultation with GSS.

GSS’s case

GSS had averred that ARUP was to design an electrical system that delivered at least 4,000 kW of uninterruptible and continuous power to critical IT equipment of GSS’s customers (the “IT Load Requirement”).

GSS also averred that Arup was to design an electrical system that delivered sufficient power for mechanical equipment (the “Mechanical Load Requirement”), such as lights, pumping systems, chillers, and other equipment and reflected the needs of GSS.

GSS claimed that Arup was to establish the cooling load requirement for the Extension (the “Cooling Load Requirement”) and to design a chilled water system to support that requirement in a way that reflected the needs of GSS.

Arup’s case

Arup averred that as the development of the design progressed, GSS did not consider the original scope of work to be technically or commercially feasible.

First, GSS expressed that it had certain cost constraints, which only allowed it to acquire a maximum of three Diesel Rotary Uninterruptible Power Supply (“DRUPS”) units for the Extension.

Secondly, the physical limitations of the site restricted the amount and size of equipment and systems that could be installed. In particular, GSS required the DRUPS units to be located above the existing loading dock on a new structural steel frame, which was only able to accommodate a maximum of three DRUPS units.

This led Arup to issue agreed tender documents for three DRUPS units to be installed, which constituted a variation.

The Court’s decision

The Court found that GSS was only entitled to nominal damages of $1,000 for Arup’s breach of its obligations regarding the provision of additional cooling. The Court allowed Arup’s counterclaims for a total of $71,347.60 for unpaid fees.

The Court’s reasoning

The Court declined to find any implied term of fitness for purpose in law because the threshold for implying such a term was a high one, and neither party had addressed the Court sufficiently on this.

In any case, the Court found that there was no such implied term in fact. When approaching this issue two questions arose: “Fit” for what purpose? And, “fit” to what standard? In the context of designing a data centre, the latter question was susceptible to numerous levels of quality and standards, such as the degree of redundancy.

While GSS had addressed the first question by identifying the purpose as use as a data centre, it had not dealt with the latter. An implied term for fitness for purpose would also not have been necessary for business efficacy, because Arup would already be under a duty to use reasonable care and skill in performing its contractual obligations.

Takeaways

  • This is an interesting case study in which the court had been asked to make a choice between imposing on the defendant an obligation of fitness for purpose, or to remain with the existing duty to use reasonable care and skill.
  • As the English High Court has previously found, whether a party is accepted to have warranted that a design would be fit for purpose would depend on the scope of that party’s engagement. This decision should not be taken as the court rejecting implied terms of fitness for purpose carte blanche for data centre design. Each case should and will be considered by its particular facts.
  • In rejecting GSS’s submission that it was an implied term of the contract for Arup to ensure that its designs were fit for their intended purposes, the Court considered that Arup was already under a duty to use reasonable care and skill in performing its contractual obligations. The Court however was concerned with whether there existed equipment that was fit for purpose, in finding whether or not Arup was in breach of its duty to advise on the implementation of the design.
  • Notwithstanding the Court’s findings that the necessity of revisions to the design was not attributable to any breach of obligations on Arup’s part, the Court nevertheless proceeded to make its findings and give its reasons as to why GSS would not have succeeded in its claims for loss of profits or opportunities, in the event of, for instance, an appeal to the Court of Appeal. Our view at juncture is that the Court of Appeal will likely take a similar approach as the High Court – at least in its adoption of the English Court of Appeal’s observation, that the general position is that a professional man who is called to advise is bound, and impliedly undertakes, to use reasonable care and skill in advising, but is not responsible for providing a perfect result or a perfect building.