In Global Switch (Property) Singapore Pte Ltd v Arup Singapore Pte Ltd  SGHC 122, one of the main issues that the Singapore High Court ("HC") considered was whether 'fitness for purpose' was an implied term in a data centre construction contract.
Sometime around 2008, the plaintiff embarked on its project to construct an extension (the "Extension") to its existing data centre facility and engaged the defendant as its mechanical and electrical ("M&E") consultant. In May 2013, the plaintiff complained, inter alia, that the utility mains power supply experienced disturbances, which in turn resulted in overloading of the back-up systems and failure of the plaintiff's tenants' IT equipment. The plaintiff then sued the defendant for breach of contract. Particularly, the plaintiff claimed that there was an implied term in the contract that the defendant needed to ensure that its designs for the M&E systems would "meet the needs of the operation of a data centre and ... be fit for their intended purposes".
As a preliminary point, the HC noted that it was not clear whether the plaintiff was seeking to argue that the fitness for purpose term should be implied "as a matter of law, or as a matter of fact". A review of the authorities cited by the plaintiff led the HC to the observation, inter alia, that there is a general reluctance to extend the implied obligation of contractors to designers or M&E consultants, such as the defendant. Accordingly, the HC declined to find an implied term in law as the threshold for such an implication is high and neither party had sufficiently addressed the court on this issue.
The HC also found that there was no such implied term in fact. In approaching this point, the HC considered two questions: 1) Fit for what purpose? and 2) Fit to what standard? It was held that while the first question had been dealt with by identifying the purpose as use as a data centre, the plaintiff had failed to address the second question. This was crucial given that, in the context of designing a data centre, there are "numerous levels of quality and standards". As such, in the absence of sufficient particularisation of the applicable standard, the HC declined to find an implied term in fact as it was "too vague and ambiguous to succeed".
In any event, the HC found that the test for implying a term in fact as set out in Semborp Marine Ltd v PPL Holdings Pte Ltd  4 SLR 193 was not satisfied. In particular, it was held that an implied term for fitness for purpose would have been unnecessary for business efficacy since the defendant would already be "under a duty to use reasonable care and skill in performing its contractual obligations".
While the court did not definitively rule on the possibility of implying a fitness for purpose term in law or in fact, the case demonstrates the difficulty of doing so. The employer should therefore consider carefully whether fitness for purpose is a necessary standard it expects of the consultant or if the standard of due care and skill is sufficient. If the fitness for purpose standard is required, then it is advisable to expressly incorporate this into the contract. In doing so, it is also essential to express clearly that the deliverables are to be fit for what purpose and for what performance standards.
November 11, 2019
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