Mehrzad Nabavieh & Anor v Chong Shao Fen & Anor and Another Appeal COURT OF APPEAL, PUTRAJAYA CIVIL APPEALS NOs: W 02 (NCVC) (W) 1698 07/2013 & W 0 2(NCVC) (W) 1699 07/2013 ALIZATUL KHAIR OSMAN JCA, LIM YEE LAN JCA, NALLINI PATHMANATHAN JCA 24 MARCH 2016 [2017] 1 CIDB-CLR 38 Chong Shao Fen and Lai Siow Lien ( Plaintiffs/Respondents ) were the owners of a three-storey bungalow in Bukit Pantai, Kuala Lumpur ( the Plaintiffs property ). Mehrzad Nabavieh and Noushin Goudarzi ( First and Second Defendants/Appellants ) were the owners of the lot adjoining the Plaintiff s property ( the neighbouring property ). The other Defendants in the High Court were the architect ( Third Defendant ), the independent contractor ( Fourth Defendant ) and the civil engineer ( Fifth Defendant ). The Plaintiffs had been residents at the Plaintiffs property since 2001. In May 2009, the First and Second Defendants commenced work on the neighbouring property with a view to demolishing an old structure and to construct a two-storey (above) and three-storey (below) bungalow ("the project"). The Plaintiffs complained that as a result of the demolition works, the Plaintiffs property was damaged with cracks appearing on the Plaintiffs bungalow and a large hole appearing in the garden. The Plaintiffs thus commenced a suit against the Defendants in negligence. The Plaintiffs alleged negligence on the part of the First and Second Defendants as Employers in failing to oversee or supervise or rectify the acts or omissions of the independent contractor. The evidence adduced through two experts disclosed that the loss and damage suffered by the Plaintiffs was caused by the acts and omissions of the Fourth and Fifth Defendants, and the First and Second Defendants in failing to supervise or causing the Fourth and Fifth Defendants to rectify the damage. The issue that arose for consideration was whether liability should be limited to the first two Defendants only on the basis of the existence of a non-delegable duty of care, or whether such liability was jointly shared amongst all the other Defendants, as tortfeasors. The learned High Court Judge ( the Judge ) found that the First and Second Defendants only were to be held liable for the entire loss and damage suffered by the Plaintiffs. The Third, Fourth and Fifth Defendants were held to be not liable for this loss and damage on the grounds that the duty of care owed by the First and Second Defendants to the Plaintiffs was a non-delegable duty. Two appeals were filed against this decision, i.e. one by the First and Second Defendants against the decision in allowing the claim against them only, but not the other Defendants; and another by the Plaintiffs against the dismissal of their claim against the Third, Fourth and Fifth Defendants. 38
Mehrzad Nabavieh & Anor v Chong Shao Fen & Anor and Another Appeal Held, dismissing the First and Second Defendants appeal but varying the relief granted and allowing the Plaintiffs appeal with costs: (1) The Plaintiffs had not pleaded any non-delegable duty. The Plaintiffs sought a prayer for joint liability amongst the Defendants as tortfeasors. The issue of non-delegable duty was not put to the parties to allow them to invoke or submit on this issue. (2) The First and Second Defendants would be vicariously liable for the acts of the Third to Fifth Defendants if they were servants/agents. But if they were independent contractors, the general principle applied, i.e., that the Employers would not be liable for their negligent acts. (3) If the Employer determines what is to be done and retains control of the actual performance, the doer is a servant/agent. However, if the Employer prescribes the work to be done but leaves the manner of doing it to the control of the doer, the doer is an independent contractor. The Third to Fifth Defendants fell within the category of independent contractors rather than servant/agents. To that extent the general principle would prevail, i.e., that the First and Second Defendants would not be liable for the negligent acts of the Third to Fifth Defendants. (4) The general rule is that one is not responsible for a tort by an independent contractor. But the exception is where the activity involves some special risk of damage, or is work which from its very nature is likely to cause danger/damage. (5) Non-delegable duties were exceptions to the general principle, that Employers were not liable for the acts of independent contractors. Nondelegable duties were dependent upon a finding that the Employer is in breach of some duty personally owed to the Claimant. If the law imposed a strict duty on the Employer, then his duty cannot be discharged by delegating work to an independent contractor. (6) The Employer is liable for extra-hazardous acts of independent contractors. However, it should not be an unshakeable presumption that Employers are liable for dangerous acts of independent contractors. Each act and its circumstances should be looked at to determine whether an Employer should be liable for the tort of the independent contractor. (7) The evidence from the expert reports showed that the both the First and Second Defendants as well as the other Defendants should be liable in negligence to the Plaintiffs. None of the factors that give rise to a nondelegable duty of care were present on the facts of the case. As such, the Judge erred in invoking and applying the proposition of law that the First and Second Defendants owed a non-delegable duty of care to the Plaintiffs to the exclusion of the other Defendants. 39
(8) The independent contractor and engineer were joint tortfeasors with the owners of the neighbouring property. The contractor (Fourth Defendant) was 40% liable for the damage suffered by the Plaintiffs together with the costs of the restitution works carried out on the property. The engineers (Fifth Defendant) were 30% liable for the damage suffered by the Plaintiffs together with the costs of the restitution works carried out on the property. The liability of the First and Second Defendants was therefore reduced to 30%. No liability was attributable to the architect (Third Defendant). COMMENTARY 1 by Tan Sri Dato Cecil Abraham Senior Partner at Cecil Abraham & Partners Aniz Ahmad Amirudin Partner at Cecil Abraham & Partners Introduction The recent decision by the Court of Appeal in Mehrzad Nabavieh s case highlights to what extent employers can still be made liable for the acts or omissions of their independent contractors. In other words, whether the principle of non-delegable duty still applies rendering an employer solely liable despite the engagement of independent contractors. The Plaintiffs were the owners of a bungalow in Kuala Lumpur which suffered damages as a result of construction works in the adjoining property. As a result, the Plaintiffs instituted legal action against their neighbour and the neighbour s architect, independent contractor and civil engineer. The High Court found that only the neighbours/employers were to be held liable for the damages suffered by the Plaintiffs as the duty of care owed by the employer was a non-delegable duty as enunciated in the case of Bower v Peate [1876] 1 QBD 321. The issue that arose for determination in the Court of Appeal was whether liability should be limited to the employers only on the basis of the existence of a non-delegable duty of care, or whether, such liability should be jointly shared amongst the architect, independent contractor and civil engineer, as tortfeasors. The Court of Appeal considered the extent of non-delegable duty of care in constructions matters and case law subsequent to Bower v Peate 40
Mehrzad Nabavieh & Anor v Chong Shao Fen & Anor and Another Appeal (above) and found that it is settled that an employer will not generally be responsible for any tort committed by an independent contractor in the course of the execution of the work. This was due to, amongst others, an independent contractor cannot be held as servants/agents of an employer and if so, the employers would be vicariously liable for the acts of the independent contractors if they were servants/agents. However, the Court of Appeal was of the view that there could be circumstances where an employer could still be made liable such as the present case where the employers were found to be negligent in failing to oversee or supervise or rectify the acts or omissions of the independent contractor. Having held as such, the Court of Appeal was also of the view that the independent contractor could not be completely exempted from liability even if the employer had a common law non-delegable duty to bear all responsibility. Further, based on the expert reports produced by the Plaintiffs at trial, the Court of Appeal found that the damages suffered by the Plaintiffs were caused by the lack of proper measures taken by the contractor and civil engineer to prevent damage. As such, the Court of Appeal apportioned liability between the employers, contractor and the civil engineer in the percentage of 40%, 30% and 30% respectively for the damages caused to the Plaintiffs property. The Malaysian position can be compared with the position taken by the Singaporean Courts where in the recent case of Ng Huat Seng and Anor v Munib Mohammad Madni & Anor [2016] SGHC 118, the Singapore Court of Appeal found that employers were not vicariously liable as they had engaged an independent contractor to do the works and neither did the employer owe a non-delegable duty arising out of the performance of the independent contractor. It should be however noted that the Court did take into account that the employers had not failed to exercise due care in the selection of the independent contractor and that an employer can be found liable where the works involved are particularly hazardous and/or extra hazardous in nature giving rise to a non-delegable duty of care. Further and by way of a comparison in a situation involving the employer against a contractor and architect, the Singapore Court of Appeal in Management Corporation Strata Title Plan No. 3322 v Tiong Aik Construction Pte Ltd & Anor [2016] SGCA 40 considered the central issue of whether, and to what extent, the developer / owner had recourse in tort against the builder and the architect for building defects in a condominium development when the defects were not caused by 41
the negligence of the builder and/or architect, but by the negligence of their sub-contractors. The Court held that there was no basis for finding a broad statutory non-delegable duty and that it would also not be consistent with the spirit of the Building Control Act 1999 to impose such a non-delegable duty in common law. Lessons learnt from the case The position in Malaysian and based on the recent decision by the Court of Appeal, it appears that an employer can still be made liable (even if not fully) for damages if the activity involves some special risk of damage, or is work which from its very nature may likely cause damages and the employer cannot free himself from liability by engaging an independent contractor to take the necessary precautions. Suggested best practices to be adopted Although there are many types of employers from a simple house owner to a major developer appointing independent contractors for construction, an employer can now be expected to be more vigilant to check and supervise the works of its independent contractors to ensure works are carried out according to the acceptable standards and to avoid any damages for all types of construction activities. This would naturally start with the selection process itself of appointing the right construction professionals for the job. Although the recent Court of Appeal decision may appear to impose an additional burden on an employer to discharge, the question arises whether an employer would be the right person to undertake the obligations such as being aware of the technical details involved in construction and being able to check on the materials and workmanship and avoid damages. This may be another issue for the Courts to consider in the future. 42
Mehrzad Nabavieh & Anor v Chong Shao Fen & Anor and Another Appeal COMMENTARY 2 by Sr Loo Ming Chee Regional Head, South East Asia Arcadis (Malaysia) Sdn Bhd Introduction This is a common construction issue, namely the claim of subsidence of unsupported soil to adjoining properties. The expert witness opined that the collapse of the boundary wall and garden area of the adjoining property resulted from the unsupported excavation at the construction site; and that the extensive and deep excavation along the boundary of the adjoining property was made without adequate safety protection, and proper temporary support was not provided by the contractor during the excavation. Lessons learnt from the case The evidence presented by the two experts highlighted the importance of: (1) having competent architects, engineers and contractors for the execution of construction work; and (2) great care must be taken by those responsible to supervise the execution of construction work on any site. It would appear, from the scant information available in the law report, that the parties did not adopt existing best practices. Suggested best practices to be adopted (a) Contract Having a detailed contract specifying the obligations of the parties so that disputes maybe avoided in the future. This would also determine how risks will be shared or divided on the project. In this case, if there was a written contract between the parties, the difficulty of the work such as demolition and excavation would have been recognised and due precautions taken. (b) The importance of Health and Safety A construction site is prone to many potential hazards. Most accidents may be avoided by implementing strict protocols and ensuring those protocols are followed. In this case, it was the opinion of the expert witness that the architect, engineer and contractor had been negligent and put the lives of the Plaintiffs, and their property at high risk. 43
No work should take place until adequate safety inspection and mitigation steps are in place. Safety best practices include: (i) Dilapidation Survey The contractor could have conducted a dilapidation survey of the existing structural condition of the surrounding buildings and structures before the commencement of demolition, construction or development. Dilapidation survey is important to (A) identify pre-existing structural defects and prepare adequate protection against possible damage to surrounding structures; and (B) avoid unwarranted third party claims. It was not known if such dilapidation survey was carried out, and if there were pre-existing structural defects in the surrounding buildings or structures. (ii) Method of Construction The methods of construction for temporary works are pertinent to ensure the permanent works are carried out and completed with minimum issues. Best practice requires the contractor to submit method statement together with calculations to the engineer for approval prior to commencement of the excavation works, and once approved the contractor should not deviate from the agreed methodology. (iii) Insurance In construction, it is important to recognise the hazards and mitigate potential risks and this includes undertaking the necessary actions or making provisions for eliminating or preventing them from occurring. Sometimes, the risks are unavoidable or unforeseen. As such, it is important for the employer to insist that the contractor take out and maintain relevant and adequate insurance for the project, including insurance for the works and third party liability insurance, prior to commencement of work and during the construction period. The insurance should be in the joint names of the employer and contractor and include a cross liability provision. In conclusion, it would appear that the issues have arisen as a result of not following best practice. These standard practices are already common place in the construction industry and the use of such practices would appear to be absent in this instance. **Acknowledgement: Many thanks to the in-house contract support team of JUBM Sdn Bhd who have helped in the analysis. 44