Revisiting Loss Assessment for Defective Works – The Role of An Intention to Cure and Avoiding Nominal Damages Awards

The damages sought in claims for defective works are often based on the "cost of cure" (“CoC”) – that is, the amount needed to rectify the defects in compliance with the contract. Would the absence of a claimant’s intention to remedy the defects then automatically defeat its CoC claim?

In principle, the answer is no. This issue was recently clarified by the Appellate Division of the Singapore High Court in Terrenus Energy SL2 Pte Ltd v Attika Interior + MEP Pte Ltd and another appeal [2025] 1 SLR 306; [2025] SGHC(A) 4 (“Terrenus Energy”). 

In this case, Terrenus had engaged Attika as the main contractor for the construction of a solar power generation facility in Changi Business Park. Terrenus subsequently terminated the agreement on a without default basis and sued Attika for delays and defects. In particular to the defects claim, Terrenus alleged that the solar panel mounting structure rods were embedded shallower than the agreed 500mm which would present a risk of structural failures during high winds, and claimed costs of rectification from Attika. 

On appeal, the Appellate Division upheld the lower court’s decision to only award nominal damages to Terrenus. In coming to its decision, the Appellate Division shared several crucial observations on assessing contractual damages. This recent ruling offers important insights for project owners, developers, and contractors alike in preparing their claims.

A Key Shift in the Relevance of 'Intention to Cure' when Awarding Damages

The Appellate Division in Terrenus Energy laid down the position that a claimant's intention to cure is neither a prerequisite nor does it carry significant weight in the decision to award CoC damages. Instead, it is merely one of several factors to be considered within the broader framework of reasonableness and proportionality.

This approach is a significant departure from the earlier decision of JSD Corporation Pte Ltd v Tri-Line Express Pte Ltd [2022] SGHC 227 (“JSD Corporation”), where it was held that a claimant's intention to cure was a "weighty factor" in deciding whether to award CoC damages¹.  The High Court’s rationale was that if a claimant had no intention to cure the defect, then no "loss" had truly been suffered, in which case awarding CoC could lead to over-compensation.²

Further, in rejecting JSD Corporation’s approach that no loss is "suffered" unless the COC is actually incurred, the Appellate Division in Terrenus Energy reaffirmed the fundamental principle that loss crystallises at the time of the breach, and that the court's role is to determine the most reasonable method to quantify that loss irrespective of how the claimant chooses to use the awarded sum³.  This brings us to the next point.  

Enduring Principle of Reasonableness and Proportionality in Assessing Damages to be Awarded

It is important to appreciate that the assessment of CoC damages is still subject to the overarching principle of reasonableness and proportionality, which ensures that the damages awarded will not be disproportionate to the benefit gained and prevents claimants from abusing legal proceedings as a means to obtain a windfall. 

This principle also aligns with the underlying objective of damages for breaches of contract – that is, to put the claimant in the same position as if the contract had been performed insofar as money can, as opposed to enriching it. 

While CoC damages are usually the most direct means of addressing such expectation loss (i.e., the gap between what was contracted and what the claimant actually received), the courts can and will take into account all relevant circumstances in determining such loss at the point of breach. 

This is where a claimant’s intention becomes relevant. If there is no intention to rectify the defects, the means of quantifying the claimant’s loss would not lie in looking at any rectification costs, but instead diminution in value and consequential loss⁴.  

For this reason, Terrenus ended up with only an award of nominal damages in the case. Both the lower and appellate courts came to the same view that it was neither reasonable nor proportionate to award any substantial damages. Terrenus could not prove the loss claimed on a CoC basis, did not put forth a case based on a subjective value (that is over and above the objective value) to be gained from compliance with the agreed embedment depth, and did not lead any evidence for any diminution in value.⁵

Practical Ramifications in Claims Management 

The Terrenus Energy decision provides fair warning that claimants who do not properly assess the potential scenarios for their damages claim and arrive at trial unprepared, risk securing a hollow victory. Given that an intention to rectify will still influence how loss will be measured, it is important for claimants to consider early the evidence required to demonstrate:

a. Whether they intend to rectify the defects;

• If so, the proposed rectification work and costs to complete such works;
• If not, alternative means of measuring the loss (e.g., diminution in value, loss of use, etc); and

b. The reasonableness and proportionality of the quantum claimed. 

Some non-exhaustive factors that the courts would consider in assessing loss include: (a) the extent of disproportionality between the CoC claimed and the benefit that would accrue to the claimant; (b) the extent and seriousness of the damage or defect and its consequences; (c) the nature and purpose of the contract, and the degree to which the contractual objective has been substantially achieved; and (d) any personal subjective value attached to what had been promised under the contract to the claimant (also known as the “consumer surplus”).⁶ 

Conclusion

In summary, Terrenus Energy establishes that a lack of intention to repair does not automatically disbar CoC damages. The court's task is to examine reasonableness and proportionality across all the circumstances. The decision provides a more balanced approach by removing a potential avenue for defendants to escape liability for genuine defects but still holding true to the core compensatory principle of contractual damages in common law. Especially where the rectification exercise will be inordinately complex and expensive (possibly coming close or even exceeding the contract value in some cases), claimants should identify and evaluate alternative methods of quantifying their losses before settling on a claims recovery strategy. Ultimately, one should not assume that a breach of contractual obligations will automatically result in the other party being ordered to pay for defects to be rectified.  

¹JSD Corporation, at [77], [82], [86(c)] and [90].

²JSD Corporation, at [80].

³Terrenus Energy, at [55].

⁴Terrenus Energy, at [54] and [62].

⁵Terrenus Energy, at [53], [63] and [64].

⁶Terrenus Energy, at [45].