Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

Pursuant to section 10 of the Building and Construction Industry Security of Payment Act, a payment claim that did not state the amount being claimed was invalid:
— YTL Construction (S) Pte Ltd v Balanced Engineering & Construction Pte Ltd [2014] SGHC 142 (Singapore, High Court, 15 July 2014)

 
Facts

 
The plaintiff was the main contractor on a project, while the defendant was its sub-contractor.

 
On 6 September 2013, the defendant served on the plaintiff a payment claim for progress payment for work done under the contract between the parties pursuant to section 10(1) of the Building and Construction Industry Security of Payment Act (“SOP Act”). The payment claim stated that the cumulative value of the work done by the defendant from the start of the Project till August 2013 was some SGD 6.1m. However, it did not specify the amount claimed for the month of August 2013.

 
Subsequently, when the plaintiff failed to make payment, the defendant gave notice of its intention to apply for adjudication in accordance with section 13(2) of the SOP Act. When the defendant lodged its adjudication application, the defendant indicated that it was claiming some SGD 1.3m for the work done in the month of August 2013. As the original payment claim did not specify the claimed amount for August 2013, the defendant added handwritten notations to the original payment claim to derive the claimed amount from the cumulative value of work done indicated in the original payment claim and lodged the amended payment claim together with its adjudication application. It was accepted by the defendant that the plaintiff did not know the actual amount claimed from the original payment claim until the payment claim was amended with handwritten entries subsequently.

 
The adjudicator allowed part of the claim. The plaintiff applied to the Singapore High Court to have the adjudication determination set aside. It argued, among other things, that the payment claim failed to comply with section 10(3)(a) of the SOP Act and that it was therefore invalid.

 
Decision

 
The High Court noted that section 10(3) of the SOP Act provides as follows:

“A payment claim:

(a) shall state the claimed amount, calculated by reference to the period to which the payment claim relates; and

(b) shall be made in such form and manner, and contain such other information or be accompanied by such documents, as may be prescribed.”

 
The Court stated that the wording of section 10(3) made it clear that Parliament had mandated that the payment claim must state the claimed amount. This was a basic requirement because the respondent, and later on the adjudicator, would want to know what was being claimed. The main purpose of the SOP Act was to facilitate easy and quick processing of claims in the construction industry and it was the payment claim that initiated the claim protocol under the SOP Act.

 
The Court also opined that for any claim or adjudication procedure to advance expeditiously and efficiently, the claimed amount must be made known in the payment claim pursuant to section 10(3)(a) of the SOP Act. If that was not the case, it would be difficult for the respondent to serve a proper payment response as he would not even know how much was demanded. Further, if there were a dispute as to the payment response, the respondent would be unable to negotiate with the claimant as he would be unaware of the claimant’s position. The adjudication process would then not be able to proceed in accordance with the envisioned framework of the SOP Act.

 
The Court found that the case was not one whereby the figures provided in the payment claim would have allowed a person to logically ascertain what the actual claimed amount was at that point in time. Instead, it was impossible for the plaintiff to have figured out the defendant’s actual claim in its payment claim. Accordingly, it held that the non-compliance with section 10(3)(a) rendered the defendant’s payment claim invalid.

 
The Court then considered whether it was possible for the plaintiff to have waived the defendant’s non-compliance with section 10(3)(a). It noted that prior cases had made it clear that an irregularity pertaining to the requirements of making a valid payment claim affected the adjudicator’s jurisdiction, such that it invalidated his appointment and his competence to hear the adjudication. Accordingly, the defendant’s non-compliance could not be waived.

 
It therefore held that the adjudication determination should be set aside.

 
Our Comments/Analysis

 
According to the High Court, the crux of the matter in an application to set aside an adjudication determination lies in the legislative intent behind the provisions in the SOP Act. Therefore, regardless of whether the word “shall” is used, the court must always ask itself whether it was Parliament’s intent to have adjudication determinations that are made in violation of certain requirements set aside.

 
The High Court’s decision affirms a number of key principles set out in recent decisions:

• The availability of the defence of waiver / estoppel depends on whether the irregularity pertaining to the requirements of making a valid payment claim related to “jurisdiction” in the narrow sense or wider sense (Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co Ltd [2010] 1 SLR 658; Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd [2013] 3 SLR 609);
• It is mandatory for an adjudicator to reject an adjudication application where it does not comply with sections 13(3)(a), (b) or (c) (RN & Associates Pte Ltd v TPX Builders Pte Ltd [2013] 1 SLR 848; Shin Khai Construction Pte Ltd v FL Wong Construction Pte Ltd [2013] SGHCR 4); and
• A court will not lightly interfere with an adjudication determination on the ground of natural justice as the aggrieved respondent could seek a review of the adjudication determination under section 18 of the SOP Act (AM Associates (Singapore) Pte Ltd v Laguna National Golf and Country Club Ltd [2009] SGHC 260).

For further information, please contact:

Christopher Chuah, Partner, WongPartnership
[email protected]

 
Peng Cheng Tay, Partner, WongPartnership
[email protected]

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