AES Façade Pte Ltd v WYSE Pte Ltd

• Jurisdiction: Singapore
• Judge: Tan Siong Thye J
• Judgment Date: 18 July 2017
• Neutral Citation: [2017] SGHC 171
• Plaintiff Counsel: Ian Marc Rosairo de Vaz, Tay Bing Wei and Chek Xinwei Liana (WongPartnership LLP)
• Date: 18 July 2017
• Docket Number: Originating Summons No 205 of 2017 (Summons No 1227 of 2017)
• Hearing Date: 24 May 2017
• Subject Matter: Sub-contracts,Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed),Claims by sub-contractor,Statutes and regulations,Building and construction law
• Published date: 25 July 2017
• Defendant Counsel: Philip Antony Jeyaretnam SC, Melissa Thng Huilin and Amogh Nallan Chakravarti (Dentons Rodyk & Davidson LLP)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 171
• Year: 2017

Tan Siong Thye J: Introduction

The plaintiff, AES Façade Pte Ltd (“AES”), took out ex parte Originating Summons No 205 of 2017 (“OS 205”) to seek leave to enforce the adjudication decision in SOP/AA 495 of 2016 dated 17 February 2017 (“the AD”) against the defendant, WYSE Private Limited (“WYSE”). AES succeeded and received Order of Court No 1337 of 2017 (“ORC 1337”) to that effect. WYSE later took out Summons No 1227/2017 (“SUM 1227”) to set aside ORC 1337. SUM 1227 also included an alternative prayer to stay all proceedings relating to the execution of ORC 1337 pending the conclusion of arbitral proceedings between AES and WYSE.

On 24 May 2017, I heard the arguments of the parties and dismissed SUM 1227 in its entirety with costs fixed at $10,000. WYSE was dissatisfied with my decision and informed me that it intended to appeal. WYSE also sought to stay the execution of my order in SUM 1227 (ie, to stay the payment out of court for the sum of $1,072,340.48, which WYSE had previously paid into court) pending the outcome of the appeal. After hearing submissions from both parties, I disallowed the application for a stay and ordered that the sum of $1,072,340.48 was to be released forthwith to AES, as this sum represented payments which had fallen due some 13 months ago.

It appears that WYSE subsequently decided not to appeal. Given that the money had already been released to AES, this was perhaps unsurprising. Nonetheless, as this application concerned issues of some importance to practitioners and players in the construction industry, I now give the grounds for my decision.

Background

This case involved the construction of a 19-storey commercial building at 140 Robinson Road (“the Project”). WYSE was engaged as the main contractor for the Project by WyWy Development Pte Ltd (“WyWy”). WYSE in turn engaged AES as its subcontractor for the design, supply, installation, testing and commissioning, and maintenance of the façade works. The value of this subcontract (“the Sub-Contract”) was $4,965,000 and the terms of the Sub-Contract incorporated, among other things, the Singapore Institute of Architects Conditions of Sub-Contract (“the SIA Conditions of Sub-Contract”). The completion date for the main contract as well as the Sub-contract was 12 April 2016.

The contractual provisions

The key provisions of the Sub-Contract were cll 11.4 and 11.5 of the SIA Conditions of Sub-Contract, which read as follows: 11.4 The Contractor may set-off against any monies due to the Sub-Contractor under this Sub-Contract, such loss or damage suffered or incurred by him as a result of the failure of the Sub-Contractor to carry out the Sub-Contract Works with diligence or due expedition or to complete the Sub-Contract Works by the date or dates specified in Schedule III hereto or the date or dates as extended until such date as may be certified by the Contractor in his Sub-Contract Completion Certificate. 11.5 Without prejudice to the Sub-Contractor’s rights under general law to dispute any set-off by the Contractor, it shall be a condition precedent for such set-off by the Contractor that: (i) the set-off has been quantified in detail with particulars and with reasonable accuracy; (ii) the Contractor has given to the Sub-Contractor written notice specifying his intention to set-off the amount so quantified together with the required detailed under Sub-Clause 5(i) hereof and the grounds on which such set-off is made;

and

(iii) such notice shall be given to the Sub-Contractor not less than 7 days before the date of issuance of the payment response which includes the amount stated as payable, the amount due to the Sub-Contractor from which the Contractor intends to make the set-off. These provisions were also referred to in WYSE’s Letter of Acceptance dated 28 November 2014. Problems with the Project

As a result of delays, the Project could not be completed on time and WyWy allegedly claimed liquidated damages of $2.05m against WYSE. WYSE’s position was that AES had caused or contributed to the delays and was therefore liable to compensate WYSE for the liability it had incurred towards WyWy. WYSE attributed about $1.47m of the liquidated damages to AES. On that basis, when AES served WYSE with Payment Claim No 20 for the amount of $1,280,179.92 (“Payment Claim No 20”), WYSE refused to make payment. However, the payment response in which WYSE stated its right to set-off as a reason for withholding the amount claimed was filed out of time, on 28 December 2016.

Adjudication and enforcement attempt

Following WYSE’s non-payment, AES lodged an adjudication application with the Singapore Mediation Centre on 29 December 2016 under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOP Act”). AES sought the sum of $1,280,179.92 previously indicated in its payment claim.

The adjudication was conducted by Mr Mohan R Pillay (“the Adjudicator”). On 17 February 2017, the Adjudicator gave an Adjudication Determination (“the AD”) in AES’s favour for the amount of $1,077,151.37 inclusive of GST and costs (“the Adjudicated Amount”). In arriving at his decision, the Adjudicator disregarded WYSE’s set-off argument, as he found that the payment response stating the reason for withholding payment had been served out of time.

WYSE refused to pay AES the Adjudicated Amount. On 28 February 2017, AES took out OS 205 to seek leave of court to enforce the AD as a judgment debt or order of court under s 27(1) of the SOP Act. The court granted the application and handed down ORC 1337, which required WYSE to pay the Adjudicated Amount (with interest) and the costs of OS 205.

WYSE then applied to this court, in SUM 1227, to set aside ORC 1337.

Parties’ submissions WYSE’s submissions

WYSE did not challenge the validity of the AD. However, WYSE sought to set aside ORC 1337 on the ground that WYSE was entitled contractually to set off the Adjudicated Amount of $1,069,062.17 against the $1.47m of the liquidated damages (out of the total of $2.05m claimed by WyWy) which was allegedly attributable to AES. The result was that nothing needed to be paid to AES.

In support of this argument, WYSE pointed out that the SOP Act did not expressly prohibit set-off under the contract or general law at the stage of the enforcement of the AD. Section 27 of the SOP Act was unlike s 25 of the New South Wales Building and Construction Industry Security of Payment Act 1999 (No 46 of 1999) (NSW) (“the NSW Act”), which included an express prohibition (in s 25(4)(a)(i)) to that effect.

WYSE also argued that a set-off was a form of payment, and there was therefore no “unpaid part of the adjudication amount” to form the basis of ORC 1337.

It was further submitted that because the Adjudicator did not adjudicate on the merits of WYSE’s set-off against AES for liquidated damages, but instead declined to consider the set-off as the payment response was lodged out of time, WYSE’s claim to a set-off was akin to a repeat claim which had not been adjudicated before and which could still be a valid claim.

AES’s submissions

AES submitted that WYSE’s application to set aside the AD was an abuse of process and an attempt to circumvent s 15(3) of the SOP Act. If WYSE had wished to rely on a set-off in the adjudication, it should have served a payment response within the required timeframe. WYSE had failed to do so and could not evade the consequences of its failure by seeking to rely on the set-off at this stage, where AES was seeking enforcement of the AD.

AES also argued that WYSE could not rely on the set-off provision in cl 11.4 of the Sub-Contract as it was void under s 36(2) of the SOP Act.

Issues

The central issue in this application was whether ORC 1337 should be set aside. This depended on whether the SOP Act permitted a respondent to raise a set-off – specifically, one which was disputed and was not itself the subject of an order, judgment, award or adjudication determination – against an adjudicated amount found to be payable under an adjudication determination.

The second issue was whether, if I did not set aside ORC 1337, I should grant a stay of execution of the order pending the determination of arbitral proceedings between the parties regarding AES’s liability for the liquidated damages.

Ultimately, I rejected WYSE’s application concerning the two issues above. This gave rise to the third issue when WYSE’s counsel immediately made an oral application for a stay of execution of my order pending the resolution of an appeal to the Court of Appeal, which WYSE intended to file. Whether to grant that stay was the last issue I had to decide.

The statutory context

Before considering the main issues in this application, it was crucial to first appreciate the rationale of the SOP Act and to understand the purpose of the adjudication process, which derives its legitimacy from the SOP Act. This was necessary not only as a matter of common sense, but also because the principle of purposive interpretation enshrined in s 9A(1) of the Interpretation Act (Cap 1, 2002 Rev Ed) mandates the court to prefer “an interpretation that would promote the purpose or object underlying the written law (whether that purpose or object is expressly stated in the written law or not)”.

The object and purpose of the SOP Act

The object and purpose of the SOP Act was definitively set out by Sundaresh Menon CJ, delivering the judgment of the Court of Appeal in W Y Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 (“W Y Steel”). To paraphrase, the court held (at [18]) that Parliament had introduced the SOP Act to provide the construction industry with a low-cost, efficient and quick process for the adjudication of payment disputes so that main contractors do not unfairly or unreasonably delay or withhold payment from their sub-contractors. Such actions or...