Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ,Tay Yong Kwang JA,Steven Chong JA
• Judgment Date: 22 January 2018
• Neutral Citation: [2018] SGCA 4
• Plaintiff Counsel: Tan Jia Wei, Justin (Trident Law Corporation)
• Date: 22 January 2018
• Hearing Date: 13 November 2017
• Docket Number: Civil Appeal No 136 of 2017
• Published date: 27 January 2018
• Defendant Counsel: Lee Peng Khoon Edwin, Poonaam Bai d/o Ramakrishnan Gnanasekaran, Amanda Koh Jia Yi and Chow Jia Yao (Eldan Law LLP)
• Court: Court of Appeal (Singapore)
• Citation: [2018] SGCA 4
• Year: 2018

Steven Chong JA (delivering the grounds of decision of the court):Introduction

The Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (the “Act”) was passed to establish “a fast and low cost adjudication system to resolve payment disputes”: Singapore Parliamentary Debates, Official Report (16 November 2004) vol 78 at col 1113 (Cedric Foo Chee Keng, Minister of State for National Development). This was in recognition of the need to ensure that contractors and subcontractors in the construction industry receive timely payments for work done and materials supplied. Notwithstanding the salutary aims of the Act, disputes relating to the Act continue to be referred to our courts for determination.

A number of disputes over the interpretation of the Act have reached this court for final determination. On one level, this may suggest that the Act is not achieving its intended purpose. Nonetheless, it would be fair to say that the decisions of this court have helped to resolve a number of issues. This has, in turn, facilitated the adjudication process. Thus, leading commentators in the field have opined that this court’s decision in W Y Steel Construction Pte Ltd v Osko Pte Ltd[2013] 3 SLR 380 (“W Y Steel”), for example, “settled many of the interpretive issues on the operation of [s 15(3) of the Act, which concerns the matters an adjudicator should consider] and is particularly valuable for its extensive inquiry into the policy considerations for its insertion in the [Act]”: Chow Kok Fong & Philip Chan Chuen Fye, “Building and Construction Law” (2013) 14 SAL Ann Rev 113 at para 7.49.

This appeal concerned yet another dispute over the interpretation of the Act. Under s 10(2)(a) of the Act, a payment claim shall be served “at such time as specified in or determined in accordance with the terms of the contract”. In the present case, the parties’ contract specified that payment claims were to be served on the 20th day of each calendar month. The 20th day of November 2016, however, fell on a Sunday. The appellant decided therefore to serve its payment claim for that month on 18 November 2016, a Friday, but dated it 20 November 2016. The respondent did not reply with a payment response.

The payment claim thus proceeded for adjudication. There, the respondent for the first time challenged its validity on the basis that it had not been served “on” 20 November 2016, as the parties’ contract had required. The adjudicator rejected this argument and issued the adjudication determination (the “AD”) in the appellant’s favour. The respondent then applied to the High Court to set aside the AD, and the Judge set it aside. He ruled that the Act required the payment claim to be served on (and not by) 20 November 2016, “neither sooner nor later”.¹ The appellant then appealed to us against that decision. We heard and allowed the appeal on 13 November 2017, noting that we would explain our decision in due course. This we do now.

The appeal raised a number of interesting issues which we will address here to provide greater clarity and certainty to the adjudication process under the Act. In particular, we will explain how the Interpretation Act (Cap 1, 2002 Rev Ed) (the “IA”) resolves the issue of how parties can perform their obligations when they fall due on a Sunday or a public holiday. We will also explain whether an omission or failure to file a payment response can constitute a waiver of a party’s right to raise an objection to the adjudicator’s jurisdiction or on a breach of a mandatory provision, or estop him from later exercising that right.

Facts

The facts of the case were straightforward and not in dispute. In October 2015, the respondent engaged the appellant as a subcontractor. Under their contract, the appellant was to carry out structural works in the construction of a nursing home.² By cl 59 of their contract, the appellant was entitled to serve a payment claim on the date for submission of progress claims as set out in Appendix 1 of the contract.³ Appendix 1 of the contract, in turn, stipulated the “[t]imes for submitting progress claims” as the “20th day of each calendar month”.⁴

The 20th day of November 2016, however, fell on a Sunday. The appellant thought that it would not be feasible to serve a payment claim that day, not least because the payment claim was voluminous and because the respondent’s office was closed. Sensibly, the appellant decided to serve a payment claim two days earlier on the Friday of that week, ie 18 November 2016, but dated the payment claim 20 November 2016.⁵ The payment claim was not met with any payment response from the respondent. In the event, the appellant applied for adjudication.

Before the adjudicator, the respondent challenged the validity of the payment claim on the basis that it had not been filed on the 20th of the month as the contract required.⁶ The adjudicator rejected this argument and issued the AD in favour of the appellant in January 2017.⁷ In February 2017, the appellant applied for and was granted leave to enforce the AD. In the same month, the respondent applied to the High Court to set aside both the AD and the order granting leave to enforce. The Judge heard the respondent’s application in April 2017 and gave judgment for the respondent in July 2017 in Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd [2017] SGHC 165 (the “Judgment”).

Decision below

The Judge identified four issues for decision: (a) whether the service of the payment claim was invalid because it had not been served on 20 November 2016; (b) whether the payment claim was invalid because it did not state in its header that it was a payment claim under the Act; (c) whether the respondent had waived its right to object under issue (a); and (d) whether the respondent had waived its right to object under issue (b).⁸ As the present appeal concerned only issues (a) and (c), we will focus on the Judge’s decision on these issues.

The Judge thought that issue (a) essentially came down to whether, on a true construction of cl 59 read with Appendix 1 of the parties’ contract, the appellant was entitled to serve a payment claim only on the 20th of each month (as the respondent argued) or was entitled to serve a payment claim by the 20th of each month (as the appellant argued).⁹ The Judge held that the ordinary and natural meaning of the words in Appendix 1 was that the event concerned was to take place on the specified day and not on any other day, “neither sooner nor later”.¹⁰

The appellant argued that the respondent would suffer no prejudice if a payment claim were to be validly served before the 20th of the month because that allowed the respondent more time to consider the payment claim. The Judge rejected this argument because by s 11(1) of the Act, early service may result in a claimant being entitled to payment on a date earlier than would have been the case if the payment claim had been served on the date specified, given that time for serving a payment response runs from the date a payment claim is served.¹¹ The Judge found arguments based on prejudice unhelpful in any event because the parties had specified the time for submission of payment claims in their contract, and it had to be presumed that there was a reason for this.¹² The Judge was also not persuaded by the appellant’s contention that it was impossible to serve a payment claim on a Sunday.¹³ So the Judge concluded that service of the payment claim had to be done on the 20th day of the month, “neither sooner nor later”.¹⁴

On issue (c), the Judge found that the respondent had not waived its right to object to the premature service of the payment claim.¹⁵ The Judge did not find it necessary to resolve the apparent conflict between four decisions of the High Court cited by the respondent (ie, JFC Builders Pte Ltd v LionCity Construction Co Pte Ltd[2013] 1 SLR 1157 (“JFC Builders”); Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd[2013] 3 SLR 609 (“Admin Construction”); YTL Construction (S) Pte Ltd v Balanced Engineering & Construction Pte Ltd[2014] SGHC 142 (“YTL Construction”); and LH Aluminium Industries Pte Ltd v Newcon Builders Pte Ltd[2015] 1 SLR 648 (“LH Aluminium”)) on the one hand, and our decision in Grouteam Pte Ltd v UES Holdings Pte Ltd[2016] 5 SLR 1011 (“Grouteam”) on the other.

The Judge then considered that even if it were possible to waive an available objection to the invalid service of a payment claim, the respondent had not done so on the facts.¹⁶ The Judge thought that it would generally be the case that filing a payment response without raising the objection to service would be inconsistent with any subsequent position that the service was invalid. But the Judge also considered that this did not necessarily extend to the situation where a respondent elects not to file a payment response at all because it has taken the view that the payment claim was invalid for not having been filed in accordance with the provisions of the contract. The Judge saw no reason that a respondent should not be entitled to take such a position and, consistently with it, take no action until he is served with an adjudication application.¹⁷ On the facts, the Judge found that the objection was not waived since there was no unequivocal representation that was sufficient to sustain either a waiver by estoppel or a waiver by election.¹⁸

As for the remaining issues, the Judge found in favour of the appellant in respect of issue (b)¹⁹ and there was therefore no need to consider issue (d).²⁰ However, the Judge observed that if there had been such a need, he would have found that the respondent had indeed waived the objection relating to the payment claim header.²¹ In the premises, the Judge set aside the AD on the ground that the payment claim had not been served on time in contravention of the mandatory provision in s 10(2)(a) of the Act. The payment claim...