CEQ v CER

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 06 April 2020
• Neutral Citation: [2020] SGHC 70
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1412 of 2019
• Published date: 14 May 2020
• Year: 2020
• Hearing Date: 16 January 2020
• Plaintiff Counsel: Ng Hweelon and Tay Ming Xun (Veritas Law Corporation)
• Defendant Counsel: Chong Chi Chuin Christopher and Josh Samuel Tan Wensu (Drew & Napier LLC)
• Citation: [2020] SGHC 70

Lee Seiu Kin J: Introduction

This was an application to set aside an adjudication determination made pursuant to the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)(“the Act”). While the factual matrix itself is not complex, this case presents an interesting opportunity to examine the propositions set forth in Far East Square Pte Ltd v Yau Lee Construction (Singapore) Pte Ltd [2019] 2 SLR 189 (“Yau Lee”) and SH Design & Build Pte Ltd v BD Cranetech Pte Ltd [2018] SGHC 133 (“SH Design”). The two main issues arising from this application centre around these two cases, which respectively discuss the validity of payment claims once an architect under an SIA contract is rendered functus officio and the jurisdiction of the adjudicator to consider bond monies. I dismissed the application. My reasons are as follows.

Facts The parties

The plaintiff was the owner and developer of a residential flat development at [address redacted] (“the Project”). The defendant was the main contractor for the Project between 1 February 2016 and 2 March 2017.

Background to the dispute

The defendant was neither the first nor the last contractor to take on the Project. It took over from a previous contractor pursuant to a novation agreement dated 1 February 2016. This previous contractor had been engaged by the plaintiff pursuant to a contract dated 19 May 2015 (“the Contract”)¹, which was novated to the defendant in its entirety.² Pursuant to cl 3.2 of the novation agreement, the defendant procured the issuance of a performance bond for $1,279,150.00 by [ABC] Pte Ltd (the “performance bond”).³

The Contract had four important features which will prove crucial to the first issue (see [12]). Firstly, the Contract incorporated the REDAS Design and Build Conditions of Main Contract (3rd Edition, July 2013).⁴ Secondly, the Contract set out a procedure for payment claims and for payment certificates to be issued in response.⁵ However, this certification process was not overseen by any independent certifier. The only certifier was the employer’s representative (“ER”) who, as the title suggests, was the plaintiff’s agent. Thirdly, the Contract had no specific procedure which brought the ER’s powers of certification to an end. Fourthly, cl 30.3.1 of the Contract explicitly provided for payment even after termination of the main contractor’s employment.⁶

The defendant’s employment was terminated by the plaintiff on 2 March 2017. On the same day, the plaintiff called on the performance bond and engaged another contractor for the Project (“[DEF Contractor]”).⁷ [DEF Contractor] completed the project around August 2017.⁸ By then, the professional parties involved in the project such as the ER, quantity surveyor, architect and professional engineers, had concluded their employment. In fact, they had wrapped up by May 2017.⁹

Little was heard from the defendant for almost two years. Then, from 7 March 2019 onwards, the defendant began serving payment claims on a regular, monthly basis. These claims are detailed below:¹⁰

Payment Claim	Lodgement Date	Sums Claimed (S$)	Adjudication Result (if applicable)
20	7 March 2019	2,674,773.66	-
21	7 April 2019	2,777,348.22	SOP/AA 172/2019 Dismissed on jurisdictional grounds
22	7 May 2019	2,777,348.22	-
23	3 June 2019	3,110,061.83	-
24	5 July 2019	3,110,061.83	SOP/AA 246/2019 Application withdrawn
25	5 August 2019	3,262,740.23	SOP/AA 318/2019 Awarded, in part, to Defendant ($1,981,579.50)
26	5 September 2019	3,262,740.23

Payment Claim 25 and the adjudication determination arising from SOP/AA 318/2019 are the subject of the present application.

Issues to be determined

Three issues were raised in this application, but only the first two warrant discussion. The last issue was simply a non-starter. For that issue, the plaintiff’s contention was that the adjudicator had not given it an opportunity to explain itself.¹¹ Specifically, the plaintiff took umbrage at (a) the adjudicator’s observation that [DEF Contractor] was hired on short notice with no competitive tenders¹² and (b) the adjudicator’s findings that the cost of rectifying defects would not have been as high as the plaintiff claimed in its adjudication response.¹³ Having not had a “fair chance” to address these matters, the plaintiff submitted that the adjudication was a breach of natural justice and accordingly, invalid.¹⁴

This was a wild attempt at enlisting the court’s aid in overturning an unfavourable adjudication determination. The position at law is clear – the courts will not review the merits of an adjudication determination: Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2014] 1 SLR 797 at [48]. The plaintiff has had ample opportunity to justify the breakdown and cost of defect rectification in its adjudication response. ¹⁵ In fact, that is precisely what the plaintiff did. The only problem was that the plaintiff made a serious and ultimately costly assumption in its submissions – that the adjudicator would accept its valuation of $740,000.00 for the cost of rectification defects without further scrutiny. The associated assertions that the adjudicator’s methodology had been “entirely wrong”¹⁶, that the adjudicator had failed to properly evaluate the cost of backcharges¹⁷ and that the adjudicator had made “arithmetical errors” or “baseless calculations”¹⁸ were in truth, attacks on the adjudicator’s decision rather than his decision-making process. These allegations ought to have been taken up in an adjudication review application under s 18 of the Act. They are not valid grounds for judicial review of the adjudicator’s decision.

There could have been an argument that the adjudicator’s decision was tainted by extraneous (and therefore irrelevant) considerations such as concerns about the bona fides of [DEF Contractor]’s contract with the plaintiff. But I saw nothing necessarily wrong with such an approach. Naturally, any adjudicator is vigilant about the possibility of fraudulent or sham contracts. The plaintiff’s complaint was that it did not have a chance to address the adjudicator’s doubts before these were memorialized in an adjudication determination. But an adjudicator is not under any obligation to test his reasoning with the claimants/respondents before him. He is not obliged to inform the parties of his thoughts during the adjudication conference and certainly not expected to zealously search for arguments that would persuade him to adopt a different position. His duties extend to reason giving, and that was amply done in the present case. The plaintiff’s real complaint therefore, was with the adjudicator’s reasoning. Again, these went to the merits of the adjudication determination and were therefore untenable in an application to set aside an adjudication determination.

This left me with the two main issues for this application: Whether a payment claim for works performed prior to termination of employment amounted to a patent error. (“The Termination Issue”); and Whether the adjudicator acted in excess of jurisdiction in considering the bond proceeds in the adjudication. (“The Bond Issue”).

The parties’ cases and the adjudication determination The Termination Issue

The adjudicator determined, firstly, that the defendant was entitled to be paid for works done up to the date of termination. In support of this, he cited s 5 of the Act which expressly provides that “[a]ny person who has carried out any construction work, or supplied any goods or service, under a contract is entitled to a [progress payment]”. In the absence of any statutory or contractual bars, the fact that these payment claims were served two years after employment termination was inconsequential.¹⁹

He then considered the Court of Appeal’s decision in Yau Lee. As he understood it, Yau Lee stood for the proposition that under the SIA Form of Contract, the power of the architect as an independent certifier comes to an end upon the issuance of his Final Certificate. Accordingly, any payment claim made after the issuance of his Final Certificate was invalid since the certifying authority (the architect) was functus officio. He concluded that Yau Lee did not apply to the present facts.

His reasoning was fourfold. First, the Contract was a REDAS Form of Contract, not an SIA one.²⁰ Second, there was no provision under the REDAS Form of Contract for the appointment of any independent certifier (unlike the architect’s appointment under an SIA Form of Contract).²¹ Third, there was no express provision under a REDAS Form of Contract that brings the relevant certifier’s powers of certification to an end.²² Fourth, there was an express clause (cl 30.3.1) in the Contract which entitled the defendant to be paid even after its employment had been terminated.²³

To this, the plaintiff submitted in the present proceedings that Yau Lee was in fact, applicable. It pointed out that the REDAS Form of Contract envisions a certifier (the ER) certifying payment claims before any payment is given. The plaintiff claimed that the ER’s certification was a condition precedent to the contractor’s right to receive payment, a role that could be likened to the architect’s in an SIA Form of Contract.²⁴ Though there was no explicit provision bringing the ER’s powers of certification to an end, the plaintiff claimed that when the ER’s employment was terminated, his powers of certification naturally came to an end. Any payment claim after that point would accordingly, be invalid since the certifying authority was now functus officio.

The defendant, in reply, began by addressing the larger issue of whether a payment claim can be made for works prior to termination. It argued that such payment claims are certainly valid, and cited two...