CFA v CFB

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 19 May 2020
• Neutral Citation: [2020] SGHC 101
• Court: High Court (Singapore)
• Hearing Date: 20 January 2020,10 March 2020
• Docket Number: Originating Summons No 1448 of 2019 (Summons No 6129 of 2019)
• Plaintiff Counsel: Chong Kuan Keong, Ernest Sia, Gan Siu Min Cheryl, Derek Tay and Andy Yeo (Chong Chia & Lim LLC)
• Defendant Counsel: Neo Kim Cheng Monica and Oung Hui Wen Karen (Chan Neo LLP)
• Subject Matter: Building and Construction Law,Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev. Ed),Setting aside adjudication determination,Fraud
• Published date: 23 May 2020

Lee Seiu Kin J: Introduction

A judgment procured by fraud cannot stand: Lazarus Estates Ltd v Beasley [1956] 1 QB 702 at 712. An adjudication determination is no different. In this application, the respondent sought to set aside an adjudication determination (“AD”) made pursuant to the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)(“the Act”). Its pleaded grounds were fraud and breach of natural justice. I accepted the former and rejected the latter. Accordingly, I granted the application and set aside the AD. I now give the grounds for my decision.

Facts The parties and their contractual relationship

The parties are involved in the “[title of construction project redacted]” (“the Project”).¹ The respondent (“CFB”) is the sub-contractor tasked with procuring and installing façade panels for the project. CFB in turn subcontracted this work to the applicant (“CFA”). The terms of their contract were spelt out in a written agreement made on 3 August 2018 (“the Subcontract”). ² The written agreement comprised a letter of award and a set of standard conditions.

CFA was engaged to fabricate, deliver and install window panels at the Project site.³ In total, the Subcontract called for 864 window panels, of which 489 panels remained undelivered by the time of the adjudication determination.⁴ The present application centred on these 489 panels (“the missing panels”).

Background to the dispute

CFA commenced adjudication proceedings on the basis that there had been no payment response to its payment claim served and dated 25 September 2019 (“the Payment Claim”). The adjudication application was lodged on 10 October 2019⁵ and the adjudication itself was conducted over two days on 25 October 2019 and 6 November 2019.⁶ CFA claimed that it had “completed all the supply works” and that “even though some materials [had not been] delivered to [the Project site]”,⁷ they were entitled to payment. CFB replied that a payment response had not been due yet and that CFA’s adjudication application had been premature.⁸ Additionally, CFB argued that CFA was only entitled to payment upon successful delivery of the window panels that it had contracted to fabricate.⁹

The adjudicator determined that a payment response had indeed been due by 2 October 2019 and that CFB had accordingly failed to provide a payment response in time.¹⁰ The adjudicator also held that the window panels, though undelivered and uninstalled, were claimable under s 7(1)(b) of the Act: Chuang Long Engineering Pte Ltd v Nan Huat Aluminium & Glass Pte Ltd [2019] 4 SLR 901 at [30] and [33] (“Chuang Long”).¹¹ Accordingly, the adjudicator ruled in CFA’s favour and CFB was ordered to pay both the adjudicated amount and 75% of the adjudication costs (together, “the adjudicated sum”).¹² The AD was recorded on 15 November 2019.

It bears mentioning that there were allegedly some representations made about the missing panels at the adjudication conferences. However, the accounts of these representations conflicted with each other.¹³ Finding both accounts to be self-serving at best, I proceeded with the adjudicator’s account of what was said at the adjudication conferences – namely, that “parties’ oral submissions at the … conference[s] broadly accorded with and expanded upon the written submissions tendered”.¹⁴ I noted the following in the written submissions and the adjudication determination: CFA claimed that it had “completed all the supply works” and that “some of the materials [were] stored at [CFA’s] warehouse and some [were] stored at [CFB’s] warehouse”;¹⁵ no mention was made of materials stored anywhere else. CFA claimed storage costs for “materials … kept in [its] warehouse for 6 months”.¹⁶ The “materials” here referred to those that had not been delivered to CFB at the time of the adjudication determination ie, the missing panels. Both CFA’s submissions and the adjudicator’s determination made no mention of any difficulty or trouble that CFA had experienced in getting the missing panels from its Chinese supplier (“ABC”). In fact, ABC was not mentioned at all.

It later transpired that some 169 of the missing panels were in China, rather than in CFA’s warehouse. ABC had ceased business with CFA, and had contacted CFB directly on 22 November 2019 to sell the remaining window panels in its possession.¹⁷ CFB professed surprise at this revelation¹⁸ as it had been operating under the impression that CFA had possession of all the missing panels. In fact, CFB had been attempting to pay the adjudicated sum in exchange for the missing panels since 19 November 2019.¹⁹ CFA had neither acceded to that request²⁰ nor had it offered any assurance that it had the missing panels in its possession. Indeed, CFA had persistently refused to give CFB any proof that it possessed the missing panels and had simply insisted on being paid the adjudicated sums.

By the time the parties first appeared before me on 20 January 2020, CFA had given CFB neither an opportunity to inspect its warehouse²¹ nor any other proof that CFA was in a position to deliver all the missing panels. This was despite CFB’s constant assurances that it was “willing and ready to pay [the adjudicated sums] so long as [it was assured] that CFA had all the materials with them and would release and deliver the same to [CFB]”.²²

Issue to be determined

The first issue, an alleged breach of natural justice, was a nonstarter. CFB’s contention was that payment for the window panels were not due until delivery was made (see above at [4]). It relied on cl 8 of the letter of award and cl 11 of the standard conditions to substantiate its claim. CFB’s complaint was that the adjudicator had failed to consider these clauses in valuing the construction work carried out and had therefore breached s 17(3)(b) of the Act. This, CFB alleged, had been a breach of natural justice.

I did not accept this argument. It was no more than an attempt to appeal against an unfavourable adjudication determination, which is impermissible: Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2015] 1 SLR 797 at [48]. In truth, the adjudicator had applied his mind to those clauses before rejecting CFB’s arguments²³ – argument which, I noted, were identical to those before me in the present application. He had expressly considered not just the clauses CFB had highlighted but also the entirety of the contract²⁴ before concluding that CFB’s submissions “held [no] water”.²⁵ I therefore took CFB’s recycled arguments as an impermissible invitation to consider the merits of the AD. Accordingly they were rejected.

The only issue therefore, was whether there had been fraud on CFA’s part in making and pursuing the payment claim.

The applicable legal principle

Fraud is a valid ground for setting aside ADs. I respectfully agreed with Tan Siong Thye J’s comments in Mansource Interior Pte Ltd v Citiwall Safety Glass Pte Ltd [2014] 3 SLR 264 at [31] and OGSP Engineering Pte Ltd v Comfort Management Pte Ltd [2018] 3 SLR 1031 at [34]–[37] (“OGSP”). Though there are no explicit provisions in the 2006 statutory scheme that allow adjudication determinations to be set aside on the basis of fraud, I shared Tan J’s sentiments that “the court will not allow its processes to be used to facilitate fraud” (OGSP at [37]). Fraud unravels all.

I also noted that the recent 2018 amendments to the Act set out some non-exhaustive grounds for setting aside an AD. Fraud is one such ground (see the new s 27(6)(h) of the Building and Construction Industry Security of Payment Amendment Act 2018 (No 47 of 2018)). In introducing this provision, Minister of State for National Development, Mr Zaqy Mohamed indicated that “[t]hese grounds were consistent with those that have been developed by the Courts over time”.²⁶ I took this to mean that the fraud ground was, at the very least, consistent with the other grounds on which ADs had been set aside.

In any case, it was undisputed between the parties that fraud was a valid ground for setting aside ADs. The test was set out in QC Communications NSW Pty Ltd v CivComm Pty Ltd [2016] NSWSC 1095 where the New South Wales Supreme Court interpreted the provisions of the Building and Construction Industry Security of Payment Act 1999 (Act 46 of 1999), which is in pari materia with the Act (at [32]):

A judgment may be set aside on the basis of fraud where: (a) The application is based on facts discovered after the judgment which are material: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; and (b) It is reasonably clear that the fresh evidence would have provided an opposite verdict: Orr v Holmes [1948] HCA 16; (1948) 76 CLR 632 at 640.

I have termed these conditions the Material Fact Requirement and Opposite Verdict Requirement, respectively.

My decision Material Fact Requirement

There were three material facts discovered after the AD was issued. First, 169 of the missing panels were not in Singapore at all. ²⁷ Second, CFA had been having serious disputes with its supplier regarding the delivery of those window panels to Singapore. The disputes had risen to such a level that their contract had been terminated on 13 October 2019.²⁸ This fact was not brought up at any of the adjudication conferences.

Third, CFA had been experiencing significant difficulty negotiating (both before and after the contractual termination) for those window panels to be delivered to Singapore. These negotiations had been going on since 27 September 2019 when ABC had first indicated to CFA that it would be delaying delivery.²⁹ Nothing had come out of them. Indeed, by CFA’s own account, ABC had proven to be unreasonable and unreliable.³⁰ Yet, CFA had failed to inform CFB of the fact that 169 of the missing panels remained in the possession of its somewhat capricious supplier.

These facts were relevant because CFA’s payment claim was for fabrication of the entire...