Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 22 October 2009
• Neutral Citation: [2009] SGHC 237
• Docket Number: Originating Summons No 894 of 2008 (Registrar's Appeal No 409 of 2008)
• Date: 22 October 2009
• Published date: 30 October 2009
• Year: 2009
• Plaintiff Counsel: Melvin Chan and Debby Lim (TSMP Law Corporation)
• Citation: [2009] SGHC 237
• Defendant Counsel: Soh Lip San and Sim Chee Siong (Rajah & Tann LLP)
• Court: High Court (Singapore)
• Subject Matter: Dispute resolution,Building and Construction Law,Alternative dispute resolution procedures

22 October 2009

Judith Prakash J:

Introduction

1 Whilst this matter came before me as an appeal from the decision of an assistant registrar (“the AR”), it had its genesis in an application for an adjudication under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOP Act”). There have, so far, been three hearings in relation to the dispute and since my decision which upheld the decision below is, in turn, being appealed against to the Court of Appeal, there will be a fourth hearing in due course. The SOP Act was intended to provide a speedy process for interim settlement of payment claims in the construction industry but this matter provides an example of how in some cases, the process can be prolonged and expensive.

2 The parties to the adjudication application were Chip Hup Hup Kee Construction Pte Ltd (“the claimant”) and Ssangyong Engineering & Construction Co Ltd (“the respondent”). The respondent is the main contractor for the construction works for the hotel portion of the Marina Bay Sands Integrated Resort construction project. In September 2007, it appointed the claimant as its subcontractor for the reinforced concrete structural works of the hotel.

Adjudication Application

3 The claimant started work and thereafter from time to time it issued and served progress claims in respect of the work that it had done. On 21 April 2008, the claimant served Progress Claim No 5 for the sum of $1,616,207.149 (“Progress Claim 5”) on the respondent. Under s 11 of the SOP Act, the respondent had the option of responding to the payment claim by paying the claimed amount by the due date or (if it objected to payment in full or in part) by providing a payment response within 21 days of service of Progress Claim 5. The respondent did not pay the claim nor did it submit a payment response by the deadline which was 12 May 2008, being 21 days after the service of Progress Claim 5. The seven day period after 12 May 2008 was regarded, under s 12 of the SOP Act, as a dispute settlement period and during this period a payment response could have been served. On 17 May 2008, the claimant reminded the respondent to provide its payment response but none was received by 19 May 2008, the end of the dispute settlement period.

4 On 22 May 2008, the claimant served on the respondent a Notice of Intention to Apply for Adjudication as required by s 13(2) of the SOP Act. On the same day, the claimant submitted its Adjudication Application for Progress Claim 5 under s 13(1) of the SOP Act to the Singapore Mediation Centre (“SMC”) as the authorised nominating body. On the next day, two things happened. First, the SMC served a copy of the Adjudication Application on the respondent and informed the latter that a response to the same had to be lodged within seven days. Second, the respondent provided its payment response, a document entitled Payment Certificate No 5.

5 On 29 May 2008, the SMC appointed Mr Goh Phai Cheng as the Adjudicator (“the Adjudicator”) for the case. The respondent’s Adjudication Response was filed on 30 May 2008. Attached to the same were various documents including Payment Certificate No. 5 and various annexes thereto. Thereafter, various submissions were made and documents furnished to the Adjudicator and there was an adjudication conference on 13 June 2008 at which the parties, represented by their respective solicitors, appeared before the Adjudicator.

6 In the meantime, the parties had continuing disputes over site issues. The subcontract was terminated some time in early May or early June 2008 and there was a dispute over who had repudiated the subcontract.

7 The Adjudicator issued his adjudication determination (the “Determination”) on 25 June 2008. He stated that the following issues had arisen in the adjudication:

(a) Whether s 15(3) of the SOP Act precluded the Adjudicator from considering the respondent’s payment response to Progress Claim 5 and the reasons given by the respondent for withholding the amounts due to the claimant which were contained in the respondent’s Adjudication Response and the documents served with it; and

(b) Whether the Adjudicator had jurisdiction to deal with the adjudication when the subcontract between the parties had been terminated.

8 In relation to the first issue, the Adjudicator cited the provisions of s 15(3) of the SOP Act and also referred to the definition of “payment response” in s 2 thereof.

9 Having considered the arguments, the Adjudicator held as follows:

31. I do not accept the Respondent’s contention that section 15(3) allows them to include in their Adjudication Response the reasons for withholding payment when those reasons had earlier been communicated to the Claimant. The language of section 15(3)(a) is clear and unambiguous. It refers to “reason(s) included in a relevant payment response provided by the respondent to the claimant”. The reasons given by a respondent in a payment response to an earlier progress claim do not fall within the meaning of the expression “reasons(s) included within a relevant payment response” in section 15(3)(a). In my view, a “relevant payment response” for the purposes of section 15(3)(a) must be a payment response to a payment claim submitted by a claimant which is the subject of an adjudication application. Such a construction is in fact supported by section 11(3) of the Act which requires a payment response provided in relation to a construction contract by a respondent to identify the payment claim to which it relates. In our instant case, the payment claim submitted by the Claimant was their Progress Claim No. 5 and since no payment response was given by the Respondent pursuant to either section 11(1) or 12(4) of the Act to the Claimant’s Progress Claim No. 5, I am therefore precluded by section 15(3) of the Act for considering the reasons given by the Respondent in their Adjudication Response.

10 The Adjudicator concluded at para 41 of the Determination that as there was no valid payment response from the respondent and as s 15(3) directed him not to consider any reason for withholding payment included in the respondent’s Adjudication Response, where such reason was not included in a valid payment response, he accepted the claimant’s valuation of the work done for Progress Claim 5 and the outstanding amount of that claim.

11 In relation to the second issue, the Adjudicator rejected the argument put forward by the respondent that the parties’ rights under the SOP Act were premised on the continued subsistence of the construction contract between the parties, and, therefore, if such a contract were to be terminated, there would no longer be any basis for an adjudicator to proceed with an adjudication. He held that under the SOP Act, he had jurisdiction to deal with an adjudication application under the legislation even though the contract between the parties had been terminated because a valid contract had existed and this was not a case where the contract had been rescinded or never existed at all.

12 In the adjudication application, the claimant had claimed an outstanding amount of $1,103,101.49 under Progress Claim 5. The claimant explained to the Adjudicator that this amount had been arrived at after allowing payments and deductions made by the respondent after the submission of Progress Claim 5 (which had been initially for $1,616,207.15). The Adjudicator accepted that the sum of $1,103,101.49 (“the adjudication amount”) was due to the claimant under Progress Claim 5 and determined that the adjudication amount was due and payable on 16 June 2008.

The court proceedings

13 The respondent did not pay any part of the adjudicated amount by 16 June 2008. On 3 July 2008, the claimant filed the originating summons herein in order to obtain leave of court to enforce the adjudication determination in the same manner as an order of the court. This application was granted shortly thereafter.

14 On 23 July 2008, the respondent filed summons 3242 of 2008 under s 27 (5) of the SOP Act (“SUM 3242”) and paid the unpaid portion of the adjudicated amount into court as security as required by the provision. The summons prayed that:

(a) the Determination be set aside and a fresh adjudication be fixed; and

(b) the order of court granting leave to the claimant to enforce the Determination in the same manner as a judgment or order of court be set aside.

At this stage, the respondent was still represented by the same solicitors who had acted for it in the adjudication application.

15 The basis on which the respondent argued before the AR that the Determination should be set aside was that the Adjudicator had been wrong to interpret s 15(3) of the SOP Act to completely exclude all aspects of the respondent’s case, and that such an interpretation constituted a failure to carry out his quasi-judicial responsibilities to ensure that justice was done. In particular, he had failed to comply with his obligations to abide by the rules of natural justice as required under s 16(3) of the SOP Act. In the result, the AR rejected the respondent’s arguments. I will summarise his holdings which are set out in his judgment dated 24 September 2008 (the “GD”).

16 In relation to the issue of whether the Adjudicator was right not to have considered the respondent’s reasons for withholding payment, the AR considered that the respondent was making a two-pronged argument. The first prong was that s 15(3) of the SOP Act ought to be interpreted in such a manner as to oblige the Adjudicator to consider the respondent’s reasons for withholding payment. The second prong was an argument that other provisions of the SOP Act, in particular s 16(7), obliged the Adjudicator to consider all the documents and information available to him, which would include Payment Certificate No 5, the Adjudication Response and the submissions made thereon.

17 Following a similar reasoning process as the Adjudicator, the AR...