Choi Peng Kum and another v Tan Poh Eng Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Eunice Chua AR
• Judgment Date: 05 July 2013
• Neutral Citation: [2013] SGHCR 19
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 275 of 2013
• Year: 2013
• Published date: 08 July 2013
• Hearing Date: 27 June 2013
• Plaintiff Counsel: Philip Ling and Ang Hou Fu (Wong Tan & Molly Lim LLC)
• Defendant Counsel: Tan Joo Seng and Wee Qian Liang (Chong Chia & Lim LLC)
• Subject Matter: Building and Construction Law,Statutes and regulations,Civil Procedure
• Citation: [2013] SGHCR 19

AR Eunice Chua:

The application before me was for the setting aside of an adjudication determination made pursuant to the Building and Construction Industry Security of Payment Act (“the SOP Act”) (Cap 30B, 2006 Rev Ed). The parties raised issues of the interaction between the SOP Act and the terms of the underlying contract between the parties, which incorporated the Singapore Institute of Architects, Articles and Conditions of Building Contract, Lump Sum Contract, 9th Edition (“the SIA Conditions”). After hearing the submissions of counsel, I reserved judgment to fully consider the matter.

Background

The applicants are property owners and the respondent is a contractor. On 25 November 2011, the applicants employed the respondent to carry out reconstruction works on their property. Their contract incorporated the SIA Conditions and also an addendum (“the Addendum”), which provided that:

Save for [the Architect’s role being to provide the relevant design, drawings/plans and to furnish all necessary information and clarification for works to be carried out by the Contractor], the Architect’s responsibility and/ or obligations to give directions and instructions including extensions of time to the Contractor for works would be carried out by the Quantity Surveyor. The Quantity Surveyor will also be responsible for certification of payment, determining variation works, omissions and the value of any works carried out by the Contractor.

Suffice to say, disputes arose between the applicants and the respondent surrounding alleged defective works or works that had not been carried out. It is not disputed that on 7 February 2013, the applicants terminated the employment of the respondent.

However, before the termination, on 31 January 2013, the respondent issued to the applicants “Progress Claim No. 9” for the sum of $480,109.97. The applicants did not respond to Progress Claim No. 9, inter alia, because they took the position that Progress Claim No. 9 was not supported by any valuation by the quantity surveyor and only consisted of a description and breakdown of all items claimed without enclosing supporting documentation.

On 7 March 2013, the respondent lodged an adjudication application in respect of Progress Claim No. 9 pursuant to the SOP Act. The adjudication application was served on the applicants on 8 March 2013. The applicants lodged their adjudication response at 5.20pm on 15 March 2013.

On 22 March 2013, the appointed adjudicator issued an adjudication determination in favour of the respondent for the full amount of Progress Claim No. 9. The adjudicator considered the adjudication response to have been lodged on 16 March 2013 as it was lodged after 4.30pm on 15 March 2013. Accordingly, pursuant to s 16(2) of the SOP Act, the adjudicator regarded the adjudication response as out of time and did not consider the adjudication response.

It is noted that the quantity surveyor issued “Progress Valuation No. 9”, dated 14 March 2013, certifying the sum of $7,086.61 as being payable on Progress Claim No. 9.

On 28 March 2013, the applicants filed this application to set aside the adjudication determination and for other consequential orders.

The applicants argued that the adjudication determination should be set aside for two reasons.

First, because their contract with the respondent was terminated on 7 February 2013, cl 32(8)(a) of the SIA Conditions applied and prevented any payment claim from being made. Under cl 32(8)(a) of the SIA Conditions:

In the event of the termination of the employment of the Contractor … (a) no further sum shall be certified as due to the Contractor until the issue by the Architect of the Cost of Termination Certificate … nor shall the Employer be bound to pay any sums previously certified if not already paid …

Second, and in the alternative, the applicants argued that the respondent was not entitled to any progress payment under Progress Claim No. 9 because, assuming that Progress Claim No. 9 was an interim claim and not a final claim as defined in the SIA Conditions, it was not supported by a valuation as required by cl 31(4) of the SIA Conditions. Clause 31(4) of the SIA Conditions states in relevant part as follows:

Where … interim payment is to be based on periodic valuation, the sum certified in interim certificates shall be based on a retrospective re-evaluation of all the work carried out under the Contract as claimed by the Contractor up to a date … not exceeding 7 days before the date of issuing the Certificate itself. …

Both these arguments were premised on the propositions that an entitlement to seek adjudication under the SOP Act only arose when the contractual right to a progress payment can be established and that a court may set aside an adjudication determination on the basis that there was no entitlement to payment under the terms of the construction contract.

Issues

The issues before me, accordingly, were as follows: Whether a court may set aside an adjudication determination under the SOP Act on the basis that there was no entitlement to payment under the terms of the construction contract; If so, whether the respondent can establish a contractual entitlement to Progress Claim No. 9 consistent with the SIA Conditions.

Setting aside an adjudication determination on the basis that there was no entitlement to payment under the terms of the construction contract

To determine whether an adjudication determination obtained under the SOP Act may be set aside on the basis that there was no entitlement to payment under the terms of the construction contract, I begin with considering the relevant provisions of the SOP Act.

Section 5 of the SOP Act states that:

Any person who has carried out any construction work, or supplied any goods or services, under a contract is entitled to a progress payment.

Section 6 of the SOP Act stipulates how the amount of progress payment is to be calculated and s 10 of the SOP Act states the requirements of a payment claim, including that: (1) A claimant may serve one payment claim in respect of a progress payment on — (a) one or more other persons who, under the contract concerned, is or may be liable to make the payment; or (b) such other person as specified in or identified in accordance with the terms of the contract for this purpose.

The applicants argued that these provisions meant that the right to a progress payment is created by the construction contract and not the SOP Act and that if there is no progress payment due under the contract, then there is no entitlement to a payment claim and no entitlement to make an adjudication application.

In support of this argument, the applicants relied on Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd [2009] NSWSC 320 (“Roseville”) at [43] where the court stated that:

The [New South Wales equivalent of the SOP Act (“the Act”)] does not create a right to remuneration for construction work – that right is created by the construction contract. What the Act does is to create and regulate a right to obtain a progress payment. It is inherent in the concept of a progress payment that it be a payment on account of the amount ultimately due. The contract provides the starting point for the determination of rights under the Act.

The applicants also relied on Chow Kok Fong, Security of Payments and Construction Adjudication (2nd Ed, LexisNexis, 2013) (“Chow”), where the learned author observed at para 3.14 that the “qualification ‘under a contract’ in [s 5 of the SOP Act]...