Comfort Management Pte Ltd v OGSP Engineering Pte Ltd

JurisdictionSingapore
JudgeJudith Prakash JA,Tay Yong Kwang JA,Steven Chong JA
Judgment Date13 April 2018
CourtCourt of Appeal (Singapore)
Docket NumberCivil Appeal No 163 of 2017
Date13 April 2018
Comfort Management Pte Ltd
and
OGSP Engineering Pte Ltd

[2018] SGCA 19

Judith Prakash JA, Tay Yong Kwang JA and Steven Chong JA

Civil Appeal No 163 of 2017

Court of Appeal

Building and Construction Law — Dispute resolution — Contractor not filing payment response after receiving payment claim — Contract requiring variation orders to be effected in writing — Subcontractor failing to produce evidence of such writing — Whether adjudicator failed to have regard to parties' contract — Whether adjudicator failed to recognise patent errors in subcontractor's payment claim — Whether such failure rendered adjudication determination liable to be set aside — Section 17(3) Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)

Statutory Interpretation — Construction of statute — Whether s 17(3) of Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) only restricted or also prescribed matters that adjudicator had to consider in his determination — Section 17(3) Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)

Held, dismissing the appeal:

(1) The two main issues to be decided were whether the appellant's interpretation of s 17(3) of the Act was correct and whether the adjudicator's alleged failure to recognise patent errors was a basis for setting aside his determination. The analysis of the first issue would be confined to what s 17(3) required of an adjudicator during the adjudication while the analysis of the second issue would examine what was required of a court when reviewing an adjudication determination for the purpose of deciding whether to set it aside for breach of s 17(3): at [17], [18] and [20].

(2) A patent error was an error in the material properly before an adjudicator that was obvious, manifest or otherwise easily recognisable. Patent errors were an exceptional and extremely narrow category of errors. Examples included the wrong contract adduced in support of the payment claim; documentary evidence that plainly contradicted the claimed amount; and the absence of any material or explanation to support the payment claim: at [21] to [24].

(3) Section 17(3) of the Act both prescribed the matters that an adjudicator must consider in determining an adjudication and restricted his consideration for that purpose to those matters only. This construction of s 17(3) was supported by its immediate context, namely, its sub-provisions, which concerned matters that Parliament could not have intended an adjudicator to have the option of ignoring, such as the provisions of the Act and the parties' contract: at [29], [30] and [52].

(4) Regardless of whether a payment response had been filed, an adjudicator had an independent duty to address his mind to and consider the true merits of a payment claim. This duty comprised the obligations set out in ss 17(2) and 17(3) of the Act. It required an adjudicator, before allowing a claim, to be persuaded that the claimant had established a prima facie case that the construction work which was the subject of the payment claim had been completed and that the value of that work was as stated in the payment claim. Thus, the applicable standard of persuasion was a prima facie case, not absence of patent errors or proof on a balance of probabilities: at [34], [54], [57] and [62] to [65].

(5) If a respondent had failed to file a payment response, he was permitted to challenge the payment claim by highlighting only patent errors in the material properly before the adjudicator. This position represented the proper balance between giving effect to the legal restrictions on a respondent's entitlement to make submissions when he had failed to file a payment response and giving effect to his right to the proper conduct of the adjudication: at [34], [66] and [67].

(6) Section 17(3) was a mandatory provision, breach of which would render an adjudication determination liable to be set aside: at [77].

(7) The question of whether there were patent errors was the decisive test for whether the adjudicator had breached his duty under s 17(3). This was because his failure to recognise such errors would lead to the inexorable inference that he had failed to consider all the matters in s 17(3). Accordingly, the central task of a respondent who was seeking to set aside an adjudication determination for breach of s 17(3) was to show the court that there were patent errors in the material properly before the adjudicator that the adjudicator had failed to recognise: at [80] and [81].

(8) The question of whether there were patent errors was also the central analytical tool for ascertaining whether the adjudicator had discharged his duty under s 17(2), which was principally to determine the adjudicated amount. In addition, the existence of patent errors would always lead to the conclusion that the adjudicator had breached his general duty to adjudicate. Also, the question of whether there were patent errors might serve as an analytical tool for ascertaining whether other mandatory provisions relating to the adjudicator's conduct had been breached: at [82] to [84].

(9) The adjudicator in this case applied the correct standard of persuasion because he stated that he could not simply rubber-stamp the claim but had instead to consider the material properly before him and consider whether there were patent errors. But even if he had looked only for patent errors, that would not have led to the inference that he did not address his mind to the true merits of the claim: at [86].

(10) The adjudicator did not fail to recognise patent errors in any of the four heads of claim in the respondent's payment claim. He considered all the material which had been adduced in support of each head, and had a positive basis for accepting all of them: at [87], [91], [99], [101] and [102].

(11) At law, the absence of writing did not automatically disentitle a party from being paid for work done under a variation order even if the variation was required by the relevant contract to be made in writing. Therefore, even though the parties' contract did contain such a requirement, and even though the respondent did not produce evidence of such writing, that did not mean that the adjudicator had failed to have regard to the parties' contract or that he would have recognised a patent error had he done so: at [88] to [90].

(12) In relation to the claim for cost of materials delivered and used, the respondent had stated on the face of the payment claim that the materials had been ordered and delivered at the appellant's instruction. The appellant, having failed to file a payment response, was precluded from denying this statement. This analysis highlighted the general point that it was overwhelmingly in a respondent's interest to file a payment response since without it, certain errors in the material which could have been made patent would remain latent: at [95] to [98].

Case(s) referred to

Asian Pacific Building Corp Pty v Aircon Duct Fabrication Pty Ltd, [2010] VSC 300 (refd)

Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd [2018] 1 SLR 317 (refd)

Ballast plc v The Burrell Company (Construction Management) Ltd [2001] BLR 529 (refd)

Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co Ltd [2010] 1 SLR 658 (refd)

Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2015] 1 SLR 797 (folld)

Civil Tech Pte Ltd v Hua Rong Engineering Pte Ltd [2018] 1 SLR 584 (refd)

Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd [2005] NSWCA 228 (refd)

Grouteam Pte Ltd v UES Holdings Pte Ltd [2016] 5 SLR 1011 (folld)

Hauslab Design & Build Pte Ltd v Vinod Kumar Ramgopal Didwania [2017] 3 SLR 103 (folld)

I-Way Ltd v World Online Telecom UK Ltd [2002] EWCA Civ 413 (refd)

Kingsford Construction Pte Ltd v A Deli Construction Pte Ltd [2017] SGHC 174 (folld)

Lee Wee Lick Terence v Chua Say Eng [2013] 1 SLR 401 (refd)

McNab Developments (Qld) Pty Ltd v MAK Construction Services Pty Ltd [2013] QSC 293 (refd)

MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2016] EWCA Civ 553 (refd)

Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13 (folld)

Richard Crookes Construction Pty Ltd v CES Projects (Aust) Pty Ltd (No 2) [2016] NSWSC 1229 (refd)

SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733 (folld)

Thomson Rubbers (India) Pte Ltd v Tan Ai Hock [2012] 1 SLR 772 (refd)

W Y Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 (folld)

WCS Engineering Construction Pte Ltd v Glaziers Engineering Pte Ltd [2018] SGHC 28 (folld)

Facts

The appellant subcontracted to the respondent the installation of a ventilation system at a warehouse for the price of $1.25m. In March 2017, the respondent issued the appellant a payment claim for $890,262.23 under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the Act”) for work done under their contract. The payment claim comprised four heads of claim, namely, work done under a variation order, the cost of certain materials delivered and used, payment of the balance contract sum, and payment of a retention sum which had yet to be released. The appellant did not file a payment response, and the respondent took the claim to adjudication under the Act, following which the adjudicator awarded the respondent the amount claimed.

After the appellant failed to pay, the respondent applied to the High Court to enforce the adjudication determination as a judgment debt. The appellant then applied to set it aside. The appellant argued that the adjudicator had breached s 17(3) of the Act by failing to have regard to the parties' contract, which required, among other things, that variation orders be made in writing. The respondent had failed to produce evidence of such writing in support of its first head of claim, and this omission, said the appellant, was a patent error in the respondent's...

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