Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ,Tay Yong Kwang JA,Steven Chong JA
• Judgment Date: 22 October 2018
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 144 of 2017
• Date: 22 October 2018

Glaziers Engineering Pte Ltd

and

WCS Engineering Construction Pte Ltd

[2018] SGCA 66

Sundaresh Menon CJ, Tay Yong Kwang JA and Steven Chong JA

Civil Appeal No 144 of 2017

Court of Appeal

Building and Construction Law — Dispute resolution — Adjudication — Main contractor resisting subcontractor's payment claim in adjudication proceedings by asserting entitlement to set-off — Adjudicator applying beyond reasonable doubt as standard of persuasion to assess main contractor's entitlement to set-off without receiving submissions as to applicable standard of persuasion — Main contractor applying for setting aside of adjudication determination on basis of alleged breach of natural justice — Whether adjudicator breached fair hearing rule by failing to invite submissions on applicable standard of persuasion — Whether main contractor suffered prejudice as a result of any breach of fair hearing rule — Section 16(3)(c) Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)

Held, allowing the appeal:

(1) In an application to have an adjudication determination set aside, the court would read the adjudication determination in question generously, having regard to the fact that such a determination only enjoyed temporary finality and the parties could have their dispute ventilated in another more thorough and deliberate forum. A generous approach was also warranted in view of the fact that adjudicators were often appointed by virtue of their commercial acumen and familiarity with the construction industry, and were not necessarily legally trained: at [48] and [49].

(2) In this case, the adjudication determination had to be read in light of the fact that the adjudicator was not legally trained. It was likely that he had used the term “beyond reasonable doubt” to express his views about the insufficiency of the evidence to support the respondent's claimed entitlement to a set-off, rather than using the term in the sense in which it would be used by a legally-qualified person: at [50] and [51].

(3) A decision-maker would breach the principles of natural justice if he decided a dispute on a point which the parties did not have a fair opportunity to address. That said, the fact that the outcome of a dispute was unforeseen or surprising to the parties did not necessarily mean that the parties had been deprived of a fair opportunity to be heard. In particular, a surprising outcome might arise in situations where the parties had omitted to address the decision-maker on an issue which turned out to be of decisive importance, despite the fact that they could reasonably have foreseen that the issue would form an important part of the decision. In such circumstances, it could not be said that the parties had been denied a fair opportunity to be heard on that issue: at [54], [55] and [60].

(4) In an adversarial decision making process, it was inherently the remit of a decision-maker to assess the evidence against some standard of proof or persuasion. Given that the applicable standard of proof or persuasion was fundamental to, and inherent in, every legal dispute, a decision-maker was not obliged to highlight such an issue to the parties, or to invite submissions on it. An omission to invite submissions on such an obviously crucial issue could not be a breach of the fair hearing rule: at [63] to [65].

(5) Having regard to the submissions filed in connection with the adjudication, it should have been obvious to the parties that they had diametrically opposing positions regarding the sufficiency of the evidence, and that the adjudicator would need to assess their claims with reference to some standard of persuasion. Thus, the parties had to have realised, or ought to have realised, that the standard of persuasion was an issue of decisive importance. If, despite this, the parties chose not to address the adjudicator on this point, they could not complain of any breach of natural justice: at [64], [66] and [67].

(6) Even assuming there had been a breach of the principles of natural justice, such a breach could not have caused any prejudice to the respondent. The test for prejudice was whether the decision-maker could reasonably have come to a different decision if it were not for the breach of natural justice. In this case, if the adjudicator had invited submissions from the parties on the applicable standard of persuasion, they would have taken the common position that the applicable standard was that of a prima facie case. If the adjudicator had applied the standard of a prima facie case to assess the respondent's asserted entitlement to a set-off, this would have made no difference to the outcome because the tenor of the adjudication determination suggested that he saw no evidential basis for the respondent's position whatsoever: at [69] to [71].

Case(s) referred to

AKN v ALC [2015] 3 SLR 488 (folld)

Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] 2 SLR 532 (folld)

BLC v BLB [2014] 4 SLR 79 (not folld)

Coal & Oil Co LLC v GHCL Ltd [2015] 3 SLR 154 (folld)

Comfort Management Pte Ltd v OGSP Engineering Pte Ltd [2018] 1 SLR 979 (folld)

John Holland Pty Ltd v Toyo Engineering Corp (Japan) [2001] 1 SLR(R) 443; [2001] 2 SLR 262 (refd)

L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125 (folld)

Pacific Recreation Pte Ltd v S Y Technology Inc [2008] 2 SLR(R) 491; [2008] 2 SLR 491 (folld)

R v Paddington and St Marylebone Rent Tribunal; ex parte Bell London & Provincial Properties Ltd [1949] 1 KB 666 (refd)

Royal Bank of Scotland NV, The v TT International Ltd [2015] 5 SLR 1104 (folld)

Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86; [2007] 3 SLR 86 (folld)

TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 (folld)

Vimeira, The [1984] 2 Lloyd's Rep 66 (folld)

Vinod Kumar Ramgopal Didwania v Hauslab Design & Build Pte Ltd [2017] 1 SLR 890 (folld)

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

Facts

The respondent subcontracted to the appellant certain works in connection with the construction of a residential development, including the installation of shower screens in the residential units. After construction was completed and the units were handed over to the subsidiary proprietors, the sliding doors in the shower screens in several units shattered while in use. The respondent took the position that the appellant was responsible for the shattering shower screens and had failed to complete the works in compliance with the subcontract. The appellant denied responsibility and refused to undertake remedial measures unless the respondent accepted that such measures amounted to a variation of the subcontract. The respondent eventually carried out remedial measures at its own cost.

When the appellant served a payment claim on the respondent under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) for outstanding payments due under the subcontract, the respondent resisted the claim on the basis that it was entitled to set off the costs it had incurred in connection with the shattering shower screens against any payments due to the appellant. The matter proceeded to adjudication. During the proceedings, neither party addressed the adjudicator on the standard of persuasion against which he should assess the respondent's asserted entitlement to a set-off. The adjudicator subsequently issued a written adjudication determination in which he allowed the appellant's claim and rejected the respondent's set-off claim on the basis that the latter was not made out “beyond reasonable doubt”.

The respondent applied to have the adjudication determination set aside on the ground that the adjudicator had breached the principles of natural justice by failing to afford the respondent an opportunity to address him on the applicable standard of persuasion. The High Court judge set aside the adjudication determination.

Legislation referred to

Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) s 16(3)(c) (consd);ss 10, 13, 21(1)

Poon Guokun Nicholas (Drew & Napier LLC) for the appellant;

Melvin Chan and Yvonne Mak (TSMP Law Corporation) (instructed) and Ong Lian Min David and Ong Li Min Magdalene (David Ong & Co, Advocates & Solicitors) for the respondent.

22 October 2018

Steven Chong JA (delivering the grounds of decision of the court):

Introduction

1 It was observed in Coal & Oil Co LLC v GHCL Ltd[2015] 3 SLR 154 at [2] that allegations against arbitral tribunals for committing breaches of natural justice are a serious matter. These are accusations against which the arbitrator in question is unable to defend him or herself, and which can have an adverse impact on the arbitrator's standing and reputation. Consequently, courts take a serious view of such challenges and will be careful to examine the substance of the allegation in deciding whether the line has been crossed.

2 The same holds equally true in the context of adjudication under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the Act”). In Bintai Kindenko Pte Ltd v Samsung C&T Corp[2018] 2 SLR 532 at [43], this court recently remarked that the reasoning in AKN v ALC[2015] 3 SLR 488 (“AKN v ALC”) relating to an alleged failure by an arbitrator to consider an important pleaded issue, as well as other case law relating to the audi alteram partem principle in the international commercial arbitration context, are also applicable in the context of assessing challenges for breach of natural justice against an adjudication determination under the Act.

3 The requirement for an adjudicator to comply with the principles of natural justice is statutorily enshrined in s 16(3)(c) of the Act and it is uncontroversial that an adjudication determination may be set...