Hua Rong Engineering Pte Ltd v Civil Tech Pte Ltd

• Jurisdiction: Singapore
• Judge: Tan Siong Thye J
• Judgment Date: 24 July 2017
• Neutral Citation: [2017] SGHC 179
• Date: 24 July 2017
• Docket Number: Originating Summons No 289 of 2017 (Summons No 1555 of 2017)
• Published date: 09 March 2018
• Plaintiff Counsel: Ho Chye Hoon and Fong Wei Li (KEL LLC)
• Defendant Counsel: Tan Tian Luh and Ngo Wei Shing (Wu Weishen) (Chancery Law Corporation)
• Court: High Court (Singapore)
• Hearing Date: 30 May 2017,15 May 2017
• Subject Matter: Sub-contracts,Building and construction law,Statutes and regulations,Claims by sub-contractor

Tan Siong Thye J [delivering the oral judgment of the court]: Introduction

Summons No 1555 of 2017 (“SUM 1555”) is an application to set aside an adjudication determination (“the AD”) made under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOP Act”) by an adjudicator, Mr Chung Khoon Leong John (“the Adjudicator”), on 15 February 2017. SUM 1555 arises in the context of an ongoing application for leave to enforce the AD, vide, Originating Summons No 289 of 2017 (“OS 289”).

The facts

The applicant in OS 289 and the respondent in SUM 1555 is Hua Rong Engineering Pte Ltd (“HRE”). The respondent in OS 289 and the applicant in SUM 1555 is Civil Tech Pte Ltd (“CTP”).

The parties were involved in two construction projects by the Land Transport Authority, the T211 project (the Bright Hill MRT station of the Thomson–East Coast Line) and the C933 project (the Jalan Besar MRT station of the Downtown Line). CTP was a sub-contractor of the main contractor, which is not involved in these proceedings. HRE in turn was a sub-contractor engaged by CTP to supply labour for construction relating to both the T211 project and the C933 project. I shall refer to the contracts between CTP and HRE relating to the two projects as “the T211 contract” and “the C933 contract” respectively.

On 6 December 2016, HRE submitted Daywork Claim No 13 for the amount of $601,873.40. This was for work done in respect of the T211 contract for the period from 1 April to 30 July 2016. CTP accepted this claim and acknowledged this amount as owing to HRE, but in CTP’s Payment Certificate 9 (which the parties accepted as having functioned as a payment response) it certified a negative value, ie, that nothing was due to HRE. This was because CTP alleged that HRE had made false and fraudulent payment claims under the C933 contract when HRE had not in fact performed those works. Thus, as stated in Payment Certificate 9, CTP claimed that it had overpaid HRE in respect of the C933 contract and sought to withhold a sum of $1,468,276.32.

On 11 January 2017, HRE lodged an adjudication application in respect of Daywork Claim No 13 after giving due notice to CTP. The latter in its adjudication response relied on the same grounds (fraud and overpayment in respect of the C933 contract) that it had stated in Payment Certificate 9. CTP argued that the fraud and overpayment in respect of the C933 contract entitled CTP to set off this amount (ie, $1,468,276.32) from the payment claim of $601,873.40 under the T211 contract. The dispute was referred to the Adjudicator, who ruled that CTP could not as a matter of law set off a counterclaim based on another contract. In his view, the SOP Act only allowed him to take into consideration cross-claims, counterclaims and set-offs arising under the same construction contract. Hence, he ruled that CTP had to pay HRE the amount of $601,873.40.

CTP was dissatisfied with the decision of the Adjudicator and filed SUM 1555 which is now before this court.

The issues

The pivotal issue in this summons is whether the Adjudicator was right to confine his deliberation to matters concerning the T211 contract, to the exclusion of the C933 contract. Put more generally, the question is whether, in an adjudication under Part IV of the SOP Act, a respondent is entitled to raise, and an adjudicator is entitled to consider, cross-claims, counterclaims and set-offs which arise outside of the context of the particular contract which is the subject of the payment claim in question. This is essentially a question of jurisdiction, as it concerns whether cross-claims, counterclaims and set-offs of that nature fall within the scope of matters which an adjudicator is empowered to consider and decide in an adjudication application.

In order to address this main question, it is necessary to closely examine two provisions in the SOP Act which are especially germane to this case. The first provision is s 15(3), the relevant portion of which prohibits a respondent from including in an adjudication response, and prohibits an adjudicator from considering, “any reason for withholding any amount, including but not limited to any cross-claim, counterclaim and set-off” unless it was included in the payment response. The other key provision is s 17(3), which lists the matters which the adjudicator “shall only have regard” in the determination of the adjudication application, thereby limiting the scope of matters that the adjudicator can consider.

In addition, other provisions of the SOP Act as well as, in a supplementary role, the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed) (“the SOP Regulations”) provide necessary context for the analysis. In line with the purposive approach to statutory interpretation, I must consider the SOP Act as a whole and from a broader perspective in order to ascertain whether the proposed reading of the aforesaid provisions are congruous with, and accord with, the overall purposes and objectives of the SOP Act.

In addition to the main issue, two other issues are whether the Adjudicator breached s 17(3) of the SOP Act (which sets out the matters which an adjudicator shall consider) and whether CTP’s allegations of fraud and unjust enrichment are made out.

The parties’ submissions

Following the initial round of written submissions and the first oral hearing, I formed the view that further submissions were necessary on issues including the purpose of the SOP Act and the position taken by other jurisdictions in relation to similar legislation. There were a total of three sets of written submissions by HRE, four sets of written submissions by CTP, and two oral hearings before me. I summarise the salient points below.

CTP’s submissions

CTP submits that the plain reading of s 15(3) of the SOP Act permitted the Adjudicator to consider any cross-claim, counterclaim or set-off arising from another contract that was not the subject matter of the payment claim in question, so long as that claim or set-off was included in the payment response. Thus, the Adjudicator should have allowed CTP to set-off CTP’s claim in respect of the C933 Contract against HRE’s claim under the T211 contract.

CTP argues that the references in s 15(3) to “cross-claim” and “counterclaim” indicate that a respondent is entitled to raise a cross-claim or counterclaim arising from another contract. If Parliament had intended to confine the payment response to the same contract, it would not have included the references to “cross-claims” and “counterclaims”, as these suggest that it is permissible for an adjudicator to consider separate and independent claims from a contract or contracts other than the contract which was the subject of the payment claim in question. CTP further contends that if Parliament had intended to limit s 15(3) to cross-claims, counterclaims or set-offs arising from the same contract, clear language along those lines would have been used.

CTP places reliance on s 36(4) of the SOP Act, which provides that nothing in the SOP Act (except for s 36(1), which effectively prohibits contracting out of the SOP Act) shall “limit or otherwise affect the operation of any other law in relation to any right, title, interest, privilege, obligation or liability of a person arising under or by virtue of a contract or an agreement.” CTP further relies on the common law presumption that a statute does not, in the absence of either express wording or a clearly evinced intention, limit the non-statutory (common law and equitable) rights which individuals have. CTP also refers to the similar principle applicable to contractual interpretation, set out in Gilbert-Ash (Norton) Limited v Modern Engineering (Bristol) Limited [1974] AC 689 (“Gilbert-Ash”), that “one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption” (at 717, per Lord Diplock). On these bases, CTP argues that s 15(3) should be read consistently with the rights of cross-claim, counterclaim and set-off arising under the common law and in equity. Accordingly, CTP asserts that it was entitled to raise the alleged fraudulent claims relating to the C933 contract as a cross-claim, counterclaim or set-off against HRE’s payment claim in the T211 contract.

Furthermore, CTP adds that s 17(3)(d) requires an adjudicator to have regard to the payment response. In this case, CTP had explained in the payment response that there were fraudulent claims made by HRE under the C933 contract. This resulted in HRE being enriched to the amount of $1,468,276.32. Hence, CTP was entitled to withhold payment relating to the T211 contract.

CTP buttresses its arguments with a comparison to the approach taken in other jurisdictions in relation to similar legislation: specifically, that in the United Kingdom, the Australian states of New South Wales and Victoria, and New Zealand. CTP’s argument is that with the exception of Victoria (which has an express statutory exclusion of cross-contract cross-claims, counterclaims and set-offs), none of these jurisdictions have interpreted their legislation as excluding cross-contract cross-claims, counterclaims and set-offs.

CTP also raises the policy argument that HRE’s interpretation (which, for convenience, I shall refer to as “the single-contract interpretation”) would adversely affect the standard form contracts used in the building and construction industry.

CTP further submits that the Adjudicator’s refusal to consider the payment response and the adjudication response was not a mere error of law (which would, without more, not be a reason to disturb the AD: see Chow Kok Fong, Security of Payments and Construction Adjudication (LexisNexis, 2nd Ed, 2013) at para 19.37), but one of a type requiring...