Libra Building Construction Pte Ltd v Emergent Engineering Pte Ltd

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JC
• Judgment Date: 27 October 2015
• Neutral Citation: [2015] SGHC 279
• Date: 27 October 2015
• Docket Number: Originating Summons No 311 of 2015
• Published date: 05 November 2015
• Plaintiff Counsel: Lee Hwai Bin, Melanie Chew Yang Nah and Tay Bing Wei (WongPartnership LLP)
• Hearing Date: 20 August 2015,24 June 2015,20 July 2015
• Defendant Counsel: Namazie Mohamed Javad En and Tan Teng Muan (Mallal & Namazie)
• Court: High Court (Singapore)
• Subject Matter: Building and construction law,dispute resolution,alternative dispute resolution procedures

Kannan Ramesh JC: Introduction

The Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the Act”) was enacted to solve a common problem in the construction industry of contractors going unpaid for work done or materials supplied. “A fast and low cost adjudication system to resolve payment disputes” (Singapore Parliamentary Debates, Official Report (16 November 2004) vol 78 at col 1113) was introduced to facilitate efficient recovery of payments, thereby enhancing cash flow which was once described as the lifeblood of the construction industry (see W Y Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 at [18]). It is therefore somewhat ironic that the Act has been bedevilled by litigation which has sought to open up fissures, fault-lines and crevices in its edifice. At first blush, the issues canvassed would appear uncontroversial, settled by the language of the Act. But closer examination leads to a different conclusion. The present application is an apt illustration. It cannot be gainsaid that the proliferation of such litigation is the very antithesis of the raison d’etre of the Act – speedy and cost-efficient recovery of progress payments. The time is perhaps ripe to re-assess the Act, iron out its wrinkles and creases, so that its language and purpose achieve better alignment.

Section 10(1) of the Act states that “[a] claimant may serve one payment claim in respect of a progress payment”. The default position under the Act, pursuant to s 10(2)(b) of the Act read with reg 5(1) of the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed) (”the Regulations”), is that a claimant may serve a payment claim on the respondent at a maximum frequency of once a month, although there is nothing in the Act or the Regulations to stop the claimant from serving its claims less regularly. For the avoidance of doubt, I shall use the phrase “payment claim period” to describe the period that the claimant is permitted under the contract or reg 5(1) (where the contract is silent) to serve a payment claim in respect of a progress payment. It is important to note that this concept of a payment claim period is distinct from the period of work covered by a payment claim, which I will refer to as the “reference period”. It is perfectly possible that the payment claim period and the reference period for any progress payment will not coincide. It is also important to note that the entitlement to progress payment is conceptually different from the payment claim period. The entitlement may accrue on such date or event as the parties may contractually prescribe. It is not uncommon for progress payments to accrue monthly.

It was in this context that I had to decide whether s 10(1) of the Act, read with the other relevant provisions of the Act and the Regulations, means that a claimant is only allowed to serve one payment claim in a payment claim period or whether it means one payment claim per reference period in a payment claim period. Casting the question in another way: does the Act permit a claimant to serve in the same payment claim period multiple payment claims, each for different reference periods? Answering the question affirmatively would have an important implication – it would allow a claimant to “bank” and thereafter serve in the same payment claim period payment claims for different reference periods.

This is the central question in the present application, an application by the Plaintiff to set aside an adjudication determination dated 16 February 2015 (“the Determination”) in favour of the Defendant. The central question was also in the cross-hairs of the dispute before the Adjudicator. The Adjudicator answered the question in the affirmative. I disagreed and set aside the Determination with costs to the Plaintiff on 20 July 2015. My view was founded on a construction of the terms of the contract between the parties, as well as the provisions of the Act and the Regulations. I should add that, after vigorously defending the Adjudicator’s conclusion on the central question, counsel for the Defendant conceded the point when parties appeared before me for further arguments on 20 August 2015.

Other issues were also canvassed before me. I shall address those issues in this judgment as well. Unless otherwise indicated, references to sections, regulations and clauses in this judgment shall be references to sections in the Act, regulations in the Regulations and clauses in the contract between the parties, respectively.

Background facts

It is helpful to recount the material background facts as they are important to understanding how the central question arose. By a contract contained in a Letter of Acceptance dated 4 September 2014 (“the Contract”), the Defendant was awarded the sub-contract for the supply of labour, materials, plant and equipment for the civil and structural works, and wet trade finishes for a project at Singapore Polytechnic (“the Project”). The contract sum was $385,030.

Unfortunately the relationship between the Plaintiff and the Defendant simmered with antagonism from the outset, rapidly becoming fractious and unhealthy. Allegations of poor workmanship and delays festered open and deep wounds of discontent. The acrimony culminated in the Plaintiff alleging that the Defendant had repudiated the Contract by abandoning the Project on or about 30 December 2014. Unsurprisingly, the Defendant challenged the allegation with force.

Three payment claims issued by the Defendant were at the heart of the present application – Payment Claim 3 dated 5 December 2014 (“PC3”), Payment Claim 3 (revised) dated 26 December 2014 (“PC3R”), and Payment Claim 4 dated 31 December 2014 (“PC4”). It was common ground that PC3R was issued to replace PC3. This was done at the behest of the Plaintiff who had insisted on compliance with a certain format for payment claims. PC3 and PC3R were for work done up to end November 2014, and PC4 was for work done up to end December 2014. They therefore covered different reference periods. Adjudication Application No SOP AA029 of 2015 (“the Application”) was eventually presented on PC4 for reasons which will become evident as we navigate the facts further.

The circumstances surrounding the issuance of PC4 were a matter of significant controversy. They form the pith and marrow of the Defendant’s further arguments. I will come to those arguments later. Returning to the facts, in substance, the Defendant alleged that the practice between the parties was for payment claims to be issued on any day in the month following completion of the work. This was evidenced by Payment Claim 1 dated 7 October 2014 for work in September 2014, Payment Claim 2 dated 7 November 2014 for work in October 2014, and PC3 for work in November 2014. However, in December 2014, following the issuance of PC3R, the Plaintiff’s new general manager allegedly notified the Defendant’s general manager Mr Yeow Ngui Siong (“Mr Yeow”) that the Contract required all payment claims to be served not by but on the 30th of the month.

Mr Yeow alleged that he understood the Plaintiff’s general manager as saying that PC3R was invalid because it had been submitted on 26 December 2014 instead of 30 December 2014. This prompted the Defendant to issue PC4 on 30 December 2014. Two points must be made here. First, the Defendant did not withdraw PC3R when it issued PC4. In fact, the Defendant’s unequivocal position before the Adjudicator and me was that PC3R was valid and remained in force at all times. This failure, as I will explain later, proved to be the Defendant’s undoing on the central question. Secondly, PC4 covered a different reference period from PC3R – it was for work up to December 2014 whilst the latter, as mentioned earlier, was for work up to November 2014. This was the bedrock of the Adjudicator’s conclusion that PC3R and PC4 were both valid payment claims.

The Plaintiff denied the circumstances surrounding the issuance of PC4 as painted by the Defendant. In the main, it was unnecessary for me to decide the controversy as the turning point in my view was the Defendant’s failure to withdraw PC3R when issuing PC4. The subsequent events were, however, relevant to the Defendant’s further arguments – the Defendant raised the issue of approbation and reprobation there. I will now sketch the subsequent events.

On 6 January 2015, the Plaintiff issued Payment Response 3 to PC3R. The Plaintiff asserted therein that PC3R was invalid and/or served out of time. However, the Plaintiff did not stop there. The Plaintiff went on to deal substantively with the merits of the claim in PC3R. On 9 January 2015, the Defendant addressed Payment Response 3 in what appears to be a response under s 12(4)(a). There was also a general denial that PC3R was invalid. Payment Response 3 was replaced by Payment Response 3R on 13 January 2015, in which the Plaintiff re-emphasised the invalidity of PC3R.

On 9 January 2015, by way of a letter of the same date, the Plaintiff responded to PC4 (“the 9 January letter”). No effort was made in the 9 January letter to address the merits of the claim, unlike Payment Response 3. Instead, a jurisdictional challenge was mounted on the basis that the Contract did not permit the Defendant to serve two or more payment claims in the same payment claim period. PC4 was therefore alleged to be invalid as it was served second in time to PC3R in the same payment claim period, ie, the payment claim period for the December 2014 progress payment.

Accordingly, as at 13 January 2015, the Defendant was faced with a challenge to the validity of both PC3R and PC4, albeit on different grounds. The Defendant resolved, or so it thought, the problem by electing to rely on PC4. On 16 January 2015, the Defendant wrote to the Plaintiff to assert that: (a) PC4 was served on 30 December 2014 because of the alleged...