Linkforce Pte Ltd v Kajima Overseas Asia Pte Ltd

• Jurisdiction: Singapore
• Judge: Foo Chee Hock JC
• Judgment Date: 13 March 2017
• Neutral Citation: [2017] SGHC 46
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 947 of 2016 (Summons No 4806 of 2016)
• Year: 2017
• Published date: 29 December 2017
• Hearing Date: 31 October 2016,04 November 2016,16 January 2017
• Plaintiff Counsel: Joseph Lopez, Intan Krishanty Wirayadi and Chong Li Tang (Joseph Lopez LLP)
• Defendant Counsel: Ng Kim Beng and Zhuang WenXiong (Rajah & Tann Singapore LLP)
• Subject Matter: Building and construction law,Dispute resolution,Adjudication,Setting aside
• Citation: [2017] SGHC 46

Foo Chee Hock JC: Background

Under a subcontract dated 1 November 2012 (“the Sub-contract”), Kajima Overseas Asia Pte Ltd (“Kajima”) appointed Linkforce Pte Ltd (“Linkforce”) to carry out works in relation to the “complete design, supply, installation, testing, commission and maintenance of a fire protection installation”.¹ These works were pursuant to a main contract between Kajima and Mediacorp Pte Ltd for a project entitled, “Proposed Erection of 12 Storey Media Complex Comprising of) [sic] 3 Basements, Theatre, Studios, Retails and other Media Facilities at Mediapolis @ One North”.²

A dispute between the parties eventually arose. Linkforce served a payment claim (“PC”) on 3 June 2016 (“PC 33”) and alleged that Kajima failed to provide a timely payment response. This sparked off a chain of events which ultimately led to an adjudication determination dated 5 September 2016 (“AD”) by Mr Seah Choo Meng (“the Adjudicator”) under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”). The Adjudicator awarded a sum of $893,751.86 and costs of $22,470 to Linkforce.³

Linkforce subsequently sought the payment of the sums from Kajima. However, Kajima did not comply with Linkforce’s request.⁴ On 19 September 2016, Linkforce filed Originating Summons No 947 of 2016 and obtained an Order of Court to enforce the AD against Kajima. On 3 October 2016, Kajima filed the present application (ie, Summons No 4806 of 2016) to set aside both the Order of Court and the AD. In the event, I granted Kajima’s application on 16 January 2017, and Linkforce has now appealed against my decision.

Material facts

As alluded to above, the present dispute could be traced back to 3 June 2016 when Linkforce served PC 33 on Kajima for the sum of $1,198,978.14, representing work done up to 31 May 2016.⁵ According to Linkforce, Kajima had to provide a payment response by 24 June 2016 by virtue of clause 27(b) of the Sub-contract, which stipulated that a payment response was to be provided within 21 days of the PC being served.⁶ However, Kajima did not provide a payment response by that date.⁷ This prompted Linkforce to notify Kajima on 7 July 2016 of its intention to apply for adjudication.⁸ A day later, on 8 July 2016, Linkforce lodged an adjudication application (“AA”).⁹

On 18 July 2016, Kajima lodged an adjudication response.¹⁰ Therein, Kajima raised an objection to Linkforce’s AA on the basis that it was lodged prematurely.¹¹ Highlighting clauses 32(b) and 27(a) of the Sub-contract, Kajima averred that PC 33 was served before the contractually stipulated deadline, which was stated to be the last day of each month. Therefore, PC 33 should only have been served on 30 June 2016 instead of 3 June 2016.¹² Accordingly, a payment response from Kajima was not due on 24 June 2016.¹³

The salient parts of the clauses were as follows:

Clause 32(b) ¹⁴

The Sub-Contractor shall be entitled to serve a payment claim as defined in Section 10 of the Act on the date for submission of applications for interim payment as set out in Clause 27 of this Sub-Contract.

Clause 27(a) ¹⁵

The Sub-Contractor shall make application for interim payment on the last day of each month (and if that falls on a Sunday or public holiday, on the next business day) of the amount which at the date thereof fairly represents the total value of the Sub-Contract Works completed and of any variations authorized and executed, and of materials and goods delivered upon the site for use in the Sub-Contract Works.

[emphasis added]

Based on the above clauses and also on clause 32(e), Kajima argued that it had until 21 July 2016 (ie, 21 days after 30 June 2016) to provide a payment response, and that the AA was consequently premature.¹⁶ On this basis, Kajima eventually provided a payment response to Linkforce on 20 July 2016.¹⁷

To answer this point, Linkforce drew the Adjudicator’s attention to an e-mail dated 25 August 2014 that was sent by Kajima’s project manager (“the E-mail”). The E-mail, which Linkforce adduced for the first time via its supplementary claim submissions for the adjudication proceedings,¹⁸ stated as follows: ¹⁹

Dear All Contractor

From next your progress claim (You need to submit to us by 5th Oct 2014), you need attach supporting documentation as below:-

1. A3 size floor plan (Your shop drawing) with highlight by colour which installed and tally with your claim 2. Equipment table (floor by floor) with mention [sp] total quantity and installed

Any luck [sp] of above document from next claim, we don’t accept your claim

(Some of contractor submitted previously)

Regards

Matsushita (KAJIMA)

Relying on the E-mail, Linkforce argued that Kajima had “clearly waived and varied the requirement that payment claims were to be submitted on the last day of the month.”²⁰ It submitted that the effect of such waiver and variation was that all PCs were to be served by the fifth day of each month.²¹ Therefore, it followed that the AA was not lodged prematurely.

The Adjudicator agreed with Linkforce. He found that the AA was lodged on time and dismissed Kajima’s jurisdictional objection.²² In the Adjudicator’s opinion, there was waiver or variation of the Sub-contract based on the E-mail such that the deadline for the service of PCs was the fifth day of each month.²³ He held that this conclusion was fortified by the fact that PCs prior to PC 33 were “mostly either dated or served after the last day of the month or by the 5th of the following month”.²⁴

The Adjudicator’s finding that the AA was not premature led not only to his conclusion that he had jurisdiction to make a determination, but also to his decision that he was precluded by s 15(3)(a) of SOPA from considering Kajima’s payment response that was provided on 20 July 2016.²⁵ This meant that the Adjudicator did not consider Kajima’s counterclaim in the form of backcharges for works that Linkforce allegedly did not complete.²⁶

Present proceedings

In support of its present application to set aside the AD and Order of Court dated 19 September 2016, Kajima raised three main arguments: The AA was lodged prematurely on 8 July 2016, thereby breaching s 13(3)(a) of SOPA and invalidating the AD. The Adjudicator had erred in finding that there was estoppel, variation or waiver that had the effect of altering the contractually stipulated deadline for the service of PCs; PC 33 should only have been served on 30 June 2016. Kajima thus had until 21 July 2016 to provide a payment response, and pursuant to s 12(5) of SOPA, the dispute settlement period would have ended on 28 July 2016. Linkforce was entitled to lodge the AA only after 28 July 2016 and therefore the AD was invalid.²⁷ Linkforce should not have been entitled to rely on the E-mail during the adjudication conference because the E-mail was not attached to the AA. This contravened s 13(3)(c) of SOPA read with reg 7(2)(d) of the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed).²⁸ The Adjudicator’s decision not to consider Kajima’s payment response (provided on 20 July 2016) and Linkforce’s belated adduction of the E-mail led to a violation of natural justice. This was a breach of the Adjudicator’s duties under s 16(3)(c) of SOPA.²⁹

After considering the facts and parties’ arguments, it became clear that the matter could be disposed of on the threshold issue of whether the AA was lodged prematurely and consequently whether the AD should be set aside. This would also involve examining whether the Adjudicator had erred in his decision on the effect of the E-mail and the parties’ conduct on the stipulated deadline for the service of PCs under the Sub-contract.

With regard to the issue of whether the AA was premature, Linkforce unsurprisingly defended the Adjudicator’s decision. It submitted that the contractual deadline for the service of PCs had been varied from the last day of each month (to the fifth day).³⁰ Further, relying on the E-mail and a number of PCs that were served prior to PC 33, Linkforce contended that Kajima had waived its right to insist that PCs were to be served on the last day of each month.³¹ In the alternative, Linkforce averred that Kajima was estopped by its representation from insisting on the same.³²

My decision Section 13(3)(a) of SOPA

The test for setting aside an adjudication determination was well established, as set out in the following passage from Lee Wee Lick Terence v Chua Say Eng [2013] 1 SLR 401 at [67]:

Even if there is a payment claim and service of that payment claim, the court may still set aside the adjudication determination on the ground that the claimant, in the course of making an adjudication application, has not complied with one (or more) of the provisions under the Act which is so important that it is the legislative purpose that an act done in breach of the provision should be invalid, whether it is labelled as an essential condition or a mandatory condition. A breach of such a provision would result in the adjudication determination being invalid.

[emphasis in original]

The question, therefore, was whether s 13(3)(a) of SOPA was such a provision, the breach of which would invalidate the AD. The answer was undoubtedly in the affirmative. This also assured me of the propriety of examining the merits of the Adjudicator’s decision: see UES Holdings Pte Ltd v Grouteam Pte Ltd [2016] 1 SLR 312 (“Grouteam (HC)”) at [40]. A fortiori when there could be a breach of natural justice caused by the wrongful exclusion of Kajima’s payment response from the Adjudicator’s consideration because of the premature AA (see [9] above).

Returning to s 13(3)(a) of SOPA, it had been held on multiple occasions that an out-of-time adjudication application would invalidate an adjudication determination because the timelines under SOPA were to be strictly followed: see eg, ...