Metropole Pte Ltd v Designshop Pte Ltd

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 07 March 2017
• Neutral Citation: [2017] SGHC 45
• Plaintiff Counsel: Tan Tian Luh and Tan Xian Ying (Chancery Law Corporation)
• Docket Number: Originating Summons No 384 of 2016
• Date: 07 March 2017
• Hearing Date: 07 July 2016
• Subject Matter: Terms,Statutes and regulations,Building and Construction Law,Building and Construction Industry Security of Payment Act
• Published date: 29 December 2017
• Defendant Counsel: Samuel Chacko and Christopher Yeo (Legis Point LLC)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 45
• Year: 2017

Vinodh Coomaraswamy J: Introduction

This is an application by Metropole Private Limited (“Metropole”) to set aside an adjudication determination dated 1 April 2016 on a number of grounds.¹ The respondent is Designshop Pte Ltd (“DPL”).

I have rejected each of Metropole’s grounds and dismissed the application. Metropole has appealed to the Court of Appeal. I therefore now give my reasons.

Background facts The parties’ contract

In June 2009, Metropole engaged Designshop.Architects LLP (“the LLP”) to provide architectural services in relation to a project to carry out additions and alternations to seven shophouses at Sims Avenue.² Mr Lim Hong Kian (“Lim”), Ms Joy Chew Chia Pow (“Chew”) and Ms Yeo Pei Shan were partners of the LLP.

Metropole and the LLP contracted on the terms set out in the Singapore Institute of Architects’ standard form Conditions of Appointment and Architects Services and Mode of Payment (“the SIA terms”).³ Lim was the “qualified person” designated for the project for the purposes of the Building Control Act (Cap 29, 1999 Rev Ed) (“the BCA”). He was also the architect in charge of and responsible for the project.⁴

The parties’ contract divided the work which the LLP was to undertake in the project into stages identified by letters of the alphabet. The contract also stipulated the fee for each stage, expressed as a percentage of the fees for basic services, or the “Construction Cost”. Clause 2.3(3) of the parties’ contract – identical to cl 2.3(3) of the SIA terms⁵ – obliged Metropole, upon termination of the contract, to pay the LLP a minimum of two-thirds of the fee for a particular stage of work if the LLP had carried out any work at all for that stage, even in part.⁶ To be precise, the clause provides that even if DPL renders only partial services for a particular stage, DPL shall nonetheless be “entitled to charge commensurate with the service provided but not less than two-third (2/3) of the fee for the incomplete stage”.⁷

In January 2012, the three partners of the LLP decided to incorporate their architectural practice using DPL as the corporate vehicle. They applied to and obtained the necessary approval from the Board of Architects. DPL then took over the performance of all ongoing projects handled by the LLP, including Metropole’s project.⁸ Lim remained the designated “qualified person” and the architect in charge of and responsible for the project.

In January 2016, Lim left DPL.⁹ It was not an amicable parting. The day after Lim left DPL, Metropole instructed DPL in writing that DPL was not to take any further steps or actions or incur any further costs or disbursements for the project. It also gave notice to DPL on 11 February 2016 terminating the parties’ contract.¹⁰

The payment claim

On 17 February 2016, DPL issued and served on Metropole a payment claim in the sum of $453,948.43.¹¹ The payment claim set out a breakdown of this sum. The sum included fees for the stages of work which DPL believed were completed (ie, stages A to D and I to K) and disbursements which DPL had incurred on Metropole’s behalf such as lithography charges incurred in the tender exercise.¹² The sum also included DPL’s claim for fees under cl 2.3(3) (see [5] above) for certain stages of work which were not complete (ie, stages E to H and M to N).¹³ The fee claimed for each of these stages was calculated by reference to a contract sum of $7,116,500 being the “Construction cost based on the lowest tender”.

On 24 February 2016, Metropole served on DPL its payment response.¹⁴ In it, Metropole disputed DPL’s claim of $453,948.43 and, in particular, disputed DPL’s entitlement to rely on cl 2.3(3). Metropole’s position was that that clause entitled DPL to two-thirds of the fee for a particular stage only if DPL had rendered some services for that stage, but not if DPL had rendered no services at all for that stage.¹⁵ The payment response nevertheless acknowledged that DPL was entitled to the following:¹⁶ A sum of $187,891.41 due under unpaid invoices issued by DPL for work carried out under the contract; A sum of $3,291.18, being the late interest charges payable on unpaid invoices; A sum of $14,655.00 for lithography charges, being disbursements incurred by DPL and not yet invoiced; and Two-thirds of the fees stipulated for stages F and G of the parties’ contract, given that DPL had rendered some services for those stages.

The payment response also asserted Metropole’s belief that it had contracted personally with Lim and not with DPL.¹⁷ It noted that Lim left DPL in January 2016 and stated that the contract was then only at the stage of tender evaluation.¹⁸ It added that “[n]o tender [had] been awarded to any contractors, no submission [had] been made yet for Building Plan clearance and it [had] not reached [the] stage for Building Plan approval submission.”¹⁹

On 3 March 2016, DPL responded by letter to Metropole’s payment response and set out its position on the issues raised.²⁰ DPL claimed inter alia that Metropole was aware that DPL had taken over performance of the parties’ contract from the LLP and had consented to it by conduct.²¹ DPL stated that a new qualified person was designated and that it had informed Metropole of this in an email dated 8 January 2016.²² DPL also listed the additional services it had rendered and claimed that it was entitled to additional fees for those services.²³

Metropole did not respond to DPL’s letter dated 3 March 2016.

On 7 March 2016, DPL gave notice to Metropole under s 12(2) of the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the Act”). The notice claimed a reduced sum of $262,765.85.²⁴ The reduction had come about because Metropole had, after receiving DPL’s payment claim, paid DPL $191,182.59.²⁵

The adjudication

On 9 March 2016, DPL made its adjudication application.²⁶

On 17 March 2016, Metropole lodged its adjudication response. The issues which the adjudication response raised included the following: Metropole entered into a contract with Lim, not with the LLP or with DPL. The relationship between Metropole and DPL was therefore not governed by the contract and the contract therefore did not apply to the works carried out by DPL for the project;²⁷ Even if there was a contract between Metropole and DPL, there was no written contract as required by to s 4 of the Act. DPL was therefore not entitled to make an adjudication application;²⁸ The payment claim was invalid because it did not comply with s 10(3)(b) of the Act and reg 5(2)(c) of the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed) (“the Regulations”). DPL had failed to provide sufficient detail to provide a reasoned basis for its claim and the merits of the claim were not evident from the payment claim;²⁹ and DPL had adduced and was seeking to rely on fraudulent documents to support its claims. The fraudulent documents were created by Chew or on her instructions. Metropole also attached a statutory declaration filed by Lim and police reports made by Lim and Tan May Hua Linda (“Linda Tan”), who is a director of Metropole.³⁰

An adjudication conference took place on 29 March 2016. The parties presented their cases to the adjudicator.³¹ He issued his determination on 1 April 2016.³² The determination may be summarised as follows: He allowed DPL’s claims for lithography charges. Metropole did not dispute this claim in its payment response and was therefore barred by s 15(3) of the Act from now advancing on any reasons for withholding payment of this claim.³³ Quite apart from that, he also found on the merits that DPL was entitled to recover this disbursement.³⁴ He allowed DPL’s claims for stages F and G of the contract. Again, Metropole did not dispute these claims in the payment response and was therefore subject to the s 15(3) bar.³⁵ Quite apart from that, DPL was entitled to not less than two-thirds of the stipulated fee that would have been payable if the incomplete stage of work had been completed pursuant to cl 2.3(3) of the contract.³⁶ He allowed DPL’s claims for stages E and H of the contract. DPL had commenced but not completed work on these stages. It was therefore entitled to not less than two-thirds of the stipulated fee due for these stages pursuant to cl 2.3(3).³⁷ He denied DPL’s claims for two-thirds of the stipulated fee for stages L, M, and N. He found that DPL had not commenced any work on these three stages at all. Clause 2.3(3) did not allow DPL to make a blanket claim for two-thirds of the stipulated fee for every stage in the contract, irrespective of whether any work had commenced.³⁸

On 15 April 2016, Metropole applied to set aside the adjudication determination.³⁹

The events of 31 March 2016

I move back in the chronology to examine the events of 31 March 2016, as they are of particular importance. This date was two days after the adjudication conference and one day before the adjudicator was obliged to issue his determination.

At about 10.20am on 31 March 2016, the adjudicator telephoned DPL’s solicitors to ask two questions.⁴⁰ First, the adjudicator asked whether DPL had issued a second tender evaluation report. Second, the adjudicator asked how DPL had derived the “Construction Cost” of $7,116,500 as stated in the payment claim, if there was no second tender evaluation report. He asked DPL to respond to the two questions by email copied to Metropole.

The cause of the adjudicator’s confusion was that the first tender evaluation report indicated that the lowest quotation then available,⁴¹ submitted by Poplar Construction Pte Ltd (“Poplar”), was for a sum of $7,318,000,⁴² and not for the sum of $7,116,500 which had been common ground between the parties in the adjudication.

DPL’s solicitors set out and answered the adjudicator’s two questions by an email sent to the adjudicator at 12.36 pm the same day,...