Range Construction Pte Ltd v Goldbell Engineering Pte Ltd

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JCA
• Judgment Date: 09 April 2021
• Neutral Citation: [2021] SGCA 34
• Published date: 14 April 2021
• Docket Number: Civil Appeal No 91 of 2020
• Year: 2021
• Hearing Date: 22 January 2021
• Plaintiff Counsel: Tan Chee Meng SC, Choo Poh Hua Josephine, Chin Yan Xun and Samuel Navindran (WongPartnership LLP)
• Citation: [2021] SGCA 34
• Defendant Counsel: Chong Chi Chuin Christopher, Teo Wei Xian Kelvin and Chester Su Yong Meng (Drew & Napier LLC)
• Court: Court of Appeal (Singapore)
• Subject Matter: Building and Construction Industry Security of Payment Act,Building and Construction Law,Set-off,Statutes and regulations,Damages,Liquidated damages

Steven Chong JCA (delivering the judgment of the court): Introduction

The Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOPA”) was enacted in 2004 to facilitate cash flow by establishing a fast and low cost adjudication system to resolve payment disputes in the construction industry (see Singapore Parliamentary Debates, Official Report (16 November 2004), vol 78 at col 1113 (Cedric Foo Chee Keng, Minister of State for National Development)). Since then, it has served the industry well by allowing payment disputes to be resolved effectively and efficiently. From time to time, however, disputes over the scope of the SOPA surface. The present appeal concerns such a dispute. The central question in this appeal is whether the SOPA regime, prior to the 2019 amendments, permits set-offs by an employer for liquidated damages. The appellant, Range Construction Pte Ltd (“Range”), argues that it does not.

The backdrop to this appeal is that Range, the contractor for a construction project, had lodged an adjudication application (“AA8”) against its employer, Goldbell Engineering Pte Ltd (“Goldbell”). An adjudication determination (“AD”) was subsequently issued, and Range applied to set aside part of the AD in the proceedings below. Amongst other things, Range alleged that the adjudicator (“the Adjudicator”) had acted in excess of his jurisdiction and in breach of natural justice in finding that Goldbell was entitled to set off liquidated damages against the sums due to Range under Range’s payment claim. The High Court judge (“the Judge”) heard and dismissed Range’s application in Range Construction Pte Ltd v Goldbell Engineering Pte Ltd [2020] SGHC 191 (“the Judgment”).

In this appeal, Range maintains that the Adjudicator had no jurisdiction to determine Goldbell’s claim to set off liquidated damages against Range’s payment claim. According to Range, the SOPA only confers upon an adjudicator the jurisdiction to value construction work done; liquidated damages, on the other hand, are damages for breach of contract and thus fall outside an adjudicator’s jurisdiction. Range also alleges that the Adjudicator breached the rules of natural justice in arriving at certain conclusions in the AD.

This appears to be the first case since the SOPA’s enactment in which an employer’s right to set off its claim for liquidated damages against a contractor’s payment claim has been disputed. Needless to say, this court’s decision on whether the Adjudicator had properly acted within his jurisdiction in determining Goldbell’s entitlement to liquidated damages will be of importance to employers across the construction industry, who not infrequently have to grapple with delays in completion. We first set out the factual background to this appeal as well as the Judge’s decision below.

Background facts

Pursuant to a letter of award dated 19 April 2017 (“the Contract”), Range was appointed as Goldbell’s contractor for the design and erection of a six-storey single-user workshop with an ancillary office (“the Project”). The Contract incorporated the Real Estate Developers’ Association of Singapore Design and Build Conditions of Main Contract (3rd Ed, July 2013) (“the Conditions”). Clause 19 of the Conditions provided for the payment of liquidated damages in the event that the Contractor (ie, Range) failed to complete the Project on time. In particular, cl 19.1 (read with Appendix 1) set out the rate at which liquidated damages would be payable while cl 19.2 stipulated that the Employer (ie, Goldbell) could deduct the amount of liquidated damages payable from any moneys due, or to become due, to the Contractor (ie, Range) under the Contract.

The contractual completion date was originally 31 August 2018 but was subsequently extended to 7 September 2018. The Temporary Occupation Permit (“TOP”) was granted on 2 October 2018.

On 2 December 2019, Range served a payment claim (“PC 28”) on Goldbell. Goldbell submitted its payment response (“PR 1”) on 20 December 2019. Thereafter, Range lodged AA8 and submitted claims totalling $2,445,225.58. The Adjudicator issued the AD and awarded Range $205,647.43, which sum was arrived at after deducting $852,000 in liquidated damages that he found to be payable by Range to Goldbell.

Per cl 19.1 of the Conditions, if Range failed to complete the Project by the extended contractual date of completion (ie, 7 September 2018), liquidated damages of $12,000 per day would be payable by Range to Goldbell for each day that elapsed between the extended contractual date of completion and the date of issuance of the Handing Over Certificate (“HOC”). The HOC was therefore critical in determining the amount of liquidated damages payable by Range to Goldbell. Goldbell had not issued the HOC at the time of the adjudication proceedings and has still not issued the HOC to date.

The Adjudicator found that Goldbell ought to have issued the HOC by the time of the adjudication proceedings. However, as it was common ground between the parties that he was not required to find the exact date of completion of the Project or the exact date when the Project could be considered as having been handed over, he made no finding as to when the HOC ought to have been issued. The Adjudicator also found that, since the issuance of the HOC was not a pre-condition for awarding liquidated damages, Goldbell was entitled to liquidated damages notwithstanding its failure to issue the HOC.

The Adjudicator then had to quantify the liquidated damages payable by Range to Goldbell. He relied on an e-mail dated 17 November 2018 (“the 17 November e-mail”) in which Range’s managing director had stated that “L3, L5 and Roof are ongoing and will be completed next week”. The Adjudicator understood this e-mail to mean that, as of 17 November 2018, Range had not completed the Project and thus remained liable for liquidated damages. He therefore found Range to be liable for liquidated damages for the period from 8 September 2018 (ie, the day after the extended contractual completion date) to 17 November 2018. While the Adjudicator also made various findings on Range’s claim for variation works, it is unnecessary for us to address those findings for the purposes of this appeal.

The proceedings below

By way of HC/OS 382/2020, Range applied to set aside the parts of the AD pertaining to: (a) the award of $852,000 in liquidated damages to Goldbell; and (b) the valuation of the net variation claim. This appeal only concerns the award of liquidated damages to Goldbell. As Range’s arguments in the present appeal are substantially similar to those that were raised in the proceedings below, we set them out in some detail below.

Range made four main arguments in support of its setting-aside application. First, Range contended that the Adjudicator had acted in excess of his jurisdiction as he had no jurisdiction to award or to take into account liquidated damages. According to Range, the SOPA only allows claims for loss and expense where they relate to the value of construction work done. Liquidated damages, however, are damages for breach of contract, rather than payments for construction work done. Range further argued that the Adjudicator had exceeded his jurisdiction in designating 17 November 2018 as the completion date, since the parties had expressly agreed that he was not required to make any findings on the completion date.

Second, Range submitted that the Adjudicator had breached the fair hearing rule. By awarding Goldbell liquidated damages up till 17 November 2018, the Adjudicator had effectively identified 17 November 2018 as the completion date, despite the parties’ explicit instructions to the contrary and without affording them the opportunity to address that issue.

Third, Range argued that the Adjudicator had breached the rules of natural justice by failing to consider its submission that the date on which TOP was issued (ie, 2 October 2018) was the date by which Goldbell ought to have issued the HOC. In other words, the issuance of TOP was said to be determinative of completion, Range’s entitlement to the HOC and, accordingly, Goldbell’s entitlement to liquidated damages.

Finally, Range submitted that the Adjudicator had erroneously interpreted the 17 November e-mail as he had failed to consider several important pieces of evidence. According to Range, documents such as an e-mail dated 2 November 2018 and a presentation dated 8 November 2018, which had been placed before the Adjudicator, showed that the outstanding works referred to in the 17 November e-mail were simply minor outstanding works that could not have justified Goldbell’s withholding of the HOC.

The decision below

The Judge dismissed Range’s setting-aside application. First, the Judge held (at [13]–[15] of the Judgment) that the Adjudicator had not acted in excess of his jurisdiction by considering Goldbell’s claim for liquidated damages. Although payment claims could only be made in respect of construction work done (and not for compensatory damages for contractual breaches), this was beside the point since liquidated damages were never meant to be part of a contractor’s payment claim. Instead, liquidated damages were claimed by employers in their payment responses. Under s 17(3)(d) of the SOPA, the Adjudicator’s jurisdiction to consider liquidated damages was derived from the fact that such damages were listed in PR 1.

The Judge highlighted that cl 19 of the Contract expressly provided for liquidated damages. He also referred to the New South Wales (“NSW”) case of Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd and others [2005] NSWCA 228, which held (at [40]) that “any requirement … that the progress payment must be for construction work carried out or for related goods and services supplied should not be given a narrow construction or effect”. In addition, s 6(a) of...