SEF Construction Pte Ltd v Skoy Connected Pte Ltd

• Judge: Judith Prakash J
• Judgment Date: 17 November 2009
• Neutral Citation: [2009] SGHC 257
• Citation: [2009] SGHC 257
• Defendant Counsel: Christopher Chuah and Emily Su (WongPartnership LLP)
• Published date: 03 December 2009
• Plaintiff Counsel: Edwin Lee and Deborah Ho (Rajah & Tann LLP)
• Date: 17 November 2009
• Docket Number: Originating Summons No 20 of 2009 (Registrar's Appeal Subordinate Courts No 29 of
• Court: High Court (Singapore)
• Subject Matter: Building and Construction Law

17 November 2009

Judith Prakash J:

Introduction

1 This registrar’s appeal poses the interesting question of what exactly the court’s powers are under s 27 of the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOP Act”). Under s 27(5) of the SOP Act, a party to an adjudication may commence proceedings to set aside the adjudication determination or the judgment entered in terms of the adjudication determination, provided that that party pays into court the unpaid portion of the adjudicated amount that he is required to pay. In this judgment, I will set out my views on how the court should approach applications of this nature.

2 This matter comes before me as an appeal against a decision of a district judge. The plaintiff, SEF Construction Pte Ltd (“SEF”), was the respondent in adjudication application, SOP/AA 74 of 2008 (“Adjudication 74”), in which the defendant, Skoy Connected Pte Ltd (“Skoy”), was the claimant. The adjudicator issued an adjudication determination dated 19 December 2008 (“the Adjudication Determination”) whereby he determined that SEF must pay Skoy an amount of $185,167.58 (“the Adjudicated Amount”). SEF was not satisfied with this result and on 16 January 2009, it applied by way of an originating summons in the District Court for the Adjudication Determination to be set aside. SEF’s present appeal to the High Court arises from the failure of that application.

The Adjudication

3 The parties were at the material time involved in a building project comprising the construction of 19 three-storey houses at Pasir Panjang Road (“the project”). SEF was the main contractor for the project and it engaged Skoy as its subcontractor to carry out the supply and installation of aluminium and glass works for the project. During the course of the project, disputes arose between the parties in relation to payment.

4 On 5 November 2008, Skoy sent SEF its Payment Claim No 4 dated 31 October 2008 for the sum of $250,344.45 (“the Payment Claim”). On 20 November 2008, Skoy served a Notice of Intention to Apply for Adjudication on SEF. On 26 November 2008, it lodged an adjudication application with the Singapore Mediation Centre (“SMC”) pursuant to s 13 of the SOP Act. In the adjudication application, the amount claimed was $214,382.20. At 5pm on 5 December 2008, SEF lodged its Adjudication Response with the SMC.

5 The SMC appointed Mr Latiff Ibrahim (“the Adjudicator”) as the adjudicator in respect of Adjudication 74. The Adjudicator directed the parties to submit their written submissions on 15 December 2008 and their reply submissions on 16 December 2008. There was no oral hearing thereafter. Instead, he issued the Adjudication Determination and it was served on the parties on 22 December 2008.

6 In the Adjudication Determination, the Adjudicator, as required by the SOP Act, gave reasons for his decision. He noted that the parties’ positions were as follows:

(a) Skoy’s claim was that it had carried out work to the value of $214,382.20 (including GST) for the period from November 2007 to October 2008 for which it had not been paid by SEF. It rejected SEF’s Payment Certificate dated 13 November 2008 as not constituting a Payment Response and further alleged that the Adjudication Response was lodged late and should be rejected by the Adjudicator;

(b) SEF alleged that its Payment Certificate was a valid Payment Response which it had attempted to hand over to Skoy on 14 November 2008 but the same had been refused by Skoy. As to the lodging of the Adjudication Response, SEF’s position was that nothing turned on the alleged lateness of the filing;

(c) SEF contended that the Adjudication Application was invalid on four grounds namely:

(1) it was filed prematurely;

(2) the reference period of the claimed amount stated in the Adjudication Application was not within the jurisdiction of the SOP Act;

(3) the Adjudication Application failed to attach relevant documents which were essential and required under s 15 [the reference to s 15 was an error in the Adjudication Determination as the correct section is actually s 13] of the SOP Act; and

(4) the claimed amount in the Adjudication Application was inconsistent with and exceeded the amount stated in the Payment Claim.

7 The Adjudicator then went on to consider various points raised by the parties. The first point related to the Payment Response. The Adjudicator found that even if SEF’s Payment Certificate dated 13 November 2008 were to constitute a valid Payment Response (as to which he made no determination), the manner in which SEF had attempted to serve it on Skoy was not proper and not in accordance with the requirements of the SOP Act and therefore he determined that no Payment Response was served on Skoy at all.

8 Next, dealing with the Adjudication Response, the Adjudicator found that although SEF purported to lodge the document on 5 December 2008, it had not complied with Rule 2.2 of the SMC Adjudication Procedure Rules which provided that documents to be lodged with the SMC had to be lodged “during the opening hours of 9.00am to 4.30pm from Monday to Friday”. The Adjudication Response had been lodged at 5pm on 5 December 2008 and therefore was not lodged by the deadline of 5 December 2008. The Adjudicator determined that the Adjudication Response was not lodged in compliance with s 15(1) of the SOP Act and he was therefore required by s 16(2)(b) of the SOP Act to reject it.

9 Next, the Adjudicator considered SEF’s submission that the Adjudication Application was filed prematurely. This was a procedural argument that he was entitled to consider by virtue of s 16(7) and 17(3)(h) of the SOP Act notwithstanding his rejection of the Adjudication Response. This issue turned on whether the subcontract provided for a time period for SEF to provide a payment response. Skoy’s contention was that it did not and therefore by virtue of s 11(1)(b) of the SOP Act, the relevant period was seven days from 5 November 2008. SEF contended that the time period should be 21 days because the provisions of the main contract were incorporated into its subcontract with Skoy. The Adjudicator decided that the provisions of the main contract were not incorporated into the subcontract. He therefore determined that the Payment Response was due on 12 November 2008 and consequently the time to commence adjudication proceedings began on 19 November 2008. Thus, the Adjudication Application was not premature.

10 In relation to SEF’s objection that there was an absence of a reference period in the Payment Claim as required by the SOP Act, the Adjudicator overruled the same. He then considered the substantive merits of Skoy’s claim. He found that the evidence of the photographs showed fairly substantive work had been done by Skoy. Whilst the evidence did not tell him precisely whether the valuation should be $214,382.20 as claimed by Skoy, he was required to value the works as best as he could. The Adjudicator then decided that, after taking into account all the relevant materials, Skoy’s claim should be discounted by ten percent on the basis that Skoy had included some items of work which it could not carry out due to acts of prevention by SEF. He therefore determined that Skoy was entitled to payment in the sum of $185,167.58.

SEF’s application to set aside the Adjudication Determination

11 It would be noted that although the Adjudicator had mentioned in para 20 of the Adjudication Determination (see [6(c)] above) the four grounds on which SEF had contended that the Adjudication Application was invalid, he had only dealt with the first and second issues in giving his reasons for the Adjudication Determination. He did not make any comment or determination in respect of the argument that the Adjudication Application failed to attach relevant documents which were required under s 13(3)(c) of the SOP Act or the argument that the amount in the Adjudication Application was inconsistent with and exceeded the amount stated in the Progress Claim. The Adjudicator’s failure to deal with these issues (which SEF termed “jurisdictional issues”) formed the main basis for SEF’s challenge of the Adjudication Determination.

12 On 16 January 2009, SEF applied to set aside the Adjudication Application. It considered that the adjudication process and the Adjudication Determination were flawed in that in the discharge of his duties under the SOP Act, the Adjudicator had breached such duties because:

(a) the Adjudicator had breached the rules of natural justice by failing to consider SEF’s submissions on two out of the four jurisdictional issues; and

(b) the Adjudicator failed to engage in a bona fide exercise of his powers.

I should also mention that SEF had a subsidiary ground of challenge and that was that in valuing Skoy’s claim, the Adjudicator had acted arbitrarily and had not followed the valuation method set out in s 7 of the SOP Act.

13 Before the District Judge, SEF contended that a finding in its favour on any one of the four jurisdictional challenges it had made would have resulted in a dismissal of the Adjudication Application. This was supported by previous adjudication determinations where adjudication applications had been dismissed on similar grounds. Further, despite acknowledging the obvious supporting evidence, the Adjudicator arbitrarily found for Skoy after a deduction of ten percent from the claimed amount. This represented a failure to apply s 7(2) of the SOP Act.

14 The above arguments were rejected by the District Judge. On appeal, SEF has reiterated the same. Before I go on to discuss SEF’s arguments and Skoy’s rebuttals in detail, it may be useful for me to give a short description of the adjudication procedure as provided for by the SOP Act.

The SOP Act

15 The SOP Act is a relatively new piece of legislation, applying only to contracts in the building and construction industry made in writing on or after 1 April 2005. The SOP Act...