Stargood Construction Pte Ltd v Shimizu Corp

• Jurisdiction: Singapore
• Judge: Vincent Hoong JC
• Judgment Date: 06 November 2019
• Neutral Citation: [2019] SGHC 261
• Citation: [2019] SGHC 261
• Court: High Court (Singapore)
• Published date: 30 April 2020
• Docket Number: Originating Summons 1099 of 2019
• Plaintiff Counsel: Chong Chi Chuin Christopher and Chen Zhihui (Drew & Napier LLC)
• Defendant Counsel: Lee Peng Khoon Edwin, Yong Boon On, Amanda Koh Jia Yi and Lee Shu Qing (Eldan Law LLP)
• Subject Matter: Building and Construction Law,Statutes and regulations,Building and Construction Industry Security of Payment Act,Adjudication determinations,Jurisdiction,Subcontracts,Claims by subcontractor after termination of subcontract
• Hearing Date: 21 October 2019

Vincent Hoong JC: Introduction

By Originating Summons No 1099 of 2019, the plaintiff seeks to set aside two adjudication determinations, namely Adjudication Determination No SOP/AA203/2019 (“AA 203”) and Adjudication Determination No SOP/AA245/2019 (“AA 245”). The plaintiff also seeks a declaration to serve a further payment claim on the defendant.

Having considered the parties’ submissions, I allow the plaintiff’s application. I agree with the plaintiff that the adjudicator in AA 203 was wrong to conclude that upon termination of the plaintiff’s employment under the subcontract (“the Sub-Contract”), the plaintiff was not entitled to submit a further payment claim and to enforce it by adjudication under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”). Given this finding in AA 203, it necessarily follows that the adjudicator in AA 245 was wrong in dismissing the plaintiff’s payment claim on the ground that the plaintiff was bound by the adjudicator’s determination in AA 203.

Facts

The plaintiff was one of the defendant’s subcontractors of a project at 79 Robinson Road, of which the defendant is the main contractor.¹ The parties do not dispute that the defendant, by a notice of termination, terminated the plaintiff’s employment under the Sub-Contract² pursuant to clause 33.2 of the Sub-Contract, which provides:³

At any time after the Project Director is satisfied that the Sub-Contractor has defaulted in respect of any of the grounds set out under Clause 33.1, the Project Director shall issue a Notice of Default to the Sub-Contractor specifying the default, and stating the Contractor’s intention to terminate the Sub-Contract unless the default is rectified within 7 days from the date of the said notice. If the Sub-Contractor fails to rectify the specified default within 7 days from the receipt of the Notice of Default, the Contractor shall be entitled, within any further notice to the Sub-Contractor, to terminate the employment of the Sub-Contractor by issuing to the Sub-Contractor a Notice of Termination of [the] Sub-Contract. [emphasis added]

After the termination of the Sub-Contract, the plaintiff served Payment Claim No 12 (“PC 12”) on the defendant for the sum of $2,599,359.44.⁴ The defendant did not serve a payment response to PC 12.⁵ The plaintiff then proceeded to lodge AA 203.⁶ In its adjudication response, the defendant alleged, inter alia, that (a) PC 12 had not been served on it and (b) PC 12 was outside the purview of the SOPA.⁷

The adjudicator dismissed AA 203 as he was found that PC 12 was improperly served on the defendant and alternatively, on jurisdictional grounds. The adjudicator referred to Engineering Construction Pte Ltd v Attorney-General [1994] 1 SLR(R) 125 (“Engineering Construction”) and Far East Square Pte Ltd v Yau Lee Construction (Singapore) Pte Ltd [2019] 2 SLR 189 (“FES”) and concluded that the plaintiff was not entitled to serve PC 12. This was because the plaintiff had served PC 12 after the defendant had already terminated the Sub-Contract. This, according to the adjudicator, rendered the project director functus officio as regards his certifying function under the Sub-Contract. He opined at [104] of the adjudication determination (“AD”):⁸

Because the Project Director was functus officio with respect to his certifying function, applying the reasoning in Engineering Construction (as set out above) and FES, no post-termination payment certification regime existed under the Sub-Contract. As such, the [plaintiff] no longer had an entitlement to serve a payment claim as the Project Director no longer had the power, under the Sub-Contract, to certify the same.

The adjudicator recognised that there was a conceptual difference between termination of a contract and the termination of one’s employment under a contract (LW Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2011] 4 SLR 477 (“LW Infrastructure”) at [51]–[53]). However, he did not think that it mattered as “there were no post-termination primary obligations in the Sub-Contract regarding [the] certification of payment claims.”⁹

Before the adjudicator issued his AD for AA 203, the plaintiff served Payment Claim No 13 (“PC 13”), claiming the same sum as it did in PC 12. The defendant served its payment response, with its response amount stated as “nil”.¹⁰ The plaintiff did not apply to set aside AA 203 as it took the position that the adjudicator had based his determination on jurisdictional grounds and not on the substantive merits. AA 203 was therefore not binding in a subsequent adjudication under the SOPA. Hence, the plaintiff proceeded to commence AA 245.¹¹ In its adjudication response to AA 245, the defendant argued, inter alia, that the plaintiff was bound by the adjudicator’s determination in AA 203.¹² The adjudicator agreed with the defendant and determined at [92]¹³ that:

… I accept the [defendant’s] submission and hold that the [plaintiff] is bound by the determinations of the issues determined by [the] learned adjudicator in the AD of SOP/AA203, in particular, in respect of the fundamental issue that upon termination of the Sub-Contract, the [plaintiff] was not entitled to submit any further payment claim under the Sub-Contact and enforce it by adjudication under the [SOPA]. Consequently, it follows from the AD of SOP/AA 203 and section 21(1) of the [SOPA] that the [plaintiff] was also not entitled to submit PC 13 and PC13 is therefore invalid under section 10 of the [SOPA]. [emphasis in original]

The adjudicator accordingly dismissed AA 245.

The plaintiff’s case

In the main, the plaintiff argues that the adjudicator in AA 203 was wrong in determining that the plaintiff was not entitled to issue a further payment claim under the Sub-Contract after termination. First, the adjudicator failed to give effect to Parliament’s intention that claims for work done or goods supplied before termination of a contract are valid.¹⁴ Second, that there are High Court decisions that were binding on the adjudicator to the effect that a claimant is entitled to serve payment claims and for them to be adjudicated upon notwithstanding termination.¹⁵ Finally, that the adjudicator for AA 203 had misconstrued and applied the principles in FES wrongly in his AD.¹⁶

The defendant’s case

The defendant contends that the application should be dismissed for the following reasons: The plaintiff’s application requires the court to review the substantive merits of the adjudicator’s decision in AA 203 which is not the court’s role.¹⁷ The adjudicator was correct in finding that the project director was functus officio as the defendant had terminated the Sub-Contract when the payment claim was submitted. As such, the primary obligations of the parties had come to an end.¹⁸ The application to set aside the AD in AA 203 did not fall within any of the accepted grounds. First, there was no breach of natural justice. Secondly, it was not alleged that the adjudicator was not validly appointed. Thirdly, there was no non-compliance with one or more of the provisions of the SOPA. Finally, there was no patent error on the face of the record.¹⁹ The plaintiff did not challenge the adjudicator’s finding in AA 203 that there was invalid service of PC 12 on the defendant.²⁰

The issues

There are two issues to be determined: whether the project director was functus officio when the plaintiff served PC 12 on the defendant; and whether the plaintiff was entitled to serve PC 12 and PC 13 for works done prior to the termination of the Sub-Contract.

My decision Whether the project director was functus officio when the plaintiff served PC 12 on the defendant

Fundamentally, FES is plainly inapplicable on the facts of the present case. The issue in FES was not whether a claimant could serve a payment claim and have its claim adjudicated after the termination of the contract. The Court of Appeal’s observations of the architect being functus officio related to a situation where the works had been completed and the architect had already issued the final certificate for the project, after the expiry of the maintenance period. In such a situation, there was simply no legal basis to submit further payment claims unless the claimant could show that the final certificate was manifestly invalid because, for example, it had been issued before the project even reached the stage of practical completion (FES at [39] and [42]).

In this case, there is no allegation that the final certificate has been issued, such that the project director is functus officio with respect to his certifying function. Indeed, the issue is not whether the plaintiff is entitled to serve a payment claim after the final certificate has been issued, as was the case in FES. The key issue in this case is whether the plaintiff can serve a payment claim and have its claim adjudicated after the termination of its employment under the Sub-Contract.

The defendant’s notice of termination under clause 33.2 does not have the effect of terminating the entire Sub-Contract. It only serves to terminate the plaintiff’s employment under the Sub-Contract.²¹ As such, the project director is not functus officio with regard to...