Tienrui Design & Construction Pte Ltd v G & Y Trading and Manufacturing Pte Ltd

• Jurisdiction: Singapore
• Judge: Lee Seiu Kin J
• Judgment Date: 16 September 2015
• Neutral Citation: [2015] SGHC 243
• Date: 16 September 2015
• Docket Number: Originating Summons No 1005 of 2014
• Published date: 09 October 2015
• Plaintiff Counsel: Monica Neo Kim Cheng (Chan Neo LLP)
• Hearing Date: 27 April 2015,04 May 2015
• Defendant Counsel: Tan Yiting Gina (Legal Solutions LLC)
• Court: High Court (Singapore)
• Subject Matter: Building and Construction Law,Statutes and Regulations

Lee Seiu Kin J: Introduction

This was an application by Tienrui Design & Construction Pte Ltd (“the plaintiff”) to set aside an adjudication determination (“the AD”) made pursuant to the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOP Act”). G & Y Trading & Manufacturing Pte Ltd was the defendant (“the defendant”).

After hearing arguments, I dismissed the application and awarded costs fixed at $5,000 (inclusive of disbursements) to the defendant. I now set out the grounds of my decision.

The facts

The background facts are as follows.

The parties were at the material time involved in a building project to convert an existing office building into a hotel at 33 Jalan Afifi (Geylang Planning Area) (“the Project”). The plaintiff was the main contractor for the Project. By a contract in writing dated 19 December 2012 (“the Contract”), the plaintiff engaged the defendantas its sub-contractor to supply and install timber doors (“the Works”). The contract was for the sum of $399,280.00.

In the course of the Project, the defendant’s performance was allegedly sub-par. The plaintiff complained that the defendant performed parts of the works poorly, failed to rectify the defects in its works and failed to complete other parts of the works. The defendant attributed its poor performance to its poor financial situation. In view of this, the plaintiff agreed to increase the frequency of payments (“the Variation Agreement”). This was evidenced in the plaintiff’s email dated 6 April 2013 where the plaintiff stated:

Therefore, in order to help your financial issues; [sic] we have decided to omit the down payment as stipulated in your contract and converted to verify based on work done on site, every 2 weeks with necessary documentations supported together with your submission of progress claim.

[emphasis added]

Under the original payment terms of the Contract, the defendant was required to submit its payment claim to the plaintiff before the 30th of each month and the plaintiff was supposed to issue an “interim certificate” with respect to the defendant’s payment claim by the 25th of the subsequent month. The relevant clauses are as follows: 14. PAYMENT (1) The Sub-Contractor shall submit to the Contractor before the 30th of each month (Month M) a request for payment in the form to be agreed with the Contractor showing the estimated value of the Sub-Contract Works executed up to the end of that month unless in the opinion of the Sub-Contractor such values and amounts together will not justify the issue of an Interim Certificate. (2) The Contractor will issue an interim certificate with respect to the above claim by 25 [sic] of the subsequent month (Month M+1). (3) The Contractor’s Interim Certificate to the Sub-Contractor will show the amounts which have been accepted for payment by the Contractor taking into account the real progress achieved during the month less a deduction of retention money at the rate of ten percent (10%) of the value of the Interim Payment up to a maximum retention of five percent (5%) of the Sub-Contract Price and less any back charges due by the Sub-Contractor to the Contractor.

Despite the increase in payment frequency, the defendant’s performance remained sub-par. That led to the termination of the Contract on 28 August 2014.

Prior to the termination of the Contract, on 19 August 2014, the defendant served payment claim no 1 (“the Payment Claim”) for work done between March 2013 and July 2014. The total amount claimed was $85,580.05. On 27 August 2014, the plaintiff responded by way of payment response no 1 (“the Payment Response”) which stated that the plaintiff did not owe any amount to the defendant and that the defendant was actually indebted to the plaintiff in the amount of $186,774.96 by reason of defective works and overpayment.

On 8 September 2014, the defendant notified the plaintiff of its intention to apply for adjudication. On 9 September 2014, the defendant lodged an adjudication application in respect of the Payment Claim with the Singapore Mediation Centre (“the SMC”). An adjudicator (“the Adjudicator”) was appointed by SMC on 11 September 2014. On 8 October 2014, the AD was rendered in favour of the defendant. Dissatisfied, the plaintiff filed the present application to set aside the AD on the ground that the adjudication application had been filed prematurely.

The adjudication proceedings

In order to make sense of the issues raised by the parties, I first set out the statutory timeline for the adjudication process. Sections 11 and 12 of the SOP Act state:

Payment responses, etc.

11.—(1) A respondent named in a payment claim served in relation to a construction contract shall respond to the payment claim by providing, or causing to be provided, a payment response to the claimant — (a) by the date as specified in or determined in accordance with the terms of the construction contract, or within 21 days after the payment claim is served under section 10, whichever is the earlier; or (b) where the construction contract does not contain such provision, within 7 days after the payment claim is served under section 10.

…

Entitlement to make adjudication applications

12. —(1) Subject to subsection (2), a claimant who, in relation to a construction contract, fails to receive payment by the due date of the response amount which he has accepted is entitled to make an adjudication application under section 13 in relation to the relevant payment claim.

(2) Where, in relation to a construction contract — (a) the claimant disputes a payment response provided by the respondent; or (b) the respondent fails to provide a payment response to the claimant by the date or within the period referred to in section 11(1),

the claimant is entitled to make an adjudication application under section 13 in relation to the relevant payment claim if, by the end of the dispute settlement period, the dispute is not settled or the respondent does not provide the payment response, as the case may be.

…

(5) In this section, “dispute settlement period”, in relation to a payment claim dispute, means the period of 7 days after the date on which or the period within which the payment response is required to be provided under section 11(1).

Adjudication applications

13. — (1) A claimant who is entitled to make an adjudication application under section 12 may, subject to this section, apply for the adjudication of a payment claim dispute by lodging the adjudication application with an authorised nominating body.

…

(3) An adjudication application —

(a) shall be made within 7 days after the entitlement of the claimant to make an adjudication application first arises under section 12;

…

The key feature of the provisions set out above is that the recipient of a payment claim is to provide a payment response within the period stipulated in the contract, except that if this is more than 21 days, the time is limited to 21 days (s 11(1)(a)). In the absence of such a stipulation in the contract, the payment response must be provided within seven days of the service of payment claim (s 11(1)(b)). Thereafter, regardless whether a payment response has been provided, the claimant has to wait out a mandatory seven-day dispute settlement period which commences after the “date on which or the period within which” the payment response is required to be provided (s 12(5)). The entitlement to lodge an adjudication application only begins after the expiry of the dispute settlement period (s 12(2)) and lasts for seven days (s 13(3)(a)).

The plaintiff’s position

The plaintiff had originally objected to the adjudication application on two grounds. First, the plaintiff argued that the adjudication application was premature as it was made before the expiry of the dispute settlement period. Secondly, the plaintiff claimed that the defendant did not include a complete set of the payment response in the adjudication application. However at the hearing before me, the plaintiff abandoned the second ground and proceeded only with the first. I shall therefore only address the first ground.

I have summarised the statutory timelines at [11] above. The plaintiff argued that, should the Variation Agreement be found to be effective, the Payment Response was due two weeks after the submission of the Payment Claim. Accordingly, as the Payment Claim was submitted on 19 August 2014, the Payment Response was only due on 2 September 2014. This would mean that the 7-day dispute settlement period ran from 3 September 2014 to 9 September 2014, and the defendant’s entitlement to lodge an adjudication application only arose on 10 September 2014. Since the adjudication application was lodged before that, on 9 September 2014, it was premature.

The plaintiff contended that, even if the Variation Agreement was found to be invalid and therefore not applicable, the adjudication application was also premature. This was because the Payment Response was due 21 days after the submission of the Payment Claim ie, by 9 September 2014. The dispute settlement period would run from 10 September 2014 to 16 September 2014, and the defendant’s entitlement to lodge an adjudication application arose on 17 September 2014, eight days after the date on which the adjudication application was actually lodged on 9 September 2014.

In essence, the plaintiff took the position that the earliest date on which the defendant’s entitlement to lodge an adjudication application was 10 September 2014. Since the defendant lodged the adjudication application with the SMC on 9 September 2014 (the day before its entitlement arose), the plaintiff submitted that the adjudication application was brought prematurely and that consequently, the resulting AD was null and void.

The defendant’s position

The defendant’s position was that the adjudication application...