Tiong Seng Contractors (Pte) Ltd v Chuan Lim Construction Pte Ltd

• Judge: Lai Siu Chiu J
• Judgment Date: 31 August 2007
• Neutral Citation: [2007] SGHC 142
• Citation: [2007] SGHC 142
• Defendant Counsel: Tai Chean Ming and Tan Joo Seng (Chong Chia & Lim LLC)
• Published date: 07 September 2007
• Plaintiff Counsel: Andrew Ang (PK Wong & Associates LLC)
• Date: 31 August 2007
• Docket Number: Originating Summons No 711 of 2007
• Court: High Court (Singapore)
• Subject Matter: Statutes and regulations,Section 34(1) Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed),Building and Construction Law,Whether Act applicable to final payment claims

31 August 2007 Judgment reserved.

Lai Siu Chiu J:

Introduction

1 These proceedings raised an important and unprecedented point of law viz. does a final progress claim come under the purview of the Building and Construction Industry Security of Payment Act (Cap 30B 2006 rev. ed) (“the Act”) for purposes of adjudication?

2 In this Originating Summons (“the OS”), the plaintiff Tiong Seng Contractors (Pte) Ltd took the position that the Act does not extend to “final claims” and that the Adjudicator had no jurisdiction to make the determination in Adjudication Application No. SOP AA 08 of 2007 (“the Adjudication”). Accordingly, the plaintiff applied to set aside the Adjudication. The defendant Chuan Lim Construction Pte Ltd on the other hand defended the award (which was in their favour) by asserting that the Act does apply to such “final claims”.

The undisputed facts

3 The salient facts surrounding the present controversy can be briefly summarized. The plaintiff had been appointed as the main contractor for a construction project at Sentosa and had contracted with the defendant to undertake certain earthworks for the project.

4 After earthworks had commenced, the defendant raised claims which included the Final Claim dated 25 January 2007 and Progress Claim No. 10 dated 26 February 2007 respectively.

5 Under the Final Claim, the defendant sought payment of S$481,155.77. In response to this claim, the plaintiff made a preliminary payment of S$210,553.68, based on a preliminary evaluation of the work done at that time, leaving S$270,602.09 unpaid (“the unpaid balance”). The defendant responded by raising Progress Claim No. 10 for the unpaid balance.

6 When further payment was not forthcoming from the plaintiff, the defendant sought an adjudication under the Act based on Progress Claim No. 10. The Singapore Mediation Centre nominated Tay Cher Seng as adjudicator (“the Adjudicator”) and an Adjudication Conference was convened on 16 April 2007.

7 At the Adjudication Conference, the plaintiff submitted inter alia, that Progress Claim No. 10 had been issued after the Final Claim, and could not be relied upon to found a claim under the Act.

8 Notwithstanding the plaintiff’s arguments, the Adjudicator made a finding that the defendant was entitled to receive a sum of S$169,949.94 plus 5% GST of another S$8,497.50 for a total of $178,447.44 (“the Adjudicated sum”). In addition, the Adjudicator determined that the plaintiff should pay 60% of the Adjudicator’s fee (of S$6,300) as well as of the adjudication application fee (of S$525).

9 The plaintiff informed the defendant on 4 May 2007 of its intention to challenge the Adjudication determination. On 8 May 2007, the defendant served on the plaintiff a statutory demand under s 254(2)(a) of the Companies Act (Cap 50 2006 rev. ed.). The plaintiff’s immediate response was to file and serve the OS on the defendant’s solicitors. The plaintiff thereafter applied for directions to make payment of S$182,542.44 to the Accountant-General. The sum comprised the Adjudicated sum plus 60% of the Adjudicator’s fee ($3,780) and application fee ($315).

10 On 16 May 2007, the defendant applied by Summons No. 2144 of 2007/K (‘the application”) to strike out the OS and/or for leave to enforce the Adjudication award because the plaintiff had failed to provide security at the time of filing the OS by paying into court the unpaid portion of the Adjudicated sum as required under O 95 r 3(3) of the Rules of Court (2006 rev. ed.) read with s 27 (3) of the Act. The application was withdrawn (with costs to the defendant) at the adjourned hearing of the OS as by then the plaintiff had rectified its omission by making payment into court of $182,542.44.

Whether a final progress claim comes under the purview of the Act for purposes of adjudication

11 The present controversy is a result of a steady escalation in property prices and burgeoning demand in the construction industry. Before I go further, it would be apposite to set matters in their proper context by tracing the legislative origins and development of the Act to its present form, so that there can be a proper appreciation of the practical purposes sought to be achieved by its enactment as well as by any subsequent amendments thereto.

Legislative origins

12 The Act is a legislative enactment of fairly recent origin, having come into effect on 1 April 2005. The Act was modeled on various statutes in existence in other jurisdictions, such as Australia, UK and New Zealand. Notably, the Act drew inspiration from the New South Wales Building and Construction Industry Security of Payment Act, 1999 (“the NSW Act”), which originally defined “progress payment” as “a payment to which a person is entitled under section 8”.

13 The NSW Act was subsequently amended in November 2003 to include a more specific definition of “progress payment”, which reads as follows:

a payment to which a person is entitled under section 8, and includes (without affecting any such entitlement):

(a) the final payment for construction work carried out (or for related goods and services supplied) under a construction contract, or

(b) a single or one-off payment for carrying out construction work (or for supplying related goods and services) under a construction contract, or

(c) a payment that is based on an event or date (known in the building and construction industry as a ‘milestone payment’)

[emphasis added]

Our current version

14 Notably, our current version of the Act does not capture all the amendments from the NSW Act, but simply defines “progress payment” as:

a payment to which a person is entitled for the carrying out of construction work, or the supply of goods or services, under a contract, and includes -

(a) a single or one-off payment, or

(b) a payment that is based on an event or a date

15 The plaintiff accordingly seized on the specific omission of claims for “final payment” and concluded therefrom that the Act was not intended to extend to claims for final payment. The defendant submitted otherwise on the basis that the broad ranging provisions of the Act do not expressly or impliedly exclude “final claims”.

16 Indeed, the present interpretative controversy has been exacerbated by conflicting views expressed by treatises, the Building and Construction Authority (“the BCA”) and adjudicators in subsequent mediations under the Act as can be seen in the following examples.

(a) Includes adjudication of “final payments”

17 ln AU v AV [2006] SGSOP 9, a construction contract was terminated and a claim was made under the Act, effectively amounting to a claim for final payment. Philip Jeyaretnam SC concluded that he had jurisdiction under the Act to hear the claim. His reasoning (at [13]) was as follows:

I also noted to both counsel in the course of the hearing that while the New South Wales Act expressly included within the definition of “progress payment” “the final payment for construction work carried out”, our Act did not. Nonetheless, I am of the view that the Act does apply even after a contract is terminated. First, the intention to protect cash flow would not be achieved if the interpretation put forward by the Respondent is adopted. If cash flow is blocked on one project, that will affect a contractor or service provider’s financial resources for other projects. Secondly, although one always speaks of termination of a contract when it is really the right and obligation to do work and be paid for it which is terminated for the future, the contract continues to govern the relationship between the parties in relation to the work already done.

18 Such a conclusion is further vindicated by the “Information Kit” released by the BCA (the main proponent of the Act), which states (at cl 2.2) that:

Progress payment claims made after completion dates, including claims for final payments (where applicable), are also covered under the Act. The payment claims must be made in relation to the contract.

(b) Excludes adjudication of “final payments”

19 In stark contrast to the foregoing conclusions, Seah Choo Meng in BC v BD [2006] SGSOP 10 concluded that a final claim should not be dealt with under the Act. In this regard, he stated (at [43]-[44]) that:

43. I am satisfied that this is an ongoing dispute about possible variation and the final accounts. It requires a detailed analysis of the provisions of the contract; of the scope of works; and a technical review of the works carried out. These points together with the letters of 15 June 2005 and 11 August 2005 need to be examined carefully with other relevant parties being cross examined. These are clearly matters that cannot [sic] be dealt with under provisions of the Act.

44. As the aim of the Act is to solve cash flow problems on monies unreasonably withheld, it is clear to one that it cannot resolve every payment issue especially one as I have described in paragraph No 43 above. The Claimant cannot [sic] just disregard the entire event that had taken place and simply raise their Payment Claim in the hope that it will be dealt with and disposed of under the Act. It must also be recognized that the payment obligations by the Respondent had largely been performed.

20 Indeed, the above extract appears to be in alignment with the holding in Jemzone Pty Ltd v Trytan Pty Ltd [2002] NSWSC 395 (“Jemzone”) which the plaintiff relied heavily on, in which Austin J held (at [37]) that the NSW Act (as it applied then) did not extend to claims for final payment:

The definition of ‘progress payment’ is unhelpful, because s 8 confers an entitlement to payment only for a ‘progress payment’, without further defining or explaining those words. In my opinion, the words ‘progress payment’ when used in s 8 and other parts of the Act should therefore be given the meaning that they have under the construction contract. That accords with the structure of the Act itself, which generally leaves it to the construction contract to define...