W Y Steel Construction Pte Ltd v Osko Pte Ltd

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 30 April 2013
• Neutral Citation: [2013] SGCA 32
• Docket Number: Civil Appeal No 108 of 2012
• Date: 30 April 2013
• Published date: 06 June 2013
• Plaintiff Counsel: Lee Eng Beng SC and Kelvin Poon (Rajah & Tann LLP), Henry Heng, Corinne Taylor and Gina Tan (Legal Solutions LLC)
• Hearing Date: 25 February 2013
• Defendant Counsel: Chelliah Ravindran and Alison Jayaram (Chelliah & Kiang)
• Court: Court of Appeal (Singapore)
• Subject Matter: Natural Justice,Building and Construction Law,Stay of enforcement of adjudication determination,Dispute Resolution,Adjudication

Sundaresh Menon CJ (delivering the grounds of decision of the court): Introduction

This is an appeal from the decision of the High Court judge (“the Judge”) in Originating Summons No 484 of 2012 (“OS 484/2012”). The Judge refused to set aside an adjudication determination dated 7 May 2012 (“the Adjudication Determination”) made under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the Act”) ordering the appellant, W Y Steel Construction Pte Ltd (“W Y Steel”), to pay the sum of $1,767,069.80 (“the Adjudicated Sum”) to the respondent, Osko Pte Ltd (“Osko”): see W Y Steel Construction Pte Ltd v Osko Pte Ltd [2012] SGHC 194 (“the GD”). W Y Steel had earlier paid the whole of the Adjudicated Sum into court pending the hearing of OS 484/2012, and it submitted that if we were minded to dismiss its appeal, we should nonetheless stay the enforcement of the Adjudication Determination and direct, instead, that the Adjudicated Sum be retained in court pending the disposal of separate proceedings that it had brought against Osko to recover the amount that it (W Y Steel) contended was properly due to it.

At the close of the hearing, we dismissed the appeal and ordered that a portion of the Adjudicated Sum was to be released to Osko to enable it to settle some of its outstanding financial obligations. We also ordered that the remainder of the Adjudicated Sum (“the Remaining Sum”) should continue to be held in court until our further order as we did not think the evidence before us at that time was sufficient to enable us to dispose of W Y Steel’s aforesaid stay application (“W Y Steel’s stay application”). At the same time, we gave leave to W Y Steel to produce affidavit evidence as to why the Remaining Sum should continue to be held in court and not paid out to Osko. We now give our grounds for dismissing the appeal. We hereby also give our decision on W Y Steel’s stay application.

The facts

W Y Steel is a registered contractor and licensed builder. By a contract dated 12 April 2011, it was appointed as the main contractor by Singapore Turf Club for alteration works at the club’s grandstand. That contract (“the Singapore Turf Club Contract”) was valued at $6,153,600. Subsequently, W Y Steel entered into a sub-contract (“the Sub-Contract”) with Osko for a sum of $3,752,436.15. Osko is also a licensed builder, but not a registered contractor. Osko was to perform a substantial part of the work under the Singapore Turf Club Contract, save for certain specialist steel works and electrical works.

By a letter dated 12 March 2012, W Y Steel purported to terminate the Sub-Contract. Osko claimed that notwithstanding this, it continued working under the Sub-Contract until 31 March 2012, that being the stipulated completion date for the work set out in the Sub-Contract. On 31 March 2012, Osko served on W Y Steel, in respect of work done under the Sub-Contract, a payment claim under the Act for a sum which later turned out to be the same as the Adjudicated Sum. Crucially for the purposes of this appeal, contrary to s 11(1)(b) of the Act, W Y Steel failed to file a payment response within seven days after Osko’s payment claim was served on it (viz, by 8 April 2012).

On 20 April 2012, Osko, having received no payment response, filed Adjudication Application No SOP/AA036 of 2012 (“the Adjudication Application”) against W Y Steel for adjudication of its payment claim. Again, W Y Steel did not file an adjudication response, which, in the circumstances, was due by 27 April 2012 (see s 15(1) of the Act). The duly appointed adjudicator (“the Adjudicator”) called the parties for an adjudication conference, which was held on 2 May 2012, in the course of which each party made submissions upon the Adjudicator’s invitation.

Before the Adjudicator, W Y Steel claimed that it was ignorant of the timelines mandated by the Act, but urged the Adjudicator nonetheless to consider the submissions which it wished to present in relation to Osko’s payment claim. In essence, W Y Steel contended that after taking into account certain deductions and contra charges, it was Osko that owed W Y Steel a sum of $158,301. The computation of this sum was purportedly based on the assessment of Singapore Turf Club’s quantity surveyor. W Y Steel claimed that it had e-mailed a response to Osko’s notification that it (Osko) had filed the Adjudication Application, and that this response, which was sent by e-mail on 23 April 2012, included the said assessment. It was further said that this e-mail should be considered W Y Steel’s payment response under the Act or, alternatively, its adjudication response.

We pause here to observe that in our view, the e-mail of 23 April 2012 was not in fact a payment response or, for that matter, a response to the Adjudication Application. Rather, it was W Y Steel’s recommended payment certificate showing an amount due to it from Osko, and not the other way around. The e-mail certainly did not comply with the requirements of s 11(3) of the Act. Nor did W Y Steel’s counsel, Mr Lee Eng Beng SC (“Mr Lee”), seriously urge us to conclude that the e-mail was a payment response or an adjudication response for the purposes of the Act.

It should also be noted that under s 11(1)(b) of the Act, W Y Steel’s payment response was due on 8 April 2012 (see [4] above). The “dispute settlement period”, as defined in s 12(5) of the Act, ran until 15 April 2012, but even by that date, no payment response had been received from W Y Steel. Quite apart from the fact that W Y Steel’s e-mail of 23 April 2012 was not in substance or even in form a payment response, it was not sent within the time permitted under the Act for a payment response to be submitted. Osko accordingly took the point that W Y Steel, having neglected to file a payment response, was prevented by s 15(3) of the Act from bringing to the notice of the Adjudicator new matters, including cross-claims, counterclaims and set-offs, that had not yet been raised in a timely payment response. Osko also submitted that in any event, under s 15(3), the Adjudicator was not even permitted to consider such material in the circumstances.

On 2 May 2012, W Y Steel attempted to file its submissions, which it claimed to be its adjudication response, with the Singapore Mediation Centre (“the SMC”), the “authorised nominating body” for the purposes of Part IV of the Act, but these submissions were rejected by the SMC as being out of time. We note in passing and in agreement with the Judge below that it was not open to the SMC, as opposed to the Adjudicator, to reject any purported adjudication response: see the GD at [8]. However, nothing turned on this as W Y Steel e-mailed its submissions directly to the Adjudicator on the evening of 2 May 2012 and again through its legal counsel on 4 May 2012, urging the Adjudicator to consider those submissions (collectively, W Y Steel’s “late submissions”).

On 7 May 2012, the Adjudicator issued the Adjudication Determination ordering W Y Steel to pay Osko the Adjudicated Sum plus costs and fees. The Adjudicator (at [23.3] of the Adjudication Determination) agreed with Osko that he was:¹

… precluded by section 15(3) [of the Act] from considering the reasons and matters submitted by [W Y Steel] … as they were not included in any valid payment response. …

On 16 May 2012, Osko applied under s 27 of the Act for leave to enforce the Adjudication Determination in the same manner as a judgment or court order. On 21 May 2012, W Y Steel filed OS 484/2012 to set aside the Adjudication Determination and also paid the Adjudicated Sum into court. In the meantime, W Y Steel commenced Suit No 474 of 2012 (“Suit 474/2012”) against Osko in relation to the disputes arising out of the Sub-Contract. We have already alluded to this earlier (see [1] above).

The decision below

OS 484/2012 was heard by the Judge on 8 August 2012. W Y Steel argued that the Adjudication Determination should be set aside because the Adjudicator had no jurisdiction to adjudicate Osko’s payment claim, had contravened the rules of natural justice and had erred in fact as well as in law.

The Judge found that the Adjudicator did have jurisdiction to adjudicate Osko’s payment claim and, therefore, to determine the relevant issues of fact and law. The Adjudication Determination was therefore imbued with temporary finality under s 21 of the Act. The Judge also held that there had been no breach of the rules of natural justice. W Y Steel’s failure to file a payment response was fatal to its case as the Adjudicator was precluded by s 15(3) of the Act from taking into account its late submissions. However, since the Adjudication Determination only enjoyed temporary finality, any error could yet be corrected upon the final determination of the parties’ disputes either: (a) by a court or tribunal or some other dispute resolution body; or (b) by way of a settlement agreement between the parties. This was in keeping with the purpose of the Act, which was to provide a fast and low-cost adjudication process to ensure that a contractor’s cash flow was not disrupted by disputes arising from or relating to construction contracts (“building and construction disputes”). The Judge therefore dismissed OS 484/2012, but ordered that pursuant to s 27(5) of the Act, the Adjudicated Sum was to be paid into court to be held pending the determination of this appeal.

The primary issue before this court

The primary issue before us was the true interpretation of s 15(3) of the Act, which reads: Adjudication responses 15. … (3) The respondent shall not include in the adjudication response, and the adjudicator shall not consider, any reason for withholding any amount, including but not limited to any cross-claim, counterclaim and set-off, unless — (a) where the adjudication relates to a construction contract, the reason was included in the relevant...