Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) v Lee Wee Lick Terence (alias Li Weili Terence)

Tay Yong Kwang J:

[1] This was an appeal against the decision of an Assistant Registrar (“the AR”) dismissing the defendant’s application to set aside an adjudication determination dated 7 July 2010 (“the Adjudication Determination”) made under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOPA”). The defendant’s application was made in response to the plaintiff’s application (by way of Originating Summons No 783 of 2010) to enforce the Adjudication Determination as a judgment under section 27 of the SOPA.

[2] The defendant raised three issues before the AR, who decided all three of them against him. Before me, the defendant only appealed against the AR’s findings on two of the three issues. After hearing the arguments from both parties, I agreed with the AR on one issue but disagreed with him on the other. In the result, I allowed the defendant’s appeal and his application.

[3] As the Adjudication Determination was for the sum of only $125,450.40, the parties required leave under section 34(2)(a) of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) if they wished to appeal to the Court of Appeal. The defendant applied for leave to appeal against my decision on the issue on which I agreed with the AR and ruled against him. The defendant’s application was however contingent on the plaintiff also seeking leave to appeal to the Court of Appeal. One day after the defendant filed his application, the plaintiff did apply for such leave.

[4] The SOPA has been the subject of several High Court decisions. In my opinion, a decision of the Court of Appeal would help clarify the law on payment claims under the SOPA for the construction industry. I therefore gave both parties leave to appeal despite the fact that they had already proceeded to litigate their dispute in court. Both the plaintiff and the defendant have filed their appeals accordingly (Civil Appeal No 46 of 2011 and Civil Appeal No 44 of 2011 respectively) and I now set out the grounds of my decision.

[5] The AR has set out the facts in detail at [3] to [9] of his decision (see Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) v Lee Wee Lick Terence @ Li Weili Terence [2010] SGHC 333) (“the AR’s decision”). I will limit my account here to the salient facts.

[6] The plaintiff is in the business of building and renovation works. The defendant is a private individual who engaged the plaintiff in August 2008 as the main contractor for the conversion of his two-storey house at 1 Pasir Ris Heights into a three-storey house. Relations soured and the defendant purported to terminate his contract with the plaintiff by way of a letter dated 21 April 2010. In the same letter, the plaintiff was instructed to vacate the construction site by 12 noon on 26 April 2010. On 2 June 2010, the plaintiff served “Payment Claim No 6” on the defendant. The defendant did not serve a payment response.

[7] On 18 June 2010, the plaintiff served the defendant with a “Notice of Intention to Apply for Adjudication” in compliance with section 13(2) of the SOPA. On 22 June 2010, the plaintiff filed an adjudication application (“the Adjudication Application”) with the Singapore Mediation Centre (“the SMC”). The SMC served the Adjudication Application on the defendant that same day. The defendant did not lodge an adjudication response with the SMC.

[8] On 7 July 2010, the Adjudication Determination was made, awarding the plaintiff $125,450.40. As stated above, the plaintiff applied to enforce this and hence the defendant’s application to set it aside.

[9] The AR identified the three issues which arose before him as follows (see [10] of the AR’s decision):

The AR decided all three issues against the defendant and dismissed his application to set aside the Adjudication Determination. Before me, on the defendant’s appeal against the AR’s dismissal of his application, the defendant only contested the AR’s findings on the first and the third issues.

[10] The preliminary question which these two issues raised was whether the court ought to even review the Adjudicator’s decision on the said issues.

[11] Following Judith Prakash J’s (“Prakash J’s”) decision in Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co Ltd [2010] 1 SLR 658 (“Chip Hup”), it would appear that the two issues do not pertain to whether an adjudicator has properly assumed jurisdiction and thus should not be considered by the court. Prakash J held the following at [54]:

At [55], the judge made reference to two New South Wales Supreme Court decisions and went on to hold at [56]:

[12] Therefore, according to Prakash J, an adjudicator obtains jurisdiction to hear and determine an adjudication application as soon as he accepts the appointment made by the SMC. Applying that to the case before me, it appears that as an adjudicator’s jurisdiction does not stem from a “properly completed and served payment claim”, this court should not be reviewing the Adjudicator’s decision on the two issues raised in this appeal.

[13] About two months after her decision in Chip Hup, Prakash J set out her views in SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733 (“SEF Construction”) on the court’s role when asked to set aside an adjudication determination or a judgment arising from the same. She said at [42]:

[14] To further elucidate the limits of the court’s role, Prakash J had regard to the New South Wales Court of Appeal (“NSW CA”) case of Brodyn Pty Ltd v Davenport [2004] NSWCA 394 (“Brodyn”). In Brodyn, Hodgson JA first stated (at [51]) that the scheme of the equivalent New South Wales Act (“the NSW Act”) “appears strongly against the availability of judicial review on the basis of non-jurisdictional error of law.” The judge went on (at [53]) to consider what the conditions for the existence of an adjudicator’s determination were:

As for more detailed statutory requirements of the NSW Act such as “section 13(2) as to the content of payment claims; section 17 as to the time when an adjudication application can be made and as to its contents”, Hodgson JA disapproved of the approach which asked “whether an error by the adjudicator in determining whether any of these requirements is satisfied is a jurisdictional or non-jurisdictional error” as he thought that approach “tended to cast the net too widely”. He preferred to ask “whether a requirement being considered was intended by the legislature to be an essential pre-condition for the existence of an adjudicator's determination.” (see Brodyn at [54])

[15] At [44] and [45] of SEF Construction, Prakash J adopted Hodgson JA’s discussion on the basic and essential requirements:

[16] Although sub-paragraph (b) of [45] in SEF Construction (which followed from sub-point 2 of [53] in Brodyn) included the service by the claimant on the respondent of a payment claim, Prakash J made clear at [46] of SEF Construction that whether a purported payment claim was actually a payment claim under the SOPA was an issue for the adjudicator:

[17] Prakash J next decided the case of AM Associates (Singapore) Pte Ltd v Laguna National Golf and Country Club Ltd [2009] SGHC 260 (“AM Associates”), in which she applied her holdings in SEF Construction. The respondent in the adjudication proceedings there applied to set aside the adjudication determination on the basis that the payment claim it was served with (“Payment Claim 1”) was not a valid payment claim under the SOPA. Prakash J held (at [20]):

[18] Shortly after the AM Associates decision, Lee Seiu Kin J (“Lee J”) decided the case of Sungdo Engineering & Construction (S) Pte Ltd v Italcor Pte Ltd [2010] 3 SLR 459 (“Sungdo Engineering”). An appeal was filed against Lee J’s decision but was subsequently withdrawn. There, the respondent in the adjudication proceedings applied to set aside the adjudication order on the basis that the letter which the claimant purported to be a payment claim (“the 2008 Letter”) did not in fact constitute a payment claim under the SOPA. Lee J found notable the conclusion of the 2008 Letter (see Sungdo Engineering at [27]):

He decided (at [23]) that the 2008 Letter was not a payment claim under the SOPA, even though it arguably contained the information prescribed in the SOPA and the regulations made thereunder, for the following five reasons.

[19] Lee J’s elaboration of reason (e) (at [28]) provides some background to the case and I set it out in full here:

[20] Significantly, Lee J disagreed with Prakash J’s statements at [56] of Chip Hup (see [11] above), stating (at [32]) that:

As for Prakash J’s view at [46] of SEF Construction (see [16] above) that whether or not a purported payment claim is actually a payment claim under the SOPA is an issue for the adjudicator and not the court, Lee J went on to say at [34] that

[21] Lee J then distinguished SEF Construction on the basis that in any event, the 2008 Letter did not purport to be a payment claim under the SOPA as nothing therein stated that it was so. Finally, notwithstanding Lee J’s disagreement in principle with Prakash J, he stated that in practice, where a document did purport to be a payment claim under the SOPA, the court should only review an adjudicator’s decision that it was indeed a valid payment claim under the SOPA on the basis of Wednesbury unreasonableness (see Associated Provincial Picture Houses, Limited v Wednesbury Corporation [1948] 1 KB 223). In support, Lee J cited the same passage from Brodyn which was cited at [46] of SEF Construction, highlighting Hodgson JA’s qualification:

[22] Since then, a different NSW CA from that which decided Brodyn has decided the case of Chase Oyster Bar v Hamo Industries [2010] NSWCA 190 (“Chase Oyster”). Section 17(2) of the NSW Act provides that a claimant cannot make an adjudication application unless the respondent is notified, within 20 business days after payment is due, of the claimant’s intention to apply for adjudication. In Chase Oyster, the claimant gave notice to the respondent outside the 20 business day limit. The adjudicator quite irrationally (see [242]-[243] of Chase Oyster) concluded that notice had been given to the respondent within the 20 business day period. In the course of answering the specific questions removed into the Court of Appeal, McDougall J (sitting in the NSW CA) stated (at [286]) that his conclusions suggested that an order should be made to quash the adjudicator’s determination, unless there was some discretionary reason to the contrary.

[23] Notable in the Chase Oyster decision were the comments which the NSW CA made regarding the decision in Brodyn. The background to some of those comments included the High Court of Australia’s decision in Kirk v Industrial Relations Commission [2010] HCA 1. The implications of that decision were neatly summarised by Spigelman CJ at [29] in Chase Oyster:

[24] The said inconsistency was Hodgson JA’s seeming preference for the higher review threshold of the failure to meet “basic and essential pre-conditions” over the lower threshold of “jurisdictional error”. “Basic and essential pre-conditions” appeared to be a subset of “jurisdictional errors.” This understanding of Hodgson JA’s decision in Brodyn was explained by Spigelman CJ at [27] of Chase Oyster:

[25] Additionally, as the AR pointed out at [13] of his decision, McDougall J made the following related critique at [149]:

[26] As for what then constitutes jurisdictional error, Spigelman CJ had this to say (at [33]):

[28] Returning to the case at hand, I answer the preliminary question in the positive. First, I agree with Lee J’s statements at [32] of Sungdo Engineering (see [20] above) that in principle, the court may review an adjudicator’s decision in respect of whether a document properly constitutes a payment claim under the SOPA and that where a document purports to be a payment claim under the SOPA, the court should only review an adjudicator’s decision that it was indeed a valid payment claim under the SOPA on the basis of Wednesbury unreasonableness (see [21] above).

[29] Second, I note that in Sungdo Engineering, Lee J took the view (also at [32]) that the service of a payment claim should be reviewable by a court:

I also agree with this. The review of the adjudicator’s decision as to whether a payment claim was properly served includes reviewing his decision as to whether a payment claim was served within the prescribed time. In so holding, I have regard to Spigelman CJ’s views on the importance of time limits in the NSW Act. Having gone through a long list of time provisions in the previous paragraph of his judgment in Chase Oyster, the judge held at [47]:

In line with those views, I think it would be helpful for the court to clarify issues regarding time limits so as to provide certainty for parties proceeding under the SOPA.

[30] The covering letter of Payment Claim No 6 reads:

As stated in the covering letter, two pages of itemised cost breakdown of the work which the plaintiff claimed had been done were attached.

[31] Payment Claim No 6 falls within the meaning of a payment claim under the SOPA. Unlike the 2008 Letter in Sungdo Engineering, Payment Claim No 6 here specified clearly on its face that it was a payment claim. It was a business-like document. From its contents, there could have been no doubt that it was claiming that a sum of money was due. As the contract had been terminated by the defendant, the inclusion of the date 26 April 2010 also made it clear that it was the final bill for the works done as the plaintiff had been directed to clear out of the site by that date (see [6] above).

[32] The obvious objection to this proposition is that if Payment Claim No 6 made no reference to the SOPA, how could it have purported to be a valid payment claim under the SOPA? However, as Lee J also noted at [17] of Sungdo Engineering, there is no requirement for a payment claim to expressly state that it is made under the SOPA for it to be a valid payment claim under the said Act. At [18], Lee J went on to observe that our SOPA departed from the NSW Act which specifically provides under its section 13(2)(c) that a valid payment claim must state that it is made under the NSW Act. The judge also noted a comment by Mr Chow Kok Fong (“Mr Chow”):

[33] The defendant did not seek to argue that the adjudicator’s finding that Payment Claim No 6 was valid under the SOPA was unreasonable in the Wednesbury sense. As stated above, I am of the opinion that Payment Claim No 6 was a valid payment claim under the SOPA. To this extent, I agreed with the AR on the first issue determined by him (see [9] above).

[34] Finally, I ought to address the defendant’s arguments on this issue which were essentially premised on Lee J’s statements at [22] of Sungdo Engineering:

The defendant emphasized that as a private individual, it was all the more important that the plaintiff’s intention (for the payment claim to be one made under the SOPA) be communicated to him. At [34] of his skeletal submissions, the defendant argued that:

[35] However, the SOPA does not distinguish between laypersons and members of the construction industry. An opponent to this view might point out that under section 4(2)(a) of the SOPA, contracts relating to residential property are excluded from the application of the SOPA:

In this regard, I note that in response to a Member of Parliament’s query during the second reading of the SOPA Bill in Parliament, the Minister of State for National Development, Mr Cedric Foo Chee Keng stated the following (Singapore Parliamentary Debates, Official Report (16 November 2004) vol 78 at col 1135:

[36] Further, Christopher Chuah et al, Annotated Guide to the Building and Construction Industry Security of Payment Act 2004 (Sweet & Maxwell Asia, 2004) states at [4.6]:

[37] It appears therefore that section 4(2)(a) exempts renovation works done by home owners from the application of the SOPA because such contracts are generally of small value and not because the potential respondent under the SOPA is a private individual.

[38] Coming back to Lee J’s decision that for a document to amount to a valid payment claim under the SOPA, it must be intended to be such by the claimant and such intention must be communicated to the recipient, the Adjudicator viewed this (at [85] of his Determination) as a statement of best practice rather than a requirement of validity under the Act. Indeed, the SOPA does not impose such a requirement for validity. The only formal requirements are found in section 10(3) and reg 5(2) in that every payment claim shall be in writing, identify the relevant contract and contain details of the claimed amount. In any event, as I have found, Payment Claim No 6 was clearly intended by the plaintiff to be a payment claim under the SOPA on its face and if the defendant did not realise that, then it was probably a case of him not being aware of the SOPA or its implications.

section 10(2) of the SOPA and reg 5(1) of the SOPR

[39] The defendant contended that section 10(2) of the SOPA, read with reg 5(1) of the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed) (“the SOPR”), establishes a limitation period for the service of payment claims under the SOPA. Section 10(2) of the SOPA states:

The time that is prescribed is found in reg 5(1) of the SOPR:

Before the AR, counsel for the defendant took the position that the payment claim for work done in April 2010 had to be served by 30 April 2010 (see [24] of the AR’s decision). However, before me, counsel for the defendant submitted that for work done in April 2010, the last day for serving a payment claim was 31 May 2010.

[40] After citing the NSW CA decision in Fyntray Constructions Pty Ltd v Macind Drainage & Hydraulic Services Pty Ltd [2002] NSWCA 238 (“Fyntray”) at [26] of his decision, the AR opined as follows (at [27]):

[41] With respect, I think the AR’s interpretation of reg 5(1) is unjustified by the language used in the provision. The words “shall be served by the last day of each month following the month in which the contract is made” cannot be read as meaning that no payment claim can be served in the month in which the contract is made. The deadline set by reg 5(1) is the very last day for service but that does not prohibit a contractor from serving earlier if he has done the work in question and there is no contractual provision postponing entitlement to payment. For instance, let us assume there is a school directive for students to submit their assignments by the last day of each month following the month in which the assignment is given and an assignment is given in early January. The deadline for submission would therefore be the last day of February. Surely a diligent student who has completed his work in January is not thereby prevented from submitting his work in January. Asking someone to complete a task by a certain time is not telling him that he is not allowed to complete it earlier.

[42] The defendant cited commentaries by two local authors in support of the interpretation he contended for. The first was Chow Kok Fong, Security of Payments and Construction Adjudication (LexisNexis, 2005) (“Security of Payments and Construction Adjudication”) at page 557:

[43] The second commentary cited was Dr Philip Chan, Statutory Adjudication in Singapore (Sweet & Maxwell Asia, 2008) (“Statutory Adjudication in Singapore”) at paragraphs 3.2.8 and 3.2.9:

[44] In clarification of Dr Philip Chan’s (“Dr Chan’s”) position, the defendant tendered a paper entitled “Statutory adjudication and the standard building contract in Singapore – Is the Final Payment referable to statutory adjudication?”, which was submitted to COBRA 2008 (the construction and building research conference of the Royal Institution of Chartered Surveyors held in September 2008). That paper discussed the first case that went up to the High Court challenging the validity of an adjudicator’s determination, Tiong Seng Contractors (Pte) Ltd v Chuan Lim Construction Pte Ltd [2007] 4 SLR(R) 364 (“Tiong Seng Contractors”). In the concluding section at page 11 of the paper, Dr Chan raised certain queries that he felt ought to have been raised in respect of that case, the first of which I set out here:

Evidently, Dr Chan took the view that each payment claim must be served within a limitation period and it seems reasonable to conclude from the preceding excerpt that he understood the limitation period to be one month. I should also state that it does not appear from the judgment in Tiong Seng Contractors that the plaintiffs had contractually provided for a limitation period within which payment claims must be served.

[45] Although the wording of reg 5(1) is admittedly not free from ambiguity, it seems to me that Mr Chow’s and Dr Chan’s understanding of the said provision is pragmatic and sensible and I agree with them.

[46] The "Building and Construction Industry Security of Payment Act 2004 Information Kit" (“the Info Kit”) which was referred to in Tiong Seng Contractors at [18] was first published in 2005 by the Building & Construction Authority (see BCA website http://www.bca.gov.sg/SecurityPayment /others/SOP_infokit.pdf), which was also the main proponent of the SOPA. Section 2.3 of the Info Kit states as follows:

[47] The Info Kit understood the SOPA as envisaging payment claims to be made at monthly intervals if there is no period otherwise specified in the contract. A similar understanding appears in clause 32.1 of the Public Sector Standard Conditions of Contract for Construction Works 2008, which reads:

[48] The default position of requiring payment claims to be made at monthly intervals is a sensible arrangement allowing a potential respondent under the Act to be regularly informed of sums due under a construction contract. With this background understanding of the default requirement of payment claims to be made at monthly intervals, the text in reg 5(1) requiring that a payment claim (under a contract which does not specify when a payment claim shall be served) must be served by the last day of each month makes sense. Therefore, reg 5(1) means that, following the month in which the contract is made, payment claims must be served at monthly intervals by the last day of each month.

[49] On this understanding, it follows that payment claims for work done in a certain month must be served by the last day of the subsequent month. Thus, for example, for work done in April, payment must be claimed by 31 May. To require payment for work done in a certain month to be claimed by the last day of the same month, e.g. payment for work done on 29 or 30 April to be claimed by 30 April, may be much too onerous for the claimant. On the other hand, if payment for work done in a certain month is not claimed under the SOPA by the last day of the subsequent month, then a claim in respect thereof cannot be made under the SOPA anymore ie any later claim would fail under the SOPA for being outside the limitation period prescribed in reg 5(1).

[50] Taking the AR’s interpretation, there would be no limitation period under the SOPA or the SOPR within which payment claims must be served. The AR took the view (at [28] of the AR’s decision) that his interpretation was to be preferred because the SOPA was purposed “to provide persons who have performed construction work with a statutory entitlement to a progress payment.” In my view, the SOPA was meant to expedite payments to claimants so as to facilitate their cash flow and relieve their financial problems and to provide an expeditious adjudication process to resolve construction disputes in the interim (see [10] and [12] of Sungdo Engineering) and having a limitation period of almost two months is entirely consistent with that purpose. If a contractor is facing cash flow difficulties, I have no doubt that he would be diligent in making monthly payment claims well within that limitation period. In any event, even if he does not do so within the limitation period, that does not mean he will be left without any remedy. He can still pursue his claims by arbitration or by litigation (as the plaintiff has now done). I note that section 13(4) of the NSW Act contains a longer limitation period of 12 months for payment claims.

[51] It is also important to remember that once a valid payment claim under the SOPA is served, a process with strict timelines applies to the respondent. As Mr Chow noted in Security of Payments and Construction Adjudication (at page 541):

[52] Finally, I will address section 10(4) of the SOPA, which I set out below together with section 10(1):

[53] The effect of section 10(4) is that a claimant can only include in a payment claim amounts which were the subject of earlier payment claims. This is also in line with Dr Chan’s view at paragraph 3.2.8 of Statutory Adjudication in Singapore:

[54] If a respondent does not pay a claimant or serve a payment response, the claimant could pursue the adjudication process and make an adjudication application but these are the early stages of the contract and chances are that he may not wish to antagonise the respondent. I say “antagonise” because while a valid payment claim may make no reference to the SOPA, the claimant’s notice to the respondent of his intention to apply for adjudication (required by section 13(2) of the SOPA) would surely indicate that the parties are moving into contention mode. However, if the claimant does nothing, he will soon be out of time to make the adjudication application. This is because the claimant has a time limit of seven days within which to make the adjudication application once he is entitled to make it (see section 13(3)(a) of the SOPA).

[55] This is the moment that section 10(4) assists the claimant. Section10(4) allows him to bundle the amount from the earlier payment claim (for which the claimant might have decided not to make an adjudication application) into a subsequent one (subject to the stipulated six year time limit) and then later submit an adjudication application for the total sum claimed. Thus, the claimant’s right to adjudication under the SOPA is preserved even if he decides not to follow through with the adjudication process early on in the construction contract.

[56] Applying the legal analysis set out earlier to the facts of this case, work was done by the plaintiff at the latest in April 2010. The last day for service of the payment claim for work done in April 2010 was 31 May 2010. Since Payment Claim No 6 was served only on 2 June 2010, it was served out of time, albeit by only a couple of days. However, the plaintiff retains her usual legal remedies as noted by McDougall J at [217] of Chase Oyster: