Hua Rong Engineering Pte Ltd v Civil Tech Pte Ltd [2017] SGHC 179

Introduction

Summons No 1555 of 2017 (“SUM 1555”) is an application to set aside an adjudication determination (“the AD”) made under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOP Act”) by an adjudicator, Mr Chung Khoon Leong John (“the Adjudicator”), on 15 February 2017. SUM 1555 arises in the context of an ongoing application for leave to enforce the AD, vide, Originating Summons No 289 of 2017 (“OS 289”).

The facts

The applicant in OS 289 and the respondent in SUM 1555 is Hua Rong Engineering Pte Ltd (“HRE”). The respondent in OS 289 and the applicant in SUM 1555 is Civil Tech Pte Ltd (“CTP”).

The parties were involved in two construction projects by the Land Transport Authority, the T211 project (the Bright Hill MRT station of the Thomson–East Coast Line) and the C933 project (the Jalan Besar MRT station of the Downtown Line). CTP was a sub-contractor of the main contractor, which is not involved in these proceedings. HRE in turn was a sub-contractor engaged by CTP to supply labour for construction relating to both the T211 project and the C933 project. I shall refer to the contracts between CTP and HRE relating to the two projects as “the T211 contract” and “the C933 contract” respectively.

On 6 December 2016, HRE submitted Daywork Claim No 13 for the amount of $601,873.40. This was for work done in respect of the T211 contract for the period from 1 April to 30 July 2016. CTP accepted this claim and acknowledged this amount as owing to HRE, but in CTP’s Payment Certificate 9 (which the parties accepted as having functioned as a payment response) it certified a negative value, ie, that nothing was due to HRE. This was because CTP alleged that HRE had made false and fraudulent payment claims under the C933 contract when HRE had not in fact performed those works. Thus, as stated in Payment Certificate 9, CTP claimed that it had overpaid HRE in respect of the C933 contract and sought to withhold a sum of $1,468,276.32.

On 11 January 2017, HRE lodged an adjudication application in respect of Daywork Claim No 13 after giving due notice to CTP. The latter in its adjudication response relied on the same grounds (fraud and overpayment in respect of the C933 contract) that it had stated in Payment Certificate 9. CTP argued that the fraud and overpayment in respect of the C933 contract entitled CTP to set off this amount (ie, $1,468,276.32) from the payment claim of $601,873.40 under the T211 contract. The dispute was referred to the Adjudicator, who ruled that CTP could not as a matter of law set off a counterclaim based on another contract. In his view, the SOP Act only allowed him to take into consideration cross-claims, counterclaims and set-offs arising under the same construction contract. Hence, he ruled that CTP had to pay HRE the amount of $601,873.40.

CTP was dissatisfied with the decision of the Adjudicator and filed SUM 1555 which is now before this court.

The issues

The pivotal issue in this summons is whether the Adjudicator was right to confine his deliberation to matters concerning the T211 contract, to the exclusion of the C933 contract. Put more generally, the question is whether, in an adjudication under Part IV of the SOP Act, a respondent is entitled to raise, and an adjudicator is entitled to consider, cross-claims, counterclaims and set-offs which arise outside of the context of the particular contract which is the subject of the payment claim in question. This is essentially a question of jurisdiction, as it concerns whether cross-claims, counterclaims and set-offs of that nature fall within the scope of matters which an adjudicator is empowered to consider and decide in an adjudication application.

In order to address this main question, it is necessary to closely examine two provisions in the SOP Act which are especially germane to this case. The first provision is s 15(3), the relevant portion of which prohibits a respondent from including in an adjudication response, and prohibits an adjudicator from considering, “any reason for withholding any amount, including but not limited to any cross-claim, counterclaim and set-off” unless it was included in the payment response. The other key provision is s 17(3), which lists the matters which the adjudicator “shall only have regard” in the determination of the adjudication application, thereby limiting the scope of matters that the adjudicator can consider.

In addition, other provisions of the SOP Act as well as, in a supplementary role, the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed) (“the SOP Regulations”) provide necessary context for the analysis. In line with the purposive approach to statutory interpretation, I must consider the SOP Act as a whole and from a broader perspective in order to ascertain whether the proposed reading of the aforesaid provisions are congruous with, and accord with, the overall purposes and objectives of the SOP Act.

In addition to the main issue, two other issues are whether the Adjudicator breached s 17(3) of the SOP Act (which sets out the matters which an adjudicator shall consider) and whether CTP’s allegations of fraud and unjust enrichment are made out.

The parties’ submissions

Following the initial round of written submissions and the first oral hearing, I formed the view that further submissions were necessary on issues including the purpose of the SOP Act and the position taken by other jurisdictions in relation to similar legislation. There were a total of three sets of written submissions by HRE, four sets of written submissions by CTP, and two oral hearings before me. I summarise the salient points below.

CTP’s submissions

CTP submits that the plain reading of s 15(3) of the SOP Act permitted the Adjudicator to consider any cross-claim, counterclaim or set-off arising from another contract that was not the subject matter of the payment claim in question, so long as that claim or set-off was included in the payment response. Thus, the Adjudicator should have allowed CTP to set-off CTP’s claim in respect of the C933 Contract against HRE’s claim under the T211 contract.

CTP argues that the references in s 15(3) to “cross-claim” and “counterclaim” indicate that a respondent is entitled to raise a cross-claim or counterclaim arising from another contract. If Parliament had intended to confine the payment response to the same contract, it would not have included the references to “cross-claims” and “counterclaims”, as these suggest that it is permissible for an adjudicator to consider separate and independent claims from a contract or contracts other than the contract which was the subject of the payment claim in question. CTP further contends that if Parliament had intended to limit s 15(3) to cross-claims, counterclaims or set-offs arising from the same contract, clear language along those lines would have been used.

CTP places reliance on s 36(4) of the SOP Act, which provides that nothing in the SOP Act (except for s 36(1), which effectively prohibits contracting out of the SOP Act) shall “limit or otherwise affect the operation of any other law in relation to any right, title, interest, privilege, obligation or liability of a person arising under or by virtue of a contract or an agreement.” CTP further relies on the common law presumption that a statute does not, in the absence of either express wording or a clearly evinced intention, limit the non-statutory (common law and equitable) rights which individuals have. CTP also refers to the similar principle applicable to contractual interpretation, set out in Gilbert-Ash (Norton) Limited v Modern Engineering (Bristol) Limited [1974] AC 689 (“Gilbert-Ash”), that “one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption” (at 717, per Lord Diplock). On these bases, CTP argues that s 15(3) should be read consistently with the rights of cross-claim, counterclaim and set-off arising under the common law and in equity. Accordingly, CTP asserts that it was entitled to raise the alleged fraudulent claims relating to the C933 contract as a cross-claim, counterclaim or set-off against HRE’s payment claim in the T211 contract.

Furthermore, CTP adds that s 17(3)(d) requires an adjudicator to have regard to the payment response. In this case, CTP had explained in the payment response that there were fraudulent claims made by HRE under the C933 contract. This resulted in HRE being enriched to the amount of $1,468,276.32. Hence, CTP was entitled to withhold payment relating to the T211 contract.

CTP buttresses its arguments with a comparison to the approach taken in other jurisdictions in relation to similar legislation: specifically, that in the United Kingdom, the Australian states of New South Wales and Victoria, and New Zealand. CTP’s argument is that with the exception of Victoria (which has an express statutory exclusion of cross-contract cross-claims, counterclaims and set-offs), none of these jurisdictions have interpreted their legislation as excluding cross-contract cross-claims, counterclaims and set-offs.

CTP also raises the policy argument that HRE’s interpretation (which, for convenience, I shall refer to as “the single-contract interpretation”) would adversely affect the standard form contracts used in the building and construction industry.

CTP further submits that the Adjudicator’s refusal to consider the payment response and the adjudication response was not a mere error of law (which would, without more, not be a reason to disturb the AD: see Chow Kok Fong, Security of Payments and Construction Adjudication (LexisNexis, 2nd Ed, 2013) at para 19.37), but one of a type requiring the AD to be set aside. CTP also makes a number of substantive factual and legal arguments regarding the validity of its claim under the C933 contract which is the subject of its cross-claim, counterclaim or set-off.

HRE’s submissions

HRE urges the court to dismiss this application on the basis that the SOP Act, and in particular s 15(3), requires that any withholding of a payment relate to the same contract that is the subject of the adjudication application. Hence, the Adjudicator was right to disregard the reasons for withholding stated in the payment response as they were an attempt to raise cross-claims, counterclaims or set-offs arising from a different contract, ie, the C933 contract. The rest of HRE’s submissions are mostly responsive to those of CTP.

My decision

I shall now deal with the various issues that I have raised above (at [7]). For ease of reference, I will hereinafter refer to the reasons for withholding payment of the sums stated in the payment response as “withholding reasons”.

Issue 1: Whether s 15(3) of the SOP Act allows cross-contract cross-claims, counterclaims or set-offs, or whether it is restricted to withholding reasons arising under the same contract

The overall purpose of the SOP Act

Before I deal with the main issue in these proceedings, I would like to state the purpose of the SOP Act so as to place the issue in its proper context. This is necessary not only as a matter of common sense, but also because s 9A(1) of the Interpretation Act (Cap 1, 2002 Rev Ed) mandates the court to prefer “an interpretation that would promote the purpose or object underlying the written law (whether that purpose or object is expressly stated in the written law or not)”.

As observed in W Y Steel, the SOP Act was intended to solve this problem in the following manner:

At the same time, Parliament recognised that quick justice may not be perfect. An adjudication process that was speedy enough to ensure that payment was made before its withholding became commercially dangerous was necessary. It was acknowledged that the adjudication process might not be expected to provide the same level of scrutiny and sophisticated legal analysis as would be available before a court or an ordinary arbitral tribunal. In that sense, adjudication under the SOP Act delivers a “roughshod” kind of justice, which is compensated for by the fact that the adjudication only has “temporary finality”, ie, finality until the dispute is “reopened at a later time and ventilated in another more thorough and deliberate forum” (W Y Steel at [22]). As the court further observed in W Y Steel (at [20]), one aspect of this notion of temporary finality is:

As this passage recognises, arguments concerning cross-claims, counterclaims and set-offs can easily grow out of control, such that they can only be resolved through long and tedious deliberation and analysis. Implicit here is the recognition that in order to fulfil its purpose, an SOP Act adjudication cannot be expected to embrace every matter which a party would be entitled to raise in litigation or arbitration. Some arguments are best pursued in another forum.

Bearing this important backdrop in mind, I turn to the specific provisions of the SOP Act which guide me in the present case.

The relevant provisions of the SOP Act

As I earlier stated, ss 15 and 17 of the SOP Act are of particular relevance. However, some of the earlier provisions of the SOP Act (namely, ss 2, 5, 10 and 12) which set out the relationship between progress payments, payment claims, and adjudication applications are also important. This is because the language used in those provisions casts light on whether the adjudication process was intended to be confined to a single contract, or to potentially encompass matters relating to multiple contracts.

In this connection, the recent decision of Vinodh Coomaraswamy J in Rong Shun Engineering & Construction Pte Ltd v C.P. Ong Construction Pte Ltd [2017] SGHC 34 (“Rong Shun”) is instructive and merits reproduction at some length. That case concerned whether a payment claim, and an adjudication application based thereon, can arise out of more than one contract, or whether a rule of “one payment claim, one contract” applied. Coomaraswamy J considered the relevant provisions (namely, ss 2, 5, 10 and 12 of the SOP Act) and concluded that such a rule did apply, for the following reasons:

To summarise the reasoning in the above passage from Rong Shun, Parliament’s consistent use of the phrase “a contract”, and variations thereon similarly adopting the singular form, indicated that payment claims as well as adjudications under the SOP Act were both intended to be confined to a single contract. Each adjudication application is to relate to one payment claim, and each payment claim is to relate to one contract.

I note that although Rong Shun was the first judicial decision to establish this position, Coomaraswamy J’s astute analysis was not unprecedented. Reasoning along similar lines, albeit in a necessarily truncated form, had been employed by the adjudicator Mr Raymond Chan in AJB Pte Ltd v AJC Pte Ltd [2011] SCAdjR 588 (“AJB”) (at [36]–[45]). In that adjudication determination, Mr Chan noted an additional provision which reinforced his conclusion: reg 7(2) of the SOP Regulations, which provides that every adjudication application shall “contain the particulars of the relevant contract” [emphasis added]. Again, the word is used in the singular form, implying that there can only be one “relevant contract” for the purpose of an adjudication.

To the provisions discussed in Rong Shun and AJB, I would add the following:

(a) Section 11(1) of the SOP Act, which requires “a respondent named in a payment claim served in relation to a construction contract” [emphasis added] to respond to the payment claim.

(b) Section 11(1)(a), which states that the payment response to the claimant has to be done “by the date as specified in or determined in accordance with the terms of the construction contract” [emphasis added].

(c) Section 11(3), which indicates what should be included in the payment response and uses the phrase “[a] payment response provided in relation to a construction contract” [emphasis added].

(d) Section 15(3)(a), which clearly refers to “a construction contract” [emphasis added].

(e) Regulation 6 of the SOP Regulations, which uses (in reg 6(1) as well as reg 6(2)) the phrase “payment response provided in relation to a construction contract” [emphasis added].

These provisions were highlighted by HRE both in this application and before the Adjudicator, who referred to them in the AD (at [34]). CTP was unable to draw the court’s attention to any provision that indicates that an adjudicator can consider matters relating to any other contract between the parties.

I am in full agreement with the position stated in Rong Shun and AJB. That said, the question before me in this application is not whether a claimant may base his claim on multiple contracts, but whether a respondent may rely on withholding reasons that arise in relation to multiple contracts. In theory, the answer to both questions need not be the same: perhaps a claimant can only rely on one contract as the basis for a payment claim, but a respondent is entitled to rely on any contract (or, indeed, any non-contractual reason) to resist that claim. That would, however, be a curious conclusion, and in determining whether that is indeed what Parliament intended, the reasoning and conclusion in Rong Shun and AJB provide a useful starting point and an indication of the general philosophy underlying the SOP Act.

This brings me to the provisions with which this application is most closely concerned. Section 15 of the SOP Act deals with adjudication responses and it reads as follows:

The most pertinent part of this section is subsection (3), the salient parts of which I have italicised above.

Additionally, s 17 of the SOP Act concerns, among other things, an adjudicator’s subject-matter jurisdiction, and provides that one of the matters to which an adjudicator shall have regard is “the provisions of the contract to which the adjudication application relates” [emphasis added] (see s 17(3)(b) of the SOP Act).

The crucial question with regard to ss 15(3) and 17(3)(b) is whether the language used indicates that Parliament intended that the same position which applies to payment claims applies as well to withholding reasons which can be considered in an adjudication under the SOP Act – namely, that they must arise out of a single contract only. Logically, this must be so. The language used is functionally identical: just as the SOP Act refers to “a” or “the” contract in the provisions concerning progress payments, payment claims and adjudication applications, it also refers to “a” or “the” contract in the provisions concerning adjudication responses and withholding reasons. It is this clear language which HRE primarily relies on, and which the Adjudicator found to be determinative (the AD at [52]–[54]).

The policy justification for single-contract interpretation

The analysis thus far has been primarily textual in nature. Looking now beyond the language used in the relevant provisions, I observe what is, to my mind, a convincing reason of policy (not as a freestanding interpretation of the law, but one that takes into account the object and purpose of the SOP Act as well as the motivations underlying Parliament’s introduction of the SOP Act) which militates toward adopting the single-contract interpretation. That reason is essentially what was identified in Rong Shun ([27] supra) (at [48]), where it was observed that:

Coomaraswamy J was referring in the above passage to the situation if a claimant were permitted to bring a payment claim and an adjudication application based on multiple contracts, but in my view his comments apply equally, mutatis mutandis, to the present scenario. Just as bringing in multiple contracts as the basis for a claim would unduly prolong and complicate an adjudication, so, too, would bringing in multiple contracts as the basis for cross-claims, counterclaims or set-offs. This cannot have been the intention of Parliament; otherwise, what was meant to be a simple, quick and fair process for the resolution of payment disputes may instead become entangled in a web of contractual complexity which would dramatically slow down the adjudication process.

Indeed, it appears to me that if CTP’s interpretation were to be adopted, it would have consequences going beyond requiring an adjudicator to consider multiple construction contracts in a single adjudication. CTP’s interpretation implies that there is no limit to the scope of matters which an adjudicator must consider as potentially valid withholding reasons in an adjudication determination. An adjudicator may, if CTP is right, be called upon to decide legal and factual issues relating to anything under the sun – for instance, contracts other than construction contracts, or tortious claims unrelated to construction contracts – so long as they are asserted to give rise to a liquidated monetary claim by the respondent against the claimant.

Such an interpretation appears to me to be unrealistic given the practical limitations of adjudication under the SOP Act. Aside from the tight timelines that apply (which the Adjudicator noted in [59] of the AD), I note as well that under the eligibility requirements for appointment as an adjudicator under s 29(1) of the SOP Act, read with reg 11(1) of the SOP Regulations, legal training is only one of many possible qualifications for a person to serve as an adjudicator. Thus, while an adjudicator will invariably be well-equipped to deal with matters arising in connection with a construction (or supply) contract, he or she may not be equally well-equipped to deal with the legal intricacies from diverse areas of the law or with factual controversies arising in different contexts. I am not the first to foresee this undesirable consequence. As Young JA observed (albeit in obiter) of similar New South Wales legislation in Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157 (“Perform”) (at [135]):

It was for that reason that Young JA expressed doubts (at [141]) as to whether equitable set-off could be raised in such an adjudication, although it was not necessary to decide the issue in that case, as the cross-claim there had not been listed in the payment response.

In the present dispute, it is true that the Adjudicator was in fact an experienced solicitor, and that the matters raised by CTP fell well within those ordinarily dealt with by an adjudicator, albeit they pertained to a different construction contract. But this was merely fortuitous: the appointed adjudicator could have had any approved background, and CTP would, on its own case, have been entitled to raise any cross-claim, counterclaim or set-off (or, indeed, any other withholding reason) arising from any set of facts. The point remains that CTP’s expansive reading of the withholding reasons available under an SOP Act adjudication, if accepted, could potentially require an adjudicator to consider an unbounded universe of claims and arguments. This would cut against the statute’s purpose of offering a contained and expedited means of giving temporary finality to payment disputes. It would also open the process up to abuse: an unscrupulous main contractor could, if he wished, bring in a multitude of dubious arguments, including cross-claims, counterclaims and set-offs, in order to enlarge and obfuscate the primary payment dispute, bog down the adjudication process, and overwhelm the sub-contractor bringing the claim. The philosophy of “pay now, argue later” which lies at the heart of the concept of temporary finality (see the passage from W Y Steel at [20], quoted at [24] above) would be hollowed out.

For these reasons, I am of the view that both the language of the SOP Act and the SOP Regulations, and their underlying object and purpose, require the court to adopt the single-contract interpretation.

Counter-arguments raised by CTP

Naturally, CTP seeks to persuade me that the single-contract interpretation is, despite the above reasons, not the correct interpretation. It raises five main counter-arguments to that end. Although I appreciate CTP’s counsel’s assiduous research on these points, I am ultimately unconvinced. I shall discuss each counter-argument in turn.

(1) The wording of s 15(3) of the SOP Act – would the interpretation proposed by HRE require it to be drafted differently?

First, CTP argues that the wording of s 15(3) is unclear, and that if Parliament had intended (as HRE contends) to confine the cross-claims, counterclaims and set-offs only to the same construction contract, then subsection (3) should have been drafted in this manner:

CTP asserts that the fact that such language was not used shows that Parliament intended to allow respondents to raise cross-contract cross-claims, counterclaims and set-offs. CTP further argues that the words “including but not limited to” confirm that the withholding reasons are not limited in scope.

I do not agree. As the Adjudicator noted (in the AD at [58], regarding the Court of Appeal’s comments on s 15(3) of the SOP Act in W Y Steel ([22] supra)), the function of s 15(3) is to set out what a respondent shall not raise and an adjudicator shall not consider. If the words “which does not arise in relation to the same contract” had been added, it would mean that the respondent shall not include in the adjudication response any cross-claim, counterclaim and set-off which does not arise in relation to the same contract. In other words, the withholding reasons in the payment response would have to relate to other contracts and not the contract from which the payment claim originated. CTP’s proposed hypothetical wording seems absurd. This may not be the intention of CTP’s suggestion and I understand what CTP is advocating, but the point remains that it is simply untrue that Parliament would have needed to add any further words to support the single-contract interpretation. The words which CTP suggests could have been added would, in fact, have changed the meaning of the provision entirely.

As for the words “including but not limited to”, CTP appears to have misunderstood the scope of this phrase. The function of s 15(3) is to prohibit the respondent from raising withholding reasons unless the reasons are in the payment response that is served on the claimant. Thus, the significance of “including but not limited to” is that it broadens the prohibition. Without that phrase, s 15(3) might give the impression that only cross-claims, counterclaims and set-offs need to be listed in the payment response in order to be raised and considered in adjudication. By adding that phrase, Parliament made it clear that, regardless of its precise nature, a withholding reason could not be raised or considered in adjudication unless it had been listed in the payment response. The phrase could not be read to imply the reverse, ie, that there is no further restriction other than the requirement of having been listed in the payment response.

On a related note, CTP also argues that since there are some places in the SOP Act (namely, ss 10(4), 24(3) and 26(5)(b)) where the phrase “the same contract” is used, the absence of the word “same” elsewhere would imply that in the latter case, no such restriction applied. I find this logic too tenuous. Those other provisions all concern payment claims or defaults occurring in the past. It is natural and prudent, therefore, for the drafters to have included the word “same” there, in order to make clear that those provisions would not apply to past payment claims or defaults in relation to different contracts between the same parties. It does not follow that every other reference to a contract which lacks the modifier “the same” should be read as meaning “the same or a different contract”. In my view, the instances referred to by CTP only serve to further emphasise the fact that the SOP Act is meant to operate on, and resolve disputes concerning, one contract at a time, and not to entangle multiple contracts in a single dispute.

In my view, s 15(3) as drafted makes it crystal clear, when read in its proper context, what the true position is: where a construction contract is concerned, withholding reasons (of whatever nature) can only be considered if they were included in the payment response and they arise in relation to the same contract. The second conjunctive requirement is admittedly implicit, but that does not mean it is unclear.

(2) Section 36(4) of the SOP Act and the Gilbert-Ash principle

Secondly, CTP relies on s 36(4) of the SOP Act, the principle in Gilbert-Ash, and the principle that Parliament should not be taken to have removed common law and equitable rights in the absence of express wording or a clearly evinced intention. I have summarised this argument in sufficient detail at [14] above, but in short, CTP argues that s 15(3) should be read to preserve a respondent’s common law and equitable rights, such that CTP was entitled to set-off the amounts that were paid to HRE for false and fraudulent claims arising from the C933 contract against the claim under the T211 contract.

CTP’s argument is erroneous. The common law and equitable rights of cross-claim, counterclaim and set-off are indeed available and are expressly provided in s 15(3). CTP would be entitled to rely on them as long as they were stated in the payment response. However, the scope of these common law and equitable rights is limited to the same construction contract that gives rise to the adjudication application. This interpretation does not offend s 36(4), as that provision only operates “except as provided in subsection (1)”. Referring back to s 36(1), that subsection in turn provides that “[t]he provisions of this Act shall have effect notwithstanding any provision to the contrary in any contract or agreement.” The question in the present application, which is also the question which was before the Adjudicator, is this: what is the effect of s 15(3)?

For the reasons earlier discussed, I agree with the Adjudicator that the effect of s 15(3) is clearly and implicitly to restrict the scope of withholding reasons to those arising in relation to the contract that gave rise to the payment claim and not in relation to other or multiple contracts. Once that has been determined, s 36(4) can be of no assistance to CTP. Likewise, I am not disregarding the presumption against the removal of rights. Rather, I am of the view that the SOP Act, properly understood, does clearly evince Parliament’s intention to restrict the scope of potential withholding reasons to those relating to the construction contract at hand.

(3) The words “cross-claim, counterclaim or set-off” – do they imply that cross-contract withholding reasons can be considered?

Thirdly, CTP argues that the words “cross-claim, counterclaim or set-off”, by their very definitions, included cross-contract situations.

This point can be dealt with summarily. It is indisputable that the three words are not, by their definitions, necessarily limited to a single-contract context. They are not inherently so restricted – they may arise in relation to a single contract, or multiple contracts. I do not think the Adjudicator meant to suggest otherwise. However, the question in this dispute is not whether these words were necessarily and in every instance limited to a single-contract context, but rather, whether the SOP Act included an implicit single-contract restriction on withholding reasons generally.

(4) The position taken by other jurisdictions

Fourthly, CTP argues that the United Kingdom, the Australian state of New South Wales, and New Zealand interpret their equivalent legislation as allowing cross-contract cross-claims, counterclaims and set-offs to be raised and considered, and that Singapore should follow suit.

The United Kingdom

With regard to the United Kingdom, I note first that any jurisprudence or case law relating to the previous version of the Housing Grants, Construction and Regeneration Act 1996 (c 53) (UK) (“HGCRA”) is of little guidance. This is because the previous s 110(2)(b) of the HGCRA, which expressly allowed cross-contract set-off (“set-off or abatement… by reference to any sum claimed to be due under one or more other contracts” [emphasis added]), has since been repealed by Part 5 of Schedule 7 of the Local Democracy, Economic Development and Construction Act 2009 (c 20) (UK) (“LDEDCA”). As for the post-amendment position, it appears that the issue has yet to be tested in court. CTP was only able to point to two academic sources for the proposition that cross-contract set-off continues to be available under the post-amendment HGCRA.

The first is Dominique Rawley QC et al, Construction Adjudication and Payments Handbook (Oxford UP, 2013) (at para 13.138), which states:

No authority for this proposition, and no further elaboration as to the reasoning behind this proposition, is provided. With respect, this appears to be merely an unsupported opinion of the author, and it is difficult to give much weight to it for that reason.

The second authority cited by CTP is Crispin Winser, “Set off in adjudication” (2014) 30(2) Construction Law Journal 103, which first notes the silence in the amended HGCRA and the LDEDCA and then states (at 105):

It is difficult to see how this advances CTP’s case. The question in the present application is not whether equitable set-off can be raised in an SOP Act adjudication but rather whether it has to be one that arises in relation to the same contract that the adjudication concerns. Winser’s article has nothing to say about that. Moreover, like the first academic source, no authority or reasoning is given for this particular point.

New South Wales, Australia

CTP recognises that there is one unfavourable authority in the form of the Perform case ([38] supra), in which Young JA expressed doubt as to the applicability of equitable set-off in adjudications under the New South Wales Building and Construction Industry Security of Payment Act 1999. However, CTP seeks to downplay the significance of Perform, as Young JA’s comments were obiter and were not reasoned in great detail. While it is true that the comments were obiter and not based on any lengthy examination of the authorities, I find Young JA’s observation on the scope of an adjudicator’s expertise to be a sensible one.

Although I do not consider Perform to weigh strongly against CTP, it also cannot be said that the New South Wales case law does much to support CTP’s proposition. The only case which CTP asserts as positive authority is Downsouth Constructions Pty Ltd v Jigsaw Corporate Childcare Australia Pty Ltd [2007] NSWC 597. This was a case which was decided on the basis that the respondent had failed to properly set out its withholding reasons in the payment schedule and/or had failed to make out a set-off (at [62]–[63]). The issue of whether a cross-contract set-off or other cross-contract withholding reasons could be validly raised was apparently never argued by either party, and the court at no point discussed it. Thus, even if the respondent had succeeded in establishing the set-off, the case would be of limited persuasive value. Its value is diminished even further given that the respondent’s attempt to raise the set-off was instead dismissed on other grounds, removing the necessity to consider the cross-contract issue entirely.

New Zealand

The sole authority relied on from New Zealand is the case of Cube Buildings Solutions Limited v Thomas Frederick Mazlin King and Judith Ruth King, CIV 2009 409 000034 (High Court of New Zealand, Christchurch Registry). That case concerned s 79 of the Construction Contracts Act 2002 (New Zealand), which prevents the court from giving effect to set-offs unless they are the subject of a judgment or are undisputed. The specific question was whether the inclusion of two set-offs which did not meet those requirements meant that the whole payment schedule was invalid. The court held that their inclusion did not invalidate the whole payment schedule (at [62] and [64]–[65]).

It is rather difficult to see how this case is relevant to the present application. The New Zealand court was simply not concerned with whether cross-contract set-offs were possible under the New Zealand statute, and indeed, it is unclear whether the set-offs raised in that case were cross-contract or not.

Victoria, Australia

For completeness, CTP recognises that Victoria prohibits cross-contract set-offs, cross-claims and counterclaims, although this is pursuant to an express provision to that effect.

Conclusion on the survey of other jurisdictions

Simply put, I am not persuaded that the jurisdictions surveyed indeed supported CTP’s position. CTP is ultimately unable to point to a single clear example of a court interpreting a statute like the SOP Act as allowing cross-contract withholding reasons to be raised in adjudication. The question has yet to be ruled on by the respective courts of these jurisdictions, and there is nothing to indicate that they might not, in time, arrive at the same single-contract interpretation that I set out earlier.

Indeed, it seems that the overall legislative and judicial attitude in these other jurisdictions is generally suspicious of cross-contract cross-claims, counterclaims and set-offs, even though they have not (with the exception of Victoria) taken the further step of expressly excluding such remedies from their construction adjudication frameworks. In the United Kingdom, for instance, there was considerable discomfort and dissatisfaction expressed concerning the availability of cross-contract set-offs among the respondents surveyed by Sir Michael Latham in his 2004 supplementary report on possible amendments to the HGCRA. The same is true of the respondents surveyed for the follow-up consultation by the UK Department of Trade and Industry and the Welsh Assembly Government in 2005, the results of which were published as a report entitled “Improving Payment Practices in the Construction Industry” in 2006 (“the 2006 report”). This discomfort apparently stemmed from the same concern raised in W Y Steel ([22] supra): namely, the complexity and delay to cash-flow which could result. There were, however, disagreements as to the degree to which equitable set-offs should be permitted (see paras 7–7.2 of the 2006 report). Ultimately, in part due to what were seen as definitional problems as a matter of drafting, no express prohibition was introduced in the 2009 amendments. Nonetheless, the fact that the express provision permitting cross-contract set-offs was removed suggests that the legislature was not keen on encouraging such set-offs to be raised. Although such doubts (like those expressed by Young JA’s obiter in Perform ([38] supra)) are certainly not determinative, they further fortify my conclusion that the single-contract interpretation is justified as a matter of policy in light of the object and purpose of the SOP Act.

(5) Implications for the standard form contracts used in the construction industry

Fifthly and finally, CTP argues that adopting the single-contract interpretation would be harmful to the construction industry because it would affect many commonly used standard form contracts. CTP refers to the wording of the Public Sector Standard Conditions of Contract for Construction Works 2014 (7th Ed) (“PSSCOC”), the Land Transport Authority Conditions of Contract (“LTACOC”), the Articles and Conditions of Building Contract (Lump Sum Contract, 8th Ed, 2008) issued by the Singapore Institute of Architects (“SIACOC”), and the Real Estate Developers’ Association of Singapore Design and Build Conditions of Contract (3rd Ed, 2010) (“REDAS”). The relevant wording used in the more relevant provisions of these standard form contracts can be summarised in the following table:

From this, I draw the following conclusions:

(a) The PSSCOC allows same contract set-off but does not expressly allow cross-contract set-off as it states “under the Contract or in any other way”. It might be argued that this impliedly allows cross-contract set-off, but that is not clearly provided.

(b) The LTACOC expressly allows same-contract set-off, as indicated by the words “any liabilities of the Contractor arising under this Contract”. The phrase “any monies whatsoever” modifies the phrase “which may at any time be due to the Contractor”, ie, the payments against which the Authority is entitled to raise a set-off, rather than the rights giving rise to a set-off. There is no mention of cross-contract set-off.

(c) The SIACOC expressly allows same-contract set-off. There is no mention of cross-contract set-off.

(d) The REDAS expressly allows deductions to be made, without specifying whether they may arise out of a different contract.

Based on the above, it appears that only the PSSCOC could arguably provide for cross-contract set-off. The other standard forms surveyed either provide for same-contract set-off (which is not affected by the single-contract interpretation) or do not specifically contemplate cross-contract set-off (in which case the exclusion of cross-contract set-off for the purpose of an SOP Act adjudication will not take away anything that the parties actively expect to have).

What would be the implications of the single-contract interpretation on the PSSCOC? The PSSCOC, although widely used for public projects, is ultimately still a pro forma contract adopted by the agreement of the parties. As far as any dispute resolution mechanism that operates outside the SOP Act regime is concerned, the parties are free to use their privately contracted rights as agreed. Once a dispute between the parties enters the SOP Act adjudication system, however, it is the SOP Act that governs. Parties will have to adapt their expectations to what the statute provides; it is not the statute that must bend to their contractual expectations. Therefore, even if, assumingly the PSSCOC permits cross-contract set-off, there is nothing unusual or problematic about the fact that the respondent cannot rely on that contractual term to frustrate the claimant’s adjudication payment claim under the SOP Act.

In any event, I am not convinced that the single-contract interpretation would lead to any severe adverse effects on the industry. CTP’s sole argument to the contrary is that the exclusion of cross-contract set-offs and other withholding reasons from an SOP Act adjudication would be unfair to the main contractor and could have adverse implications, due to the public nature of these works, on the public purse. CTP makes this argument through the following hypothetical scenario:

I cannot agree that there is immense unfairness in the above scenario. This hypothetical employer has received satisfactory performance in respect of two projects and will be required to make payment in respect of that performance. If the sub-contractor later makes payment claims followed by adjudication applications in respect of the three remaining projects, the employer will at that point be entitled to raise the unsatisfactory performance or non-performance of the sub-contractor as a reason to withhold payment in respect of those three payment claims/adjudication applications. It is difficult to see how any of this could prejudice the public purse.

Conclusion on the correct interpretation of s 15(3) of the SOP Act

To summarise, I find that when the SOP Act is looked at from a broad perspective with its object and purpose in mind, it is clear that Parliament intended to limit the adjudication procedure to a single construction contract. The Adjudicator’s decision on this point cannot be faulted, and it is therefore unnecessary to address the further question of whether the (non-existent) error by the Adjudicator to disallow CTP’s set-off arising from the C933 contract amounted to an error as to jurisdiction or a breach of natural justice.

Issue 2: Whether the Adjudicator breached s 17(3) of the SOP Act

CTP further argues that in finding that the cross-contract set-off should be disregarded, the Adjudicator breached s 17(3) of the SOP Act.

Section 17(3) prescribes the scope of the adjudicator’s jurisdiction. It reads:

Sub-paragraphs (b) and (d) above are salient in these proceedings. CTP argues that under s 17(3)(d), the Adjudicator must consider the payment response and the adjudication response, and that he failed to do so as he had indicated in the AD that he was constrained by s 17(3)(b).

Section 17(3)(b) clearly requires the adjudicator to focus on “the provisions of the contract to which the adjudication application relates”. In this case, that would be the T211 contract as the adjudication application was lodged with the Singapore Mediation Centre by HRE on 11 January 2017. This relates to Daywork Claim No 13 of the T211 contract. HRE did not lodge an adjudication application for any payment claim pertaining to the C933 contract.

Under s 17(3)(d), the Adjudicator was required to consider CTP’s payment response. The payment response and the adjudication response were focused primarily on CTP’s belief that the purported false and fraudulent claims were made and subsequently approved and paid to HRE under the C933 contract. Hence, CTP wanted to withhold Daywork Claim No 13 of the T211 contract on the basis that it was entitled to set off this claim against the payments that it claimed to have wrongfully made under the C933 contract to HRE. CTP did not deny that HRE was otherwise entitled to Daywork Claim No 13.

It stands to reason that although s 17(3)(d) requires an adjudicator to consider a respondent’s payment response and adjudication response, that directive is still subject to s 15(3), which concerns the kinds of withholding reasons which may be raised and considered in an adjudication. Thus, if an adjudicator considered a payment response and/or adjudication response (as required under s 17(3)(d)) and found that it included matters which should not be considered under s 15(3), he would then disregard those matters (but not without having first directed his mind to whether they should properly be considered).

In the present case, the Adjudicator had considered and comprehensively summarised the various allegations of fraudulent claims postulated by CTP in his adjudication deliberation (at [22]–[32] of the AD). However, the Adjudicator also stated (at [49]) as follows:

In other words, the Adjudicator did consider the adjudication response and the payment response. This does not necessarily mean that the Adjudicator had to accept CPT’s contentions in those responses. The Adjudicator was right to ascertain that the central issue was whether CTP was legally entitled to set-off claims from a different contract against monies due to HRE under the contract to which the adjudication relates.

Ultimately, the Adjudicator came to the decision that he had to reject the allegations in the payment response and the adjudication response. He did so on the combined basis of his interpretation of s 15(3) of the SOP Act (which, as I earlier stated, is in my view correct) and the directive in s 17(3)(b) to the adjudicator to focus on “the contract to which the adjudication application relates”. Although the Adjudicator rightly recognised that he had to also consider the payment response and adjudication response, he concluded (at [59]) that:

Not only do I agree with the Adjudicator’s conclusion, I find that his reasoning here clearly shows that he had properly considered the contents of the payment response and adjudication response. His rejection of the withholding reasons raised therein was thus a product of that proper consideration.

Issue 3: Whether the allegations of fraud and unjust enrichment are made out

Finally, although CTP’s submissions comprehensively deal with the allegations of fraud and unjust enrichment which CTP asserts resulted in a total failure of consideration in the payment claims arising from the C933 contract, I do not consider it necessary to make any findings or observations in that respect. Since I have ruled that the Adjudicator was right to confine his deliberation to the T211 contract, it follows that the alleged fraud and unjust enrichment regarding the C933 contract are immaterial, and it is not necessary to consider the various issues (including whether there was in fact fraud) relating to the purported wrong payment claims made under the C933 contract. If CTP wishes to pursue these allegations further, it is perfectly entitled to do so in a separate action.

Conclusion

This should not be thought to work an injustice. The adjudication determination is not the final determination of the parties’ rights. It provides only temporary finality. CTP is at liberty to take a separate action against HRE for the purported false and fraudulent claims in the C933 contract. It is also free to raise those claims as withholding reasons if HRE makes a subsequent payment claim in relation to the C933 contract. In fact, the issues relating to CTP’s claims in the C933 contract are diverse and distinct from HRE’s payment claims under the T211 contract. It is only right that CTP’s set-off claim should not be joined in the same action, as HRE’s payment claim is straightforward and not disputed by CTP.

I therefore dismiss CTP’s application to set aside the AD.