Emergent Engineering Pte Ltd v China Construction Realty Co Pte Ltd [2022] SGHC 276

Introduction

China Construction Realty Co Pte Ltd (the “Respondent”) brings the present application to set aside both the Adjudication Determination dated 29 July 2022 (the “Adjudication Determination”) and the Order of Court dated 17 August 2022 obtained by Emergent Engineering Pte Ltd (the “Applicant”) under the Building and Construction Industry Security of Payment Act 2004 (2020 Rev Ed) (“SOPA”) which enforced the Adjudication Determination in the same manner as a Judgment or an Order of the Court (the “Order of Court”). The Adjudication Determination was rendered following the Adjudicator’s determination of Adjudication Application No. SOP/AA 093 of 2022 (“AA 93”), which was filed by the Applicant on 10 June 2022.

Having considered the parties’ written and oral submissions, I dismiss the Respondent’s application to set aside the Adjudication Determination and the Order of Court. In my view, the Respondent has not made out any of the grounds for setting aside the Adjudication Determination and the Order of Court. I now give the reasons for my decision.

The facts

The background leading to AA 93

The subject matter of the present proceedings involves a residential project (the “Project”). The Respondent is the main contractor of the Project.

In December 2019, the Respondent engaged the Applicant as a sub-contractor for the Project. The terms of the engagement were detailed in a Letter of Acceptance dated 14 December 2019 (the “LOA”). Subsequently, the scope of the Applicant’s sub-contract work was varied under Variation Order No 1 (“VO 1”) dated 14 August 2020 and there was a further Supplemental Agreement dated 31 March 2021 (the “Supplemental Agreement”). The LOA, VO 1 and the Supplemental Agreement collectively define the relationship between the parties and make up the scope of the Applicant’s contractual obligations under its sub-contract (the “Sub-Contract”).

On 22 April 2022, the Respondent issued a Notice of Termination seeking to terminate the Sub-Contract. The Respondent purportedly relied on, amongst others, clause 5.10.1 of the LOA (“Clause 5.10.1”) as the basis for terminating the Sub-Contract. The relevant portion of Clause 5.10.1, which I shall term as the “Termination Provision”, reads as follows:

On 30 April 2022, the Applicant responded with its notice stating that the Respondent had wrongfully terminated the Sub-Contract and was therefore in repudiatory breach.

AA 93

On 6 May 2022, the Applicant served on the Respondent Payment Claim No 25 (“PC 25”) pursuant to s 10 of the SOPA. On 27 May 2022, the Respondent served Payment Response No 25 (“PR 25”) on the Applicant under s 11 of the SOPA.

On 10 June 2022, the Applicant lodged AA 93 pursuant to s 13(1) of the SOPA. Two adjudication conferences were held: the first was on 24 June 2022 (the “First Adjudication Conference”) and the second was on 8 July 2022 (the “Second Adjudication Conference”).

On 29 July 2022, the Adjudicator rendered the Adjudication Determination. The Adjudicator found that the Applicant was entitled to the sum of $175,099.23 from the Respondent (the “Adjudicated Amount”).

Despite the due date for payment of the Adjudicated Amount falling on 5 August 2022, the Respondent expressed its unwillingness to make payment of the Adjudicated Amount to the Applicant.

Enforcement of the Adjudication Determination

In DC/OA 64/2022 (“OA 64”), the Applicant sought the District Court’s permission to enforce the Adjudication Determination in the same manner as a judgment or an order of the court, under s 27 of the SOPA. The Applicant’s application was subsequently granted via the Order of Court.

In DC/SUM 2788/2022 (“SUM 2788”), the Respondent applied to the District Court to set aside the Adjudication Determination and the Order of Court (the “Setting-Aside Application”). By the parties’ consent, the proceedings in OA 64 and SUM 2788 were transferred to be heard in the General Division of the High Court, ie, the present application.

The Respondent’s claims

The Respondent raises the following allegations in support of its application to set aside the Adjudication Determination:

(a) The Adjudicator failed to comply with the principles of natural justice set out in s 16(5)(c) of the SOPA.

(b) PC 25 was not served in accordance with s 10 of the SOPA.

(c) PC 25 involves a claim for the final settlement of accounts and is therefore not a progress payment within the ambit of the SOPA.

I shall deal with each of the above allegations, starting with the Respondent’s claim that there was a breach of natural justice.

My decision

It is axiomatic, and in any case undisputed between the parties, that the court cannot review the findings of the adjudicator. This is because the court is exercising its supervisory jurisdiction in hearing and determining an application to set aside an adjudication determination, or a judgment procured under s 27(1) of the SOPA to enforce the adjudication determination in the same manner as a judgment or an order of the court. The Court of Appeal explained as follows in Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2015] 1 SLR 797 (“Citiwall”) at [48]–[49]:

The Court of Appeal in Citiwall further observed that there are limited instances in which the court can intervene. These instances are prescribed statutorily under s 27(5) read with s 27(6) of the SOPA, such as a breach of the rules of natural justice or where the adjudication determination was induced or affected by fraud or corruption.

Breach of natural justice

The applicable law

Section 16(5)(c) of the SOPA prescribes the duty of an adjudicator to act in accordance with the principles of natural justice. Further, s 27(6)(g) of the SOPA provides that a party may apply to set aside an adjudication determination on the ground that a breach of the rules of natural justice has occurred in connection with the making of the adjudication determination.

A party seeking to set aside an adjudication determination on the ground of a breach of natural justice must show, on a balance of probabilities, that: (a) there has been a material breach of natural justice, (b) which has caused it to suffer prejudice (Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd [2018] 2 SLR 1311 (“Glaziers”) at [34]–[35]).

The principles of natural justice are well-established. One of the twin pillars of the rules of natural justice requires that each party must be given an adequate opportunity to be heard and to respond to the case raised by the other party (the “fair hearing rule”) (see Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] 2 SLR 532 (“Bintai Kindenko”) at [34]). One aspect of the fair hearing rule is the requirement that the adjudicator must receive both parties’ submissions and address important issues which are determinative of the outcome of a dispute (see Metropole Pte Ltd v Designshop Pte Ltd [2017] 4 SLR 277 at [57]; Bintai Kindenko at [40]–[43]).

Accordingly, an adjudicator will be found to have acted in breach of natural justice for failing to consider an important issue in a dispute before him if: (a) the issue was essential to the resolution of the dispute; and (b) a clear and virtually inescapable inference may be drawn that the adjudicator did not apply his mind to the said issue (see Bintai Kindenko at [46]). Element (a) is simple and clear. As for element (b), it is useful to explain that where the adjudicator fails to consider an important pleaded issue, the court can draw an inference that the adjudicator failed to address that issue, if the facts and circumstances clearly warrant it.

The threshold for finding a breach of natural justice on this ground is a high one; the court should only infer that the adjudicator has failed to consider an important pleaded issue if such an inference was “clear and virtually inescapable” (see Glaziers, citing AKN v ALC [2015] 3 SLR 488 (“AKN”) at [46]). The Court of Appeal in Glaziers observed at [36]:

The holding of the Court of Appeal in Glaziers is apposite. Where the adjudicator is alleged to have breached the fair hearing rule by failing to expressly consider a pleaded issue in the adjudication determination, the court must be wary of drawing an inference from the adjudicator’s “silence” that he or she has failed to consider the pleaded issue. The Court of Appeal in AKN held as follows at [46], albeit in the context of setting aside an arbitral award (but equally applicable to the context of setting aside an adjudication determination):

However, where the adjudicator’s failure to expressly consider a pleaded issue in the adjudication determination is based on the adjudicator’s misunderstanding of the complainant’s case, disagreement with the complainant’s submission, or an error of law, an inference should not be drawn that the adjudicator has failed to afford the complainant natural justice by not expressly considering the pleaded issue (AKN at [47]; see also Bintai Kindenko at [47]). Natural justice only requires that the parties be heard; it does not require that the parties be given responses on all submissions made (see Range Construction Pte Ltd v Goldbell Engineering Pte Ltd [2021] 2 SLR 91 (“Range Construction”) at [75], citing SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733 (“SEF Construction”) at [60]). Accordingly, the fact that an adjudicator did not explicitly state his conclusions in relation to a given issue does not mean that he had not considered the parties’ submissions on that issue (see Range Construction at [75]).

The Respondent has not established that the Adjudication Determination was rendered in breach of natural justice

The Respondent submits that the Adjudicator had breached the rules of natural justice in connection with the making of the Adjudication Determination under s 16(5)(c) read with s 27(6)(g) of the SOPA. The Respondent makes the following arguments:

(a) The Respondent pleaded that the termination of the Sub-Contract was based on two distinct and separate grounds, namely (i) the Termination Provision under Clause 5.10.1, ie, the Respondent’s contractual right to terminate the Sub-Contract; and (ii) the Applicant’s wrongful repudiation of the Sub-Contract under common law. Both grounds were canvassed by the Respondent in PR 25 and its submissions to the Adjudicator.

(b) From a reading of the Adjudication Determination, the Adjudicator only determined the issue of wrongful repudiation under common law. That was distinct from the Respondent’s contractual right to terminate the Sub-Contract under the Termination Provision following the Applicant’s breach of the terms of the Sub-Contract. Accordingly, it is “patently clear and obvious” that the Adjudicator had failed to consider and determine the same.

(c) Had the Adjudicator applied his mind to the Termination Provision, he would invariably have determined that the Respondent had validly terminated the Sub-Contract. This was because in the Adjudication Determination it was stated that there were “other outstanding and defective works” by the Applicant and thus the Applicant had breached the term(s) of the Sub-Contract.

In my view, the Respondent’s submission that the Adjudicator had breached the principles of natural justice is baseless.

First, the Adjudicator had, in the First Adjudication Conference, asked the parties to address the Adjudicator on the jurisdictional issue of whether PC 25 was invalid given the Respondent’s termination of the Sub-Contract on 22 April 2022. The Adjudicator also allowed both parties to make further written submissions specifically concerning, amongst others, the Respondent’s termination of the Sub-Contract under the Termination Provision and the validity of PC 25. The Respondent was thus allowed to raise all the arguments that it wanted to in the submissions without any restriction.

Second, it is obvious that the Adjudicator read the parties’ submissions. A perusal of the Adjudication Determination shows the Adjudicator’s awareness of the two alternative grounds of termination that the Respondent relied upon, in particular under the Termination Provision. Indeed, as the Applicant points out, there are numerous references throughout the Adjudication Determination to Clause 5.10.1 and the Termination Provision. This is entirely consistent with the view that the Adjudicator was aware of the parties’ submissions on this issue. If it were otherwise, the Adjudicator would not have been able to summarise in the Adjudication Determination the Respondent’s factual arguments on its entitlement to terminate the Sub-Contract, whether under common law or the Termination Provision.

It is also important to note paragraphs 75 and 76 of the Adjudication Determination:

This shows that the Adjudicator had applied his mind and considered the issue of the Respondent’s termination of the Sub-Contract under Clause 5.10.1. It cannot be argued that the Adjudicator had failed to decide on a pleaded issue.

Third, it is important to note that the Respondent relied on two distinct legal grounds for terminating the Sub-Contract, ie, under common law and the Termination Provision. However, the Respondent relied on substantially the same facts to argue that it was entitled to terminate the Sub-Contract. This was clear from the Respondent’s written submissions filed in AA 93, and the Adjudicator’s summary of the same. In brief, the Respondent’s case was that the Applicant had, by its conduct, committed a repudiatory breach of the Sub-Contract under common law and this also resulted in a breach of the terms of the Sub-Contract.

The Adjudicator found that the Respondent “had not provided sufficient justification to terminate the Sub-Contract”. Thus, the Adjudicator was also not satisfied that the Applicant had, by its conduct, committed a repudiatory breach of the Sub-Contract under common law, or a breach of the terms of the Sub-Contract. It follows that the Adjudicator was of the view that there was no basis to terminate the Sub-Contract, whether under common law or contract, ie, Clause 5.10.1. That was why the Adjudicator stated in the Adjudication Determination in paragraph 101 that he had “determined the termination not to be valid”.

Thus, the Adjudicator found that there was insufficient basis for the Respondent to allege a repudiatory breach or a breach of the terms of the Sub-Contract. Hence, the Respondent cannot argue that the Adjudicator failed to apply his mind to consider the merits of the Respondent’s case for terminating the Sub-Contract under the Termination Provision.

I further note that the Adjudicator had, in the Adjudication Determination, found PC 25 to be a valid payment claim under the SOPA and concluded that he had the jurisdiction to adjudicate AA 93. According to the Adjudicator, the following portion of Clause 5.10.1, which I shall term as the “Payment Suspension Provision”, was not invoked on the facts to invalidate the Applicant’s payment claim:

It is necessary, at this juncture, to also consider s 4(2)(c) of the SOPA, which states as follows:

If the Payment Suspension Provision was invoked, the effect would be to suspend the Applicant’s entitlement to issue the Respondent a payment claim. This would have rendered the Applicant’s service of PC 25 invalid under s 4(2)(c) of the SOPA. The invocation of the Payment Suspension Provision is dependent on the Respondent’s termination of the Sub-Contract “for default and/or repudiatory breach under general law”. In other words, from the moment the Respondent terminates the Sub-Contract under either the Termination Provision “for default” or under common law for “repudiatory breach”, the Applicant would not be entitled to serve any payment claim on the Respondent.

It does appear that the Payment Suspension Provision could potentially be abused by the Respondent to delay the Applicant’s progress payment claim and offset it without any proper supporting documentation.

Further, the Applicant also contends that the Payment Suspension Provision is in contravention of the “pay when paid provisions” in s 9 of the SOPA. I also agree with the Applicant’s argument on this issue. For the purpose of this ex-tempore judgment, and given my findings above, it may not be necessary to discuss in detail the validity of the Payment Suspension Provision of the Sub-Contract. However, I shall supplement this ex-tempore judgment, if necessary.

Returning to my main analysis, the Adjudicator found that the Respondent had wrongly terminated the Sub-Contract, the Payment Suspension Provision did not apply and PC 25 was a valid payment claim under the SOPA. It can be inferred that the Adjudicator would have considered and rejected the Respondent’s purported termination of the Sub-Contract under the Termination Provision. For the Adjudicator to conclude that the Payment Suspension Provision did not apply, he must have considered that the conditions for invoking that provision were not met, ie, that the Respondent had not validly terminated the Sub-Contract, amongst others, under the Termination Provision. It, therefore, follows that the Adjudicator would have applied his mind to consider the Respondent’s arguments on the issue relating to the Respondent’s entitlement to terminate the Sub-Contract under the Termination Provision.

Therefore, the Adjudicator has not wholly ignored and failed to consider the Respondent’s reliance on Clause 5.10.1 as an alternative ground for terminating the Sub-Contract. Indeed, the Adjudicator’s analysis in the Adjudication Determination suggests that he was aware of the Respondent’s argument on the termination of the Applicant’s employment under the Sub-Contract.

The true substance of the Respondent’s complaint lies in its grievance that the Adjudicator had found that the Respondent had wrongfully terminated the Sub-Contract under common law and the Termination Provision. The Respondent’s basis for alleging a breach of natural justice is, fundamentally, its disagreement with the Adjudicator’s decision on the merits.

Whether the Adjudicator was correct in his analysis on this point is beside the point. As I have held at [23] above, even an error of law committed by the Adjudicator is not a ground for finding a breach of natural justice. It is not the prerogative of the Court to review the merits of an adjudicator’s decision when hearing an application to set aside an adjudication determination. As Judith Prakash J (as she then was) emphasised in SEF Construction at [41], the court’s role in deciding a setting-aside application cannot be “to look into the parties’ arguments before the adjudicator and determine whether the adjudicator arrived at the correct decision”. A complete review of the adjudication determination would unduly prolong the process before a dispute relating to a payment claim is finally disposed of. This will prolong the payment disputes and will be expensive. Further, the review of the adjudication determination is inconsistent with the purpose of the SOPA which is to facilitate cash flow, a vital feed in the building and construction industry, by according speedy interim relief. Any party who is dissatisfied with the adjudicator’s decision, can always avail itself to the full suite of the court procedure if it so decides.

I accept the Applicant’s submission that the proper recourse for the Respondent is to apply for an adjudication review under s 18 of the SOPA, and not to disguise its grievances on the merits of the Adjudicator’s decision as an argument founded on a breach of natural justice. Unfortunately, the Respondent did not avail itself to this procedure.

I shall now consider the Respondent’s submission for setting aside the Adjudication Determination on the ground that PC 25 was not served in accordance with s 10 of the SOPA.

Whether PC 25 was validly served on the Respondent

The applicable principles

Section 27(6)(a) of the SOPA provides that a party to an adjudication may commence proceedings to set aside an adjudication determination on the ground that the payment claim was not served in accordance with s 10 of the SOPA.

Section 10 of the SOPA prescribes the following relevant requirements for service of payment claims:

Where there has not been valid and proper service of a payment claim under s 10 of the SOPA, the time for making a payment response under s 11(1) of the SOPA would not begin to run, and a claimant would not be entitled to make an adjudication application under s 13 of the SOPA. It also follows that the appointment of an adjudicator under s 14(1) of the SOPA in such an adjudication application would be invalid. As the Court of Appeal observed in Lee Wee Lick Terence (alias Li Weili Terence) v Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) and another appeal [2013] 1 SLR 401 at [66]:

The Respondent’s submission on this ground is that, given the alleged improper service of PC 25, the Applicant would not be entitled to apply for an adjudication of its claims under PC 25. It also follows that there is no basis at all for an adjudicator to be appointed in the first place, and the adjudicator would not have had the jurisdiction to adjudicate on the parties’ dispute.

The Applicant has validly served PC 25 on the Respondent

The Respondent does not allege that any of the requirements under s 10 of the SOPA set out above was breached in the Applicant’s service of PC 25. Indeed, the parties do not dispute that PC 25 was, in fact, compliant with all the payment claim requirements under s 10 of the SOPA. Rather, the Respondent’s main contention is that the Applicant was not entitled to serve PC 25 on the Respondent as the Respondent had terminated the Sub-Contract. The Respondent makes two arguments in support.

Second, the Respondent also relies on s 4(2)(c) of the SOPA, which provides that the SOPA shall not apply to any “terminated contract” to the extent that the contract “contains provisions relating to termination that permit the respondent to suspend progress payments to the claimant until … the occurrence of an event specified in the contract” and “that event has not occurred” (see [33] above). Accordingly, the Respondent says that since the Sub-Contract was validly terminated, s 4(2)(c) of the SOPA reinforces the Respondent’s position that the Applicant was not entitled to issue PC 25.

As I have canvassed above, the Applicant also argues that s 4(2)(c) of the SOPA does not apply as the Payment Suspension Provision contravenes other provisions of the SOPA (see [35]–[37] above). Be that as it may, I do not accept the Respondent’s submission.

I emphasise that the court’s supervisory jurisdiction in respect of an application to set aside an adjudication determination does not include an examination of the merits of the adjudication determination (see [15] above). As the Court of Appeal in Comfort Management Pte Ltd v OGSP Engineering Pte Ltd [2018] 1 SLR 979 observed at [73]:

Bearing this principle in mind, the Respondent’s submissions above clearly amount to a backdoor attempt to review the merits of the underlying dispute; it sought to invite this Court to consider whether it would have reached the same decision as the Adjudicator on the issue regarding the validity of the Respondent’s termination of the Sub-Contract.

As the Applicant points out, the Respondent’s basis for alleging that the Applicant has improperly served PC 25 is premised fundamentally on its disagreement with the Adjudicator’s decision that the Respondent had not validly terminated the Sub-Contract pursuant to the Termination Provision. This was an issue that the Adjudication Determination had resolved in the Applicant’s favour. I accept the Adjudicator’s finding at face value that “the Respondent had not provided sufficient justification to terminate the Sub-Contract” [emphasis in original] and that the termination was not valid. Having made this determination, the Adjudicator was entitled to conclude that PC 25 was a valid payment claim under the SOPA and that the Payment Suspension Provision was not triggered to invalidate PC 25. Accordingly, I reject the Respondent’s submission that PC 25 was not a valid payment claim in this regard.

Whether PC 25 was a claim for progress payment within the scope of the SOPA

Finally, I shall consider the Respondent’s submission that PC 25 was not a progress payment claim, and thus falls outside the scope of the SOPA.

The Respondent submits that PC 25 was a claim for the final settlement of accounts between the Applicant and the Respondent following the termination of the Applicant’s employment under the Sub-Contract. Such a claim, the Respondent alleges, was outside the scope of the SOPA. Accordingly, the Respondent alleges that the Adjudicator acted in excess of his jurisdiction and powers under the SOPA in making the Adjudication Determination in respect of PC 25 in AA 93. In support, the Respondent seeks to analogise the present case with the Court of Appeal’s observations in Orion-One Residential Pte Ltd v Dong Cheng Construction Pte Ltd and another appeal [2021] 1 SLR 791 (“Orion-One”).

In Orion-One, Orion-One Residential Pte Ltd (“Orion”), the developer of a condominium project, engaged Dong Cheng Construction Pte Ltd (“Dong Cheng”) as the main contractor for the project. The main contract between Dong Cheng and Orion incorporated the REDAS Design & Build Conditions of Main Contract (Real Estate Developers’ Association of Singapore, 3rd Ed, July 2013) (“REDAS Conditions”) which contained clause 30.3, the effects of termination for default. I shall elaborate on clause 30.3 below. Orion eventually terminated Dong Cheng’s employment as the main contractor of the project. Slightly more than two years later, Dong Cheng served a payment claim on Orion, which Orion disputed. Dong Cheng then lodged an adjudication application in respect of the payment claim. The adjudicator in that case found, amongst others, that Dong Cheng was entitled to serve the payment claim despite the payment claim being served after Dong Cheng’s employment had been terminated. The High Court found that Dong Cheng’s payment claim was valid, and thus dismissed Orion’s application to set aside the adjudication determination.

On appeal, Dong Cheng submitted that its right to serve a payment claim post-termination was prescribed by cl 30.3.1 of the REDAS Conditions (“Clause 30.3.1”). Clause 30.3.1 states:

The Court of Appeal allowed the appeal and held that Clause 30.3.1 was only applicable if Dong Cheng’s employment was terminated under clause 30.2. This was not the case; Dong Cheng’s employment was instead terminated under clause 2.5 of the supplementary agreement between Dong Cheng and Orion. Thus, Clause 30.3.1 was not applicable, and Dong Cheng was not entitled to rely on Clause 30.3.1 to serve its payment claim (see Orion-One at [31]).

The Court of Appeal commented, obiter, that Clause 30.3.1 of the REDAS Conditions concerned the final settlement of accounts between the parties in the event that the contractor was terminated by the employer for breach of contract (see Orion-One at [33] and [34]):

Thus, Clause 30.3.1 was concerned with Orion’s payment to Dong Cheng after ascertaining all the costs incurred by Orion as a result of its termination of Dong Cheng’s employment and any damages that are due to Orion as a result of the termination of Dong Cheng’s employment (the “Termination Costs”). Payments made pursuant to Clause 30.3.1, which factors into account the Termination Costs, could not be viewed as progress payments as they are not concerned solely with the value of the works done but also sums that the contractor is legally liable to pay to the employer as a result of its breach of contract (Orion-One at [34]). The Court of Appeal thus concluded that Dong Cheng’s payment claim did not fall within the ambit of the SOPA. Any payment claimed under Clause 30.3.1 concerns the final settlement of accounts between the parties in the event that the contractor’s employment is terminated by the employer for breach of contract (see Orion-One at [38] and [44]).

In the present case, the Respondent seeks to analogise Clause 30.3.1 in Orion-One with the Payment Suspension Provision. The Respondent submits that since PC 25 was served following the Applicant’s termination of its employment under the Sub-Contract, it follows that PC 25 was served pursuant to the Payment Suspension Provision. That meant that PC 25 was a claim for the final settlement of accounts between the Applicant and the Respondent following the termination of the Applicant’s employment under the Sub-Contract.

The language of Clause 30.3.1 in Orion-One may appear similar to the Payment Suspension Provision in the present case. However, I cannot accept the Respondent’s submissions. The Payment Suspension Provision applied only in the event of the termination of the Applicant’s employment under the Sub-Contract (see [34] above). And as I have accepted above, the Adjudicator determined that the Respondent had wrongfully terminated the Sub-Contract (see [30] above). Thus, the Payment Suspension Provision was not operative. Therefore, the final settlement of accounts as prescribed by the Payment Suspension Provision could not have been initiated. Hence, PC 25 cannot possibly be a claim for the final settlement of accounts.

I accept the Applicant’s submission that its right to serve PC 25 is founded on clause 5.1.1 of the LOA (“Clause 5.1.1”). This clause is an express mechanism for the service of progress payment claims under the SOPA. Clause 5.1.1 states:

I turn next to consider the statutory framework prescribing the process for making a progress payment claim. Section 2 of the SOPA defines “progress payment” as including “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 single or one-off payment (including a final payment)” [emphasis added]. Sections 5 and 6 of the SOPA further provide that:

As the Court of Appeal in Orion-One observed at [40], the statutory framework defines a claim for progress payments as “payments predicated upon and directly linked to the carrying out of construction work or the supplying of goods or services under a contract. The quantum of such payment depends on the terms of the contract, or the value of the work carried out or of the goods or services supplied.”

It is clear that Clause 5.1.1 largely mirrors progress payments as defined in the SOPA. The amounts of such progress payments are determined through the process of periodic valuation of the works or part thereof carried out by the contractor.

Conclusion

In summary, I find that the Respondent has not made out any ground for its Setting-Aside Application:

(a) First, I am satisfied that the Adjudicator had not breached the rules of natural justice as the Respondent has not proven, on a balance of probabilities, that the Adjudicator had failed to consider the Respondent’s alternative ground for terminating the Sub-Contract under Clause 5.10.1 of the LOA, ie, the Termination Provision. A thorough perusal of the Adjudication Determination shows that the Adjudicator was aware of the two alternative grounds of termination that the Respondent relied upon, ie, under the common law and under the Termination Provision. The factual basis for these two grounds is the same. The parties had comprehensively argued these grounds before the Adjudicator. The mere fact that the Adjudicator did not expressly mention that the Respondent was not entitled to terminate the Sub-Contract based on Clause 5.10.1 is insufficient to sustain the allegation that the Adjudicator had failed to consider an important pleaded issue. Therefore, the Adjudicator had not failed to apply his mind to consider the merits of the Respondent’s case for terminating the Sub-Contract under Clause 5.10.1. The true grievance of the Respondent is that it disagreed with the Adjudicator’s finding that the Respondent had wrongly terminated the Sub-Contract. This is not a valid basis for setting aside the Adjudication Determination. It is not the role of the Court to review the merits of an adjudicator’s decision when hearing an application to set aside an adjudication determination.

(b) I also find that the Applicant has validly served PC 25 on the Respondent. Whether the Applicant was entitled to serve PC 25 turned on whether the Sub-Contract was validly terminated, such that the Payment Suspension Provision and s 4(2)(c) of the SOPA precluded the Applicant from serving any payment claim. The Adjudicator has found that PC 25 was validly served. This determination on the merits is one which the Court is not entitled to review. Accordingly, the Respondent’s submission on this ground amounts to an impermissible backdoor attempt to review the merits of the underlying dispute, ie, whether the Respondent had validly terminated the Sub-Contract.

(c) Finally, I accept that PC 25 was not a claim for the final settlement of accounts, ie, a claim for the value of works done by the Applicant less any deductions or claims prescribed under the Payment Suspension Provision. The fact that the Applicant had served PC 25 following the Respondent’s purported termination of the Sub-Contract does not automatically render PC 25 a claim for the final settlement of accounts. It is still necessary to examine the substance of PC 25. In this case, I am satisfied that PC 25 was merely a progress payment claim made under Clause 5.1.1. The Respondent’s reliance on analogising the present case with the Court of Appeal’s decision in Orion-One is flawed and based on a misreading of the Court of Appeal’s observations therein.