Mataban Development Pte Ltd v Black Knight Warrior Pte Ltd [2017] SGHCR 12

Introduction

Summons No 2236 of 2017 (“the Application”) is an application taken out by Black Knight Warrior Pte Ltd (“the Defendant”) seeking the following orders:

(a) that the Order of Court dated 26 April 2017 vide HC/ORC 2675/2017 be set aside;

(b) that the Adjudication Determination dated 21 March 2017 (“the Adjudication Determination”) vide Adjudication Application No SOP/AA 051 of 2017 (“the Adjudication Application”) be set aside; and

(c) Costs of the Application to be paid by Mataban Development Pte Ltd (“the Plaintiff”) to the Defendant.

The Application was taken out pursuant to section 27(5) of the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOPA”). The procedure for the taking out of such an application is provided for under Order 95 rule 3 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“the ROC”).

The Application came up for hearing before me on 11 July 2017, at the end of which I reserved judgment. At the invitation of this court, further written submissions were tendered by the parties’ respective counsel on 2 August 2017. I now render my decision on the Application with my grounds attached.

Procedural history

Before I delve into the merits of the Application, it is apposite to outline very briefly how the Application came to be heard by me.

On 24 April 2017, the Plaintiff took out an ex parte application in Originating Summons No 448 of 2017 (“the OS”) pursuant to section 27 of the SOPA seeking leave to enforce the Adjudication Determination against the Defendant. The Adjudication Determination was earlier issued in the Plaintiff’s favour on 21 March 2017 pursuant to the Plaintiff’s Adjudication Application against the Defendant in respect of a construction dispute that had arisen between the parties. Leave to enforce the Adjudication Determination was granted by an Assistant Registrar on 26 April 2017.

On 27 April 2017, the Assistant Registrar’s order was extracted by the Plaintiff vide HC/ORC 2675/2017 (see [1(a)] above).

On 16 May 2017, the Defendant filed the Application in court. The hearing for the Application was initially scheduled to take place on 2 June 2017. The hearing was later re-scheduled twice before it was fixed on 13 June 2017 before a High Court Judge. The 13 June 2017 hearing was subsequently vacated, and the parties appeared before a Senior Assistant Registrar for a pre-trial conference (“PTC”) on 14 June 2017. At the PTC, directions were given for the Application to be heard by a High Court Judge on 11 July 2017.

On 27 June 2017, the Plaintiff’s counsel wrote in to the Registry requesting that the hearing of the Application be re-fixed before any Assistant Registrar for reasons which I shall reproduce herewith for reference:

The Registry accordingly re-fixed the Application to be heard by any Assistant Registrar on 11 July 2017. The Application was eventually assigned to my list for hearing.

In relation to the parties’ request for the hearing to be re-fixed before any Assistant Registrar, I thought it appropriate to highlight certain comments made by the High Court in Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd [2013] 3 SLR 609 at [65] (“Admin Construction Pte Ltd”), as follows (per Quentin Loh J):

It is appreciated that the High Court’s comments in Admin Construction Pte Ltd are strictly speaking obiter. Nevertheless, I consider these comments to be of useful guidance to parties embroiled in a challenge against an adjudication determination under the SOPA regime. More so, it is my respectful view that it is sensible for legal practitioners in the field of construction disputes to be mindful of these comments of the High Court when advising their clients as to the manner in which a setting aside application such as the present one should take its course at first instance.

At the hearing before me, counsel for the Plaintiff quite candidly admitted that he was not aware of the High Court’s comments in Admin Construction Pte Ltd when the request to re-fix the hearing before any Assistant Registrar was made earlier. To his credit, however, counsel for the Plaintiff explained (as he did before (see [8] above)) that the request was made having regard to the following considerations:

(a) the principal sum involved in the Adjudication Determination was around $92,000; and

(b) he thought it best not to trouble a High Court Judge to hear the Application at first instance given the relatively low amount at stake.

In the end, I considered it proper to proceed with the hearing on 11 July 2017 rather than deferring the hearing to a High Court Judge, in order to avoid any further postponement of the hearing quite literally at the eleventh hour. This was also on account of the fact that counsel for both sides who attended the hearing on 11 July 2017 had indicated their readiness to proceed with their arguments on the same day.

Be that as it may, I should think that moving forward, litigants and litigators alike should stay guided by the High Court’s comments in Admin Construction Pte Ltd (see [10] above), if anything at all as a reminder for consideration in the event that a similar request for the re-fixing of a hearing is contemplated in a future case. With that, I turn now to deal with the Application proper.

Parties’ respective cases in the Application

A major point of contention pursued by the Defendant in the Application revolves around the validity of the Defendant’s purported payment response (“the Payment Response”) in the SOPA adjudication proceedings. The material content of the Payment Response, which was served via email by the Defendant on the Plaintiff four days after the latter had served its payment claim (“the Payment Claim”), is reproduced herewith in its original wording for reference:

Against this backdrop, the Defendant’s case in the Application may be summarised as follows:

(a) The adjudicator had erred in disregarding the Defendant’s adjudication response (“the Adjudication Response”) in the SOPA adjudication proceedings on the ground that the Payment Response was non-compliant with and therefore invalid under section 11(3) of the SOPA and regulation 6(1) of the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed) (“the SOPR”).

(b) The adjudicator’s misdirection as to the validity of the Payment Response resulted in a denial of the Defendant’s right to be heard in the SOPA adjudication proceedings. This constituted a material breach of the rules of natural justice and should render the Adjudication Determination void.

(c) Alternatively, in the light of the adjudicator’s misdirection as to the validity of the Payment Response, the Adjudication Determination was based on a “jurisdictional error” and should therefore be set aside on that basis.

The Plaintiff’s case in resisting the Application may be summarised as follows:

(a) It is not the court’s role, when hearing an application to set aside an adjudication determination, to review the merits of the adjudicator’s decision to determine whether the adjudicator had made an error in his decision.

(b) In any case, the adjudicator had correctly found that the Payment Response was not valid. In particular, the Payment Response failed to comply with section 11(3) of the SOPA and regulation 6(1) of the SOPR in that it did not (i) expressly identify the payment claim to which it related, (ii) state the response amount, and/or (iii) address or respond to any of the items claimed in the payment claim with reasons.

(c) Even if the adjudicator had incorrectly found that the Payment Response was not valid, the adjudicator had not breached the rules of natural justice because he had in fact considered the parties’ submissions on the validity of the Payment Response before deciding not to consider the Defendant’s reasons for withholding payment in accordance with section 15(3) of the SOPA. This was in contrast with a situation where an adjudicator finds that there was a valid payment response, and yet fails to take into account the reasons for withholding payment in arriving at his adjudication determination.

(d) In any event, even if the adjudicator had incorrectly found that the Payment Response was not valid, there was no “jurisdictional error” committed by the adjudicator that would justify a setting aside of the Adjudication Determination.

For ease of reference, the relevant provisions of the SOPA and the SOPR referred to above are set out below:

The issues in dispute

Having regard to the parties’ respective cases in the Application, this court considers the following to be the relevant issues for determination:

(a) Does the court have a role, under section 27(5) of the SOPA, to review the merits of the adjudicator’s finding that the Payment Response was invalid? (“the First Issue”)

(b) If the answer to the First Issue is “yes”, did the adjudicator incorrectly find that the Payment Response was invalid? (“the Second Issue”)

(c) If the answer to the Second Issue is “yes”, did the adjudicator commit any breach of the rules of natural justice or “jurisdictional error” in disregarding the Adjudication Response in the Adjudication Determination, such that the Adjudication Determination should be set aside? (“the Third Issue”)

I will address these issues in sequence.

The First Issue

The key authorities for consideration

In respect of the First Issue, the Plaintiff relies principally on the High Court’s decision in SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733 (“SEF Construction Pte Ltd”) for the proposition that the court, in hearing a setting aside application under section 27(5) of the SOPA, has no role to play in reviewing the merits of an adjudicator’s findings in his adjudication determination. Section 27 of the SOPA provides as follows:

In SEF Construction Pte Ltd, the key issue before the High Court was whether an adjudication determination should be set aside on grounds that the adjudicator had failed to engage in a bona fide exercise of his powers, and breached the rules of natural justice, by issuing an adjudication determination containing written grounds only in respect of two out of four issues argued in the course of the adjudication proceedings. In declining to order the setting aside of the adjudication determination, Judith Prakash J (as she then was) outlined the role of the court as follows (at [41]-[42]):

Prakash J further took the view that the role of the court “must be limited to” determining the existence of the following “basic requirements” (at [45]):

(a) the existence of a contract between the claimant and the respondent, to which the SOPA applies;

(b) the service by the claimant on the respondent of a payment claim;

(c) the making of an adjudication application by the claimant to an authorised nominating body;

(d) the reference of the application to an eligible adjudicator who agrees to determine the adjudication application;

(e) the determination by the adjudicator of the application within the specified period by determining the adjudicated amount (if any) to be paid by the respondent to the claimant, the date on which the adjudicated amount is payable, the interest payable on the adjudicated amount and the proportion of the costs payable by each party to the adjudication;

(f) whether the adjudicator acted independently and impartially and in a timely manner and complied with the principles of natural justice; and

(g) in the case where a review adjudicator or panel of adjudicators has been appointed, whether the same conditions existed, mutatis mutandis, as under (a) to (f) above.

It also bears mentioning that Prakash J, in referring to a New South Wales case authority in Brodyn Pty Ltd v Davenport [2004] NSWCA 394 (“Brodyn Pty Ltd”), also opined that “although the [SOPA] requires a payment claim to be served, whether or not the document purporting to be a payment claim which has been served by a claimant is actually a payment claim is an issue for the adjudicator and not the court” (see SEF Construction Pte Ltd at [46]). The material passage in Brodyn Pty Ltd referred to by Prakash J reads as follows (per Hodgson JA):

The Defendant, on the other hand, raises a fairly recent High Court decision in Ang Cheng Guan Construction Pte Ltd v Corporate Residence Pte Ltd [2017] 3 SLR 988 (“Ang Cheng Guan Construction Pte Ltd”) which, at first blush, appears to be at some variance in approach with that advocated in SEF Construction Pte Ltd.

In Ang Cheng Guan Construction Pte Ltd, an application was taken out to set aside an adjudication review determination on the basis that the review adjudicator had declined to take into consideration issues raised by the claimant in an adjudication review initiated by the respondent. The two main grounds advanced by the claimant in seeking the setting aside order were:

(a) the review adjudicator had committed a breach of the rules of natural justice by erroneously arriving at a narrow interpretation of the scope of the adjudication review; and

(b) the error committed by the review adjudicator amounted to a “jurisdictional error” that warranted the setting aside of the adjudication review determination.

In granting the setting aside application, Lee Seiu Kin J embarked on a fairly detailed analysis of the merits of the review adjudicator’s decision in the adjudication review, viz. whether the review adjudicator had in fact committed an error in taking a narrow view towards the scope of the adjudication review (see Ang Cheng Guan Construction Pte Ltd at [11]-[30]). In the course of his analysis, Lee J held, inter alia, that orders of an adjudicator and a review adjudicator “are susceptible to judicial review” and, upon his review of the review adjudicator’s orders, found that the review adjudicator “had misdirected himself in a point of law” and had therefore wrongly failed to take into account issues raised by the claimant in the adjudication review (see Ang Cheng Guan Construction Pte Ltd at [35] and [44]). The adjudication review determination was thus set aside on that basis.

This court’s reading of the authorities

In my reading of the two High Court cases mentioned above, it is first and foremost noted that Ang Cheng Guan Construction Pte Ltd was a case involving the setting aside of an adjudication review determination, whereas SEF Construction Pte Ltd was concerned with the setting aside of an adjudication determination. However, it is not obvious if such a difference would per se amount to a material point of distinction between the two cases, given that section 21(2) of the SOPA expressly recognises that “[a]n adjudication review determination […] shall have effect as if it were an adjudication determination for the purposes of this Act”. Furthermore, it appears that in SEF Construction Pte Ltd, Prakash J did somehow recognise that a setting aside application in respect of an adjudication review determination may be treated by the court in a similar manner as if it were an adjudication determination (see [24(g)] above).

At the same time, it is also noted that the High Court in SEF Construction Pte Ltd was faced with a rather specific situation where a party was seeking to set aside an adjudication determination on the basis that two issues raised in argument were not addressed by the adjudicator in his adjudication determination. In particular, the complaint in SEF Construction Pte Ltd was that the adjudicator had failed to address issues that were properly canvassed before him, not – as in the present case – that the adjudicator had wrongly assumed or wrongly decided that he was not empowered to consider those issues in his determination at all. By contrast, Ang Cheng Guan Construction Pte Ltd was a case where – similar to the present case – the contention was that the review adjudicator had taken an unduly restrictive view towards the scope of matters that should be considered in the adjudication review determination.

Nevertheless, in my respectful view, I consider SEF Construction Pte Ltd to be the more instructive authority which ought to be applied in the present case. This is because the holdings in SEF Construction Pte Ltd relating to the role of the court in a setting aside application had been endorsed by the Court of Appeal 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 (“Lee Wee Lick Terence”).

In Lee Wee Lick Terence, the Court of Appeal (per Chan Sek Keong CJ (as he then was), Andrew Phang JA and VK Rajah JA (as he then was)) addressed – albeit arguably in obiter given that the parties had actually settled their dispute shortly after the Court of Appeal reserved its judgment – two lines of local case authorities constituting what was perceived to be “two judicial approaches” vis-à-vis the role of the court “in the scheme of the [SOPA]” (see Lee Wee Lick Terence at [19]). The first approach advocated (as did Prakash J in SEF Construction Pte Ltd) a fairly circumscribed role of the court in revisiting issues determined by an adjudicator, while the second approach appeared to embrace a more expansive role of the court (as characterised by the High Court’s decision in Sungdo Engineering & Construction (S) Pte Ltd v Italcor Pte Ltd [2010] 3 SLR 459 (per Lee J) (“Sungdo Engineering & Construction (S) Pte Ltd”)). The Court of Appeal endorsed the approach in SEF Construction Pte Ltd and distinguished Sungdo Engineering & Construction (S) Pte Ltd. Pertinently, the Court of Appeal held (at [66]):

At [67], the Court of Appeal further observed as follows:

In a later decision in Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2015] 1 SLR 797 at [46]) (“Citiwall Safety Glass Pte Ltd”), the Court of Appeal (per Sundaresh Menon CJ, Chao Hick Tin JA and Steven Chong J (as he then was)) reaffirmed its earlier holdings in Lee Wee Lick Terence. In particular, the Court of Appeal in Citiwall Safety Glass Pte Ltd summarised its holdings in this regard as follows (at [48]):

Thus, having regard to the authorities surveyed above, this court considers that the following conclusions may be drawn:

(a) the case authorities demonstrate that a prevalent view is held in the Court of Appeal that a court should play only a limited role in a setting aside application under section 27(5) of the SOPA; and

(b) the limited role that a court should play in this regard is that which was advocated by Prakash J in SEF Construction Pte Ltd (see also [24] above).

Application of the authorities

Bearing these conclusions in mind, this court finds it inappropriate, in this Application, to act against the weight of the authorities by embarking on a review of the adjudicator’s decision relating to the validity of the Payment Response. This is for the following reasons.

First, the question regarding the validity of a payment response is not one which will affect the validity of the appointment of (and, correspondingly, the taking of jurisdiction over adjudication proceedings by) an adjudicator under the SOPA adjudication regime (cf Lee Wee Lick Terence at [66], which is reproduced in [32] above). Section 14(1) of the SOPA stipulates the steps by which an adjudicator is to be appointed by the authorised nominating body “upon the receipt of an adjudication application”. Relevant to the present context, a claimant’s entitlement to make an adjudication application is provided for in section 12(2) of the SOPA, which states that:

In either of the scenarios contemplated under sections 12(2)(a) and 12(2)(b) of the SOPA, and indeed regardless of whether the Defendant in the present case had in fact furnished a valid payment response by serving the Payment Response, the Plaintiff would have been entitled to make (as it did pursuant to section 12(2) of the SOPA) its Adjudication Application. In other words, no issues relating to the adjudicator’s appointment are engaged by virtue of the issue raised with regard to the validity of the Payment Response. I should also mention that there have been no issues raised by the Defendant regarding whether the Adjudication Application had properly complied with the formal requirements set out in section 13(3) of the SOPA (cf Lee Wee Lick Terence at [67], which is reproduced in [33] above).

Second, the question whether a payment response is valid is not a question of jurisdictional fact. At a fundamental level, section 16(7) of the SOPA clearly provides that “[a]n adjudicator’s power to determine an adjudication application is not affected by the failure of […] the respondent to provide a payment response […]”. A fortiori, the same should also be true where the respondent has provided a payment response which is invalid.

For completeness, I shall also consider section 15(3)(a) of the SOPA (reproduced in [19] above) which provides that an adjudicator “shall not consider” any reason for withholding any amount sought in a payment claim unless “the reason was included in the relevant payment response provided by the respondent to the claimant”. On one reading of section 15(3) of the SOPA, one might perhaps argue that the provision concerns an adjudicator’s “jurisdiction” in the sense of his competence to adjudicate on certain issues raised (or purported to be raised) in an adjudication proceedings (cf, eg, Hua Rong Engineering Pte Ltd v Civil Tech Pte Ltd [2017] SGHC 179 at [7] (per Tan Siong Thye J)).

With respect, I am doubtful that introducing into the analysis such additional layer of understanding “jurisdiction” would not substantially muddy (and effectively so much as to alienate) the test that the Court of Appeal in Lee Wee Lick Terence at [52]-[56] (referring to Chase Oyster Bar v Hamo Industries [2010] NSWCA 190) considered to be more pertinent, namely to focus the inquiry on the distinction between “acts done [by a claimant] in breach of an essential preliminary to the [adjudicator’s] exercise of a statutory power or authority” and “acts done [by a claimant] in breach of a procedural condition for the [adjudicator’s] exercise of a statutory power or authority” [emphases added]. Indeed, if one were to extrapolate this test further, a broad distinction could, mutatis mutandis, in theory similarly also be drawn in respect of decisions made by an adjudicator to determine whether an alleged error in the adjudicator’s decision-making is correspondingly in the nature of a “jurisdictional error” or a “mere error in the exercise of jurisdiction” (see Lee Wee Lick Terence at [49], referring to Craig v South Australia [1995] HCA 58).

To illustrate, an example of an adjudicator committing a “jurisdictional error” might be where an adjudicator decides to proceed with an adjudication where no payment claim existed at all. In such a situation, it might stand to reason that the court in a setting aside application may review the correctness of the adjudicator’s decision to proceed with the adjudication, so as to arrive at a judicial finding as to whether the adjudicator’s appointment in the adjudication proceedings was tainted at all (see, eg, Sungdo Engineering & Construction (S) Pte Ltd at [32], and as clarified in Lee Wee Lick Terence at [39]). Where, instead, for example an adjudicator makes an adjudication determination in favour of a claimant taking into account a formally defective payment claim (as distinguished from a non-existent payment claim or a payment claim which has not been served on the respondent at all), any error in the adjudicator’s finding on the validity of such payment claim would most likely be considered a “mere error in the exercise of jurisdiction” (see, eg, Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co Ltd [2010] 1 SLR 658 (per Prakash J) as clarified in Lee Wee Lick Terence at [39]). As there is no question engaged with regard to the propriety of the adjudicator’s appointment, a review of the merits of the adjudicator’s decision would not be justified in a setting aside application under section 27(5) of the SOPA. This would indeed be consistent with Prakash J’s holding in SEF Construction Pte Ltd that whether or not a document purporting to be a payment claim which has been served by a claimant is actually a payment claim is an issue for the adjudicator and not the court (see [25] above); in similar vein, the same could also be said in respect of an adjudicator’s decision as to whether or not a document purporting to be a payment response is a valid payment response under the relevant provisions of the SOPA.

In this last regard, it is noted that the Defendant has sought to rely on a New South Wales decision in Multiplex Constructions Pty Ltd v Luikens and Anor [2003] NSWSC 1140 (“Multiplex Constructions Pty Ltd”), which was cited with approval by the High Court in Ang Cheng Guan Construction Pte Ltd at [46]. In Multiplex Constructions Pty Ltd, issues were raised as to whether an adjudication determination should be quashed on the basis of an “error of law that appears on the face of the record of the proceedings” under section 69(3) of the Supreme Court Act 1970 (NSW). There, the New South Wales Supreme Court dealt with, inter alia, an issue as to whether the adjudicator had committed an error of law in disregarding the respondent’s submissions and evidence in the adjudication response, where reasons for withholding payment had not been stated in the respondent’s payment schedule (ie, the equivalent of a payment response under the SOPA regime) (see Multiplex Constructions Pty Ltd at [60]-[71]). The New South Wales Supreme Court in its judgment appeared to recognise that any error of such nature would amount to a “jurisdictional error” justifying a quashing of the adjudication determination.

With respect, however, I find that the proposition in Multiplex Constructions Pty Ltd could potentially and so fundamentally unsettle the prevalent view held in the Court of Appeal on the limited role of the court in a setting aside application (see [35] above) that it should, as a matter of principle, not be open to a court of this present level to simply follow Multiplex Constructions Pty Ltd. This court therefore respectfully declines to apply Multiplex Constructions Pty Ltd in the present case.

With that, I now move on to the third reason as to why I consider that this court should not embark on a review of adjudicator’s decision relating to the validity of the Payment Response. The Defendant has not, in the Application, put forth any argument to the satisfaction of this court that an adjudicator’s decision on the validity of a payment response is one in respect of which an error would, in any case as a matter of “legislative purpose”, render the resulting adjudication determination null and void (cf Lee Wee Lick Terence at [67], which is reproduced in [33] above albeit in respect of “acts done” by a claimant in the course of making an adjudication application). There has been no parliamentary material adduced by the Defendant to assist this court in this specific regard. Instead, the Defendant’s submissions appear to focus solely on the contention that the adjudicator’s decision on the validity of the Payment Response was either a “jurisdictional error” or had resulted in a breach of the rules of natural justice.

Finally, the Defendant’s allegation of a breach of the rules of natural justice is a misconceived one. In Ang Cheng Guan Construction Pte Ltd, a similar challenge was raised by the claimant as a ground for setting aside an adjudication review determination. In rejecting this particular ground, Lee J held (at [32]-[34]):

Coming back to the present case, the adjudicator had heard the parties on the issue relating to the validity of the Payment Response. At [42]-[48] of the Adjudication Determination, the adjudicator set out the context of the arguments raised by the respective parties on the validity of the Payment Response. This was followed by [49]-[53] of the Adjudication Determination where the adjudicator gave reasoned grounds as to why he found the Payment Response to be invalid under section 11(3) of the SOPA and regulation 6(1) of the SOPR, and accordingly why, pursuant to section 15(3) of the SOPA, he “shall not consider any reason the Respondent may raise for the withholding of any payment”. Clearly, the adjudicator had applied his mind to the arguments raised with regard to the validity of the Payment Response and had made a considered determination on that issue. Applying the holding in Ang Cheng Guan Construction Pte Ltd as quoted above, I therefore find that there is no basis upon which the Defendant could launch a challenge framed as a breach of the rules of natural justice.

Summary of the decision in respect of the First Issue

In sum, this court considers that the prevailing judicial approach in a setting aside application taken out pursuant to section 27(5) of the SOPA is such that the court should play a limited role as envisaged by Prakash J in SEF Construction Pte Ltd and endorsed by the Court of Appeal in Lee Wee Lick Terence (and also Citiwall Safety Glass Pte Ltd). Flowing from that, this court has found no valid reason to embark on a review of the adjudicator’s decision relating to the validity of the Payment Response.

The Second Issue and the Third Issue

In the light of this court’s decision in relation to the First Issue, this court will make no specific finding in relation to the Second Issue and the Third Issue (see [20(b)]-[20(c)] above). Nevertheless, for completeness particularly with regard to the Third Issue, this court will repeat its views expressed earlier that there is no basis upon which the Defendant could launch a challenge premised either on a “jurisdictional error” (see [39]-[44] above) or a breach of the rules of natural justice (see [46]-[47] above) committed by the adjudicator in question.

Conclusion