Validity of an adjudication determination: recent decisions in Singapore
Adjudication News / 18 November 2010
By Kok Fong Chow Chartered Arbitrator
The Building and Construction Industry Security of Payment Act 2006 (Chapter 30B) is now a definitive part of the dispute resolution landscape in the construction industry in Singapore.
The Act provides for a scheme of adjudication by which parties to a construction contract can obtain a quick, interim decision on a payment dispute.
However, unlike its counterparts elsewhere, the Singapore Act has provisions for a dispute settlement period which affords the respondent a second opportunity to issue a payment response and also for a respondent, aggrieved by a determination, to apply to a panel of review adjudicators.
As a consequence of these and other features, there is a measured difference in the approach taken by the Singapore courts in deciding applications to set aside adjudication determinations.
Setting aside
An important aspect concerns the extent to which the courts could re-examine the merits of a determination.
In SEF Construction Pte Ltd v Skoy Connected Pte Ltd (2009), the main contractors applied to set aside an adjudication determination on the basis that the adjudication application had been filed prematurely and that the items which formed the claim did not fall within the reference period prescribed under the Act.
Justice Judith Prakash rejected the main contractor's application. She ruled that a setting-aside application is not an appeal and the court's power does not extend to re-examining the merits of the dispute, but is limited to deciding the validity of the adjudication determination.
On this point, the learned judge considered that on a proper construction of the Singapore Act, unlike the situation in New South Wales, there is no separate requirement that an adjudicator has "to engage in a bona fide exercise of his powers".
However she held that the other "basic and essential conditions" for a valid determination, as laid down by Hodgson JA in Brodyn v Davenport (2004), would apply to Singapore. These are: the existence of a contract, service of a valid payment claim, the filing of the adjudication application with an authorised nominating body, the referral to an eligible adjudicator and the making of the determination within the prescribed period.
However, it has been emphasised that a valid adjudication determination pre-supposes that there was a valid payment claim. In Sungdo Engineering & Construction (S) Pte Ltd v Italcor Pte Ltd (2010), the alleged payment claim was in the form of a one-page letter accompanied by 164 pages of supporting documents. The one-page letter requested early payment and was signed off with "greetings of the season". It was held that the letter could not amount to a payment claim under the Act. Justice Lee Seiu Kin held that a payment claim should not be considered valid merely because it "satisfies all the requirements under the Act"; to be a valid payment claim it must also be intended as a payment claim.
Natural Justice in Adjudication
The unique features of the Singapore Act have also been felt in relation to the subject of natural justice. In Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co Ltd (2009), the respondent failed to respond to a payment claim within the time prescribed under the Act.
The adjudicator considered that, in the circumstances, he was precluded by s15(3) of the Act from considering the respondent's subsequent arguments against the payment claim. The High Court rejected the respondent's argument that this strict construction of s 15(3) amounted to a breach of natural justice.
Prakash J affirmed that an adjudicator must comply with the rules of natural justice and held that, in this case, the adjudicator had discharged this requirement. For the respondent's application to succeed, it must be shown that the adjuidcator failed to address in good faith the issues raised by the parties. In this case, an omission to deal with one issue because it was not thought to be determinative of the result could not amount to a breach of natural justice.
The present position
These developments suggest that the Singapore courts are conscious of the legislative intent behind the adjudication regime for payment disputes to be adjudicated quickly and economically.
A determination may be set aside either on the basis that it fails to satisfy the "basic and essential conditions" for a valid determination, as laid down in Brodyn, or that there has been a breach of natural justice. However, Sungdo Engineering appears to suggest that in certain situations, the courts would be prepared to go beyond these "basic and essential conditions" and inquire whether the adjudication process was properly founded.
What remains to be clarified is the extent of the inquiry and the distinction between the issues which could attract judicial intervention and those which the court had expressly declined to consider in SEF Construction.