Building and Construction Law – Early Notice of Intention to apply for Adjudication not invalid

LEGAL UPDATE – A EARLY NOTICE OF INTENTION TO APPLY FOR ADJUDICATION EVEN BEFORE A RIGHT TO ADJUDICATE ARISES IS NOT INVALID

Section 13(2) of the Building and Construction Industry Security of Payment Act (“SOPA”) provides that an adjudication application shall not be made unless the claimant has, by notice in writing containing the prescribed particulars, notified the respondent of his intention to apply for an adjudication of a payment claim dispute. The practice and understanding of the industry has been that that a Notice of Intention to Apply for an Adjudication (“NIAA”) is to be served after the entitlement to make an adjudication application arises under s.12 of SOPA. In view of the wording of s.13(2), the failure to give a NIAA is fatal to any adjudication application.

The case of JFC Builders Pte Ltd v Lion City Construction Co Pte Ltd [2012] SGHC 243, which was a decision of Justice Woo Bih Li, on appeal from the decision of an Assistant Registrar, considered the issue of the validity of a NIAA that is served prior to the entitlement to apply for an adjudication arises. The arguments were raised by the appellant in that case to assert that a NIAA served before the entitlement to adjudication arises is invalid. Counsel for the appellant relied on Security of Payments and Construction Adjudication by Chow Kok Fong, LexisNexis, 2005 Ed at pp 264-265 and a flowchart in the Building and Construction Authority’s SOPA 2004 Information Kit to support his contention that an NIAA can only be issued after the claimant is entitled to apply for adjudication under s 12(2).

Although Woo J formed the view that SOPA envisages that the NIAA will be given after the Defendant is entitled to apply for adjudication, ie, after the expiry of the dispute settlement period, neither the flowchart nor the textbook went so far as to say that an NIAA may only be issued after the Defendant is entitled to apply for adjudication. He was of the view that whilst it is true that there is an express deadline by which the adjudication application must be made (and consequently an NIAA must be given before that deadline), there is no express stipulation that the NIAA may only be issued after the right to apply for adjudication has arisen.  Woo J declined to hold that such a stipulation should be implied.

In coming to his decision that an NIAA is valid even if served before the dispute settlement period (i.e. before the entitlement to apply for an adjudication arises) Woo J. took into account that (a) there is an absence of any express prohibition against an early NIAA, (b) that an early NIAA is held invalid would be fatal to any adjudication application, (c) the absence of any prejudice to the appellant if an NIAA was served early and (d) the absence of any policy argument in favouring the contention that a NIAA must be served only after the entitlement to apply for an adjudication application arises.

No blanket NIAA

However, it should also be noted that Woo J. formed the view that there would be no danger of a ‘blanket NIAA’ i.e. a NIAA which could be served, for example, from the very first payment claim is issued since s.13(2) of SOPA requires the NIAA to contain the prescribed particulars which Woo J held to must mean the particulars of a particular claim.

Impact on Industry

This case corrects the perception held by many legal practitioners that a NIAA must be served only after the right to make an adjudication application arises. Clients should be advised that an NIAA served at the same time as a payment claim may be a valid NIAA and respond accordingly.

Prepared by Joseph WW Liow,
Director