Building and Construction Law – Validity of a Payment Response irrelevant in application to set aside an Adjudication Determination

 

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

 

I.       INTRODUCTION

The recent decision of the High Court in Mataban Development Pte Ltd v Black Knight Warrior Pte Ltd [2017] SGHCR 12 provides a useful overview of the applicable principles in relation to an application to set aside an adjudication determination pursuant to section 27(5) of the Building and Construction Industry Security of Payment Act (Cap. 30B, 2006 Rev Ed) (“SOPA”).

At the adjudication proceedings, our client, Mataban Development Pte Ltd (“Mataban”), successfully obtained an Adjudication Determination (“AD”) for the full sum claimed in its payment claim. In his AD, the Adjudicator found, inter alia, that the purported Payment Response (“PR”) served by the Respondent was not a valid payment response under SOPA. As such, the Adjudicator did not go on to consider the Respondent’s reasons for withholding payment pursuant to section 15(3)(a) of SOPA.

The Defendant later applied to set aside the AD on the following grounds:

a.   Its purported PR was valid, i.e. the Adjudicator’s finding was incorrect; and

b.   The Adjudicator had breached the principles of natural justice in not considering the PR.

 

II.       ISSUES FOR DETERMINATION

 

After the Court had heard parties’ respective cases in the application, the Court identified the following issues for determination:

a.   Whether the Court has a role, under section 27(5) of SOPA, to review the merits of the adjudicator’s finding that the PR was invalid? (“the 1st Issue”)

b.   If the answer to the 1st Issue is yes, whether the adjudicator incorrectly found that the PR was invalid? (“the 2nd Issue”)

c.   If the answer to the 2nd Issue is yes, whether the adjudicator committed any breach of natural justice or “jurisdictional error” in disregarding the Defendant’s Adjudication Response, such that the AD should be set aside? (“the 3rd Issue”)

 

III.       DECISION

The Defendant’s application was dismissed by the Court.

A preliminary point dealt with by the Court was the manner in which an application to set aside an adjudication determination should take its course at the first instance. In this case, we had requested that an Assistant Registrar (“AR”) hear the matter at first instance as the sum in dispute was less than S$250,000. Our request was allowed and the application was heard before the learned AR Colin Seow (“AR Seow”). However, in his written judgment, AR Seow indicated that in the future, parties should be guided by the Honourable Justice Quentin Loh’s comments in Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd [2013] 3 SLR 609 at [65] that:

“Perhaps some thought should be given to whether challenges to adjudication determinations should in the first instance be heard before assistant registrars as that would add one more layer of appeal. This would cause undue delay, especially if there has been a stay of payment out to the claimant.”

The learned AR Seow then went on to decide the abovementioned three (3) issues.

In relation to the 1st Issue, the Court held that it was not the role of the Court to embark on a review of the adjudicator’s decision relating to the validity of the PR. The Court’s role is limited to determining the existence of the basic requirements for the adjudication application to have been validly commenced and the adjudicator validly appointed. These requirements are set out by the High Court at [45] of SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733 (“SEF”). This approach has also 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.

The Court further held that in this case, the Defendant had failed to show that the adjudicator’s decision on the validity of the PR was 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”.

In light of the Court’s decision on the 1st Issue, the Court did not make any specific finding in relation to the 2nd and 3rd Issues.

However, the Court did express its view in relation to the 3rd Issue that there was no basis on which the Defendant could set aside the AD on the grounds of a “jurisdictional error” or breach of natural justice committed by the adjudicator as the adjudicator had considered parties’ arguments in relation to the validity of the PR and had made a considered determination on the issue. In this regard, the Court referred to [32] and [34] of the decision in Ang Cheng Guan Construction Pte Ltd v Corporate Residence Pte Ltd [2017] 3 SLR 988, in which the High Court had rejected a similar challenge raised by the claimant as a ground for setting aside an adjudication review determination.

 

IV.       CONCLUSION

Given the Court’s clear pronouncement on the limited role that it should play in a setting aside application under section 27(5) of SOPA, it becomes all the more important that contractors remember to issue a payment response to payment claims received within the specified timeline under their contract. Contractors should also ensure that their payment response complies with the other requirements under SOPA such as identifying the payment claim to which it relates.

If a party who fails to serve a valid payment response is dissatisfied with the adjudication determination that it subsequently receives, it appears that such party will have little recourse to challenge the adjudication determination and will have to commence court or arbitration proceedings (depending on the terms of the contract) to resolve the matter on a full and final basis.

If you have any queries pertaining to this article, please feel free to contact Mr Joseph Liow Wang Wu at joeliow@straitslaw.com.sg or Ms Charlene Cheam at charlenecheam@straitslaw.com.sg or the Straits Law Director who usually attends to your matters.