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1 August, 2017
Construction companies in Singapore must submit claims for payment on the precise date stipulated in their construction contract or otherwise find that those claims are invalid, a new ruling by the High Court in the city state has confirmed.
In reaching its finding, the court considered how to interpret provisions contained in the Building and Construction Industry Security of Payment Act (SOPA).
The case concerned a dispute between Kian Hiap Construction and Audi Construction, which it had engaged as a sub-contractor to carry out structural reinforcement works at a nursing home.
Kian Hiap disputed the validity of a payment claim made by Audi. Audi served its claim on Kian Hiap ahead of the date specified in its contract with Kian Hiap for such claims to be made. Audi argued that SOPA did not preclude premature payment claims being submitted. However, Singapore's High Court disagreed with that assessment.
Yong Neng Chan of Pinsent Masons MPillay, the Singapore joint law venture partner of Pinsent Masons, the law firm behind Out-Law.com, said the ruling was of significant importance to contractors and sub-contractors conducting business in Singapore.
He said that there were previously doubts as to whether a contracting party could serve a payment claim before or by the specified date in the contract where a contractual provision stated that a payment claim must be served 'on' a specific date. This ruling puts beyond doubt that service on the specified date is now absolutely necessary.
Audi said that it was "impossible" for it to submit its payment claim to Kian Hiap on the date set out in their contract, 20 November 2016, because that date "fell on a Sunday", according to the ruling.
However, Justice Lee Seiu Kin said he was "satisfied that it was possible to do so". The company could have left the payment claim documents outside Kian Hiap's office on the Sunday or submitted them via email, he said.
"It would not lie in the mouth of [Kian Hiap] to reject service [of the payment claim (PC)] by way of deposit of the documents outside its office when it has specified service on a day that its office would be closed," the judge said. "I therefore hold that the terms of the contract provide that service of the PC must be done on the 20th day of the month, neither sooner nor later."
In reaching that conclusion, the judge rejected Audi's argument that it was not prejudicial to Kian Hiap for it to submit its payment claim prematurely.
"Early service [of the claim] could result in [Audi] being entitled to payment on an earlier date than would have been the case if the payment claim had been served on the date specified," Justice Lee Seiu Kin said. "It is therefore not true that [Kian Hiap] does not suffer prejudice when a payment claim is served early. In any event, arguments based on prejudice are not helpful because the parties have specified in the contract the time for submission of payment claim. It must be presumed that there is a basis for this."
In his ruling, Justice Lee Seiu Kin said the case highlighted "a major weakness" in SOPA. He said the provisions on the timings of payment claims in the legislation "are not tightly drafted" and allow businesses "to elect to specify certain time limits in their contracts".
He suggested this goes against the purpose of the legislation which is to ensure payment disputes in the construction industry are resolved speedily and thereby allow cash, "the lifeblood" of the industry, to flow to businesses in the supply chain and construction workers.
The judge predicted that further disputes over the timing of payment claims would come before the courts in Singapore.
For further information, please contact:
Ian Laing, Partner, Pinsent Masons
ian.laing@pinsentmasons.com
