17 March, 2017
What is the scope of an adjudication review?
Under section 18 of the Building and Construction Industry Security of Payment Act (the "SOPA"), a respondent who is aggrieved by an adjudication determination may lodge an application for the review of the determination.
However, there is nothing in the SOPA that explicitly spells out the scope of an adjudication review. Is a review adjudicator entitled to review the entire adjudication determination? Or is the adjudication review restricted only to issues raised by the respondent?
In Ang Cheng Guan Construction Pte Ltd v Corporate Residence Pte Ltd [2017] SGHC 09, the Singapore High Court considered for the first time the question of the scope of an adjudication review.
Background
The Defendant, Corporate Residence Pte Ltd (the Employer) engaged the Plaintiff, Ang Cheng Guan Construction Pte Ltd (the Contractor) to carry out works in a construction project.
On 18 March 2016, the Contractor took out an adjudication application in relation to a payment claim dated 22 February 2016. The adjudicator determined five issues in the adjudication:
a) the payment claim was not served out of time and the adjudication application was not invalid;
b) the payment responses provided by the Employer in response to the payment claim were valid;
c) the Contractor was entitled to an additional extension of time (EOT) of 133 days for only one of the four delay events alleged by the Contractor (the Contractor was not entitled to any additional EOT for the other three delay events);
d) in light of the EOT granted by the adjudicator, the Employer was not entitled to impose liquidated damages for late completion; and
e) the Contractor was entitled to certain amounts for work done and for variations / prolongation claims.
On 19 May 2016, the dissatisfied Employer lodged an adjudication review application and sought a review of two of the adjudicator's determinations – i.e. that the Contractor was entitled to EOT of 133 days; and that the Employer was not entitled to impose liquidated damages.
What was notable is that, at the same time, the Contractor was also dissatisfied with the adjudication determination and submitted the following issues to the review adjudicator:
a) whether the adjudicator should have granted further EOT for two other delay events; and
b) whether the adjudicator should have determined that time had been set at large (collectively, the Contractor's Issues).
The review adjudicator found in favour of the Employer. In the course of his decision, the review adjudicator formed the view that his jurisdiction was limited to the determination of the issues raised by the Employer in the adjudication review – and therefore did not hear parties on the Contractor's Issues. Subsequently, the Contractor commenced proceedings in the High Court in respect of this view by the review adjudicator.
Issues before the High Court
The Singapore High Court had to consider the question of the scope of an adjudication review. The Court noted that the adjudication review procedure is unique to Singapore and is not found in other jurisdictions with similar regimes to expedite payments in the construction industry.
The Contractor submitted that a review adjudicator is entitled to review the entire adjudication determination (the Broad Interpretation). However, the Employer submitted that an adjudication review is restricted to only the issues raised by the respondent (the Narrow Interpretation) because:
a) under section 18 of the SOPA, only the respondent in an adjudication determination is entitled to apply for an adjudication review; and
b) the adjudication review process is analogous to an appeal in court proceedings, where it is well established that the respondent is not permitted to raise any matter on appeal unless he has filed a cross-appeal.
The High Court's decision
i) Adjudication review versus court appeal
The Court quite quickly dismissed the second argument and held that it is incorrect to draw an analogy between the adjudication review process and appeals in court proceedings. The former is a creature of the SOPA, which establishes an entirely new regime for the purpose of providing a fast but interim means for resolving payment disputes in the construction industry. The latter, however, is governed by different legislation and provide for a final decision arrived at after a comprehensive process that ensures that all relevant facts and legal arguments are fully ventilated.
ii) Interpreting the provisions in the SOPA
Instead, the Court held that the correct approach was to consider the provisions in the SOPA and its regulations, as well as the policy behind the SOPA. First, the Court held that the operative words in section 18(2) of the SOPA are "the review of the determination". Prima facie, this refers to the entire adjudication determination and supports the Broad Interpretation.
Further, section 19(6)(a) of the SOPA states that the review adjudicator shall only have regard to the matters in sections 17(3)(a) to (h) of the SOPA and the adjudication determination under review. The Court held that if the Narrow Interpretation were intended, either section 17(3) or section 19(6) of the SOPA could have easily inserted, in either provision, words to the effect (i.e. that, in an adjudication review, only matters raised by the respondent may be considered).
However, the draftsman did not do that.
In addition, section 19(5) of the SOPA states that an adjudication review shall determine the adjudicated amount (if any) to be paid by the respondent to the claimant; and that if this is different from the amount determined at first instance the review adjudicator shall determine "the date on which the difference in amount is payable". The Court held that section 19(5) of the SOPA leaves it open to the review adjudicator to increase the adjudicated amount – which militates against the Narrow Interpretation.
Finally, the Court observed that while section 18(2) of the SOPA provides that only the respondent in an adjudication is entitled to apply for an adjudication review, it does not state that such a review is limited to the issues raised by the respondent.
iii) Policy
On policy reasons, the Court held that it was conceivable that the legislature deemed it necessary that once an adjudication review is set in motion, the entire adjudication determination is open for review and not just the parts that the respondent is dissatisfied with.
The Court elaborated that in many adjudication determinations, there will be parts where the adjudicator gets it right and parts where he gets it wrong. To permit a respondent to cherry-pick the parts which he is unhappy with, without a corresponding right on the part of the claimant to seek a review of the parts where the adjudicator may have gotten it wrong, could also be unfair.
The Court concluded that the Narrow Interpretation would tend to encourage respondents to apply for an adjudication review as there would be nothing to lose, but everything to gain.
iv) Should the adjudication review determination be set aside
After holding that the Broad Interpretation is preferred, the Court considered whether the Adjudication Review Determination should be set aside.
It is interesting to note that the Court disagreed that the Adjudication Review Determination should be set aside on the basis that there was a breach of natural justice – because "even if [the review adjudicator] agreed with those arguments [concerning the Contractor's Issues], it would not have made a difference to his decision".
Instead, the Court decided to set aside the Adjudication Review Determination because the adjudicator had misdirected himself as to the law by deciding that he could only consider issues raised by the respondent. In doing so, the review adjudicator had failed to consider relevant issues.
Conclusion
Based on an interpretation of the SOPA and its underlying policy, the Court held in favour of the Broad Interpretation. From a policy perspective, this decision makes sense.
It is now clear that in an adjudication review, the entire adjudication determination may be reviewed by the review adjudicator. Therefore, an aggrieved respondent in any adjudication determination should carefully consider the merits of its claims before deciding to proceed with an application to review the determination.
Further, the Court's decision that an adjudication determination can be set aside on the basis of misdirection as to the law raises the potential for interesting developments. Parties trying to set aside an adjudication decision may push the ambit of what may be considered as a misdirection as to the law.
For further information, please contact:
Nandakumar Ponniya , Principal, Baker & McKenzie.Wong & Leow
nandakumar.ponniya@bakermckenzie. com
