Singapore – Dissecting The Scope Of An Adjudication Review Under The SOPA.

 

2 May, 2017

 

 

INTRODUCTION

 

The recent Singapore High Court (“HC”) decision of Ang Cheng Guan Construction Pte Ltd v Corporate Residence Pte Ltd [2017] SGHC 9 is the first reported case in Singapore that addresses the question of the scope of an adjudication review under the Building and Construction Industry Security of Payment Act (“SOPA”). Sections 18 and 19 of the SOPA set out the procedures for the review of an adjudicator’s determination on a payment claim dispute.

 

The key issue in this decision concerned a novel question on the scope of an adjudication review: is an adjudication review restricted to the issues raised by the respondent (“the Narrow Interpretation”) or does it encompass the entire adjudicator’s determination (“the Broad Interpretation”)? 

 

In finding that the Broad Interpretation was the correct one and that the review adjudicator had misdirected himself on a point of law and failed to take into account the relevant issues raised by the plaintiff, Lee Seiu Kin J (“Lee J”) set aside the adjudication review determination. In doing so, he took the opportunity to articulate the reasons why the Broad Interpretation should be preferred. This article examines the reasoning behind the HC’s decision, which would be useful to parties seeking to review an adjudication determination in the future.

 

BRIEF FACTS
 

The defendant employer, Corporate Residence Pte Ltd (the“Defendant”), had engaged the plaintiff main contractor, Ang Cheng Guan Construction Pte Ltd (the “Plaintiff”), to carry out works in a construction project. The Plaintiff took out an adjudication application in relation to a payment claim, and five issues were determined by the adjudicator in the resulting adjudication. The net result was that the Defendant was found liable to pay the Plaintiff an adjudicated amount with interest, and to bear 70% of the costs of the adjudication.

The Defendant subsequently lodged an adjudication review application to review two of the adjudicator’s determinations before a review adjudicator (“RA”). Dissatisfied with several of the adjudicator’s determinations, the Plaintiff submitted on three issues for the RA’s determination as well. However, the RA was of the view that his jurisdiction was limited to the determinations raised by the Defendant in the adjudication review (i.e. the Defendant’s issues). It was for this reason that the Plaintiff filed an originating summons seeking to set aside the adjudication review determination.

SCOPE OF AN ADJUDICATION REVIEW: BROAD INTERPRETATION VS NARROW INTERPRETATION
 

Whereas the Plaintiff adopted the Broad Interpretation, the Defendant favoured the Narrow Interpretation on two grounds. Firstly, the Defendant argued that an adjudication review process was similar to an appeal in court proceedings, where the respondent is not permitted to raise any matter on appeal unless he has filed a cross-appeal.

 

The HC dismissed this ground quickly on the basis that appeals in court proceedings were not analogous to the adjudication process as they were different processes and governed by separate legislation.

 

Secondly, the Defendant contended that under s 18(2) of the SOPA, only the respondent in an adjudication determination was entitled to apply for an adjudication review. In considering this argument, Lee J undertook an extensive analysis of the relevant provisions of the SOPA,1 Parliamentary speeches as well as underlying policy considerations. He concluded that the weight of the statutory provisions supported the
Broad Interpretation:

 

• Although the relevant SOPA provisions did not explicitly set out the scope of an adjudication review, a plain reading of the operative words “the review of the determination” in s 18(2) prima facie referred to the entire adjudication determination, which supported the Broad Interpretation;
• A review adjudicator’s scope of review was limited to only matters set out in s 17(3), read with s 19(6)(a) of the SOPA.

 

In the absence of any words to the effect that an adjudication review could only consider matters raised by the respondent, the language of the SOPA was sufficiently broad to cover the entire adjudication determination.

Further, the plain language of the statutory provisions referred to the adjudication determination, and was not limited to a part of it; 

 

• Section 19(5) of the SOPA, which provided that an adjudication review shall determine the adjudicated amount, accorded a review adjudicator the discretion not only to maintain or decrease the adjudicated amount, but to increase it as well. If the Narrow Interpretation was intended, it could have been easily specified that any  difference was payable only by the claimant. The lack of any statutory language suggesting otherwise was therefore consistent with the Broad Interpretation; and
• Section 18(2) of the SOPA only established “the right of an aggrieved respondent to apply for an adjudication review” and did not state that such a review was restricted to the issues raised by the respondent. 2 It was illogical to conclude from the fact that only the respondent was entitled to apply for a review that the consequent review was limited to only the issues raised by the respondent.

 

Additionally, Lee J considered the policy considerations underpinning the SOPA, namely that the objective of the SOPA was to establish a “mechanism for speedy and low-cost adjudication of disputes over payment claims, so as to ensure cash flow in the cash-sensitive construction industry”. 3 Although Lee J recognised that the policy of the SOPA was “ambivalent” 4 as to which interpretation applied, he noted that it was plausible that Parliament deemed it necessary to provide that once an adjudication review commenced, the entire adjudication determination would be open for review, and not just the parts that the respondent was dissatisfied with. It could be unfair to allow a respondent to cherry-pick the parts he was unhappy with, without a corresponding right to the claimant to seek a review of the parts where the adjudicator might have committed an error.

 

WHETHER THE ADJUDICATION REVIEW DETERMINATION WAS LIABLE TO SET ASIDE
 

The Plaintiff submitted that the adjudication review determination should be set aside for breach of natural justice, but the HC rejected this ground as there was no such breach in this case. The HC found that, after carefully studying the issues and taking a position that the Narrow Interpretation applied to the adjudication review, the review adjudicator
had correctly refused to hear the Plaintiff’s issues concerning the parts of the adjudication determination that the Defendant had not sought to review.

 

However, the HC set aside the adjudication review determination on the basis that the review adjudicator had misdirected himself on a point of law and the Plaintiff’s issues were relevant considerations that he had failed to take into account. Based on ss 21(3) and 27(5) of the SOPA, as well as case law from Singapore, England and New South Wales, Lee J held that the jurisdiction and powers of a review adjudicator were subject to judicial review. Applying the principles relating to judicial review, Lee J concluded that as the Broad Interpretation was the correct one, the review adjudicator had committed a jurisdictional error.

 

CONCLUSION
 

This decision is a landmark ruling in the construction industry because, as recognised by Lee J, the adjudication review procedure is unique to Singapore and has no precedent in other jurisdictions with similar

regimes to expedite payments in the construction industry.

Given the dearth of guidance available from precedent cases, whether from Singapore or abroad, the present decision is therefore instructive as a precedent for both construction companies and construction lawyers to take into account when applying for an adjudication determination review. 

 

It also takes a laudable step in clarifying the law on the scope of an adjudication review, which would be useful for potential review adjudicators to bear in mind.

1 Sections 17, 18 and 19 of SOPA and Regulation 10 of the Building and Construction Industry Security of Payment Regulations.
2 [2017[ SGHC 9 at [22].
3 [2017] SGHC 9 at [27].
4 [2017] SGHC 9 at [30]

For more information, please contact:

 

Conrad Campos, Partner, RHT Taylor Wessing

conrad.campos@rhtlawtaylorwessing.com