15 May, 2018
A party making a claim for payment under a construction contract must still be able to prove a "prima facie case" that it is entitled to that payment, even in the absence of a response from the other party, the Singapore appeal court has confirmed.
Under the Building and Construction Industry Security of Payment Act, a party which does not file a response to a claim for payment may be found to have waived its right to raise objections, including those relating to the adjudicator's jurisdiction, before the adjudicator.
However, Singapore Court of Appeal judge Justice Steven Chong said that the legislation made it clear that this does not mean that an adjudicator "should … simply rubberstamp any payment claim that is unchallenged". Even in the absence of a payment response, the Act both "prescribes and restricts" the things which the adjudicator is entitled to and must consider when coming to a decision.
"[The Act] requires him to act 'independently'," he said. "Inherent in the concept of independence, in our view, is the idea that the content of the adjudicator's duty to adjudicate cannot depend on whether a payment response has been filed or not."
The court went on to find that this gave the responding party in this case the right to highlight "patent errors" to the adjudicator, even though by not filing a response it had waived its right to withhold payment or to object to the adjudicator's jurisdiction. However, it ultimately dismissed the challenge by the respondent employer, Comfort Management, as it was unable to identify any such errors.
"[T]he alleged patent error which a respondent seeks to raise with the court that the adjudicator has failed to recognise must be an error on the face of the material that is properly before the adjudicator," the judge said. "In the light of this point, it should not be surprising that the absence of any payment or adjudication response will make it that much harder for any respondent to identify patent errors which the adjudicator allegedly failed to identify."
"Certain errors which could have been patent in the face of material adduced by the respondent will naturally be latent where no such material is properly before the adjudicator. The lesson in this is simply that it is overwhelmingly in a respondent's interest to file a payment response, so that he is not confronted with the difficult task of determining that the adjudicator has failed to identify a patent error," he said.
Comfort had employed OGSP Engineering Pte Ltd to supply and install a ventilation and ducting system in a warehouse. On 16 March 2017, OGSP issued a payment claim against Comfort for work done between October 2013 and October 2014. Comfort replied via email, stating that the invoices had already been paid and asking for additional supporting documents. It did not, however, file a payment response in accordance with the requirements in the Act.
The adjudicator awarded OGSP the sum sought, which Comfort was required to pay within seven days. Comfort did not do so, and OGSP applied to the High Court for enforcement of the award.
Comfort's case before the High Court was based in part on what it saw as the adjudicator's failure to consider patent errors in OGSP's claim. Patent errors are those which are "obvious, manifest or otherwise easily recognisable". The High Court judge found that there were no patent errors in the material which was presented to the adjudicator and dismissed Comfort's arguments. Comfort appealed.
Among the arguments Comfort made on appeal was that section 17(3) of the Act imposed a duty on the adjudicator to consider all matters listed in that provision, including the terms of the contract between the parties. If the adjudicator had considered the terms of the contract, he would have recognised the patent errors which allegedly existed in OGSP's payment claim. The appeal court disagreed. It found that as long as the adjudicator was satisfied that OGSP had a prima facie case that payment was due, he was not required to go further and consider Comfort's potential objections based on the provisions of the parties' contract when no payment response had been filed.
The appeal court's decision was "extremely helpful", as it clarified two important points, said construction disputes expert Wee Jian Ang of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law.com.
"First, an adjudicator should not simply rubber stamp any payment claim that is unchallenged," he said. "He or she has a duty to act 'independently', i.e. address his mind to and consider the true merits of a payment claim, and at least have 'some positive basis' for his determination and not simply lack of reasons not to allow the claim. This duty to adjudicate independently is conceptually distinct from a respondent's entitlement to make submissions before the adjudicator."
"Second, the category of 'patent errors' is extremely narrow and limited – for instance, where the evidence submitted plainly contradicts the claimed amount, or where no supporting material or explanation has been adduced to support the payment claim. Save for these instances, it may be difficult to conceive of other types of patent errors," he said.
This article was published in Out-law here.
For further information, please contact:
Wee Jian Ang, Pinsent Masons
weejian.ang@pinsentmasons.com
