CONSTRUCTION CASE LAW UPDATES

The Importance of Observing the Dispute Settlement Period

Toh Chen Han, Pinsents Masons

Wen Si Chow, Clasis LLC

Newcon Builders Pte Ltd v Sino New Steel Pte Ltd [2015] SGHCR 13
Newcon Builders Pte Ltd v Sino New Steel Pte Ltd [2015] SGHC 226
Tienrui Design & Construction Pte Ltd v G&Y Trading and Manufacturing Pte Ltd [2015]
SGHC 243

Can an adjudication application be lodged prior to the expiry of the dispute settlement period
("DSP") provided under section 12(5) of the Building and Construction Industry Security of
Payment act (the "Act")? This issue was considered in several decisions by the High Court.

In the case of Newcon Builders Pte Ltd v Sino New Steel Pte Ltd [2015] SGHCR 13,
Assistant Registrar Paul Chan was asked to consider whether the lodgement of an
Adjudication Application prior to the expiry of the dispute settlement period. AR Chan held
that the primary objective of the Act was to create an expedited adjudication process to
facilitate cash flow. If an adjudication application were to be rendered invalid by reason that
it had been lodged prior to the expiry of the DSP, such invalidity would run counter to this
primary objective. Further to the same, AR Chan also held that a failure to comply with
section 12 of the Act was not an issue which fell to be considered by the High Court in an
application to set aside an adjudication determination. For this reason, the Assistant Registrar
upheld the validity of the adjudication application, and hence, the adjudication determination.

The decision of AR Chan went on appeal before Quentin Loh J in Newcon Builders Pte Ltd v
Sino New Steel Pte Ltd [2015] SGHC 226. Loh J examined the wording of sections 12 and
13 of the Act and concluded, essentially, that the claimant was only entitled to lodge an
adjudication application after expiry of the DSP. Loh J explained that the introduction of the
DSP in the Act was to reduce the possibility of ambush by a claimant. It also provides
respondents with a further opportunity to provide a payment response, if this had not been
done earlier, or to vary any payment response already served. Allowing adjudication
applications to be made during the DSP would deprive the respondent of these statutorily-
provided rights. Loh J held that if a claimant wished to utilise the Act to obtain payment,
then it would have to ensure that the timelines (being a key feature of the Act) were complied
with. In this regard, Loh J said that breach of such timelines should not be excused simply
because the respondent had not suffered any prejudice. Loh J therefore disagreed with the
decision of AR Chan and set the adjudication application aside.

In Tienrui Design & Construction Pte Ltd v G&Y Trading and Manufacturing Pte Ltd
[2015] SGHC 243, Lee Sieu Kin J similarly held that an adjudication application which had
been lodged prematurely was invalid. The legislative intent of encouraging settlement would
be undermined if parties were allowed to jump the gun during the DSP. A premature
adjudication application went towards the jurisdiction of the adjudicator, and nullified any
resulting adjudication determination. The learned judge stated that the 7-day DSP timeline set
out under section 12(5) of the Act was a creature of statute and could not be modified by
contract. In this respect, he disagreed with the Assistant Registrar's views in LH Aluminium
Industries Pte Ltd v Newcon Builders Pte Ltd [2014] SGHCR 10, that there was no reason
why the 7-day DSP should not commence on the date of the service of the payment response.
Lee J held that this interpretation ran counter to the wording of section 12(5). Consequently,
it was found that the adjudication application had been lodged prematurely as the claimant
had failed to allow 7 days to elapse from the deadline to submit the payment response.

Given the court's emphasis on strict observance of the DSP in the cases above, it appears that
lodging an adjudication application too early would be just as fatal to the claim as lodging an
adjudication application too late. Consequently, it would be prudent for potential claimants
to ensure that the time for filing an adjudication application is calculated accurately.

The importance of strict compliance with SOP timelines, and lodging of documents within
SMC's business hours

Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2014] SGCA 61

The case of Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2014] SGCA 61
concerned the lodgement of an adjudication response at 4.32pm with the Singapore
Mediation Centre ("SMC").

This was an issue because, under the rules of the SMC, all documents lodged after 4.30 pm
on a Monday to Friday (12.00pm on the eves of Christmas, New Year and Chinese New Year)
would be either be rejected by the SMC, or if accepted, be deemed to have been lodged on
the next working day. Consequently, the adjudication response was deemed to have been
lodged out of time by the adjudicator, and disregarded on that basis, resulting in almost the
whole amount claimed in the adjudication being allowed.

The determination was challenged by the Respondent, and at the High Court, Tan Siong Thye
JC set it aside, because he considered that the respondent was entitled under the Act to put in
its Adjudication Response at any time up to 11.59 pm on the due date, and that the SMC had
no authority to make a rule which circumscribed that right.

The Court of Appeal however disagreed. Having regard to the SMC's authority to create its
own rules under section 28 of the Act, and section 37 of the Act, which provides for service
of documents at a person's usual place of business within normal business hours, the Court of
Appeal upheld the validity of the SMC's rules restricting the hours for lodgement of
documents.
The Court of Appeal considered it irrelevant that the adjudication response in this case had
been lodged only two minutes after SMC's 4.30pm cut-off time, making it clear that
timelines under the Act must be strictly complied with. Whilst the Court acknowledged
that this might seem harsh, it did not consider the strict application of the timelines unduly
draconian, since redress was still available to the respondent, either in a suit or arbitration on
the substantive merits of the claim.

Progressive Builders Pte Ltd v Long Rise Pte Ltd [2015] SGHC 223

In the case of Progressive Builders Pte Ltd v Long Rise Pte Ltd [2015] SGHC 223, Lee Sieu
Kin J was asked to consider the a challenge to validity of a payment claim on the basis that it
had:

(a) been served by email, and

(b) allegedly failed to comply with section 10(3) of the Act.

Lee J rejected both complaints.

On the first issue, Lee J held that service of a payment claim by email was permitted, and he
reached this conclusion for a number of reasons including the following:

(a) Section 37 of the Act, which deals with service of documents, was worded permissively
and not prescriptively, as section 37 used the word 'may'. The Court of Appeal in Lee
Wee Lick Terence v Chua Say Eng [2013] 1 SLR 401, had thus alluded to the possible
validity of other modes of service not described under section 37.

(b) Leaving aside the service of originating processes (i.e. documents such as writs of
summons, which are used to commence legal proceedings), the courts of Australia,
England and New Zealand appear to have adopted what Lee J called the "effective
informal service rule", which essentially validates the service of documents by means
other than those stated in the relevant statutory provision as long as the said
documents have come to the attention of the intended recipient.

(c) Email is now widely used in the construction industry. It could not have been the
legislative intent of the Act to shut email out as a mode of service, if it is effective in
bringing documents to the attention of intended recipients.

On the second issue, Lee J held that the standard required for a payment claim to comply with
section 10(3)(a) was not an onerous one. The respondent had alleged that the payment claim
was invalid as the reference period of the payment claim was July 2014 but had nonetheless
included works carried out in other months. Lee J found that this did not invalidate the
payment claim as the claimant had stated in its cover email that the payment claim was for
works done till the end of July 2014. The respondent had thus been sufficiently informed of
the basis of the payment claim. An unduly technical approach is inappropriate, and payment
claims should only be invalidated if the breach of 10(3)(a) impeded the adjudication process.

Obrascon Huarte Lain SA v Attorney General for Gibraltar [2014] EWHC 1028 (TCC);
[2015] EWCA Civ 712 (CA)

The question of strict compliance with a contractually prescribed timeline was considered in
the case of Obrascon Huarte Lain SA v Attorney General for Gibraltar. It involved a
Spanish civil engineering contractor, who was engaged by the Government of Gibraltar to
construct a road around Gibraltar Airport. The case was heard at first instance by Mr Justice
Akenhead (sitting in the Technology and Construction Court) whose decision was affirmed
by the Court of Appeal.
The contract between parties in that case was governed by the FIDIC Yellow Book, which
contained at Clause 20.1 (which has identical equivalents in the FIDIC Red and Silver Books)
a requirement that notice to be given by the contractor in respect of claims for time
extensions or additional payment. The clause stipulated that notice was to be given no later
than 28 days after the contractor became, or should have become, aware of the event or
circumstance giving rise to the claim. Mr Justice Akenhead held that a strict construction of
such a clause, namely one which required the contractor to submit a notice within 28 days of
the occurrence of the delay event, would result in rather onerous results for the contractor.
He therefore saw no reason why the clause should be construed strictly against the contractor.
Mr Justice Akenhead also held that such a clause should be construed reasonably broadly,
given its serious effect on what could otherwise be good claims for instance for breach of
contract by the employer. Consequently, he held that an extension of time ought to be
claimed either when it was clear that there would be a delay (i.e. prospective delay) or when
the delay had started to be incurred (i.e. retrospective delay). These findings were not subject
to appeal. Contractors are likely to welcome Mr Justice Akenhead's forgiving interpretation
of the claim notice requirements under Clause 20.1 of the FIDIC Yellow, Red and Silver
Books.

Aside from the issue of an extension of time, there was a question as to whether the
contractor had encountered unforeseeable physical conditions under Clause 4.12 of the FIDIC
Yellow Book. In this respect, Mr Justice Akenhead held that this depended on the ground
conditions that were reasonably foreseeable by an experienced contractor at the date of the
submission of the tender. In this case, given that the contractor had been provided with site
data, and had been told to allow for a substantial volume of contaminated material, the court
held that the contractor should have carried out some intelligent assessment and analysis of
this information at the tender stage. As the contractor failed to do so, its claims on this front
were rejected. In upholding Mr Justice Akenhead's decision on appeal, Jackson LJ (with
whom Gloster and Floyd LLJ agreed) held that given the history of use of the site the
contractor should have prepared for a 'worst case scenario'. This is significant as it seems to
imply that a claim under Clause 4.12 requires conditions that go beyond the worst case
foreseeable by the contractor at the time of tender.