Singapore’s Court of Appeal Clarifies Key Issues of Jurisdiction, Parties’ Obligations Under Payment Disputes Law

The court’s recent decision in Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd addresses perennial issues surrounding the validity of contractual payment claims for the purposes of the Building and Construction Industry Security of Payment Act and the appropriate time for respondents to raise objections to invalid payment claims.

Addressing a payment dispute between a main contractor (Kian Hiap Construction) and a subcontractor Audi Construction), Singapore’s Court of Appeal ruled in Audi Construction [2018] SGCA 4 on 22 January that the subcontractor’s payment claim was valid despite being served two days before the date specified in the contract.

Under the scheme of the Building and Construction Industry Security of Payment Act (the Act), claimants at adjudication are required under section 10(2)(a) of the Act to have first served their contractual payment claim “at such time as specified in or determined in accordance with the terms of the contract”. Adjudication applications brought on payment claims served out of time are therefore ground for challenging the adjudicator’s jurisdiction.

In Audi Construction, the Court of Appeal held that where the contract stipulates a time for service of payment claims on (and not by) a stipulated date (Stipulated Date),and service of the payment claim is not possible on the Stipulated Date, earlier service of that payment claim may be valid for the purposes of the Act, subject to the following:

• The claimant intends for the operative date of the payment claim to be the Stipulated Date and not the date of actual service
• The claimant has good reason for serving the payment claim on the date of actual service other than the Stipulated Date
• No confusion is reasonably caused to the respondent about the operative date of the payment claim by the claimant’s service of the payment claim

However, given the Court of Appeal’s characterisation of the appellant’s early service of a post-dated payment claim as an “unnecessarily ’creative’” attempt to comply with the contractually specified service date, its view that the s 50 provisions for computation of time in the Interpretation Act (Cap. 1) applies to the claimant’s statutoryobligation under s 10(2)(a) of the Act deserves careful consideration when assessing if a late payment claim would in fact be validly served for the purposes of the Act (as apparently, it might well be).

In a significant departure from its earlier reasoning in Lee Wee Lick Terence (alias Li Weili Terence) v Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) [2013] 1 SLR 401, the Court of Appeal also held that an adjudicator has the power to decide all matters which go towards his/her jurisdiction, including challenges to his/her substantive jurisdiction and challenges to his/her jurisdiction based on his/her appointment.

Following the Court of Appeal’s pronouncement that s 15(3)(a) of the Act specifically imposes on a respondent the duty to raise in the payment response all jurisdictional objections he/she intends to raise before the adjudicator, and that failure to do so will give rise to an estoppel at adjudication, Audi Construction further underscores the apex court’s view that both claimants’ and respondents’ pre-adjudication conduct circumscribes their rights at adjudication under the Act.

Parties to construction contracts would therefore be well advised to seek legal counsel at the early stages of payment disputes, particularly in the preparation and service of contractual payment claims and payment responses (respectively), to better position themselves for adjudication at a later date.