December 1, 2015
The Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) stipulates the procedure to be adopted for an adjudication application.
In Aik Heng Contracts and Services Pte Ltd v Deshin Engineering & Construction Pte Ltd  SGHC 293, the Court reiterated that in setting aside an adjudication determination, it was only concerned with material breaches, and not technical breaches.
Deshin Engineering & Construction Pte Ltd (“Deshin”) was the main contractor for a project and Aik Heng Contracts and Services Pte Ltd (“Aik Heng”) was appointed as its subcontractor for the aluminium, steel & glazing works. Aik Heng served a payment claim for work done that was not paid. Deshin did not file a payment response. Aik Heng proceeded to file an adjudication application and the adjudicator made a determination in Aik Heng’s favour. Aik Heng applied for leave to enforce the determination.
In response, Deshin applied to set aside the determination on the basis that:
- the Notice of Intention to Apply for Adjudication was invalid and irregular; and/or
- the adjudicator had breached natural justice in making determination.
1. Notice of Intention was irregular
Deshin complained that the Notice of Intention was irregular because it did not state (a) the “service address” of Deshin; and (b) the “date the contract was made” as required by regulation 7(1) of the Building and Construction Industry Security of Payment Regulations 2005 (Cap 30B, Reg 1, 2006 Rev Ed).
The Court noted that Deshin did not press the point about the “service address” and observed that the address of Deshin was stated and there was no requirement in the Regulations that an address for correspondence be explicitly stated to be a “service address”.
Date the contract was made
However, Deshin sought to persuade the Court that the failure to state the “date the contract was made” was fatal to the Notice of Intention. The “date the contract was made” was the date the Letter of Award by Deshin was accepted by Aik Heng; however, the Notice of Intention only stated the date of the Letter of Award.
The Court reiterated that the purpose of the formal requirements of the Notice of Intention were to ensure that a respondent has sufficient notice of the case it has to meet and to prepare a response. Given the speed and informality of the adjudication process, the Court held that stating the date of the Letter of Award and not the date of the acceptance was a technical breach which was insufficient to invalidate the Notice of Intention and that an excessively technical approach should not be adopted. This was especially since Deshin conceded that it was able to identify the subcontract in dispute.
2. Breach of natural justice
Deshin argued that natural justice was breached because (a) the adjudicator had failed to properly adjudicate the claim by blindly endorsing the variation claims despite there being no evidence of instructions for the variations claimed and obvious errors in supporting documents; and (b) it had not been given the opportunity to raise its contentions as the adjudicator declined to hear them during the adjudication conference.
Patent errors in documents
The Court held that the first objection was not an allegation of breach of natural justice but an allegation that the adjudicator failed to come to his own independent and impartial view of the payment claim and had simply “rubber-stamped” the claim.
Deshin highlighted that the supporting documents provided by Aik Heng were “timecards” that (a) did not reflect the number of working hours of each worker at the site, but merely contained descriptions of the variation works carried out and the total number of man-hours required to carry out each of the variation work; and (b) had inconsistent or erroneous dates on the “timecards”, for example, some of the dates were either after the date on which Aik Heng claimed to have completed the work contracted for or before the date of the subcontract in dispute.
The Court was of the view that the errors highlighted were not patent errors which are obvious on the face of the material which might show that the adjudicator simply “rubber-stamped” the payment claim. Also, the adjudicator expressly stated in the determination that he had reviewed and found that Aik Heng had substantiated all its claims with drawings, documents and information available to him.
Refusing to hear response
Denshin conceded that section 15(3) of the Building and Construction Industry Security of Payment Act compelled an adjudicator to reject any submissions made in the course of proceedings which serve to rectify a party’s failure to have made a payment r esponse. However, Denshin argued that this only precluded an adjudicator from considering Denshin’s substantive response but not hearing the response. Therefore, Denshin argued that it should have been able to put forward its case even though the adjudicator would not allowed to take it into consideration.
The Court disagreed with this literal interpretation and held that even if this literal interpretation was correct, this would not have led the determination to be set aside because the adjudicator could not have taken the arguments into account even if he had heard them. There was no material breach of natural justice.
The Court reiterated that an adjudication determination would be void if there had been a substantial denial of nature justice and that this must be assessed in the light of the provisional nature of adjudication determinations and the need for a speedy resolution.
The Court held that therefore, a respondent has a right to be heard on patent errors in an applicant’s claim even where no payment response was filed and an adjudicator’s refusal to hear the respondent on such matters would be a material breach of natural justice. The Court did not think that section 15(3) precluded this because all that the respondent is allowed to do is to comment on the material produced by the applicant.
This is entirely consistent with and supports the adjudicator’s duty to consider the payment claim and not to “rubber-stamp” it.
However, on the facts of this case, the Court did not find that there was a material breach of natural justice. This was because Denshin did not show convincing evidence that it would have pointed out patent errors had it been given a chance to do so. In any event, the Court was of the view the so called errors in the “timecards” were not patent errors that would have affected the outcome of the determination and were not open to interpretation. The Court found that the adjudicator could have found that the “timecards” accurately reflected the work done by Aik Heng notwithstanding the errors in the dates stamped, particularly since Denshin’s employees had signed off on them. Thus, the Court did not find a material breach of natural justice.
As there were no material breaches to invalidate either the Notice of Intention or determination, the Court dismissed Denshin’s application to set aside the adjudication determination.
The Court reiterated that adjudicators did not need to hear a respondent in an adjudication application on any matter that the respondent ought to have put in a valid payment response but had failed to do so. However, an adjudicator must hear a respondent on, apart from issues raised in a valid payment response (if any), any submission relating to patent errors on the documents, calculations or submissions of the claimant.
Our recommendations from this case are:-
(1) Applicants should take care to substantiate all their claims because even if the respondent does not file a payment response, the respondent can point out patent errors and the adjudicator will not “rubber-stamp” the payment claim.
(2) Respondents should ensure that their intention to raise patent errors to the adjudicator be evidenced by documentary evidence such as written submissions tendered to the adjudicator, so that their case for setting aside any determination is stronger should the adjudicator refuse to hear the submission on patent errors.