October 1, 2015
Strict and tight timelines apply to adjudication under the Building and Construction Industry Security of Payment Act (“SOP Act”). Time is very much of the essence.
In the High Court case of Mansource Interior Pte Ltd v Citiwall Safety Glass Pte Ltd  3 SLR 264 (“Citiwall HC”), the issue of when documents for the purposes of adjudication would be deemed successfully lodged on the day was decided by the judge.
Interestingly, the judge found in Citiwall HC that documents lodged with the Singapore Mediation Centre (“SMC”) for the purposes of adjudication would be deemed lodged on the day so long as it had reached the SMC before 2359 hours or 11.59 pm. This was notwithstanding the then applicable SMC Adjudication Procedure Rules (“SMC Rules”) which provided that any document lodged after 1630 hours (4.30 pm) shall be deemed to be lodged on the next working day. As a consequence, the Adjudication Determination (“AD”) in Citiwall HC was set aside.
On appeal, the Court of Appeal considered the correctness of the Citiwall HC decision in Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd  SGCA 42 (“Citiwall CA”). The Court of Appeal allowed the appeal and upheld the AD in favour of the Appellant, Citiwall Safety Glass Pte Ltd (“Citiwall”). The court gave full effect to the then rule 2.2 of the SMC Rules and various provisions of the SOP Act, and held that the Adjudicator was entitled to reject the Adjudication Response (“AR”) filed by the Respondent, Mansource Interior Pte Ltd (“Mansource”) due to the lateness of its lodgement, even though it was just two minutes late, i.e. lodged at 4.32 pm.
Citiwall and Mansource are parties to a subcontract for construction works. Under the contract, Citiwall served Mansource a payment claim for S$322,536.65. Mansource responded with its payment response in due course. Dissatisfied with the payment response, Citiwall lodged an Adjudication Application (“AA”) with the SMC. The AA was served on Mansource on 29 August 2013. The usual AR was due on 5 September 2013. On 5 September 2013, the AR was lodged with the SMC at 4.32 pm - two minutes later than the 4.30 pm deadline. Under the SMC Rules, this delay in meeting the deadline would cause the AR to be deemed as lodged on 6 September 2013.
Rule 2.2 of the SMC Rules provides:-
“All documents to be lodged with SMC shall be lodged during the opening hours of 9 am to 4.30 pm from Monday to Friday (except public holidays)... Documents which are submitted after opening hours shall be treated as being lodged the next working day.” (Emphasis added)
The significance of this cannot be overstated – this meant that the Adjudicator should reject the AR as being lodged out of time and not consider it in the adjudication launched by Citiwall, and the Adjudicator so held. The Adjudicator then allowed Citiwall’s claim for virtually the entire amount claimed. Mansource applied to set the AD aside in the High Court which failed before the Assistant Registrar. Dissatisfied, Mansource appealed to a judge of the High Court.
The key issue in Citiwall HC was whether the Adjudicator was correct to rely on the then rule 2.2 of the SMC Rules in rejecting the AR. The High Court judge disagreed with the Assistant Registrar and set aside the AD. He reasoned that:
- It was the function of the Adjudicator, and not the SMC, to determine the timeliness of a lodged AA or AR. Hence, the then rule 2.2 of the SMC Rules which limited the Adjudicator’s discretion was ultra vires.
- Section 15(1) of the SOP Act provided for a 7-day time window for the AR to be lodged. Relying on the definition of “day” from Black’s Law Dictionary, this should start from 0001 hours until 2359 hours. As such, the AR was lodged within time (before 2359 hours on 5 September 2013) and should not have been rejected by the Adjudicator. Hence, the AD should be set aside.
Citiwall appealed to the Court of Appeal. In support of the Citiwall HC decision, Mansource raised several arguments, all of which were dismissed by the Court of Appeal.
First, Mansource argued that the then rule 2.2 of the SMC Rules was ultra vires, or beyond the powers of the SMC, because it conflicted with section 15(1) of the SOP Act.
- The Court of Appeal disagreed and found that the then rule 2.2 the SMC Rules was entirely consistent with the SOP Act. Further, the SMC was entitled to prescribe a “clear and sensible arrangement as to how it should discharge its functions under the [SOP Act].”
- In concluding that the SMC had complete authority to prescribe its own business hours, it stated “s 37(1)(b) [of the SOP Act] does not envisage that the SMC should remain open until 11.59 pm...”.
Secondly, Mansource argued that practical difficulties arising from the enforcement of the then rule 2.2 of the SMC Rules rendered it ultra vires.
- One example of a practical difficulty was that if an AA was lodged on a Friday with the next Friday being a public holiday, the time window for lodging an AR would be six and not seven days (as the SMC is closed on a public holiday). Mansource contended that this is clearly inconsistent with the express wording contained in section 15(1) of the SOP Act.
- The Court of Appeal rejected this submission on several grounds: first, what mattered was that the SMC had the power to make such rules, and not whether practical difficulties surfaced as a result of their creation; secondly, practical difficulties were an unavoidable issue “whatever may be the operating hours of SMC”; and thirdly, such practical difficulties are not insurmountable problems that have the effect of rendering rule 2.2 inapplicable or ultra vires.
Thirdly, Mansource contended that the then rule 2.2 of the SMC Rules limited the Adjudicator’s discretion as conferred upon it by section 16(2) of the SOP Act.
- The Court of Appeal rejected this argument and found that the Adjudicator did not “blindly follow” rule 2.2 in rejecting the AR.
- Rather, in exercising his discretion under section 16(2)(b) of the SOP Act to determine the timeliness of lodgement, the Adjudicator had considered rule 2.2 to be a valid rule and came to a decision accordingly. In other words, rule 2.2 did not limit the Adjudicator’s discretion, but rather aided him in exercising his discretion.
Finally, Mansource argued that the de minimis principle, i.e. the alleged discrepancy is simply too insignificant, should apply on the basis that the lodging of the AR was only late by two minutes.
- The Court of Appeal examined the relevant case law and was of the view that the strict enforcement of timelines under the SOP Act was needed precisely to avoid lengthy and fruitless litigation.
- The Court of Appeal cited with approval Justice Judith Prakash’s dicta in SEF Construction Pte Ltd v Skoy Connected Pte Ltd  1 SLR 733 that “one of the adjudicator’s duties is to avoid incurring unnecessary [litigation] expense,” and the Court of Appeal’s observations in an earlier case of W Y Steel Construction Pte Ltd v Osko Pte Ltd  3 SLR 380 where it held that:
“We should not strain the natural construction of the Act to accommodate cases such as the present, where a respondent has failed through his own lack of diligence to file a payment response. Everyone in the building and construction industry must be aware, or at least taken to be aware, of the rigorous application of the timelines in the Act, and if they ignore them, they do so at their own peril.” (Emphasis added)
- On the grounds of “the principle of temporary finality undergirding the [SOP Act]” and the SOP Act’s objective for the speedy and economical handling of Adjudication applications, the Court rejected that there was space for the de minimis rule to apply.
Take-away from this case
In keeping to the strict timelines applicable to adjudication applications, the Court of Appeal is absolutely correct. Allowing any deviation under the de minimis principle opens up a Pandora’s Box. Will 10 minutes be de minimis and if so, why not 10 minutes more, i.e. 20 minutes in all? The Court of Appeal’s approach gives clarity on timelines and is welcome. Indeed, the Court of Appeal obviously did not lose sight of the fact that ADs merely have the character of temporary finality and it is open to the parties to settle the issue fully and finally in Court or in arbitration at a later stage. Therefore, any apparent harshness of being a few minutes late is mitigated by the ability to reopen the issues at a later stage.