The Building and Construction Industry Security of Payment Act (Cap 30B) (SOP Act) gives parties in Singapore a way to quickly resolve construction payment disputes on a “temporary finality” basis with the right to fully and finally resolve all disputes in Court or in arbitration (where the parties had agreed to arbitration).
If a party is aggrieved by the outcome in the adjudication proceedings, it may apply to set aside the adjudication determination where there are grounds to do so, including if they were not properly heard by the adjudicator.
In the recent case of Bintai Kindenko Pte Ltd v Samsung C&T Corp [2017] SGHC 321¸ the Singapore High Court further clarified what would amount to a breach of natural justice on the part of the adjudicator, such that the Court would exercise its power to set aside the adjudication determination.
In particular, this case highlights the importance of an adjudicator having to apply his/ her mind to all of the essential arguments raised by parties in the adjudication. Otherwise, there is a risk that the adjudication determination may be set aside by the Court for being in breach of natural justice.
The plaintiff sub-contractor, Bintai Kindenko Pte Ltd (Bintai Kindenko) applied for adjudication against the defendant main-contractor, Samsung C&T Corp (Samsung). The claims by Bintai Kindenko and Samsung are summarised as follows:
The adjudicator ruled in favour of Bintai Kindenko. Specifically, the adjudicator excluded the two issues raised by Samsung, and stated expressly in its adjudication determination that the dispute “centred solely on the release of the first retention monies, and not the variations or backcharges”. However, in the adjudication conference, neither party had sought to limit the scope of the adjudication to the issue of retention monies only.
When Bintai Kindenko sought to enforce the adjudication determination in Court, Samsung then applied to set aside the adjudication determination on the basis that the adjudicator had breached the rules of natural justice by failing to consider the two issues which it had raised in the adjudication.
Below, we discuss the important legal principles in relation to the breach of natural justice.
There will be a breach of natural justice if (1) the adjudicator fails to deal with all the essential issues in dispute, and (2) the breach was material and caused real and serious prejudice to the aggrieved party.
An issue would be essential if it was of such major consequence and so much to the forefront of the parties’ submission that no adjudicator could, in good faith, have regarded the issue as requiring no specific examination in the reasons for determination.
In this case, the Court found that the two issues of backcharges and variation works were repeatedly flagged out in both Bintai Kindenko’s and Samsung’s submissions to the adjudicator as important issues in dispute. Thus, this would support the point that the two issues were essential. By failing to consider the two essential issues in dispute, the Court found that the adjudicator had acted in breach of natural justice.
Even if the aggrieved party can show that the adjudicator was in breach of natural justice, the Court has to be convinced that such breach was material and caused real and serious prejudice to the aggrieved party. In this regard, the test of materiality was whether the breach could reasonably have made a difference, and not whether it would necessarily have done so. The crux is whether the omission to consider the issues in question might have had some prospect of changing the adjudicator’s mind in respect of his decision.
Ultimately, the Singapore High Court concluded that the adjudicator had not dealt with the two issues raised by Samsung. Further, the two issues which the adjudicator had excluded could certainly have changed the adjudicator’s mind as to the final outcome, since the sum disputed in relation to these two issues was greater than Bintai Kindenko’s claim for the first half of the retention monies. Thus, the Court decided that there was real and serious prejudice occasioned to Samsung, and allowed Samsung’s application to set aside the adjudication determination.
When the adjudicator renders his/ her adjudication determination, one should always scrutinize the decision to see if the adjudicator had considered all the essential issues raised by the parties, which is likely to have a bearing on the eventual outcome of the case.
If the adjudicator did not rule in your favour, and you feel that the adjudicator had failed to consider some of the essential issues at hand which should have been properly considered, this may very well constitute a ground for setting aside the adjudication determination. In which case, it would be advisable to seek legal advice to assess whether you have a good case for setting aside the adjudication determination.
Dentons Rodyk acknowledges and thanks associate Tan Ting Wei for her contribution to the article.
heading