The COVID-19 (Temporary Measures) Act 2020

On 7 April 2020, Parliament passed the COVID-19 (Temporary Measures) Act 2020 (the “Act”). The Act seeks to ameliorate the impact of COVID-19 on businesses and individuals who are unable to fulfil their contractual obligations due to COVID-19 such as construction projects, tenancy agreements and supply agreements. The Act will also increase the monetary thresholds and time limits for bankruptcy and insolvency.

Parts 1 (except section 2), 2 and 3 of the Act will continue in force for 1 year from 7 April 2020 (Section 1 of the Act). The safe harbour provisions in Part 2 of the Act will last for an initial period of 6 months and may be extended or shortened by the Minister for Law (Section 3 of the Act).

The Act covers the following types of contracts (The Schedule to the Act):

1. Leases or licences for non-residential immovable property (e.g. lease for factory premises);
2. Construction contract or supply contract (e.g. contract for the supply of materials);
3. Contracts for the provision of goods and services (e.g. venue, catering) for events (e.g. weddings, business meetings);
4. Certain contracts for goods or services for visitors to Singapore, domestic tourists or outbound tourists, or promotion of tourism (e.g. cruises, hotel accommodation bookings); and
5. Certain loan facilities granted by a bank or a finance company to SMEs.

The Act will prohibit a contracting party from commencing the following legal actions against a non-performing party (Section 5(3) of the Act):

1. Court and insolvency proceedings;
2. Enforcement of security over immovable property as well as movable property that is used for the purposes of business or trade;
3. Call on a performance bond given pursuant to a construction contract; and
4. Termination of leases of non-residential premises.

In the case of construction and supply contracts, a contractor will be relieved from liability for non-performance if this was caused to a material extent by COVID-19.

The Act will also raise the monetary threshold for bankruptcy and insolvency (Sections 20(1) and 22(1) of the Act):

1. For individuals, the monetary threshold for bankruptcy is being raised from S$15,000 to S$60,000.
2. For companies, the monetary threshold for insolvency is being raised from S$10,000 to S$100,000.
3. The deadline for statutory demands have been increased from 3 weeks to 6 months.

Directors will also be temporarily relieved from their obligations to ensure that their companies are not trading while insolvent if the debts are incurred in the company’s ordinary course of business although directors will still remain liable for fraud (Section 22(2) of the Act).

This Act will affect everyone from large financial institutions to SMEs. A copy of the Act can be found here. Contact us if you wish to know how this Act will affect your business and current contractual rights and obligations.

Case Updates

In recent months, the Singapore Courts have released several important decisions concerning the law on arbitration, tort and contract. We summarise 5 of these decisions which may be of particular relevance to those involved in arbitration and in the building and construction sector:

BNA v BNB and another [2019] SGCA 84: Ensuring parties apply their minds on the seat, and not just the venue, of the arbitration.  

1. The parties to an arbitration agreement stipulated that the underlying agreement would be governed by PRC law and that the arbitration would be submitted to the Singapore International Arbitration Centre (“SIAC”) for arbitration in Shanghai.
2. It was subsequently contended, by way of a jurisdiction challenge under section 10 of the International Arbitration Act (“IAA”), that the arbitral tribunal had no jurisdiction because the proper law of the arbitration agreement was PRC law. Under PRC law, the arbitration agreement was invalid. This was because PRC law did not allow a foreign arbitral institution such as the SIAC to administer a PRC-seated arbitration.
3. Thus, the question of whether the arbitral tribunal had jurisdiction or not turned on a proper interpretation of the arbitration agreement and the meaning of the phrase “arbitration in Shanghai”. The High Court interpreted “arbitration in Shanghai” as a reference to the venue, and not the seat, of the arbitration. The venue is the physical location where the arbitration hearing will take place. This is in contrast with the “seat” which refers to the law governing the arbitration process. A Singapore-seated arbitration can heard in any other country but the Singapore courts will continue to have supervisory jurisdiction over the arbitration.
4. However, the Court of Appeal disagreed with the High Court. The Court of Appeal found that the natural reading of the phrase “arbitration in Shanghai” meant that the parties’ implied choice of the proper law of the arbitration agreement was PRC law and Shanghai was the seat of the arbitration. However, the Court of Appeal did not then go on to make a finding as to the tribunal’s jurisdiction. Having decided that the proper law of the arbitration agreement was PRC law, the Court of Appeal held that it was for the PRC courts, as the courts at the seat of the arbitration, to decide this issue.
5. This case demonstrates the importance of drafting clear arbitration agreements and the need for parties to apply their minds to the seat, and not just the venue, of the arbitration. In particular, beware when choosing a place in China as a seat of arbitration. Bear in mind that PRC law does not recognise arbitrations administered by foreign arbitral institutions where the seat is China. If the hearings have to take place in China, then parties must endeavour to specify that China is merely the venue and not the seat of the arbitration. To find out more about this case, click here.

ST Group Co Ltd and others v Sanum Investments Limited and another appeal [2019] SGCA 65: A wrongly-seated arbitration may have an impact on whether the award will be recognised and enforced.

1. ST Group v Sanum also demonstrates the importance of the parties’ choice of the seat of the arbitration. In this case, the Singapore Court of Appeal held, that once an arbitration is wrongly seated, in the absence of waiver of the wrong seat, any award that ensues should not be recognised or enforced by other jurisdictions. This is because such award would not have been obtained in accordance with the parties’ arbitration agreement. In this case, the order for leave to enforce the Award was set aside as the proper seat of the arbitration was Macau and not Singapore.
2. The choice of seat is a matter of critical importance. This is because the law of the seat governs a number of important matters relating to arbitration, such as, the validity and finality of the award resulting from the arbitral proceedings and the choice of remedies available to the parties.
3. Crucially, the Court of Appeal held that it was not necessary for a party resisting enforcement of a wrongly-seated award to demonstrate actual prejudice arising from the wrong seat so long as it can be shown that a different supervisory court would have been available to the parties. To find out more about this case, click here.

Daisho Development Singapore Pte Ltd v Architects 61 Pte Ltd [2020] SGHC 16: Buyer Beware! The importance of doing your due diligence before buying commercial property.

1. An architect was sued for negligence by the buyer of a hotel. The architect was engaged by the seller for the development of a hotel and had advised the seller on certain use restrictions imposed by the URA. When the hotel was sold to the buyer, the buyer was not aware of these use restrictions and only subsequently discovered them.
2. After failing to hold the seller liable, the buyer then commenced proceedings against the architect. The buyer alleged that the architect owed the buyer a duty of care and had made negligent misrepresentations to the buyer, which caused the buyer to suffer loss.
3. The court rejected the buyer’s claim and found that the architect did not owe the buyer a duty of care. In analysing whether a duty of care should even be imposed, the court held that it was not even factually foreseeable that the architect’s advice on the URA use restrictions would be taken into consideration by the buyer and lead to the buyer suffering economic loss. In applying the Spandeck test, the court also found that there was insufficient proximity to impose a duty of care and that policy considerations negated the imposition of a duty of care on the architect. To find out more about this case, click here.

Min Hawk Pte Ltd V SCB Building Construction Pte Ltd [2020] SGHC 13: Agree on a time for performance, otherwise a “reasonable time” will be implied by law.

1. The main contractor owed an outstanding amount of S$486,641.56 to the sub-contractor. The parties entered into a two-tranche payment agreement over the outstanding amount (the “Agreement”). Pursuant to Clause 1.2, it was agreed that the second tranche payment would be made by 31 January 2017, subject to the full resolution of the main contractor’s issues with the owner. In the event these issues were not resolved by 31 December 2017, the parties were obliged to review the terms and conditions of the Agreement and where necessary extend the payment timeline. Eventually, the main contractor could not resolve its issues with the owner on time. The sub-contractor commenced legal proceedings for the second tranche payment.
2. The court held that the sub-contractor failed to discharge its obligation to review when it plainly rejected a proposal made by the main contractor to extend the second tranche payment date. In light of this, and given that the parties did not agree on a time extension, the court reviewed the facts of the case and determined a reasonable due date for the second tranche payment.
3. This case illustrates how parties ought to discharge a contractual obligation to review terms and conditions of their agreement if a pre-condition is not met. Additionally, this case reaffirms that where a contract does not specify the time for performance, an obligation to perform within a reasonable time shall be implied by law. To find out more about this case, click here.

Ramo Industries Pte Ltd v DLE Solutions Pte Ltd [2020] SGHC 4: Ensuring pre-contractual negotiations remain just that.

1. The main dispute was whether a letter of award formed part of a contract for the supply, fabrication, painting and delivery of structural steel. The contention lay in the fact that when the letter of award was signed, the parties had yet to agree on the price, and only came to an oral agreement on the price after the letter of award was signed.
2. The court held that the oral price agreement for the agreed scope of works set out in the letter of award was sufficient enough to render the letter of award as part of the contract. The court elaborated that the letter of award should be viewed effectively as an incomplete agreement, with the terms on the scope of works having been agreed upon, and merely subject to the finalisation of the price. In coming to this conclusion, the court also took note of the fact that the letter of award explicitly stated: “This letter shall constitute a binding agreement between [the Plaintiff] & [the Defendant]”. In light of this, the court held that the letter of award was indeed part of the contract.
3. This case therefore serves as a reminder that depending on the circumstances, a contract can be formed even though some terms may yet be agreed upon at the time of signing. To find out more about this case, click here.

Dentons Rodyk thanks and acknowledges Senior Associate Adriel Chioh and John Paul Koh for their contributions to this article.