Singapore's construction law developments: 2023
In 2023 Singapore saw three judicial decisions that provided much-needed guidance on the interpretation of the amended Building and Construction Industry Security of Payment Act (the “SOPA”) and the law on damages in construction disputes.
Case 1: Crescendas Bionics Pte Ltd v Jurong Primewide Pte Ltd and other appeals [2023] SGHC(A) 9
Brief background
Crescendas Bionics Pte Ltd (“CB”), a property developer, engaged Jurong Primewide Pte Ltd (“JPPL”) as the main contractor to build Biopolis 3, a multi-tenanted business park development for biomedical science by 22 January 2010. However, this completion date was not met. CB therefore brought an action against JPPL for the delay in completion.
The laws relating to liquidated damages and award of damages
- As a preliminary point, the Court agreed with the principles that where CB had committed acts of prevention and there was no extension of time clause, the contractor is not bound by the original contractual completion date and the time for project completion will be set at large. The contractor is then under an obligation to complete the project within a reasonable time, failing which would render the contractor liable for general damages.
- As a further preliminary point, the Court set out the difference between a claim for loss and a claim for loss of chance arising from CB’s mischaracterisation of the claim. The distinction is that in cases where a favorable outcome depends on the actions of a third party, a claimant may be able to recover for the loss of chance of a favorable outcome rather than the actual loss of the favorable outcome. It is sufficient to demonstrate that there was a genuine and significant chance that the third party would have taken action to confer the desired outcome in a loss of chance claim; the claimant does not need to demonstrate on the balance of probability that the third party would have taken such action. The Court also decided that issues faced by a claimant in precisely quantifying its loss do not transform a claim for loss into that of a loss of chance.
- On causation, a loss is recoverable where the breach of contract was the effective or dominant cause of the loss. Relying on this basis, the Court agreed that both CB and JPPL’s delay were independent and effective causes of CB’s losses. Both CB and JPPL’s delays were evenly balanced and were interspersed throughout construction.
- On the related issue of remoteness, the Court found that post-completion net revenue rental loss was ordinary damage.
- In terms of quantifying the loss, the Court decided that the Multi-Year Model instead of the Single-Year Model should be used to determine the loss of net rental revenue due to the fact that Biopolis 3 was a multi-tenanted development which would take multiple years to fill up its rental capacity and the income stream arose from multi-year leases with tenants.
Key takeaways
- It would be helpful for employers to share with their main contractors at the contract negotiation stage the nature of the project and the consequences of delay. In a dispute situation, it would then be easier for the innocent party to establish that such losses are not too remote.
- In construction claims, the innocent party must keep records and engage experts early to prove damages. The employer, in this case, had submitted a significant amount of evidence to support its claim for damages and had multiple expert witnesses to support its multi-year modeling.
Case 2: Asia Grand Pte Ltd v A I Associates Pte Ltd [2023] SGHC 175
In Asia Grand Pte Ltd v A I Associates Pte Ltd [2023] SGHC 175 ("Asia Grand"), the High Court addressed the issue of when a payment claim would be deemed to be served under s10 SOPA when the contract is silent on when a payment claim is to be served.
Brief background
- The employer, Asia Grand Pte Ltd ("AGPL"), engaged the contractor, A I Associates Pte Ltd ("AI"), to carry out works for a project at Bras Basah Road (the "Project"). The contract did not contain provisions specifying when payment claims and payment responses were to be served. On 16 November 2022, AI served a payment claim on AGPL, claiming S$133,529.08.
- On 13 December 2022, AI submitted an adjudication application in relation to the payment claim. AGPL then served a payment response in relation to the payment claim on 14 December 2022, claiming it was timely served under the SOPA.
- AGPL argued that while the payment claim was served on 16 November 2022, s 10(2)(a)(ii) and 10(3)(b) of the SOPA applied such that the payment claim was deemed to be served on the last day of the month, i.e., 30 November 2022. The adjudication application lodged on 13 December 2022 was premature.
- The Adjudicator determined that the date of service of the payment claim was 16 November 2022.
- AGPL applied to set aside the Adjudication Determination.
- The issue was whether the payment claim was served on 16 November 2022, or on 30 November 2022.
Statutory timelines under SOPA
- The High Court decided that the payment claim should have been deemed to be served on 30 November 2022, rejecting the Adjudicator’s Determination. The Court held that if a contract does not contain any terms specifying when a payment claim is to be served, any payment claim would be deemed to be served on the last day of the calendar month in which it was served, regardless of when the payment claim was served. This was due to the effect of s10(2)(a)(ii) and 10(3)(b) of the SOPA.
- Since the contract did not stipulate the date for service, the payment claim was deemed to have been served on the last day of November 2022, i.e. 30 November 2022, even though it was served on 16 November 2022.
- The payment response was due 14 days after the deemed date of service of the payment claim, i.e. 14 December 2022 as the contract did not prescribe a timeline for the provision of the payment response.
- The date from which AI was entitled to lodge an adjudication application was 22 December 2022, which was seven days from the date AGPL was required to provide the payment response i.e., 14 December 2022.
- Therefore, AI’s adjudication application lodged on 13 December 2022 was premature and the Adjudication Determination was set aside.
Key takeaways
This decision has put to rest some lingering doubts about how the deeming provision is to be applied where the service date of the payment claim is not specified in the contract.
Case 3: H P Construction & Engineering Pte Ltd v Mega Team Engineering Pte Ltd [2023] SGHC 298
In H P Construction & Engineering Pte Ltd v Mega Team Engineering Pte Ltd [2023] SGHC 298 ("HP Construction"), the High Court addressed the issue of how to calculate the time for when a claimant’s entitlement to make an adjudication application arises.
Brief background
- The Claimant engaged the Defendant to supply labour under a sub-contract for a building project. According to the subcontract, the Defendant submitted a payment claim to the Claimant on 30 May 2023, which the Claimant was required to respond to by 20 June 2023.
- The Claimant failed to do so and the 7-day dispute settlement period ended on 27 June 2023. The Claimant failed to provide a payment response to the Defendant’s payment claim during the dispute settlement period.
- On 6 July 2023, the Defendant made an adjudication application under s 13 of SOPA. Thereafter, the Claimant argued that the Defendant’s adjudication application was filed out of time.
- The Claimant argued that the Defendant’s right to make an adjudication application arose on 28 June 2023 at 0000hrs, after which the Defendant is required to file its adjudication application by 5 July 2023 at 2359hrs (excluding 29 June 2023 because it was a public holiday). The Defendant’s adjudication application was filed one day late i.e., 6 July 2023, and must be rejected as it was not made within the period prescribed by s 13(3)(a) SOPA. The Claimant relied on a guide on the SOPA published by the Building and Construction Authority (“BCA”) and a checklist issued by the Singapore Mediation Centre (“SMC”).
- The Defendant argued that 28 June 2023 should not be counted as part of the 7 days under s 13(3)(a) SOPA based on the plain interpretation of s 50(a) of the Interpretation Act (“IA”). Furthermore, the Defendant relied on YTL Construction Pte Ltd v Balanced Engineering and Construction Pte Ltd [2014] SGHC 142.
Statutory timelines under the SOPA
The High Court disagreed with the Claimant’s views and held that:
- The SOPA regime operates in days, an ordinary interpretation of the time periods adopted in the SOPA will lead an ordinary reader to the conclusion that the entitlement arises on the day and not any particular time of the day. The 7 days after the entitlement arises would commence on the day after;
- The interpretation is supported by s 50(a) IA and the common law position; and
- The BCA’s infographics and SMC’s checklist do not accurately reflect the correct position.
As a result, the Defendant’s adjudication application lodged on 6 July 2023, was timely.
Key takeaways
- While the decision may not have significant practical implications as claimants would generally avoid filing the adjudication application on the last day, this case has put to rest the long-standing debate on when the period for submitting an adjudication application arises particularly in situations where an additional day would be of importance to a claimant.
- Extrapolating the reasoning behind this decision to another similarly worded provision of s 17 of the SOPA on when an adjudication determination is due would mean that an adjudicator would have an additional day to render a decision.
- A point that remains of interest is the Claimant’s argument that the adjudication applicant cannot make an adjudication application on the day the entitlement arises and such an interruption would be absurd. While the Court agreed that such an interruption would be absurd, the issue was not squarely before the Court. It remains to be seen how the Court would decide the issue in a scenario where an adjudication application is made on the day the entitlement arises.
For further information contact Danna ER, Partner, Eldan Law
