Claims in adjudication for terminated construction contracts in Singapore
Since the amendments to the Building and Construction Industry Security of Payment Act (“SOPA”) came into operation on 15 December 2019, one issue that has commonly cropped up before the Singapore Courts is whether a claimant may pursue claims in adjudication where the construction contract has been terminated.
The Court of Appeal has generally held that the terms of the contract would govern in determining whether a payment claim for work done pre-termination can be issued post-termination (see Shimizu Corp v Stargood Construction Pte Ltd [2020] 1 SLR 1338; Orion-One Residential Pte Ltd v Dong Cheng Construction Pte Ltd and another appeal [2021] 1 SLR 791).
In a recent case of Builders Hub Pte Ltd And JP Nelson Equipment Pte Ltd [2023] SGHC 120 (“Builders Hub”), the Court had to consider whether the contractor was precluded from applying for adjudication of the payment claim due to a contractual termination event occurring before the adjudication application was filed although the payment claim was validly served before the termination event.
The Court disagreed with the Adjudicator’s finding that where a contract bears an express termination clause providing for the termination of a contractor’s employment and the consequences of such termination, the “default position” is that the contractor has no right to submit further payment claims or to be paid progress payments even if the relevant payment claim was served prior to such termination unless the contract expressly provides otherwise.
The Court considered amongst others, the case of Choi Peng Kum and another v Tan Poh Eng Construction Pte Ltd [2014] 1 SLR 1210 (“Choi Peng Kum”) where a contractor issued a payment claim under the SIA Conditions. The employer in that case terminated the contract and did not serve a payment response. The Court in that case held that the contractor could lodge an adjudication application. Following from Choi Peng Kum, the Court considered that the correct inquiry in cases where a payment claim had been validly served before termination, is whether the relevant contract extinguishes the right to adjudicate the payment claim.
On the facts, the Court considered the antecedent issue of which party had terminated the contract must first be considered. If the contractor was legally justified to terminate the contract on common law grounds of repudiation, then there would be no basis for the employer to have terminated the contractor under Clause 30.2.2 of the REDAS Conditions. In such a case, Clause 30.3 of the REDAS Conditions which suspends a contractor’s entitlement to a progress payment upon the termination of the employment of the contractor would not be engaged and the contractor would be entitled to progress payments. If the reverse were true, then the contractor would not be entitled to pursue an adjudication application.
The case of Builders Hub presents a number of interesting developments in this area of terminated contracts. First, it draws a distinction between cases of terminated contracts where the payment claim was served prior to termination and those cases where a payment claim was served after termination and applies a different test to each situation. Second, while Choi Peng Kum was discussed, the Court did not go further to consider in detail the case of Choi Peng Kum which shared a similar factual matrix to Builders Hub and which had allowed the contractor’s adjudication application to proceed. Perhaps, the reason might lie in the Court’s reference to Choi Peng Kum being a pre-amendment case that did not consider the effect of Section 4(2)(c) of the SOPA.
For further information contact Danna ER, Partner, Eldan Law
