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newsletter . volume one .

issue No 2 july - december 2014

MALAYSIAN SOCIETY
OF ADJUDICATORs
Contents

MALAYSIAN SOCIETY
OF ADJUDICATORs

Published by This Newsletter is periodically published for distribution


to its members and to those who are interested in the
THE MALAYSIAN SOCIETY OF ADJUDICATORS adjudication of disputes under the Construction Industry
Payment & Adjudication Act of 2012 (CIPAA 2012). The
logo of the MSA symbolizes the functions and constraints
Kuala Lumpur Regional Centre for Arbitration of adjudication: three arches represent a simpler, cheaper,
Bangunan Sulaiman and faster summary passage through the payment dispute
Jalan Sultan Hishamuddin resolution process via adjudication; grey signifies the
50000 Kuala Lumpur, Malaysia integrity, independence, and impartiality of the adjudicator;
and blue stands for the adjudicators fair-minded, open,
Tel: +603.2271.1000 Fax: +603.2271.1010 and even approach towards the parties, mindful of justice,
perseverance, and vigilance.

The Newsletter is intended to serve as the leading forum


for the thoughtful review, analysis, and improvement of
adjudication under CIPAA 2012. Accordingly, submissions
of articles and information are invited. The views
presented in the Newsletter are those of the individual
authors, and do not necessarily represent the views of the
MSA, which takes no responsibility for any statement or
opinion in this Newsletter. That being said, the MSA makes
no representation, express or implied, that the contents
are accurate, complete, or correct, and similarly disclaims
all liability whatsoever for the content in the Newsletter.
Submissions may be made by email to enquiries@klrca.org

Permit Number: PP18529/07/2014 (033945)

i
Contents

MSA Newsletter Vol. 1


Issue 2
JULY - DEC 2014

1 PRESIDENTS PAGE The Presidents Message

2 EDITORS DESK Aligning with CIPAA 2012!

4 PODIUM
Five Questions - Four Respondents
Chang Wei Mun, Rodney Gomez, Suriana Abdul Hamid, Tai Choon Seng

Judicial Review of Adjudication Under CIPAA An Australian Perspective


9 IN FOCUS on The Obligation of An Adjudicator to Comply with Natural Justice
by John K. Arthur

Issues in Construction Adjudication in Singapore


14 IN FOCUS Lessons and Challenges for CIPAA
by S. Magintharan

26 IN FOCUS
Adjudicators Jurisdiction and Natural Justice in Adjudication in Singapore
by Lawrence Tan Shien Loon and Teo Yi Hui

36 ADJUDICATORS CORNER
Being An Adjudicator: Are You Up to the Mark?
by Daniel Tan Chun Hao

40 ADJUDICATORS CORNER CIPAA The Magic Wand of Payment Woes?


by Tan Swee Im

49 ADJUDICATORS CORNER The Timely CIPAA Adjudication Decision: Mission Impossible?


by John Wong

The Journey Towards Security of Payment Legislation in Hong Kong


52 SIDEBAR by Christopher To

Mansource Interior Pty Ltd v Citiwall Safety Glass Pte Ltd [2014] SGHC 87:

56 SIDEBAR
Natural Justice: Re-Balancing the Rights of the Parties under the Building
and Construction Industry Security of Payment Act (Chapter 30 B)
by Timothy Ng Wai Keong

Capitol Avenue Development Sdn Bhd v. Bauer (M) Sdn Bhd (24C-5-09/2014)
60 DECISION NOTES and UDA Holdings Bhd v. Bisraya Construction Sdn Bhd (24C-06-09/2014)

61 HAPPENINGS KLRCA CIPAA Circular 02 (Amended 1st August 2014)

63 HAPPENINGS KLRCA CIPAA Circular 1A (11 November 2014)

64 HAPPENINGS Bayview Hotel, Penang / 15 August 2014 Construction Industry Payment


& Adjudication Act 2012 (CIPAA 2012) Talk

Renaissance Hotel, Kuala Lumpur / 5 July 2014 #1 Practical Drafting


65 HAPPENINGS & Defending of Adjudication Claims

ii
presidents page

A Word from the President

Dear Members,

5 July 2014 marks the first year of the existence of the As shown by the Contents page in this Newsletter, in-
Malaysian Society of Adjudicators (MSA). The MSA depth examinations of principles of natural justice and
was set up to promote adjudication as a means of judicial review in the context of CIPAA and other forms
dispute resolution for the construction industry. of statutory construction adjudications are found in
the In Focus section. Submissions on several questions
Accordingly earlier this year, the MSA collaborated and issues that have arisen or may arise under CIPAA
with the Kuala Lumpur Regional Centre for Arbitration 2012 are set forth in responses by four adjudicators to
(KLRCA) to organise two well-received Construction five questions in the Podium section. The articles in
Industry Payment & Adjudication Act (CIPAA 2012) the Adjudicators Corner and in the Sidebar sections
Conferences in Kuala Lumpur. The first annual offer insights from adjudicators writing from several
general meeting of the MSA was held in June 2014 in different professional and national experiences and
conjunction with the second CIPAA 2012 Conference. perspectives. We are privileged to have in this issue
the writings of adjudicators from Australia, Hong Kong,
Contemporaneously with the first annual meeting and Malaysia, and Singapore.
the June 2012 CIPAA Conference, the inaugural edition
of the Newsletter of the MSA was published and I trust and hope that you will enjoy reading the
distributed to the participants of the June 2014 CIPAA informative and relevant articles in this Newsletter and
2012 Conference and to the members of the MSA. look forward to an exciting 2015 as the adjudication and
construction communities continue to align practices
There have been several watershed events in 2014 for and procedures with the mandates of CIPAA 2012 that
the construction adjudication community. The first are designed to facilitate regular and timely payment,
was the triggering of the operative date for CIPAA to provide a mechanism for speedy dispute resolution
2012 on 15 April 2014. This accelerated the movement through adjudication, to provide remedies for the
towards alignment by all stakeholders with CIPAA 2012. recovery of payment in the construction industry and
As of 3 November 2014, one consequence has been to provide for connected and incidental matters.
the submission of more than a dozen notices to the
Director of the KLRCA to register adjudications under
CIPAA 2012 and the filing of three actions in the Kuala
Lumpur High Court relating to adjudication matters
under CIPAA 2012. On 31 October 2014 the High Court
orally ruled that CIPAA 2012 has a retrospective effect
with section 41 applying only to limit its applicability to
exclude proceedings that had been commenced in any
court or arbitration before 15 April 2014. This landmark
decision makes CIPAA 2012 applicable to a payment
claim notwithstanding when the construction contract
was signed or when a payment dispute crystallised or
otherwise occurred. This ruling significantly expands Datuk Professor Sundra Rajoo
the reach of CIPAA 2012 beyond the scope provided for President
in KLRCA CIPAA Circular 01. Malaysian Society of Adjudicators

01
editors page

Editors Desk
By Michael Heihre

Aligning with CIPAA 2012! is the title of the second Between 15 April 2014 and 31 October 2014, a dozen
issue of the MSA Newsletter. It was selected to stress plus notices to register adjudications were lodged with
the predominant dynamic of the phase of CIPAA the Director of the KLRCA. Most of the notices were
2012 that started on 15 April 2014. True, the process registered and adjudicators appointed. But the Director
of aligning operations, practices, procedures, and declined to register payment disputes that did not arise
contractual documentation with CIPAA 2012 began under a construction contract on or after 15.4.2014. In
in earnest with the enactment of CIPAA in 2012. But these instances, the Directors interpretation of CIPAA
this process was a comparatively measured one, due 2012 adhered to Circular 01.
in large part to the conceptual structure of section 1(2)
authorising the Minister of Works to appoint a future Compared to positions taken by some observers that
date to bring CIPAA 2012 into operation. CIPAA 2012 should apply only to construction contracts
signed after 15 April 2014, the Directors position
Unsurprisingly, quite a few questions were voiced reflected in Circular 01 was broader. Conversely, the
during the initial phases of preparing and training for Directors view on the applicability of CIPAA 2012 was
the implementation of CIPAA 2012. Some questions narrower than the stance advocated by commentators
turned on interpretations of the statutorily defined who argued that CIPAA 2012 should apply to all
scope and content of payment claims under section payment disputes brought within the period of
5 (such as, for one example, whether costs relating to limitations that were not the subject of a proceeding in
extensions of time should be cognizable pursuant to court or arbitration commenced before 15 April 2014.
section 5). Similarly questions regarding appropriate The existence of discordant positions on the important
grounds for exemptions pursuant to section 40 were question of the applicability of CIPAA 2012 to payment
extensively mooted. Likewise, considerable energy disputes and contracts pre-dating 15 April 2014 meant
was invested in analyzing questions on the application that ultimately the different views would have to be
of CIPAA 2012 to contracts or payment disputes resolved by judicial decision. This occurred when an
commenced before the operative date to be set by important oral ruling on CIPAA 2012 was issued by the
the Minister. Relatedly, the language of the savings High Court in Kuala Lumpur (Commercial Division)
provision in section 41 was minutely examined. In the on 31 October 2014. This decision is the subject of
absence of an operative date, however, these questions Decision Notes.
lacked the bite of an immediate reality.
On 11 November 2014, the KLRCA announced that it
On 15 April 2014, the Minister of Works established 15 would comply with and administer adjudication cases
April 2014 as the operative date, promulgated CIPA in accordance with the decision of the High Court and
Regulations 2014, and issued CIPA [Exemption] Order therefore issued Circular 1A to supersede Circular
2014. This provoked a new urgency to align operations, 01. Circular 1A is included in Happenings with the
practices, procedures, and contractual documents with permission of the KLRCA.
the requirements of CIPAA 2012, CIPA Regulations 2014,
and the CIPA [Exemption] Order 2014. In this context, To start this issue, the Podium sets forth five highly
hypotheticals yielded to concrete controversies as relevant and pressing questions that were put to
payment claims and notices of adjudication were four accomplished members of the adjudication and
served by parties to written construction contracts. construction community to obtain the benefits of

02
editors page
their insights. Their views were obtained before the The Adjudicators Corner in this issue concentrates on
31 October 2014 oral ruling by the High Court and practical suggestions for adjudicators to improve the
consequently do not reflect that development. The process of adjudication.
questions touch upon issues arising from the meaning
of payment and Government used in section 4, In Happenings, highlights of CIPAA related activities
CIPAA 2012, and in CIPA [Exemption] Order 2014. The in the second half of 2014 are featured. For a timely
Podium also solicited views from the four participants and convenient reference, KLRCA Circular 1A issued
on the interpretation and scope of section 41, CIPAA on 11 November 2014 is included in this section of the
2012. Newsletter.

In Focus and Sidebar, the Newsletter offers thoughtful As noted in the first issue, this Newsletter is written
articles that suggest relevant lessons from Australia to inform, stimulate interest, provoke thought, and
and Singapore - jurisdictions that preceded Malaysia by contribute to the betterment of adjudication practice
earlier adopting statutory schemes with aims similar to and procedure under CIPAA 2012. We hope that you
CIPAA 2012. Special attention is given in these articles find that this issue furthers those goals and leads
to one of the anchoring principles of adjudication - readers to submit articles that contribute to the success
natural justice. of CIPAA 2012.

From Hong Kong, there is an article discussing the


genesis and emergence of a regime of statutory
adjudication of construction disputes that is featured
in Sidebar. With its vibrant construction industry,
adjudication in Hong Kong should provide valuable
experiences for other jurisdictions with statutory
adjudication schemes to consult for guidance and
information.

03
podium

Five Questions Four Respondents

Question 1:
In your view, should the definition of payment used in CIPAA 2012 be read to
include: loss and expense, loss of profit, prolongation and delay costs, extensions of
time, provisional sum items, and contingent sum items?

Chang Wei Mun: Suriana Abdul Hamid:


No. CIPAA is meant to be a quick fix with temporary No, because the current definition of payment in
finality to improve cash flow by dealing with simple section 4 only refers to work done or services rendered
claims for payment for work done or services rendered under the express terms of a construction contract. In
(see definition of payment in section 4). It should contrast, loss and expense, loss of profit, prolongation
not be used to deal with complex claims needing more and delay costs, and extensions of time are costs that
mature considerations. Provisional Sum and Contingent are related to the works or services rendered which the
Sum claims should be included as long as they are claims contractor may be entitled to claim as a result of certain
in respect of work done or services rendered under the events under the construction contract, but they are
express terms of a written construction contract. not categories of compensable items payable directly
for work done or services rendered. Therefore, in this
context it would be reasonable to include these items in
the definition of payment under CIPAA by legislatively
amending the present definition of payment in section
4. Otherwise, it is my reading of section 4 that these
categories do not presently fall within the plain meaning
of payment as used in CIPAA 2012.

Tai Choon Seng: Rodney Gomez:


Generally, I agree that the definition of payment should Yes, it should provided the construction contract
include loss and expense, loss of profit, prolongation expressly provides for the aforesaid items.
and delay costs because time is money and vice versa.
However, because CIPAAs main objective is to ease
obstacles to cash flow in the construction industry,
the definition of payment should not include claims
for time related losses. Furthermore, I dont think the
Adjudicator has sufficient time to evaluate the time
related losses due to the time limitations to resolve
claims provided in CIPAA.

04
podium

Question 2:
In your view, as a matter of sound public policy, should CIPAA 2012 be legislatively
amended to expand the scope of a payment dispute to include those items
referenced in the preceding question or any difference between the parties to a
construction contract or a construction consultancy contract along the lines of
the Housing Grants, Construction and Regeneration Act (1996) as amended?

Suriana Abdul Hamid:


Yes. Although disputes arising from claims for loss and particularly smaller scale contractors. At the same time,
expense, loss of profit, prolongation and delay costs and the larger scale contractors who are more experienced in
extensions of time often require lengthy negotiation and formal dispute resolution processes would have the option
time-consuming examination of voluminuous supporting to go straight to arbitration or litigation.
documentation, the amount of money in controversy is
similarly large. For this reason, they comprise an important Furthermore, payment disputes relating to variation order
component of the cash flow demands arising from a works can sum up to 15 to 20% of the monthly interim
project. Since the CIPAA is aimed at facilitating regular and amount claimed by a contractor. Contractors may have
timely cash flows by providing a mechanism for speedy no choice but to carry out the variation works before the
dispute resolution and rough justice, expanding the rates for the variation can be agreed. It is not uncommon
scope of payment disputes to include these items should for there to be no agreement on rates even though the
provide additional options for contractors and consultants works have been completed and no payment received
to choose for resolution of important cash flow issues by the contractor for the variation work. Under these
depending on the particular nature of a dispute. circumstances, most contractors would prefer to have the
payment definition in CIPAA enlarged to include the
The inclusion of these items in the definition of extended categories of claims referenced in this question.
payment may have the added benefits of widening the
pool of adjudicators to attract individuals with significant In any event, it is my view that section 7 and related
construction and consultancy backgrounds and provisions of the CIPAA should be further improved by
experiences. These individuals are often more familiar providing clearer wording. This would help to minimize
than many lawyers with these types of construction related costly legal arguments over whether these items are
disputes. This potentially greater expertise may lead to covered and focus the parties on the cash flow issues
faster and more accurate adjudication decisions. In turn, rather than on the meaning of words used in the legislation
this should result in a dispute resolution environment that intended to resolve cash flow problems.
is more encouraging and less intimidating to participants,

Rodney Gomez: Tai Choon Seng:


There is no need to amend as CIPAA 2012 has clearly No. We should test the effectiveness of CIPAA in operation
provided what falls within the ambit of payment, i.e. the first before making any amendments.
same must be expressly provided for in the contract.

Chang Wei Mun:


No, and for the same reasons stated above in my response
to question 1. The definition of payment in section 4,
which will apply to sections 5, 6 and 27 to limit the type of
claims that can be made, should remain as it is.

05
podium

Question 3:
In your view, should the exemption given to a Government construction contract
as specified in the First Schedule of the Construction Industry Payment and
Adjudication [Exemption] Order 2014 be read to include related subcontracts, supply
agreements, labour agreements, and construction consultancy contracts?

Rodney Gomez: Chang Wei Mun:


No. In my view, the Exemption should not include related Yes. That would be the fair thing to do. Otherwise, the
subcontracts, supply agreements, labour agreements and burden of not being able to adjudicate will lie solely with
construction consultancy contracts as such interpretation the Main Contractor. The Exemption Order is not clear as
would limit the application of CIPAA 2012. to whether the exemption extends to related contracts.

Suriana Abdul Hamid: Tai Choon Seng:


Yes, because these related contracts and agreements serve Yes. This is because logically any exemption pertaining
to achieve the purposes of the Government construction to the Main Contract should have the same effect on the
contracts that have been exempted and the exemption related subcontracts. Otherwise, it is not fair to the Main
could be frustrated or cause unnecessary confusion if part Contractor. Furthermore, some good intentions reflected
of the process is exempt and other parts are not exempt. in CIPAA i.e. stop work due to non-payment, requests
for direct payment from the principal, etc. may not work
practically if the exemption is only given to the Main
Contractor.

06
podium

Question 4:
Should the word Government as defined in section 4, CIPAA 2012 and as used in
in CIPA [Exemption] Order 2014 be read to include government linked companies,
government owned companies, and statutory bodies of the Government?

Rodney Gomez: Chang Wei Mun:


No. In my view, government linked companies, The exemption should not apply to Companies
government owned companies or statutory bodies of the incorporated under the Companies Act irrespective of who
government should not be included as this would restrict owns or controls them. However, I am not sure whether
the application of CIPAA 2012. the exemption should apply to statutory bodies since some
of them do play a direct governmental/administrative role
e.g. local authorities.

Suriana Abdul Hamid:


In general, no. The current definition of Government contractors. The latter class of contractors frequently
appears to be very broad, covering both the Federal and are the most vulnerable to non-payment disputes owing
State Government. It would be useful to list exactly the to lack of understanding of contract provisions and poor
identities of the relevant government bodies or agencies documentation. If these agencies are included within the
included in the definition of Government in the CIPAA. meaning of Government, the main objective of easing
Preferrably, the definition of Government should not cashflow problems in the construction industry may not
include government linked companies, government owned be achieved in the long run and the most needy elements
companies, or statutory bodies and local councils. This of the industry may not be effectively assisted by the
is because a significant portion of public infrastructure, CIPAA.
built environment, and facilities/maintenance works in In my view, an expansive definition of Government
Malaysia are tendered out through these agencies. should not be adopted. Instead, it should be sufficient
to use the Governments power under section 40 to
The value of works out-sourced for tenders through issue exemptions on a case by case basis taking into
these agencies allows for participation by various consideration the primary objective of the CIPAA to
classes of contractors from Class A (> RM10 million) facilite regular and timely payment.
down to Class F (below RM200k) involving bumiputra

Tai Choon Seng:


No, because a GLC is considered to be a private company the State Governments and the Federal Government.
in many respects. A GLC may be considered to be the Additionally, there will be too many exemptions for CIPAA
Governments investment company, but nevertheless, it is to have the intended beneficial consequences for the
not the same as being the Government. My interpretation construction industry if GLCs are considered to be entitled
of Government in CIPAA is that it should be limited to to the status of the Government under CIPAA.

Rodney Gomez is an accredited adjudicator with the Kuala Lumpur Regional Centre
for Arbitration. He is a partner in Messrs Shearn Delamore & Co and specializes in
building and construction law. He has appeared as counsel in arbitration, mediation,
adjudication and Court proceedings.

Wei Mun practices law as a partner of Messrs Raja, Darryl & Loh where he heads
the construction and energy practice group. He is an accredited adjudicator and
an experienced arbitrator. He has been involved in the dispute resolution process
involving international airports, oil, gas and petrochemical facilities, dams and power
stations, water treatment plants, and many other major projects. He is listed as a
recommended lawyer for construction work in Asia Pacific Legal 500, Chambers Asia
and Asialaw Profiles.

07
podium

Question 5:
In your view, should CIPAA 2012 be read to apply to construction contracts and
construction consultancy contracts made before 15 April 2014?

Chang Wei Mun: Rodney Gomez:


Yes and No. The procedural aspects should have Yes it would apply. The problem is whether the Act
retrospective effect. Those aspects that affect substantive actually applies to a payment dispute that may be subject
rights (i.e. the abolition of the pay when paid clause) to an arbitration or court proceedings before the coming
should not. into operation of the Act. This is unclear. If there was no
arbitration or court proceedings then, it is clear that CIPAA
still applies.

Suriana Abdul Hamid: Tai Choon Seng:


Yes, as mooted by KLRCA in its circulars, CIPAA should Yes. CIPAA was approved by Parliament in 2012. In my
apply to disputes arising after 15 April 2014 regardless of opinion, CIPAA benefits the construction industry in
whether the contract was made before or after 15 April many aspects and it is intended to remedy significant
2014 provided such contracts have not expired at the deficiencies in the present payment system. For these
time of the start of the adjudication process. Otherwise, reasons, CIPAA should be enforced as early and as broadly
going for arbitration or litigation may be the better option, as possible.
especially once the project is completed because the
contractors interim cashflow would no longer be the
driving factor for completion at that stage.

Tai Choon Seng, MBA (Finance) Dip. Tech (Building), is an accredited adjudicator with
Kuala Lumpur Regional Centre for Arbitration. He is the Project Director of Desa Parkcity
Kuala Lumpur Office and a specialist in property development and project management.

Suriana is the Head of Procurement and Contract Division of OPUS International (M) Bhd, a
project management consultancy and asset management company. She has over 20 years
of experience in project management and construction contract administration. She is a
Quantity Surveyor (QS) registered with the Malaysian Board of Surveyors and a member of
the Royal Institute of Surveyors Malaysia, the Australian institute of Quantity Surveyors,
Australian Institute of Building and the Malaysian Institute of Management. She is also on
the KLRCAs panel of Mediators and Adjudicators and a CIDB accredited Mediator.

08
in focus

Judicial Review of Adjudication Under


CIPAA An Australian Perspective on The
Obligation of An Adjudicator To Comply
with Natural Justice
By John K. Arthur

introduction
1. Under the new Malaysian Construction Industry 2. In most jurisdictions, absent an express right of
Payment and Adjudication Act 2012 (CIPAA) parties recourse to the courts, an aggrieved party must
to construction contracts will be subject to compulsory primarily rely on internal review by a review
statutory adjudication1. The policy of (CIPAA) is pay adjudication if provided for under the adjudication
first, argue later in order to facilitate payment and legislation9, or judicial review (seeking relief or remedy
cash flow in the construction industry2. CIPAA, and in the nature of certiorari, mandamus, prohibition
the various Australian models of security of payment or quo warranto), and if the legislation concerned
legislation, as well as the New Zealand, Singapore, UK permits, resisting enforcement of adjudication
and other Commonwealth models3 seek to achieve decisions on equivalent grounds10.
similar objects, through similar legislative means,
although there are also distinct differences4. For 3. As the Malaysian Act gives an express right of recourse
instance, unlike most of the jurisdictions which have against the adjudication decision under s. 15 CIPAA, it
adopted security of payment legislation, in Malaysia remains to be seen whether Malaysian courts will be
an aggrieved party to adjudication proceedings under willing to admit a separate right to seek judicial review
CIPAA is given express recourse to apply to the High under O. 53 of the Rules of Court 2012, or in resisting
Court to set aside an adjudication decision on one or enforcement of adjudication decisions under s. 28
more of the grounds set out in s. 15 (a)-(d) CIPAA5. In CIPAA.
Western Australia and the Northern Territory, rather
than granting the contractor a statutory entitlement
to progress payments6, the legislation implies terms 4. Subject to the distinct nature of CIPAA and its
into construction contracts dealing with a contractors differences with the Australian and other models of
entitlement to claim progress payments in absence of security of payment legislation in the Commonwealth,
express provision.7 There are many other differences the Australian experience over the past decade or
between the various Acts8. more with statutory adjudication may provide helpful
guidance to Malaysian courts and practitioners by
way of comparison and analogy in interpreting and
applying the Malaysian legislation.

09
in focus

Judicial review in the The obligations of an


Australian context adjudicator under CIPAA to
comply with natural justice
5. Under the Australian legislation (except for limited
rights under the WA and NT legislation), there are no 7. One of the principal grounds relied upon by Australian
express legislative rights of recourse to the courts. courts for setting aside an adjudication determination
In the context of the statutory adjudication model, is where a substantial denial of the measure of natural
there are several important factors which suggest justice required under the Act18 is established.
that full judicial review should not be available.
The legislation was intended to provide a relatively 8. Clearly an adjudicator under CIPAA has a duty to
quick and inexpensive process11 for the recovery of comply with the principles of natural justice19.
progress payments by persons who carry out work
or supply goods or services in the construction 9. Under the Malaysian Act, at the time of acceptance
industry.12 Significantly, the statutory regime was of appointment, an adjudicator must make a written
designed to operate on an interim basis and therefore declaration that there is no conflict of interest in
may be adjusted or even reversed in further or other respect of his appointment20, that he shall act
proceedings in a court, or arbitral tribunal or other independently, impartially and in a timely manner
form of dispute resolution under the contract13. and avoid incurring unnecessary expense21, he
shall comply with the principles of natural justice22
6. Despite these factors, it has been held in Australia that and there are no circumstances likely to give rise to
judicial review of an adjudication determination made justifiable doubts as to the adjudicators impartiality
under the legislation is available14: and independence23.

(a) by certiorari15 on all of the grounds available under 10. Where there has been a denial of natural justice, or the
the writ, including for jurisdictional error, or error adjudicator has not acted independently or impartially,
on the face of the record, and such relief is not an aggrieved party has an express right to apply to the
excluded either expressly or by implication16; High Court to set aside an adjudication decision24.
There may be a further right to resist enforcement
(b) where the basic and essential requirements of the under s. 28 CIPAA on the same grounds that would
Act for a valid determination are not met (which give a right to relief by way of judicial review (that
may be equated with jurisdictional error); the adjudicator exceeded his jurisdiction and failed to
comply with the rules of natural justice)25, and ordinary
(c) if it is not a bona fide attempt to exercise power judicial review may also be available.
under the Act17; and

(d) where there has been a substantial denial of the


standard of procedural fairness which is required
under the Act (which is also a jurisdictional error).

10
in focus

What are the principles of (d) a party is not permitted to add new claims, adduce
natural justice which apply new evidence or arise new arguments when the
to statutory adjudications in other side has no opportunity to respond41;
Australia?
(e) the adjudicator has no jurisdiction to reach a
decision that was not responsive to the issues
11. While, unlike CIPAA, there is no express reference to
referred in the adjudication or decide matters that
the rules or principles of natural justice in any of the
were not referred,42 or was on a basis which was
Australian models of security of payment legislation26,
not advanced by either party43, or on the basis of
it has been held by courts around Australia that
evidence that was not before the parties44;
an adjudicator is under a duty to comply with the
principles of natural justice27, taking into account the
(f) the adjudicator may draw on the adjudicators own
purpose and provisions of the various Australian Acts.
knowledge and expertise (see, s. 25(d) CIPAA), but
While this is the case28:
must notify the parties of this intention and give
them equal opportunity to comment and a failure
(a) the particular content of the rules that will apply is
to do so will be a breach of natural justice45;
derived from the context of the legislative regime
established by the legislation enactments, including
(g) there is no requirement to hold a hearing46.
taking into consideration the truncated timetable in
which the determination must be made29; and

(b) the denial of natural justice in each case must be What are the consequences of
material or substantial in the sense that it must a finding that the principles
have made a difference to the outcome30. of natural justice have been
contravened?
12. In South Australia the position is that an adjudicator
is required to afford natural justice to the parties 14. If the principles of natural justice are contravened in
and a failure to do so will result in the adjudication respect of a particular adjudication, the court may:
determination being a nullity31. The position is to
the same effect in Queensland32, in Tasmania33 and in (a) refuse relief on the basis that the denial of natural
Western Australia34. justice could not possibly have made a difference
to the outcome47, or the party asserting a denial of
What is the content natural justice had created the confusion which
of the requirement to resulted in the alleged unfairness48; or
afford natural justice in
(b) find that the adjudication determination is invalid,
adjudication proceedings?
and make a declaration of invalidity, or grant relief
in the nature of certiorari to quash the adjudication
13. There are many examples of the requirement to afford
determination or decision. The court may also
natural justice in an adjudication context35 which are
remit the matter back to the adjudicator to be
illustrative of the measure required:
determined in accordance with law49.
(a)
if an adjudicator is contemplating making a
determination on a different basis from how the Conclusion:
parties conducted the case, the adjudicator must
inform the parties of that prospect so they have an 15.
With the recent commencement of CIPAA,
opportunity to address any new issue, and a failure practitioners, stakeholders, and interested observers
to do so will ordinarily result in a denial of natural will need to wait to see to what extent Malaysian
justice or procedural fairness36; Courts are prepared to intervene in the adjudication
process, what principles and tests will be applied in
(b) a failure by an adjudicator to have regard to relevant relation to setting aside, judicial review, and/or refusal
facts may amount to a denial of natural justice as the of enforcement, of adjudication decisions, and how
concern of the law is to avoid practical injustice37; this will work for the operation of CIPAA. Given the
commonalities between the various models of security
(c) if an adjudicator does not read the parties of payment legislation and subject to their respective
submissions at all38, or does not consider the differences, it is to be expected (or at least hoped) that
adjudication response39, or possibly when the a distinct regional/Commonwealth jurisprudence will
adjudicator fails to mention a critical issue40, there emerge which will assist practitioners and stakeholders
will be a denial of natural justice; across the region. The next step . . . harmonisation?50

11
in focus
endnotes
1. KLRCA Adjudication Training Programme Training Manual Units 1 9. By another adjudicator in an expeditious manner, eg Part 3, Div 2A
and 2, p. 5. of the Victorian Act.

2. Ibid. 10. See for example, Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC)
(Akenhead J), para [55]ff.
3. In Australia there are 8 different legislative models owing to the
federal nature of the Australian legal system. There are stated to 11. Which is free from excessive legal formality, and not bedevilled by
be 15 Commonwealth jurisdictions which have enacted statutory unnecessary technicality: Hickory Developments Pty Ltd v Schiavello
adjudication regimes: Best Practice in Construction Disputes, P Gerber (Vic) Pty Ltd (2009) 26VR 112; [2009] VSC 156 at [46], and Grocon (No
and BJ Ong, LexisNexis, Aust., 2013 at para [16.14]. New South Wales 2) ibid at n. 5, [112] cited with approved in Pearl Hill Pty Ltd v Concorp
was the first state to enact security of payment legislation in 1999 Construction Group (Vic) Pty Ltd [2011] VSCA 99 at [11].
with the Building and Construction Industry Security of Payment
Act 1999 (NSW) which was based on the adjudication provisions of 12. The view has been expressed by one commentator that while
the Housing Grants, Construction and Regeneration Act 1996 (UK) the underlying intent of the act was to provide a simple means of
which grew out of the report by Latham, M. (July 1994) Constructing facilitating cashflow, it is by no means a straight-forward task to
the Team - Final report of the government/industry review of navigate the legislation and its judicial consideration, Security of
procurement and contractual arrangements in the UK construction Payment in Victoria An Update, Vicbar and Commercial Bar Assoc,
industry, The Department of the Environment, HMSO. The other Construction Law Section, 13 Sept., 2010, by Matthew Bell, p. 12. The
legislation which followed was: Building and Construction Industry problem is compounded for practitioners operating across states and
Security of Payment Act 2002 (Vic); Building and Construction territories in Australia, ibid.
Industry Payments Act 2004 (Qld); Construction Contracts (Security
of Payments) Act 2004 (NT); Construction Contracts Act 2004 (WA); 13. See s. 47(2), (3) and Grocon (No. 2), ibid, n. 5 at [110]-[111] cited with
Building and Construction Industry Security of Payment Act 2009 approval in Pearl Hill , n. 11 at [16]-[17].
(Tas); Building and Construction Industry Security of Payment
Act 2009 (ACT); Building and Construction Industry Security of 14. See Maxstra Constructions Pty Ltd v Gilbert & Ors [2013] VSC 243 per
Payment Act 2009 (SA). Note also the Construction Contracts Act Vickery J, [15] stating the law under the Victorian Act which subject
2002 (NZ) and the Building and Construction Industry Security of to the differences in legislation between the Australian states and
Payment Act 2004 (Singapore). See Security of Payment Legislation territories may be taken to apply Australia wide mutatis mutandis.
in Australia, Differences between the States Vive la Diffrence?
Hon. Justice Peter Vickery, Building Dispute Practitioners Society 12 15. Ibid, Hon Justice Peter Vickery, at [61] citing ibid, Grocon (No 2) at n
October 2011; and Towards Harmonisation of Construction Industry 5. The view has been expressed that Grocon (No 2) does not change
Payment Legislation: A Consideration of the Success Afforded the legal landscape much, as reviewable jurisdictional error derived
by the East and West Coast Models in Australia plus Addendum, from Brodyn Pty Ltd (t/as Time, Cost and Quality) v Davenport (2004)
Australasian Journal of Construction Economics and Building, 10 61 NSWLR 421 and other cases already encompass the adjudicators
(3) 14-35, Coggins, J; Elliott, RF; Bell, M. See Statutory Adjudication failure to comply with the basic and essential requirements to make
Under Nine Commonwealth JurisdictionsA Users Perspective on a bona fide attempt to exercise the power granted under the act or
Legislative Drafting Style by N A N Ameer Ali and Associate Professor to accord natural justice: ibid, Matthew Bell at p. 8 referring to T.
Dr. S. Wilkinson, see http://www.opc.gov.au/calc/docs/Loophole_ Shnookal, Security of payments in Victoria its use as an effective
papers/Ali_Dec2010.pdf. For a summary of the Victorian Act, see payment tool (2010) 38 Building Dispute Practitioners Society
Building and Construction Industry Security of Payment Act 2002 Newsletter 18.
What Does it Do and How Does it Work? Available at http://www.
gordonandjackson.com.au/ online-library. For general reference, 16. The relief is sought under the local rules of court in each jurisdiction
see Security of Payment in New South Wales and Victoria, J. Wilson, that are equivalent to O. 53 of the Malaysian Rules of Court 2012; See,
Lexis Nexis, 2014 and Adjudication in the Building Industry by ibid, Hon Justice Peter Vickery at [50] citing Hickory Developments
Phillip Davenport, 3rd Ed., The Federation Press, 2010. and Grocon (No 2) at n. 5. Subsequently confirmed in Metacorp
Australia Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR
4. CIPAA is economically contained in 41 sections (27 pages), but 141; [2010] VSC 255. And see Maxstra Constructions Pty Ltd v Gilbert
for example, the Victorian Act has 53 sections (and is spread over & Ors [2013] VSC 243 per Vickery J, [15]. In New South Wales since
76 pages). The NSW Act is spread over an economical 38 sections Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR
in 31 pages. The definition of construction work under CIPAA is 393, certiorari is available to set aside an adjudicators determination
seemingly broader under than under the Victorian or NSW Acts. on the ground of jurisdictional error (which overturned Brodyn Pty
Under the latter acts the definition of construction work does not Ltd, ibid at n. 14, largely applying Grocon (No 2) at n. 5). The situation
include drilling for, or extraction of, oil or natural gas (s. 5(2) of is similar in other States, see eg. A J Lucas Operations Pty Ltd v Mac-
each act). In Victoria, once the adjudicator accepts the nomination Attack Equipment Hire Pty Ltd [2009] NTCA; Perrinepod Pty Ltd v
(s. 20(1), the adjudicator has the capacity to determine facts which Georgiou Building Pty Ltd [2011] WASCA 217 at [96], [113]; Northbuild
go to his or her jurisdiction except for the case where the basic and Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R
essential requirements of the Act for a valid determination are not 525; Built Environs Pty Ltd v Tali Engineering Pty Ltd and Ors [2013]
met, or where the determination is not a bona fide attempt to exercise SASC 84 at [209]; Skilltech Consulting Services Pty Ltd v Bold Vision
the power granted under the act, ibid, Grocon Constructors v Planit Pty Ltd [2013] TASSC 3 at [7].
Cocciardi Joint Venture (No 2) [2009] VSC 426; 26 VR 172 at 203) he
or she has 10 business days (or up to 15 business days if the claimant 17. Ibid, Brodyn Pty Ltd at n. 14 part of which decision was applied
agrees) to determine the adjudication application (the amount of by Vickery J in Hickory; and Grocon (No 2) at n. 5, [166], ibid. See,
the progress payment to be paid the respondent (if any) and the date Building balances into progress payments, by Ben Patrick (2010)
when it is payable, and the rate of interest payable under s. 12(2): 85 LIJ 28. See also Asian Pacific Building Corporation Pty Ltd v
s. 23). Under CIPAA, the adjudicator has 45 days from the service Aircon Duct Fabrication Pty Ltd [2010] VSC 300 at [25]; Claude Neon
of the adjudication response, or reply to such response, whichever Pty Ltd v Rhino Signmakers Pty Ltd [2010] VSC 619; and Maxstra
is the later, or 45 days from the expiry of the prescribed period for Constructions, ibid at n. 15, [15] where availability of judicial review
service of the adjudication response if none is submitted: s. 12(2) and of associated remedies in respect of adjudication determinations
CIPAA. The differences between acts in the various Commonwealth made under the Act is summarised. The availability of judicial
jurisdictions have been subject to adverse comment and a push review and of associated remedies for adjudication determinations
towards harmonisation: see n. 2, Coggins, J; Elliott, RF; Bell, M. For made under the security of payment legislation in Victoria have been
a table of the differences in the Australian Acts, see, ibid Hon. Justice authoritatively stated in Maxstra Constructions , ibid at [15].
Peter Vickery, n. 3.
18. Ibid, Maxstra Constructions Pty Ltd v Gilbert & Ors at n. 15.
5. This is also the case in Singapore, see s. 27(5) Building and
Construction Industry Security of Payment Act (SG) although 19. S. 24(c) CIPAA.
the grounds are not expressly stated. See Sungdo Engineering &
Construction (S) Pte Ltd v Italcor Pte Ltd [2010] SGHC 105. 20. R. 3(c) Kuala Lumpur Regional Centre for Arbitration Adjudication
Rules and Procedure (revised 1 August, 2014); Reg. 5(4) Construction
6. Eg s 5 Singapore Act; s. 16 NZ Act; S. 9 Victorian Act; s. 8 NSW Act; s. Industry Payment and Adjudication Regulations 2014.
12 Qld Act; s. 12 Tas Act; s, 8 SA Act cf s. 36 CIPAA unless otherwise
agreed right to progress payment. 21. S. 24 (b) CIPAA.

7. S. 15 WA Act; s. 18 NT Act. 22. S. 24 (c) CIPAA.

8. For a table of the differences between the Australian Acts, see, ibid 23. S. 24 (d) CIPAA.
Hon. Justice Peter Vickery, n. 3; and between the NSW and Victorian
Acts, see , ibid, J. Wilson, n. 3. 24. S. 15(b), (c) CIPAA.

12
in focus
endnotes

25. Which is the case in the UK, see for example, Cantillon Ltd v Urvasco Investment Holdings Pty Ltd v James Trowse Constructions Pty Ltd
Ltd [2008] EWHC 282 (TCC) (Akenhead J), para [55]ff. For Singapore (No 2) [2010] QSC 166 at [10].
position, see n. 5 above.
33. Skilltech ibid at n 15, [26]ff.
26. Adjudication in the Building Industry by Phillip Davenport, 3rd Ed.,
The Federation Press, 2010 at p. 238. 34. MRCN Pty Ltd (t/as Westforce Constructions) v ABB Australia Pty Ltd
[2014] WASAT 59 at [48].
27. For example, Brodyn, ibid at n. 14; [2004] NSWCA 394 per
Hodgson JA at [55]; Reiby Street Apartments Pty Ltd v Winterton 35. Sourced from KLRCA Adjudication Training Programme Training
Constructions Pty Ltd [2005] NSWSC 545 per Macready AsJ at [22]; Manual Unit 1 and 2, pp. 16-17.
Metacorp Australia, ibid at n. 15; Allpro Building Services Pty Limited
v Micos Architectural Division Pty Limited & Ors [2010] NSWSC 474. 36. Musico v Davenport [2003] NSWSC 977, [107]-[108]; Seltsam Pty
The right to seek to have an adjudication decision reviewed for Ltd v Ghaleb [2005] NSWCA 208, [78]-[79] per Ipp JA with Mason P
breach of natural justice has been subject to criticism from at least agreeing, referred to in Skilltech ibid at n. 15at [24]-[26].
one commentator who has argued that as an adjudicators role is
that of essentially a certifier, there is no reason why the principles of 37. Procorp Civil Pty Ltd v Napoli Excavations and Contracting Pty Ltd
natural justice should apply. It is argued that each of the Australian [2006] NSWSC 205 at [10], point (xiv).
Acts has a provision similar or identical to s. 22(2) of the NSW Act
which provides that in determining an adjudication application, 38. Timwin Construction Pty Ltd v Faade Innovations Pty Ltd (2005) 21
the adjudicator is to consider certain matters only including the BCL 383 [2005] NSWSC 548 cited in Skilltech, ibid at n 15, [76].
provisions of the act, the provisions of the relevant construction
contract, the relevant payment claim, together with all submissions 39. Reiby Street Apartments v Winterton Constructions [2006] NSWSC
(including relevant documentation) that have been duly provided 375 cited in Skilltech, ibid at n 15.
by the parties and the results of any inspection carried out by the
adjudicator of any matter to which the claim relates. It is argued 40. Brook Hollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1,
that courts have no need to go further than these principles in [57]-[58] cited in Skilltech, ibid at n 15.
determining an adjudication application: Ibid, Davenport at p. 238.
41. McAlpine PPS Pipeline Systems Joint Venture v Transco Plc [2004]
28. The rules of natural justice also generally apply to adjudication under EWHC 2030 (TCC); [2004] BLR 352 at 356, per Judge Toulmin GMG
the UK legislation: Amec Group Limited v Thames Water Utilities QC; London and Amsterdam Properties Ltd v Waterman Partnership
Limited [2010] EWHC 419 (TCC) at [21], [54] (per Coulson J) citing Ltd [2003] EWHC 3059 (TCC); [2004] BLR 179 at 201 per Judge Wilcox.
see Discain Project Services Limited v. Opecprime Developments
Limited [2001] BLR 287 and RSL (South West) Limited v. Stansell 42. Principle referred to in McAlpine PPS Pipeline Systems Joint Venture
Limited [2003] EWHC 1390 (TCC). at n. 40.

29. Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] 43. Ardmore Construction Ltd v Taylor Woodrow Construction Ltd
NSWSC 168 at [142] per McDougall J. According to a recent authority [2006] CSOH 3.
from New South Wales provided there has been a bona fide attempt
by the adjudicator to exercise the relevant power and no substantial 44. See Hyder Consulting (UK) Ltd v Carillion Constructions Ltd
denial of natural justice of the kind required by the Act, the courts [2011] EWHC 1810 (TCC); and for a similar Australian decision, see
approach should be not to apply an overzealous analysis to the Metacorp Australia, ibid at n 15 where there was found to be a breach
determination of an adjudicator, but rather to take a practical of natural justice by the adjudicator when claimant raised new issue;
approach, concentrating on the effect of the determination and respondent requested opportunity to respond and the adjudicator
the reasons of the adjudicator: Maxstra NSW Pty Ltd v Blacklabel refused. The new matter was material to the adjudicators decision.
Services Pty Ltd [2013] NSWSC 406 per Rothman J (at [79] also see See also TQM Design & Construct Pty Ltd v Dasen Constructions Pty
Grocon No. 2, ibid at n. 5 at [143]; Watpac Constructions, ibid , [147]. Ltd [2004] NSWSC 1216 at [26]-[31].

30. John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205 ; [2010] 45. Carillion Utility Services Ltd v SP Power Systems Ltd [2011] CSOH
1 Qd R 302 (at [40]) per Applegarth J relying upon Stead v State 139; Hyder Consulting (UK) Ltd v Carillion Constructions Ltd [2011]
Government Insurance Commission and Ex parte Aala; Trysams EWHC 1810 (TCC).
Pty Ltd v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399 per
McDougall J at [52]; Maxstra NSW , ibid at n. 28at [79]. Recently in 46. ROK Building Ltd v Celtic Composting Systems Ltd [2009] EWHC
Anderson Street Banksmeadow Pty Ltd v JCM Contracting Pty Ltd 2664 (TCC).
[2014], Ball J. summarised the relevant principles (at [46]).
47. Eg Shorten v David Hurest Constructions Pty Ltd Ltd [2008] NSWSC
31. Built Environs Pty Ltd v Tali Engineering Pty Ltd and Ors [2013] SASC 546 at [23] and see Watpac, ibid at [147].
84 , [128] (Blue J) citing by way of example, John Holland Pty Ltd v
Cardno MBK (NSW) Pty Ltd [2004] NSWSC 258 at [10], [40][41] per 48. Veolia Water Solutions v Kruger Engineering [2007] NSWSC 46 at
Einstein J; Brodyn , ibid at n. 14 at [57]; Grocon (No 2) at n. 5 at [133] [53].
[139] per Vickery J.
49. Metacorp, ibid at n. 15.
32. James Trowse Constructions Pty Ltd v ASAP Plasterers Pty Ltd and
Ors [2011] QSC 145, [45] relying upon David & Gai Spankie & Northern 50. See ibid, Coggins, J; Elliott, RF; Bell, M at n. 4.

John K. Arthur, BA, LLB, DipICArb, FCIArb, Barrister, Isaacs Chambers, Melbourne, is a
Fellow of CIArb and ACICA, and empanelled on the KLRCAs arbitration, adjudication
and mediation panels. John is a member of the Victorian Bar of over 24 years standing.
His principal area of practice is general commercial litigation including contracts, sale
of land, property, equity, corporations, and estates. He is a Nationally Accredited
Mediator (ACDC) and a trained adjudicator (KLRCA). For his full profile, go to: http://
www.vicbar.com.au/Profile?2419. John is keen for lawyers to embrace harmonisation of
Australian law and ADR, especially international and domestic commercial arbitration,
and to reach out to, and build professional, cultural and personal links with Asia.

13
in focus

Issues In Construction Adjudication In


Singapore
Lessons And Challenges For CIPAA*
By S. Magintharan

Introduction Significant Issues Prior to the


Singapore Court of Appeals
Construction adjudication was adopted by Singapore Decision in Chua Say Eng
in 2004 with the Singapore Parliament enacting the
Building and Construction Industry Security of Payment Prior to the Singapore Court of Appeals decision in Chua
Act [Cap 30B (hereinafter referred to as SOPA]1. SOPA Say Eng, there were five [5] main areas of controversy in
was modelled after the New South Wales Act, Australia2 construction adjudication in Singapore:7
which in turn found its inspiration in the English SOP [E]
Act3. Malaysia is the most recent jurisdiction to accept 1. The first significant issue concerned the question
construction adjudication with the enactment of the as to whether the High Court had the jurisdiction to
Construction Industry Payment & Adjudication Act 2012 determine if there was a valid payment claim and
[CIPAA]4 by the Malaysian Parliament on 22 June 2012 to set aside an adjudication determination. Justice
and the establishment of an operative date of 15 April Judith Prakash in a trilogy of cases in the High Court of
2014.5 Singapore8 held that whether there was a valid payment
claim was a question only for the adjudicator to decide
However, the provisions of SOPA are not pari materia that and was not a subject for the High Court to review. On
is, read as one - with the statutory adjudication schemes the contrary, Lee Sieu Kin J in Sungdo Engineering &
of the SOP [NSW] and/or the SOP [E] and/or CIPAA and Construction (S) Pte Ltd v Italcor Pte Ltd9 (hereinafter
since its enactment there have been significant legal referred to as Sungdo) disagreed and held that it was
issues raised relating to the validity of payment claims a question for the High Court to determine and review
and jurisdictional challenges resulting in divergent views and the decision was subject to judicial review.
expressed in the Singapore High Courts.5
2. The second issue was whether the application for
On 2 November 2012, the Singapore Court of Appeal in Lee setting aside or a challenge to the adjudication award
Wee Lick Terence v Chua Say Eng [hereinafter referred to in the High Court was to be determined by a High Court
as Chua Say Eng]6 sought to resolve these divergent and Judge or by an Assistant Registrar of the High Court10.
conflicting views which had persisted for several years Both the SOPA and its Regulations do not provide any
in Singapore and laid down important principles with indication on the nature and process for setting aside
significant implications for construction adjudication an adjudication determination by the High Court
in Singapore. This article summarizes the legal issues [ what and how, if not why ] albeit there is an
encountered in Singapore with regard to its statutory express provision for an unique11 review procedure
construction adjudication scheme and from this history to challenge the merits of the adjudicators decision
highlights lessons and potential challenges under CIPAA. before an adjudication review tribunal. Even Order
95 Rule 3 of the Rules of Court, Singapore12, which was
introduced to facilitate the applications to enforce
and setting aside adjudication determination to the
High Court under SOPA, is unclear as to whether the
application is in the nature of a judicial review and
whether it should be heard by a High Court judge
thereby contributing to the unsatisfactory practice of
setting aside applications continuing to be heard in the
first instances by Assistant Registrars of the High Court
instead of the High Court Judges.

14
in focus
3. The third significant issue concerned the controversy Brief Facts of Chua Say Eng
as to whether there was a requirement under the SOPA
for the claimant to subjectively communicate to the Chua Say Eng (C) was a civil engineering contractor.
respondent that the payment claim was issued under Lee Wee Lick Terence (L) was the owner of a property.
the SOPA. This issue arose because SOPA, unlike its L employed C to convert his two-storey house into a
model SOP [NSW]13, did not expressly mandate that three-storey house. Disputes arose which resulted in L
the Claimant shall state in the payment claim [as terminating the contract on 26 April 2010. In 2 June 2010,
opposed to a progress claim] that it was a payment C served a document described as Payment Claim No: 6
claim under the SOPA. In Sungdo, Lee J laid down, as (PC 6) on L claiming the sum of S$140,450.40 for work
part of the Sungdo principles14 that even though the done for the period June 2009 to 26 April 2010. There was
SOPA did not have such a stipulation, the claimant had no reference in PC 6 that it was a payment claim made,
to subjectively communicate to the respondents that or served under the SOPA. L did not serve a payment
the payment claim is in fact a payment claim under response as required under s. 11 SOPA. C then applied for
the SOPA in order to prevent the SOPA from being adjudication under s.13 SOPA on the ground that there
used as an instrument of oppression15. Tay J at the was no payment response and under s.15 (3) SOPA, L was
first instance in the Singapore High Court in Chua Say precluded and the adjudicator prohibited from considering
Eng disagreed with the view that there was a need for any of Ls reason for withholding any amount, including
the claimant to subjectively communicate to the but not limited to any cross-claim and set-off since L had
respondent that the payment claim was under the SOPA failed to serve the mandated payment response.21
for it was not expressly mandated by Parliament16.
The adjudicator, who was appointed under s.14 SOPA,
4. The fourth controversy was whether s.10 [2] (b) made an adjudication determination in favour of C in
SOPA read with SOPA Reg. 5[1] imposed a one-month the sum of S$125,450.40. L did not pay the adjudication
limitation period on the claimant to serve the amount and C applied under s. 27 (1) SOPA for leave to
payment claim for works done (unless a contrary enforce the said determination. L on the other hand
provision is contained in the construction contract) in commenced an application to set aside the adjudication
relation to works in the previous month by the last determination on, inter alia, the grounds that (a) PC 6
day of each month following the month in which the was not a valid payment claim under the Act and (b) PC 6
contract was made, failing which the claimant was was served out of time.
barred from making any payment claim for the works
done in respect for the same period.17 The High Court The application to set aside the adjudication determination
in Chua Say Eng disagreed with the decision of the came before the Assistant Registrar of the High Court of
Assistant Registrar in refusing to set aside the payment Singapore but was dismissed22. L appealed against the
claim on the basis that the payment claim was served decision of the Assistant Registrar to the High Court and
later than the one-month limitation period18. reiterated his arguments that:

5. The fifth controversy concerned what amounted to a a. PC 6 was not a valid payment claim under the SOPA
repeat claim under the SOPA and therefore debarred because:
under s.10 [1] SOPA. Section 10 [1] SOPA expressly
provided that a claimant may serve one payment claim i. PC 6 was not a valid payment claim under the SOPA
in respect of a progress payment and section 10 [2] for it did not expressly state that it was a payment
SOPA provided that the payment claim shall be served claim under the Act and
at such time specified or determined in accordance
with the terms or if the contract did not provide such ii. C had not subjectively communicated to L the
a provision, at such a time as may be prescribed. In intention to make a payment claim under the
Doo Ree Engineering & Trading Pte Ltd v Taisei Corp19, SOPA23.
the Assistant Registrar of the Singapore High Court was
of the view that the payment claim was a repeat claim b. PC 6 was served out time because it was not served
under the SOPA even though the previous payment within the limitation period of one month from the
claim was not adjudicated upon20. last day of each month following the month in which
the contract is made under s.10(2) SOPA, read with
Reg. 5(1).

15
in focus

The Decision of The Singapore The Decision of The Singapore


High Court In Chua Say Eng24 Court of Appeal and
Relevance to CIPAA
Ls appeal came before Justice Tay Yong Kwong [Tay
J]. His Honour, inter alia, held as follows in allowing Ls The Singapore Court of Appeal heard full arguments on
appeal in part: 17 October 2011; took time to deliberate on the important
issues with reference to the SOPA model of SOP [NSW]
a. At the outset, his Honour considered the preliminary and the New South Wales Court of Appeal decisions of
issue: What should the court review? and the Brody Pty Ltd v Davenport28 and Chase Oyster. The Court
controversy as to whether the High Court had the of Appeal delivered its judgment on 2 November 201229
jurisdiction to review and set aside adjudicators setting out the following significant principles governing
determination if there was no valid payment claim . construction adjudication in Singapore.
Tay J agreed with and followed the view expressed by
Lee J in Sungdo Engineering that High Court had the [1] Resolution of divergent views on whether
jurisdiction to review the decision of the adjudicator the High Court had jurisdiction to review the
as to the validity of a payment claim25. However, decision of the adjudicator
recognising conflicting views in the High Court, the
Learned Judge26 granted leave for the parties to appeal The Court of Appeal at the outset sought to resolve the
to the Court of Appeal in order to clarify the law. conflicting approaches adopted by the Singapore High
Court in Chip Hup Hup Kee and Sungdo Engineering.
b. On the issue as to whether PC 6 was a valid payment The Court of Appeal reconciled the different approaches
claim under the SOPA the Learned Judge dismissed Ls adopted by the High Courts on the legal basis that they
appeal on the ground that: dealt with different issues and therefore were both
correct for the following reasons:
i. PC 6 was a valid payment claim and that under the
SOPA the payment claim does not need to contain a. The Court of Appeal held that the approach taken by
a stipulation that it was a payment claim under the the High Court in Sungdo Engineering concerned
SOPA. the validity of a payment claim which went to the
ii. There was no statutory requirement under the appointment of the adjudicator and thus a jurisdictional
SOPA for the claimant to subjectively communicate issue and therefore the High Court had the jurisdiction
to the respondent that the intention was to make a to review the adjudicators determination30.
payment under the SOPA27.
b. Whereas, the Court of Appeal held, that the approach
c. On the limitation period, the Learned Judge allowed taken by the High Court in Chip Hup Hup Kee [and
Ls appeal for he interpreted s.10 (2) (b) SOPA and SOPA the related cases] concerned a situation where there
Reg. 5 (1) as imposing a one-month limitation period was a valid payment claim but the payment claim was
on the claimant to serve the payment claim by the last defective for non-compliance with the requirements
day of each month following the month in which the of the Act which the Court of Appeal held goes to
contract was made. On the facts of Chua Say Eng, the the validity of the adjudication determination [merits
Learned Judge held that the construction contract was of the adjudication] and therefore was not a jurisdiction
made on 31 November 2008 and as such Cs payment question reviewable by the High Court31.
claim for work done in April 2010 should be served not
later than 31 May 2010. The Learned Judge held that, c. The Court of Appeal held that when there is a challenge
on the facts, since the payment claim was only served to the validity of the appointment of an adjudicator
on 2 June 2010, it was served out of time for the April [including whether there was a valid payment claim],
2010 claim and therefore out of time. such questions were jurisdictional issues and only the
High Court [and not the adjudicator] had the power
Both parties appealed to the Court of Appeal, with leave, and duty to review the adjudication proceedings. On
from the decision of the High Court. L appealed against the other hand, the Court of Appeal held that in the
the High Courts decision that PC 6 was a valid payment case of the challenge to the validity to the adjudication
claim and C appealed against the High Courts decision determination [merits], then the issue was not one
that held that PC 6 was served out of time. that went to the jurisdiction of the adjudicator and
therefore one for only the adjudicator to decide
[subject to review to the review tribunal] and not one
for the High Court to review32.

16
in focus
This aspect of Chua Say Eng was quickly embraced and [2] Roles of the adjudicator nominating body
applied by the Singapore High Courts and the Singapore [ANB], adjudicator, and the high court
Court of Appeal in WY Steel Construction Pte Ltd v Osko clarified
Pte Ltd33.
Treating the case before it as a test case, the Singapore
In Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd34, Court of Appeal proceeded to clarify and limit the roles of
Quentin Loh J, reiterated and applied the principles set the ANB, Adjudicator, and the High Court as follows:
out by the Court of Appeal in Chua Say Eng and set aside
an adjudication determination on the basis, inter alia, a. The Court of Appeal limited the role of the ANB to
that the payment claim upon which the adjudication merely administrative in nature when appointing
determination was made was invalid because there was an adjudicator. The ANB merely served as an
no existing construction contract at the time the payment administrative body under the SOPA40 for the receipt
claim was served for the parties had entered into and of the adjudication application, appointment of
compromised all their claims prior to the payment claim. the adjudicator and the adjudication process. The
The Learned Judge held that the compromised agreement, Singapore Court of Appeal emphatically stated that the
which was ex facie valid at the time the payment claim ANB had no legal obligation to consider the validity of
was served, extinguished all the claimants claims under the payment claim or process in the following terms41 :
the construction contract and as such the claimant had
no legal right to invoke the SOPA and the adjudicator no The ANB has no obligation to consider the bona fides
jurisdiction to make any adjudication determination under of the claimants request by looking into or questioning
the SOPA. The Learned Judge held that the question as to whether the payment claim is intended to be a payment
whether there was an existing construction contract was a claim, whether it has been served or properly served
jurisdictional question to be determined by the High Court on the respondent, or whether it complies with all the
and not the adjudicator. The decision of the Singapore requirements of the Act [Emphasis mine]
High Court was affirmed in the Court of Appeal35.
The essential role played by the KLRCA under CIPAA is
Similarly, in the recent case of YTL Construction (S) Pte similar to that of the ANB in Singapore and serves merely as
Ltd v Balanced Engineering & Construction Pte Ltd36, an administrative body in the appointment of adjudicators
Tan Siong Thye J, the Singapore High Court applied the and administering of the adjudication process rather than
principles stated by the Court of Appeal in Chua Say Eng in any judicial or quasi-judicial capacity. In the premises,
and set aside an adjudication determination on the basis, it is respectfully submitted that the dicta of the Singapore
inter alia, that the payment claim was invalid for it did Court of Appeal in Chua Say Eng on the limited role of the
not state the amount claimed by reference to the period ANB in Singapore is equally applicable to the limited role of
to which the payment related [as required under s.10 (3) the KLRCA under the CIPAA. In particular, it is submitted
(a) SOPA] and that such irregularity could not be waived that it is certainly not the role of the KLRCA to consider the
as it was jurisdictional37. The High Court also held that an validity of the payment claim/payment response.
adjudicator under s.16 (2) (a) SOPA was bound to reject an
adjudication application which was commenced out of b. The Singapore Court of Appeals clarification on the role
time38. of the adjudicator under SOPA is rather controversial42
for the following reasons:
Unlike the SOPA, the role of the High Court in setting aside
the adjudication determination is much clearer under i. The Court of Appeal held that the function of the
the CIPAA. Section 15 CIPAA expressly provides for an adjudicator under the SOPA was limited to:
aggrieved party to apply to the High Court to set aside an
adjudication decision on four [4] grounds39 all of which [1] deciding whether the adjudication application
are public law and jurisdictional grounds. It follows in question was made in accordance with
therefore that under CIPAA the role of the High Court is section 13 [3] (a) to (c) SOPA.
similar to that under SOPA - supervisory, prerogative and
the process is by way of judicial review. It is respectfully [2] that if the adjudication application complied
submitted that the principles laid by the Singapore Court with the requirements under s.13 (3) (a) (c)
of Appeal in Chua Say Eng that the High Court will only SOPA, to determine the adjudication application
decide jurisdictional challenges [including validity of in accordance with s.17 (2) SOPA.
payment claim and payment response] and not the merits
of the adjudication determination [unless it falls within ii. The Court of Appeal held that the adjudicator was
Wednesbury unreasonableness] would equally apply to not competent to decide whether he was validly
an application to set aside an adjudicators determination appointed to adjudicate the matter and that such
under the CIPAA. argument should be made to the court43.

17
in focus
The present author respectfully reiterates his submission subject to judicial review in the High Court.
elsewhere (see endnote 42) that the Singapore Court of
Appeals ruling that the adjudicator was not competent and c. The Singapore Court of Appeal held45 that the
did not have the jurisdiction to decide on the validity of High Courts role in setting-aside an adjudicators
the payment claim/payment response and consequently, determination is as follows:
his appointment, is wrong for the adjudicator is mandated
under 17 (3) (a) (h) SOPA to decide such questions which i. The High Court should not review the merits of the
are the basic and essential conditions imposed by adjudicators determination.
SOPA.44
ii. The High Court has the power [and duty] to
The stance taken by the Singapore Court of Appeal is decide matters which go to the jurisdiction of
also, it is respectfully submitted, contrary to the role of the adjudicator and affect the validity of the
the adjudicator under CIPAA. The jurisdiction of the adjudicators appointment in particular where
adjudicator under the CIPAA is clearly set out in s.27 there is no payment claim or service of the
CIPAA and it is mandated that the adjudicator jurisdiction payment claim, the appointment of the adjudicator
is limited to adjudicating on the payment claim [under will be invalid, and the resulting adjudication
section 5 CIPAA] and payment response [under section determination would be null and void.46
6 CIPAA] unless the jurisdiction is extended in writing
under section 27 [2] CIPAA by the parties. It is therefore It is respectfully submitted that for reasons stated
submitted that, unlike the position in SOPA [as set out above, the principles laid by the Singapore Court of
in Chua Say Eng], under CIPAA the adjudicator has the Appeal in Chua Say Eng that the High Court will only
jurisdiction to decide on the validity of the payment decide jurisdictional challenges [including validity of
claim and the payment response. It is submitted that payment claim & payment response] and not the merits
under CIPAA, the validity of the payment claim and the of the adjudication determination [unless it falls within
payment response are basic and essential conditions Wednesbury unreasonableness] are relevant and equally
which have to be decided by the adjudicator, failing which applicable in setting aside the adjudicators determination
the adjudication decision will be void and not voidable under section 15 of the CIPAA for it is by way of a judicial
[as per Hodgson JA in Brodyn Pty Ltd v Davenport [2004] review and it is trite law that the role of the High Court in a
NSWCA 394 at [52] [55]). However, unlike the SOPA and judicial review is only to review the legality of the decision
SOP [NSW], CIPAA, under section 27 [3], expressly bestows and not its merits.
on the adjudicator a statutory discretion not to decide
the jurisdictional challenge [including the validity of the [3] The gloss on the Sungdo Principles
payment claim and the payment response] and to proceed
with and complete the adjudication proceedings despite The Singapore Court of Appeal considered the Sungdo
the jurisdictional challenge. As such, it follows that under Principles holding that, despite the lack of an express
section 27 (3) CIPAA the adjudicator is not bound to decide stipulation in the SOPA [unlike the SOP (NSW) and
the basic and essential conditions as to the validity of the CIPAA], the claimant was required to communicate the
payment claim and payment response. It is respectfully subjective intention to the respondent that the claim
submitted that section 27 (3) CIPAA is a very unusual served on the respondent is in fact a payment claim under
provision indeed. Although the clear intention behind the SOPA.47 The Singapore Court of Appeal recognized that
section 27 (3) CIPAA, is to reiterate the underlying purpose the lack of a stipulation or communication in the payment
of CIPAA to provide a speedy and low cost adjudication, claim would result in a certain amount of inconveniences
it is respectfully submitted that, it will be counter- and even hardship on potential respondents who are
productive to the whole intention of CIPAA and a complete considering what action to be taken to protect their interest
waste of costs to the parties for an adjudicator to exercise in the context of the Act48. Notwithstanding the potential
his discretion not to decide on the validity of the payment hardship to the respondent, the Court of Appeal refused to
claim and/or the payment response and to proceed with approve the Sungdo principles; instead holding that since
and complete an adjudication application when it is Parliament had deliberately omitted49 to impose such a
clear from the evidence at the outset that the payment requirement on the claimant, the respondent is to treat
claim is invalid. It is further respectfully submitted that every claim submitted to the claimant that satisfies the
the prudent and proper exercise of discretion will be for requirement of the Act as a payment claim and respond
the adjudicator to decide any jurisdictional challenge on accordingly50. The Singapore Court of Appeal imposed a
the validity of the payment claim and/or response or any gloss on the Sungdo principles and limited their application
other jurisdictional issues under s 27 [1] CIPAA and only to its own peculiar facts where the court is seeking to
to proceed with the adjudication when such challenges prevent unscrupulous contractors who take advantage of
are unsubstantiated or invalid or unclear. Finally on this the legislative scheme.
point, it is respectfully submitted that a deliberate refusal
by an adjudicator under CIPAA to consider whether to The decision of the Court of Appeal is very unfortunate51,
exercise the statutory discretion may by itself amount to especially since the respondent under section 15 [3] SOPA
a fettering of the adjudicators statutory discretion and be [and s 15(4) & 20 SOP (NSW)] is subject to the draconian

18
in focus
consequence of not being able to raise any defence, set- reg. 5 and held that these provisions did not impose any
off, cross-claim for withholding payment unless it is obligation on the claimant to make monthly claims by
contained in the payment response served within the the last day of each month following the month and
strict time-lines under the SOPA. This draconian effect therefore there was no limitation period imposed by
is further exasperated by the recent Singapore Court of s 10 (2) SOPA and reg. 5 as held by the Learned Judge.
Appeal decision in WY Steel Construction Pte Ltd v Osko The Court of Appeal held that 10 (2) (b) SOPA did not
Pte Ltd52 which confirmed that the respondents failure to compel a claimant to make monthly payment claims
serve a payment response is a jurisdictional issue and for work done in the previous month, whether he
held that respondent is precluded from raising and the wants to or not56. It therefore follows that in Singapore
adjudicator had no jurisdiction to consider any defence, there is no definite period within which a claimant
cross-claim or set-off not raised by the respondent in the must make a monthly payment claim and a claimant
payment response. can refrain from making a prompt payment claim for
works carried out and commence an application under
The draconian consequences to respondents under s 15 the SOPA long after the contract is completed57.
[3] SOPA [SOP [NSW] & SOP [E]) is thankfully anticipated
and avoided under the CIPAA by the express stipulation Section 10 (2) (b) & SOPA Reg 5 was clearly intended to
under s 5 (d) CIPAA that the payment claim shall include provide a statutory time-line for the service of the payment
a statement that it is made under the Act [as in the case claim when the construction contract failed to specify the
of s. 13(3) (c) SOP [NSW]), the unusual provision of s.6(4) same. However, the decision of the Singapore Court of
CIPAA which expressly provides [unlike the SOP [E], SOP Appeal in Chua Say Eng renders the statutory time-lime
[NSW] & SOPA] that a non-paying party who fails to for the service of the payment claim otiose for there is no
respond to a payment claim in the manner provided under compulsion on the claimant to make monthly claims. The
this section is deemed to have disputed the entire payment claimant is allowed to serve a payment claim for previous
claim [emphasis mine] and the glaring absence of the claims long after the works are carried out - so long it is
equivalent draconian provision contained in of s 15[3] within the Limitation period.
SOPA, s 15(4) & 20 SOP (NSW) & s 111 SOP (E) in the CIPAA.
Unlike s 10 (2) (b) & Reg 5 SOPA, s 5 (1) CIPAA does not seek
[4] The was no one month limitation period to impose any statutory limitation period and delegates
for the service of a payment claim under the the date of service of the payment claim to the parties
SOPA under the construction contract. Section 5 [1] CIPAA
expressly stipulates that the service of the payment claim
The Singapore Court of Appeal then considered Cs appeal shall be pursuant to a construction contract and under
against the High Courts interpretation of section 10 (2) section 5 [2] CIPAA the payment claim shall include
(b) SOPA and SOPA Reg. 5 that imposed a limitation the due date for the payment claimed.58 However, the
period53 on the claimant and the claimant had to serve the provision under s 5(1) CIPAA begs the question: what if
payment claim for monthly works by the last day of each there was no due date for the service of the payment claim
month following the month failing which the claimant provided under the construction contract? There is a clear
was debarred from making a claim for preceding months lacuna in the CIPAA in this regard bearing in mind that
construction works carried out. The Court of Appeal most construction contracts under which sub-contractors
disagreed54 with the High Court that Cs payment claim are engaged [at least in Singapore] are not Standard Form
was debarred and served out of time for the following Contracts and may not contain the due dates for service of
reasons: payment claims. The Regulations under the CIPAA also do
not provide for any specific time-frame for the service of
a. On the facts, the Court of Appeal held55 that the the payment claim [as stipulated by Reg 5 SOPA]. In fact,
High Court Judge had erred in failing to take into it is respectfully submitted that any attempt to resolve this
consideration the supplemental agreement dated lacuna will require an express amendment to the CIPAA
3 Dec 2008 which determined the reference period and inclusion in s 5 CIPAA for the Rules to prescribe such
for the following months of claim under s 10 (2) (b) time-line [as in the case of S 10[2] (b) SOPA and SOPA Reg 5]
SOPA and SOPA Reg. 5. The Court of Appeal held that for it is questionable whether the Regulations under CIPAA
the effective date was the date of the supplemental could impose any such limitation when the parent Act [s
agreement and the last date for the claimant to serve 5 CIPAA] does not provide as in the case of s 10[2] (b) SOPA]
the payment for works carried out in April 2010 was 3 any such limitation period. It is further respectfully
June 2010 and not 31 May 2010 as held by the Learned submitted that there is an urgent need to amend CIPAA to
Judge. Consequently, since on the facts C had served stipulate a prescribed time-line for the Claimant to serve
the payment claim on 2 June 2010, the claim was served the payment claim if the construction contract does not
within time and valid. contain such specific time-frame failing which claimants
will be in the dilemma when to serve the payment claim
b. The Court of Appeal interpreted s 10 (2) (b) SOPA and under the CIPAA. The alternative and default position, as

19
in focus

It is further respectfully submitted that the prudent and proper


exercise of discretion will be for the adjudicator to decide any
jurisdictional challenge on the validity of the payment claim
and/or response or any other jurisdictional issues under s 27
[1] CIPAA and only to proceed with the adjudication when such
challenges are unsubstantiated or invalid or unclear.

held by the Singapore Court of Appeal in Chua Say Eng, claim in respect of a progress payment...61 [Emphasis
is that the claimant can serve their payment claim at any mine]. The situation under section 5 CIPAA begs two
time so long as it is within the Limitation period. questions: [a] Is the claimant limited to serve one [1]
payment claim for a period for works for which it is due
[5] Repeat claims clarified Doo Ree Engineering under the construction contract and [b] Can the claimant
& Trading Pte Ltd v Taisei Corporation make a rolled-up claim in and/or consisting of an
overruled. adjudicated amount?

In the course of its decision, the Singapore Court of Appeal With respect to first question, it is submitted that even
considered the issue of what amounted to a repeat claim though CIPAA does not contain the clear prohibition
prohibited under the SOPA. Section 10 (1) SOPA provided contained in s.13 (5) SOP [NSW] and/or s 10[1] SOPA, the
that A claimant may serve one payment claim in respect reference to the claimants right under section 5(1) CIPAA
of a progress payment. (Emphasis mine] to serve a payment claim limits the claimant to only one
payment claim for work carried out for each reference
In Doo Ree Engineering & Trading Pte Ltd v Taisei period [or progress claim] under the construction contract.
Corporation, the High Court Assistant Registrar held This interpretation accords with the principles applied
that service of a payment claim which was similar to and/ under the SOPA and SOP [NSW] prohibiting a claimant
or substantially similar to a non-adjudicated previous from issuing more than one payment claim for each period
payment claim was a repeat claim prohibited under the of work done and avoids repeat claims that would be
SOPA. The Court of Appeal in Chua Say Eng reviewed and tantamount to an abuse of the CIPAA62.
overruled Doo Ree Engineering59 The Court of Appeal
interpreted ss 10 (1) & 10(4) SOPA and defined a repeat With respect to the second question, it is respectfully
claim as a subsequent payment claim for amounts already submitted that even though CIPAA does not contain any
previously adjudicated upon under the SOPA. The Court express provision allowing roll-up claims as in the case
of Appeal held that the SOPA only prohibited a claimant of s. 10(4) SOPA and s.13 (6) SOP [NSW], CIPAA does not
from serving a payment claim which was the same and/ prohibit the claimant from making a rolled-up claim
or substantially the same as one which was previously against the respondent, including claims not previously
adjudicated. The Court of Appeal held that the SOPA did paid or partially paid. In fact, support for CIPAA allowing
not prohibit a claimant from including in a payment claim a rolled-up claim [despite section 5] is contained in the
under SOPA claims for unpaid or partially paid amounts definition of unpaid party [s.4 CIPAA] which is defined
contained in previous claims, provided the previous as a party who claims payment of a sum which has not
claims were not adjudicated under the SOPA and inclusion been paid in whole or in part under a construction contract.
of such unpaid or partially unpaid did not amount to [Emphasis added]. Nevertheless, the definition of a
repeat claim.60 The provisions of ss 10 (1) & 10(4) SOPA repeat claim by the Singapore Court of Appeal in Chua
are materially different from that contained in section 5 Say Eng [derived from the NSWCA decision of Dualcorp
CIPAA. In particular, CIPAA does not have the rolled-up Pty Ltd v Remo Construction Pty Ltd [2009] NSWCA at
provision as contained in section 10(4) SOPA, which was [53]), consisting of a claim for a sum previously adjudicated
instrumental to the Singapore Court of Appeals holding upon amounted to a repeat claim and is prohibited
that the claimant was not prohibited from including in should be applicable under the CIPAA. It is respectfully
a payment claim unpaid and partially unpaid amounts submitted that for a claimant to make a payment claim
contained in previous payment claims. under s. 5 CIPAA, either in the form of a rolled-up claim or
a new claim consisting of amounts which have already
Section 5 [1] CIPAA however, does provide that an unpaid been adjudicated upon clearly amounts to an abuse of the
party may serve a payment claim on the non-paying CIPAA and is a repeat claim prohibited by CIPAA.
party for payment pursuant to a construction contract
unlike the clearer provision under section 10 [1] SOPA
which provides that A claimant may serve one payment

20
in focus
[6] Final claims subject to adjudication under [7] No resolution on the nature of challenge and
SOPA who is to decide setting aside applications in
Singapore
The Singapore Court of Appeal in Chua Say Eng
considered63 the important question [although not raised Andrew Burr in his editorial in Construction Law Journal
by the parties] as to whether a final claim (as opposed to a [2014]68 pointed out that at the outset of the introduction
progress claim) fell within the SOPA for adjudication, for of the SOP [E], following Sir Michael Lathams report,
PC 6 was a final claim and not a progress claim. The issue there were a host of unanswered questions what
first arose in Singapore before the High Court in Tiong and how, if not why [nature of challenge and who is to
Seng Constructors (Pte) Ltd v Chuan Lim Construction decide setting aside applications] - which were resolved
Pte Ltd64 wherein it was, inter alia, argued that that the over twenty years since the introduction of construction
SOPA applied only to a progress payment and not to a adjudication in England. These unanswered questions
final payment.65 The Singapore High Court in Tiong Seng similarly prevail even today after ten years following the
Construction (Pte) Ltd v Chuan Lim Construction Pte Ltd introduction of SOPA in Singapore. This is particularly so
adopted a purposive interpretation of a progress claim because there is no indication whatsoever in the SOPA on
in s 2 SOPA66 to include a claim for payments. the nature of challenges to adjudication and the lack of
guidance from the Singapore High Court.
In Chua Seng Eng, the Singapore Court of Appeal
approved67 the purposive approach adopted by the In Chua Say Eng the Singapore Court of Appeal was
Singapore High Court in Tiong Seng Construction (Pte) Ltd presented with an opportunity to resolve this deficiency
and held that the definition of a progress claim under s. but unfortunately, it is respectfully submitted, it skirted
2 SOPA was wide enough to include a payment, albeit the whole issue and focussed on merely on seeking to
final, to which a person is entitled to for the carrying out of reconcile the two approaches on when the High Court
construction work. should review an adjudication determination. It is
unclear from the whole decision whether the nature of the
CIPAA does not contain any definition of payment challenge is a judicial review. Although it is reasonable to
claim and/or progress claim as set forth in SOPA or assume that the Singapore Court of Appeal proceeded on
SOP [NSW]. The question whether a payment claim the basis that the application to set aside the adjudication
would include a final claim is therefore open to dispute. determination was in the nature of a judicial review69,
However, guidance on the definition of a payment claim the Court left this essential question unanswered. The
can be deduced from the definition of a payment resulting lack of clarity is unfortunate70 because it is an
means a payment for work done or services rendered essential, practical consideration for parties to consider
under the express terms of a construction contract and whether the application for setting aside is susceptible to
unpaid party means a party who claims payment of challenge in the first place in the High Court [i.e. whether
a sum which has not been paid in whole or in part under to challenge the determination on jurisdictional grounds
a construction contract [s. 2 CIPAA]. It is respectfully or on the merits]. The lack of clarification has continued
submitted that the definition of a payment and to perpetuate the wrong and unsatisfactory conduct of
unpaid party reinforces the whole object and purpose Assistant Registrars of the High Court of Singapore hearing
of CIPAA to facilitate regular and timely payment and and deciding applications for setting aside adjudication
to provide remedies for recovery of payment in the determination in the first instance when they must be
construction industry [preamble to CIPAA]. Bearing in heard and determined by the High Court Judge exercising
mind these salutary objectives and purposes of CIPAA, it supervisory and preparative powers.71
is respectfully submitted that the purposive interpretation
by the Singapore Court of Appeal in Chua Say Eng for a Unlike the SOPA, the role of the High Court in setting aside
payment claim to include a final payment should also the adjudication determination is much clearer under the
apply under the CIPAA for the obvious reason that a final CIPAA. Section 15 CIPAA expressly provides the remedy
claim is also a claim under the construction contract and for an aggrieved party to apply to the High Court to set
it would be untenable for the CIPAA to be applicable to aside and adjudication application on four [4] grounds72
progress claims but not to a final claim, which rise from all of which are public law and jurisdictional grounds.
the same construction contract - especially since it was It follows therefore that under CIPAA the role of the High
not excluded by Parliament. Court is clearly supervisory, prerogative and the process is
by way of judicial review. Consequently, the application
must be heard before a High Court judge as it is an exercise
of the High Courts prerogative and supervisory powers
over an inferior tribunal [the adjudicator under the
CIPAA] and hopefully the wrongful practice persisting
in Singapore of Assistant Registrars hearing applications
to set aside n adjudication determination would not be
followed or allowed in Malaysia.

21
in focus

Conclusion
In conclusion, the law relating to construction
adjudication in Singapore has been significantly clarified
and laid down by the decision of the Singapore Court of
Appeal in Chua Say Eng. However, as pointed out by the
present author elsewhere73, this decision of the Singapore
Court of Appeal is really a quagmire. Although intended
to comprehensively resolve all the pending High Court
controversies existing at time of its decision, Chua Say
Eng has sown the seeds for future controversies affecting
statutory adjudication in Singapore. In spite of this
limitation, Chua Say Eng can serve as a useful guide and
approach in the interpretation of principles in construction
adjudication under CIPAA subject, of course, to the view
of its utility and persuasiveness taken by the Malaysian
Courts.

*This article is a summary and synopsis of the detailed views expressed by the present author and published in S. Magintharan:
Construction Adjudication in Singapore Lee Wee Lick Terence v Chua Say Eng [2014] 30 Constr. LJ 73 [hereinafter referred to as
S. Magintharan: Chua Say Eng] and S. Magintharan: Setting Aside of Payment Claims and Jurisdictional Issues in Singapore The
Sungdo Principles [2011] 27 Constr. LJ 506 [hereinafter referred to as S. Magintharan: Sungdo Principles].

endnotes
1. Building and Construction Industry Security of Payment Act [Cap 30B] to an application to set aside the adjudication determination whilst
[hereinafter referred to as SOPA]. Regulations were passed under section 34 [1] [a] & [b] SOPA preserves the parties concurrent rights to
the SOPA and are contained in the Building and Construction Industry a court or tribunal. There is regrettably no specific provision in the
Security of Payment Regulations [Cap 30B, reg 1, 2006 Rev Edn], SOPA dealing with the nature of the application or to which court the
hereinafter referred to as SOPA Reg. application should be made. This lacuna had resulted in an application
to set aside an adjudication determination under SOPA to be taken
2. Building and Construction Industry Security of Payment Act 1999 [Act out in the Subordinate Courts [now the State Courts of Singapore];
46 of 1999] (NSW), hereinafter referred to as the SOP [NSW] Act. the subordinate Courts rejection of the same and affirmation that
the nature of the application was a judicial review and that such
3. Housing Grants, Construction and Regeneration Act 1996 as amended application had to be taken in the High Court: Liao He Pte Ltd v JFC
by ss.143 145 of the Local Democracy, Economic Development and Builder Pte Ltd [2012] SGDC 23.
Construction Act 2009 [hereinafter referred to as the SOP [E] Act].
11. Sections 18 22 SOPA & Regulations 10 provide a redress to only the
4. The Construction Industry Payment & Adjudication Act 2012 which Respondent to challenge the merits of the adjudicators determination
came into force on 15 Apr 2014 along with the Construction Industry when the award exceeds S$100,000.00 to a review panel comprising
Payment and Adjudication Regulations [CIPAA Reg]. of three [3] review adjudicators who have powers to inter alia,
substitute the adjudication determination. However, one of the
5. Please refer to the present authors views expressed in both S. practical shortcoming of this review process is that the Respondent
Magintharan: Sungdo Principles and S. Magintharan: Chua Say Eng is not allowed to invoke the review process unless he paid the
wherein the details of the divergent views were discussed. adjudicated amount to the claimant prior to lodging of the review and
evidenced the same. There is no safeguard provided under the SOPA
6. Lee Wee Lick Terene (alias Li Weilic Terence) v Chua Say Eng (formerly for the return of the payment under the adjudication determination if
trading as Weng Fatt Construction Engineering) and another appeal upon review the full or substantial amount is determined to be returned
[2013] 1 SLR 401; [2012] SGCA 63 to the Respondent. On the contrary, Section 27 [5] SOPA and Order 95
Rule 3 [2] Rules of Court, Singapore [2006 Edn] provides a safeguard
7. Please see S. Magintharan: Chua Say Eng at pages 73 75. The to the Respondent and requires the payment of the adjudicated
problems were aptly described by the Editor of Construction Law determination into the High Court as security on an application to set
Journal, Andrew Burr, in his editorial to CLJ [2014] 30 Vol 2 page 71 as aside the adjudication determination thereby enabling the Respondent
what and how, if not why. The present author is indebted for to lock-up the adjudicated amount which is disputed until the final
the comments made by Mr Michael Heihre on the draft of this article determination determination by the High Court and/or the Court of
but all views expressed in this article are solely the personal views and Appeal. It is a practical and real concern of Respondent that his payment
responsibility of the present author. of the adjudicated amount is safeguarded because once the payment
is made to the claimant it is almost impossible to seek a return of the
8. Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & amount paid from the sub-contractor regardless as to the decision
Construction Co Ltd [2010] 1 SLR 658; SEF Construction Pte Ltd v Skoy of the review tribunal or the High Court. As the result, in practice it
Connected Pted Ltd [ 2010] 1 SLR 733 and AM Associates (Singapore) is more practical to seek to set aside the adjudication determination
Pte Ltd v Laguna National Golf & Country Club Ltd [2009] SHHC 260. on jurisdictional grounds and at the same time challenge the merits on
the ground on Wednesbury principles Associated Provincial Picture
9. Sungdo Engineering & Construction (S) Pte Ltd v Italcor Pte Ltd [2010] Houses Ltd v Wednesbury Corp [1948] 1 KB 223 [ie. no reasonable
3 SLR 45 [hereinafter referred to Sungdo]. This view was approved tribunal, would have arrived at the adjudication determination], if
by Tay Yong Kwang J at first instance in Chua Say Eng v Lee Wee Lick possible, rather than to invoke the review process. CIPAA does not
Terence [2010] SGHC 109 at [28]. The present author was counsel who provide for any review procedure as contained in the SOPA. However,
acted for Sungdo before the Singapore High Court. Sungdo is the first ss 15, 16 & 28 CIPAA are clear and unequivocal that the jurisdiction to
Singapore High Court decision where an adjudication determination review the adjudication determination is in the High Court. It is
was set aside. The High Court held that the question as to the validity respectfully submitted that, as in the case of the SOPA, the review and
of a payment claim was a jurisdictional issue which the High Court setting aside by the High Court is in the exercise of its supervisory and
could review. In Sungdo, the High Court set aside the adjudication prerogative powers over inferior tribunals [adjudication determination
determination on, inter alia, the ground that the payment claim was under the CIPAA] and therefore only the High Court judge should have
invalid because it did not contain any indication that it was a payment the jurisdiction to review and set aside an adjudication determination
claim under the SOPA. Please refer to S. Magintharan: Sungdo under the CIPAA.
Principles [2011] 27 Constr. LJ 506.
12. Order 95 Rule 3 Rules of Court [2006 Edn] which deals with
10. In fact SOPA & SOP Reg are rather cryptic as the nature of the an application before the High Court to set aside adjudication
application to the High Court. Section 27 [5] SOPA makes reference determination or judgment under the SOPA is not helpful for it does

22
in focus
endnotes

not stipulate the nature and who should be hearing an application to [2000] 75 Con. LR 92 and Australia Walter Construction Group Ltd v
set aside an adjudication determination. This lacuna has in Singapore, CPL (Surrey Hills) Pty Ltd [2003] NSWCA 266; Leighton Contractors Pty
it is submitted, led to the present incorrect and unsatisfactory practice Ltd v Campbelltown Catholic Club [2003] NSWSC 1103; Parist Holdings
of applications for setting aside adjudication application being Pty Ltd v WT Partnership Australia Pty Ltd [2003] NSWC 365; Multiplex
heard and determined by Assistant Registrars of the High Court of Construction Pty Limited v Jan Luikens and Lahey Detailed Joinery Pty
Singapore instead of High Court Judges. See for example the cases Ltd [2003] NSWSC 1140.
of Taisei Corp v Doo Ree Engineering & Trading Pte Ltd [2009] SGHC
156 where the application to set aside the adjudication was heard and 22. It is respectfully reiterated that this is yet another case where an
adjudication determination set aside by the Assistant Registrar of the application to set aside the adjudication determination was wrongly
Singapore High Court. See also Associate Dynamic Builder Pte Ltd v heard and determined by an Assistant Registrar of the High Court at
Tactic Foundation Pte Ltd [2013] SGHC 16; Shin Khai Construction Pte the first instance instead of the High Court Judge.
Ltd v F L Wong Construction Pte Ltd [2013] SACHCR 4 and recently
LH Aluminium Industries Pte Ltd v Newcon Builders Pte Ltd [2014] 23. L was relying entirely on the Sungdo Principles as set out in Sungdo
SGHCR 10 as persisting instances of Assistant Registrars hearing and Engineering & Construction Pte Ltd [2010] 3 SLR 459. See also S.
determining applications to set aside adjudication determination. Magintharan: Sungdo Principles, supra, 510 514.
As set out in S. Magintharan: Sungdo Principles, supra at fn 63 and S.
Magintharan: Chua Say Eng, supra at fn 16 & page 46 it is reiterated 24. Chua Say Eng v Terene Wee [2011] SGHC 109. See S. Magintharan: Chua
that the nature and power exercised in setting aside of an adjudication Say Eng, supra, pages 77 81.
determination is by way of the High Courts Supervisory/Prerogative
powers of judicial review and as such only the High Court Judges 25. The divergent views in Chip Hup Hup Kee Construction Pte Ltd v
must hear and determine any application to set aside an adjudication Ssangyong Engineering & Construction Co Ltd [2010] 1 SLR 658; SEF
determination and none other. This point was argued by the present Construction Pte Ltd v Skoy Connected Pted Ltd [2010] 1 SLR 733 and
author before the Singapore High Court in Admin Constructions Pte AM Associates (Singapore) Pte Ltd v Laguna National Golf & Country
Ltd v Vivaldi (S) Pte Ltd [2013] 3 SLR 609 but no definitive decision was Club Ltd [2009] SHHC 260 expressed by Prakash J and that of Lee J
made by the High Court Judge, although the Learned Judge, Quentin in Sungdo Engineering & Construction (S) Pte Ltd v Italcor Pte Ltd
Loh J, at [65] questioned the feasibility of such setting aside application [2010] 3 SLR 45. Tay J considered the controversy in the light of the
being heard before the Assistant Registrar in the context that it would recent Australian Court of Appeal decision of Chase Oyster Bar v Hamo
entail an additional layer in the appeal proceedings, cause delay and Industries [2010] NSWCA 190 [Chase Oyster].
be contrary to intent SOPA to provide a quick and speedy remedy to
contractors. 26. Chua Say Eng v Terrence Wee [2011] SGHC 109 at [27] [29].

13. Section 13[2] [c] SOP [NSW] Act. This significant issue, fortunately, 27. The Learned Judge rejected the Sungdo principles although he
does not arise under CIPAA for section 5 [2] [d] CIPAA mandates that recognised that it was a statement of best practice.
a valid payment claim shall contain, inter alia, a statement that
it is made under the Act. In Singapore, it seems that Parliament, 28. Brodyn Pty Ltd t/a Time Cost and Quality v Davenport [2004] NSWCA
deliberately omitted to mandate for such an express stipulation 394 (Brodyn).
following suggestions from subcontractors and suppliers lobby that
such a requirement may conceivably result in creating a contentious 29. In the interim, the parties had actually settled the dispute but the Court
atmosphere in the relationship between the main contractor and of Appeal found it necessary to proceed with the appeal in the public
subcontractor straight away: K.F. Chow, Security of Payment and interest because the two judicial approaches have created difficulties
Construction Adjudication [Lexis Nexis, 2005] at pp 134 135. In amongst adjudicators on the proper approach to adopt, for this reason
Sungdo at page 467 [11] Lee J held that the suggestions by the it is desirable for this court to express its view on the state of the law:
subcontractors and suppliers lobby does not bear scrutiny in view per Chan Sek Keong CJ in Lee Wee Lick Terrence v Chua Say Eng [2013]
of the short timelines under the Act for the respondents to come out 1 SLR 401 at [18].
with a payment response. See also S. Magintharan: Sungdo Principles
at pages 513 & 514, where the present author had criticised the lack 30. Chua Say Eng v Terence Wee [2013] 1 SLR 401 at [31], [37] [39]. See
of such a stipulation which propagates ambush by the claimants and also S. Magintharan: Chua Say Eng, supra, at pages 78 80.
amounts to a breach of natural justice [fair notice]. Unfortunately as
noted in S. Magintharan: Chua Say Eng, supra, at pages 86 & 87, the 31. Chua Say Eng at [30] [32].
Singapore Court of Appeal in Chua Say Eng had put a gloss over the
Sungdo principles and rejected the Sungdo principles in the light of the 32. Subject to the situation where the adjudicator had failed to comply
deliberate omission by Parliament of such a stipulation. with one or more of the provisions under the Act which was so
important that it was the legislative purpose that an act done in breach
14. A term coined by the present author in S. Magintharan: Sungdo of the provision should be invalid, whether it be labelled as an essential
Principles [supra] at pages 512 & 513. condition, or mandatory condition. A breach of such a provision would
result in the adjudication determination being invalid per Chan CJ in
15. Sungdo [supra] at page 473 at [21] and [22]. Chua Say Eng at [67].

16. At first instance in Chua Say Eng [2011] SGHC 109 at [28] although the 33. WY Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380.
Learned Judge conceded that such a stipulation was a statement of
best practice. 34. Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd [2013] 3 SLR 609;
[2012] SGHC 95.
17. There is no such limitation period provided under CIPAA although
section 5 [1] CIPAA expressly stipulates that the service of the payment 35. Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd [2013] 3 SLR 609
claim shall be pursuant to a construction contract and under section at [19] [32]. The present author was counsel who acted for Admin
5 [2] CIPAA the payment claim shall include the due date for the Construction before the High Court of Singapore and the Singapore
payment claimed. Court of Appeal. The Singapore High Court approved and followed the
English High Court decision of Sheppard Construction Ltd v Mecright
18. The decision of the Assistant Registrar is reported in Chua Say Eng v [2000] BLR 489. The decision of the Singapore High Court was
Lee Wee Lick Terrence [2009] SGHC 333. affirmed by the Singapore Court of Appeal comprising of Sundaresh
Menon CJ, VK Rajah JA and Lee Sieu Kin J in Vivaldi (S) Pte Ltd v Admin
19. Doo Ree Engineering & Trading Pte Ltd v Taisei Corp [2009] SGHC 218. Construction Pte Ltd [2013] Unreported Civil Appeal No: 63 of 2013.

20. The Learned Assistant Registrar had relied on the Australian cases of 36. YTL Construction (S) Pte Ltd v Balanced Engineering & Construction
Shellbridge Pty Ltd v Rider Hung Sydney Pty Ltd [2005] 1152; Dualcorp Pte Ltd [2014] SGHC 142 judgment released on 15 July 2014.
Pty Ltd v Remo Construction Pty Ltd [2009] NSWCA 69 and Doolan v
Rubikon (Qld) Pty Ltd [2008] R 117 in arriving at his interpretation that 37. YTL Construction, supra, at [32]. The High Court in any event found
repeat payment claims were not allowed under section 10 [1] SOPA. that there was no waiver of the irregularity.

21. In Singapore this draconian effect of s.15 (3) SOPA set out by Lee 38. YTL Construction, supra, at [43] [49] applying the New South Wales
J in Sungdo Engineering & Construction Pte Ltd v Italcor Pte Ltd Court of Appeal decision of Chase Oyster, supra.
[2010] 3 SLR 459 at [13] was approved and applied by the recent [and
second] Singapore Court of Appeal decision of WY Steel Construction 39. Section 15 (a) (d) CIPAA (a) adjudication improperly procured
Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 at [24] [54]. As noted in S. through fraud or bribery, (b) denial of natural justice (c) adjudicator had
Magintharan: Chua Say Eng, supra at fn 15 the law in construction not acted independently or impartiality [biasness] and (d) adjudicator
adjudication in Singapore in this regard is draconian but in line with acted in excess of his jurisdiction See also reasons and authorities S.
the SOP regimes of England Rupert Morgan Building Services (LLC) Magintharan: Sungdo Principles at pages 516 518 & authorities cited
v Jervis [2003] EWCA Civ 1563; [2004] B.L.R. 18; VHE Construction in fn 5239. Chua Say Eng [2013] 1 SLR 401 at [62] [68].
Plc v RBSTB Trust Co Ltd [2000] B.L.R. 187; QBD (TCC); Whiteways
Contractors (Sussex) Ltd v Impressa Castelli Construction UK Ltd 40. Sections 14 & 15 SOPA. The views expressed by the Singapore Court

23
in focus
endnotes

of Appeal in respect to the ANB is also, it is respectfully submitted, [33] & [34].
applicable to the role of the KLRCA prescribed under sections 21 23,
32 & 33 of CIPAA. 53. There is a similar provision in s 13(4) (b) SOP [NSW] but the limitation
period is for a period of twelve [12] months from the date when the
41. Chua Say Eng [2013] 1 SLR 401 at [63]. Sections 12, 21- 23 CIPAA. works were carried out.

42. See S. Magintharan: Chua Say Eng at pages 88 93 wherein the present 54. Chua Say Eng [2013] 1 SLR 401 at [79] [90]. Consequently, the Court
author had respectfully submitted and reiterates that the Court of of Appeal allowed Cs appeal against the High Courts decision that the
Appeal in Chua Say Eng was wrong in holding that the adjudicator was payment claim was served out of time.
not competent to decide the validity of the payment claim, payment
response and provisions of the SOPA in particular the matters set out 55. Chua Say Eng [2013] 1 SLR 410 at [94].
in ss 17 (3) (a) (h) SOPA. See also the decision of Hodgson JA (with
whom Mason P and Giles JA agreed) in Brodyn Pty Ltd v Davenport 56. Chua Say Eng [2013] 1 SLR 410 at [89]. Sections 10 (1) & (2) (a), (b) SOPA
[2004] NSWCA 394 at [52] [55] wherein the New South Wales Court provides that a Claimant may serve one payment claim in respect of
of Appeal held that the adjudicator was bound to determine the a progress payment on (a} at such time as specified in or identified
basic and essential conditions contained in ss 22(2) (a) (e) SOP in accordance with the terms of the contract for this purpose; or (b)
[NWS], which are similar to that contained in ss 17 (3) (a) (h) SOPA, where the contract does not contain such provision, at such time as
failing which the adjudicators determination will be void and not may be prescribed. Reg 5 SOPA provides that where the contract
voidable. does not contain a provision specifying the time at which a payment
claim shall be served or by which such time may be determined, then a
43. Chua Say Eng [2013] 1 SLR 401 at [64] and [65]. The point that the payment claim made under the contract shall be served by the last day
adjudicator was not competent to decide validity of the payment claim of each month following the month in which the contract is made.
was applied by the Singapore High Courts in Admin Construction v
Vivaldi (S) Pte Ltd [2013] 3 SLR 609 at [22] and YTL Construction (S) 57. This aspect of the Singapore Court of Appeal, with respect, goes
Pte Ltd v Balanced Engineering & Construction Pte Ltd [2014] SGHC against the whole object of the SOPA which was introduced to
142 at [32] without hearing full arguments set out in fn 42 and S. facilitate payment for construction work and to facilitate cash
Magintharan: Chua Say Eng at pages 88 93. flow and to enable the claimants to invoke the fast and low cost
adjudication system to recover claims for works already carried out
44. See sections 17 (3) (a) (h) SOPA. See also the decision of Hodgson and completed. In Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd
JA (with whom Mason P and Giles JA agreed) in Brodyn Pty Ltd v [2013] 3 SLR 609, Quentin Loh J at [45] voiced the concerned that the
Davenport [2004] NSWCA 394 at [52] [55] wherein the New South Court of Appeals decision in this respect has the effect allowing the
Wales Court of Appeal held that the adjudicator was bound to claimant to make a payment claim, sit on it until some two years or
determine the basic and essential conditions contained in ss 22(2) so after all construction work in relation thereof has ended, and only
(a) (e) SOP [NWS], which is similar to that contained in ss 17 (3) (a) then spring an adjudication application. See also S. Magintharan:
(h) SOPA, failing which the adjudicators determination will be void Chua Say Eng at pages 92 & 93 on the critique of this aspect of Chua
and not voidable. It is respectfully reiterated that the decision of Say Eng.
the Singapore Court of Appeal in Chua Say Eng that the adjudicator is
not competent to decide the validity of the payment claim or matters 58. It should be noted that section 36 (1) (4) CIPAA seek to provide
which decided his jurisdiction is in variance with principles stated by default provisions for the absence of terms of payment but these
the New South Wales Court of Appeal in Brodyn, supra, and Chase provisions deal with the question as to when payment is due to the
Oyster, supra, and contrary to section 17 (3) SOPA. Claimant as part of the progress payment [not payment claim], in
the absence of express terms in a construction contract. Such a
45. Chua Say Eng [2013] 1 SLR 401 at [66] & [67]. The Court of Appeal provision is similar to that contained in section 8 SOPA [due date
conflated and applied the principles laid by the Singapore High Court for payment]. Section 36 CIPAA, it is submitted, however does not
in SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR address the lacuna as to when the Claimant is required to serve his
at [14] and Sungdo Engineering & Construction (S) Pte Ltd v Italcor payment claim [not when payment is due for a progress payment]
Pte Ltd [2010] 3 SLR 459 at [20] [22]. See S. Magintharan: Sungdo in the absence of express terms in the construction contract as was
Principles, supra at pages 512 514. the issue dealt with by the Singapore Court of Appeal in Chua Say Eng.

46. Chua Say Eng [2013] 1 SLR 401 at [32]. See also the recent High Court 59. Chua Say Eng [2013] 1 SLR 401 at [92].
decisions of Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd [2013]
3 SLR 609 and YTL Construction (S) Pte Ltd v Balanced Engineering 60. Chua Say Eng [2013] 1 SLR 401 at [97]. The Court of Appeal arrived at
& Construction Pte Ltd [2014] SGHC 142 where the adjudicators the said conclusion having considered s 10(4) SOPA which allowed for
determinations were set aside on jurisdictional grounds. rolled-up payment claim to include previously unpaid or partially
unpaid amounts.
47. Chua Say Eng [2013] 1 SLR 401 at [76].
61. See the express prohibition contained in section 13(5) SOP [NSW]
48. Chua Say Eng [2013] 1 SLR 401 at [76]. which provides: A claimant cannot serve more than one payment
claim in respect of each reference date under the construction
49. Chua Say Eng [2013] 1 SLR 401 at [76]. contract and section 13 (6) which provides: However, subsection
(5) does not prevent the claim from including a payment claim an
50. Consequently Ls appeal against the High Courts decision that the amount that had been the subject of a previous claim. MacFalan JA
payment claim was invalid since it did not stipulate that it was a in the New South Wales Court of Appeal in Dualcorp Pty Ltd v Remo
payment clam under the SOPA was dismissed and the High Courts Construction Pty Ltd [2009] NSWCA at [53] interpreted the sections
decision affirmed. Hence in Singapore, all progress claims which and held that the section 13 (5) precluded a payment claim of amount
satisfy the requirements of SOPA would amount to a payment claim previously adjudicated. The Singapore Court of Appeals decision in
under the SOPA even it was not intended by the claimant. This fails Chua Say Eng seems to follow such an interpretation. See also Doolan
to appreciate the essential difference between a progress claim and a v Rubikcom (Qld) Pty Ltd [2008] 2 Qld R 117.
payment claim under the SOPA. A claimant can now issue insidious
claims without any indication that it is intended to be a payment 62. See statement of Mr Morris Iemma, the Minister for Public Works and
claim under the SOPA in order to ambush and mislead the respondent Services, Minister for Sports and Recreation, and Minister Assisting
into believing that the claim was not intended to be a payment claim the Premier on Citizenship in New South Wales, Legislative Assembly,
under the SOPA and rush to adjudication when the respondent does Parliamentary Debates (12 November 2002] at page 6543 on the
not serve a payment response and enforce the draconian effect of introduction of the SOP [NSW] reference to s 13 (5) SOP [NSW] alluded
section 15 [3] SOPA. that Parliament recognised the potential for claimants to abuse
the SOP [NSW] making more than one [1] claim and the SOP {NSW]
51. See S. Magintharan: Chua Say Eng at pages 81, 82, 86 88, for a restricts claimants to one payment under the Act in respect of each
critique on the decision of the Court of Appeal in imposing the reference date. See also Dualcorp Pty Ltd v Remo Construction Pty
gloss on the Sungdo principles. The author respectfully reiterates Ltd [2009] NSWCA at [53] and Doolan v Rubicon (Qld) Pty Ltd [2008]
that the Court of Appeal had unfortunately adopted an hands-off 2 Qld R 117.
approach and allowed the broad brush of policy to prevail over
the legal principles of natural justice and failed to prevent the real 63. Chua Say Eng [2013] 1 SLR 401 at [95].
and potential injustice that would be caused to the respondent with
claimants ambushing unsuspecting respondents by serving insidious 64. Tiong Seng Contractors (Pte) Ltd v Chuan Lim Construction Pte Ltd
letters or claims without any indication that they were seeking to [2007] 4 SLR 364 at [27].
invoke the SOPA and relying on the draconian provision of s 15 (3)
SOPA to preclude the respondent from raising any defence, set-off and 65. The High Court acknowledged the conflicting views taken by
counterclaim not contained in any payment response. adjudicators under the SOPA at the material time. In AU v AV [2006]
SGSOP 9 the adjudicator held that the SOPS was applicable to final
52. WY Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 at [26], claims whilst in BC v BD [2006] SGSOP 10 the adjudicator held that

24
in focus
endnotes
the SOPA only applied to progress payments and not final claims.
The Singapore High Court at [27] acknowledged that the definition
of payment claim under the SOP [NSW], prior to its amendment on
22 November 2002, did not apply to final claim as held by Austin J in
Jemzone Pty Ltd v Trytan Pty Ltd [2002] NSWSC. However, the High
Court noted that the NSW Parliament had intervened and that section
4 SOP [NSW] was amended in 22 November 2002 to expressly include
a final claim as a progress claim and reversed the interpretation given
in Jemzone Pty Ltd v Trytan Pte Ltd.

66. Tiong Seng Contractors (Pte) Ltd v Chuan Lim Construction Pte Ltd
[2007] 4 SLR 364 at [12] [51]. Section 2 defined a progress claim
to include (a} a single or one-off payment; or (b) a payment that is
based on an event or a date.

67. Chua Say Eng [2013] 1 SLR 410 at [94] & [95].

68. Construction Law Journal [2014] Vol 30 page 71.

69. With the Singapore Courts of Appeal approval of the principle set out
in Sungdo that the High Court had the power to review and set aside
the adjudicators determination if there was a jurisdictional error
[validity on his appointment] and not the merits of the determination
[unless it is subject to the Wednesbury unreasonableness. See fn 11
supra.

70. Please refer to S. Magintharan: Chua Say Eng [2014] at pages 85 & 85
and S. Magintharan: Sungdo Principles [2011] for a critique on the lack
of guidance from the Singapore Court on the nature and process of
challenges to adjudication determinations.

71. Please refer to S. Magintharan: Sungdo Principles [2011] at fn 63; S.


Magintharan: Chua Say Eng [2014] at fn 16, pages 85 & 86 for a critique
on this unsatisfactory practice still persisting in Singapore. See the
following recent cases where application for setting aside continue
to be heard and determined by Assistant Registrar in the Singapore
High Court JFC Builder Pte Ltd v Lion City Construction Company
Pte Ltd [2012] SGHCR 12 ; Shin Khai Construction Pte Ltd v FL Wong
Construction Pte Ltd [2013] SGHCR 4. In fact Chua Say Eng itself was
a case which was determined by the Assistant Registrar in the first
instance but no comment was made by the Singapore Court of Appeal
on this practice.

72. Section 15 (a) (d) CIPAA (a) adjudication improperly procured


through fraud or bribery, (b) denial of natural justice (c) adjudicator
had not acted independently or impartiality [bias] and (d) adjudicator
acted in excess of his jurisdiction.

73. S. Magintharan: Chua Say Eng [2014] supra, pages 85 -94

Mr. S. Magintharan is a graduate of the University of number of his cases are reported in the Singapore Law
Essex, England with 2nd Class Upper Honours, a Barrister- Reports. He was counsel in the first Singapore High Court
at-Law of the Inner Temple, a holder of the Diploma decision wherein an adjudication determination was set
in International Arbitration awarded by the Chartered aside [Sungdo Engineering & Construction (S) Pte Ltd
Institute of Arbitrators, a Fellow of the Chartered Institute v Italcor Pte Ltd] and the SOPA was considered by the
of Arbitrators, a Fellow of the Singapore Institute of High Court in detail leading to the setting of important
Arbitrators, an accredited panel arbitrator of the Singapore principles for construction adjudication in Singapore.
Institute of Arbitrators and the Kuala Lumpur Regional He was counsel in Admin Construction Pte Ltd v Vivaldi
Centre for Arbitration, a certified Adjudicator (KLRCA), Pte Ltd [2013] 3 SLR 609. Mr. S. Magintharan has written
and a Fellow of the Malaysian Society of Adjudicators. extensively on construction adjudication in Singapore in
He is the Managing Director of Essex LLC, Singapore. the Construction Law Journal [Const. LJ].
He was called to the Singapore Bar in 1992 and he has
been engaged in active practice as counsel for more than
twenty-three years undertaking substantial construction
adjudication, arbitration, and litigation in Singapore. A

25
in focus

ADJUDICATORS JURISDICTION AND NATURAL


JUSTICE IN ADJUDICATION IN SINGAPORE
By Lawrence Tan Shien Loon and Teo Yi Hui

Introduction adopted for arbitration or trial proceedings. The various


principles underpinning the rule of natural justice are
derived substantially from administrative law and, as
This article is to consider the various recent cases
will be seen, are intended to minimise any risk of bias or
dealing with the duties of an adjudicator in respect of his
partiality, whether actual or apparent.
jurisdiction and the role of natural justice in adjudication.

In this regard, Marks J in the case of Gas & Fuel Corporation


An examination of the recent case authorities in Singapore
of Victoria [1978]2 at [396] helpfully distilled the essence
reveals that a partys challenge against an adjudication
of the two pillars of natural justice in the following terms:
determination made pursuant to the Building and
Construction Security of Payment Act (Cap 30B) (the
The first is that an adjudicator must be
SOPA) is typically advanced either on a partys allegation
disinterested and unbiased. This is expressed in
that the adjudicator has breached of the principles of
the Latin maxim -nemo judex in causa sua. The
natural justice or on jurisdictional grounds.
second principle is that the parties must be given
adequate notice and opportunity to be heard. This
This article also explores the Singapore courts authority
in turn is expressed in the familiar Latin maxim -
to set aside an adjudication determination made under
audi alteram partem. In considering the evidence
the SOPA due to a breach of natural justice, and will focus
in this case, it is important to bear in mind that
principally on the maxim audi alteram partem. In addition,
each of the two principles may be said to have sub-
this article will also consider an alternative but related
branches or amplifications. One amplification
ground for setting aside an adjudication determination,
of the first rule is that justice must not only be
namely, where an adjudicator has been found to have
done but appear to be done....Sub-branches of the
exceeded his jurisdictional limitations imposed by the
second principle are that each party must be given
SOPA.
a fair hearing and a fair opportunity to present its
case. Transcending both principles are the notions
Breach of Natural Justice of fairness and judgment only after a full and fair
hearing given to all parties.
(i) The Meaning of Natural Justice?
[Emphasis added]
The SOPA expressly sets out the principles governing
an adjudicators exercise of power in the making of an
In short, there are two limbs to the concept of natural
adjudication determination under s 16 of the SOPA.
justice. The first of these requires a tribunal to act fairly or
impartially as between the parties. The second limb is the
In particular, s 16(3)(c)1 expressly requires the adjudicator
right of each party to be heard.
to comply with the principles of natural justice. The SOPA
does not elaborate further on the meaning of natural
Although both limbs do not encapsulate the full extent
justice, but this concept of natural justice is broadly
of the requirements of natural justice as laid down under
understood to relate to the fairness of the procedures

26
in focus
common law, a review of case law reveals that actions for relation to an arbitration award:
the breach of natural justice tend to be largely formulated
on one or both of these limbs. First, parties to arbitration had, in general, a right to be
heard effectively on every issue that might be relevant to
Where the adjudicator failed to comply with the rules the resolution of a dispute. The overriding concern was
of natural justice, the courts will intervene to set aside fairness.
the adjudication determination. In this regard, a party
challenging an adjudication determination as having Second, fairness, however, was a multidimensional
contravened the rules of natural justice had to establish: concept and it would also be unfair to the successful party
(a) which rule of natural justice was breached; (b) how it if it were deprived of the fruits of its labour as a result of
was breached; (c) in what way the breach was connected a dissatisfied party raising a multitude of arid technical
to the making of the award; and (d) how the breach challenges after an arbitral award had been made. The
prejudiced its rights.3 courts were not a stage where a dissatisfied party could
have a second bite of the cherry.
(ii) Setting Aside an Adjudication
Determination Third, the latter conception of fairness justified a policy of
minimal curial intervention, which had become common
In respect of an application to set aside an adjudication as a matter of international practice.
determination, it is established law that it is not an
appeal and that the court should not be concerned with Fourth, the delicate balance between ensuring the
substantive issues. integrity of the arbitral process and ensuring that the
rules of natural justice were complied with in the arbitral
In the case of Chip Hup Hup Kee Construction Pte Ltd4 process was preserved by strictly adhering to only the
[2008] (Chip Hup Hup Kee), the High Court stated in narrow scope and basis for challenging an arbitral award
respect of the courts power to review the merits of the that had been expressly acknowledged under the Act.
case that:
Fifth, it was almost invariably the case that parties
What is clear is that the setting aside application proposed diametrically opposite solutions to resolve a
is not an appeal. The SOP Act already provides dispute. The Arbitrator, however, was not bound to adopt
a limited right of reviewing the substantive an either-or approach.
correctness of the adjudication determination
through the adjudication review procedure under Sixth, each case should be decided within its own factual
ss 18 and 19. (I say it is limited because there is matrix. It had to be always be borne in mind that it was
only such a right for the respondent, and then only not the function of the court to assiduously comb an
if the adjudicated amount exceeds the relevant arbitral award microscopically in attempting to determine
response amount by a prescribed amount: s 18(1) if there was any blame or fault in the arbitral process;
of the SOP Act. The prescribed amount is presently rather, an award should be read generously such that only
$100,000: s 10(1) of the Building and Construction meaningful breaches of the rules of natural justice that
Industry Security of Payment Regulations (Cap had actually caused prejudice were ultimately remedied.
30B, Regulation 1) (the SOP Regulations). Section
18(1) of the SOP Act presupposes that there has In respect of this last principle, it is foreseeable that this
been a payment response made and thus is also not approach would be even more appropriate in the context of
available to respondents who fail to give a payment adjudication in Singapore under the SOPA, given that the
response.) The panel of review adjudicators may risk of injustice is mitigated by the ability of a respondent
substitute their determination of the appropriate to apply for an adjudication review pursuant to s18 of the
adjudication amount for the previous adjudication SOPA.7
determination. Given the availability of the In addition, what is required by natural justice depends
adjudication review procedure, it is not surprising heavily on the context in which it operates. The operation
that a court considering a setting aside application of these principles underpinning the rule of natural justice
should not be concerned with substantive issues. must be considered in relation to the context of statutory
..5 adjudication under the SOPA. In Chip Hup Hup Kee
[2008]8 the High Court stated as follows: Justice, whether
(iii) Principles of Natural Justice in the Context performed by a court, a tribunal or any quasi-judicial
body, is a balancing exercise between thoroughness
of the SOPA
and timeliness. More formal settings, such as litigation
through a court, would tend to emphasise the former. The
When determining if there has been a breach of natural
adjudication process under the SOPA instead chooses a
justice, it is useful to bear in mind the following principles
quicker, but somewhat less thorough, means of achieving
as set out by the Court of Appeal in the case of Soh Beng
justice. This is a general theme which pervades the SOPA
Tee & Co Pte Ltd (Soh Beng Tee) [2007]6 at [42]-[65]
and in itself in not a ground for saying that natural justice
where the subject of natural justice was considered in
has been denied...9

27
in focus
With the operation of these principles in mind, this article (d) the person has assisted the party to prepare any
will now go on to examine situations where a party has document for, or has provided any advice to, the
alleged that the adjudicator is in breach of natural justice party in relation to the contract.
by (a) failing to act fairly or impartially as between the
parties and (b) failing to give a party the right to be heard. Further, s 29(3) of the SOPA provides that an adjudicator
who is in any way whether directly or indirectly, interested
(iv) Failing to Act Fairly or Impartially as in any contract or other matter which relates to an
Between the Parties adjudication application referred to him by the authorised
nominating body shall immediately disclose the nature of
In addition to being one of the integral limbs of natural his interest to the authorised nominating body.
justice, the duty of the adjudicator to act fairly and
impartially is also expressly encapsulated in s 16(3)(a) The learned author of Security of Payment and
of the SOPA which provides that an adjudicator shall act Construction Adjudication (2nd edition) opined that the
independently, impartially and in a timely manner. independence of an adjudicator may be usefully viewed
at two levels. At the first level, the requirement is that
The maxim, nemo judex in causa sua, requires that the the adjudicator must adjudicate independently and may
decision-maker should not be biased or prejudiced in a not be influenced by any person in the exercise of his
way that precludes a genuine and fair consideration being powers. The second level requires that the adjudicator
given to the arguments or evidence presented by the should not have financial or other interests in either the
parties. parties or in the outcome of the dispute referred to him for
determination.10
S 29(2) of the SOPA provides a good starting point to
understanding the concepts of fairness and impartiality by While there has not been an incident in Singapore where
setting out instances in respect of when a candidate may an adjudication determination made pursuant to the SOPA
not be eligible to be an adjudicator: has been challenged for want of fairness and impartially
on the part of the adjudicator, it is probable that such an
Eligibility criteria for adjudicators allegation will not be easy to prove. Guidance may be
29. (2) A person is not eligible to be an adjudicator in drawn from the recent case of TMM Division Maritima
relation to a contract SA de CV [2013] 11 (TMM) where the High Court refused
(a) if the person is a party to the contract, or is to set aside an arbitral award under the International
otherwise related to a party to the contract in such Arbitration Act.
manner as may be prescribed; or
(b) if there exists such circumstances as may be In TMM, the appellants had applied to set aside an arbitral
prescribed. award on the grounds that there was a breach of natural
(3) A person who is in any way, whether directly justice in connection with the making of the award. The
or indirectly, interested in any contract or other appellant argued that the presence of egregious errors
matter which relates to an adjudication application of law and fact from such an experienced arbitrator
referred to him by the authorised nominating body pointed to a reasonable suspicion that he was biased.
under section 14 or 18 shall immediately disclose the Unsurprisingly, the High Court rejected this argument
nature of his interest to the authorised nominating on various grounds, and noted that at its highest, the
body. appellants case merely suggested that the Arbitrator may
have committed certain errors of fact and law. However,
Regulation 11(2) of the SOPA further elaborates on the while the appellant may lament those higher standards
circumstances in s 29(b) of the SOPA by prescribing are usually expected of an experienced arbitrator of the
other relationships and situations where a person may be Arbitrators calibre, this was not sufficient to make out a
deemed to be in conflict if appointed as an adjudicator: case for apparent bias.

Eligibility criteria for adjudicators (v) Failing to Give a Party the Right to be
11(b)(2). For the purposes of section 29 (2) of the Heard
Act, a person is not eligible to be an adjudicator in
relation to a contract if the person is related to a It is a cardinal principle of justice that no man shall
party to the contract in the following manner: be condemned unless he has been given notice of the
(a) the person is an employee or a partner of the allegations against him and a fair opportunity to be heard,
party, or where the party is a corporation, the person and in particular, to make oral or written representations
is a director or a shareholder of the corporation; to the body which will make a decision affecting him.12
(b) the person is an employee, a director, a partner
or a shareholder of any corporation which owns or However, the maxim audi alteram partem does not afford a
is owned by the party; party a complete an unrestricted right to be heard in every
(c) the person is a parent, spouse or sibling of the circumstance. In this respect, the concept of audi alteram
party; or partem may be described as an open-textured concept
which depends on the character of the decision-making

28
in focus
body, the kind of decision it has to make and the statutory to be considered a breach of natural justice. The High
or other framework in which it operates.13 Court ruled that there could be a breach of natural justice
just because the adjudicator did not explicitly give
A review of recent case law in Singapore reveals that the responses on all submissions made. It might have been
Singapore courts are not easily persuaded that there has an accidental omission, or he might have found the points
been a breach of natural justice on this ground. While so unconvincing that he had thought it was not necessary
the cry for natural justice is a strong and emotive one,14 to explicitly state his findings. The principle only requires
the Singapore courts will always look to the scheme and that parties should be heard.
objective of the SOPA as a guide in determining if there has
indeed been a breach of natural justice in each situation. (vii) Principles of Natural Justice Do Not
What then are some of the restrictions recognized by the Mandate a Particular Result
Singapore Court in respect of the principle that every party
ought to be given the right to be heard? The case of AM Associates (Singapore) Pte Ltd [2009]17
involved an appeal against the assistant registrars refusal
(vi) Adjudicator Not Required to Explicitly to set aside an adjudication determination obtained by
Address Each and Every Point A.M. Associates (Singapore) Pte Ltd (AMA) against
Laguna National Golf and Country Club Ltd (Laguna).
Often, the failure by an adjudicator to mention in his
reasons for determination a critical issue (as distinct from Laguna was not satisfied with the adjudication
a subsidiary or non-determinative issue) gives rise to the determination. It did not, however, make an application
inference that the adjudicator has overlooked it and that for an adjudication review. Nor did it pay the adjudicated
the adjudicator has failed to give consideration to the amount or any part of the same. Accordingly, on 12 March
parties submissions. Even so, an adjudicators oversight 2009, AMA filed the originating summons herein for
must be distinguished from a lack of good faith. An error leave to enforce the adjudication determination against
in identifying or addressing issues, as distinct from lack of Laguna and for judgment to be entered in its favour for the
good faith in attempting to do so, cannot be a ground of adjudicated amount with interest and costs. One of the
invalidity of the adjudication determination.15 Such was grounds for setting aside the adjudication determination
the position taken by the High Court in the case of SEF which Laguna relied on was that the adjudicator had
Construction Pte Ltd [2010]16. failed to comply with the rules of natural justice because
in coming to the adjudication determination, he had failed
In the above case, Skoy Connected Pte Ltd (Skoy) and to take into consideration and/or give proper weight to
SEF Construction Pte Ltd (SEF) had a dispute as to material evidence tendered by AMA which showed a
the Skoys right to receive payments for work done on a discrepancy in AMAs claim. Laguna argued that if the
construction project. adjudicator had given proper consideration and weight
to such discrepancy and had taken into consideration the
SEF applied to set aside the adjudication application. It relevant evidence tendered by the parties, he would have
appeared before the District Judge and argued that the held that all payment claim made by AMA had been made
adjudicator breached his duties under the SOP Act for, prematurely.
inter alia, breaching the rules of natural justice by failing
to consider SEFs submissions on two out of the four The High Court opined that it would not lightly interfere
jurisdictional issues. The District Judge rejected SEFs with an adjudication determination on the ground of
arguments and SEF appealed to the High Court. natural justice as the aggrieved respondent could seek a
review of the adjudication determination under s 18 of the
In response, Skoy advanced the argument that because SOP Act.
an adjudicator only has a short time to render his
determination, it would place an unduly onerous duty on Further, the High Court held that the respondent not
him if he is expected to formulate detailed reasons for his complaining about failure on the adjudicator to hear both
decision on each and every one of the submissions before sides of the dispute, but rather a failure to decide the
him. dispute as it thought should be decided. The principles of
natural justice are concerned with the provision of a fair
The High Court rejected SEFs arguments, noting that the hearing to contending parties. They do not mandate any
adjudicator had called for submissions from both parties particular result. In the absence of evidence to show that
and that SEF had the opportunity to present its case before a party who is dissatisfied with the decision on its merits
it. In doing so, the Court held that the adjudicator had cannot use the principles of natural justice to have the
clearly observed the rule that he was required to hear both decision set aside.
sides cases.

Where the adjudicator has dealt with most of the issues,


an omission to deal with one issue because he does not
believe it to be determinative of the result, is unlikely

29
in focus
(viii) Right to be Heard May Be Forfeited by making a payment response had passed) as well as in an
Inadvertence adjudication response. Unfortunately for the Respondent,
the adjudicator took the view that he was precluded by s
The case of RN & Associates Pte Ltd [2013]18 involved a 15(3)23 of the SOP Act from giving any consideration to such
payment dispute arising out of an agreement between reasons as they had not been contained in any payment
the plaintiff, RN & Associates Pte Ltd (RN), and the response made within the stipulated time.
defendant, TPX Builders Pte Ltd (TPX), wherein RN
subcontracted to TPX addition and alteration works to The Respondent applied to set aside the adjudication
an existing block of 11-storey flats at Nassim Road. TPX determination on the basis that the adjudicator had
served a payment claim on RN on 31 January 2012 for wrongly interpreted s 15(3) of the SOP and this constituted
$996,899.08. RN served its payment response on TPX a failure to carry out his quasi-judicial responsibilities to
on 1 February 2012, disputing the payment claim. On ensure that justice was done. In particular, the adjudicator
21 February 2012, TPX filed an adjudication application had offended the rules of natural justice by denying the
pursuant to s 12(2)(a) of the SOPA. Respondent the opportunity to be heard.

On 2 March 2012, three days after the adjudication response However, the High Court held at [75] that its interpretation
was to be filed under s 15(1)19 of the SOP Act, RN tendered of s 15(3) was not inconsistent with the requirement of
a supplementary bundle of documents. RN tendered two natural justice and stated as follows:
further supplementary bundles of documents on 13 March
2012, alleging that these three supplementary bundles In my view, there are two points which should
were essential to prove their counterclaim against TPX be borne in mind. The first is that natural
in the Adjudication. TPX opposed the inclusion of the justice requires that a respondent be given a fair
bundles into evidence, and the adjudicator subsequently opportunity to be heard. There is no requirement
rejected the supplementary bundles and decided in favour that in every case a party is actually heard and it
of TPX. is entirely possible for a party to forfeit his right
to be heard through some procedural default. In
RN was dissatisfied and subsequently applied to court the instant case, it is clear that the SOP Act does
to set aside the adjudicators determination. One of afford a respondent the opportunity to be heard. In
grounds RN relied on to set aside the adjudication was regard to the hearing of a respondents reasons why
that there had been a breach of natural justice because payment was withheld, the SOP Act specifies that
of the adjudicators refusal to accept and consider the such hearing is contingent on the reasons being
supplementary bundles. provided in the payment response tendered within
certain timelines. What has really happened in
The High Court subsequently held that the adjudicators this case was that the Respondent chose not to
refusal to consider RNs supplementary bundles was not avail itself of the opportunity to be heard on its
a breach of natural justice. The adjudicators discretion reasons for withholding payment.24
to exclude the supplementary bundles was properly
exercised because the supplementary bundles were [Emphasis added]
submitted outside the statutory time limit of 7 days given
in s 15(1)20 read with s 16(2)(b)21 of the SOP Act due to RNs It should be noted however, the High Courts ruling above
own default. In addition, TPX also had not had, and would does not mean a respondent who failed to submit a payment
not have, the chance to respond to the allegations made response would be denied any sort of hearing at all. In such
in the supplementary bundles and would be unfairly a situation, it is not the case that the adjudication process
prejudiced by their inclusion. becomes a mere rubber-stamping exercise in favour of
the claimant. The fact that a respondent had not filed a
In conclusion, the court found that RNs concept of audi response did not obviate an adjudicators obligation to
alteram partem was simply too broad. The right to have consider the material properly before him.
ones case heard is not a right to have an adjudicator
consider all material which the parties think are relevant. While it is clear from the above authorities that the rules of
The barring of a defence outside of time limits cannot be natural justice cannot be called in aid where a party chose
deemed a breach of natural justice, without more. not to use its rights under s 16(3)(c) SOPA25 to be heard,
parties in adjudication continue to attempt to find creative
In Chip Hup Hup Kee [2008]22, Ssangyong Engineering ways to evade the strict timelines imposed by the SOPA.
& Construction Co Ltd (the Respondent) did not serve
a payment response on Chip Hup Hup Kee Construction In the recent Court of Appeal case of W Y Steel Construction
Pte Ltd (the Claimant) within the stipulated time. Pte Ltd [2013]26 , the respondent in the adjudication
Before the adjudicator, the Respondent sought to raise determination failed to file a payment response and
certain reasons why it was justified in withholding the adjudicator rejected its adjudication response in
payment. These reasons had been included in a payment accordance with s 15(3) of the SOP Act. The respondent
certificate (provided to the Claimant after the time for then cited a raft of provisions of the Act under which, it

30
in focus
argued, the adjudicator was allowed - even obliged - to take adjudication application. There was no provision under
into consideration its late submissions. These provisions the SOP Act to explain the computation of time.
were s 16(3)(c), 16(4)27, 16(7)28 and 17(3)29.
The adjudicator, following the rules of the Singapore
In respect of 16(3)(c), the Court of Appeal confirmed that Mediation Centre (SMC) which provides that any
the respondent had his opportunity to make his case, but document lodged after 4.30 pm would be treated as being
failed to take that opportunity and an allegation of breach lodged the next working day, ruled that the adjudication
of natural justice cannot then be called in aid. response had been filed a day late and therefore could not
consider it.
In respect of s 16(4) of the Act which sets out various
powers of an adjudicator, the Court of Appeal held that Ultimately, the High Court held that it was not the role of
the provision only spells out what an adjudicator is the SMC to create rules that stipulated that a document
permitted to do and it cannot change what, under some lodged at 4.32 pm on 5 September 2013 was deemed to
other provision of the Act, he is not permitted to do. be lodged out of time on 6 September 2013. It was for the
Accordingly, the Court of Appeal found that it would be adjudicator to determine, in accordance with the SOP Act,
perverse and, for that reason, wrong to hold that under whether a document was deemed to be lodged within time.
this provision, an adjudicator may require submissions on In this regard, the adjudicator ought not to have relied
matters that he is expressly proscribed from considering on the SMC Rules to reject the appellants adjudication
under s 15(3). response. Instead, s 50(a) of the Interpretation Act (Cap 1,
2002 Rev Ed) which provided the default position for the
As for s 16(7) of the Act, W Y Steels reliance on this computation of time ought to apply.
provision was wholly misconceived. The Court of
Appeal found that this subsection merely empowers an Under the time limit stipulated by the Interpretation Act
adjudicator to proceed to determine an adjudication (Cap 1, 2002 Rev Ed), the adjudication response was filed
application undeterred by the failure of the respondent within the seven-day time limit as prescribed under the
to file his payment response or his adjudication response, SOPA. The High Court found that in this situation where
and by the failure of either party to comply with his an adjudication response was deemed by the adjudicator
(the adjudicators) instructions. In no way did this lend to be lodged out of time wrongly and rejected, the party
support or assistance to the respondents case. who lodged the response would then be wrongly denied
his opportunity to be heard. That party could then rely
The crux of W Y Steels argument in relation to s 17(3) on the rules of natural justice and have the adjudication
was that it obliged the adjudicator to consider all the determination set aside.
submissions made before him. The Court of Appeal quickly
dismissed this argument and found that the provision did Exceeding Jurisdiction
not help the respondents case because there was a limit
to what material the adjudicator could consider as the As previously stated, the courts are not allowed to review
respondents payment response was filed out of time. the merits of an adjudicators decision. Instead, an
application to set aside an adjudication determination
In conclusion, sections 16(3)(c), 16(4), 16(7) and 17(3) of the must be premised on issues relating to the jurisdiction of
Act did not either individually or collectively permit an the adjudicator.
adjudicator to ignore s 15(3). The Court of Appeal further
stated that the natural construction of the Act should not In the recent case of Admin Construction Pte Ltd [2013]31
be strained to accommodate cases such as the present, the main contractor (the Plaintiff) applied to set aside
where a respondent has failed through his own lack of the adjudicators determination on the basis that as the
diligence to file a payment response. Plaintiff and the sub-contractor (the Defendant) had
previously settled their dispute by way of a settlement
(ix) Recent Case of Mansource Interior Pte Ltd agreement. The settlement agreement was evidenced by
a letter of acceptance from the Defendant to the Plaintiff
The recent High Court decision in Mansource Interior Pte dated 31 January 2011, irrevocably and unconditionally
Ltd [2014]30 (Mansource) provides a rare insight into accepting the sums of $165,271.80 and $34,125 as full and
the circumstances where the courts will indeed find that final settlement for all the works under the subcontract.
the maxim audi alteram partem has been breached by the
adjudicator. The court held that the settlement agreement was valid
and binding on parties and since the Defendant has not
In Mansource, the respondent lodged the adjudication taken any steps to set it aside, and accordingly, as at the
response at 4.32 pm on the last day of the filing deadline. date of the Defendants adjudication application, all
Section 15(1) of the SOP Act stated that a respondent to an disputes that existed between the parties on or were
adjudication claim shall, within 7 days after receipt of a extinguished. There was therefore no dispute capable of
copy of an adjudication application under s 13(4)(a), lodge being referred to adjudication and the Defendant had no
with the authorised nominating body a response to the right to apply for adjudication.

31
in focus
administrative decisions where a decision is so outrageous
Accordingly, the High Court found that adjudicator had in its defence of logic or accepted moral standards that no
no authority or jurisdiction to deal with the adjudication sensible person who applied his mind to the question to be
application and consequently, the determination rendered decided could have arrived at it, or no reasonable person
by the adjudicator had to be set aside. could have come to such a view.

(i) Jurisdiction is Predicated on the Existence This distinction between the existence of a payment claim
of a Payment Claim and the validity of a payment claim was also highlighted
in the case of RN & Associates Pte Ltd [2013]34. Here, the
The jurisdiction of an adjudicator is vested in him by his High Court held that the SOPA was introduced to provide
appointment by an Authorised Nominating Body (ANB) a faster and less costly way of allowing subcontractors
under s 14(1)32 of the SOPA. The power of the ANB to make to get paid and to weed out the practice of delaying or
this appointment is in turn founded on the existence of a withholding payment without valid reasons. Accordingly,
payment claim. In situations where there is no payment the High Court found that the Legislature could not have
claim, the adjudicator will be found to be lacking in intended for the jurisdiction of the adjudicator to be
jurisdiction to determine an adjudication application. ousted where the main contractor was relying on his own
delay and withholding of payment to dispute the validity
In this regard, the Court of Appeal in the case of Chua Say of a payment claim.
Eng [2013]33 made the following observations at [66] [67]:
The High Court confirmed that there was a crucial
66 Turning now to the courts role in a setting- difference between the existence of a payment claim and
aside action, we agree with the holding in SEF its validity. The question of existence asks whether the
Construction ([14] supra) that the court should payment claim is, on its face, a claim for progress payments
not review the merits of an adjudicators decision. outstanding. The question of validity asked whether the
The court does, however, have the power to decide payment claim was in its proper form.
whether the adjudicator was validly appointed. If
there is no payment claim or service of a payment Given that the adjudicators jurisdiction was only over a
claim, the appointment of an adjudicator will payment claim dispute, the relevant question in this case
be invalid, and the resulting adjudication was not whether there had been a valid payment claim, but
determination would be null and void. whether there had been a payment claim which resulted in
a payment claim dispute.
67 Even if there is a payment claim and service of
that payment claim, the court may still set aside the (ii) Estoppel
adjudication determination on the ground that the
claimant, in the course of making an adjudication In Chip Hup Hup Kee [2010]35, the High Court found
application, has not complied with one (or more) of that jurisdiction could be used in the narrow or wide
the provisions under the Act which is so important sense. When jurisdiction is used in the narrow sense it
that it is the legislative purpose that an act done simply means competence to hear. On the other hand,
in breach of the provision should be invalid, jurisdiction used in a wider sense refers to the manner
whether it is labelled as an essential condition or a in which the courts power was exercised.
mandatory condition. A breach of such a provision
would result in the adjudication determination The importance of the aforementioned distinction in
being invalid. [Emphasis in original]. respect of a partys ability to raise the doctrine of estoppel
becomes clear in the following paragraph from Chip Hup
[Emphasis added] Hup Kee [2010]36 at [43]:

If there is no payment claim or if a payment claim is not Thus, it seemed that when what was being alleged
served on the respondent, the payment claim had not was an absolute lack of jurisdiction on the part of
come into existence and the adjudicator would not have a particular tribunal or court to hear a particular
the competence to hear and determine the adjudication. dispute, jurisdiction being used in the strict sense
Instead, such a challenge ought to be immediately raised of capacity to hear, then if the tribunal concerned
with the court. On the other hand, where a payment claim does not have such jurisdiction, any party to the
was allegedly defective for not having complied with the dispute may assert the lack of jurisdiction at any
requirements of the SOPA, this defective payment claim stage and can never be held to be estopped from
would still be within the adjudicators purview. doing so or to have waived its right of protest. On
the contrary, when it is a question of irregularity
The court will only review an adjudicators decision of procedure or contingent jurisdiction or non-
in respect of whether a payment claim is valid or not compliance with a statutory condition precedent
on the basis of Wednesbury Unreasonableness. In to the validity of a step in the litigation, such
such a situation, the court will have the power to quash irregularity or non-compliance can be waived

32
in focus
because the effect of the waiver would not be to In the recent case of YTL Construction (S) Pte Ltd [2014]43,
create or confer any jurisdiction that did not the High Court stated that the question of whether an
previously exist. irregularity could be waived depended on whether the
irregularity pertaining to the requirements of making a
[Emphasis added] valid payment claim relates to jurisdiction in the narrow
sense or the wider sense. In relation to non-compliance
However, recent decisions suggest that Singapore courts with s 10(3) of the SOP Act44, the High Court found that the
tend to take a restrictive view of what may amount to an irregularity here related to jurisdiction in the strict sense,
irregularity which may be waived. such that it affected the validity of the appointment of the
adjudicator and his competence to hear the adjudication.
In the case of JFC Builders Pte Ltd [2013]37, the High Court Accordingly, no defence of waiver or estoppel could be
was of the view that a payment claim in breach of s 10(1)38 relied upon by the defendant.
SOPA was not an irregularity which could be waived. The
High Court in this decision did elaborate on its reasons for Conclusion
holding as such.
The various principles concerning breach of natural justice
In the case of Australian Timber Products Pte Ltd [2013]39, and lack of jurisdiction continue to be refined with each
the claimant made the argument that as the defendant did application to the courts to set aside an adjudication
not object to the adjudicator regarding the lack of detail determination. However, one unifying theme that
in the claimants progress claim No.9, the defendant was underpins the development of these principles is that the
now estopped from raising that view before the court. courts will always seek to uphold the legislative intention
The High Court rejected the claimants argument and held underlying SOPA, namely, to improve cash-flow in the
that the formal validity of a payment claim under s 10(3)40 construction industry by giving parties the right to seek
of the Act was not a matter on which an adjudicator was progress payment for work done, and providing fast and
entitled to decide. low-cost adjudication to resolve payment disputes.

In doing so, the High Court quoted the following passage


from Chua Say Eng [2013]41 at [64]:

We are of the opinion that the only functions of an


adjudicator are to: (a) decide whether the adjudication
application in question is made in accordance with s
13(3)(a), (b) and (c)42 of the Act (see s 16(2)(a)); and (b) to
determine the adjudication application (see s 17(2)). If the
adjudication application complies with s 13(3)(a), (b) and
(c), the adjudicator should proceed with the adjudication.
He is not competent to decide whether he was validly
appointed to adjudicate the matter

33
in focus
endnotes

1. Commencement of adjudication and adjudication procedures


16. (3) An adjudicator shall 25. Commencement of adjudication and adjudication procedures
16. (3) An adjudicator shall
(a) act independently, impartially and in a timely manner;
(a) act independently, impartially and in a timely manner;
(b) avoid incurring unnecessary expense; and
(b) avoid incurring unnecessary expense; and
(c) comply with the principles of natural justice.
(c) comply with the principles of natural justice.
2. Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline
Contractors Ltd [1978] VR 385. 26. W Y Steel Construction Pte Ltd v Osko Pte Ltd[2013] 3 SLR 380.

3. Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 27. Commencement of adjudication and adjudication procedures
SLR(R) 86 at [29]. 16. (4) Subject to subsection (3), an adjudicator may do all or any of
the following in relation to an adjudication:
4. Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering &
Construction Pte Ltd [2008] SGHC 159. (a) conduct the adjudication in such manner as he thinks fit;

5. Ibid, at [25] and [36]. (b) require submissions or documents from any party to the
adjudication;
6. Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3
SLR(R) 86. (c) set deadlines for the submissions or documents to be provided by
any party and for the submissions or responses thereto by any other
7. Chow Kok Fong, Security of Payment and Construction Adjudication, party;
at page 653.
(d) appoint, after notifying the parties, an independent expert to inquire
8. Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & and report on specific issues relevant to the adjudication;
Construction Pte Ltd [2008] SGHC 159.
(e) call a conference of the parties;
9. Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering &
Construction Co Ltd [2008] SGHC 159 at [50]. (f) carry out an inspection of any construction work, construction site,
goods or any other matter to which the adjudication relates;
10. Chow Kok Fong, Security of Payment and Construction Adjudication,
at Page 562. (g) issue such directions as may be necessary or expedient for the
conduct of the adjudication.
11. TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd
[2013]. 28. Commencement of adjudication and adjudication procedures
16. (7) An adjudicators power to determine an adjudication
12. Halsburys Laws of Singapore vol 1 (LexisNexis, 2005) at paragraph [ application is not affected by the failure of
10.059].
(a) the respondent to provide a payment response or lodge an
13. Lloyd v McMahon [1987] 1 AC 625 at [702]. adjudication response; or

14. RN & Associates Pte Ltd v TPX Builders Pte Ltd [2013] 1 SLR 848. (b) any of the parties to comply with the adjudicators call for a
conference of the parties or any other requirement made or direction
15. Brookhollow Pty Ltd v R&R Consultants Pty Ltd[2006] NSWSC 1 (at [57]- issued by the adjudicator, and in the event of any such failure,
[58]). the adjudicator may determine the application on the basis of the
information and documents available to him.
16. SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733.
29. Determination of adjudicator
17. AM Associates (Singapore) Pte Ltd v Laguna National Golf and Country 17. (3) Subject to subsection (4), in determining an adjudication
Club Ltd[2009]SGHC 260. application, an adjudicator shall only have regard to the following
matters:
18. RN & Associates Pte Ltd v TPX Builders Pte Ltd [2013] 1 SLR 848.
(a) the provisions of this Act
19. Adjudication responses
15. (1) A respondent shall, within 7 days after receipt of a copy (b) the provisions of the contract to which the adjudication application
of an adjudication application under section 13 (4) (a), lodge with relates;
the authorised nominating body a response to the adjudication
application. (c) the payment claim to which the adjudication application relates, the
adjudication application, and the accompanying documents thereto;
20. Ibid.
(d) the payment response to which the adjudication application relates
21. Commencement of adjudication and adjudication procedures (if any), the adjudication response (if any), and the accompanying
16. (2) An adjudicator shall reject documents thereto;

(a) any adjudication application that is not made in accordance with (e) the results of any inspection carried out by the adjudicator of any
section 13 (3) (a), (b) or (c); and matter to which the adjudication relates;

(b) any adjudication response that is not lodged within the period (f) the report of any expert appointed to inquire on specific issues;
referred to I in section 15 (1).
(g) the submissions and responses of the parties to the adjudication,
22. Chip Hup Hop Kee Construction Pte Ltd v Ssangyong Engineering & and any other information or document provided at the request of the
Construction Pte Ltd [2008] SGHC 159. adjudicator in relation to the adjudication; and
[2008] SGHC 159
(h) any other matter that the adjudicator reasonably considers to be
23. Adjudication responses relevant to the adjudication.
15. (3) The respondent shall not include in the adjudication response,
and the adjudicator shall not consider, any reason for withholding any 30. Mansource Interior Pte Ltd v Citiwall Safety Glass Pte Ltd [2014] 3 SLR
amount, including but not limited to any cross-claim, counterclaim 264.
and set-off, unless
31. Admin Construction Pte Ltd v Vivaldi (S) Pte Ltd [2013] 3 SLR 609.
(a) where the adjudication relates to a construction contract, the
reason was included in the relevant payment response provided by 32. Appointment of adjudicator
the respondent to the claimant; or (b) where the adjudication relates 14. (1) The authorised nominating body shall, upon receipt of an
to a supply contract, the reason was provided by the respondent to the adjudication application, refer the adjudication application to a person
claimant on or before the relevant due date. who is on the register of adjudicators established under section 28 (4) (a)
and whom the authorised nominating body considers to be appropriate
24. Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & for appointment as the adjudicator to determine the adjudication
Construction Pte Ltd [2008] SGHC 159 . application.

34
in focus
endnotes

33. Lee Wee Lick Terence (alias Li Weili Terence) v Chua Say Eng (formerly (b) shall be made in such form and manner, and contain such other
trading as Weng Fatt Construction Engineering) and another appeal information or be accompanied by such documents, as may be
[2013] 1 SLR 401. prescribed.
41. Lee Wee Lick Terence (alias Li Weili Terence) v Chua Say Eng (formerly
34. RN & Associates Pte Ltd v TPX Builders Pte Ltd [2013] 1 SLR 848. trading as Weng Fatt Construction Engineering) and another appeal
[2013] 1 SLR 401.
35. Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering &
Construction Co Ltd [2010] 1 SLR 658. 42. 13. Adjudication applications
(3) An adjudication application
36. Ibid.
(a) shall be made within 7 days after the entitlement of the claimant to
37. JFC Builders Pte Ltd v LionCity Construction Co Pte Ltd [2013] 1 SLR make an adjudication application first arises under section 12;
1157.
(b) shall be made in writing addressed to the authorised nominating
38. Payment claims body requesting it to appoint an adjudicator;
10. (1) A claimant may serve one payment claim in respect of a
progress payment on (c) shall contain such information or be accompanied by such
documents as may be prescribed.
(a) one or more other persons who, under the contract concerned, is or
may be liable to make the payment; or 43. YTL Construction (S) Pte Ltd v Balanced Engineering & Construction Pte
Ltd [2014] SGHC 142.
(b) such other person as specified in or identified in accordance with the
terms of the contract for this purpose. 44. Payment claims
10. (3) A payment claim
39. Australian Timber Products Pte Ltd v A Pacific Construction &
Development Pte Ltd[2013] 2 SLR 776. (a) shall state the claimed amount, calculated by reference to the period
to which the payment claim relates; and
40. Payment claims
10. (3) A payment claim (b) shall be made in such form and manner, and contain such other
information or be accompanied by such documents, as may be
(a) shall state the claimed amount, calculated by reference to the period prescribed.
to which the payment claim relates; and

Called to the Singapore bar in 1994, Lawrence Tan Teo Yi Hui graduated with LLB (Hons) from the University
conducts cases in court, arbitration and adjudication of Leeds, UK, in 2012 and is an Advocate and Solicitor
hearings. He is one of the founding partners in the law of the Supreme Court in Singapore. As an associate in
firm Eldan Law LLP. Lawrence is an accredited adjudicator Eldan Law LLP, Yi Huis current practice covers a diverse
with the Singapore Mediation Centre for the purposes of range of dispute resolution matters with an emphasis in
the Security of Payment Act, and a Principal Mediator / building and infrastructure-related litigation, arbitration
Trainer with the Singapore Mediation Centre (SMC). He and adjudication. In addition, Yi Hui enjoys the rigour
is a lecturer with the Singapore Institute of Management of reviewing and drafting contract documentation and
(in conjunction with the Royal Melbourne Institute of advising clients in respect of the same.
Technology). Lawrence trains students in advocacy for
the National University of Singapore and the Singapore
Institute of Legal Education (SILE). Whos Who Legal:
Singapore 2008 lists Lawrence as a leading lawyer in
the field of construction and is described as one of the
best around and does first-class drafting of contracts.
Lawrence is listed in the The International Whos Who of
Commercial Mediation 2012 to 2014.

35
adjudicators corner

Being An Adjudicator:
Are You Up To The Mark?
By Daniel Tan Chun Hao

With the Construction Industry Payment and Adjudication Cannot allow the adjudication decision to be tainted
Act 2012 (CIPAA) now in effect, the industry should ensure with fraud or bribery;
that proper infrastructure is in place for administering
these statutory adjudications. The infrastructure must Must apply the rules of natural justice;
include competent adjudicators that rise to the mark of
high standards properly demanded by CIPAA. Must act independently and impartially (this is
reiterated in Clause 1 of Schedule II (Standard Terms
Apart from disputants having to familiarise themselves of Appointment) of the KRCA Adjudication Rules and
with CIPAA and its regulations, it is imperative that a pool Procedure; and further elaborated upon in Clauses 1
of adjudicators exist from which disputants may appoint and 2 of Schedule IV (Adjudicator Code of Conduct) of
(either by themselves or through an institution such as the the KLRCA Adjudication Rules and Procedure); and
Kuala Lumpur Regional Centre for Arbitration (KLRCA))
a competent, well-trained adjudicator to make reasoned Must not act in excess of his jurisdiction.
and sound adjudication decisions.
There is an abundance of written materials on principles
Being a relatively new form of dispute resolution in pertaining to these attributes, but it is not the intention of
Malaysia, there was no ready-made pool of trained this article to delve into these sources. Instead, this article
adjudicators to choose from before CIPAA was enacted will look at adjudicators from a perspective that is not
in 2012. Training courses for the making of adjudicators often found in textbooks and other written authorities.
have recently been conducted by various institutions. From common sense and experience perspectives,
The KLRCA with a statutory function under CIPAA (as this article lists some of the likely attributes of a good
the adjudication authority) has led the way with the adjudicator deciding disputes with the framework of
training of adjudicators, offered conversion courses to CIPAA. In no particular order of importance and by no
its panel of arbitrators, and subsequently developed a means exhausting the universe of relevant attributes, here
pool of adjudicators comprised of suitably qualified and are 15 virtues of a good adjudicator:
experienced individuals involved in the construction
industry. 1. Decision making. It is surprising how much
people like to procrastinate in making a decision.
The purpose of this article is to take a brief look at CIPAA However, the primary function of adjudicators is
and the requirements imposed by it on adjudicators to make decisions, and to make them timely and
to identify attributes of a person who is likely to be a efficiently. The disputants in adjudication appoint an
competent and effective adjudicator in deciding disputes adjudicator for this sole purpose and if you are fickle
under CIPAA. As mandated by CIPAA, (see Section 15 of and not good in making definitive reasoned decisions,
CIPAA) an adjudicator: then you may want to look at a different role in the
adjudication process.

36
adjudicators corner

needs to be discussed at the meeting; how evidence is


2. Timely decisions. We usually know the to be submitted to you; any limitation on the volume of
deadlines for making a decision. Under CIPAA, there documents to be submitted by the disputants; should
is little room for the extension of critical deadlines, there be a hearing and if so, the number of days; do you
so it is imperative for decisions to be made before still require further submissions (on arguments and/
the time allowed expires. Often however, decisions or evidence) from the disputants on top of what has
are prematurely made without taking issues through already been submitted to you.
the requisite deliberative process, e.g. jumping to
conclusions without considering all the evidence and 6. Evidence. Receiving evidence is an area that
hastily arriving at a view that is inconsistent with a needs to be managed well. You need to decide: if you
reasoned decision. If a decision is reached either too can proceed with a documents only adjudication; if
late or too early, the probability is high that it will be you need to limit documents; if witness statements
challenged, set aside, or ignored. are required; if oral examination is required; whether
discovery and production of documents is necessary;
3. Effective communication. Most commercial when to draw on your own knowledge and expertise;
transactions in Malaysia are in the English language when to appoint independent experts; whether to
and the conduct of most adjudications, therefore, will inspect work, etc. (see section 25 of CIPAA). The
likely be in English. But whatever language is used, a powers of the adjudicator in respect of evidence are
good adjudicator should be proficient in the respective very wide, but injudicious use of the powers can make
language, particularly in writing clearly and coherently. the process a lot more difficult to manage unless the
Proficiency in the language will determine how well powers are exercised prudently and appropriately by
you are able to understand the case as it is presented the adjudicator.
to you, how well you understand and apply the law 7. Delay analysis. There are differing views on
to the relevant facts, and how well you are able to whether delay analysis is an area that is within the
ultimately communicate your decision to the parties. jurisdiction of adjudicators given that CIPAA is confined
Any limitation in effective communication during to payment disputes. In the event a delay analysis is
any phase of the case will inevitably have an adverse required to ascertain entitlement to, say, prolongation
impact on the quality and correctness of your decision costs or to decide a claim for liquidated damages due
and, very importantly, acceptance of your decision by to delay, there may be no way to avoid deciding issues
the parties. arising from the analysis of delays. Delay analysis is
one particular area of competence and experience
4. Knowledge of the law. Without knowledge where many adjudicators are likely to be quite weak,
of the relevant law, you will not be able to apply the given that this area is often regarded as a specialised
law correctly when making your decision. If you expertise. It can be a very time consuming process to
have no basic knowledge about contract law and the understand work programmes and the critical path of
interpretation of contracts, you need to do something programmes. Delay analysis often involves forensic
about it as soon as possible if you are going to correctly modelling of the dynamic behaviour of the critical path
adjudicate cases under CIPAA. Sure, the disputants are during the course of the works. Disputants almost
supposed to submit to you on the law, but quite often always have different competing models to identify
the position taken by the disputants diametrically the critical path in a project. Finding the right answer
oppose one another, and you must know if you are to a delay claim often requires you to apply your own
to accept one position over another or even apply a understanding of the facts to the work programmes.
legal position that neither party has taken. Although This understanding needs to be informed by a sound
Section 25(d) of CIPAA empowers an adjudicator to grounding in the analysis of delay claims. If you do
draw on personal knowledge and expertise, if doing not have a firm grasp on the basic principles of delay
so raises a new legal issue (or any other new issue) analysis, now is the time to sign up for a course to
not previously tabled by the disputants, the prudent educate yourself.
and fair adjudicator should give both disputants an
opportunity to address the new issues before making a 8. Payment computations. CIPAA is all about
decision. payment disputes, and payment disputes are all about
numbers. Understanding how contracts are priced,
5. Procedure. How an adjudicator decides to how works are valued, and how payment certificates
conduct the adjudication is left quite open by CIPAA, are drawn up are essential. People working in the
subject to the principles of natural justice. It is construction industry should be quite familiar with
therefore up to you to ascertain, based on the available this process. Accordingly, adjudicators who are not
information presented to you, the best way to deal with familiar with payment computations need to get up
the issues at hand so that you can eventually make your to speed. Adjudicators have to understand that there
decision. A few areas you need to consider would be: is no one universal way of dealing with pricing and
should you call for a preliminary meeting and if so what valuation. Instead, there are different methods. A

37
adjudicators corner

sound adjudicator should have a basic understanding be an everyday occurrence and hopefully it will be
of lump sum contracts, contracts with quantities, and sparingly encountered, but it is a part of the process.
contracts without quantities. Be cautioned, however, It may be a simple expression of dissent or a formal
that quantity surveyors, engineers, and lawyers all challenge made in court. It may be made politely and
have their own views on these contracts and you will respectfully. Or it may be laden with criticism and
have decide for yourself the correct view in a particular personal attacks on your intelligence, fairness, and
situation. expertise. Bear in mind that challenges to a decision
may be frivolous, but usually challenges will be due to
9. Punctuality. CIPAA has numerous deadlines a genuine difference in views towards your decision. It
which are non-negotiable. Keeping to the deadlines is important that all challenges not be taken personally.
is therefore crucial. As a start, demonstrating to the If you have discharged your obligations and duties as
disputants that you are able to meet all timelines and an adjudicator to the best of your ability and consistent
deadlines generally, e.g. punctuality at meetings, with CIPAA, that is all you and the parties can expect
attending to correspondence promptly, respecting the of you. Taking the matter personally will only hamper
time demands on the parties, is essential in maintaining your ability to learn, impair your credibility as a neutral
the confidence of the disputants and showing that you and unbiased adjudicator, and slow your progress in
can meet the crucial CIPAA timelines and deadlines. elevating your skills as an adjudicator, particularly if
the challenge is not without merit.
10. Patience. It is said that patience is a virtue.
Despite tight statutory timeframes and deadlines 13. Handling public perception. The adage that
imposed on adjudicators, the disputants may not justice must not only be done, it must be seen to be
present their cases in the manner and the way thought done also applies to an adjudicator. Clause 2.1 of
best by you. You need patience to carefully consider Schedule IV (Adjudicator Code of Conduct) of the
and understand why a party has done things in a KLRCA Rules & Procedure requires an adjudicator to
particular way. There is almost always a reason for it be impartial and fair to the parties, and be seen to be
that may not be apparent at the beginning. If you lack so. The manner in which an adjudicator acts in a case,
patience, you may jump to conclusions which will be and also in public, particularly when in the presence
difficult to undo later and it may appear that you have of counsel or the disputants, must be such that there
prejudged the facts or developed a bias for or against can be no doubt that the adjudicator will be impartial
one of the disputants. It is best to allow the process to and fair to the disputants and counsel. Perceptions are
take its course before making up your mind. Hear both very subjective. For this reason alone, it is usually best
sides first before taking any position. Be patient. to err on the side of caution when there is a question
of conduct to avoid disputants jumping to the wrong
11. Psychology. As an adjudicator, you are providing conclusions (which they are entitled to do, but not
a service to the disputants. In this sense, the you!).
disputants are like your customers. Your customers
may not always be right, but you must provide the 14. Commanding respect. To have full control of
service for which they have paid or will be paying. the adjudication process (at least where it is possible),
Reading their (and their counsels) behaviour may the adjudicator must command the respect of the
be required to ensure that you know their needs and disputants and their counsel. Respect is something
expectations. Whilst you will not meet every need or that is earned, and being an adjudicator by itself will
expectation of a disputant, you should readily oblige not be sufficient to generate entitlement to respect.
those needs and meet those expectations when you The way you communicate with the disputants, the
can do so consistently with your statutory duties and manner in which you deal with issues that have arisen,
the underlying intent of CIPAA. and your overall conduct of the proceedings will
determine if respect has been duly earned. Without
12. Taking criticism. On occasion, one or respect, your task will be much more difficult and the
sometimes even both disputants will take issue with tendency of the disputants to challenge your decisions
a decision made by an adjudicator. It should not will be greater.

How an adjudicator decides to conduct the adjudication is left


quite open by CIPAA, subject to the principles of natural justice.
It is therefore up to you to ascertain, based on the available
information presented to you, the best way to deal with the
issues at hand so that you can eventually make your decision.

38
adjudicators corner

It is important that all challenges not be taken personally.


If you have discharged your obligations and duties as an adjudicator to
the best of your ability and consistent with CIPAA, that is all you and the
parties can expect of you.

15. Fraud and bribery. In an ideal world, these Being an adjudicator who is up to the mark expected by
factors need not be mentioned at all. However, as we CIPAA 2012 will not be an easy task. This is particularly
live in a less than an ideal world, situations involving so in a jurisdiction such as Malaysia where statutory
fraud and bribery may arise but hopefully in only very, adjudication and CIPAA are still relatively new
very rare occasions if at all. If they do arise, offenders developments. Consequently, the adjudicators path to
beware. The dispute resolution fraternity is small, and a proper, reasoned, and timely decision may be akin to
word spreads like wildfire. If you are ever associated sailing in unchartered waters. The attributes discussed
with such conduct, the system will relentlessly weed above are not meant in any way to discourage anyone
you out. The consensual nature of the appointment from being an adjudicator. On the contrary, listing these
of adjudicators, be it through an appointing authority fifteen attributes is intended to help all of us be better
or directly by the disputants, will ensure that the adjudicators, to properly navigate the adjudication
offender will never again receive another appointment process, and to evaluate where we are in relationship to
or be credible in any adjudication proceeding. These the mark where good adjudicators stand. And for the
consequences will be over and above the wrath of what already good adjudicators, perhaps this list will function
the law separately has in store for the offender. as an aide memoire. Nobody is perfect, but surely we
should all strive to be, and all towards ensuring that CIPAA
is effectively implemented.

Daniel Tan Chun Hao, BE (Civil), LLB, FCIArb, FSIArb, contractors and owners in the engineering and
FMIArb, FMSAdj, and Barrister-at-Law is a Fellow of the construction industries. He has been principally involved
Chartered Institute of Arbitrators, panel arbitrator and in arbitrations and other forms of dispute resolution,
accredited mediator with the Kuala Lumpur Regional contract management, and advisory services on a wide
Centre for Arbitration, and an accredited mediator with spectrum of projects. He acts as advocate in arbitrations
the Construction Industry Development Board, Malaysia. and sits as arbitrator.
Daniel is the principal of the law firm Messrs TAN CHUN
HAO. He holds dual qualifications in civil engineering and
law, and is a practising lawyer. Admitted to the Malaysian
Bar in 1993, Daniel has over 20 years experience in the
provision of contractual advice to local and international

39
adjudicators corner

CIPAA The Magic Wand


of Payment Woes?
By Tan Swee Im

The word on everyones lips since 15th April 2014 has been wonderful arguments they are testing the boundaries of
CIPAA, the battle cry of every unpaid contractor has the contract and the law which is no bad thing, it is part of
been CIPAA! the growth. So along comes CIPAA and horror of horrors,
one is expected to pay for work done on a regular basis and
Indeed a milestone to be lauded and a big step in the right in a timely manner? And one has to make that payment
direction for our beloved but beleaguered construction regardless of not having received the corresponding
industry in Malaysia. payment from the party in the head contract? Well yes, is
the answer, pure and simple.
But lets take pause for a moment and examine what CIPAA
means in real life and in real time. What are the practical Pay now, argue later.
aspects of CIPAA that we have to take cognisance of and
what transformational changes do we have to embrace in However on the other side of the fence lies the perennially
light of CIPAA? optimistic contractor who is always in wait of the payment
that is on the way and soon to be made. Time to
This is not written with the lawyers in mind, this is written wake up! If payment is not made, CIPAA is one method of
with CIPAA users in mind. realising your optimism!

Mindset So lets reboot and recognise that work done and services
rendered must be paid for. And paid for on a regular basis
Lets start with mindset. All too often in the last 6 months and in a timely manner. Paying parties cash up! Unpaid
since the advent of CIPAA, I have had people responding parties utilise your rights!
that no, they have never heard of CIPAA and do not know
what it is. How can that be? The very same people who Documents, Documents,
complain loud and often of non-payment do not know of Documents
this Magic Wand called CIPAA?
So, mindset rebooted and parties all ready to rush out
Once they know the basics of CIPAA then the next common and utilise CIPAA! But all too often, there is a dearth of
reaction is that oh, if a contractor takes me to adjudication, documents which tell the story which is so well articulated
I will blacklist him and make sure he never gets another in discussion. The story articulated is often not the story
job! And the reaction from the complaining contractor? Oh one finds from the documents. Why is that?
cannot, if I go legal then I will not get jobs.
Many Malaysian organisations have a fear of the written
Why is it that contracts and laws are put in place and yet word it would seem notices and letters are often not
the mindset is that if the contract or the law is followed, issued as required by the contract or as required by the
it is a bad contractor who should be blacklisted? Why is a circumstances. Employers and consultants have been
contractually aware contractor labelled a claims conscious known to tell contractors not to write so much.
contractor? Isnt that what contracts and laws are in put in
place for? To regulate the rights and obligations of parties But without documents, parties in a CIPAA adjudication
in given situations? are at a disadvantage. The adjudication decision is to be
delivered within 45 working days of the last pleading. The
Surely its time for our industry to grow up. Time to mature adjudicator may not call for an oral hearing, and even if
into an industry where professionalism is the norm and held, there is no unlimited time for oral examinations.
contracts and laws are respected for what they do; regulate Therefore the evidential value of documents is higher in
the rights and obligations of parties. Of course lawyers such limited time adjudications.
will always look for loopholes and conjure up weird and

40
adjudicators corner
CIPAA is no magic wand it a right to be utilised, and it Document Management
rewards the diligent.
However, having the raw documents is only the start of the
There is little point for all to charge on the battle cry of process. How about assembling them in an order that the
CIPAA, but fail to prepare the arsenal to follow through. adjudicator can understand the story, the issues and arrive
What is this arsenal? Its simply the normal documents at a decision. 100 lever arch files of documents may look
that are required for competent contract administration. impressive in an arbitration hearing room but it is of little
Its the familiar use to an adjudicator who has to cut through the chaff,
get to the issues and opposing views, analyse them and
Letters make a decision. So help the adjudicator to help you! Can
Faxes technology make this exercise an even better experience?
Memos How about also giving the adjudicator a thumbdrive of the
Emails documents which are indexed and word searchable?
SMS
Whatsapp / Etc.
Drawings
Challenges on Jurisdiction
Written Instructions
The start of CIPAA has not been exactly smooth. Excitement
Confirmation of Verbal Instructions
was high with KLRCAs CIPAA seminars attracting 1,000
Minutes of Meetings
people each time, and the more contractually aware parties
Progress Reports
making Payment Claims and appointing adjudicators.
Site Diary
However, the excitement was short lived when challenges
NCR
to the jurisdiction of the appointed adjudicator were
Photos
made, and adjudication proceedings suspended.

It is also the perennial question of whether the document


There were several challenges filed in the courts. The
prepared was in fact sent out? Needless to say a drawerful
challenges have centred on fundamental issues relating to:
of unsent drafts is of little help.
Whether CIPAA has retrospective effect or only
How about the contents of these reams of documents?
prospective effect
What do they say? Often, too little in that they are so
general that they are vague and dont provide support for
Whether claims which arose prior to the effective date
the point in question. Or too much in that they contain a
of CIPAA can be subjected to CIPAA adjudication
litany of admissions of wrongdoing.
Whether claims for Extension of Time fall within the
Parties cannot be reminded enough to put emphasis on
purview and ambit of CIPAA
the documents which are required by the contract, be they
progress reports, programmes, notices or applications for
The issue of retrospective or prospective effect impacts
payment and confirmations of variation instructions.
on KLRCA Circular 01 which provides for CIPAA to apply
to payment disputes which arose after 15th April 2014,
The nature of CIPAA adjudication demands a greater
regardless of whether the construction contract was made
emphasis of telling the story through the documents. If
before or after 15th April 2014. KLRCA participated as
you will just put yourself in the shoes of the adjudicator,
amicus curiae to explain the basis of Circular 01.These
coming in cold to a project he knows nothing about, to be
arguments have focussed on the less than clear provisions
met with conflicting versions of events and to have only
of CIPAA and the courts decision and reasoning will have
45 working days to deliver a decision, you will see the
great impact on the CIPAA adjudications ongoing and
relevance of the story told through the documents.
contemplated.

The ability to produce copies of the documents presumes


Breaking news! Dato Mary Lim J, Judge of the Construction
that copies have been kept. It is not uncommon to
Court in KL High Court delivered her decision on 31st
hear contractors explain that they had submitted the
October 2014. She held that CIPAA has retrospective effect.
originals of invoices, payment vouchers, etc as required
In short, CIPAA will apply to qualifying construction
by the consultants, and failed to keep copies as it was too
contracts made before and after 15th April 2014.
voluminous. You dont have much time for discovery in
adjudication, and besides the adjudicator may not order
The only exception from retrospective effect is by way
it. CIPAA is there to assist you to get payment in a timely
of section 41 in respect of payment disputes which are
manner it is self-defeating if the process for getting
already the subject of court or arbitration proceedings as
payment is hampered by the Unpaid Parties themselves.
at 15th April 2014.

41
adjudicators corner
That decision is very impactful as it opens up pretty for the payment dispute to have arisen after 15th April
much all payment disputes to be resolved through CIPAA 2014 even if the contract was made prior. This would at
adjudication, regardless of whether the construction least bring such a payment dispute within the ambit of
contract was made before or after 15th April 2014 and KLRCA Circular 01.
regardless of whether the payment dispute arose before
or after 15th April 2014. It also means that the defence of Having said that, one cannot ignore the fact that CIPAA is
pay when paid clauses cannot be relied upon. Unpaid not the only route to the resolution of payment disputes.
Parties who were previously nervous of making Payment In fact users must be reminded that arbitration remains
Claims in contradiction to KLRCA Circular 01 are now the primary form of dispute resolution in construction
empowered to proceed. contracts and that a CIPAA adjudication decision is
binding only until the said dispute is finally decided in
It remains to be seen if this decision will be taken on arbitration (or the decision set aside or settled). Therefore
appeal. But nevertheless, as time progresses, arguments the choice of CIPAA adjudication although on the face of
on the retrospective or prospective effect of CIPAA will it is attractive due to its shorter time frame and pay first
naturally fall away as payment disputes referred to CIPAA argue later philosophy, may not always be the best route.
adjudication will increasingly arise from contracts made
and payment disputes arising, after 15th April 2014. The fact that the adjudication process from service of
payment claim to delivery of adjudication decision takes
As for whether the ambit of CIPAA can include a claim for about 100 working days which translates into about
Extension of Time, the argument for, is that a claim for 5 calendar months, is in itself a practical matter to be
EOT is so linked to entitlement to payment for work done considered. Given the usual monthly cycle of payment
that is should naturally become a concern under CIPAA, applications, certificates and payment due dates, as
whereas the argument against is simply that the wording each month passes the number of payment applications,
of CIPAA makes it applicable only to payment claims or certificates and payment due dates will accumulate,
disputes and not time. This argument will not fall away rendering the payment claim all too soon out of date. This
with the passage of time, and if anything will intensify. may perhaps be why the payment disputes referred to
Following the KL High Courts decision on 31st October CIPAA adjudication have been largely in respect of final
2014, this matter has been left to be dealt with by the accounts and claims. But more likely that at this time, the
appointed adjudicators. only payment disputes which have matured beyond the
tolerance of the Malaysian contractors ever-optimistic
So what do users of CIPAA do? Well, the world is an outlook are those arising out of older contracts for which
imperfect place and we get on with life anyway. CIPAA is work has been long completed but final payments not
a vast improvement on the sluggish arbitration system of received.
dispute resolution. Our construction courts are doing a
great job, but they are weighed down by heavy caseloads. Transformation of
Both are susceptible to delays for legitimate reasons. Operational Practices
This may be contrasted to the provisions of CIPAA which
provide for each stage to progress regardless of one party CIPAA is upon us. It may not be perfectly worded, it may be
dragging its feet. Once the CIPAA train leaves the station, challenged, but imperfections and all, CIPAA is a reality.
it moves on and waits for nobody.
With that reality, organisations could do well to step up and
Admittedly the first few CIPAA trains seem to have been face up to everyday realities that CIPAA brings. Standard
derailed somewhat by the challenges on jurisdiction. operating procedures which are out of step with payment
So those unwilling to take the risk of challenges to obligations in the construction contract will fall victim to
jurisdiction as we have seen filed in court, could do well to CIPAA payment claims. Illogical as it may sound there are
take a practical view of which payment disputes to take to organisations whose internal procedures immediately set
CIPAA adjudication. The most obvious would be to only them in default of the payment terms of the constructions
prosecute payment disputes which arose after 15th April contracts they enter into. This is especially prevalent
2014 on a construction contract made after 15th April 2014. in respect of variations validly instructed where the
But since most of the current existing payment disputes requirement to carry out the work is significantly ahead
are in relation to contracts made prior to 15th April 2014, of internal approval procedures for the same. Given that
therefore it may seem like too long a wait to qualify on almost all construction contracts require work properly
both criteria. So the obvious runner-up will be to at least executed to be included in the next payment certificate,

So lets reboot and recognise that work done and services rendered
must be paid for. And paid for on a regular basis and in a timely manner.
Paying parties cash up! Unpaid parties utilise your rights

42
adjudicators corner
the lag in internal approvals mean that it is not so included. As for challenges on jurisdiction, they will not stop. Legal
CIPAA allows for payment claims to be made for such work minds set to work for their clients will continue to go into
executed, and lack of internal approvals which are not a overdrive and keep testing the boundaries. That is how
condition for payment in the construction contract are no the law develops. But it should not deter the entitled from
defence. utilising CIPAA, and does not enable bad paymasters to
keep hiding.
There are many other common instances of internal
procedures not matching contract requirements, not least, But until and unless users of CIPAA realise that they have
lack of budget allocation. Attached as Appendix 1 is a to help CIPAA help them, the useful new rights accorded
mindmap of what I presented at the CIDB Roadshows on by CIPAA will remain but words in a statute.
CIPAA summarising some of the thinking on these issues.
CIPAA is not the magic wand of payment woes; it is a tool
If these organisations could in the past hide behind which with knowledge, diligence and organised thought,
the comfort of contractors reluctance to commence can be made to work hard for you.
arbitration, the right to pursue such payment claims in
CIPAA adjudication will remove much of that comfort.

Moving Ahead
So where does all this lead us to?

It is suggested that despite the criticisms of the


imperfections or inadequacies of CIPAA, it is a significant
step forward in the right direction towards addressing the
payment problems that are endemic of the construction
industry in Malaysia.

But a contractor starved of cashflow needs to do more


than chant CIPAA, CIPAA he needs to work hard at
making CIPAA work. He needs to understand what CIPAA
says and what CIPAA requires. He needs to know what
CIPAA means in practice. And he needs to take the action
to actuate CIPAA.

Tan Swee Im, Senior Partner of Tan Swee Im, P.Y. Hoh & drafting of the CIDB Form of Contract for Building Works,
Tai, is a Barrister-at-Law from the Middle Temple and she led the drafting for the new standard form of design
an Advocate and Solicitor of the High Court of Malaya, a and build contract promoted by the CIDB. She is a council
Fellow of the Chartered Institute of Arbitrators, a Fellow member of the Society of Construction Law Malaysia and
of the Malaysian Institute of Arbitrators, a Fellow of the a member of the committee developing the Malaysian
Chartered Institute of Building, a Fellow of the Malaysian Construction Protocols for delay, disruption and other
Society of Adjudicators, an arbitrator, adjudicator and construction related issues. Miss Tan and her firm prepared
mediator on the panel of the Kuala Lumpur Regional the Working Guide, Standard Forms and Checklists on the
Centre for Arbitration, a qualified adjudicator, a CIDB Adjudication Process under the CIPAA published by CIDB
Accredited Mediator, and holds a Diploma in International to assist parties to make and defend payment claims under
Commercial Arbitration. She was a key member of the CIPAA. Her international experience extends to Cambodia
drafting team on the first independent power plants in and Myanmar, when she participated in the negotiation
Malaysia, the KL International Airport, the Malaysia- of their international airport contracts and projects in the
Singapore Second Crossing projects, and many other major Middle East, South Africa and Papua New Guinea. Miss
projects in Malaysia. An active contributor to the Master Tan is 1 of only 5 lawyers in Malaysia named in Whos Who
Builders Association of Malaysia and very involved in the Legal for the practice area of Construction.

43
adjudicators corner

Appendix 1 TAN SWEE IM, P.Y. HOH & TAI


ADVOCATES & SOLICITORS

Transformation
of
Operational
Practices

Transformation
of Operational
Practices for CIPAA
Alignment
with CIPAA

ADJUDICATION

Original scope

VO
'An Act to facilitate regular and timely
payment to provide a mechanism for speedy
dispute resolution through adjudication
to provide remedies for the recovery of works properly
payment in the construction industry and Monthly valuation - of the works executed
to provide for connected and incidental properly executed and of unfixed
matters' materials and goods delivered to or
adjacent to the Site unfixed
materials and
goods
Interim Certificate - to be issued
within 14 days from the date of
Contract JKR 203 valuation - stating the amount
/203A due to the Contractor from the
Government

Payment - within a number of days


Payment as stated in Appendix (or if none
terms stated then within thirty (30) days
of the issue of any such Interim
Certificate), the Government shall
make payment to the Contractor
CIPAA S36 Default
Provisions

Monthly - for construction work


Adjudication and construction consultancy
services

Remedies to Enforce
Adjudication Decision Upon delivery - for supply,
for the supply of construction
material, equipment or workers
in connection to the contract

44
adjudicators corner

Interim
TAN SWEE IM, P.Y. HOH & TAI Original scope

ADVOCATES & SOLICITORS


Non Payment Final VO
Works properly
executed

FOR
Unfixed materials
Payment and goods
Dispute
Certified but not paid

amount Under Certified

Not Certified
due In accordance with the Contract
Payment
Claim
Monthly Valuation

Monthly issuance of IPC

Payment within Period of


Honouring IPC
Payment
response

notice of
adjudication

APPOINTMENT
OF
ADJUDICATOR

Legitimate
Reasons
adjudication
CLAIM

adjudication
RESPONSE SUBSTANTIATION

adjudication
REPLY
LAW

adjudication
PROCEEDING

adjudication
DECISION

Slow down or suspend work

ENFORCEMENT
Direct Payment from Principal
OF
adjudication
DECISION
Enforce as court judgment

45
adjudicators corner

Not Certified S.O shall issue a Certificate of Non-


Completion to the Contractor
Not yet evaluated
Amount not approved Prior to the issuance of the Certificate
COMMONLY of Non-Completion, the S.O shall issue
ENCOUNTERED Approval not yet signed
a notice to the Contractor informing
VO not approved by VO Committee the Contractor the intention of the
No Budget Government to impose Liquidated and
Ascertained Damages to the Contractor
if the Contractor fails to complete the
Works by the Date for Completion or
E.g LAD CI 40 within any extended time granted
What does Contract say? Recover from the Contractor Liquidated
and Ascertained Damages calculated
BUT
at the rate stated in Appendix from the
Regardless of Internal Procedures period of the issuance of the Certificate
and Difficulties of Non-Completion to the date of
issuance of Certificate of Practical
Completion or the date of termination
of this Contract

Legitimate reasons for non payment


NEEDED

E.g JKR 203A Non compliance with SO Instructions


E.g Deductions
In lieu of Performance Bond
Allowed by Contract
Failure of Contractor to Insure
Failure of Contractor to pay SOCSO
Default of Contractor to remedy
Standard Conditions Defects
Contract Amended / Supplementary Terms Certificate of Termination Cost -
termination for Contractor default
Bill No.1

Initial Notice Letters


Conditions Precedent Faxes
Follow Up Details Memos
Time Frame Emails
Provisions What to be submitted SMS
Additional Submissions Whatsapp / Etc
Responses Drawings
Evaluations Written Instructions
Certificates Confirmation of Verbal Instructions
Minutes of Meetings
Progress Reports
Documents, documents, documents Site Diary
NCR
Photos

46
adjudicators corner

TAN SWEE IM, P.Y. HOH & TAI Any contractor who takes me to CIPAA adjudication is blacklisted
ADVOCATES & SOLICITORS I am in charge
I can pay what I think is fair to me
I dont have budget so I cannot pay you, its not my fault
Attitude
I have not been paid, how to pay you?
I dont have authority to approve payment to you
VO Committee has not approved payment
For sure I will pay you, give me time

KNOW what
the Contract
requires of
you

Process of approving interim payment certificates


TRANSFORM
internal processes Process of approving final account and final payment
to enable FULL
COMPLIANCE with
the Contract
Process of approving release of retention sum

DOCUMENT
generation and
control

TIMELINESS Tracking time of what needs to be done by whom

What work Contractor has carried out - regardless of whether certified

AWARENESS Work which has been instructed to contractor


of what is - by consultants / internal department / site staff
happening
and when by Valuations - by consultants / internal department
whom
Whether valuations = work done If not then potential CIPAA Payment Claim

ACT to comply Regardless of Internal Procedures - must comply with Contract


with Contract
Manage Internal Procedures - to enable compliance with Contract

Know what is going on - really going on,


not what you want to hear No problem Boss
MANAGE to avoid
disputes Know when payment disputes are brewing
Documentation - to be complete and kept updated at all times

CARE to see both


No party is entirely correct or entirely wrong
sides of the story
Dont believe everything you are told

47
adjudicators corner

NOT - we always do it this way


NOT - but its not fair
Change your NOT - Ya lah Contract says must pay for VO when work done, but we have to get approval
attitude - READ the Contract! from VO Committee first and they only meet every 2 months, but work is urgent
CIPAA is here

Standard Conditions
Amended / Supplementary Terms
Contract
Appendix to COC
Bill No.1 / Prelims

Limits on authority - made known No VO is valid if exceeds stated authority Contractor beware
to Contractor / part of Contract

Limits on authority - internal and VO valid when issued to Contractor, but Employer beware
not part of Contract payment is not approved or delayed
Process of approving VO
REMEMBER - Monthly valuation
of the works properly executed Letters
means inclusive VO works
Faxes
Documents, documents, documents Memos
Evidence Do they reflect the facts? Emails
Who is your letter writer? SMS
Are the documents prepared, actually sent out? And sent out in a timely manner? Whatsapp / Etc
Where are your document kept? Are they all in one place? Drawings
Who keeps your documents? Is there a log? Written Instructions
What about email? Whose laptop is it on? Any record? Confirmation of Verbal Instructions
What about SMS / Whatsapp? Whose phone is it on? Any record? Minutes of Meetings
What happens when someone is transferred / resigns Progress Reports
Site Diary
NCR
Contractor applications for payment
Photos
Contractor applications for payment of VO
Valuation of applications for payment - by consultants / internal departments
Issuance of payment certificate Partial payments
Payment of certified amounts Deductions
KNOW when payment for work done is due under the Contract If not paid then potential CIPAA Payment Claim
Real time tracking system
- e.g Excel sheet with time frames built in - orange and red warnings

If not then potential CIPAA Payment Claim


If not then potential CIPAA Payment Claim

You have 10 working days for Payment Response


You have 10 working days for Adjudication Response
You have no time for Let me check Let me ask the consultants
/ I will check with my staff / I will get it done next week
/ Annual Leave / Emergency Leave / MC / Kursus

The truth usually lies somewhere in between


Do you know what actually happened?
Can your version be evidenced?
Do you know the real facts?

Remember; with
great power,
comes great
responsibility

48
adjudicators corner

The Timely CIPAA Adjudication


Decision: Mission Impossible?
By John Wong

Abstract
An adjudicator has 45 working days under CIPAA to decide the dispute and deliver the adjudication decision. Even if
the complexity of the dispute involves multiple facets of the construction process such as variations, extensions of time,
contract administration, and legal issues, it is still very possible - albeit challenging - for the adjudicator to deliver the
decision within the statutory period of 45 working days by drawing on the personal knowledge, experience, and skill of
the adjudicator and drawing judiciously upon the powers granted to the adjudicator by section 25, CIPAA 2012.

Introduction
The main objective of the Construction Industry Payment In view of the Employers dispute of the Contractors
and Adjudication Act 2012s (CIPAA 2012) is to provide a payment claim, the Contractor commenced an
new, expedited legal avenue to resolve cash flow-related adjudication proceeding. After the appointment of the
problems in the construction industry. CIPAA 2012 adjudicator, the Contractor served an adjudication claim
provides for an adjudicator to decide the construction upon the Employer claiming the full variation claim
dispute and deliver an adjudication decision within amount. The Employer served an adjudication response
the statutory period of 45 working days from service disputing the Contractors rate and contending that the
of an adjudication response or an adjudication reply if Architects certification and the Quantity Surveyors
a reply is served, whichever is later. With the operative valuation accurately reflected the market rate for the
effect of CIPAA 2012 on 15 April 2014, this article asks the variation. Further, the Employer counter-claimed for
question whether it will be a Mission Impossible to deliver liquidated damages for the Contractors delays. In reply
a reasoned adjudication decision within the statutory to the Employers counter-claim, the Contractor served an
period when the dispute involves multiple and complex adjudication reply denying responsibility for the delays
questions on the valuation of variations, the assessment and attributing the delays to the variation work instructed
of extensions of time, contract administration, and the by the Architect thus claiming an extension of time by
application of principles of Malaysian construction law. way of a critical path method of delay analysis. Finally,
the Contractor asserted that the Architect had not issued a
valid Certificate of Non-Completion, which is a condition
precedent to the Employers deduction of liquidated
Complex Issues in Dispute damages and, moreover, that the Employer had suffered
no actual losses relating to the delay. As evident from this
CIPAA 2012 provides for a payment claim to be initiated by
summary of a hypothetical dispute, the dispute increased
an unpaid party, say, a Contractor. In this instance, assume
in complexity as the adjudication process unfolded. For
that the payment claim is for construction work done
this reason, the adjudicator must decide four main issues
pursuant to the express terms of a written construction
in dispute:
contract. For example, the Contractor performed variation
work pursuant to an Architects Instruction, but no contract
(i) Whether the variation claim should be valued based
rate of payment is applicable to the variation work. Then,
on the Architects rate or the Contractors rate;
upon application for payment, the Architect only certified
for payment 50% of the Contractors variation claim on
(ii) Whether the Contractor has proven an entitlement to
the ground that the Contractors rate was excessive and
an extension of time by way of its critical path method
inflated above the market rate. The Contractor disputed
of delay analysis;
the Architects certification as an under-certification and
claimed the balance of its variation claim against the
(iii) If the Contractor is not entitled to any extension
Employer as a payment claim under CIPAA 2012. The
of time, whether the Architect has issued a valid
Employer served a payment response on the Contractor
Certificate of Non-Completion; and
under CIPAA 2012 denying any under-certification and
counter-claiming for liquidated damages arising from
(iv) If so, whether the Employer is entitled to deduct
delays alleged to have been caused by the Contractor.
liquidated damages from payments otherwise due to
the Contractor.

49
adjudicators corner

Decision Making Factors path method of delay analysis so as to ascertain the


extent of any impact of the variation work on milestone
completion dates. Similar to paragraph (a) above, the
The adjudicator has a statutory period of 45 working
adjudicator may appoint, subject to the consent of the
days or any other extended period agreed by both the
parties, an independent delay analysis expert to assess
Contractor and the Employer to make and deliver an
the Contractors extension of time claim and to submit
adjudication decision that deals with the issues in dispute.
the analysis to the adjudicator and the parties. In the
To make a reasoned decision in respect of the issues in
absence of an independent expert, the adjudicator may
dispute, the adjudicator has to consider the following
draw on personal knowledge and expertise and on
factors:
evidence adduced in the adjudication process to decide
whether the Contractor is entitled to an extension of
a) In respect of issue (i), the adjudicator has to consider
time. As with other issues, the adjudicator should
what the reasonable market rate is and then use it as
closely consider and then carefully apply the powers
a basis to decide whether the Architects rate or the
of the adjudicator set forth in section 25 of CIPAA, and
Contractors rate is a reasonable rate for the valuation
particularly those in section 25(d) (personal knowledge
of the variation. In this instance, the adjudicator may
and expertise) and section 25(i) (inquisitorially take
pursuant to section 25(e) of CIPAA 2012, appoint, with
the initiative to ascertain the facts and the law required
the consent of the parties, an independent expert to
for the decision.).
give evidence on the reasonable market rate. In many
instances, however, there may be inadequate time to
c) In respect of issue (iii), the adjudicator should
appoint an independent expert, such an appointment
consider the form and content of the Certificate of
may be disproportionately costly compared to its
Non-Completion and compare those factors to the
benefits, or the parties may object to the exercise of
requirements prescribed in the construction contract
the power granted to the adjudicator by section 25(e)
to decide whether the certificate was validly issued.
in the particular circumstances of the dispute. In this
In this instance, the adjudicator should take into
event, the adjudicator should then use the powers
account case-law authority submitted by the parties in
provided by section 25(d) and (i) to analyze and decide
this respect. Here again, section 25 has equipped the
the dispute. Section 25(d) permits the adjudicator to
adjudicator with several powers to properly decide
draw upon the adjudicators personal knowledge and
this issue. By carefully tailoring the statutory powers
expertise and section 25(i) allows the adjudicator to
to the dispute, the adjudicator can deploy personal
question the parties and witnesses to develop the
knowledge and expertise (section 25(d)), with the
information needed to make the correct decisions on
consent of the parties, independent experts (section
the issues presented to the adjudicator by the parties.
25(e)), inquisitorial initiatives (section 25(i)), and
The adjudicator must, however, provide the parties
review and revise any certificate (section 25(m)) to
with an opportunity to respond to the adjudicators
timely and correctly decide the dispute.
analysis based on the adjudicators personal knowledge
and expertise and the adjudicator ought to conduct
d) In respect of issue (iv), the adjudicator has to consider
any inquisitorial questioning with a judicious and fair-
the present authorities in Malaysian construction law
minded attitude free of the appearance of bias and pre-
to determine whether the Employer is required to
judgments of the issues.
prove actual loss and whether the condition precedent
to the deduction of liquidated damages has been
b) In respect of issue (ii), the adjudicator must analyse
fulfilled under the construction contract in deciding
pre-impact and post-impact programmes in the critical
the Employers entitlement, if any, to liquidated

50
adjudicators corner
damages. The tasks here are similar to those described
in the preceding paragraph of this article. In addition,
it will be likely that the adjudicator will be presented
with the question of whether a claim for an extension
of time or for liquidated damages is within the
jurisdiction of the adjudicator. For resolution of this
challenge, the adjudicator should consider directing
the parties to submit memoranda on the jurisdictional
question pursuant to the adjudicators power to issue
any direction as may be necessary or expedient (section
25(j)). In this context, the adjudicator may exercise
discretion under section 27(3) and proceed to complete
the adjudication proceedings without prejudice to
the rights of the parties to set aside the adjudication
decision or to oppose an application to enforce the
adjudication decision.

Conclusion
In light of the above, it may be concluded that if the
adjudicator is to decide a complex dispute and deliver
the adjudication decision within the statutory period of
45 working days likely, quite a short period of time - it
should be possible for the adjudicator to render a sound
and reasoned decision by judiciously exercising the
powers of the adjudicator under section 25, particularly
subsections (d), (e), (i), (j) and (m). If feasible, assistance
from independent experts may be especially helpful
to reach a timely and reasoned decision if the parties
consent to the appointment of the experts. Even in the
absence of assistance by experts, a successful completion
of a Mission Impossible adjudication assignment calls for
the adjudicator to draw upon the adjudicators personal
knowledge and expertise; consider taking the initiative to
inquisitorially ascertain the facts and the law required to
make a reasoned and timely decision; assess whether to
direct the parties to submit on specific questions of fact
and law; and review and revise disputed certificates based
on the evidence provided by the parties. As with the
challenge posed to the actors in the movie and television
series Mission Impossible, the adjudicators successful
acceptance of the task to make a well-reasoned decision
within the statutory period of 45 working days is quite
possible, albeit challenging.

John Wong, BSc (Hons) LLB (Hons) Dip. Int. Arb, FCIArb, FMSAdj, MRISM, is a legally
qualified Registered Quantity Surveyor who specializes in construction claims and
forensic delay analysis. In his previous employment as a claims specialist, he had
the rare privilege of assisting a seasoned construction lawyer in arbitration counsel
work from whom he obtained valuable experience. He is a director of Charlton Martin
Consultants Sdn Bhd. His email address is john.wong@charltonmartin.com

51
sidebar

The Journey Towards Security of


Payment Legislation in Hong Kong
By Christopher To

Introduction Survey on General Building


Contractors and Specialist
Work has commenced in Hong Kong on the drafting of Contractors Status on Cash
new legislation to enhance the security of payments Flow and Other Related Issues
in construction-related contracts and provide for
adjudication for speedy resolution of disputes. The target In 2008, the Hong Kong Construction Association
of the government is to introduce the Bill to the Legislative commissioned a Survey on General Building Contractors
Council in 2015/161. This article reviews the background and Specialist Contractors Status on Cash Flow and
and status of the proposed legislation. Other Related Issues to collect information on the extent
of cash flow problems faced by main contractors and
The construction sector is a major driving force behind specialist contractors. The survey revealed that over 60%
Hong Kongs economy. In 2012, it contributed about 3.6% of the respondents regarded outstanding payment from
of the citys GDP. Currently, it employs over 300,000 the other contract parties as a serious problem affecting
persons and has over 1,200 construction sites across their companies. The result of the survey, whilst helpful,
Hong Kong. Figure 1 below shows the construction covered only limited groups of industry stakeholders and
expenditure forecast for 2014/15 to 2023/24 prepared by the survey was not seen to have done enough to identify
the Construction Industry Council (CIC) Hong Kong. the main causes of late or non-payment within the
With considerable demand for infrastructure and housing, construction industry as a whole.
it is estimated that the total construction expenditure
will exceed $150 billion annually in the coming few years.
Hence, the adoption of fair and good payment practices is Survey on Problems of
conducive to the healthy and sustainable development of
the construction industry in Hong Kong.
Outstanding Payments in
Construction Supply Chain
As with many other jurisdictions, subcontracting has
In 2009, with an aim to identify possible causes of
been widely adopted in the construction industry of Hong
outstanding payment and cash flow problems, the CIC
Kong. Under the traditional practice of pay if/when
commissioned a Survey on Problems of Outstanding
paid, subcontractors are not paid until the contractor is
Payments in Construction Supply Chain. The survey
paid. Whether due to the upper-tier contractors not being
covered a full spectrum of stakeholders in the construction
paid on time or other reasons, subcontractors are often not
industry from employers/developers, consultants,
paid timely for the works performed. As a result, payment
contractors, subcontractors, to suppliers. The survey
problems become so complex and deep-rooted that the
revealed the following five major causes of payment
issues are very difficult to resolve amicably.
problems:
Over the years, several surveys and studies aimed at
late resolution of disputes;
ascertaining and rectifying the industrys longstanding
payment problems have been conducted:
continuation of work while arrears were not settled;

late settlement of final account;

delay in certification of interim payments; and

other obstacles to payment.

52
sidebar

CONSTRUCTION ACTUAL EXPENDITURE(2004/05 TO 2013/14) & MID-TERM


Public PRIVATE
LONG-TERM
Public PRIVATE
EXPENDITURE SECTOR SECTOR SECTOR + SECTOR

FORECAST FOR PUBLIC electrical & mechanical works

AND repair, maintainance, alteration & additional works

PRIVATE SECTORS civil works

(2014/15 TO 2023-24) building works

UPPER BOUND LINE


LOWER BOUND LINE

HK$ HK$
Billion Billion
260 ACTUAL EXPENDITURE MID-TERM FORECAST LONG-TERM FORECAST 260
(2004/05 TO 2013/14)
240 240

220 220

200 200
CONSTRUCTION EXPENDITURE

180 180
(IN SEPTEMBER 2013 PRICES)

160 160

140 140

120 120

100 100

80 80

60 60

40 40

20 20

0 0
5

06

07

-10

-11

13

14

15

16

17

18

19

20

4
-2
1-1

-2

-2

-2
0

-0
-0

6-
2-

4-

8-
5-
3-

7-
10
6-

9-
4-

5-

20
09

22
21

23
07

08

1
1

1
1
1
1

1
20
0

20

1
20
20
0

20
0

20
20
20

20

20
20
20

20

20
20
20
20
20
20

20

YEAR
Figure 1 Construction Expenditure Forecast for Public and Private Sectors in Hong Kong (2014/15 to 2023/24)2

The survey also revealed that payment problems were chain. It revealed that:
more serious in the private sector than the public sector. A
rough projection undertaken by the researcher indicated Subcontracting was prevalent in the construction
that outstanding payments held up by the upper-tier industry 90% of main contractors had sub-contracted
contracting parties to the contractors and subcontractors construction works to subcontractors; 60% of sub-
could be in the region of more than HK$10 billion. The contractors had sub-contracted construction works
projected figures, albeit rough, were quite alarming. to sub-sub-contractors; and 68% of consultants had
Further detailed investigation was hence called for and a engaged sub-consultants;
Task Force on Security of Payment Legislation was set Cash flow throughout the supply chain was a serious
up by the CIC in 2010 to take up this task in collaboration issue difficulty in receiving payments existed within
with the Development Bureau (DevB) of the Government the industry. Subcontractors appeared to have suffered
of the Hong Kong Special Administrative Region. the most from problems due to cash flow issues. 57% of
the subcontractors considered payment problems to be
Survey on Payment Practice in either very serious or serious, whilst 49% of suppliers,
the Construction Industry 45% of main contractors, and 37% of consultants
shared the same view;
In 2011, the DevB, with the support of the CIC and
the governments Census and Statistics Department, Quantum of outstanding payments was substantial
commissioned another industry-wide Survey on Payment the average outstanding payments per annum for
Practice in the Construction Industry. The survey covered the reference period between 2009 and 2010 were
some 8,100 companies from across the construction HK$9.4 billion for main contractors (equivalent to
supply chain; and, unlike the previous surveys, this one 8% of total business receipts), and HK$9.9 billion for
extended the scope to collect stakeholders view on the subcontractors (equivalent to 12% of total business
effectiveness of possible legislative and administrative receipts);
measures to secure payments in the construction supply

53
sidebar
Adoption of pay if/when paid conditional payment Specialist Subcontractor - The Hong Kong Federation
practices was prevalent - 50% of the respondents in of Electrical and Mechanical Contractors Limited noted
the subcontractor and consultant sectors said that that legislative measures and administrative measures
the practice of conditional payments in this form was were not mutually exclusive. Enhanced administrative
imposed upon them by upper-tier parties; 39% of measures could be introduced and adopted in
main contractors adopted such conditional payment parallel with the development of Security of Payment
practice in contracts with lower-tier parties; and 16% of legislation.
subcontractors engaged in similar practice with lower-
tier parties; Domestic Subcontractor - The Hong Kong Construction
Sub-Contractors Association felt that legislation was
Payment problems were more serious in contracts necessary as various administrative measures adopted
adopting pay if/when paid conditional payment by the industry had not provided an adequate and
clauses; effective means to improve the underlining payment
practice along the construction supply chain.
The majority of subcontractors (74%) and suppliers
(79%) considered conditional payment practices as not
acceptable/not reasonable; Drafting Security of Payment
Legislation
Disagreements and disputes between contracting
parties were the major reasons for payment problems In October 2012, the DevB followed up the survey results
encountered by the main contractors, subcontractors, and CICs recommendations by forming a Working Group
and consultants; and on Security of Payment Legislation for the Construction
Industry to take forward the preparatory work for
In general, it was considered by the respondents that enacting the Security of Payment legislation. The Working
both administrative and legislative measures would Group is chaired by the DevB and comprises members from
be very effective or effective in resolving payment across the construction industry, including employers/
problems with regard to public works; while only developers, main contractors, subcontractors, as well as
legislative measures would be very effective or effective the CIC, the Hong Kong International Arbitration Centre,
with regard to private works. and professional bodies.

The CIC Report on Security As at the time of writing this article in late October 2014,
of Payment Legislation to work has begun on the drafting of the proposed Security of
Improve Payment Practices in Payment legislation and the government has announced a
the Construction Industry target of 2015/16 for introducing the Bill to the Legislative
Council. The government originally proposed to start
In September 2012, the CIC submitted a Report on Security public consultation in 2014, but there have been signs
of Payment Legislation to Improve Payment Practices in of slippage. The tentative consultation period has been
the Construction Industry to the DevB reaffirming the revised from April to July 2015.
construction industrys views and urging the government
to look at enacting Security of Payment legislation in Hong Although the exact form of the proposed Security of
Kong. In broad outline, the stakeholders views were: Payment legislation in Hong Kong is currently under
review, it is quite possible that it will contain, in some
Developer - In an effort to maintain the principle of form, the following provisions:
big market, small government in Hong Kong, The
Real Estate Developers Association of Hong Kong set Statutory right to progress payment;
out that legislative measures should only be proposed
when all other administrative measures have been Ban on pay if/when paid conditional payment
exhausted and proved ineffective. clauses;

Main Contractor - The Hong Kong Construction Statutory right to suspend work for non-payment;
Association pointed out that the implementation of
various administrative measures adopted in recent Statutory adjudication process to settle disputes during
years was only modestly effective in curing the the construction project; and
payment problems within the public sector, and
ineffective within the private sector. Legislation was Enforcement of the adjudication decision.
therefore considered as the most efficient way to tackle
the extensive and widespread problems arising from If statutory adjudication is introduced in Hong Kong, it is
disputes that impacted payments in the construction likely that dramatic changes on how disputes are handled
industry. and resolved in the local construction industry will result.

54
sidebar

Looking Ahead construction enterprises to invest and carry out business


in Hong Kong, thereby improving the citys infrastructure
The construction supply chain has long been suffering delivery capacity and increasing competition. As
from the difficulty or failure to receive timely payment for employers improve their cash flow, it is also hoped that the
works performed. This reality is reflected in the survey proposed legislation will combat wage arrears.
results and comments from industry stakeholders. The Further information will be published as developments
CIC Hong Kong recognises the need to put in place a form occur in Security of Payment legislation in Hong Kong, so
of Security of Payment legislation for the construction stay tuned.
industry and has been urging the government to press on
with legislative drafting work. A solution to longstanding
payment problems is imminently needed given the slew
of ongoing construction projects and those that are in the
pipeline.

Enacting Security of Payment legislation will likely have


a transformative effect on the local construction industry,
changing longstanding payment practices and protecting
the vulnerable position of the lower-tier contracting
parties. Although the exact form and effect of the future
Security of Payment legislation are yet to be seen, it is
hoped that, as the Secretary of Development put it , the
proposed legislation will enhance the cash flow of the
construction supply chain and attract more overseas

As employers improve their cash flow, it is also hoped that the


proposed legislation will combat wage arrears.

endnotes
1. Government of the Hong Kong Special Administrative Region, Upcoming Consultation Exercises.
Legislative Council Panel on Development Initiatives of Development http://www.gov.hk/en/theme/bf/consultation/upcoming.htm
Bureau in the 2014 Policy Address and Policy Agenda, January 2014. (accessed on 22 October 2014).

2. Construction Industry Council, Construction Expenditure Forecast for 4. Government of the Hong Kong Special Administrative Region,
Public and Private Sectors - 2014/15 to 2023/24, August 2014. Speaking Notes on Works Policy Areas of the Secretary for
Development tabled at the Finance Committee Special Meeting of the
3. Government of the Hong Kong Special Administrative Region, Legislative Council, 10 April 2014.

Christopher To is the Executive Director of the Construction Industry Council in


Hong Kong. He is an independent mediator and arbitrator who is on the panels of
various leading global alternative dispute resolution bodies. He has handled a variety
of complex international cases as mediator and arbitrator. Mr. To was previously the
Secretary-General of the Hong Kong International Arbitration Centre and currently is
the Chairman of the East Asia Branch of the Chartered Institute of Arbitrators, an At-
Large Council Member of the Inter-Pacific Bar Association, an Executive Committee
Member of the Hong Kong Corporate Counsel Association, a Council Member of the
Hong Kong International Arbitration Centre and the Asian Domain Name Dispute
Resolution Centre.

55
sidebar

Mansource Interior Pte Ltd v Citiwall


Safety Glass Pte Ltd [2014] SGHC 87: Natural
Justice: Re-balancing the Rights
of Parties under the Building and
Construction Industry Security of
Payment Act (Chapter 30 B)
By Timothy Ng Wai Keong

Introduction the litigants, fundamental points of natural justice in


this context have only recently been examined by the
Singapore Courts.
1. The Building and Construction Industry Security of
Payment Act (SOPA) seeks to improve cash-flow in
4. The decision in Mansource is significant not only
the construction industry by giving parties the right to
because of its impact on the practice of filing
seek progress payments for work done, and providing
adjudication applications, but also for the relief it gives
fast and low-cost adjudication to resolve payment
to practitioners who often find it difficult to take on
disputes. Like all construction industry adjudication
adjudication responses due to a relatively limited pool
processes, it prescribes tight timelines with a view to
of resources and the very demanding schedule set for
improve cash-flow. This inevitably leads to parties
responsive submissions in the adjudication process.
trying to make use of these tight timelines to weaken
the presentation of their opponents cases. This
has led to cases where adjudicators have made their Facts of the Case
determinations based on procedural grounds and
parties were by reason of the draconian rules prevented 5. The appellant, Mansource Interior Pte Ltd, and
from fully presenting their entire case.1 respondent, Citiwall Safety Glass Pte Ltd, were
involved in an adjudication conducted in accordance
2. In the recent case of Mansource Interior Pte Ltd v with the SOPA.
Citiwall Safety Glass Pte Ltd [2014] SGHC 87, the High
Court held that the Singapore Mediation Centre, as 6. During the course of the adjudication, the appellant
an Authorised Nominating Body under SOPA, had no lodged its adjudication response (AR) with the
authority to reject documents lodged at the Singapore Singapore Mediation Centre (SMC) at 4:32 pm on
Mediation Centre after its closing hours and that parties 5 September 2013. It had received the adjudication
serving documents pursuant to SOPA have the right to application at 5:25 pm on 29 August 2013. The
serve documents up until 11:59 pm on the final day for adjudicator rejected the appellants AR when coming
lodgment of documents. Denying parties the full time to his determination. The adjudicator relied on Rule
to file documents was viewed by the High Court as a 2.2 of the Singapore Mediation Centres Adjudication
breach of natural justice. Procedure Rules (SMC Rules) which provided that
the opening hours of the SMC are from 9:00 am to
3. Litigation involving such points is not common in 4:30 pm on weekdays and that any document lodged
adjudication cases. This is because there are very high after 4:30 pm shall be treated as being lodged the next
stakes when it comes to adjudication, the process is working day. On this basis, the adjudicator found that
swift, and the timelines are strictly enforced. As such, the AR was lodged on 6 September 2013. Since the
many practitioners err on the side of caution and serve last day for lodging an AR was 5 September 2013, the
the relevant documents well within the specified time response was out of time and accordingly rejected by
frame. Even though an adjudication determination the adjudicator pursuant to s 16(2)(b) of the SOPA.
is not final and may be reversed at trial or arbitration,
cash flow is important for all parties to construction 7. The appellant appealed on the ground that the
contracts. Notwithstanding that there have been adjudicator wrongly rejected its AR. The appellant
numerous opportunities for litigation on points of this also relied on two other grounds, fraud and an alleged
nature, conservative practice is so prevalent that those failure of the adjudicator to consider the material
opportunities have not been taken up by parties2. As before him. These points, however, were discussed
the courts can only decide on issues referred to it by and dismissed by the High Court.

56
sidebar

Denying parties the full time to file documents was viewed by


the High Court as a breach of natural justice.

Holding 12. This language from the High Court decision in W Y


Steel was quoted with approval in the CA decision7, but
the CA ruled that nothing turned on the submission of
8.
The High Court set aside the adjudication
the adjudication response after 4:30 pm as W Y Steel
determination on the ground that the adjudicators
had emailed its AR directly to the adjudicator on the
failure to consider the AR constituted a breach of
evening of the last day of lodgment. Two propositions
natural justice3. According to the court, the adjudicator
can be inferred from this ruling.
had incorrectly relied on Rule 2.2 of the SMR Rules and
rejected the AR that was lodged at 4:32 pm on the final
13. Firstly, as Tan JC ruled in Mansource, parties have
day for lodgment as being out of time. Tan Siong Thye
until 11:59 pm on the last day of lodgment to lodge the
JC (as he then was) held that the adjudicator was wrong
relevant documents under SOPA. Secondly, it suggests
to have rejected the AR as this was a breach of natural
that the CA is open to allowing parties to lodge
justice. Instead, parties should have until 11:59 pm on
documents directly by email with the adjudicator,
the final day for lodgment to lodge their documents
thereby bypassing the Authorised Nominating Body.
because the operative provision on timing is s. 15(1) of
SOPA, not Rule 2.2 of the SMC Rules4.
14. The first proposition is well-founded on section 16(3)
(c) of the SOPA, when it is read to give a plain and
Analysis ordinary meaning to the word day as the entire 24-
hour period.8
9. It is very clear from the case law that the grounds for
setting aside an adjudication determination are limited
15. The second proposition is also based on section 16(3)
and that the court will not review the merits of an
(c) of the SOPA. Under section 15(1) of the SOPA, the
adjudication determination.5
respondent must lodge the adjudication response with
the Authorised Nominating Body; however, section
10. However, just as an applicant deserves not to have its
16(2)(b) only directs an adjudicator to reject an AR that
payment improperly withheld, the respondent also
is not lodged within the period referred to in section
deserves its chance to present why it is entitled to
15(1), which is seven (7) days. It does not direct the
withhold payment to the applicant. This recent ruling
adjudicator to reject an adjudication response because
by the High Court in Mansource demonstrates the
it was lodged with a person other than the Authorised
courts disapproval of the treatment of adjudication
Nominating Body as specified in section 15(1). This
submissions under the SMC rules and re-aligns the
reasoning nicely fits the situation where the respondent
process with the time limits contemplated by SOPA.
in the adjudication application is willing and able to
This correctly re-balances the rights of the parties
lodge its adjudication response within seven (7) days,
under SOPA and secures a just outcome consistent
but the Authorised Nominating Body is not available
with principles of natural justice.
and/or open to receive it. Natural justice provides
that the respondent should be allowed to lodge its
11. The ruling by the High Court is not surprising given
adjudication response, but since the Authorised
the backdrop of key cases leading to this case. In
Nominating Body is not open and consequently the
Mansource, Tan JC (as he then was) relied on the Court
respondent cannot comply with section 15(1), it would
of Appeal (CA) decision in W Y Steel Construction
be just to allow the respondent to directly lodge the
Pte v Osko Pte Ltd [2013] 3 SLR 380 which affirmed the
adjudication response with the adjudicator.
High Court decision in the same case where Justice Lee
Sieu Kin J noted at [8]:

The SMCs role is only to accept whatever document


is filed and to note the time and date of filing. The
decision whether it is late, and the consequence of
that, should be left to the adjudicator to make.6

57
sidebar

The Right to Present Ones Case team to service the client. These lawyers and their
clients would greatly benefit from not having their
and the Tactical Abuse of timelines shortened more than is required by the SOPA.
Process Reducing the Time for Moreover, clients may be pleased that the decision
Adjudication Responses to Be in Mansource may have an impact on reducing fees,
Lodged as their lawyers are given more breathing space. It is
market practice that lawyers who take on adjudication
16. It is not uncommon for adjudication applications to response cases tend to charge at least twice their
be filed for tactical advantages immediately before ordinary hourly rates because of constrained time
public holidays or weekends, thereby reducing time for limits under SOPA. Any measure that gives relief to
respondents to respond. Illustratively, the applicant help clients reduce these rates will allow them greater
lodges its adjudication application on a Friday. The access to legal representation and likely function to
respondent will have to lodge its adjudication response decrease the overall costs of adjudication.
within the next seven (7) days, i.e. by the next Friday.
However, if there is a public holiday that falls within
Practical Ramifications
this seven (7) day period, then under the SOPA9 it is
not considered to be a day. The respondent would
18. The decision of the High Court sends a strong message
technically have until Saturday to lodge its adjudication
to the Authorised Nominating Body that it plays a
response. However, the SMC is not open on Saturday
facilitative role in the adjudication process and should
for the respondent to lodge the necessary documents,
not, therefore, adopt rules that affect the substantive
and the respondent would therefore have to lodge the
rights of the parties. As this case has shown, the SMC
documents by that Friday. This problem of shortening
has no authority to reject documents and deem them
the respondents time frames would be aggravated if
lodged the next day simply because they are submitted
the public holiday happens to fall on the last day for
after its office hours. In this context, the SMC should
filing, i.e. the following Friday. In such event, based on
re-consider another of its rules that is likely to be struck
SOPA, the respondent is entitled to file its adjudication
down as breaching natural justice. This is rule 2.1 of
response by Saturday. However, as the SMC is not
the SMC Rules, which states that all documents must
open during the weekends and as the previous day,
be lodged by hand.10 Section 37(1) of the SOPA states
Friday, is a public holiday, the respondent would have
that documents may be served, lodged, provided, or
to file its adjudication response by Thursday. This
submitted by either (1) personal delivery, (2) leaving
effectively denies the respondent one full day. Instead
it during normal business hours at the usual place of
of getting an extra day (i.e. 8 days) to file by virtue of a
business of the person or (3) by sending it by post or
public holiday interposing the seven (7) calendar day
facsimile transmission to the usual or last known place
response period, the respondent now has only six (6)
of business of the person. The obvious tension here
calendar days to file the adjudication response.
is that the SMC closes at 4:30 pm on weekdays, and
does not open on weekends and public holidays. If
17.
Furthermore, this timing problem is compounded
the ruling Tan JC in Mansource is correct, then the two
by the need to retain counsel. It is important to
propositions in W S Steel should kick in simultaneously
note that not all adjudication respondents have
to achieve the practicable result that the relevant
solicitors on retainers, and amongst those who do,
documents may be served directly on the adjudicator
not all have solicitors who are immediately ready to
by 11:59 pm on the last day of lodgment.
prepare adjudication responses and adhere to the
strict timelines under the SOPA. Accordingly, it is not
uncommon for litigants to lose at least one day before
they secure solicitors who are able to act on their behalf,
after sieving through those who are conflicted out or
who simply do not have the time and/or resources to
take on the engagement. Amongst those who actually
do take on the job, not all have the luxury of a large

58
sidebar

Conclusion
It has been common practice for lawyers and
19.
their clients to force fit their work within reduced,
conservative timelines established by the SMC. But
Mansource stands for the proposition that shortened
deadlines that are inconsistent with SOPA may
constitute a breach of natural justice. The tactical
employment of early closing times on weekdays
and closures on weekends and public holidays to
further shorten already constricted timelines given to
adjudication respondents is obviously an abuse of the
adjudication process and timelines stipulated by the
SOPA that ought to be evaluated and re-balanced using
sound principles of natural justice.

20. Notwithstanding Mansource, it is prudent for parties


to lodge documents within the timelines stipulated by
the SMC Rules as this case is pending appeal and the
Court of Appeal may reverse the High Courts decision.
Moreover, it is costly to appeal an adjudication
determination to the High Court and/or the Court of
Appeal and, on balance, it may be more economical
to simply pay a higher premium for work to be done
on an urgent basis than to file an appeal. It is hoped,
however, that the Court of Appeal will affirm the High
Courts rejection of this unfairness in the adjudication
process which arbitrarily unbalances the rights of the
parties, prejudices adjudication respondents, rewards
tactical games playing, and breaches the natural rights
of responding parties.

endnotes
1. For instance under section 15(3) of SOPA, the adjudicator is precluded
from considering defences raised by the respondent in the adjudication 5. Lee Wee Lick Terence v Chua Say Eng [2013] 1 SLR 401 at [66][67].
response, which were not previously stated in the corresponding
payment response. Such defences, if raised in court or arbitration 6. WY Steel Construction Pte Ltd v Osko Pte Ltd [2012] SGHC 194, at
would certainly not be excluded by reason of the respondent not raising paragraph [8].
such defences prior to the court or arbitration proceeding.
7. W Y Steel Construction Pte v Osko Pte Ltd [2013] 3 SLR 380, at paragraph
2. For example, in Choi Peng Kum and another v Tan Poh Eng Construction [9].
Pte Ltd [2013] SGHC 272, an adjudication involving adjudication
responses lodged out of time, Justice Woo Bih Li observed, at paragraph 8. [2014] SGHC 87, at paragraph [15].
[16], that neither party raised the issue of whether the adjudicator was
wrong in rejecting the adjudication response as out of time. 9. SOPA section 2.

3. [2014] SGHC 87, at paragraph [29]. 10. Singapore Mediation Centre Adjudication Under The Building And
Construction Industry Security Of Payment Act (Cap 30b) (Rev Ed 2006)
4. [2014] SGHC 87, at paragraphs [15] and [23]. Adjudication Procedure Rules, Rule 2.1.

Timothy Ng Wai Keong is an accredited adjudicator and arbitrator with the KLRCA and
has also been appointed to the panel of arbitrators of several institutions in Singapore.
He is the managing director of Timothy Ng LLC, a boutique law corporation focusing
on corporate and commercial disputes. Timothys principal areas of practice are
construction, professional negligence, and shareholder disputes. He is frequently
instructed to act as counsel by fellow practitioners and clients and also accepts
appointments as arbitrator and adjudicator. Timothy teaches construction law at the
National University of Singapore where he is an adjunct assistant professor. Timothy
would also like to thank Mr Lee Yu Ming who was a trainee in Timothy Ng LLC for his
assistance in the production of this article.

59
decision notes

Capitol Avenue Development Sdn Bhd v Bauer (Malaysia) Sdn


Bhd (24C-5-09/2014)(Capitol Avenue)

UDA Holdings Berhad v Bisraya Construction Sdn Bhd and


MRCB Engineering Sdn Bhd (24C-06-09/2014)(UDA Holdings)

On 31 October 2014, an oral decision of the High The UDA Holdings case also emerged from an
Court of Malaya at Kuala Lumpur (Commercial adjudication administered by the KLRCA. In the
Division), was announced by Dato Mary Lim, J., adjudication proceeding, Bisraya Construction
in Capitol Avenue Development Sdn Bhd v Bauer MRCB Engineering Consortium asserted claims
(Malaysia) Sdn Bhd, Originating Summons No.: against UDA Holdings Berhad. Thereafter, UDA
24C-5-09/2014, and UDA Holdings Berhad v Bisraya Holdings Berhad filed the originating summons
Construction Sdn Bhd and MRCB Engineering Sdn as plaintiff seeking, inter alia, to set aside the
Bhd, Originating Summons No.: 24C-06-09/2014. adjudication proceedings and/or to have the
The written decision had not been released when adjudication proceedings declared null and void.
this Newsletter was submitted to its graphics and In support of its positions, UHA Holdings Berhad
printing consultants. The following summary is submitted that the payment claims at issue arose
believed to be accurate, but caution is recommended before 15 April 2014 and therefore were not subject
until the release of the official written decision of the to CIPAA 2012. UDA Holdings Berhad further
High Court.* submitted that costs relating to extensions of time
are not within the meaning of payment as the
The Capitol Avenue proceeding stemmed from an word is defined in section 4, CIPAA 2012.
adjudication administered by the KLRCA between
Sara Timur Bauer JV (Claimant) and Capitol Avenue On 31 October 2014, the High Court orally ruled
Development Sdn Bhd (Respondent). Capitol that CIPAA 2012 applies to construction contracts
Avenue Development Sdn Bhd filed the originating entered into before 15 April 2012 and to payment
summons as plaintiff and named Bauer (Malaysia) disputes arising before 15 April 2012 with section 41
Sdn Bhd as defendant. In relevant part, plaintiff carving out from the application of CIPAA 2012 only
submitted that CIPAA 2012 was inapplicable to the those payment disputes that had been commenced
payment dispute and the construction contract at in court or arbitration before 15 April 2014. As for
issue because (1) the payment dispute arose before the extension of time issue, the court left it to be
the operative date of CIPAA 2012 and, similarly, (2) resolved in the first instance by the adjudicator.
the construction contract under which the payment
dispute arose was entered into before the operative
date of CIPAA 2012.

*This article was compiled from several sources who attended the hearing on 31 October 2014 and kindly
provided summaries from their notes on the oral ruling by the court. Any errors that may occur in this article,
however, are those of the editor.

60
happenings

KLRCA CIPAA CIRCULAR 02

CIRCULAR ON KLRCAS RECOMMENDED


SCHEDULE OF FEES (Amended as at 1st August 2014)
The Construction Industry Payment and Adjudication Act comments and concerns in the imposition of the standard
2012 (CIPAA) and Construction Industry Payment and fees under the Regulations.
Adjudication Regulations 2014 (Regulations) came into
effect on the 15th April 2014. Therefore the KLRCA recommends an alternative
adjudicator fee schedule to reduce the likelihood of
The Schedule of Fees under the Regulations sets out the adjudicators declining appointment due to the low fees.
standard fees for services and expenses of an adjudicator The recommended adjudicator fees takes into account
as imposed by the Ministry of Works. factors such as the quality of professionalism required of
an adjudicator, the timeline within which an adjudicator
The KLRCA is of the view that the schedule of fees under will be required to complete the adjudication as well as the
the Regulations may not be reasonable enough to attract claimed amount involved in an adjudication.
qualified and experienced people capable of working
under the very tight deadlines imposed by the CIPAA 2012. The adjudicator and parties can agree to adopt the KLRCA
The KLRCA highlighted its concerns to the Ministry of Recommended Schedule of Fees at any time during the
Works that should the scale fee be set too low there is a negotiations of the adjudicators terms of appointment
high likelihood that the selected adjudicator will try to and fees chargeable.
negotiate with the parties to agree on a reasonable fee
acceptable to the selected adjudicator, and decline the KLRCAs Recommended Adjudicator Fee Schedule is set
appointment if such an agreement cannot be reached. out below:
However, the Ministry of Works did not incorporate our

1.1 KLRCAs recommended adjudicator fee schedule

Amount In Dispute Adjudicators Fees (RM)

Up to 150 000 8 400

150 001 to 300 000 8 400 + 3.5% of excess over 150 000

300 001 to 800 000 13 650 + 1.3% of excess over 300 000

800 001 to 1 300 000 20 150 + 1.25% of excess over 800 000

1 300 001 to 1 800 000 26 400 + 1.1% of excess over 1 300 000

1 800 001 to 2 300 000 31 900 + 0.7% of excess over 1 800 000

2 300 001 to 2 800 000 35 400 + 0.5% of excess over 2 300 000

2 800 001 to 3 300 000 37 900 + 0.683% of excess over 2 800 000

3 300 001 to 5 000 000 41 315 + 0.65% of excess over 3 300 000

5 000 001 to 10 000 000 52 365 + 0.365% of excess over 5 000 000

10 000 001 to 15 000 000 70 615 + 0.38% of excess over 10 000 000

Over 15 000 000 89 615

61
happenings

1.2 Adjudicator fees to be paid by the parties as directed by 2.3 The expenses covered by the per diem above shall
the adjudicator. include the following items:

Adjudicator fees prescribed in sub-paragraph


1.3 Hotel accommodation
1.1 excludes the 10% administrative support fee Meals/beverages
prescribed in Schedule III of the KLRCA Adjudication Laundry/dry cleaning/ironing
Rules & Procedure and all taxes as may be imposed by City transportation (excluding airport transfers)
the Government of Malaysia on the fee earned by the Communication costs (telephone, fax, internet
adjudicator. usage etc)
Tips
2. Expenses
2.4 Expenses to be paid by the parties as directed by the
2.1 An adjudicator who is required to travel outside his adjudicator.
place of residence to conduct a site visit and the like
will be reimbursed with an economy class airfare, A copy of the KLRCA Recommended Schedule of Fees
reasonable mileage claim (as agreed by both parties) or together with the complete set of the KLRCA Rules &
as prescribed by KLRCA or any other reasonable fare Procedure can be found at: www.klrca.org
for mode of transportation (as agreed by both parties)
whichever is applicable, subject to the submission
of invoice, receipt or in original or such evidence Dated 1st August, 2014.
acceptable to the KLRCA.

2.2 A per diem of RM1800 shall be paid to an adjudicator


who is required to travel outside his place of residence
to conduct a site visit and the like, whenever overnight
accommodation is required. Where no overnight PROFESSOR DATUK SUNDRA RAJOO
accommodation is required, a per diem of RM900 shall DIRECTOR OF KLRCA
be paid.

62
happenings

KLRCA CIPAA CIRCULAR 1A

CIRCULAR BY KLRCA ON THE SCOPE OF APPLICATION


OF CIPAA AND THE ADMINISTRATION OF
ADJUDICATION CASES BY KLRCA

The KLRCA through Circular 01 issued on 23rd April Given that the issue relating to the scope of the application
2014 had advised that the KLRCA would administer of CIPAA 2012 has been determined by the High Court, the
adjudication cases in accordance with the position taken KLRCA will comply and administer adjudication cases in
therein. accordance with the decision of the High Court.

On the 31st October 2014, the High Court in UDA HOLDINGS Therefore the KLRCA will henceforth register and
BHD V BISRAYA CONSTRUCTION SDN BHD (24C-6- administer adjudication cases filed with it under CIPAA
09/2014) and CAPITAL AVENUE DEVELOPMENT SDN BHD 2012 provided that the relevant requirements of the KLRCA
V BAUER (M) SDN BHD (24C-5-09/2014), had determined Adjudication Rules & Procedure are complied with.
that CIPAA 2012 was intended to apply retrospectively,
namely, subject to sections 3 and 41 of the Act, the Act This Circular 1A supersedes Circular 1 issued on 23rd April
applies to every construction contract made in writing 2014 with immediate effect.
within the meaning of Section 4 of the Act regardless of
when it was made and under which a payment claim is
made.

Section 3 provides that CIPAA 2012 shall not apply to a


construction contract entered into by a natural person for
any construction work in respect of any building which is
less than four storeys high and which is wholly intended Dated this 11th November 2014.
for his occupation.

Section 41 provides that CIPAA 2012 shall not affect the


proceedings relating to any payment dispute under a
construction contract which had been commenced in
Court or Arbitration before the coming into operation of PROFESSOR DATUK SUNDRA RAJOO
the Act. Director of KLRCA

63
happenings

Majestic Hotel, Kuala Lumpur


/ 9 13 August 2014
KLRCA Adjudication Training Programme

The Construction Industry Payment & Adjudication Act (CIPAA For the eighth time since the first training programme in
2012), the CIPAA Regulations 2014, and the CIPAA Exemption September 2012, the flagship KLRCA Adjudication Training
Order 2014 became operative as of 15 April 2014. Programme was conducted on 9 13 August 2014. The venue was
the Majestic Hotel in Kuala Lumpur.
Regulation 4 of the Construction Industry Payment & Adjudication
Regulations 2014 (CIPAA Regulation) prescribes that The adjudication training programme continues to focus on CIPAA
2012, but this focus is now supplemented by attention to the
The competency standard and criteria of an adjudicator are as Regulations, the Exemption Order, and the KLRCA Adjudication
follows - Rules & Procedure. The training programme continues to
underscore the form and substance of a well-written adjudication
(a) the adjudicator has working experience of at least seven years decision.
in the building and construction industry in Malaysia or any
other fields recognised by the KLRCA; The KLRCA awards Certificates in Adjudication in accordance
with Regulation 4(b) to those who pass the written examinations,
(b) the adjudicator is a holder of a Certificate in Adjudication thereby evidencing their attainment of competency standard
from an institution recognised by the Minister; sand criteria requirements of the CIPAA Regulations.

(c) the adjudicator is not an undischarged bankrupt; and For the eighth session of the training programme, there were
twenty-eight participants from backgrounds such as law,
(d) the adjudicator has not been convicted of any criminal offence engineering, quantity surveying, architecture, and contracting.
within or outside Malaysia. Experienced experts in the fields of construction dispute
resolution and adjudication, Ir Harbans Singh, Mr Lam Wai Loon,
As a result of the operation of CIPAA and the CIPAA Regulations, and Mr Chong Thaw Sing, conducted the training programme.
it is imperative that there be adequate numbers of well-trained
adjudicators for the KLRCA and stakeholders in the construction
industry may call upon to conduct adjudications.

In anticipation of the operation of CIPAA and prior to 15 April


2014, the KLRCA had conducted seven training programmes
to train adjudicators and provide a Certificate in Adjudication
to those who successfully passed the examinations given to
participants in the training programmes. Approximately four-
hundred participants successfully participated in the previous
seven training programmes and have been certified by the KLRCA
as adjudicators under CIPAA.

64
happenings

Bayview Hotel, Penang / 15 August 2014


Construction Industry Payment & Adjudication Act 2012
(CIPAA 2012) Talk

In light of the operative date of CIPAAA 2012 on 15th April 2014, on and questions presented by CIPAA 2012 and the accompanying
15 August 2014, a Construction Industry Payment & Adjudication Regulations. The apt title of his talk was CIPAA 2012: Issues
Act 2012 (CIPAA 2012) talk was organised by the KLRCA in Penang on Implementation. Mr Lam Wai Loon guided the audience
at the Bayview Hotel Georgetown. An enthusiastic crowd of more through the adjudicatory process contemplated by the CIPAA
than 150 people from all the stakeholders in the construction Regulations and the KLRCA Adjudication Rules & Procedure in his
industry in Penang crowded the Sri Gangsa Hall to hear Ir Harbans discussion titled Understanding the CIPAA Regulations & KLRCA
Singh, Mr Lam Wai Loon, and Ms Lai Jen Li speak on CIPAA 2012. Adjudication Rules.

Ms Lai Jen Li, the Acting Head of Legal Services of KLRCA, The audience engaged the speakers with thoughtful questions
started the discussion with her talk titled CIPAA The Past, during the question and answer session that followed the
Present & Future. Ir Harbans Singh then spoke on several Issues prepared presentations by the speakers.

Renaissance Hotel, Kuala Lumpur / 5 July 2014


#1 Practical Drafting & Defending of Adjudication Claims

As the official adjudication authority under the Construction in accordance with CIPAA 2012 sections 5 & 6,; starting the
Industry Payment & Adjudication Act 2012 (CIPAA 2012), the adjudication stage controlled by CIPAA 2012 Part II; selecting
KLRCA designed a new course intended to be experienced as and appointing adjudicators pursuant to sections 21-23; and the
a practical workshop on drafting and defending adjudication written submissions that are called for in each of these phases of
claims. adjudication under CIPAA 2012.

It was offered for the first time on 5 July 2014 at the Renaissance Mr. Chong Thaw Sing offered Typical Payment Dispute Claim
Hotel Kuala Lumpur. Close to 80 participants drawn from almost Scenarios before dividing the participants into six working
all sectors of the construction industry affected by CIPAA 2012 groups for workshop sessions. In two separate workshop sessions,
attended the first session of this course which is contemplated to participants were given case scenarios to analyse and discuss in
be given periodically through the year. the first instance with tutors and in a subsequent second session
using a hypothetical case study as the foundation for completing
KLRCAs Director, Professor Datuk Sundra Rajoo, opened the the CIPAA 2012 forms accurately and correctly.
workshop with a speech welcoming the participants, reviewing
the history of CIPAA 2012, and stressing the critical role in the In concluding the course, Professor Datuk Sundra Rajoo, Ir
adjudication process played by the payment claim and response Harbans Singh, Mr. Lam Wai Loon, Mr. Chong Thaw Sing, Mr.
submissions. Daniel Tan, Mr. Thayananthan, and Ms. Samrith Kaur convened
an authoritative question and answer session that provided a
Ir Harbans Singh and lawyer Lam Wai Loon guided the fitting ending to an informative and interesting day.
participants through a series of presentations that stressed
the practical components of making and responding to a claim

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MSA membership
1. TYPE OF MEMBERSHIPS
1.4.3 Have practiced as an adjudicator or counsel representing parties
Membership of this Society shall be open to persons whose duties, in the adjudication, arbitration or litigation of disputes for not
activities, work, business and/or services are such as to cause them to less than 10 years and satisfy Council as to his proficiency in the
deal, participate, or work in the area of the law and/or practice relating law and practice relating to adjudication. Provided always, that
to adjudication. Council may waive this requirement in the case of a candidate
who has at least 5 years experience as aforesaid and passes any
There are 4 categories of Membership which are as follows:- assessment or examination as may be prescribed by Council
from time to time to evaluate the candidates proficiency in the
a. Affiliates; law and practice relating to adjudication.
b. Associates;
c. Members; and 1.4.4 Provided always that Council may, in exceptional circumstances,
d. Fellows. waive the requirement that the candidate for election as a
Fellow shall have attained the age of Thirty Five Years in the case
The word Council used below shall mean The Council of the of candidates holding a professional qualification recognised
Society. by Council as justifying such a waiver or the requirement of a
period of satisfactory training.
1.1 AFFILIATES
1.4.5 Provided always that Council may, at its discretion, directly
1.1.1 Any graduate, undergraduate or person who is unable to qualify elect into the Fellow category candidates who are already
as an Associate under the conditions stipulated to apply as an Fellows of a national Society or organisation where Council
Associate but who intends to so qualify shall be entitled to join considers the candidate to be a fit and proper person to be so
the Society as an Affiliate provided he satisfies the Council that elected.
he/she is fit in all respects to be a proper person for admission as
an Affiliate. 1.4.6 Provided always that the Council may, in exceptional
circumstances set out below, waive totally or partly the
1.1.2 Any person admitted as an Affiliate shall take up approved requirement that the candidate for election as a Fellow shall
training to qualify as an Associate within 5 years of his/her have been a Member of the Society for not less than five years
admission as an Affiliate, failing which any extension of in the case of:-
membership as an Affiliate shall be subject to the approval of
Council and Council may prescribe such conditions thereto as it (a) a candidate who has been actively practicing as an
thinks fit. adjudicator, arbitrator or counsel in the settlement of
construction disputes for not less than five years, who
1.2 ASSOCIATES (AMSAdj) satisfies the Council as to his/her proficiency in the law
and procedure relating to adjudication, and who is of
Associates shall be elected by Council and every candidate for election considerable reputation in adjudication matters; or
shall fulfil the following conditions in that he/she:-
(b) a candidate who has been actively involved in adjudication
1.2.1 Be proposed and seconded by Fellows or Members of the in the settlement of construction disputes in his/her
Society; capacity as adjudicator or counsel or as administrative
head or director of a national or international adjudication
1.2.2 Satisfies the Council that he/she is fit in all respects to be Society or body, and with whom the Council is satisfied as
a proper person for admission and not one who had been to his/her proficiency in the law and procedure relating to
convicted of any criminal offence by the courts of law; adjudication, and whose election as a Fellow would in the
opinion of the Council, enhance or promote the image or
1.2.3 Be engaged in a profession, occupation or calling in which there reputation of the Society; or
is recourse to adjudication directly or indirectly;
(c) a candidate who is or has been a Judge of the High Court
1.2.4 Be over twenty-one years of age at the date of submitting an (or its equivalent) or a Judge of a Court of higher hierarchy,
application for membership; and whether in Malaysia or outside Malaysia, and with whom
the Council is satisfied as to his/her proficiency in the law
1.2.5 Has obtained a degree or equivalent qualification from a and practice relating to adjudication.
university or tertiary educational body acceptable to the
Council 1.4.7 Counsel shall include any person who represents a party in an
adjudication and conducts the adjudication on its behalf.
1.3 MEMBERS (MMSAdj)
2. SUBSCRIPTION FEE
1.3.1 Members shall be elected by the Council.
2.1 Annual subscriptions and Entrance Fees for membership shall
1.3.2 Every candidate for election as a Member: be as follows:

(a) shall fulfil the conditions for election to be an Associate as Membership Entrance Fee Annual Subscription Fee
stated above (read with the provisos);
Affiliate RM 50.00 RM 50.00
(b) he or she satisfies the Council either as to his/her actual Associate RM 250.00 RM 150.00
involvement in the adjudication process as an Member RM 250.00 RM 200.00
adjudicator, counsel, expert witness or advisor, or as to his/
her actual experience in making judicial decisions for not Fellow RM 250.00 RM 250.00
less than two years in a court of law or judicial tribunal, or
as to his/her proficiency in the law and procedure relating Entrance Fee shall be payable only once upon the first admission to
to adjudication; and the membership of the Society. A candidate whose membership is
upgraded to a higher category in a particular year shall, in addition to
(c) he or she satisfies the competency standard and criteria of the annual subscription for his previous category, also pay an annual
an adjudicator as set by the Kuala Lumpur Regional Centre subscription for the higher category in respect of the same year.
For Arbitration, or such other equivalent qualification as
may be recognised by the Council. 2.2 A member who has attained the age of 65 years or more shall
be exempted from payment of annual subscriptions provided
1.3.3 Provided always that the Council may, at its sole discretion, that for 5 years preceding such exemption he/she had been a
waive totally or partly the requirements aforesaid and directly member in good standing and had fully paid up all dues to the
elect into the Member category candidates who are employees Society.
or officers of the Kuala Lumpur Regional Centre for Arbitration
holding position as an Executive or above. 3. APPLICATION FOR MEMBERSHIP

1.4 FELLOWS (FMSAdj) Every application for membership should be made in the prescribed
form provided by the Society and submitted to the Council for
Fellows shall be elected by the Council and every candidate for approval.
election shall:-
All membership form must be submitted in full and must be legible.
1.4.1 Be a member of the Society for a period of not less than five Membership form shall be submitted together with a copy of
years and be over the age of thirty five years on the date of his relevant academic certificates/KLRCA Certificate in Adjudication and
application. applicable membership fee.

1.4.2 Satisfy the Council that he is a fit and proper person to be made Cheques for payment shall be issued in favour of Malaysian Society
a Fellow. of Adjudicators.

66
MSA membership
Kindly complete the registration form as below and send it together with the
required documents via:

FAX : +603 2271 1010

EMAIL : events@klrca.org

MAIL : Yip Xiaoheng


Kuala Lumpur Regional Centre for Arbitration
Bangunan Sulaiman, Jalan Sultan Hishamuddin
50000 Kuala Lumpur, Malaysia
TEL : +603 2271 1000
FAX : +603 2271 1000

For enquiries, please contact Yip Xiaoheng at +603 2271 1000 or email events@klrca.org

MEMBERSHIP APPLICATION FORM

Name (as per NRIC/ Passport)

NRIC No/ Passport No

Membership Type (Kindly tick where applicable)


Affiliate Associate Member Fellow

Organization (if applicable)

Position

Correspondence Address



Postcode State Country
Telephone Mobile Fax
Email

(Please ensure that the telephone number and e-mail address given are valid ones for communication purposes)

Payment (Kindly tick where applicable)


Relevant academic certificates/KLRCA Certificate in Adjudication


Payment for Membership Fee RM Cheque No.

(Please refer to the Subscription Fee table for amount payable)

DECLARATION FOR OFFICE USE ONLY


I hereby declare that the documents enclosed Ref No.
herein are true and accurate to my knowledge.
I have read and understood the terms and
conditions in this Registration Form.

Approved by

(Signature)

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