CONSTRUCTION LAW
PAYMENT CLAIMS
ENTITLEMENTS AND LIMITATIONS by Jimmy Yap, Accredited Adjudicator (Partner) and Daphne Tan (Associate), CNPLaw LLP, Singapore In 2019, the Court of Appeal considered whether a contractor had the right to apply for adjudica on under the Building and Construc on Industry Security of Payment Act (“SOP Act”). The construc on contract in that case incorporated, with some modifica ons, the standard terms of the Singapore Ins tute of Architects’ Ar cles and Condi ons of Building Contract (Measurement Contract) (“SIA Form Contract”), and the claimant-contractor served the relevant payment claims on the respondentdeveloper a er the architect had already issued a final cer ficate in accordance with the terms of the construc on contract. The respondent-developer argued that these payment claims were invalid as they were not accompanied by an architect’s cer ficate, as required under the SIA Form Contract. The Court of Appeal ruled in favour of the respondent-developer. This ar cle provides a brief summary of the decision and key takeaway points for those in the construc on industry. The case before the High Court In Yau Lee Construc on (Singapore) Pte Ltd v Far East Square Pte Ltd [2018] SGHC 261 (“Yau Lee”), the developer argued that the adjudica on determina on ought to be set aside on the basis that the adjudicator had no jurisdic on to determine the adjudica on applica on [1]. The developer argued this to be the case as the payment claims submi ed by the contractor and which formed the basis of the claimant’s adjudica on applica on were submi ed a er the architect had already issued a final cer ficate. The developer argued that as a consequence of having been submi ed a er the architect’s issuance of the final cer ficate, the payment claims fell outside the scope of the SOP Act [2]. The High Court ruled in favour of the contractor on the basis of the duty to speak espoused in Audi Construc on Pte Ltd v Kian Hiap Construc on Pte Ltd [2018] 1 SLR 317 (“Audi Construc on”) [3]. The High Court accepted the contractor’s argument that the developer was estopped from objec ng to the validity of the payment claim in ques on as the developer failed to serve a payment response in rela on thereto [4].
The case before the Court of Appeal The developer appealed, and in the case of Far East Square Pte Ltd v Yau Lee Construction (Singapore) Pte Ltd [2019] 2 SLR 189 (“Far East”), the Court of Appeal considered whether the developer had a duty to speak in respect of the payment claims in question. The Court of Appeal answered this question in the negative. The Court of Appeal interpreted the relevant clauses of the SIA Form Contract and held that the SIA Form Contract imposed as a condition precedent to 24
THE SINGAPORE ENGINEER January 2020
a contractor’s right to payment, an architect’s certification of the value of the works that have been done [5]. Having held that the said condition precedent had not been and, indeed, could not have been fulfilled in relation to the payment claims in question, the Court of Appeal held that the duty to speak referred to in Audi Construction was not engaged. The Court of Appeal held that the said duty to speak arose, in respect of objections to the jurisdiction of an adjudicator in an adjudication under the SOP Act, only in relation to payment claims which fell within the scope of the SOP Act, and that the payment claims in question did not.
The ra onale underscoring the Court of Appeal’s decision The SIA Form Contract does not expressly state that the issuance of an architect’s cer ficate is a condi on precedent to a contractor’s en tlement to payment and/or to apply for adjudica on under the SOP Act. However, the Court of Appeal’s finding was well-reasoned on the following bases: • Whilst sec on 5 of the SOP Act provides that any person that has carried out any construc on work under a contract is en tled to a progress payment, sec on 6(a) provides that the quantum of the said en tlement “shall” be calculated “in accordance with the terms of the contract”. In other words, sec on 5 s pulates the circumstances in which a contractor is en tled to a progress payment (namely, when the contractor has carried out any construc on work or has supplied any goods or services under a contract), whilst sec on 6 prescribes that the said en tlement must be quan -
