Feb 20, 2018 - 20 November 2016, the day on which the subcontract entitled Audi to serve a payment claim, that Audi inte
CONSTRUCTION LAW CASE UPDATE 20 February 2018
THE VALIDITY OF SOPA CLAIMS SERVED EARLY & WAIVER OF JURISDICTIONAL OBJECTIONS Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd [2018] SGCA 4
SUMMARY The Court of Appeal in Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd [2018] SGCA 4 upheld the validity of a post-dated payment claim served under a construction contract which specified that payment claims were to be served on the “20th day of each calendar month”. The subcontractor thought that it was not feasible to serve a payment claim on Sunday, 20 November 2016 as the employer’s offices were closed, and instead served the payment claim in question on the Friday before. However, the payment claim itself was post-dated 20 November 2016. The Court of Appeal also gave guidance on the circumstances in which a respondent may be taken to have waived any objection to the validity of a payment claim’s service or to be estopped from doing so due to a failure to file a payment response.
Sunday when Kian Hiap’s offices were closed. Audi therefore served a payment claim on Friday, 18 November 2016, but post-dated the payment claim to 20 November 2016. Kian Hiap did not issue a payment response. Subsequently, Audi applied for adjudication under the Building and Construction Industry Security of Payment Act (“SOPA”) and the adjudicator issued an adjudication determination in Audi’s favour. Before the adjudicator and the High Court, Kian Hiap challenged the validity of the payment claim th on the basis that it had not been served on the 20 day of the month as required under the subcontract. While the adjudicator rejected Kian Hiap’s argument and decided in favour of Audi, the High Court agreed with Kian Hiap and set aside both the adjudicator’s determination and the order granting leave to enforce. Audi then appealed to the Court of Appeal against the High Court’s decision that the payment claim was invalidly served on 20 November 2016 and that Kian Hiap had not waived its right to object to the premature service of the payment claim. Audi argued that the applicable date for service of the payment claim was “by (and not on)” 20 November 2016, and that even if Audi had served the payment claim prematurely, Kian Hiap had waived its right to object to the allegedly premature service of the payment claim by failing to object at the earliest possible opportunity; that is, the deadline for serving a payment response. Kian Hiap maintained that the payment claim was prematurely served as the subcontract expressly provided for payment claims to be served only on th the 20 of each month. Further, Kian Hiap argued that it was not possible to waive a mandatory or jurisdictional provision of the SOPA and that, in any event, it had not waived its objections to the payment claim.
BACKGROUND In October 2015, Kian Hiap Construction Pte Ltd (“Kian Hiap”) engaged Audi Construction Pte Ltd (“Audi”) under a subcontract for the execution of structural works for a nursing home. The subcontractor, Audi, was entitled to serve a payment claim on the “20th day of each calendar month”. However, 20 November 2016 fell on a
DECISION OF THE COURT OF APPEAL The Court of Appeal disagreed with the High Court and allowed Audi’s appeal. While the Court of Appeal agreed with the High Court that the parties’ contract was clear and provided for the service of payment claims on (and
not by) the stipulated date, the payment claim was nonetheless validly served.
First, Audi had “good reason” for effecting service of the payment claim before 20 November 2016, namely, that the deadline fell on Sunday, when Kian Hiap’s office was closed.
Second, there could not have been any confusion as to the payment claim’s operative date. It must have therefore been clear and obvious to Kian Hiap from the fact that the payment claim was dated 20 November 2016, the day on which the subcontract entitled Audi to serve a payment claim, that Audi intended for the payment claim to be served and operative only from that date.
challenges can therefore properly be raised for decision by the adjudicator.
The Court of Appeal then indicated that in their view, the rights conferred by parties under both the construction contract and the SOPA were rights which were capable of being elected and/or waived. In particular, the Court of Appeal held that a respondent had a duty to raise jurisdictional objections in its payment response, and if it failed to do so, the respondent would be taken to have waived its right to raise such objections and be estopped from raising such objections.
COMMENT
However, the Court of Appeal clarified that if there was no good reason for early service of the payment claim, such service would not be valid. Hence, the decision in this case did not mean that it would always be acceptable for payment claims to be served early. For example, if serving a payment claim early might cause confusion as to its operative date, such service would not be valid.
The Court of Appeal’s decision takes a pragmatic approach to service of payment claims under the SOPA. In determining whether there is “good reason” to permit early service, the relevant considerations would include whether:
service of the payment claim on the respondent is practically impossible;
The Court of Appeal also noted that, going forward, parties should note the provisions of the Interpretation Act which permitted obligations originally to be performed on a Sunday or public holiday to be considered valid if performed the next day (without clarifying if the time for serving a payment response would begin to run from the original contractual date or the actual date of performance).
the mode of service is effective in drawing the respondent’s attention to the payment claim, thus affording him the full opportunity to respond; and/or
the respondent could reasonably claim to have been confused as to the operative dates.
Given its decision that the payment claim was valid, there was no need for the Court of Appeal to rule on the waiver point. Nonetheless, the Court of Appeal made several remarks:
The Court of Appeal first stated that adjudicators have the power to decide matters relating to their substantive jurisdiction (departing from views which had previously been expressed in Lee Wee Lick Terence (alias Li Weili Terence) v Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) and another appeal) [2013] 1 SLR 401). Arguments concerning jurisdictional
Nonetheless, to reduce such uncertainty, the construction contract should clearly prescribe how and when payment claims are to be served, with contingencies for office closure, public holidays and weekends. Further, given the potential for abuse, the stipulated time for serving payment claims should not be expressed as being on a particular date, but rather by a particular date. The Court of Appeal has expressed the view that a respondent may in principle waive its rights or be estopped from raising jurisdictional objections in the event it does not do so at the earliest opportunity. This would mean that, for SOPA claims, the respondent has to raise jurisdictional objections on the basis of an invalid payment claim 2
or invalid service of a payment claim by the deadline for the payment response.
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