Shimizu Corporation v Stargood Construction Pte Ltd  SGCA 3
This is a Court of Appeal decision rendered in 2020 concerning an application to set aside two adjudication determinations relating to the submission of payment claims following the termination of a sub-contract.
This decision touches on the “dual railroad track system” for making payment claims which has been accepted and understood by the industry as a norm since the Singapore High Court’s decision in Tienrui Design & Construction Pte Ltd v G & Y Trading and Manufacturing Pte Ltd  5 SLR 852 (“Tienrui”) in 2015.
After this decision, do parties have separate rights under contract and statute to make payment claims? What impact will this have on contract negotiations for main and subcontractors alike? This decision by the apex court will clarify matters and provide clearer guidance for construction contracts.
The appellant, Shimizu Corporation (“Shimizu”), engaged Stargood Construction Pte Ltd (“Stargood”) as one of their subcontractors for a project which incorporated (with amendments) the Real Estate Developers’ Association of Singapore Design and Build Conditions of Contract (3rd Ed, 2013) (the “Subcontract”).
In brief, parties’ payment claim mechanism under the subcontract was as follows:
Sometime before March 2019, Shimizu alleged breaches by Stargood and issued a Notice of Default, subsequently terminating the Subcontract with Stargood on 22 March 2019. On 30 April 2019, Stargood served Payment Claim No. 12 (“PC12”) on Shimizu for works done prior to termination and proceeded to lodge an Adjudication Application on 4 June 2019 (“AA203”) following a lack of payment response.
Stargood appeared to be cognisant that their case in AA203 could be deterred by the issue of improper service, and elected to serve Payment Claim No. 13 (“PC13”) on 31 May 2019. The content of the claims in PC13 was essentially identical to PC12. Stargood also proceeded to file an adjudication application on PC13 (“AA245”) on 5 July 2019.
AA203 was dismissed due to improper service of PC12, and more importantly, the adjudicator found that PC12 was served after Shimizu had already terminated the Subcontract, rendering the Project Director functus officio as regards his function of certifying payment claims under the payment claim mechanism.
AA245 was also dismissed by the adjudicator as he determined that parties were bound by the adjudication determination in AA203.
Stargood subsequently filed OS 1099 of 2019 to set aside the adjudication determinations. The High Court found that Shimizu had only terminated Stargood’s employment rather than the entire Subcontract. This finding in effect determined that the payment claim mechanism survived the termination. Further, the High Court found that the Building and Construction Industry Security of Payment Act (Cap 30B, Rev ed 2006) (“SOPA”) provided Stargood with the “independent right to progress payments, even if the entire Subcontract had been terminated”.
The High Court thus set aside both adjudication determinations and granted a declaration that Stargood was entitled to serve further payment claims for work done prior to the termination of the Subcontract.
The appellant in the present case applied to set aside the orders made by the Judge below.
The Singapore Mediation Centre (‘SMC’) has issued Supplementary Rules for Electronic Adjudication Lodgement (‘Supplementary Rules’) which provide for lodgement of documents electronically, telegraphic transfer of fees, electronic service of documents and online Adjudication Conferences.
The Supplementary Rules take effect on 15 April 2020. A copy of the latest version of the Supplementary Rules is available for download at the SMC’s website.
These Rules are a welcome update especially with the ongoing COVID 19 situation. With the Supplementary Rules, the entire Adjudications Application process can be carried out virtually. Adjudication Application and Adjudication Responses can be lodged electronically with the SMC and Adjudication Conferences can be held using online virtual meeting platforms. These measures should reduce costs for parties; increase the efficacy of the process while at the same time allowing parties to comply with safe distancing protocols.
Our director, Mr Tan Joo Seng, has published an article in the SAL Practitioner.
The article is entitled " What a Difference A Day Makes - When Does the Time for Lodging an Adjudication Application Start and End?"  SAL Prac 29.
The period for lodging an adjudication application is a critical period. Making an adjudication application outside the period will result in a rejection by the adjudicator. There are however two schools of thought on when the period starts and ends. The article considers these views and provides a definitive answer.
The article can be downloaded from the SAL's website or by clicking on this link.