COMFORT MANAGEMENT PTE LTD V OGSP ENGINEERING PTE LTD  SGCA 19
Previously, we examined the Singapore Court of Appeal’s (CA) decision in Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd  SGCA 4 which dealt with the time for service of payment claims and the consequences failing to provide a payment response in an adjudication under the Building and Construction Industry Security of Payment Act (Cap. 30B) (“SOPA”)
The adjudication theme continues as we consider the CA’s judgment of Comfort Management Pte Ltd v OGSP Engineering Pte Ltd  SGCA 19 (“Comfort Management”).
Here, the CA provided clarity on three important legal issues in an adjudication where no payment response has been provided by a respondent (“No Response Adjudication”).
The facts of Comfort Management are typical of a No Response Adjudication.
OGSP Engineering Pte Ltd (“OGSP”) was Comfort Management Pte Ltd’s (“Comfort”) sub-contractors for the supply and installation of ventilation and ducting system for a warehouse construction project. In March 2017, OGSP issued a payment claim for $890,262.23. Comfort did not issue any payment response.
OGSP lodged an adjudication and obtained a determination in its favour. Comfort applied to set aside the determination. Comfort alleged, amongst others, that the adjudicator had failed to consider patent errors in OGSP’s claims. The application was dismissed by the High Court. Comfort appealed. The CA dismissed the appeal.
EXTENT OF ADJUDICATOR’S DUTY TO ADJUDICATE
Prior to Comfort Management, it was commonly understood that in a No Response Adjudication, an adjudicator’s role was constrained to a deliberation on patent errors in a payment claim.
In Comfort Management, the CA clarified that this should not be the approach. The CA held that an adjudicator should not look only for the ‘absence of patent errors’ as it would wrongly place the focus on the respondent to show why the claim should not be allowed, as opposed to the claimant justifying why the payment claim should be allowed. The adjudicator “must consider the material properly before him and made an independent and impartial determination” whether to allow a payment claim. The adjudicator must “address his mind to the true merits of the claim and must at a minimum determine whether the construction work in the payment claim has been carried out and, if so, what its value is”. All matters delineated in section 17(3) of SOPA must be considered as it is both a prescriptive and restrictive provision.
In assessing the claim, an adjudicator need only be satisfied to a prima facie standard that the claim is supported by the facts and materials before him.
CHALLENGES A RESPONDENT MAY RAISE IN NO RESPONSE ADJUDICATION
The CA confirmed that a respondent who has failed to file a payment response or adjudication response still has the right to raise patent errors on the face of the material that is properly before the adjudicator. This is grounded in his right to ensure that the adjudicator properly discharges his duty by examining the material before him and identifying patent errors, if any, because of which a payment claim should be refused.
The CA however stressed that the category of patent errors is an “extremely narrow and limited one”. Patent errors are obviously recognizable errors in the material that is before an adjudicator when he is making his decision. The respondent may not go any further and attack the merits of the payment claim, as this would run afoul of the restriction imposed by section 15(3)(a) of SOPA that a respondent cannot raise any reasons for withholding payment which should have been raised in a payment response.
COURT’S ROLE IN SETTING ASIDE
A court may set aside adjudication determinations where a “mandatory provision” of the SOPA has been breached. Section 17(3) such a provision as it is an integral component of an adjudicator’s duty to adjudicate and is thus a critical feature of adjudication scheme in the SOPA.
The decisive test for breach of section 17(3) is an adjudicator’s failure to recognize a patent error in the materials properly before him. The court would then infer that he failed his duty to consider all the matters set out in section 17(3) and could not have been satisfied, to a prima facie standard, that the construction works were completed, or their appropriate value.
A reviewing court must not engage in a review of the merits of an adjudicator’s determination, such as arguments that the evidence put before the adjudicator was insufficient to support the payment claim.
WHETHER A CLAIM FOR VARIATION WORKS WITHOUT COMPLIANCE WITH CONTRACTUAL PROCEDURAL REQUIREMENTS IS A PATENT ERROR
One of Comfort’s main complaint about the determination was that the adjudicator had allowed OGSP’s claims for variation works despite OGSP’s failure to comply with the contractual procedural requirements for variation works.
The CA rejected Comfort’s complaint. It was held that a claimant’s failure to follow a prescribed procedure in parties’ contract, such as claims for variation works or retention sums, will not disentitle him from such claims. The fact of non-compliance with contractual procedure does not translate into a patent error in the payment claim.
This decision underscores the importance of an adjudicator’s duty in No Response Adjudications. Their duty goes beyond merely checking for obvious errors. Adjudicators must ensure that the Claimant’s claims are justified on a prima facie level i.e. that there is enough evidence to support each element of the Claimant’s claims.
Another takeaway from this decision, is that “it is overwhelmingly in a respondent’s interest to file a payment response”. Though a respondent will be entitled to raise patent errors, the lack of a payment response or adjudication response will only make it that much harder to identify patent errors which the adjudicator failed to identify”.
Tan Joo Seng
Director, Tyto LLC
Abhinav R Mohan
Associate, Tyto LLC