ADJUDICATION UPDATE

Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd [2018] SGCA 66
 
INTRODUCTION
Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd [2018] SGCA 66 is the fourth Court of Appeal decision rendered in 2018. It concerned an application to set aside an adjudication determination issued under the SOP Building and Construction Industry Security of Payment Act (Cap. 30B) (“SOPA”) for an alleged breach of natural justice by the adjudicator.
 
In this post, we highlight one aspect of the Court of Appeal’s decision which will have important practical significance to claimant’s and respondent’s in the SOPA adjudication process. This is the standard of persuasion that should be applied by an adjudicator and which has to be met by the parties in order to succeed in their respective claims or set-offs. 

FACTS
The claimant in the SOPA adjudication was Glaziers Engineering Pte Ltd and the respondent was WCS Engineering Construction Pte Ltd.
 
The respondent was the main contractor in the Hillford condominium development project (“The Hillford Project”). The claimant were the respondent’s sub-contractors for the aluminium, stainless steel and glazing works for the Hillford Project
 
When the claimant served a payment claim on the respondent under SOPA for outstanding payments due under the subcontract, the respondent resisted the claim on the basis that it was entitled to set off the costs it had incurred in connection with the claimant’s defective works namely, the shattering shower screens, against any payments due to the claimant.
 
The matter proceeded to adjudication. During the proceedings, neither party addressed the adjudicator on the standard of persuasion against which he should assess the respondent’s asserted entitlement to a set-off.
 
In his determination, the adjudicator allowed the claimant’s claim and rejected the respondent’s set-off claim on the basis that the latter was not made out “beyond reasonable doubt”. Thus, the adjudicator appeared to have applied a burden of proof of “beyond reasonable doubt” in assessing the respondent’s set-offs.
 
The respondent applied to have the adjudication determination set aside on the ground that the adjudicator had breached the principles of natural justice by failing to afford the respondent an opportunity to address him on the applicable standard of persuasion. The High Court judge set aside the adjudication determination. The claimant was dissatisfied with the High Court’s decision and appealed to the Court of Appeal.  
 
The Court of Appeal allowed the appeal and upheld the adjudicator’s decision.

DECISION
The Court of Appeal held that the adjudicator did not breach the principles of natural justice.

The Court of Appeal was of the view that since the respondent’s set-offs were disputed at the adjudication proceedings, both parties ought to have realised that the standard of persuasion was an important issue. However, despite this the parties chose not to address the adjudicator on this point. That being the case, they could not complain of any breach of natural justice.
 
In any event, even the adjudicator had applied the correct standard of persuasion, which is that of a prima facie case, it would have made no difference to the outcome of the adjudication application as there was insufficient evidential basis for the set-off.

 
COMMENTS
In arriving at its decision, one of the preliminary points considered by the Court of Appeal related to the standard of persuasion which the adjudicator ought to have applied. This issue arose because if a breach of natural justice was present on the facts, the court would have to consider whether the adjudicator’s breach of natural justice (if any) caused the respondent to suffer any prejudice.
 
On this point, the Court of Appeal, following its earlier decision in Comfort Management Pte Ltd v OGSP Engineering Pte Ltd [2018]1 SLR 979, held the correct standard of satisfaction to be applied by an adjudicator in an adjudication under SOPA is that of a prima facie case that the payment claim is supported by the facts. This applied regardless of whether a payment adjudication response has been filed, because it is part of the adjudicator’s core duty to adjudicate.
 
Significantly, the Court of Appeal went on to decide that this is also the standard which ought to be applied to any alleged entitlement to a set-off which a respondent may raise in the payment response. Namely, the same standard applies to both the claimant for its laims and the respondent for its intended set-offs.
 
This pronouncement by the Court of Appeal is important. Before this, there had not been any discussion on the standard of persuasion that should be applied to a respondent’s set-offs.  The clarification will provide an invaluable and consistent benchmark for adjudicators in assessing set-offs in an SOPA adjudication.  Respondents who intend to raise set-off should be mindful of the standard of persuasion in preparing the substantiation for its intended set-offs. 

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Tan Joo Seng
[email protected]