SECTION 17 (2A) OF THE SOP ACT: ARE CLAIMS FOR DAMAGES EXCLUDED FROM AN ADJUDICATOR’S JURISDICTION?

Range Construction Pte Ltd v Goldbell Engineering Pte Ltd [2020] SGHC 1919  (“Range Construction”)
 
Decision Date: 10 Sept 2020
 
INTRODUCTION

Range Construction Pte Ltd (“RC”) was Goldbell Engineering Pte Ltd’s (“GE”) contractor.
 
RC obtained an adjudication determination in its favour against GE.
 
However, RC was dissatisfied with the adjudicator’s decision to allow GE’s claim for liquidated damages of $852,000.00.
 
RC applied to the High Court (“HC”) set aside the adjudication determination. One of the grounds relied on by RC was that the adjudicator did not have the power to determine GC’s claim for liquidated damages.
 
The HC disagreed with RC’s contention and dismissed the application.  In doing so the HC briefly commented on Section 17 (2A) of the SOP Act.  This appears to be the first reported observations on Section 17 (2A) which came into effect on 15 December 2019.  We will discuss this aspect of the HC’s decision in this post.
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BRIEF FACTS
 
RC was engaged as GE’s contractor by a letter of award dated 19 April 2017. The contractual completion date was 7 September 2018.
 
On 2 December 2019, it served a payment claim on GE to claim for the sum of $2.4M. It included a claim for the release of the first half of the retention sum. GE served a payment response to the claim where it claimed for, amongst others liquidated damages for delay.
 
Contractually, RC was entitled to the release of the first half of the retention sum after a “Handing Over” certificate (“HO Cert”) was issued by GE.  The HO Cert signified substantial completion and put a stop to the accumulation of liquidated damages. GE contested the claim on the ground no HO Cert had been issued and counterclaimed for liquidated damages for RC’s delay.
 
In assessing the claim for liquidated damages, the adjudicator determined that the works were completed only on 17 November 2018 and thus GE was entitled to liquidated damages for the period 8 September to 17 November 2018. Further, the adjudicator allowed the release of the first half of the retention sum.
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HC’S DECISION

RC raised two primary arguments in its challenge to the determination. Firstly, it submitted that liquidated damages were not claimable under the SOP Act as it was in the nature of damages and was not a claim for construction work done. As such, the adjudicator had no power to allow any liquidated damages in his determination. RC argued that this was supported by the introduction of section 17 (2A) of the SOP Act, which was to preclude complex claims for prolongation costs, damages, losses or expenses.  
 
The HC did not accept RC’s position. It considered that employers are entitled to claim for liquidated damages in a payment response and an adjudicator was empowered to determine it under section 17 (3)(d) of the SOP Act.  Here, GE was entitled to impose liquidated damages under the contract, and this had to be taken into account by the adjudicator in order to determine the amount payable to RC under the contract.

With regard to section 17 (2A), the HC opined that it was intended to cover a “contractor’s damage claims for the employer’s actions” and for the contractor’s “loss and expense” claims. The introduction of section 17 (2A) did not mean that liquidated damages were not within the ambit of an adjudicator’s jurisdiction.
 

COMMENTS
 
Section 17 (2A) of the SOP Act provides:
 
“17 (2A)  In determining an adjudication application, an adjudicator must disregard any part of a payment claim or a payment response related to damage, loss or expense that is not supported by:
 
a) any document showing agreement between the claimant and the respondent on the quantum of that part of the payment claim or the payment response; or 

b)any certificate or other document that is required to be issued under the contract.” 

From our experience, the scope of application of section 17 (2A) has been a source of consternation to practitioners of construction law since it came into effect on 15 December 2019. There are two areas of ambiguity. The meaning of “damage” and, the phrase “other document that is required to be issued under the contract” in sub-section (a).
 
If “damage” is construed in the broad sense to include damages arising from breach of contract as indicated by the HC in Range Construction, section 17 (2A) could potentially exclude many categories of set-offs claimed by employers against contractors. For example, a claim for costs of rectification of defect could arguably be considered to be a claim for damages for breach of contract. It could arguably exclude general damages for delay. Such an interpretation would significantly smoothen adjudication process for claimants. The same cannot be said for respondents who would then have to resort to other legal dispute resolution processes to pursue their set-offs for damages.
 
In our humble view a definitive and authoritative interpretation of section 17 (2A) is still up in the air.  This is because the HC’s observations on section 17 (2A) in Range Construction was obiter dicta.  Section 17 (2A) did not apply on the adjudicator in Range Construction as the payment claim had been served on 2 December 2019, well before the date when Section 17 (2A) came into effect on 15 December 2019. 
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Tan Joo Seng
E: js.tan@tytolaw.com