Case Summaries

Civil Tech Pte Ltd v Hua Rong Engineering Pte Ltd

SUPREME COURT OF SINGAPORE

2 March 2018

Case summary

Civil Tech Pte Ltd v Hua Rong Engineering Pte Ltd
Civil Appeal No 153 of 2017

-------------------------------------------------------------------------------------------------Decision of the Court of Appeal (delivered by Chief Justice Sundaresh Menon):

Outcome: CoA holds that under the SOPA, a respondent to a payment claim may not withhold payment on the basis of Cross-Construction Contract Claims.

Pertinent and significant points of the judgment

  •       CoA holds that a respondent to a payment claim under the Building and Construction Industry Security of Payment Act is not entitled to rely on Cross-Construction Contract Claims to withhold payment.

1          Civil Appeal No 153 of 2017 was an appeal by Civil Tech Pte Ltd (“Civil Tech”) against the decision of Justice Tan Siong Thye (“the Judge”) in Hua Rong Engineering Pte Ltd v Civil Tech Pte Ltd [2017] SGHC 179.

Facts

2          By two separate contracts (“the T211 Contract” and “the C933 Contract”), Civil Tech engaged Hua Rong Engineering Pte Ltd (“Hua Rong”) as its sub-contractor to supply labour for two construction projects.            

3          Hua Rong submitted a payment claim to Civil Tech for work done under the T211 Contract (“the Payment Claim”). In its payment response, Civil Tech sought to raise a set-off to the Payment Claim based on claims under the C933 Contract.

4          Hua Rong subsequently commenced adjudication proceedings in relation to the Payment Claim. The adjudicator held that the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) did not permit Civil Tech to set-off claims under the C933 Contract against monies due under the T211 Contract, and accordingly determined that Hua Rong was entitled to the claimed sum.

5          Civil Tech applied to court to set aside the adjudication determination. The Judge held that in an adjudication under the Act (“a SOPA adjudication”), a respondent to a payment claim was only entitled to rely on reasons for withholding payment (“withholding reasons”) arising out of the contract on which the payment claim was based (“the Payment Claim Contract”). The Judge therefore dismissed Civil Tech’s application to set aside the adjudication determination.

Decision on appeal

6          The Court of Appeal dismissed Civil Tech’s appeal.

7          The Court of Appeal held that under the Act, the respondent to a payment claim was not entitled to withhold payment based on a claim or asserted set-off which did not arise from the Payment Claim Contract, but from a separate construction contract that was also governed by the Act (a “Cross-Construction Contract Claim”) (at [45]).

8          First, a plain reading of the relevant provisions of the Act and the Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed) (“the Regulations”) indicated that Cross-Construction Contract Claims were not valid withholding reasons (at [45(a)]). Section 15(3) of the Act was not material to the issue at hand (at [52]). However, ss 17(3) and 11 of the Act indicated that a respondent to a payment claim was not entitled to raise, nor was an adjudicator entitled to consider, Cross-Construction Contract Claims as withholding reasons (at [58] and [63]). Other provisions of the Act and the Regulations also indicated that the inquiry in a SOPA adjudication related to the claimant’s entitlement under the Payment Claim Contract, and not to its entitlement taking into account claims arising under separate contracts (at [68]).

9          Second, it would not be consistent with the purpose and scheme of the Act for a respondent to be permitted to raise Cross-Construction Contract Claims to withhold payment (at [71]). Such a position would not cohere with the Act’s purpose of facilitating cash flow to downstream contractors (at [72]). Furthermore, if a respondent could raise Cross-Construction Contract Claims to withhold payment, it would be able to evade the deadlines which the Act prescribes for the contract(s) on which such claims were based. Such a result would cut against the statutory scheme (at [76]).

10        In this appeal, Civil Tech sought to withhold payment based on claims arising under the C933 Contract, which were Cross-Construction Contract Claims. Civil Tech was not entitled to do so. The Court of Appeal therefore dismissed the appeal (at [79]).

11        Finally, the Court of Appeal observed that it was not necessary for the court to decide whether the Judge’s holding that the only valid withholding reasons under the Act were those arising from the Payment Claim Contract (“the Single Contract Interpretation”) was correct. The court left the question of whether the Single Contract Interpretation was correct for another day (at [80]).

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court's grounds of decision.

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