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COMMERCIAL LAW

Ch. 26 Building and Construction Law

1 INTRODUCTION

(1) Basic features of Singapore building and construction law

26.1.1 Building and construction law in Singapore shares common features with its equivalent in other common law jurisdictions. Contracts between participants within the building and construction industry are typically in standard form.

26.1.2 The terms and conditions of standard form contracts used in Singapore are not identical to international contracts, but follow a similar basic structure.

(2) Relevant areas of law: contract, tort and statutes

26.1.3 Aside from the law of contract, the law of torts also has a significant impact on the rights and liabilities of parties in the building and construction industry.

26.1.4 Statutes and regulations also govern the conduct of the industry and give expression to public policy considerations. For instance, as with many of the Commonwealth jurisdictions, Singapore has introduced legislation to govern the substantive rights of parties in terms of payments, and mandatory dispute resolution in support of the right to timely payment.

2 BUILDING AND CONSTRUCTION CONTRACTS IN SINGAPORE

A. Types of contractual arrangements

26.2.1 Building and construction contracts in Singapore have been shaped by both colonial and indigenous arrangements and practices. There are significant differences between local and international standard form contracts; however, the organisational structure of the local standard form and the contractual arrangements between parties fall into internationally recognisable categories, namely:

  • “traditional” contracts;
  • “design and build” contracts; and
  • traditional contracts

(1) Traditional contracts

(i) Appointment

26.2.2 In the traditional system of contracting, the owner or developer of an intended project first engages someone to administer the contract. For a building project, this is typically the architect. Other professionals, such as the quantity surveyor, structural engineer, and the mechanical and electrical engineers are then appointed. Contracts are entered into between the employer and these consultants. Popular standard form contracts for the appointment of:

  • architects: Singapore Institute of Architects (“SIA”) Conditions of Appointment (containing the Scale of Professional Charges) ; and
  • engineers: Association of Consulting Engineers (“ACES”)

(ii) Design

26.2.3 The architect or engineer then prepares a design. The architect (sometimes in collaboration with other consultants) prepares documentation in sufficient detail to enable contractors to submit competitive tenders, such as:

  • drawings;
  • specifications;
  • bills of quantities; and
  • other documentation constituting contract documents.

(iii) Tender, design and /or construction

26.2.4 The successful tenderer is awarded the contract. In the course of construction, the design function is usually left in the hands of the consultants. There will not be any competitive design submitted by contractors.

(iv) Contract arrangements

26.2.5 Contract arrangements between parties in a “traditional” system are generally based on a standard form contract. For the construction of buildings, the most popular forms include standard forms and their derivatives by:

  • The SIA (currently 2016 Ed.) ;
  • The Royal Institute of British Architects (“RIBA”) ; and
  • The Joint Contracts Tribunal (“JCT”).

26.2.6 The public sector has its own set of standard forms for the traditional system, the Public Sector Standard Conditions of Contract for Construction Works (PSSCOC, currently in its 7th Ed (2014)).

(2) Design and build contracts

26.2.7 In recent years, the international and local trend has been to move away from the “traditional system” to alternative contract arrangements. For instance, “design and build” contracts have increased in popularity.

26.2.8 Under a design and build contract, the contractor agrees to accept all responsibility for the structure he constructs. In addition to his usual obligations for the completed work, he also agrees to accept obligations relating to design. Whether a construction contract is a “design and build” contract is a matter of interpretation of the terms: Goh Eng Lee Andy v Yeo Jin Know [2016] 4 SLR 292. It necessarily operates as a lump sum contract in that a contractor has to do everything necessary to achieve what he contracted to do without an adjustment in price.  A design and build contractor would not be able to seek additional payment unless he can show that the works undertaken were substantially different from the original design or that the additional expenses were incurred because of the employer’s breach.

(i) Local standard forms

26.2.9 To accommodate such new arrangements, the following local standard forms are available:

  • For the public sector: Public Sector Standard Conditions of Contract (“PSSCOC”) for Design and Build.
  • Real Estate Developer’s Association, Singapore (“REDAS”) Design and Build Conditions of Contract.
  • The new SIA Building Contract 2016 (Design and Build).

(ii) International standard forms

26.2.10 International standard forms are also available:

  • FIDIC Suite of Contracts that include, the “Yellow Book” (Conditions of Contract for Plant and Design-Build), the “Orange Book” (Conditions of Contract for Design-Build and Turnkey), “the Silver Book” (Conditions of Contract for EPC/Turnkey Projects) and DOB Contract (Conditions of Contract for Design, Build and Operate Projects).
  • JCT Suite of Standard Form Contracts, the latest of which is the 2005 series (with amendments in 2009 and 2011), for use in the construction of petrochemical and pharmaceutical facilities involving the main contractor in the design of the facilities and the procurement of equipment and machinery, bespoke Engineering Procurement and Construction (“EPC”) contracts are commonly used.

B. Types of contracts and related contract documents

(1) Standard form contracts

26.2.11 Standard form contracts usually contain provisions relating to certification of payment, variations, and defective work within its general terms and conditions which usually has priority over any other document forming part of the contract. The standardisation of such terms and conditions makes the administration of such contracts much easier. In addition, the evolution of changes resulting from case law will be more easily identifiable in standard form contracts.

(2) Non-standard form contracts

26.2.12 In contrast, the general terms and conditions of non-standard form contracts, may be less easily identifiable and may require greater scrutiny for contract administration purposes. In the absence of a priority of documents clause, ambiguities could be difficult to resolve and the contra proferentem rule would apply against the contract originator.

(3) Related documents

26.2.13 Disputes could occur if the contract is contained in or evidenced by the main contract together with drawings, specifications, bills of quantities, exchanges of correspondence, and quotations. It may be contested as to which related documents form part of the contract: Ohbayashi-Gumi Ltd v Kian Hong Holdings Pte Ltd [1987] SLR 94; [1987] 2 MLJ 110, CA). Generally, specially drafted provisions or contract documents will take precedence over the printed terms and conditions: Ser Kim Koi v GTMS Construction Pte Ltd [2016] 3 SLR 51. Related documents are either admissible as evidence in the interpretation of contracts, or as express terms. Where a document was signed by the parties and was drafted specifically to govern the relationship between the parties to a subcontract, it was held that the terms of another document, taken from the main contract to which the subcontractor was not a party, could not have been intended to supersede it: Grouteam Pte Ltd v UES Holdings Pte Ltd [2016] 5 SLR 1011.

(i) Admissibility of extrinsic evidence in the interpretation of contracts

26.2.14 In Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029 (“Zurich Insurance”), the Court of Appeal held that s 94(f) of the Evidence Act is “a fundamental rule of interpretation” and governs contractual interpretation in Singapore. S 94(f) allows extrinsic evidence to be admitted in the contextual interpretation of contracts, if the evidence:

  • does not contradict, vary, add to or subtract from the contract’s terms;
  • is relevant, in that it would affect the way in which the language of the document would be understood by a reasonable man;
  • is reasonably available to all contracting parties; and
  • relates to a clear and obvious context.

However, the plain language of the contract must be ambiguous or absurd, before the Court is allowed to interpret the contract differently from that demanded by its plain language.

(ii) As an express term

26.2.15 Aside from written documents, an express term may also be found in diagrams and plans. In Sheng Siong Supermarket Pte Ltd v Carilla Pte Ltd [2011] 4 SLR 1094, a dispute arose as to whether a precondition to the tenancy agreement was that permission would be granted for the premises concerned to be used as a supermarket.

26.2.16 The High Court decided in favour of Sheng Siong. It found that a plan of the premises annexed to the final tenancy agreement showed a supermarket, and therefore constituted an “express provision” in support of such a precondition.

3 ARCHITECTS, ENGINEERS AND SURVEYORS

26.3.1 In Singapore, in order to comply with the requirements of planning and building legislation, the appointment of a `qualified person´ by the employer is often necessary (Building Control Act, Cap 29, s 6(3). The qualified person must be a registered architect or a professional engineer. The qualified person has statutory obligations that he must properly discharge.

A. Architects

(1) Regulated by the Architects Act

26.3.2 Architects in Singapore are regulated by the Architects Act, Cap 12, While the Architects Act does not define who is an architect, “architectural services” are defined under s 2(b) to include selling or supplying for gain or reward any architectural plan, drawing, tracing or the like for use in the construction, enlargement or alteration of any building or part thereof.

(2) Registered architect

26.3.3 Under s 10(1), no one can "draw or prepare any architectural plan, drawing, tracing, design, specification or other document intended to govern the construction, enlargement or alteration of any building or part thereof in Singapore" unless he is a registered architect with a practising certificate or unless he is someone working under the direction or supervision of such an architect. Under s 10(3), the designation “architect” or any of its derivatives cannot be used by anyone unless he is a registered architect.

(3) Board of Architects

26.3.4 A register of architects is kept and maintained by the Board of Architects (see also s 8). The Board is also responsible for the issuance of practising certificates and exercises overall control over the profession. It has power to conduct disciplinary proceedings and may cancel the registration of any registered architect or suspend him from practice in specified circumstances.

(4) Other professional bodies

26.3.5 In addition to registration, most architects are also members of professional bodies. In Singapore, the main body is the Singapore Institute of Architects (SIA) (http://sia.org.sg/). Besides membership of the SIA, architects educated abroad are often also members of foreign professional bodies like the Royal Institute of British Architects (RIBA) for those educated in the United Kingdom

B. Engineers

(1) Regulated by the Professional Engineers Act

26.3.6 In Singapore, engineers are regulated by the Professional Engineers Act, Cap 253. There are no restrictions in Singapore against anyone describing himself as an “engineer”. Under s 2 of the Act, “professional engineering services” and “professional engineering work” are defined; however, there is no definition of the term “engineer” or “professional engineer” in the Act.

(2) Registered engineer

26.3.7 Nonetheless, a person must be properly registered under the Act before he is entitled to call himself a “professional engineer”, or use the word “engineer” or the abbreviation “Er.” or “Engr.” as a title before his name, or to use any word, name or designation that will lead to the belief that the person is a registered professional engineer.

(3) Professional Engineers Board

26.3.8 A Professional Engineers Board was established by the Professional Engineers Act. The Board keeps and maintains a register of professional engineers, a register of practitioners and a register of licensees. The register of professional engineers contains the names, qualifications and other particulars of all persons registered under the Act whereas the register of practitioners, kept and maintained annually, contains the particulars of those professional engineers with practising certificates.

(4) Other professional bodies

26.3.9 Besides registration as a professional engineer, an engineer in Singapore is usually also a member of a professional body, like the Institution of Engineers, Singapore (IES) or Association of Civil Engineers, Singapore (ACES). Many engineers who are trained overseas are also members of foreign professional bodies like the Institution of Civil Engineers, United Kingdom.

C. Quantity surveyors

26.3.10 The term “surveyor” encompasses a large number of fields, including:

  • building surveyors who examine and evaluate defects to buildings;
  • land and hydrographic surveyors;
  • valuers of properties; and
  • quantity surveyors.

(1) Regulated by the Land Surveyors Act

26.3.11 The registration of land surveyors is provided for under the Land Surveyors Act, Cap 156. It is also provided that no person can certify to the correctness or accuracy of any title survey unless he is a registered surveyor who has in force a practising certificate. Surveyors practising other types of survey work, such as topographical, engineering and hydrographic surveying, need not be registered under the Act.

(2) Land Surveyors Board

26.3.12 A Land Surveyors Board is also established by the Act. Among its other functions, it keeps and maintains a register of surveyors, a register of practitioners, and a register of licensees.

(3) Quantity surveyors

26.3.13 Quantity surveyors, who are sometimes described by themselves and other construction professionals as “costs consultants” or “construction economists”, are responsible for the evaluation of construction costs.

26.3.14 These costs would usually include site preparation costs, labour, material and equipment costs, professional fees, taxes and maintenance costs. There are no registration requirements before someone can practise as a quantity surveyor nor are there any prohibitions against anyone styling himself as a quantity surveyor. There is no equivalent of the Board of Architects or the Professional Engineers Board to govern the professional conduct of quantity surveyors.

(4) Singapore Institute of Surveyors and Valuers

26.3.15 Many are also members of the local professional body for valuers and surveyors, namely, the Singapore Institute of Surveyors and Valuers (“SISV”). SISV has three divisions that represent the various fields of surveying, namely, quantity surveyors, land surveyors, and valuation and the general practice surveyors. An acceptable degree or professional qualification and at least two years of relevant postgraduate experience are necessary for membership. A person can also seek membership of professional bodies like the Royal Institution of Chartered Surveyors, United Kingdom which conduct examinations in the various fields of surveying.

D. Duties, obligations and liabilities of owners, architects, engineers and surveyors

26.3.16 The obligations of the owners, architects, engineers and surveyors are determined by the agreement between parties, regulations and statutory requirements, and common law.

(1) Standard form contract

26.3.17 In Singapore, professional bodies like SIA and ACES have published standard form agreements that architects and engineers can put forward to the person engaging them. Contracts of engagement can also be specially drafted, or adapted from the standard form agreements. A contract might just state that the terms and conditions of engagement are to be “in accordance” with the standard agreement of the relevant professional body: Soon Nam Co Ltd v Archynamics Architects [1978-1979] SLR 123.

26.3.18 The arrangement between parties generally determines each party’s duties, obligations and liabilities.

(2) Traditional building contract model

26.3.19 In the traditional building contract model, the obligation of the employer or owner includes:

  • securing planning permission and regulatory permits to enable works to proceed, under the Planning Act (Cap 2323, 1998 Rev Ed) ;
  • allowing the contractor sufficient possession of and access to the site to enable works to proceed, viz. a physical means of access and opportunity to enter the site by this access: LRE Engineering Services Ltd v Otto Simon Carves Ltd (1983) 24 BLR 127 at 137.
  • An obligation to do all things necessary to bring about completion: Evergreat Construction Co Pte Ltd v Presscrete Engineering Pte Ltd [2006] 1 SLR(R) 634.
  • Paying the contractor on time; typically, this is made through progress payments on an interim valuation of works completed up to a particular date or milestone.
  • An obligation not to prevent the contractor from performing his duties under the contract: TT International Ltd v Ho Lee Construction Pte Ltd [2017] SGHC 62.

(3) Duties of an Architect or Engineer

26.3.20 The general duties of an architect or engineer can include:

  • working with the project manager (if any) ;
  • completing the design and overseeing the development of the project;
  • taking on the role of a “lead consultant”;
  • supervising the works and ensuring the owner’s interests are properly served by the contractor;
  • performing the role of both certifier and approving authority, on progress payments and final accounts, and other issues such as prolongation, quality, and workmanship; and
  • the positive obligation of informing the quantity surveyor of defective work, such that the work is not included in the interim valuation (in the absence of express terms to the contrary).

(4) Duties of a Quantity Surveyor

26.3.21 The general duties of a quantity surveyor can include:

  • preparation of tender documents;
  • contract documentation work;
  • providing estimates for feasibility studies;
  • advising on construction procurement; and
  • supporting the architect or engineer in certification, in the evaluating the contractor’s progress payment and final account claims.

(5) Duties and obligations under design and build contracting model

26.3.22 In a design and build arrangement, the functions of design and construction are integrated. The design architect, structural engineer and other design consultants are not directly employed by the owner, but employed instead by the contractor.

26.3.23 In comparison to the obligations under a traditional arrangement, the architect or engineer is not expected to extensively supervise or administer the contract, except where statutory regulations require professional oversight. Instead, the contractor takes on additional obligations, such as ensuring that the works delivered are fit for purpose.

26.3.24 Further, the architect and engineer are not directly accountable to the owner, but may be liable in tort.

26.3.25 Subject to express provisions, the obligations of the quantity surveyor are generally similar to that of the traditional contracting model.

(6) Liabilities of professionals

26.3.26 In common law, an architect is subjected to “minimum standards” in carrying out his duties. These duties include:

  • The duty to act in good faith and to the best of his uninfluenced professional judgment: Aoki Corporation v Lippoland (Singapore) Pte Ltd [1995] 2 SLR 609;
  • The duty to perform his duty, or exercise his power with reasonable diligence and in accordance with the contract: Lian Soon Construction v Guan Qian Realty Pte Ltd [1999] 3 SLR(R) 518 at [22];
  • The duty to act fairly and on a rational basis in making any determination: Liew Ter Kwang v Hurry General Contractor Pte Ltd [2004] 3 SLR(R) 59; [2004] SGHC 97;
  • The duty to apply professional skill and function, but not to be an agent of the developer: Hiap Hong & Co Pte Ltd v Hong Huat Development Co (Pte) Ltd [2001] 1 SLR(R) 458; [2001] SGCA 17.

26.3.27 The Architect and Quantity Surveyor ought to “apply [their] mind[s] to the issue” in the valuation of amounts when issuing instructions or certificates: H P Construction & Engineering Pte Ltd v Chin Ivan [2014] 3 SLR 1318 (HC) at para [52]. If there is proof of damage, the Quantity Surveyor may also be liable in a claim for negligence: Hyundai Engineering & Construction Co Ltd v Rankine & Hill (Singapore) Pte Ltd [2004] SGHC 178.

26.3.28 An engineer cannot contract out of regulatory oversight of his professional conduct by the Professional Engineers Board (“PEB”) ; however, the Professional Engineers Act allows, but does not compel complaints to be made to the PEB. That said, parties should not seek to interfere with a professional engineer’s independence or influence the professional engineer in his course of work: Poh Cheng Chew v K P Koh & Partners Pte Ltd and another [2014] 2 SLR 573 at [81] and [95].

4 PERFORMANCE BONDS

26.4.1 Performance bonds provide the employer with some security against non-performance by the contractor: see Wah Heng Glass & Metal Products Pte Ltd v Gammon-CCI Construction Ltd [1998] SGHC 48 for a brief description of the purpose and usage of a performance bond.

A. Performance bonds issued in Singapore

26.4.2 In Singapore, the bond is usually given by financial institutions, such as banks and insurance companies, who in turn act as sureties. The amount secured is typically 5% to 10% of the value of the contract. It is typically issued valid for one year and subject to annual renewals until the completion of the project or the expiry of the maintenance or defect liability period. The extent and security provided by the bond depends on its nature and type, and its terms and conditions. The only standard form performance bond used in Singapore is found in the appendix of the PSSCOC.

(1) Nature and types

26.4.3 Confusion could arise as to the meaning to be attached to what is commonly referred to as a “performance bond”, for four reasons:

  1. It has been described by various labels, including:
    1. performance bond;
    2. b. performance guarantee;
    3. c. first demand bond, or its American sibling, the stand-by letter of credit.
  2. In its application or usage, it could be used to secure various stages of the construction process. The documentation concerned is often described with reference to that particular process. For example:
    1. tender or bid bond;
    2. advance payment bond;
    3. retention money bond; or
    4. maintenance bond, etc.
  3. Conditions attached to the call on the bond can differ, depending on whether it is:
    1. payable on demand (“demand bonds”); or
    2. upon proof of default (“default bonds”)
  4. It could require the surety to either:
    1. pay money; or
    2. perform the works left undone by the contractor.

Such a bond is usually given by the parent company of the contractor. However, such a bond is not popular with local employers who prefer cash payment. They are usually accepted by MNC employers operating in Singapore, who have engaged contractors from their home country under arrangements and conditions similar to those found in the home country.

26.4.4 Disputes typically involve whether the conditions attached to the call on the bond have been triggered, and in particular, whether an injunctions against the financial institution is justified.

(2) Demand bonds: Only fraud or unconscionability will permit injunction against payment

26.4.5 It has been recognised that performance bonds, particularly, those expressed to be payable on demand, stand on a similar footing as irrevocable letters of credit and that an injunction restraining a call or payment upon the bond will not be granted unless fraud or unconscionability is involved. There is also no distinction between the principles to be applied in the cases dealing with attempts to restrain banks from making payment from those dealing with restraint of beneficiaries from calling upon the bond: Bocotra Construction Pte Ltd & Ors v Attorney General (No 2) [1995] 2 SLR 733 (CA).

(3) Clear case of fraud or unconscionability required for injunction

26.4.6 The sole consideration in the application for an injunction is whether there is fraud or unconscionability. The party seeking the injunction would be required to establish a clear case of fraud or unconscionability in interlocutory proceedings. It is not enough to raise "mere allegations". In the UK, an interlocutory injunction will not therefore be granted against a bank which has given a bond or guarantee to restrain its payment, since the bank must honour it according to its terms, unless it has clear notice or evidence or fraud: Edward Owen Engineering Ltd v Barclays Bank International Ltd [1978] 1 All ER 976. As regards the standard of proof of fraud, the courts have accepted, for cases involving letters of credit, what is known as "the Ackner standard" in assessing allegations of fraud in applications for interlocutory injunctions (propounded by Ackner LJ in United Trading Corporation v Allied Arab Bank [1985] 2 Lloyd's Rep 554; applied in Singapore in Korea Industry Co Ltd v Andoll Ltd [1989] 3 MLJ 449).

(4) Unconscionability is distinct from fraud

26.4.7 There is a recent line of cases, mostly in the High Court, elaborating on the requirement of "unconscionability" as distinct from "fraud", thus departing from the UK position. In the decision of the High Court in Min Thai Holdings Pte Ltd v Sunlabel & Anor [1999] 2 SLR 368, the court stated that the concept of unconscionability "involves unfairness, as distinct from dishonesty or fraud, or conduct so reprehensible or lacking in good faith that a court of conscience would either restrain the party or refuse to assist the party." The doctrine that unconscionability is a separate ground from "fraud" was reiterated by the Court of Appeal in Samwoh Asphalt Premix Pte Ltd v Sum Cheong Piling Pte Ltd [2002] 1 SLR 1; see also JBE Properties v Gammon [2010] SGCA 46.

26.4.8 The Court of Appeal has noted that the letter of credit serves a different function from a performance bond; hence, a lower threshold of unconscionability (instead of fraud) applies in restraining a call on a performance bond: JBE Properties v Gammon [2010] SGCA 46.

(5) Strong prima facie case of unconscionability for contractor to restrain employer as beneficiary

26.4.9 Nonetheless, a contractor who seeks to restrain the employer as beneficiary of the performance bond from calling on it must establish a strong prima facie case of unconscionability: AES Façade Pte Ltd v Wyse Pte Ltd and another [2018] SGHC 163. Recently, the following principles on unconscionability have been described as (a) the courts are slow to upset the status quo and disrupt the allocation of risk which the parties have decided upon themselves (b) a strong prima facie case of unconscionability must be established (c) unconscionability suggests unfairness or bad faith and ought not be raised where there are genuine disputes and (d) the court need not carry out a detailed examination of the merits of the case: Tactic Engineering Pte Ltd v Sato Kogyo (s) Pte Ltd [2017] SGHC 103.

26.4.10 The call on a bond can considered unconscionable “where either the beneficiary of the performance bond had by its own default contributed to the circumstances which founded the call, or both parties were wholly innocent”: Ryobi-Kiso (S) Pte Ltd v Lum Chang Building Contractors Pte Ltd [2013] SGHC 86 at [19]. A call on a performance bond ought to be restrained if the caller did not have an honest belief that there was any non-performance in respect of the underlying contract:  Ryobi Tactics Pte Ltd v UES Holdings Pte Ltd and another and another matter 
[2019] SGHC 11.

26.4.11  Parties may be able to agree by contract to exclude unconscionability as a ground for stopping a call on a bond provided clear language is used: CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd [2015] 3 SLR 1041.

5 SUBCONTRACTS

A. Explanation of subcontracts

(1) Usual practice for contractors to engage subcontractors

26.5.1 In Singapore, as is the case elsewhere, it is usual for the contractor to engage sub-contractors to whom he will owe and be entitled to contractual obligations according to the terms of the sub-contract. For larger projects, sub-contracts are also usually in standard forms that are mostly derivatives of the main contract forms. There would be appropriate cross-references between the main and sub-contract forms and some provisions of the main contract may even be replicated in the sub-contract. The sub-contractor will not normally owe any direct contractual obligations to the employer or consultants.

(2) Subcontracts can vary considerably in type

26.5.2 The type of contractual arrangements that can be arrived at in sub-contracts can vary considerably. They can involve the supply of labour only, a supply of goods and materials only, a supply and build arrangement, or even a complete “design and build” arrangement. Most of the principles of law applicable to a main contract would also be applicable to a sub-contract.

B. Employer’s selection of sub-contractors

(1) Traditional system: Employer selects specialist contractors who enter into sub-contract with main contractor

26.5.3 In the traditional system, it is usual to provide in the main contract, terms that allow the employer to select for the main contractor, certain specialist contractors whose participation in the project he desires. The specialist contractor is then usually made to enter into a sub-contract with the main contractor. This process is usually described as a “nomination”.

(2) Two standard form nominated sub-contracts widely used in Singapore

26.5.4 Two standard form nominated sub-contracts are in wide usage in Singapore. They are:

  • the Standard Conditions of Nominated Sub-Contract for use in conjunction with Public Sector Conditions of Contract for Construction Work 2008 (now in its 5th edition) ; and
  • the SIA Conditions of Sub-Contract for use in conjunction with the main contract (now in its 8th edition).

C. Incorporation of main contract terms

(1) Express terms and contra proferentum

26.5.5 As the sub-contract obligations commonly mirror that of the main contract (in a limited aspect), the draftsman of sub-contracts typically incorporates the terms of the main contract by reference. As a general rule, anything in the main contract that is not applicable or appropriate in the sub-contract ought not to be impliedly incorporated: Star-Trans Far East Pte Ltd v Norske-Tech Ltd [1996] 2 SLR 409 (CA) .

(2) Whether or not a provision is incorporated depends on intention of parties

26.5.6 The relevant principle in ascertaining whether a provision or a document ought to be incorporated is to ascertain the intention of the parties. Where the meaning of the provisions already in the sub-contract is perfectly clear, there can be no resort to other documents to give another meaning to it. Where the draftsman had purposely left out any condition which he could without difficulty have put in, then the contra proferentem rule may be applied to prevent the clause or document from forming part of the sub-contract: Union Workshop (Construction) Co v Ng Chew Ho Construction Co Sdn Bhd [1978] 2 MLJ 22. Where the alleged clause incorporating terms of the main contract in the sub-contract is unclear or ambiguous, as where it merely provides that “the sub-contractor shall observe, perform and comply with all the provisions of the main contract on the part of the contractor to be observed, performed and complied with so far as they relate and apply to the sub-contract works” it is unlikely that the court will find that such a clause has the effect of incorporating the provisions of the main contract into the sub-contract: Kum Leng General Contractor v Hytech Builders Pte Ltd [1996] 1 SLR 751.

(3) Incorporation via back-to-back provisions

26.5.7 Similarly, incorporation solely via back-to-back provisions will not suffice. Rather, back-to-back provisions should be “construed in light of the factual matrix known to the parties at the time they contracted”. However, the right to payment may still persist on a back-to-back basis with the main contract, if “work had been accepted or certified for payment following an application for payment for such work having been made” by the subcontractor: per Menon JC (as he then was) in GIB Automation Pte Ltd v Deluge Fire Protection (SEA) Pte Ltd [2007] 2 SLR(R) 918; [2007] SGHC 48 at [49].

(4) Subcontract formed by conduct

26.5.8 A subcontract may also be concluded by conduct before the terms are wholly reduced to writing: in United Eng Contractors Pte Ltd v L&M Concrete Specialists Pte Ltd [2000] SGHC 74 OR [1999] SGHC 141 OR CS Bored Pile System Pte Ltd v Evan Lim & Co Pte Ltd [2006] 2 SLR(R) 1; [2006] SGHC 11.

(5) Subcontract formed by oral agreement

26.5.9 In addition, extrinsic proof of oral collateral contracts is admissible under proviso (b) of s 94 of the Evidence Act, if its terms are not inconsistent with those contained in the main agreement.

D. "Pay When Paid" provisions (now prohibited)

(1) “Pay When Paid” Provisions: Sub-contractor only entitled payment when main contractor receives payment

26.5.10 “Pay when paid” provisions stipulate that the sub-contractor is only entitled to be paid when the main contractor has himself received payment. “Pay when paid” provisions operate even if payments have been certified but not received yet by the main contractor, or if payment has been withheld from the main contractor by the employer due to the main contractor’s own default or breach, and the default or breach was not caused or contributed to by the sub-contractor: Brightside Mechanical and Electrical Services Group Ltd v Hyundai Engineering and Construction Co Ltd [1988] SLR 186; Interpro Engineering Pte Ltd v Sin Heng Construction Co Pte Ltd [1998] 1 SLR 694.

(2) “Pay when paid” clauses prohibited by statute

26.5.11 In Singapore, “pay when paid” clauses are now prohibited by s 9 of the Building and Construction Industry Security of Payment Act 2004 (“SOPA”) for contracts that are governed by the legislation. However, while s 9 of the SOPA renders void unenforceable “pay when paid” payment structures, it “does not absolve a party of its payment obligations owed to the other”: SKK (S) Pte Ltd v Management Corporation Strata Title Plan No 1166 [2013] SGHCR 11 at [23]. E. Direct and Indirect Claims

E. Sub-contractor and direct claims against employer

(1) Privity of contract

26.5.12  As a general rule, a sub-contractor cannot make any claim against the employer for the price of work done or material supplied under the sub- contract: Henderick Engineering v Kansai Paint Singapore Pte Ltd [1992] SGHC 184. The existence of a direct payment clause, permitting the employer to make direct payments to the sub-contractor, does not create a contractual relationship between the employer and the sub-contractor: A Vigers Sons & Co Ltd v Swindell [1939] 3 All ER 590. Similarly, an employer cannot make any claim against the sub-contractor directly: Dawber Willamson Roofing Ltd v Humberside County Council (1979) 14 BLR 70.

(2) CRTPA and exceptions to privity

26.5.13 With the enactment of the Contracts (Rights of Third Parties) Act 2001 that came into operation on 1 January 2002, it may be possible for a nominated sub-contractor to assert rights as a third party against the employer even in the absence of a direct contract with the employer. Section 2(3) of the Act provides that the third party should be expressly identified in the contract by name, as a member of a class, or as answering to a particular description. It is possible that a wide category of persons can qualify as third parties under the Act.

26.5.14 In the case of an undisclosed principal, there remains controversy in Singapore as to whether the common law exceptions to privity apply.

26.5.15 In what was referred to by the Court of Appeal as a “leading decision”, Judith Prakash J held that in a disclosed principal situation, Prosperland (a developer of a condominium) was entitled to sue the building contractor (Civic) and the architects (collectively “the defendants”) for substantial damages, even though Prosperland had suffered no loss arising from the breach of contract: Prosperland Pte Ltd v Civic Construction Pte Ltd [2004] 4 SLR(R) 129; [2004] SGHC 157 (HC).

(3) Undisclosed principal

26.5.16 It is less certain as to whether an exception to privity could apply in an undisclosed principal situation, as the Court of Appeal’s observations on the matter have, thus far, been in obiter. Nonetheless, the undisclosed principal could be made a party to the proceedings, as the court has the power to order joinder under O 15 r 6(2) (b) of the Rules of Court: Family Food Court (a firm) v Seah Book Lock and anor [2008] 4 SLR 272; [2008] SGCA 31 (CA) at [63]; see also the doctrine of the undisclosed principal, M P Furmston in Cheshire, Fifoot and Furmston’s Law of Contract (OUP, 16th Ed, 2012).

(4) Contractor’s negligence liability owed to subcontractor

26.5.17 The main contractor may also be liable in negligence to the subcontractor, if a duty of care is owed to the subcontractor: Jurong Primewide v Moh Seng Cranes & ors [2014] 2 SLR 360; [2014] SGCA 6 (CA) ; see also, Spandeck test under “Section 8 Construction and the Law of Negligence”.

(5) Estoppel and unjust enrichment

26.5.18 Other indirect claims include estoppel and unjust enrichment: see Laws of Singapore, Chapter 19: Restitution.

6 TIME AND COMPLETION

26.6.1 This section will look at the issue of completion and extension of time in construction projects within the contractual framework of the SIA standard form as most of the case law has arisen in that context.

A. Completion criteria

(1) “Completion” is determined by construing the standard form in question

26.6.2 Where standard form contracts are being used, the issue of completion is often reduced to construing what is meant by `completion´ in the standard form in question. A number of standard form contracts, including pre-1980 versions of the SIA Contract defined completion in terms of `practical completion´. Usage had also been made of the term `substantial completion´ in some other standard form contracts. For the SIA Contract, the term completion is used without the description “practical” or “substantial”. In the absence of any definition of completion, substantial or practical completion is normally regarded to have been achieved once the works are in a condition which is reasonably ready to be used by the employer:  Smile Inc Dental Surgeons Pte Ltd v OP3 International Pte Ltd [2017] SGHC 246.

B. Time for completion

(1) Construction contracts should contain provisions relating to time, absenting which the court will imply term to complete within a reasonable time

26.6.3 Construction contracts contain provisions relating to the commencement and completion of the works that the contractor is engaged to carry out. If the contract is silent on this, a reasonable time for completion would be implied:  Lee Kai Corp (Pte) Ltd v Chong Gay Theatres Ltd [1992] 2 SLR 68911 (CA). If in a standard form contract, the time for completion in the schedule to a contract is left blank, the court will imply a term to complete within a reasonable time:  Shia Kian Eng (trading as Forest Contractors) v Nakano Singapore (Pte) Ltd [2001] SGHC 68). What is a reasonable time will be treated as a question of fact. Most standard form contracts also impose an obligation on the contractor to proceed with due diligence and expedition. However, it is doubtful whether such an obligation can be implied in the absence of an expressed term: CAA Technologies Pte Ltd v Newcon Builders Pte Ltd [2017] 2 SLR 940. Unless it is expressly provided, time is not of the essence in construction contracts: Ibid.

(2) Standard form contracts contain liquidated damages and extension of time clauses

26.6.4 Most standard form building and infrastructure contracts, contains liquidated damages and extension of time clauses. The liquidated damages clause gives the employer a remedy in pre-agreed damages if the contractor fails to complete on time and caps the contractor’s.  A sub-contractor can be made liable for liquidated damages that the contractor is made to pay the employer in certain circumstances:  L&M Airconditioning (Pte) Ltd v SA Shee & Co (Pte) Ltd [1993] 3 SLR 483. Where the main contractor seeks to recover from a subcontractor liquidated damages paid by the main contractor to the employer, it is necessary for the main contractor to prove that the liquidated damages arose solely from the breaches by the subcontractor. The subcontractor does not have the burden to show that delays were caused by other subcontractors: CAA Technologies Pte Ltd v Newcon Builders Pte Ltd [2017] 2 SLR 940.

C. Extension of time clauses

(1) Contractor’s work may be affected by acts of employer

26.6.5 The contractor´s progress and completion may be affected by acts of the employer or his agents. These employer related events can be found in SIA 7th Edition and 8th Edition, Clauses 23(1) (f), (g), (h), (i), (j), (k), (n) (o) and (p). Clauses 23(1) (a), (b), (c), (d), (e), (l), (m) deal with neutral events, mainly arising from circumstances not reasonably foreseeable.

(2) Neutral events and employer-related events may render original date of completion inapplicable

26.6.6 The contract date for completion may be affected by neutral events and employer related events to such an extent that it is rendered inapplicable. Without an applicable date for completion, time will be set “at large” and the obligation to complete becomes assessable by normal common law principles of reasonableness instead of the agreed contractual framework. With an extension of time, on the other hand, a new date may be set for completion and the right to liquidated damages preserved.

26.6.7 Arguably, an event that can be construed as a force majeure event can excuse a delay in completing or even in performance of the works contracted for by the contractor:  Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd [2011] 2 SLR 106.

(3) Employer could potentially lose right to compensation where there is a “nil” for liquidated damages in the contract, but the legal position is unclear

26.6.8 The employer could arguably lose his right to compensation where the express provision for liquidated damages is exhaustive of his rights and "nil" is inserted for the rate of liquidated and ascertained damages: Temloc Ltd v Errill Properties Ltd (1987) 39 BLR 34. However, in the local decision of Shia Kian Eng (trading as Forest Contractors v Nakano Singapore (Pte) Ltd [2001] SGHC 68, the parties agreed that there should be no liquidated damages. Judith Prakash J found it “difficult to accept the proposition that simply because it was agreed that there should be no liquidated damages clause, no damages at all could be claimed” if the plaintiff´s delay had caused loss to the defendants.

D. Contra proferentem

(1) Liquidated damages and extensions of time clauses construed by the courts against the employer, unless the contract stipulates otherwise

26.6.9 Both liquidated damages and extensions of time clauses (see Lian Soon Construction Pte Ltd v Guan Qian Realty Pte Ltd (No 2) [2000] 1 SLR 495per Warren Khoo J) operate primarily for the employer in that the main contractor is sufficiently protected by the common law rules on impossibility and interference with performance. Thus, the attitude of the courts has been to construe them contra proferentem, strictly against the employer: Peak Construction Ltd v McKinney Foundations Ltd (1971) 1 BLR 111.

26.6.10 However, it should be noted that Article 7 SIA 8th Edition excludes the application of the contra proferentem rule of construction.

E. Employer’s obligation concerning completion

26.6.10 The employer has an implied obligation to bring about completion and should not prevent the contractor from carrying out the contractor’s obligation under the contract: Evergreat Construction Co Pte Ltd v Presscrete Engineering Pte Ltd [2006] 1 SLR(R) 634 and TT International Ltd v Ho Lee Construction Pte Ltd [2017] SGHC 62.

26.6.11 Most standard forms of contract provide for loss and expense to be certified by the architect where the contractor has been delayed by breaches or acts of prevention by the employer or his agent. The PSSCOC provides for such compensation but “loss and expense” has a special meaning in this contract as defined in clause 1.1(q) which serves to limit the contractor’s recovery of compensation under this head to what is specified in the definition (see also TT International Ltd v Ho Lee Construction Pte Ltd [2017] SGHC 62).

26.6.12 However, none of the SIA forms after 1980 has a loss and expense clause for prolongation. In fact, Clause 31(14) expressly provides that the architect has no power to decide or certify any claim for breach of contract made against the Employer by the Contractor. However, one might consider that Clause 12(4) [Valuation of Variations] does provide a limited express entitlement under the contract to additional `preliminaries´ costs which are associated with variations, which in themselves do not amount to a breach of contract.

7 TERMINATION

26.7.1 A typical construction contract usually lasts for a fairly long period of time and the option to terminate the contract by an innocent party in the event of a breach by the defaulting party before the date of completion is an important remedy. Termination can be made according to the principles of general contract law or under the terms of the contract.

A. Termination under general principles of contract law

(1) Four situations in which innocent party may terminate contract

26.7.2 A repudiatory breach could arise under common law or pursuant to express provisions in the contract. In RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and anor appeal [2007] 4 SLR 413 (“RDC”), the Court of Appeal summarised four situations in which an innocent party might be entitled to terminate: (a) where a contractual term breached clearly states that, in the event of certain event or events occurring, the innocent party is entitled to terminate the contract, (b) where the party in breach renounces the contract by clearly conveying to the innocent party that it will not perform its contractual obligations at all (c) condition-warranty approach – party in breach has breached a condition of the contract (as opposed to a warranty, and (d) where the party in breach has committed a breach, the consequences of which will deprive the innocent party of substantially the whole benefit which it was intended that the innocent party should obtain from the contract. 

B. Termination under the terms of contract

(1)  Standard form contracts and termination

26.7.3 Most standard form contracts expressly provide powers for the employer to terminate the contract in circumstances specified so that the employer can terminate without having to demonstrate that the contractor’s breach amounted to a repudiatory breach. In fact, some provisions give the employer a power to terminate even without demonstrating that the contractor has breached the contract or is in any way in default of his obligations under it (see for example, clause 32(1) SIA Main Contract and clause 31.4(1) of the PSSCOC and TT International Ltd v Ho Lee Construction Pte Ltd [2017] SGHC 62 as to how such a provision should be applied). The termination clauses may also provide the employer additional rights or remedies and a clear set of procedures to be followed upon termination that may otherwise be uncertain in the event of a repudiation under common law. For example, concerning rights, under clause 32(10) of the SIA Main Contract, an employer is entitled to withhold payment under the interim certificates if he accepts the wrongful repudiation of a contractor as terminating the contract: SA Shee & Co (Pte) Ltd v Kaki Bukit Industrial Park Pte Ltd [2000] 2 SLR 12.

Typical grounds in most standard form contracts for termination by the employer based on the contractor’s wrongful conduct include:

  • default of the contractor;
  • bankruptcy of the contractor;
  • failure to start work;
  • failure to proceed with the work;
  • failure to comply with architect´s instructions;
  • failure to comply with the contract;
  • failure to complete the works; and
  • failure to remedy defects.

Unlike the employer, most standard form contracts allow the contractor to terminate only in a limited number of circumstances. Most of these involve either the employer’s failure to make payment or his interference in the architect’s or contract supervisor’s certifications (for example, clause 33(1) of the SIA Main Contract). The PSSCOC, for example, does not even contain any expressed provision allowing the contractor to terminate.

 (3) Contractual provisions prescribing termination procedures must be fully complied with

26.7.4 As termination, also known as forfeiture clauses, is construed strictly (Roberts v Bury Commissioners (1870) LR 5 CP 310), the contractual provisions prescribing the procedures by which a contract may be determined must be properly and faithfully complied with for the termination to be effective. Otherwise, the termination may be wrongful and amount to a wrongful repudiation by the employer instead - Lodder v Slowey [1904] AC 442. The contractor is then entitled to sue the employer for the actual value of the work done and materials supplied or damages or both.

(4) Forfeiture clauses construed contra proferentum

26.7.5 Since forfeiture clauses have such serious consequences, they are construed contra proferentem and the requirements for notices to be given need careful observation - Central Provident Fund Board v Ho Bok Kee [1980-1981] SLR 180AL Stainless Industries v Wei Sin Construction Pte Ltd [2001] SGHC 243.

(5) Contractor”s occupation of site

26.7.6 Where the contract does not contain a termination clause and the contractor disputes the alleged default, he may contest or resist any attempt to eject him from the site: London Borough of Hounslow v Twickenham Garden Developments Ltd [1971] Ch 233. See also Mayfield Holdings Ltd v Moana Reef Ltd [1973] 1 NZLR 309. The terms of some standard form contract like clauses 32(4) & 32(5) of the SIA Main Contracts, however, require the contractor to deliver possession of the site upon receipt of the Notice of Termination, irrespective of the validity of the notice.

8 CONSTRUCTION AND THE LAW OF NEGLIGENCE

26.8.1 The law of negligence has a significant impact on construction projects. Owners may find recourse in a claim in tort if they have no contractual relationship with the parties responsible for the negligent design or construction of their property, or if the operation of the Contract (Rights of Third Parties Act (Cap 53, 2002 Rev Ed) is excluded by express contract terms. Following the seminal decision by the Singapore Court of Appeal in Spandeck Engineering (S) Pte Ltd v Defence Science and Technology Agency [2007] 4 SLR(R) 100 (“Spandeck”), there is now a single, universal test for determining a duty of care in the law of negligence, irrespective of the type of the damages claimed. In Spandeck, the contractor claimed against the superintending officer for negligently under-valuing and under-certifying works carried out by the contractor. There was no contractual relationship between the contractor and the superintending officer. The Court of Appeal affirmed the trial court’s finding that the superintending officer did not owe a duty of care to the contractor.

26.8.2 The Court of Appeal formulated and applied a two-stage test, preceded by a threshold test of factual foreseeability. In the first stage, sufficient legal proximity must be established between the plaintiff and defendant, viz. on physical, circumstantial and causal proximity, and supported by a voluntary assumption of responsibility and reliance. If the threshold of factual foreseeability and the first stage are surmounted, the second stage examines if there are policy considerations that ought to negate the prima facie case established in the first stage of the test. The Court of Appeal added that the Spandeck test should be applied incrementally, with reference to prior cases in analogous situations. Further, the mere existence of statutory duty is not in itself conclusive of a common law duty of care: Tan Juay Pah v Kimly Construction & Ors [2012] 2 SLR 549 (CA) ; see also Resource Piling v Geospecs [2014] 1 SLR 485 (HC decision referred to at CA). Ultimately, whether the “requisite proximity is present in a particular case, …will turn on the precise factual matrix concerned”: Ngiam Kong Seng v Lim Chiew Hock [2008] 3 SLR(R) 674 (CA) at para [123].

26.8.7  The Court of Appeal in NTUC Foodfare Co-operative Ltd v SIA Engineering Co Ltd and another [2018] 2 SLR 588 affirmed Spandeck in the single test laid down for the establishment of a duty of care in tort and recognised that it doing so, there was a departure from English law principles which applies a general exclusionary rule against recovery for pure economic loss. It found that there was nothing intrinsically wrong about recovery for pure economic loss, provided the single test premised on proximity and policy consideration is met. After Spandeck, it is therefore no longer necessary to characterise the nature of the plaintiff’s loss before considering whether a duty of care arises in tort.

26.8.8  The presence of a statutory duty would not automatically give rise to a concomitant common law duty of care. It has been held that “statutory duty would fall within the rubric of the existing analysis for negligence:” Jurong Primewide Pte Ltd v Moh Seng Cranes Pte Ltd and others [2014] SGCA 6. Further, the law on occupier’s liability was held to be “subsumed under the tort of negligence:  See Toh Siew Kee v Ho Ah Lam Ferrocement (Pte) Ltd and others [2013] SGCA 29.

26.8.9  The standard of care was the general objective standard of a reasonable person using ordinary care and skill. It had been held that the Workplace Health and Safety Act framework and other guidelines “laid down industry standards which were relevant in ascertaining the appropriate standard of care:” Miah Rasel v 5 Ways Engineering Services Pte Ltd [2017] SGHC 235.

9 ARBITRATION

26.9.1 Arbitration features a tribunal empowered to judge and determine a matter, distinct and separate from litigation in constituted courts. As the arbitral decision is binding, arbitration ought to be distinguished from other Alternative Dispute Resolution methods.

A. Arbitration provisions in standard form contracts

26.9.2 Arbitration provisions exist in many of the standard forms, such as the JCT Contract (2005 Ed.), ICE Form of Contract (7th Ed. 1999), PSSCOC and the new suite of standard forms of contract introduced by FIDIC (Federation Internationale des Ingenieurs-Counseils).

(1) Security of Payments Act renders void any arbitration provision that aims to circumvent the Act

26.9.3 Notably, section 36 of the Security of Payments Act (“SOPA”) renders void any provision that has the effect of “modifying, restricting or prejudicing” its operation, or which may “reasonably be construed as an attempt to deter a person from taking action under the Act”. An arbitration provision which aims to circumvent the SOPA would thus be rendered void. The SOPA is discussed below, under “Legislation”.

(2) Arbitration Act allows party to challenge an arbitral award

26.9.4 Under the Arbitration Act, a party can also challenge an arbitral award either by:

  • 1. Filing an appeal with the High Court on a question of law arising out of the award under s 49(1) of the Act; or
  • 2. Applying to the court to set aside the award on the grounds prescribed under the s 49(3) of the Act.

26.9.5 International and domestic arbitration are discussed in detail in the Laws of Singapore Chapter 4.

10 LEGISLATION

A. Building Control Act (Chapter 29)

(1) Standards of safety and good building practices

26.10.1 The Building Control Act is a prescriptive code. It prescribes standards of safety and good building practice. The legislation provides a blueprint to control legally the construction of building works, the monitoring of existing structures with powers to deal with them where safety is in issue. It is well known that the current legislation was a direct consequence of the Hotel New World collapse.

(2) Every person for whom building works are to be carried out have to appoint an accredited checker as an extra level of control in process of design

26.10.2 A central feature of the legislation was the conception of the role of an "accredited checker". The accredited checker operates as an extra level of control in the process of design. The legislation obliges "every person for whom building works are to be carried out" to appoint an accredited checker. The accredited checker must be registered with the Building Authority and maintain no professional or financial interest (other than the stipulated appointment) in the building works concerned. In addition, only qualified civil or structural engineers of 15 years' standing in terms of practical experience in the design and construction of buildings, in addition to being distinguished by ability, standing or special knowledge or experience could be appointed as accredited independent checkers. This is clearly to ensure that the professional stature of the expert would safeguard his independence when appointed as accredited checker. The appointed accredited checker is required to check the key structural elements in the plans and issue a certificate and evaluation report approving them. This is the independent technical control prescribed by the legislation.

(3) Commissioner of Building Control relies solely on certificate and evaluation report of accredited checker to approve plans

26.10.3 Section 6(1) provides for approval of plans by the Commissioner of Building Control. Among the documents to be submitted with the plans is the certificate of the accredited checker in relation to the adequacy of the key structural elements. By section 6(3), the Commissioner of Building Control is authorised to rely solely on the certificate and evaluation report of the accredited checker to approve plans. Hence, the Commissioner of Building Control has no duty to check the plans when granting "approval".

(4) Commissioner has discretion to carry out random checks on structural plans and design calculations and may revoke approval if any information given previously was false

26.10.4 Notwithstanding the earlier section, section 5(6) gives the Commissioner the discretion to carry out random checks with respect to structural plans and design calculations of the building works. The Commissioner also retains the right to revoke acquiescence of the building plans if satisfied that any information given in respect of the approval had been false in a material particular.

(5) Government and public officers are excluded from liability by reason that works are carried out in accordance with the Act or works are subject to approval by the Commissioner

26.10.5 Section 32 is an extremely comprehensive exclusion of liability of the Government and public officers. It even protects the government and any public officer from suit arising by reason of the fact that any building works are carried out in accordance with the provisions of this Act or that such building works or plans of the building works are subject to inspection or approval by the Commissioner or the public officer. Accordingly, the Building Authority has been given unequivocal protection which the decision of Murphy v Brentwood District Council [1991] 1 AC 398 achieved to a limited extent in England in 1991.

(6) Amendments were made in 2003 to move from procurement methods to design and build, give the Commissioner the power to stop dangerous building works and may require the person for whom works are being carried out to take actions to avert such danger

26.10.6 Various amendments have been made to the Act. In September 2003, amendments were made to take into account the move away from the traditional form of procurement to the design and build method. Section 7A gives the Commissioner the power to issue an order to immediately stop building works that pose a danger to persons, property or other buildings. In addition, the Commissioner may require the person for whom the works are carried out to take certain remedial and other measures to avert such danger. An example of the type of situation to which this section could apply may be found in Xpress Print Pte Ltd v Monocrafts Pte Ltd & Anor [2000] 3 SLR 545.

26.10.7 In September 2007, further amendments were made to update building control systems, to enhance building safety and raise professionalism in the industry.

26.10.8 For instance, section section 8(f) (ii) introduced a new requirement for developers to appoint an Instrumentation Specialist Builder (“ISB”). The scope of the Act also extended to “Underground Building Works” under part II of the Act. Builder’s licensing was introduced. Provisions on existing requirements were also strengthened.

26.10.9 In 2008, the Building Control Regulations and the Building Control (Accredited Checkers and Accredit Checking Organisations) Regulations were similarly amended, and the Building Control (Builders’ Licensing) Regulations were introduced.

26.10.10 These changes are delineated in “A Guidebook to the Changes in Building Control”, published by the Building and Construction Authority.

B. Building and Construction Industry Security of Payment Act 2004

(1) Singapore’s Building and Construction Industry Security of Payment Act 2004 incorporates most key features of New South Wales’ Act with several differences

26.10.11 In 2005, Parliament introduced the Building and Construction Industry Security for Payment Act 2004 (“SOPA”) in Singapore. The Act is primarily based on the New South Wales Building and Construction Industry Security of Payment Act 1999 (Act 46 of 1999) (“the NSW Act”). The NSW Act and SOPA have similar structure and purpose, with several important modifications in SOPA taking into account local concerns and circumstances..

(2) Most standard form contracts in use in Singapore have been amended to accommodate the Act; Building and Construction Industry Security of Payment Regulations 2005 accompany the Act

26.10.12 SOPA came into operation on 1 April 2005. Since then, most of the standard form contracts in use in Singapore accommodate the provisions of the SOPA. In exercise of the powers conferred by section 41 of the Building and Construction Industry Security of Payment Act 2004, the Minister for National Development has introduced the Building and Construction Industry Security of Payment Regulations 2005 ("the Regulations") that accompany the Act. Like the parent Act, the Regulations came into operation on 1st April 2005. The Regulations contain, inter alia, requirements that were left by the Act to the Minister to prescribe.

(3) Legislation’s far-impact on practices of construction industry

26.10.13 The legislation has also had far-reaching impact on the practices of the construction industry. For instance, amendments have been made to the Public Sector Standard Conditions of Contract to bring it in line with the legislation.

(4) Primary objective of legislation is to reduce difficulties faced by construction industry

(i) Purpose

26.10.14 The primary objective of the legislation is to redress the difficulties faced by the construction industry in obtaining payment for work done and services rendered. The intention of the legislature is unequivocally to facilitate payment in the construction industry. In that regard, the Act not only categorically affirms the right to payment, it goes further and also provides a mechanism for obtaining payment through the speedy dispute resolution procedure of adjudication. Anticipating that efforts may be made to impede the right to payment, the Act prohibits any attempt to hamper the right to payment with its anti-avoidance provisions.

26.10.15 Adjudication has “temporary finality”, as adjudication is provisional in nature and is final and binding until the parties’ differences are ultimately and conclusively determined or resolved. The court has the power to set aside or stay enforcement of an adjudication determination where necessary, if justified by a high threshold of “securing the ends of justice”, such as the insolvency of the claimant: W Y Steel Construction v Osko Pte Ltd [2013] 3 SLR 380 at [70].

(ii) Process

 (a) Jurisdiction of adjudicator and the payment claim

26.10.16  The scope of the claimant’s case in an adjudication is circumscribed by what is being claimed or advanced in the payment claim. There is no mandate for an adjudicator to deal with a claim that is not already brought within the payment claim: Rong Shun Engineering & Construction Pte Ltd v CP Ong Construction Pte Ltd [2017] 4 SLR 359.

26.10.17 The outcome of a number of adjudication cases used to turn on issues relating to compliance with the requirements of SOPA. Many of these involved jurisdictional challenges based on the validity of payment claims (see for example, Sungdo Engineering & Construction (S) Pte Ltd v Italcor Pte Ltd [2010] SGHC 105 and Chip Hup Hup Kee Construction Pte Ltd v Ssangyong Engineering & Construction Co Ltd [2009] SGHC 237. While the validity of a payment claim continues to have jurisdictional consequences (Lee Wee Lick Terence (alias Li Weili Terence) v Chua Say Eng (formerly trading as Weng Fatt Construction Engieering) [2013] 1 SLR 401), the Court of Appeal in Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd [2018] SGCA 4, had considered and accepted the operation of waiver and estoppel for the situation where the respondent failed to raised jurisdiction objections in a payment response. Such failure may result in the respondent being prohibited from relying on such an objection before a tribunal or court: Yau Lee Construction (Singapore) Pte Ltd v Far East Square Pte Ltd  [2018] SGHC 261.The objection should be raised at the earliest possible opportunity: Grouteam Pte Ltd v UES Holdings Pte Ltd [2016] 5 SLR 1011. An adjudicator has the power to decide on his own jurisdiction, subject to review by the court: (ibid.)

(b) Determination in absence of payment response

26.10.18 Under s 15(3) of the Act, an adjudicator’s jurisdictional powers are set out and circumscribed. A respondent cannot raise new grounds for withholding payment that were not included in his payment response. The Court of Appeal observed that this is not a violation of natural justice and the right to be heard; rather, a respondent has failed to exercise his chance to respond to a payment claim and make his case. Nonetheless, the adjudicator is not entitled to simply take the payment claim at face value and must “consider the material properly before him” and there is nothing to stop a respondent from raising patent errors: W Y Steel Construction v Osko Pte Ltd [2013] 3 SLR 380. However, the adjudicator’s task is not just to look for patent errors. There is a need to examine alleged errors in the context of the whole evidence or material available. The standard of proof in evaluating the material in the absence of a payment response is to consider whether the Claimant’s case has been made out on a prima facie basis: Comfort Management v OGSP Engineering [2018] 1 SLR 979.

(c) Natural justice

26.10.18   The court has the power to set aside an adjudication determination if an adjudicator has acted in breach of his duty to comply with the requirements of natural justice: Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2015] 1 SLR 797 at [47]. There are two aspects concerning natural justice (a) the parties to the adjudication must be accorded a fair hearing (the fair hearing rule), and (b) the adjudicator must have been independent and impartial in deciding the dispute (the no bias rule): CMC Ravenna Singapore Branch v CGW Construction & Engineering (S) Pte Ltd [2018] 3 SLR 503 at [24]; SEF Construction at [49]; AM Associates (Singapore) Pte Ltd v Laguna National Golf and Country Club Ltd [2009] SGHC 260 at [23].

26.10.19   An adjudicator can be in breach of natural justice if he proceeds to decide a dispute without giving the parties a fair opportunity to address the relevant issue on which the dispute was decided:  Bintai Kindenko Pte Ltd v Samsung C&T Corp  [2018] SGCA 39. A party that omits to address the adjudicator on an obviously crucial issue or one that turns out to be pivotal could not be said to have been denied a fair opportunity to be heard on the issue:  Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd [2018] SGCA 66. Even if there is a breach of natural justice, an adjudicator’s determination would not be set aside the breach could not have caused any prejudice to the respondent: ibid; see also Hauslab Design & Build Pte Ltd v Vinod Kumar Ramgopal Didwania [2017] 3 SLR 103.

(d) Repeat claims

26.10.20  A claimant is not precluded from making a “repeat claim” in adjudication as long as the earlier payment claim had not be previously adjudicated on its merits: Grouteam Pte Ltd v UES Holdings Pte Ltd [2016] 5 SLR 1011.

26.10.21 In Tiong Seng Contractors v Chuan Lim Construction [2007] 4 SLR(R) 354, it was held that SOPA applies to both final and interim payment claims. In response to the decision, the use of the term “Final Claim” in the SIA 7th edition has since been replaced with “Final Account”.

 (e) Adherence to SOPA timelines

26.10.25  It is important that for the service of the payment claim to comply with the contractual deadline as required by section 10(2)(a) of SOPA. Where the contract provides for the service of payment claims on a stipulated date, this means service on that date and not service by that date: Audi Construction, supra. In Shin Khai Construction Pte Ltd v FL Wong Construction Pte Ltd [2013] SGHCR 4, it was held that an adjudication determination must be set aside if the adjudication application was lodged later than the period stipulated in s 13(3) of the SOPA. Public holidays, consistent with the statutory definition of “day”, should be excluded for the purpose of computing the timelines: UES Holdings Pte Ltd v KH Foges Pte Ltd [2017] SGHC 114. However, where the parties employed the term “calendar days” instead of “days” in the contract to describe the timelines, effect may be given to the parties’ choice for the purpose of establishing whether the relevant timeline has been complied with.

(f) Adjudication review application

26.10.26  Under section 18(2) of SOPA, only an aggrieved respondent is entitled to lodge an adjudication review application.  Once an application is made for adjudication review, the entire adjudication determination can be reviewed by the review adjudicator and the adjudication review is not limited to only matters referred to by the aggrieved respondent for review: Ang Cheng Guan Construction Pte Ltd v Corporate Residence Pte Ltd [2017] 3 SLR 988.

26.10.27  Review adjudicators have the same powers as adjudicators under section 19(4), SOPA and are entitled to reconsider the findings of facts and well as the application of legal principles to those findings of fact: CMC Ravenna Singapore Branch v CGW Construction & Engineering (S) Pte Ltd [2018] 3 SLR 503.

(g)  Enforcement and setting aside

26.10.28  A disputed and an unadjudicated set-off cannot be raised against an adjudicated amount in enforcement proceedings; section 27 of SOPA comtemplates an actual payment: AES Façade Pte Ltd v Wyse Pte Ltd and another [2017] SGHC 171. The court’s power to set aside an adjudication determination does not derive from SOPA as section 27 only deals with the right of a successful claimant to enforce the determination as a judgment of the court. The power of the court to set aside an an adjudictor’s determination is a common law power: Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2015] 1 SLR 797.  In a setting aside application, the court does not review the merits of the adjudication determination: Hauslab Design & Build Pte Ltd v Vinod Kumar Ramgopal Didwania [2017] 3 SLR 103.  The court may partially set aside a determination for jurisdictional error without having to set aside or undermine the enforceability of the rest of the determination. Thus, a finding that an adjudicator’s determination on the retention sum is null and void would not render nullify the entire determination: Rong Shun Engineering & Construction Pte Ltd v CP Ong Construction Pte Ltd [2017] 4 SLR 359.

C. Building and Construction Industry Bill 2018

26.10.28  The Building and Construction Industry Bill which makes a number of important changes to SOPA was passed on 2 October 2018  but at the time of writing, these changes are not yet in operation.  With the amendments, there will be changes to the scope of SOPA affecting (a) construction contracts that have been terminated and (b) contracts for the prefabrication of works. Loss or expenses claim will be restricted to the circumstances specified. The timeline for a payment claim and the validity of  “repeat” payment claims and final payment claims  are also being clarified. The 6-year limitation period for the service of a payment claim for both a supply and construction contracts has been reduced. For payment responses, the time to provide a payment response will be increased from 7 to 14 days from the service of the payment claim. Subject to the exceptions specified, late objections by respondents in the adjudication response are to be prohibited. There are also provisions affecting applications to set aside determinations, the rate of interest payable in the unpaid amount and a right to review determinations that will be given to the claimant that is currently available only to the respondent.

Updated as at 4 March 2019

By:

George Tan

Consultant

Chan Neo LLP

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