In short
The Singapore High Court has, for the first time, weighed in on the scope of review of an adjudication determination in a Review Adjudication under section 18 of the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (the Act).
The High Court concluded that a review adjudicator is not limited to the issues raised by the respondent, and instead is entitled to have regard to issues agitated by the claimant. This has considerable strategic implications for respondents who are considering whether to challenge findings of an adjudicator by way of Review Adjudication. If Review Adjudication was limited to issues agitated by the respondent, there would be little strategic downside to applying for review. Following the decision, respondents applying for a Review Adjudication must now take into account the risk that issues may be determined in favour of the claimant, opening up the potential for a worse result than the original determination.
Background
Ang Cheng Guan Construction Pte Ltd (Ang) was engaged by Corporate Residence Pte Ltd (CR) as main contractor. ANG applied for adjudication of a payment claim, which involved competing claims for variations, extensions of time and liquidated damages. The Adjudicator ultimately awarded Ang $467,428.69 for various different claims. The Adjudicator also granted a further EOT to Ang of 133 days, which the Adjudicator found had the result of preventing CR from applying liquidated damages.
Both CR and Ang were dissatisfied with the Adjudicator’s determination:
- CR lodged an adjudication review application in which it sought a finding by the Review Adjudicator that the original Adjudicator erred in awarding the 133 day EOT, and therefore erred in disallowing CR’s set off for liquidated damages.
- Conversely, Ang submitted that the Review Adjudicator should find that further EOTs should have been awarded, time should have been set at large, and the Adjudicator should have awarded Ang preliminaries, prolongation costs, and idling costs in relation to the delays.
The Review Adjudicator refused to consider the issues raised by Ang, based on the Review Adjudicator’s view that his jurisdiction was limited to the review of the issues raised by CR.
Review adjudication under the Singapore regime
Section 18(2) of the Act provides that a respondent who “is aggrieved” by an adjudication determination can, within 7 days after being served with the determination, lodge an application for review of the determination. A review can be determined by a single review adjudicator, or a panel of 3 review adjudicators.
As a condition of applying for review, a respondent must first make payment of any amount awarded in the determination. This reduces the risk of respondents utilising the review process for the collateral purpose of delaying payment to the claimant, and preserves the objective of the Act of improving cashflow.
A review adjudicator, or panel of review adjudicators:
- is required to determine the adjudication review application within 14 days; however, that timeframe can be extended with the consent of both parties;
- can only have regard to the material before the original adjudicator set out under section 17(3) of the Act (the scope of this section is notably wider than the Australian equivalents); and
- is empowered to refuse the application, or substitute the original adjudication determination with any other determination, as considered appropriate by the adjudicator(s).
- The process of review of adjudication determinations by a further adjudicator is unique to the Singapore model of adjudication.
The narrow and broad interpretations of adjudication review
Before the High Court, Ang argued that the correct approach a review adjudication under section 18 was a broad interpretation, which allowed the Review Adjudicator to review the entire adjudication determination.
On the other hand, CR argued that:
- based on the express words of section 18, only the respondent is entitled to apply for a review of the determination; and
- the adjudication review process is akin to an appeal in court proceedings, in which a respondent is not permitted to raise any matter on appeal unless he has filed a cross-appeal.
Lee Seiu Kin J commenced by observing that the Act does not expressly define the scope of adjudication review, however the operative words “the review of the determination” tended to confirm that the entirety of the adjudication determination was open for review, thus supporting the broad interpretation.
His Honour remarked that, should the draftsman of the legislation intended to limit the matters that a review adjudicator could consider, it would have been easy to insert words to that effect in either of sections 17(3) or 19(6)(a) of the Act. To the contrary, section 19(6)(a) states the matters which the review adjudicator can have regard to, which includes the entirety of the adjudication determination under review. There is no suggestion in the legislation that the review is only limited to some part of the adjudication determination.
In addition, His Honour found that section 19(5), which provides that a Review Adjudicated should determine the adjudicated amount to be paid by the respondent and the due date for payment, “does not expressly restrict a review adjudicator to simply maintaining or decreasing the adjudicator amount. Rather, the provision leaves him open to increase it.” This was held to be consistent with the broad interpretation of the scope of review.
In support of the narrow interpretation, CR pointed to section 18(2) of the Act, which provides that only a respondent is entitled to apply for a Review Adjudication. In rejecting this argument, His Honour considered it crucial that the provision did not state that such review is limited to the issues raised by the respondent, and commented that “It is a leap of logic to conclude from the fact that only the respondent is entitled to apply for a review that the ensuing review is limited to only the issues raised by the respondent.”
The Court also considered whether the policy of the Act supported a broad or narrow interpretation of the scope of review.
“Indeed, the Narrow Interpretation would tend to encourage respondents to apply for an adjudication review as there would be nothing to lose, but everything to gain.”
In favour of the broad interpretation, the Court stated that one of the limitations put in place by the legislature was that once an adjudication review is set in motion, the entire adjudication determination is open for review, and not just the parts that the respondent was dissatisfied with. Taking into account that many adjudication determinations would include some issues determined correctly and some issues determined incorrectly, the broad interpretation would prevent respondents from cherry-picking pats that the respondent is unhappy with, whilst limiting the rights of review of the claimant. In this regard, his Honour stated “Indeed, the Narrow Interpretation would tend to encourage respondents to apply for an adjudication review as there would be nothing to lose, but everything to gain.”
His Honour ultimately found that the policy of the Act is ambivalent as to which interpretation is preferred, but that the relevant provisions of the Act tend to confirm that a broad interpretation was intended by the legislature.
The decision of the High Court
Having decided that the broad interpretation was the correct one, and the entire adjudication determination is liable to be reviewed by a review adjudicator, his Honour considered Ang’s arguments as to why the Review Adjudication should be set aside.
Ang argued that, in failing to consider Ang’s arguments in the Review Adjudication, the review adjudicator had denied it natural justice. The Court held that the review adjudicator refused to consider Ang’s arguments because the adjudicator took the incorrect view that the narrow interpretation of adjudication review applied. Given the adjudicator’s approach was based on this misconception of the scope of review, the Court held that it was fair for the adjudicator to take the approach he did, and there was no breach of natural justice.
This is an interesting contrast to the Australian position regarding the entitlement of parties in adjudications to natural justice, pursuant to which a failure to consider one parties’ submissions in their entirety would, in and of itself, constitute jurisdictional error leading to the determination being liable to be set aside.
Ang also argued that the adjudicator made an error of law by accepting the narrow interpretation and failing to have regard to Ang’s arguments. The Court accepted this argument, and held that the review adjudicator had misdirected himself in point of law and therefore failed to take into account considerations which the Act required him to take into account.
In doing so, the Court made reference to the principles set out by the New South Wales Court of Appeal in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140, that relief will be granted where an adjudicator’s determination is the result of jurisdictional error, which will arise where, for example, the adjudicator’s decision, inter alia, did not take into account something which the NSW Act required to be taken into account or was based upon something which the NSW Act prohibited from being taken into account.
Read the full text of the decision here.
CDI Lawyers’ specialist adjudication practice is well placed to advise and act on behalf of domestic and international clients in relation to adjudication disputes under international security for payment legislation.
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