A TALE OF TWO SOP ADS
In the recent High Court decision of United Integrated Services Pte Ltd v Civil Tech Pte Ltd and another [2019] SGHC 32 (“UIS v CTPL”), the High Court dealt with the question of, inter alia, what happens if an Adjudication Determination (“AD”) issued under the Building and Construction Industry Security of Payment Act (“SOP Act”) has been effectively superseded by a subsequent AD: should enforcement of the prior AD be allowed independent of the second AD?
Brief facts. The salient facts are as follows. The respondent sub-contractor, Civil Tech Pte Ltd (the “Sub-Contractor”), had obtained an AD in its favour dated 23 October 2018 (the “1AD”). Pursuant to 1AD, the applicant-main contractor, United Integrated Services Pte Ltd (the “Main Contractor”), had to pay the Sub-Contractor $1,369,987.02 plus interest and costs.
The Sub-Contractor was granted leave to enforce 1AD on 19 November 2018.
However, shortly thereafter, in a second AD dated 23 November 2018 (the “2AD”), the adjudicator took into account the items considered in 1AD, as well as items that were not considered in 1AD, and determined that no amount was payable by the Main Contractor to the Sub-Contractor.
Accordingly, the Main Contractor applied to stay the enforcement of 1AD.
The Sub-Contractor cannot enforce each AD independently. The High Court held that “were the Sub Contractor correct that each AD could be enforced independently at its choosing, a subcontractor could gain a windfall which was unintended by the drafters of the SOPA.”
The rationale is essentially that the ADs are “cumulative… subsequent adjudicator will consider and adopt the findings of the prior adjudicator… factor in all prior payments (if any) made to the subcontractor whether under the subcontract or pursuant to prior adjudications made in favour of the sub contractor, in order to arrive at the final amount to be paid…” ([16] UIS v CTPL).
Contrary to legislative intent. Furthermore, the High Court found that the legislative intent of the SOP Act was to ensure “prompt payment for work done or materials supplied”: the High Court found that if a sub-contractor could elect which AD to enforce, “the subcontractor would be wise to withhold enforcement of the ADs. Upon accumulating sufficient ADs, the subcontractor may then elect to enforce each AD in its favour so as to enjoy the temporary windfall. Hence, subcontractors would be incentivised to be slow in enforcing the ADs in its favour…” ([22] UIS v CTPL).
Stay of enforcement. As a result, the High Court granted the Main Contractor’s application to stay the enforcement of 1AD, subject to the condition of “unless the [Sub Contractor] obtain[ed] an order setting aside [2AD]” ([24] UIS v CTPL).
Enforce ADs fast. For claimant sub-contractors, UIS v CTPL stands for the proposition that if you have an AD in your favour, it would be wise to enforce the AD swiftly.
Putting aside the issues that arose in UIS v CTPL, there is also a practical reason. If the respondent main contractor is near insolvency, a failure to enforce your AD on time may render your AD little more than a “paper judgment”.
For respondent main contractors, UIS v CTPL stands for the proposition that if your sub-contractors have multiple ADs against you, it is the latest cumulative AD which matters. As the High Court stated, “”when faced with two or more ADs which have not been enforced, each of which have considered and adopted the determination of the prior AD(s), the sensible outcome … must be that only the final AD, which has accumulated the findings of all prior ADs and taken into account all matters reasonably relevant to the adjudication… is enforceable.” ([23] UIS v CTPL; emphasis in original).
Tags: Building and Construction Industry Security of Payment Act; Enforcement of Adjudication Determinations
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.