SETTING ASIDE OF ADJUDICATION DETERMINATION BASED ON FRAUD AND/OR CORRUPTION
In JE Synergy Engineering Pte Ltd v Sinohydro Corp Ltd (Singapore Branch) [2023] SGHC 362, the claimant applied to set aside (among others) two adjudication determinations on the ground of fraud and/or corruption under s 27(6)(h) of the Building and Construction Industry Security of Payment Act 2004 (2020 Rev Ed) (“SOPA”). This application was dismissed by S Mohan J.
Facts. The key facts are as follows.
The claimant’s application was primarily (at [19]) to set aside two adjudication determinations (collectively, the “ADs”), and the Order of Court (“ORC 3729”) granting the defendant leave to enforce the ADs against the claimant (at [1]).
The claimant sought to set aside the ADs and ORC 3729 under s 27(6)(h) of the SOPA, which states as follows (at [27]):
“Enforcement of adjudication determination as judgment debt, etc.
27.— …
…
(6) The grounds on which a party to an adjudication may commence proceedings under subsection (5) include, but are not limited to, the following:
…
(h) the making of the adjudication determination was induced or affected by fraud or corruption.”
The allegations raised by the claimant were essentially that:
The defendant had paid bribes, kickbacks, and/or secret profits to the claimant’s Project Director “Mr Niu” and Senior Project Engineer “Ms Chen” (at [13]; [20]);
In return, Mr Niu and Ms Chen would approve payment claims submitted by the defendant without conducting any proper verification of the work done, resulting in amounts overclaimed by the defendant being certified in full in the claimant’s payment responses (at [21]);
While the claimant initially also advanced the case that the ADs and ORC 3729 should be set aside on the basis that the underlying subcontract was allegedly awarded as a result of fraud and/or corruption (at [22]), the claimant later limited its challenge to rely on the allegation of over-certification of the payment claims as the sole basis for its setting aside application (at [28]).
The Court noted that the claimant was correct to limit its challenge, because s 24(a) of the International Arbitration Act 1994 (2020 Rev Ed) – which is in pari materia with s 27(6)(h) of the SOPA – “contemplates a situation where the award itself, rather than the underlying contract between the parties, is tainted or induced by fraud or corruption” (at [28]; emphasis in original).
Intensely factual dispute on the merits. As for the allegations of over-certification of the payment claims, the Court was of the view that these allegations, “if established, would amount to both fraudulent and corrupt conduct.” (at [30])
But this allegation was “an intensely factual one, and one which went to the very heart of the merits of the claims being advanced by the claimant” (a) against Mr Niu and Ms Chen in a separate High Court suit (“S 950”) commenced by the claimant; and (b) against the defendant in an arbitration commenced by the claimant (at [31])
The Court noted that, in an application to set aside the adjudication determination, the court in its supervisory jurisdiction does not review the merits of the adjudicator’s determination (at [32]).
Therefore, the claimant’s allegation was an invitation for the court to engage in the merits of the dispute as a whole, for which, in the present case, “subverts the parties’ choice of having the merits of the dispute decided in their agreed forum, such as via arbitration” (at [32]; emphasis in original). This was, in the Court’s view, antithetical to the SOPA regime, as it would turn the “pay now, argue later” regime into one allowing for “pay now, argue now and argue again later” (at [32]).
Fraud. The Court noted that mere allegations of fraud or corruption was not enough; there “must be compelling evidence … before the court” in order for there to be “effectively no dispute on the merits” (at [34]; emphasis in original):
“34 … If the evidence of fraud and/or corruption is so compelling that there is effectively no dispute on the merits to be had, then the supervisory court in finding that the making of an adjudication determination was induced by fraud and/or corruption would not be intruding into the territory of a dispute on the merits, or reviewing the merits of the adjudicator’s determination. There is, in the scenario above, effectively no dispute on the merits to begin with and therefore the court would not be subverting the SOPA regime. Thus, in a case where just on the affidavit evidence alone, the high threshold of compelling evidence of fraud and/or corruption inducing or affecting the adjudication determination is met, then the adjudication determination may be set aside (Facade at [35]). …”
The Court found that this was not met on the evidence of the case before it (at [35] – [46]). And the Court found that “the allegations raised by the claimant in this application, which form the very subject of the substantive dispute in S 950 and the Arbitration, are vigorously contested; those substantive disputes are to be resolved in the appropriate forum and not in this application.” (at [46])
Significance. This decision reiterates the importance of the “pay now, argue later” philosophy undergirding the SOPA. Fraud in a civil case requires a high threshold to prove. And it is all the more difficult in an application to set aside an adjudication determination where the court exercising supervisory jurisdiction is only deciding on the basis of affidavit evidence, and especially where the dispute is already the subject matter of separate proceedings which is the “appropriate forum” or “proper forum” for the dispute (at [39]) (in this case, arbitration was to be the “ground-clearing” forum, see [39]) . Therefore, while it is not impossible, the court has made clear that compelling evidence of fraud or corruption is required before the court will set aside an adjudication determination on s 27(6)(h) of the SOPA.
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.