WHEN IS THE MATTER IN DISPUTE BETWEEN THE PARTIES IN WRITING FOR PURPOSES OF SOPA?
The Building and Construction Industry Security of Payment Act 2004 (“SOPA”) applies to any contracts that is made in writing per s. 4(1) SOPA. But if a contract is not wholly made in writing, it can be treated as such if “the matter in dispute between the parties to the contract is in writing” per s. 4(5) SOPA. So, what does this mean? The High Court in CGS Construction Pte Ltd v Quek & Quek Civil Engineering Pte Ltd [2024] SGHC 183 (“CGS v QCE”) addressed this important issue.
Brief facts. Quek & Quek Civil Engineering Pte Ltd (“Q&Q”) was the main contractor for the Operation and Maintenance of Landfill Equipment, Vehicles and Floating Platform at Semakau Landfill (“Project”) (CGS v QCE [2]).
Q&Q subcontracted the entire works to CGS Construction Pte Ltd (“CGS”) (the “SMK3 Works”) (CGS v QCE [3]).
Disputes arose, and CGS commenced adjudication under SOPA and obtained an adjudication determination (“AD”) in its favour (CGS v QCE [4]).
Q&Q then applied to set aside the AD on 3 grounds, including the ground of there being no contract made in writing between Q&Q and CGS for the purposes of SOPA (CGS v QCE [5]).
The issues. The High Court held that there are two issues at play (CGS v QCE [18]):
Whether the contract for SMK3 was partly in writing, or if it was purely oral; and
If it was partly in writing, whether the “mater in dispute between the parties thereto is in writing”.
Partly in writing. On the facts of the case, the only written document which CGS had referred to as forming part of the SMK3 contract were the NEA Tender Documents setting out the scope of work for SMK3 (CGS v QCE [19]). Q&Q’s position was that the “entire subcontract” was not in writing and it was “mostly verbal” (CGS v QCE [19]).
But as there NEA Tender Documents do contain the work scope and was in writing, the contrat was therefore no purely oral, and was instead “not wholly made in writing” (CGS v QCE [20])
The High Court disagreed with Q&WQ that the NEA Tender Documents were insufficient on the basis of there being no written quotation, finding that SOPA does not require any quotation to be in writing and the case of Qingjian International (South Pacific) Group Development Co Pte Ltd v Capstone Engineering Pte Ltd [2014] SGHCR 5 did not assist on this issue as the issue of written quotations in that case was in context of whether “the matter in dispute” between the parties was in writing (CQS v QCE [21]).
Matter in dispute in writing. As for the second sub-issue, the crux termed on whether it was sufficient for the purposes of s. 4(5) SOPA Act for the matters in dispute to be recorded in writing, or whether the contractual terms in relation to the dispute to be also in writing (CQS v QCE [24]).
The High Court held that in light of the legislative concern over SOPA applying to purely oral contract, there must be “sufficient clarity of terms or agreement in writing, for the adjudicator to decide expeditiously in the summary procedure envisioned under SOPA” (CQS v QCE [28]).
As such, the High Court distilled the following principles at CQS v QCE [28]:
“28 In light of the legislative concern with applying SOPA to purely oral contracts, it necessarily follows that the phrase “matter in dispute between the parties thereto is in writing” in s 4(5) of SOPA, must mean that there is sufficient clarity of terms or agreement in writing, for the adjudicator to decide expeditiously in the summary procedure envisioned under SOPA. In my view, the following principles should apply in determining if the matter in dispute is in writing.
(a) It would not suffice if there is only written correspondence setting out the positions of dispute between the parties, where contractual terms or agreement may be relevant to the dispute. In such a situation, the contractual term or agreement relied on by a party, that is relevant to the dispute before the adjudicator, should be in writing, notwithstanding that the evidence or construction of a particular term or agreement may be disputed.
(b) Where a party does not rely on a contractual term or agreement for its claim, but on an alleged fact, the alleged fact that a party relies on should be in writing, notwithstanding that the evidence of that particular fact may be disputed. This may occur, for example, where a party seeks to exercise the right to a non-contractual set-off.
(c) Bearing in mind the policy rationale for SOPA, set out in Lee Terence at [2]-[5], a broad approach should be taken in making this assessment, taking into account the commercial context.”
It is important to note that even if the evidence or construction of the term may be disputed, it is important that the term itself be in writing.
Applying the above to the facts of the case, the High Court was satisfied that the requirement for the matter in dispute to be in writing under s. 4(5) SOPA was satisfied.
The terms of the project price of $12,488,000 was captured in writing in Q&Q’s letter of 13 December 2023 and CGS’s payment claim of 29 February 2024 where, among others, Q&Q had set out a final account proposing the project price of $12,488,000 and CGS had stated that for interim purposes, it was prepared to claim on the basis of $12,488,000 (CQS v QCE [30]). While there was a disagreement over whether the price of the SMK3 works should be based on 92% of the NEA Tender price, that was not the subject of the dispute in the adjudication (CQS v QCE [30]).
On the issue of a variation deduction, Q&Q had submitted that the deduction was supported by certain specifications in the NEA Tender Document and in its correspondence. Hence, while the adjudicator had pro-rated the variation deduction, Q&Q’s disagreement with the adjudicator’s determination was a matter that goes towards the merits, rather than an issue over whether the relevant contractual term was in writing (CGS v QCE [31]).
On the issue of expenses deduction, there was an email on the same (CQS v QCE [32]).
Similarly, the dispute over deduction for retention was documented in correspondence between the parties, even though there was no contractual term or agreement that was relied upon by Q&Q for the deduction (CQS v QCE [33] – [37]). The High Court held at CQS v QCE [42] that “[t]he dispute over the Retention Deduction was therefore, in essence a dispute in which the party seeking to retain the monies did not rely on any contractual term or agreement, but on an alleged fact, that was completely bare and unsupported by any document.” This, therefore, did not pose any difficulty for the purposes of s. 4(5) SOPA.
As to the submission that there was uncertainty over matters such as timelines and whether the contract was lump sum or not, the High Court held at CQS v QCE [44] that “… the uncertainty of such terms do not detract from there being sufficient clarity of agreement in respect of the dispute in AA 68, as set out above. They therefore do not affect the satisfaction of s 4(5) of SOPA.”
Conclusion. Generally, most contractors would take care to ensure that they only carry out works based on a contract in writing. But there are situations where the contractor may have carried out works based on a contract that is partly oral, and partly in writing. In such situations, the question that often arises is whether the contract can be treated as though it is made in writing under s. 4(5) SOPA.
This case is therefore important as it provides clarity on how to approach such situations. Importantly, as can be seen from the High Court’s approach, in such situations, reference can be taken from the correspondence between the parties.
As such, when approaching a situation where the contract is not wholly made in writing, one should also look at the correspondence between the parties to see if the correspondence deals with the matter(s) in dispute between the parties, including (in particular) the contractual terms relating to the matters in dispute.
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