SETTING ASIDE OF ADJUDICATION DETERMINATION FOR FRAUD
In the short ex tempore decision of Builders Hub Pte Ltd v JP Nelson Equipment Pte Ltd [2024] SGHC(A) 28 (the “Judgment”), the Appellate Division of the High Court clarified whether an adjudication determination can be set aside for fraud if the fraud did not affect the adjudication determination.
The earlier decision. In JP Nelson Equipment Pte Ltd v Builders Hub Pte Ltd [2023] SGHC 186, the High Court held that, among others, even though the facts of the fraud were not relied upon by the adjudicators in arriving at their respective adjudication determination, the adjudication review amount should be reduced by $155,160.00.
This was on the premise that “fraud unravels all”, and as the adjudication claimant was “still holding onto the fruits of its fraud”, the court therefore had the power to interfere with it.
And this was even though, as noted at [83] – [84] of the judgment, the adjudication respondent was unable to show how much the overpayment had been.
The appeal. On appeal, the Appellate Division disagreed with the High Court.
Firstly, the Appellate Division held that as the fraud did not affect the adjudication determinations, the scheme under the Building and Construction Industry Security of Payment Act 2004 (“SOPA”) does not permit the amounts in the adjudication determinations to be reduced due to the fraud.
“20 The remaining issue is whether the Judge was correct to reduce the amount under the RA because of the fraud on the basis that “fraud unravels everything”. While we understand the sense of justice underpinning the Judge’s decision, we are of the view that it was not open to him to do so as that is not the scheme under SOPA and is outside its scope. Under that scheme, an adjudication determination (whether original or upon review) has temporary finality and can only be set aside (or varied) if it is affected by the fraud. If the Judge was correct in reducing the RA even though neither of the awards was affected by the fraud, then the words in s 27(6)(h) SOPA (quoted above at [11]) would be otiose. There would be no need to establish that a particular adjudication determination is affected by fraud.”
Secondly, the Appellate Division noted that the adjudication respondent had not established the quantum of its loss. If so, then the High Court should not have adopted the approach that it did to reduce the adjudicated amount.
“21 Furthermore, JPN had not established the quantum of its loss as claimed. We note that the approach of the parties and the Judge was to ascertain the quantum of JPN’s loss by establishing the value of the unsupplied aircon equipment. JPN had claimed that the value of the unsupplied equipment was roughly 54% of the contract sum for the aircon system. However, BH had argued that the value of the equipment would be about 26.61%. As mentioned, the Judge noted that JPN did not have enough evidence to support its allegation on the value of the equipment, but nevertheless reduced the RA by $155,160. We are of the view that the Judge erred in doing so when that was not the approach adopted to ascertain the quantum of the loss.”
Where this leaves us. Does this mean that the adjudication respondent was left without any recourse? The answer is no, for as the Appellate Division noted at Judgment [22] – [23], the adjudication respondent could seek recourse in respect of overpayment due to the fraudulent conduct elsewhere.
So, while it may be said that fraud unravels all, when it comes to the setting aside of an adjudication determination under SOPA, if the making of the adjudication determination was not induced or affected by fraud, then the adjudication determination cannot be set aside based on that fraudulent act or conduct.
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