Dispute Resolution Singapore Client Alert November 2015 Newcon Builders: A Timely Reminder The High Court decision in Newcon Builders Pte Ltd v Sino New Steel Pte Ltd  SGHC 226 was keenly awaited because it was an appeal from a first instance decision that had upheld an adjudication determination based on a premature adjudication application. The first instance decision had created much buzz and (from our experience) buttressed a slew of counter-arguments by claimants in adjudication proceedings who were otherwise out of time when their adjudication application had been filed prematurely. On appeal, the Singapore High Court overturned the first instance decision and held inter alia, that an adjudication application cannot be made before the expiry of the dispute settlement period (i.e. a premature adjudication application will be set aside). In the course of the judgment, the Court also provided some practical insights that may be useful for contractors. The Dispute The plaintiff ("Newcon") was engaged as the main contractor for a construction project. Newcon subsequently sub-contracted some structural and architectural steel works to the defendant ("Sino"). A clause of the subcontract made clear that the sub-contract was to be executed in accordance to the main contract. After Sino completed the work for the sub-contract, it served a payment claim on Newcon, which replied by asking for additional documents and clarification in order to assess the payment claim. Sino did not respond to this request and instead served Newcon with a notice of its intention to apply for adjudication. Sino then submitted an adjudication application with the Singapore Mediation Centre and the adjudication application was served on Newcon the next day. Sino's adjudication application was submitted prematurely one day before the 7-day dispute settlement period had run its course. An adjudication conference was held and the adjudicator issued his adjudication determination. Newcon was not happy with the determination and filed a summons to be heard before an assistant registrar (the "AR"), asking for the adjudication determination to be set aside on the basis of the application being submitted prematurely. The AR dismissed Newcon's application to set aside the adjudication determination. Hence, Newcon lodged the appeal before the High Court. The High Court's Decision On the jurisdiction issue of whether an adjudication application can be made prematurely (e.g. before the expiry of the dispute resolution period), the Honourable Justice Quentin Loh (the "Judge") first affirmed the role of the court in a setting-aside action as laid down by the Court of Appeal in Chua For further information please contact Nandakumar Ponniya +65 6434 2663 Nandakumar.ponniya @bakermckenzie.com Wong Tjen Wee +65 6434 2686 Tjen.wee.wong @bakermckenzie.com Baker & McKenzie.Wong & Leow 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1 Singapore 018981 www.bakermckenzie.com 2 Client Alert November 2015 Say Eng1 - that the Court may set aside adjudication determinations on the ground that a mandatory condition of the SOP Act has not been complied with. A mandatory condition is a provision under the SOP Act which is so important that it is the legislative purpose that an act done in breach of the provision should be invalid. Where there is no payment claim or service of a payment claim, it is clear that the adjudication determination would be null and void. As for premature adjudication applications, the Judge overturned the first instance decision and held that "both premature and late adjudication applications are not valid as they do not comply with [Sections] 12 and 13". In his view, Section 13(3)(a) prescribes, in mandatory terms, a time limit beyond which the right to make an adjudication is lost - and when the time starts to run is as important a milestone as when the time ends. As such, when the dispute settlement period has not run its course, Sino has no right to make an adjudication application. The judgment is also useful for other purposes. The Judge raised several pointers for industry players: The importance of complying with the conditions and timelines under the SOP Act. If a party wishes to avail itself of the SOP scheme of 'rough and ready' justice to obtain speedy payment, then it has to ensure that its conditions and timelines are complied with. "The steps, their required content and timelines are key features of this scheme and must be complied with." There is no "effects-centric" approach to ascertaining whether a breach of a condition of the SOP Act should be construed as a breach of a mandatory condition. The effect of declining such an approach means that the exact prejudice (or lack thereof) suffered by the other party is not relevant. "The question asked should not be what is the exact prejudice suffered by the Plaintiff from the Defendant's breach of the Act. Rather, the question is whether Parliament intended for the provision that was breached to be strictly observed." When ascertaining if a document has been incorporated into a contract (which is particularly relevant in sub-contracts that incorporate terms of the main contract), what is crucial is the intention of both parties to the contract. The Judge cited ABB Holdings with approval: "Where a document is expressly incorporated by general words, it is still necessary to consider, in conjunction with the words of incorporation, whether any particular part of a document is apt to be a term of the contract." In this case, it was held that the words: "[t]he Conditions of this Sub-Contract shall comply fully with all the terms and conditions as set out in the Main Contract", in context and content, were adequate to incorporate the terms of the Main Contract (where applicable). In principle and practice, there can be no impediment or objection to an interim certificate functioning as a payment response. "From a perusal of both [Section] 11 of the [SOP] Act and [Regulation] 6(1) of the [SOP] Regulations, it is clear that no particular form is specified for payment responses and only the important or essential information is prescribed, leaving much of the details to the parties or their advisers to craft"; and 1 Lee Wee Lick Terence (alias Li Weili Terence) v Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) and another appeal  1 SLR 401 3 Client Alert November 2015 A respondent to a payment claim must be careful to provide adequate reasons in its payment response. "It is also self-evident that if a party chooses to give its reasons laconically by stating 'rejected' or 'not entitled' or 'withheld' without explaining more, it will find itself unable to supplement that in the adjudication response". Comment Newcon is not a watershed case in the sense that it does not set out new law. However, it serves as a timely reminder that the conditions and timelines under the SOP Act must be strictly complied with, otherwise the consequences can be significant - in particular, that "both premature and late adjudication applications are not valid as they do not comply with [Sections] 12 and 13". From our experience, there are two further practical points to be noted from Newcon - which contractors still constantly fall foul of: (1) ensure that adequate reasons are provided in your payment response. The case has taken a view (rather strictly) that "rejected" or "not entitled" or "withheld" (without more) will not be adequate and will prevent the respondent from supplementing its adjudication response; and (2) specify in the contract that a particular document will serve as a payment response for the purposes of the SOP Act. Although the case actually allowed an interim certificate to function as a payment response, the Judge had taken into consideration the context of the relationship between the parties and their previous dealings. As such, for the avoidance of any doubt or to avoid any argument by a claimant, it would be prudent to ensure that the contract expressly sets out which document would form a payment response under the SOP Act. ©2015. All rights reserved. Baker & McKenzie.Wong & Leow is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.