Introduction

The Building and Construction Industry Security of Payment Act (the “Act”) was introduced to facilitate the efficient recovery of payments in a sector where cash flow is vital to the survival of construction projects. Since its enactment, it has provided a much utilised payment claim and dispute resolution regime.

However, the Act has generated its fair share of litigation, as parties have brought before the courts disputes over the meaning and operation of its various mechanisms. In Libra Building Construction Pte Ltd v Emergent Engineering Pte Ltd [2015] SGHC 279, the High Court sought to clarify the operation of payment claims and the frequency at which they can be issued.

Payment Claim Timeframes

The Act allows contractors to make payment claims throughout the course of a project. Each payment claim will request for payment in respect of work done  during a particular period (the “reference period”). Ordinarily, the contract between the parties will state that the contractor may serve payment claims at certain intervals (e.g. once a month, or by a certain date every month) (the “payment claim period”). The contractor is thus able to claim regular progress payments in accordance with the contract.

However, there may be issues over how frequently and at what time a contractor may serve payment claims. After considering, amongst others, the Court of Appeal's decision in Lee Wee Lick Terence v Chua Say Eng (formerly trading as Weng Fatt Construction Engineering) and another appeal [2013] 1 SLR 401 and the decisions of the New South Wales courts, the High Court in this decision shed some light on these issues.

  1. There can only be one payment claim served in respect of a progress payment.
  2. Unless otherwise stated in the contract, a contractor is not obliged to make a payment claim during each payment period; it can hold over claims till a subsequent time.
  3. In each payment claim period, the contractor can only make one payment claim, even if the payment claims are for different claim reference periods. Therefore, if the contractor is entitled to monthly payment claims, it cannot serve three separate payment claims in April even if the claims are for work done in January, February and March respectively.
  4. However, if the contractor has indeed held over certain payment claims, it can serve one payment claim in a later payment claim period specifying the enlarged reference period. Therefore, the contractor can serve one payment claim in April specifying that it is for work done in January, February and March (provided this is not barred by the contract).

​The exact frequency and time for service of payment claims is first and foremost a matter of contract. Where the contract is silent, the default setting is one payment claim per month. This means that the contractor is entitled to a maximum of one payment claim per month.

In arriving at the above decision, the High Court was of the view that contractors should not be allowed to abuse the system by holding over payment claims and serving multiple payment claims all at once as the recipient of the payment claims would be left scrambling to file complete and comprehensive payment responses in time, which could severely debilitate the recipient. The Act, while serving the interests of the contractor, must also balance the interests of the recipient.

Brief Facts

In this case, the Plaintiff had contracted with the Defendant sub-contractor for a certain project. The contract provided for monthly payment claims.

However, the Defendant issued 3 payment claims in December 2014 – Payment Claim 3 on 4th December, Revised Payment Claim 3 on 26 December, and Payment Claim 4 on 31 December. The payment claims covered different reference periods, as the first two were for work done up to end November 2014, and the Payment Claim 4 was for work done up to end December 2014.

The court thus held that Payment Claim 4 was not valid. The Defendant was entitled under the contract to make one payment claim per month; since it had already served Revised Payment Claim 3 in December 2014, it could not serve Payment Claim 4 in the same month.

The court also discussed possible remedial measures, and  opined that a contractor could ostensibly withdraw a payment claim and substitute it with another. In this situation, the Defendant could thus have withdrawn Revised Payment Claim 3 in order to substitute it with Payment Claim 4, although it did not do so on the facts.

Concluding Words

As the payment claim regime under the Act is based on speedy enforcement of payment, it is vital for parties to observe the relevant time frames. Contractors should thus be aware of how often they can serve payment claims, and whether it is provided under the contract that payment claims in respect of a certain reference period must be served by a certain date. Contractors should also consider whether potentially invalid unsatisfied payment claims can be withdrawn and substituted with a valid payment claim to remedy any defects.

Consequently, the recipient of a payment claim must be aware of how long it has before a payment response, whether it be an objection or a full payment, must be made.