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The SCL (International) meeting was held on 26th September 2018 in Chicago on the 1st evening of SCL 8th International Conference (organised by SCL (North America)) and was chaired by SCL (International) Liaison’s committee of Keith Kirkwoood & Paul Battrick SCL(UK), Basil Georgiou SCL(Australia), John Cock SCL(Hong Kong) and Anil Changaroth SCL(Singapore).

This meeting had the largest representation of SCL (International) with attendance by about 40 heads and/or international relations chairs from SCL Australia, Africa, Brazil, Chile, Europe, Gulf, Hong Kong, Mexico, Mauritius, New Zealand, North America, Romania, Singapore and United Kingdom.

The discussion included the status of the current SCLs, potential SCLs including Sri Lanka, Philippines and Indonesia, the operations of the international website (hosted in UK by the webmaster Edward Peters) and functions, the Delay Disruption Protocol, the SCL medal, the international updates that SCLs would be called upon to submit, potential SCL article/paper competition, and the SCL (International) conference returning to its Biennial format.

It was announced that the SCL 9th International Conference will be hosted by SCL (New Zealand) (as it was the only SCL submitting a bid) and will be held in Auckland, New Zealand from 4th to 6th November 2020.

Contributed by:
Anil Changaroth - 
MD and General Counsel, ChangAroth Chambers LLC and ChangAroth InterNational Consultancy

The SCL 8th International Construction Law conference organised by the SCL (North America) was held from 26th to 28th September 2018 in Chicago Illinois USA. With attendance numbering to about 200 local and 100 international Construction industry practitioners, the conference had two full days of programme that included keynote addresses by the Honourable Justice Vickery of the Supreme Court of Victoria Australia and Doug Jones AO and 24 working sessions that covered a full spectrum of the Construction Industry and Law topics.

   

With the organising of the conference meticulously executed SCL (NA) chairperson Dr Anamaria Popescu assisted by a couple of its Council/Board members and the SCL (International) Liaison’s committee of Keith Kirkwoood & Paul Battrick SCL(UK), Basil Georgiou SCL(Australia), John Cock SCL(Hong Kong) and Anil Changaroth SCL(Singapore) – SCL(NA) several months ahead sent out invitations for submissions of topics/presentations. These were carefully reviewed and selected for presentations during the working sessions that included several that were moderated by SCL (International) representatives. The fringe events included the Chicago Architecture Foundation River Cruise, inaugural Law Rock! Chicago concert and culminated with the inaugural SCL (International) Medal awarded to Sir Vivian Ramsey for his vast contribution to the Society of Construction Law internationally.

The highly successful conference set a new bench mark for the SCL (International) specifically with regard to the selection of papers/presentation/speakers and the involvement of SCL(International) on several aspects of the conference throughout the planning period and the conference. Kuddos to Dr Anamaria !

Contributed by:
Anil Changaroth - 
MD and General Counsel, ChangAroth Chambers LLC and ChangAroth InterNational Consultancy

Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] SGCA 39


Introduction

Adjudications under the Building and Construction Industry Security of Payment Act (Cap 30B) (the “SOP Act”) are routinely described as a rough species of justice, wherein an adjudicator is required to make a determination within a short period of time. The adjudication’s quick pace is a feature of the SOP Act, along with its provisionally binding nature (referred to as temporary finality) until the differences are ultimately resolved in court or at arbitration. Both features facilitate the overall aim of easing cash flow to contractors and sub-contractors downstream in the building and construction industry.

Due to the constrains of time, adjudicators have been given considerable latitude to make their determination. Errors of law in adjudications are tolerated and cannot be appealed against. However, this does not mean that adjudicators have carte-blanche to do as they wish, as they are required to comply with the principles of natural justice in rendering a determination.

In Bintai Kindenko Pte Ltd v Samsung C&T Corp [2018] SGCA 39 (“Bintai Kindenko”), the Court of Appeal decided on the issue of an adjudicator who breached the principles of natural justice by failing to provide a fair hearing. In so doing, the Court of Appeal elaborated on the principles of natural justice, particularly in relation to the duty to provide a fair hearing in the context of adjudications.

Background to Bintai Kindenko

The appellant, Bintai Kindenko Pte Ltd (the “sub-contractor”), was engaged by the respondent, Samsung C&T Corp (the “main contractor”) as its sub-contractor for a project in respect of additions and alterations to Suntec City’s convention centre and retail podium ([7] of Bintai Kindenko).

Disputes occurred between the parties and the sub-contractor applied for adjudication under the SOP Act. The sub-contractor raised 3 issues in dispute for the adjudicator to determine, namely:

  1. the retention monies;
  2. the backcharges (for scaffolding carried out during the project); and
  3. the variation works (certified and paid in earlier payment responses but recomputed and reversed in the main contractor’s payment response).

The main contractor responded to the 3 issues raised by the sub-contractor stated above. In addition, the main contractor also raised a preliminary objection to the validity of the Adjudication Application. Further submissions were also made by both parties, which dealt with all 4 issues stated above ([13]-[17] of Bintai Kindenko).

However, when the adjudicator rendered the adjudication determination in favour of the sub-contractor, the adjudicator only addressed (a) the preliminary objection to the validity of the adjudication application; and (b) the retention monies ([19] of Bintai Kindenko).

The adjudicator did not make any findings with regard to the issues regarding the back charges and the variation works. In fact, the adjudicator stated that the adjudication “[centered] solely on the claim for release of the first retention monies” ([20] of Bintai Kindenko).

The main contractor applied to the High Court to set aside the adjudication determination, arguing that the adjudicator had breached the rules of natural justice by failing to consider the two issues regarding back charges and variation works. The High Court accepted that the rules of natural justice were breached, and set aside the adjudication determination accordingly.

Being dissatisfied with the High Court’s decision, the sub-contractor appealed to the Court of Appeal.

The Court of Appeal’s Decision in Bintai Kindenko

The Court of Appeal dismissed the sub-contractor’s appeal, and found that there was a breach of natural justice as the adjudicator did not accord the respondent a fair hearing by failing to consider the essential issues, and that the breach caused was material to the main contractor.

Two Aspects of Natural Justice

The Court of Appeal highlighted that there were two aspects to the natural justice principles. Firstly, the parties to the adjudication must be accorded a fair hearing (the fair hearing rule), which meant that, inter alia, the adjudicator must consider the essential issues. Secondly, the adjudicator must have been independent and impartial in deciding the dispute (the no bias rule) ([34] of Bintai Kindenko). Only the fair hearing rule was considered as this formed the basis of the High Court’s decision to set aside the adjudication determination.

The Fair Hearing Rule – Failing to Consider the Essential Issues

Importantly, the Court of Appeal distinguished between an adjudicator’s decision to reject an argument against the adjudicator’s failure to even consider that argument. The latter would be a breach of natural justice while the former would only be an error of law, not a breach of natural justice ([38] of Bintai Kindenko).

Additionally, the Court of Appeal highlighted that an adjudicator would not need to consider every issue raised by the parties, but would only need to deal with the essential issues. Furthermore, in deciding the essential issues ([40] of Bintai Kindenko):

  1. the adjudicator would not need to deal with every argument canvassed under each essential issue as long as one argument could resolve the issue;
  2. the adjudicator could resolve an issue implicitly without expressly addressing it, if the outcome of that issue flows from the conclusion of a specific logically anterior issue; and
  3. the adjudicator must have demonstrably attempted to comprehend the parties’ arguments on those essential issues.

As such, the Court of Appeal held that an adjudicator would be found to have breached the principles of natural justice for failing to consider an issue in the dispute only if ([46] of Bintai Kindenko):

  1. the issue was essential to the resolution of the dispute; and
  2. a clear and virtually inescapable inference could be drawn that the adjudicator did not apply his mind at all to the said issue.

The Failure to Consider the Essential Issues

In Bintai Kindenko’s case, the back charges and the variation works were clearly essential issues to resolving the dispute, especially since they were raised in the main contractor’s Adjudication Response which featured a response amount of “($2,190,963.62)” ([49] of Bintai Kindenko).

As such, the sub-contractor had to persuade the Adjudicator to find in its favour in respect of the first half of the retention monies, as well as rule against the main contractor in respect of the back charges and variation works, especially since the sub-contractor’s claims would have been defeated if the Adjudicator concluded that the main contractor was entitled to the back charges and variation works ([49] of Bintai Kindenko).

The Court of Appeal found that the adjudicator clearly did not apply his mind at all to the issues of the back charges and variation works, especially since the adjudication determination did not contain a single paragraph on the issues of the backcharges and variation works. As such, the Court of Appeal found that the adjudicator had failed to consider the essential issues in resolving the dispute ([50] of Bintai Kindenko).

The Breach of Natural Justice Must be Material

The Court of Appeal then considered whether the breach was material. In so doing, the Court of Appeal held that a breach would only be material if the adjudicator was denied the benefit of arguments or evidence that had a real chance of making a difference to his deliberations, as opposed to a fanciful one. If the breach would not have made any difference because it wholly lacked any legal or factual weight, then such a breach would not be material ([60]-[61] of Bintai Kindenko).

In Bintai Kindenko’s case, the Court of Appeal found that the Adjudicator’s failure to consider the issues regarding the backcharges and variation works was sufficiently material as to prejudice the main contractor, especially since the sub-contractor’s claims would have been defeated if the Adjudicator concluded that the main contractor was entitled to the back charges and variation works ([62] of Bintai Kindenko).

The Effect of Bintai Kindenko

The Court’s decision in Bintai Kindenko highlights the importance that all adjudicators must consider the essential issues in dispute before making the determination. While the SOP Act gives adjudicators a wide latitude in making their determination, the failure to consider the essential issues and provide a fair hearing or comply with the principles of natural justice will result in a determination being set aside through no fault of the parties.

 

Contributed by: Justin Tan - Senior Associate, Eversheds Harry Elias LLP

Disclaimer: The views expressed in this article are the author’s personal views and do not represent the views of Eversheds Harry Elias LLP.

Overview

In Lee Tat Development Pte Ltd v Management Corporation Strata Title Plan No 301 [2018] SGCA 50 the Singapore Court of Appeal recently clarified the applicability under Singapore law of 2 closely-related torts of English origin and considerable vintage.

It held that the tort of malicious prosecution should not be extended to civil proceedings generally and that the tort of abuse of process is not recognised under Singapore law.

Of particular interest is both the settling of a previously murky area of law in Singapore and the reasoning behind the SGCA's calculated departure from the position under English law.

Remarkably this decision represents the culmination of a series of court actions between the same parties over four decades. The SGCA noted, drolly: "These proceedings are, in fact, replete with irony as well as legal significance. It is ironic that a dispute bitterly fought over several decades by two parties who have nothing but personal ill will towards each other has engendered (for Singapore law) questions of the first importance in relation to the development of the common law in general and tort law in particular."

The Torts

The tort of malicious prosecution provides that a party is entitled to damages in respect of the other party's prosecution of previous legal proceedings against it where that prosecution was "without reasonable or probable cause" and "malicious".

As for the tort of abuse of process, a party is entitled to damages where the other party has brought legal proceedings for "an illegitimate purpose" to seek "some wholly extraneous benefit other than the relief sought and not reasonably flowing from or connected with the relief sought".

Under English law abuse of process is a recognised tort, while it was clarified quite recently that the tort of malicious prosecution does extend to civil proceedings generally (including Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366 (Privy Council) and Willers v Joyce and Anor [2016] UKSC 43).

Facts

The case originally concerned a dispute over whether the residents of a condominium (Grange Heights), who were represented by their management corporation (MCST), had a right of way over a neighbouring strip of land owned by Lee Tat.

In 2009 the SGCA overruled its 2005 decision (which had held that the residents enjoyed the right of way), on the basis that the right of way had been extinguished by operation of the law (as a result of the amalgamation of two adjoining plots of land on which Grange Heights had been built).

In the action commenced by Lee Tat from which the present appeal arose, Lee Tat claimed damages from the MCST, including for:

• maliciously prosecuting 2 of the previous actions given the MCST did not genuinely believe that the Grange Height residents were entitled to use the right of way; and

• abusing the court's process by participating in 4 of the previous actions for the collateral purpose of enhancing the value of its land by retaining the "Grange Heights" address and name, which it sought to do by retaining the right of way.

The SGCA upheld the High Court's first instance decision to dismiss the MCST's claims. It held that

  • • While the tort of malicious prosecution applies to the prosecution of criminal proceedings, it does not extend to civil proceedings generally, and only applies in very limited and specific types of case which may "inflict immediate and perhaps even irreversible damage to the reputation of the victim" (e.g. some ex parte interlocutory orders, and bankruptcy and winding up petitions). None of these exceptions were applicable in the present case.

  • • The tort of abuse of process is not recognised in Singapore.

Reasons

The SGCA declined to extend the tort of malicious prosecution to civil proceedings generally for reasons which it categorised in its judgment as being either reasons of principle or "legal policy":

Principle

  • • The differences between criminal and civil proceedings (and their consequences) justify a distinction as regards the applicability of the tort of malicious prosecution. The SGCA noted that the "public character and harsh consequences of criminal proceedings undergird the law's recognition that those who suffer at the hands of prosecutors who abuse their function for malicious or improper motives are deserving of a remedy". While it was acknowledged that maliciously brought civil proceedings may also cause damage to a defendant, the Court was not persuaded that "the risk that such injury will go without remedy is sufficient to outweigh" other problems if the tort extended to civil proceedings.

  • • Extending the tort to civil proceedings generally would be inconsistent with the principle that "malice is generally irrelevant in the context of tort law" – i.e. a person has a right to perform lawful acts, regardless of the motive for doing so.

    • Extending the tort to civil proceedings generally could have an unintended impact on other, connected areas of law, such as the law of absolute privilege which covers statements made in the course of judicial proceedings, and the principle that a party owes no duty of care to his counterparty in the conduct of litigation.


  • Legal Policy
  • • Extending the tort to civil proceedings generally would undermine the principle of finality in the law and legal process as it could encourage unnecessary satellite litigation (as seen in the present case, where the parties were disputing not the original subject matter but the conduct of the dispute itself), thereby opening the "floodgates" of litigation and wasting the court's time and resources.

    • Extending the tort to civil proceedings generally would have a "chilling effect" on regular litigation. Genuine potential litigants may be deterred from invoking the court's jurisdiction.

    • The current rules of civil procedure already avail a party of other potential remedies (e.g. award of costs on an indemnity basis) coupled with legal mechanisms to bring malicious prosecutions to a prompt and early end (e.g. striking out claims which are frivolous, vexatious or otherwise an abuse of process). Parties on the receiving end of a malicious prosecution are unlikely to be completely without a remedy, therefore.

    As for the tort of abuse of process, the SGCA noted that it was closely-related to the tort of malicious prosecution, with the two torts sharing similarities as regards both their "elements" and "underlying rationale".

    For the same policy reasons that led to its decision not to extend the tort of malicious prosecution to civil proceedings generally, the SGCA declined to recognise the tort of abuse of process.

Concluding remarks

Both the English and Singapore Courts have grappled with the clear tension between what the SGCA described as the "common instinct that a remedy should be provided to those who suffer injury as a result of abusive legal proceedings brought against them" on the one hand, and the potential difficulties which could arise from the recognition of the torts of malicious prosecution and abuse of process on the other.

The SGCA - taking a somewhat pragmatic approach based on considerations of principle and policy – essentially concluded that those potential difficulties outweigh the potential benefits.

In doing so the SGCA noted that "whilst a parochial approach to legal development ought to be assiduously eschewed, this court cannot ignore – where relevant – the lack of suitability of any rule or principle of English law to the local circumstances of Singapore".

Although exactly what "local circumstances" the SGCA was referring to is not entirely clear, what is clear is that the Singapore courts will continue to chart their own course, including where they consider there to be compelling policy considerations which justify a departure from English law.

 

Contributed by:
Sean Hardy - 
Senior Associate, Pinsent Masons MPillay
Justin Ee - Senior Associate, MPillay

Construction projects are fraught with risks. Delays, defects and disputes over variation works are par for the course.

To compound matters (or to make things more interesting) is the risk of insolvency. Due to the sheer size of the capital investment that is required for construction and the cyclical nature of the industry, contractors face risks of insolvency far more regularly than companies in other industries (with the exception being shipping possibly).

An insolvent contractor leaves employers in a terrible situation. Building works may go uncompleted, defects may not be remedied and employers may be left with little recourse. Employers therefore devise ways to protect themselves against such situations.

A popular one is to ask the contractor to provide a performance bond. The bondsman is obligated to pay out the sum of money stipulated in the performance bond once certain conditions in the performance bond are fulfilled.

Remedies for failure to provide a bond

An interesting question that arises is the following – What is the employer’s remedy if the contractor fails to provide a performance bond?

Should the employer terminate the contract and look for another contractor? However, this approach comes with the risk of the employer being charged with wrongful termination especially when the contract does not provide for termination on this ground.

Another approach may be to seek a court order compelling the contractor to pay to the employer the full amount of the performance bond. However, this approach could be disproportionate especially when the project is still on-going and it may not be clear that the contractor has defaulted in respect of its other obligations which the performance bond is to safeguard against e.g. defects in its work, delay in completion of the project.

The case of Liberty Mercian

This issue was considered in Liberty Mercian Limited v Cuddy Civil Engineering Limited & Others [2014] EWHC 3584 (“Liberty Mercian”).

In Liberty Mercian, the claimant employer sought remedies for the defendant contractor’s failure to provide a performance bond. To this end, the claimant wanted specific performance to be ordered.

In an earlier decision in the same proceedings (Liberty Mercian Limited v Cuddy Civil Engineering Limited & Others [2013] EWHC 4110 (TCC)), the court found that specific performance would be an appropriate remedy given that the defendant was found to have no assets and so, damages may not be an adequate remedy.

Accordingly, the court decided to proceed by stages and ordered the defendant to use its best endeavours to obtain the performance bond so that the position on the alleged impossibility can be considered at another hearing.

In the subsequent hearing which the judgment in Liberty Mercian related to, evidence was tendered to show that the defendant could not obtain a performance bond. The court accepted that the defendant did use its best endeavours and that it was impossible for the court to order specific performance.

However, the court considered that the defendant had not fully disclosed how it was able to fund the litigation if it had no assets. It appeared that the defendant had access to third party funding.

Faced with this conundrum, the court adopted a creative solution: It ordered the defendant to pay into court the amount of £420,000 representing the value of the bond to be issued.

The defendant submitted that the court should not be asked to act as a bondman and to administer the fund in accordance with the terms of the bond. The court dismissed the objection and considered that it was within the court’s powers to do so.

Thoughts on Liberty Mercian

The case is notable for the novel way that the court treated the issue of what remedy to award when a contractor fails to provide a performance bond. It is submitted that the order is a sensible one in the light of the unsatisfactory alternative – damages.

Generally, the purpose of damages is to put a party in the position they would have been if the contract had been performed. However, the issue can be vexing in the case of performance bonds. What is the loss suffered from the non-provision of the performance bond if the project is still on-going and there are no major defects in the contractor’s works? What if the contractor has its own claims against the employer for non-payment for work done?

The remedy of specific performance is attractive as it directly brings parties to the position they promised the other would be in if the contract was performed. Provided that the contractor’s insurer is willing to provide a performance bond, this is the remedy that should be sought and ordered.

The difficulty that arises is when the contractor is no longer in a position to obtain a performance bond. This could happen for a variety of reasons e.g. there may be a downturn in the market or the credit standing of the contractor may have taken a hit due to recent events.

Therefore, the court’s solution of ordering the contractor to pay into the court the amount representing the value of the bond is really the only viable alternative. The contractor may complain that such a remedy is draconian. However, the contractor has only itself to blame for not providing the performance bond in the first place.

The performance bond in Liberty Mercian appeared to be an on-demand bond. Therefore, it should be relatively simple for the court to administer the monies deposited with the court.

Conditional bonds

Things could be different in the case of a conditional bond. The court would have to look closely at the demand to see if the conditions of the demand are met. There could be numerous hearings and a significant amount of judicial resources could be expended in the process. It is uncertain whether a court would be willing to take on such a role.

It will be interesting to see how the Singapore courts will approach the issue. It may very well be possible that the Singapore courts may even adopt a third approach – e.g. the appointment of a receiver over the monies under the performance bond.

It is unlikely that Liberty Mercian will be the final word on the issue and there is much room for argument on what the appropriate court order should be.

 

Contributed by: Ashok Rai - Eversheds Harry Elias

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