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The Singapore construction industry is no stranger to the Building and Construction Industry Security of Payment Act 2004 (“SOPA”). For over two decades, SOPA has provided a fast-track mechanism for resolving payment disputes and keeping cash flowing on projects. Yet, as the recent High Court decision in Hiap Seng Building Construction Pte Ltd v Hock Heng Seng Contractor Pte Ltd (“Hiap Seng”) [2024] SGHC 50 demonstrates, the law continues to evolve in ways that are highly significant to contractors, subcontractors, and consultants alike. Hiap Seng adds fresh nuance in at least three areas of practical significance to industry stakeholders: the effect of a payment response served before the due date, the strictness of statutory timelines for adjudication, and the limits of an adjudicator’s jurisdiction where statutory non-compliance is at play.

The Facts: A Simple Dispute with a Critical Wrinkle

The factual matrix in Hiap Seng was, at first glance, unremarkable. The claimant subcontractor in the adjudication (the “Subcontractor”), issued Payment Claim No. 15 on 5 July 2023. Under the subcontract, read together with section 11 of SOPA, the respondent main contractor in the adjudication (the “Main Contractor”) had fourteen days to serve any payment response. The Main Contractor circulated its payment response on 27 July 2023, setting out its assessment of the sums claimed.

Subsequently, the Subcontractor issued to the Main Contractor a tax invoice dated 1 August 2023 for the sum of S$16,861.61 (inclusive of GST). Having not received payment nor any response from the Main Contractor on the tax Invoice, on 8 September 2023, the Subcontractor lodged an adjudication application with the Singapore Mediation Centre (the “SMC”) against the Main Contractor pursuant to section 12(1) of the SOPA. The SMC appointed an adjudicator, who issued his adjudication determination substantially in the Subcontractor’s favour, awarding the Subcontractor S$17,019.19 (which was higher than the amount of S$16,861.80 claimed in the Subcontractor’s adjudication application). The Subcontractor then commenced enforcement proceedings, and the Main Contractor applied to set aside the adjudication determination.

The Core Legal Issues: Early Payment Responses and Statutory Timelines

The pivotal ground of challenge was the validity of the Main Contractor’s payment response. The Main Contractor argued that its own payment response was invalid because it predated the deemed date of service of the payment claim. This argument drew on the earlier case of Asia Grand Pte Ltd v A I Associates Pte Ltd [2023] SGHC 175, which held that if a payment claim is served on 5 July 2023, it is deemed to have been served on 31 July 2023, and the payment response is due 14 days after that date. In response, the Subcontractor argued that while the deadline for serving the payment response only started running after the deemed date of service of the payment claim, the payment response could be validly served starting from the actual date of service of the payment claim.

This raised a practical question: If a contract is silent on the payment claim service date, and a contractor serves a payment claim early in the calendar month, is the respondent required to provide its payment response within 14 days of actual service of the payment claim, or 14 days after the deemed service date (which, under the SOPA, is the last day of the month)? The High Court clarified the law on several fronts:

1. A Payment Response Served Before the Due Date Is a Nullity: The High Court held that, on a true construction of SOPA, the natural reading of section 11(1)(b) is that a payment response must be served starting from the date “after the payment claim is served under Section 10” - that is, after the deemed service date, not before. In Hiap Seng, the payment response was served before the deemed service date of the payment claim, rendering it invalid.
   
   
2. Estoppel: Silence and Inaction Can Be Fatal: Despite finding that the Main Contractor’s payment response was defective, the High Court held that the Main Contractor was estopped from relying on its own defective payment response to set aside the adjudication determination. By receiving the tax invoice without objection and allowing the time for a proper payment response to lapse, the Main Contractor had made an unequivocal representation that it would not insist on its legal right to serve a later payment response, which the Subcontractor detrimentally relied upon.
   
   
3. Adjudicators: Stay Within Your Lane: The decision also serves as a reminder to adjudicators to remain within the boundaries of the claims before them. In Hiap Seng, the adjudicator awarded a sum greater than what was claimed in the Subcontractor’s adjudication application. The High Court held this was an overreach of jurisdiction. Adjudicators must not award more than what is claimed, except for clear arithmetical corrections.

The decision in Hiap Seng offers several practical lessons:

1. Serving a payment response early does not mean you ‘get ahead of the game’ - if you receive a payment claim and the contract is silent on the date in which a payment claim is due to be served, the SOPA stipulates that the payment claim is deemed served on the last day of the calendar month in which it is served. Therefore, it is only on the last day of the calendar month that your 14-day window to respond commences. Serve your payment response before this date, and you run the risk that the payment response is considered invalid. This could result in you being deemed not to have served a payment response at all, meaning that any objections you raise in your payment response may not be taken into account by the adjudicator, except in the case of patent errors.
   
   
2. However, this also means that the respondent has a right to a reasonable time to respond. This is important because not all payment claims are equal in respect of the effort and intensity required to respond to all issues contained therein. While certain payment claims are straightforward (particularly those served in the beginning of the project), others can be more complex especially if they raise contentious variation claims that usually arise towards the end of the project. Consider the following hypothetical scenario: A claimant unintentionally delays its claim for variation items and only raises its accumulated variation claims under one payment claim towards the end of the project. The contract is silent on the service date for a payment claim, and the claimant serves its payment claim early in the calendar month. In such a scenario, the respondent may be hard pressed to deal with such an overwhelming claim if its 14-day window to respond commences from the date the payment claim is actually served. The Court’s holding in Hiap Seng provides the respondent in this scenario with some much-needed leeway. Following Hiap Seng, it is beyond doubt that the respondent’s 14-day window to respond only commences from the date the claimant’s payment claim is deemed to be served under the SOPA, which is the last day of the calendar month.
   
   
3. Perhaps the most important message from Hiap Seng is that though SOPA has been described as a system for “rough and ready justice”, the SOPA is also a carefully calibrated regime of steps and deadlines. Its rigidity is intentional, providing certainty and predictability for all parties. The High Court made clear that the greater good of certainty outweighs any sympathy to parties who miss deadlines or make procedural errors. The rules are strict for a reason - they allow all parties to plan, price, and manage projects with confidence.

Conclusion: Observe the Timelines, or Forego the Remedy

Hiap Seng is a wake-up call for the industry. The Singapore courts will police the jurisdictional boundaries of SOPA adjudications with exacting rigour. Early payment responses are not valid unless served within the prescribed window. Parties who fail to object in a timely manner may be estopped from raising technical objections later. Adjudicators must ensure that applications are made within the statutory window and that awards do not exceed the scope of the claims.

For contractors, subcontractors, and consultants, the message could not be clearer: observe the timelines or forego the remedy. The certainty and predictability provided by SOPA’s strict regime are essential for effective project management and cash flow planning in Singapore’s construction sector. In the world of SOPA, discipline is not just a virtue - it is a necessity.

Contributed by:

Benny Santoso - Partner, Rajah & Tann Singapore LLP