The Singapore grip

During a recent trip to Singapore, I talked with a number of clients and consultants about the Building and Construction Industry Security of Payment Bill which is shortly to be passed into Singaporean law. On the face of it, something akin to the Construction Act. It introduces adjudication, outlaws pay-when-paid and introduces progress payment entitlements and notice regimes. But the way it does those things is quite different to the English legislation.

For instance, we were told that the English legislation was designed to speed up payment. The Singaporean legislation aims to do the same – but it does it in a simpler way, because the right to adjudicate only arises in the favour of the payee. The impact of this will no doubt be to limit the type of claims that can be adjudicated and to prevent it being used for disputes it is not designed for, such as defect claims.

The entitlement to adjudicate must be exercised in a seven-day period of the right arising. There are distinctions between supply and construction contracts and between the position where a payment response – the equivalent of a notice – is issued and where it is not. The legislation makes it clear that an adjudicator cannot act if the conditions are not met. This gives much better certainty. A paying party knows that if it sets out its position in a payment response and is not subject to an adjudication in the prescribed period, then that is an end to immediate issues concerning that interim application.

However, to prevent unfairness, the legislation makes clear that a claim made in an interim application can be made in a later one. No need then to adjudicate the speculative claim or contentious issue immediately; it can be raised later. Perhaps this is one way of seeking to ensure that the building gets built and site relationships remain cordial.

What the Singaporean legislation does not deal with is the fact that sometimes determining a money claim involves having to decide a related issue such as entitlement to time. Such an ancillary but inherent issue can be determined by an adjudicator. This raises the risk that some Singaporean adjudications might become as complicated as their English counterparts.

The right to adjudicate only arises in the favour of the payee, which will limit the types of claims

And what of the paying party ordered to pay a sum by an adjudicator it does not think is due? As a paying party, it is not entitled to adjudicate itself. In this instance the Singaporean legislation provides for a right to appeal to another adjudicator or possibly a panel of adjudicators. Again, time limits apply and the possibility of a panel being appointed raises the risk of substantial costs being incurred.

The Singaporean legislation is also simpler in relation to the issue that has caused much controversy under the Construction Act - notices. All the Singaporean legislation requires is one notice – a payment response. No dual notices and question marks regarding the position if one isn’t served. The legislation makes clear what the position is for construction contracts. If a payment notice is served but then the payment stated as payable is not paid, there is an immediate right to adjudicate. If no notice is served, or one is served but the payee disputes the amount to be paid, then there is a dispute settlement period of seven days. If the dispute is not then resolved, the right to adjudicate arises.

But it is not all plain sailing. One provision which does cause concern is that although the general position on costs mirrors English law, namely that an adjudicator does not decide who pays each party’s costs, they can do so if there has been “frivolous or vexatious conduct … or unfounded submissions”. I suspect that most Singaporean adjudications will contain a claim for party costs based on such alleged conduct. Particularly if an amount stated in a notice has not been paid, it may be a valid claim to make. But it will raise the adversarial nature of the process and encourage such claims.

James Bessey is a partner at Hammonds, Birmingham. He will shortly be joining law firm Cobbetts, Birmingham.