SH Design & Build Pte Ltd v BD Cranetech Pte Ltd: SOP Act Adjudication & Performance Bond

In SH Design & Build Pte Ltd v BD Cranetech Pte Ltd, the High Court of Singapore heard an application by SH Design & Build Pte Ltd to set aside an adjudication determination made under the Building and Construction Industry Security of Payment Act in favor of BD Cranetech Pte Ltd. The court, presided over by Justice Tan Siong Thye, dismissed the application, holding that the adjudicator had not exceeded his jurisdiction by considering bond proceeds and that the omission of the owner's name and address in the adjudication application was not fatal. The court also dismissed the application for a stay of enforcement of the adjudication determination pending arbitration.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Application dismissed.

1.3 Case Type

Building and Construction Law

1.4 Judgment Type

Oral Judgment

1.5 Jurisdiction

Singapore

1.6 Description

SH Design & Build's application to set aside an adjudication determination under the SOP Act was dismissed. The court addressed cross-contract set-off and Owner omission.

1.7 Decision Date

30 May 2018

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
SH Design & Build Pte Ltd	Plaintiff	Corporation	Application dismissed	Lost	Chuah Chee Kian Christopher, Koh Swee Yen, Lee Hwai Bin, Tay Bing Wei, Sheryl Ang
BD Cranetech Pte Ltd	Defendant	Corporation	Judgment for Defendant	Won	Yam Wern-Jhien

3. Judges

Judge Name	Title	Delivered Judgment
Tan Siong Thye	Judge	Yes

4. Counsels

Counsel Name	Organization
Chuah Chee Kian Christopher	WongPartnership LLP
Koh Swee Yen	WongPartnership LLP
Lee Hwai Bin	WongPartnership LLP
Tay Bing Wei	WongPartnership LLP
Sheryl Ang	WongPartnership LLP
Yam Wern-Jhien	Rajah & Tann Singapore LLP

4. Facts

The Plaintiff is the main contractor for the construction of an integrated logistics hub.
The Defendant is a specialist subcontractor engaged by the Plaintiff for the design, supply, installation and commissioning of overhead cranes.
The Plaintiff entered into an agreement with the Defendant on 22 February 2013 for the works relating to the Development.
The Defendant procured an on-demand performance bond dated 21 May 2013 for up to the sum of $1,293,600.
Pursuant to a deed of assignment dated 22 December 2015, the Plaintiff assigned to the Owner all of its rights, title, interest and benefit under the Subcontract, including the Performance Bond.
On 23 March 2016, MSIG made full payment of the Bond Proceeds to the Owner.
On 27 June 2016, the Defendant lodged an Adjudication Application against the Plaintiff based on its purported entitlement to outstanding payment for work done under the Subcontract.

5. Formal Citations

SH Design & Build Pte Ltd v BD Cranetech Pte Ltd, Originating Summons No 290 of 2018, [2018] SGHC 133

6. Timeline

Date	Event
2012-12-10	Owner contracted with Defendant for overhead cranes
2013-02-22	Plaintiff and Defendant entered into Subcontract
2013-05-21	Defendant procured Performance Bond
2015-12-22	Plaintiff assigned rights to Owner
2015-12-22	Owner terminated Defendant's employment
2015-12-22	Owner demanded payment of Bond Proceeds from MSIG
2016-01-04	Owner issued further demand to MSIG
2016-01-04	Owner commenced proceedings in Suit No 12 of 2016
2016-01-05	Defendant filed Originating Summons No 4 of 2016
2016-03-23	MSIG paid Bond Proceeds to Owner
2016-05-23	Defendant served payment claim on Plaintiff
2016-06-07	Plaintiff provided payment response
2016-06-27	Defendant lodged Adjudication Application
2016-07-05	Plaintiff lodged adjudication response
2016-07-18	Adjudication conference held
2016-08-11	Adjudicator issued the AD
2016-08-17	Plaintiff requested amendments to the AD
2016-08-29	Adjudicator declined to amend the AD
2016-12-13	Defendant obtained Order of Court to enforce AD
2018-02-26	Order of Court served on Plaintiff
2018-03-12	Plaintiff made application in OS 290/2018 to set aside the AD
2018-05-14	Hearing for OS 290/2018
2018-05-31	Oral judgment delivered

7. Legal Issues

Exceeding Jurisdiction
- Outcome: The court held that the Adjudicator had not exceeded his jurisdiction.
- Category: Jurisdictional
- Sub-Issues:
  - Wrongly taking into account the amount received under the performance bond
  - Reversing the decision of Ramesh JC in OS 4/2016
  - Allowing the Defendant to rectify the error in the Adjudication Application
Cross-Contract Set-Off
- Outcome: The court held that accounting for the Bond Proceeds in assessing the Adjudicated Amount was not akin to a cross-contract set-off.
- Category: Substantive
Validity of Adjudication Application
- Outcome: The court held that the initial omission of the Owner’s name and service address from the Adjudication Application was not sufficient basis for the AD to be set aside.
- Category: Procedural
- Sub-Issues:
  - Omission of Owner's name and service address
  - Power to allow amendments to Adjudication Application

8. Remedies Sought

Setting aside of adjudication determination
Stay of enforcement of adjudication determination

9. Cause of Actions

Outstanding payment for work done under the Subcontract

10. Practice Areas

Construction Law
Commercial Litigation
Arbitration

11. Industries

Construction

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Civil Tech Pte Ltd v Hua Rong Engineering Pte Ltd	Court of Appeal	Yes	[2018] 1 SLR 584	Singapore	Cited for the principle that each adjudication under the SOP Act should relate only to the contract upon which the payment claim is founded, and should not take into account cross-claims from other contracts.
Hua Rong Engineering Pte Ltd v Civil Tech Pte Ltd	High Court	Yes	[2018] 3 SLR 778	Singapore	Cited for the reasoning that the spirit and purpose of the SOP Act would militate against allowing cross-contract claims to be considered in an adjudication.
Comfort Management Pte Ltd v OGSP Engineering Pte Ltd	Court of Appeal	Yes	[2018] SGCA 19	Singapore	Cited for the principle that s 17(3) of the SOP Act imposes a mandatory obligation on the adjudicator to consider all matters listed in that provision.
Rong Shun Engineering & Construction Pte Ltd v CP Ong Construction Pte Ltd	High Court	Yes	[2017] 4 SLR 359	Singapore	Cited for the proposition that an adjudicator can only award sums that were specifically included in the payment claim, but distinguished because a payment response was lodged in the present case.
Cargill International S.A. and Another v Bangladesh Sugar and Food Industries Corporation	Unknown	Yes	[1996] 4 All ER 563	England	Cited for the principle that a performance bond is a form of security and the issuance of such a bond does not mean that the holder of the bond has an absolute right to keep the proceeds from the bond permanently.
Comdel Commodities Ltd v Siporex Trade SA	English Court of Appeal	Yes	[1997] 1 Lloyd’s Rep 424	England	Cited for approving the analysis in Cargill, stating that if the amount of the bond is more than enough to satisfy the seller’s claim for damages, the buyer can recover from the seller the amount of the bond which exceeds the seller’s damages.
Pun Serge v Joy Head Investments Ltd	High Court	Yes	[2010] 4 SLR 478	Singapore	Cited for approving the principle in Cargill.
W Y Steel Construction Pte Ltd v Osko Pte Ltd	Court of Appeal	Yes	[2013] 3 SLR 380	Singapore	Cited for the principle that adjudications under the SOP Act are meant to provide parties only with temporary finality.
Bocotra Construction Pte Ltd and others v Attorney-General	Unknown	Yes	[1995] 2 SLR(R) 262	Singapore	Cited for the principle that the court may only grant an injunction to restrain the calling of an otherwise unconditional performance bond where there is fraud or unconscionability.
SEF Construction Pte Ltd v Skoy Connected Pte Ltd	High Court	Yes	[2010] 1 SLR 733	Singapore	Cited for setting out the basic requirements that must exist for an adjudication determination to be valid.
Kingsford Construction Pte Ltd v A Deli Construction Pte Ltd	High Court	Yes	[2017] SGHC 174	Singapore	Cited for the principle that when striking a balance between the claimant’s entitlement to receive quick payment and the respondent’s entitlement to recover the money upon subsequent dispute resolution, the overall objective of the SOP Act, which is to ensure cash flow in the construction industry, should ultimately be given more weight.
Erinford Properties Ltd and Another v Cheshire County Council	Unknown	Yes	[1974] 2 WLR 749	England	Cited for the principle that where the application is for an injunction pending an appeal, the question is whether the judgment that has been given is one upon which the successful party ought to be free to act despite the pendency of an appeal.
Tan Soo Leng David v Wee, Satku & Kumar Pte Ltd and another	Unknown	Yes	[1993] 2 SLR(R) 741	Singapore	Cited as accepting the Erinford principle as good law in Singapore.
Sin Herh Construction Pte Ltd v Hyundai Engineering & Construction Co Ltd and another	High Court	Yes	[2017] SGHC 3	Singapore	Cited as accepting the Erinford principle as good law in Singapore.

13. Applicable Rules

Rule Name
Rules of Court (Cap 322, R 5, 2014 Rev Ed)

14. Applicable Statutes

Statute Name	Jurisdiction
Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Adjudication Determination
Building and Construction Industry Security of Payment Act
Performance Bond
Payment Claim
Payment Response
Adjudicated Amount
Subcontract
Deed of Assignment
Originating Summons
Arbitration

15.2 Keywords

adjudication
SOP Act
performance bond
construction
payment
security of payment

16. Subjects

Construction Dispute
Adjudication
Security of Payment
Performance Bonds

17. Areas of Law

Building and Construction Law
Contract Law
Civil Procedure
Arbitration Law