Annotated Guide to the Building and Construction Industry Security of Payment Act 2004

On 1 April 2005, Singapore became the third country to introduce legislation to deal with payment difficulties in the construction industry.   In the UK, following the Latham Report Constructing the Team, the 1996 Housing Grants, Construction and Regeneration Act in the UK introduced mandatory provisions requiring progress payments and adjudication, giving a right to suspend work in case of non-payment and prohibiting ‘pay when paid’ clause in construction contracts. In 1999, New South Wales enacted the Building and Construction Industry Security of Payment Act which introduced similar provisions but with a more limited scope of adjudication. Singapore has modelled its Building and Construction Industry Security of Payment Act 2004 on the New South Wales legislation but has introduced changes, some of which reflect the provisions of the UK statute. As a result, there is clearly a need for a comprehensive guide to this new Act which deals with the detail of the legislation drawing from previous UK and New South Wales experience. By combining the experience of three specialist construction lawyers at Wong Partnership, led by Christopher Chuah, this Guide succeeds in its aim of doing just that.

The style of the Guide is easy to follow. It contains the full text of the statute, section by section, together with a commentary on the relevant parts of each sub-section. Of significance is the fact that the commentary is not merely an explanation of the wording of the Act, but includes an analysis of potential problems that might arise and cites UK and New South Wales cases, to the extent that the problems have been dealt with in those jurisdictions. For example, s 21(3) of the Act states that the temporarily binding effect of an adjudication determination shall not affect the right of a party to challenge that determination in any proceeding before a court or tribunal or in any other dispute resolution proceedings. As the authors point out, the Act does not set out the grounds of challenge and so they go on to suggest the possible grounds of challenge which might exist such as excess of the adjudicator’s jurisdiction and a failure to observe the rules of natural justice. For each of the potential grounds, they set out relevant case law such as the English Court of Appeal decision in Bouygues v Dahl-Jensen and the New South Wales decision in Paynter Dixon Construction v JF & CG Tilston, both dealing with aspects of the scope of an adjudicator’s jurisdiction.

While many of the provisions follow the UK or New South Wales models, it is equally clear that the Singapore legislature has decided to introduce aspects which are completely new. These include an adjudication review procedure and the ability to obtain direct payment from the principal, who is a party higher up the contractual chain. In relation to the review procedure, as the authors point out, the concept of a further appeal stage in the adjudication process may be questionable given the objective of the speedy temporary resolution of disputes and the need for cash flow. However, the fact that the aggrieved respondent has to pay the adjudicated amount to the claimant before the review application can be lodged does, in the view of the authors, ameliorate the position. Equally, the fact that only the respondent, not the claimant, can seek a review is curious when the claimant may well consider that the adjudicated amount is insufficient.

The direct payment provision is one which permits, but does not oblige, the principal of the respondent to make direct payment to the claimant. The principal, typically the employer, will then be able either to treat the payment as payment to the respondent or to recover the sum from the respondent as a debt. The authors consider that this provision will allow an employer to alleviate cash flow problems of sub-contractors which may otherwise cause delay and disruption to a project. They point out, though, that the impact of insolvency or a scheme of arrangement and previous court decisions on those aspects need to be considered. They properly draw a distinction between a statutory right to payment under the Act and a contractual provision, so far as the effect of insolvency is concerned. Equally they point out that the provision needs to be taken into account in any scheme of arrangement.

Altogether, this book provides an excellent handbook on the new legislation, identifying traps for the unwary and opportunities for those who wish to take them. As LP Thean states in his Foreword, the value of this book cannot be overstated. It will, I am sure, become the standard work on the Singapore Act and will form a necessary part of the library for anyone likely to be involved in the use of the Act — from lawyers to adjudicators and from contractors to consultants.

The Annotated Guide to the Building and Construction Industry Security of Payment Act 2004 is produced by Wong Partnership and published by Sweet & Maxwell.

Vivian Ramsey, QC

Keating Chambers

London