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Objecting to a claim on the basis that the claim was not based on VOs but a separate contract?

In Tong Hai Yang Construction Pte Ltd v Little Swan Air-Conditioning & Engineering Pte Ltd [2019] SGHC 188, the plaintiff main contractor engaged the defendant as its subcontractor for Air-Conditioning and Mechanical Ventilation, Electrical, Fire Prevention and Protection System, and Additional Optional Works. On 22 March 2019, the defendant served a payment claim on the plaintiff for works it had carried out pursuant to 21 Variation Orders (“VOs“). As no payment response was filed by the plaintiff, the defendant proceeded to lodge an adjudication application and eventually obtained an adjudication determination in its favour (the “AD”).

The plaintiff then applied to the HC for the AD to be set aside, arguing in the main that the adjudicator had overlooked a material patent error as he had accepted the VOs as being part of the contract, when they were not. The plaintiff argued that the VOs were exclusively between the defendant and the employer’s representative, EWC Engineers Pte Ltd (“EWC”) given that, inter alia, the quotations for the VOs were addressed directly to EWC and similarly, they were accepted and approved by EWC only.

In dismissing the plaintiff’s setting aside application, the HC agreed with the adjudicator that the plaintiff had been put on notice of the VOs. Particularly, it was observed that after the adjudication application was lodged, the plaintiff issued a letter to the defendant, stating that the defendant had in a meeting accepted that some of the VO items were invalid. The appendix to the plaintiff’s letter also reflected the “Amount Approved”, which included the amounts asserted by the defendant pursuant to the VOs. As such, the Court held that “the Plaintiff’s letter, which was not made without prejudice and which refers to the VOs, amounts to a concession that only some, but not all, of the VOs were disputed”. Accordingly, it was found that the plaintiff had waived its right to object to the VOs on the basis that they fell outside of the contract.

The HC also found that the adjudicator had not failed to recognise a patent error as regards the VOs. This is because the adjudicator had properly considered the materials before him and had found that although the VOs were drawn to the plaintiff’s attention, the plaintiff did not seek to clarify whether the VOs fell outside the scope of the contract. It was further held that it is not within the scope of the Court’s remit to re-assess the merits of the adjudicator’s determination.

This case illustrates the importance of objecting to a payment claim in a timely manner where the objection goes to the merits or validity of the payment claim within the context of SOPA. The failure to object in a timely manner as required by Audi Construction would preclude the respondent from raising the objection later.

Disclaimer: This update is provided to you for general information and should not be relied upon as legal advice.