security of payment act · khoo sze boonfsisv, faiqs, mrics, mciarb, fsiarb, ... enacted in 2004...

HKIS-AIQS Joint Conference 2015 | 14 Nov

2015 | Security of Payment Act - Who

Makes The Best Adjudicators?

© Khoo Sze Boon 2015 1

Inc. Langdon Seah | ARCADIS Project Management | EC Harris I Hyder Consulting

HKIS-AIQS JOINT CONFERENCE 2015

Khoo Sze Boon FSISV, FAIQS, MRICS, MCIArb, FSIArb, SMC Accreditated Adjudicator

Executive Director, Arcadis / Langdon & Seah Singapore Pte Ltd

1st Vice President, QS Division – Singapore Institute of Surveyors & Valuers (SISV)

SECURITY OF PAYMENT ACTWHO MAKES THE BEST ADJUDICATOR?

Contents

� Background

� Growing Band of Adjudication

� Overview of SOP Regime in Singapore

� Adjudicator – Qualification & Training

� Challenges Faced by The Adjudicators

� Who Makes the Best Adjudicator

� Conclusion

2





Background

Security of Payment Act

� Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Revised Edition)

Enacted in 2004 but came into force on 1 April 2005

� Building and Construction Industry Security of Payment Regulations (Cap 30B, Regulation 1, 2006 Revised Edition)

Made by the Minister for National Development in January 2005 under Section 41 of the Act

4

Legislative Framework

Building & Construction Security of Payment Act (Cap 30B)

Building & Construction Security of Payment Regulation (Cap 30B, Regulation 1)






� Enacted to regulate payment disputes

� Introduces adjudication as a means of dispute resolution

� Seeks to improve cash-flow in the construction industry

� Gives parties the right to seek payment for work done and goods supplied

� Provides fast and low-cost adjudication to resolve payment disputes.

5

SOP Act


6

Legislative Framework

Introduce adjudication as mean of

dispute resolution

More favorable results – leverage Contractor’s expertise area

Regulate payment disputes

Fast and Low-Cost

Adjudication to resolve payment dispute

Improve cash-flow in construction

industry

Gives parties right

to seek payment for work done and goods supplied

Interim Finality – Pay First & Argue

Later





Background of SOP Act

� To redress some of the payment issues which have confronted the industry for a long time

� Effort around the same time when a number of highly publicized financial failures of main contractors spectacularly grounded several huge housing projects to a halt.

� Unleashed a torrent of financial insolvencies down the construction process – wiping out sub-contractors, sub-subcontractors, suppliers and other parties at the end of the supply chain

� The issue with delayed payments for work done and cash-flow is not new.

7

Background

8

Built Environment Sector

“BCA is expecting construction output to remain strong at S$35 billion-S$37 billion this year, though a high base effect from a record 2014 (estimated S$36 billion) will result in muted year-on-year comparisons. A decade-long expansion of the sector has seen construction output surge 200 per cent in nominal value from 2005's S$12 billion”

BCA 2015, Built Environment Prospect 2015

“BCA is expecting construction output to remain strong at S$35 billion-S$37 billion this year, though a high base effect from a record 2014 (estimated S$36 billion) will result in muted year-on-year comparisons. A decade-long expansion of the sector has seen construction output surge 200 per cent in nominal value from 2005's S$12 billion”

BCA 2015, Built Environment Prospect 2015





Growing Band of Adjudication

Introduction of Adjudication

� Following the recommendations of the Latham Report, the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996) came into effect for contracts entered into from May 1998, being the first jurisdiction to introduce the right to adjudication.

10


The Latham ReportChapter 9 – Dispute ResolutionIn Sir Michael Latham’s Report

“Cash Flow crunch arising from disputes hinders construction

productivity”





11


United Kingdom

HGCRA 1996

HGCRA 1996 – Housing Grants, Construction and Regeneration Act 1996

NZ CCA 2002 – Construction Contracts Act 2002

CIPAA 2012 – Construction Industry Payment and Adjudication Act 2012

SOPL 2015 – Security of Payment Legislation (Proposed) 2015

New South Wales SOP Act 1999

New Zealand

CCA 2002

Victoria SOP Act

2002

Singapore SOP Act 2004

Queensland SOP Act 2004

North Territory

SOP Act 2004

Western Australia

SOP Act 2004

TasminiaSOP Act 2009

Australian Capital Territory

SOP Act 2009

South Australia

SOP Act 2009

Malaysia CIPAA 2012

La

tha

m R

ep

ort

19

94

Hong KongSOPL 2015(Proposed)

Hong Kong –Proposed Security of Payment Legislation for the Construction Industry

� Detailed industry wide survey was conducted in 2011 by the Government and the Construction Industry Council.

� Security of Payment Legislation was subsequently proposed for the Construction Industry

� Consultation Document published by the Development Bureau of the Government of Hong Kong Special Administrative Region in June 2015

12






Overview of Security of Payment Regime in Singapore

Building & Construction Industry Security of Payment Act 2004 (Cap 30B)

� Closer to the New South Wales Building & Construction Industry Security of Payment Act 1999

� Retains some elements from the UK Housing Grants Construction and Regeneration Act 1996

14

Singapore Regime

� UK HGCRA 1996 – adjudication is treated as contractual process

� NSW Act and Singapore Act – whole adjudication process is statutorily prescribed






15

Singapore Regime

Statutory right to payment (work done & good supplied for construction contract)

Time limits to make payment

Improve Cashflow

Fast Track Adjudication Process to resolve payment disputes

Right to suspend work amongst other remedies when adjudicated amount not paid

The SOP Act rests on three main pillars

OVERVIEW OF THE SECURITY OF PAYMENT REGIME IN SINGAPORE

Entitlement to Payment

Payment Rights

Anti-Avoidance Provisions

No contracting out

Void “Pay when Paid”

Adjudication Machinery Taking advantage of Cost and Speed of Resolution

Singapore Regime






� Any person who have carried out construction works, or supplied any goods or services under a contract is entitled to a progress payment.

� Only claimant may invoke the Act.

� Entitlement to progress payment crystallises as soon as work is done.

� The onus is on the respondent to show that claimant is to be denied the sum claimed.

� Act renders void “pay when paid” provisions

� No contracting out of the Act

17

Singapore Regime

18

Key SOP Timeline

Payment ClaimPayment Claim Payment RespPayment Resp Payment Due DatePayment Due Date

Post SOP

� As in contract; or

� 21 days (max)

� 7 days (if contract silent)

� As in contract

� 35 days after invoice (max); or

� 35 days after response date[if non-taxable]T

imeline 1

Silent

Pre SOP

C’s ApplicationC’s Application A’s CertificateA’s Certificate Owner paysOwner paysQS

ValuationQS

Valuation

� 7 (or 14) days � 14, 21 or 28 days� 7 days

Tax InvoiceTax

Invoice

Tim

eline 2

� 7 days� 14 days

� As in contract

� 35 days (max) after invoice; or

� 35 days after response

date [if non-taxable]

By Employer

??

Post SOP Payment RespPayment Resp Payment Due DatePayment Due DatePayment ClaimPayment Claim A’s

CertificateA’s

CertificateTax

InvoiceTax

Invoice

QS Valuation

QS Valuation

QS Valuation

QS Valuation





Process leading to the Determination

Source : CHOW KF (2012)

Payment Claim

Payment Response

Disp

ute Settle

ment P

erio

d

Adjudication Notice

AdjudicationApplication

Appointment of Adjudicator

Adjudication Response

AdjudicationDetermination

Adjudica

tion Process

Regime

requires

scrupulous

procedural

compliance


20

Key Features

Adjudication Notice &

Application within 7 days

(served only after 7 days DSP)

More favorable results – leverage Contractor’s expertise area

Maximum period for Payment Response 21 days

(contract silence 7 days)

Appointment of adjudicator by

AuthorisedNominating Body (ANB)

Second Opportunity to serve / amend

Payment Response

(during 7 days DSP)

Adjudication Determination within 7 days

(no payment response or fail to

pay); otherwise 14 days

Review of Adjudication

Determination can be applied by aggrieved respondent





21

Adjudication Applications

999Adjudication Applications as at Dec 2013

Between

2006 & 2009Adjudication Application filed

Doubled

2009Adjudication Application stablised

around 170applications

400Adjudication Cases estimated in 2014

2013Adjudication cases load doubled to

228

Dropped to

135 Cases2011 & 2012

ADJUDICATORS –QUALIFICATION AND TRAINING





BCISOP Act Accredited Adjudicators

� Trained & accredited by the Construction Adjudicator Accreditation Committee (CAAC) of the Singapore Mediation Centre (SMC).

� Equipped with in-depth understanding of the adjudication regime of SOP Act.

� Term of appointment is 2 years renewable upon Adjudicators meeting requirements.

23

Adjudicators

Accredited Adjudicators By Profession

� Based on the Register of Adjudicators under SMC, there are currently 118 Accredited Adjudicators1.

� The 3 main professions are Lawyers, Engineers and Quantity Surveyors.

24

Adjudicators

1 Source : SMC Website www.mediation.com.sg





Admission Requirements

25

Adjudicators

Working Experience

• Senior Position in any firm, company or professional body

• At least 15 years working experience in building and construction industry in Singapore

Qualification

• Degree or Diploma in architectural, building studies, engineering, environmental studies, law, planning, real estate or urban design

Good Character

• Not been convicted of any offence and must not be an undischarged bankrupt

Source : SMC Adjudication Accreditation Requirements 2015

Applicants have to fulfil three (3) parts :-

26

Adjudicators

• Attended a course on Law Related to Construction Contracts; and

• Pass an assessment on Law Related to Construction Contracts

Part A – Law Related to Construction Contracts

(unless exempted)

• Attended a course on Statutory Adjudication; and

• Pass an assessment on Statutory Adjudication

Part B – Statutory Adjudication

• Satisfy SMC of their suitability to be accredited to the SMC Register of Adjudicators through an interview and/or other requirements

Professional Interview






Part A – Law Related Construction Contracts

Candidates who hold one of the following qualifications, exemption are granted :-

� Admitted to the roll of advocates and solicitors of Singapore

� MSc (Construction Law and Arbitration) from National University of Singapore

� Such other qualification as SMC’s Construction Adjudicator Accreditation Committee may approves

27

Adjudicators


28

Adjudicators

Part 2 Statutory Adjudication

(3 Days)*

Part 1Law Relating to Construction Contracts

(1 Day)*

• Tenders and Award of Contract• Redress for Breach of Contract• Variations• Payment and Certification• Time

• Objectives and Broad Scheme of the SOP Act

• Rights to Progress Payment• Payment Claims and Response• Adjudication of Payment Claim Disputes• Enforcement of Payment of Adjudicated

Amount• Conducting the Adjudication• Writing the Adjudication Determinaiton

Adjudicator Accreditation Course

* Duration of the Course excludes assessment






CHALLENGES FACED BY THE ADJUDICATORS

SOP Act and Procedures

Knowledge on Construction

Law

Construction Contract & Practices

Technical Knowledge

Key Challenges Faced





Adjudicator has to be familiar with :-

� Overall regime of SOP Act which overlays progress payment claims have to be served and payment responses have to be made and the timelines.

� Entire adjudication procedure –adjudication application, response, determination and review process

SOP Act and

Procedures



AppointmentAdjudicator has to be begin by ensuring that he has been properly appointed under the Act

Contract in WritingExisting of contract in accordance with principles of contract formation and definition of “contract made in writing” in section 4(3)

Nature of ContractContract falls within the meaning of a “construction contract” or a “supply contract” under the Act

Territorial ReachContract relates to work carried in Singapore or goods or services supplied to work carried out in Singapore

Procedural ComplianceWhether the payment claim was served prematurely, compliance with requirements of DSP and Adjudication Notice

� Adjudicator is also often confronted with jurisdiction issues :- SOP Act and

Procedures

Challenges





Construction Contract & Practices

EOTExtension of Time

Release of

RetentionMonies

PaymentTerms

VariationDeductions &

Counter Claims

Loss & Expenses andExtended Prelims

� Adjudicator has to be proficient in construction contract and practice


Law

� Adjudicator may face issues on the point of law being raised in an adjudication matter

� To have relevant construction law knowledge

� To be well aware of the latest development of construction law






Law

Chua Say Eng [CSE] v Lee Wee Lick Terence [TL] (CA No. 46 of 2011)

On 2 Jun 2010, CSE served a document “Payment Claim No. 6” (PC 6) for work done Jun 2009 to Apr 2010.

TL did not serve payment response within 7 days as required by s. 11(1)(b)

CSE filed adjudication application and TL did not file an adjudication response.

Court of Appeal

• CSE appealed to CA• CA allowed appeal• CA disagreed with High

Court Judge’s interpretation that s 10(2) of the Act read with reg. 5(1) created limitation period

• i.e. no time bar and PC6 was not out of time

High Court

• TL appealed to High Court• High Court Judge allowed

TL’s appeal.• Held that s. 10(2) of Act

read with reg. 5(1) did create a limitation period.

• PC6 was served out of time.

Adjudication Proceedings

• Adjudicator determined PC6 was not served out of time

• Awarded a sum in favour of CSE (Claimant)

Technical Knowledge Proficiency in Construction Technical Knowledge

� Adjudicator shall be proficient in construction technical knowledge.

� Some of the matter may be technically challenging –e.g. Piling Works, Basement Work, Temporary Works.

� Understanding technical issues (e.g. Piling Work) coupled with the basis of contract (e.g. lump sum or re-measurement contract)





WHO MAKES THE BEST ADJUDICATOR?

38

Who’s the Best

An adjudicator shall –(a) Act independently, impartially and in a timely

manner;(b) Avoid incurring unnecessary expense; and(c) Comply with the principles of natural justice

An adjudicator shall –(a) Act independently, impartially and in a timely

manner;(b) Avoid incurring unnecessary expense; and(c) Comply with the principles of natural justice

Duties of an adjudicator

� The duties of an adjudicator are encapsulated under section 16(3) of the SOP Act which provides

Vast experience and competenciesrequired

SOP Case deals

with multi-front issues

Multi-facetedProficiency & Competency

“Hence, it warrant

a stringent pre-

requisite

requirements for

adjudicator

application…

holding senior

position with

minimum 15 years

experience”





39

Who’s the Best

Engineer

Lawyer

Quantity Surveyor

Project Manager

Contractor

Architect

40

Which Profession?

Who Makes the Best Adjudicator

� Experienced QS practitioners who are proficient in construction contract, practice and procedure may have added advantage.

� Architects with strong contract administration background would have similar advantage.

� Other essential knowledge in construction law and technical / engineering – lawyers and engineers would be in a good position.

� Different professional background will have advantages in their respective areas of strength – depends on nature of dispute.

� It is not the profession of the adjudicator – but more the individual experience and competency on the 4 areas of proficiency.

� Apart from strong knowledge in these areas, importantly – Adjudicator must also be able to act independently and impartially.





CONCLUSION

42

Conclusion

New Opportunities for QS

� Experienced QS practitioners who meet the requirements – may be registered as Accredited Adjudicator.

� QS could take the lead on the following :-

� establishing and managing the strict procedures and timeline for the entire payment regime imposed by the Act

� Streamlining payment process including timeline and templates

� Strengthening the contract documentation and introduce templates for project adoption.





43

Payment Claim Templates

Overview of SOP Regime

44

Contents of Payment Claim – s(10(3) r5(2)

� Addressed to

Respondent

� Identify Contract:

- Contract title

- Contract date

� Period of

Claim

� Identify

Claimant

� Date of

Claim





45

Payment Response Templates … 1

� Response amount

- Amount to pay Claimant

� Addressed to Claimant

� Identify payment claim:

- Project name

- Payment claim date

- Parties


46

Payment Response Sample Template






47

Reasons for differences

between claimed amount and

response amount

Reasoned Response – Examples … 2

Particulars supporting

valuation of variations


48

Conclusion

� No single profession will make the best adjudicator.

� It is more the individual experience in the 4 key areas of proficiency.

� Having a panel of accredited adjudicators with different professional background will come in useful to deal with different nature of dispute.

� Important that adjudicators consistently keep themselves abreast of the latest development in the construction law and matters on SOP Act – through Continuous Professional Development programme.





Imagine the result

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Thank You

contact

Inc. Langdon & Seah I ARCADIS Project Management I EC Harris | Hyder Consulting

Khoo Sze Boon FSISV, FAIQS, MRICS, FSIArb, MCIArb

Executive Director, Arcadis / Langdon & Seah Singapore Pte Ltd

1st Vice President, QS Division – Singapore Institute of Surveyors & Valuers

e [email protected]

t +65 6239 8232

www.arcadis.com

security of payment act · khoo sze boonfsisv, faiqs, mrics, mciarb, fsiarb, ... enacted in 2004...

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