30 October 2018
On 2 October 2018, the Building and Construction Industry Security of Payment (Amendment) Bill (“Bill”) was passed in Parliament, following its introduction on 10 September 2018. The Bill is aimed at improving the administration of the Building and Construction Industry Security of Payment Act (“SOPA”) and proceedings under the SOPA.
In his second reading speech, the Minister of State, Ministry of National Development (“MND”) and Ministry of Manpower, Mr Zaqy Mohamad, highlighted the main features of the Bill. According to the Minister, the proposed changes fall into three broad categories as set out, below.
Expanding and clarifying scope of application of SOPA
- Prefabrication works covered: The Bill will allow prefabrication works done overseas for projects in Singapore to be covered under the SOPA. However, prefabrication works that are carried out in Singapore for projects overseas will not be covered when any party to the contract is not incorporated or registered in Singapore.
- Pre-termination claims valid: The Bill will make clear that claims for work done or goods supplied before contract termination are valid.
- Reducing complex claims: The Minister further addressed the issue of lengthy adjudication processes arising from the existence of “complicated claims” for prolongation costs, damages, losses or expenses. The proposal which seeks to address this issue is that, now under the Bill, adjudicators will be required to disregard any part of a payment claim or payment response related to damage, loss or expense that is not supported by a document showing the parties’ agreement on the quantum of that part of the payment claim or payment response, or a certificate or document that is required to be issued under the contract. This will address concerns over the lengthening of the adjudication process due to the submission of complex claims.
Refinements to handling of payment claims and responses
- Payment claim valid even if served before stipulated date: The Bill clarifies that a payment claim will be valid even if it is served before the date, or the last day of a period, specified in the contract. This will address the current concern that a payment claim is technically invalidated when a claimant unintentionally serves its claims on the wrong date.
- Repeat payment claims allowed: The Bill will clarify that claimants may repeat a payment claim even without additional work done or goods or services supplied. This will preserve claimants’ entitlement to seek payment through adjudication.
Revisions to adjudication processes
- Claimant may apply for adjudication review: Currently, only respondents may apply for an adjudication review if they disagree with an adjudication determination. The Bill will allow claimants to also apply for an adjudication review.
- SOPA aligned with court decisions: The Bill will also align the SOPA with previous court decisions on the SOPA. For example, adjudicators will be empowered to accept an adjudication application that does not comply with the prescribed formalities if the non-compliance does not materially prejudice the respondent.
- Minimum interest rate: The Bill will set a minimum interest payment rate at the higher of the rate specified in the contract or the rate prescribed in respect of judgment debts under the Supreme Court of Judicature Act, which is currently 5.33% per annum. This will address the concern that the low interest rates set out in contracts (typically where subcontractors have low bargaining power) are ineffective in deterring late payments.
- List of setting aside grounds: The Bill will set out a non-exhaustive list of grounds upon which a party to an adjudication may commence proceedings to set aside the adjudication determination.
The impact of these proposed changes and how they will operate in practice remains to be seen. Practitioners will invariably find new avenues to challenge or uphold a claim in light of some of the new provisions. However, it is apparent that clear steps have been taken to accommodate and strike a balance between the competing interests of the different stakeholders in the industry. In doing so, the Minister was clear about the unwavering objective which is to enhance the effectiveness of the adjudication mechanism as a low-cost and speedy dispute resolution mechanism for the construction industry.
- Building and Construction Industry Security of Payment (Amendment) Bill
- Second Reading Speech on the Building and Construction Industry Security of Payment (Amendment) Bill
- Round-Up Speech on the Building and Construction Industry Security of Payment (Amendment) Bill