26 February 2019
Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd  SGCA 66
The case of Glaziers Engineering Pte Ltd v WCS Engineering Construction Pte Ltd is noteworthy because the Singapore Court of Appeal explained in detail the natural justice principle that parties are entitled to a fair hearing in the context of Adjudication under the Building and Construction Industry Security of Payment Act (“Act”).
In particular, the Court of Appeal confirmed that there is no breach of the fair hearing rule when parties ought reasonably to have foreseen that a particular issue in question would arise, but failed to make submissions on that point. Further, the Court of Appeal emphasised that even if there was a breach of the principles of natural justice, the adjudicator’s determination would nevertheless be upheld where there was no prejudice to the respondent.
WCS Engineering Construction Pte Ltd (“WCS”) was the main contractor for the construction of a residential development. It engaged Glaziers Engineering Pte Ltd (“Glaziers”) under a subcontract to fabricate, supply and install the shower screens in all the bathrooms in the development.
After the development’s temporary occupation permit was issued, the shower screens of a number of units shattered while they were in use. Some of these incidents resulted in personal injuries. WCS maintained that Glaziers was responsible for the shattering shower screens, either because it had used defective materials or installed them with defective workmanship. While Glaziers agreed to replace the shower screens at its own cost, it refused to perform other remedial measures which were requested, such as laminating the shower screen with safety film. Ultimately, WCS bore the cost of the remedial work and reimbursed the medical expenses of the residents who had suffered personal injuries.
Subsequently, Glaziers served a payment claim on WCS pursuant to the Act. The sum claimed included that for the supply and installation of the shower screens. In its payment response, WCS sought to back charge Glaziers for costs incurred from the shattering of the shower screens, including residents’ medical expenses and the remedial measures which WCS had undertaken (“Back Charge”).
With the dispute unresolved, Glaziers applied to have its claim adjudicated pursuant to the Act. Glaziers contended that WCS had failed to provide sufficient evidence to substantiate the Back Charge. WCS’ position was that it had produced sufficient evidence for the Back Charge. However, neither party specifically addressed the adjudicator on the applicable standard against which the sufficiency of the evidence ought to be assessed (“Standard of Persuasion”).
The adjudicator allowed Glaziers’ claim in full without making any deduction for the costs arising from the shattering shower screens. The reason was that he was not satisfied that Glaziers was responsible for the shattering shower screens “beyond reasonable doubt”.
WCS then sought to have the adjudication determination set aside in the High Court. The High Court held that the adjudicator had breached the principles of natural justice, and set aside the adjudication determination. Glaziers lodged an appeal against the High Court’s decision.
Decision of the Court of Appeal
The Court of Appeal allowed Glaziers’ appeal, finding that the adjudicator had not breached the fair hearing rule and that, even if he had, WCS had not suffered any prejudice.
No breach of the fair hearing rule
As the adjudicator was not a legally-trained person, the court was of the view that the adjudication determination had to be read in that light. Thus, although the adjudicator used the term “beyond reasonable doubt”, it was doubtful that he had intended to use the phrase with the same import it would carry as used by a lawyer or a judge. On balance, the court thought it was more likely that the adjudicator used that term to mean he needed to be satisfied that there was a basis for WCS’ Back Charge, and that he would not be so satisfied if he entertained reasonable concerns or doubts.
It is well-established that a decision-maker may breach the fair hearing rule if he decides a dispute on a point which the parties have not had a fair opportunity to address. However, where the parties could have reasonably foreseen that a particular issue would arise but chose not to address that issue, they cannot complain that they had been deprived of a fair hearing. In this case, it would have been an understatement to say that the parties could “reasonably foresee” that the issue of the Standard of Persuasion would arise. In fact, the Standard of Persuasion was so integral and crucial to the adjudicator’s very task of determining the dispute that he could not have been able to decide the dispute without coming to a position on the applicable standard.
Further, during the course of the adjudication, the parties did make submissions on the sufficiency of the evidence showing that the shattering shower screens were attributable to Glaziers. Glaziers also expressly argued that WCS failed to meet its burden of proof. Thus, the parties must have realised that the adjudicator had to apply some Standard of Persuasion. The parties nevertheless chose not to address the adjudicator on the applicable standard, either because it never crossed their mind or they assumed that the answer was clear and obvious. That being the case, the parties could not then complain that the adjudicator applied the incorrect Standard of Persuasion. While this might amount to an error of law, it would not constitute a breach of natural justice.
No prejudice to WCS
Lastly, even if there had been a breach of natural justice, it had not caused WCS to suffer any prejudice. The court found that if the adjudicator had invited submissions on the point, the parties would have submitted that the applicable Standard of Persuasion was that of a prima facie case that the payment claim was supported by the facts. Yet, the court was of the view that this would have made no difference to the adjudicator’s decision. The overall tenor of the adjudication determination suggested that the adjudicator saw no evidential basis for WCS’s Back Charge whatsoever. For example, the adjudicator was not convinced of WCS’ arguments on the true cause of the shattering shower screens, and was doubtful about the efficacy of the remedial measures which WCS sought to back charge to Glaziers. Thus, even if the adjudicator had applied the standard of a prima facie case, he would still have found that WCS’ claim was unsupported and rejected it.
The following learning points can be gleaned from this case:
- Failure of an adjudicator to specifically invite parties’ to address him on the standard of persuasion is unlikely to constitute a breach of natural justice where the issue of evidential proof is a live issue.
- Parties that choose not to address the adjudicator on the applicable standard of persuasion in such a case should be aware that even if the adjudicator were to eventually apply an erroneous standard of persuasion, this is unlikely to afford the aggrieved party grounds to set aside the adjudicator’s determination. In such a situation, the aggrieved party may be limited to obtaining relief by seeking a final determination through arbitration or litigation.