Subcontractor wins appeal over post-dated payment claim

A dispute between main contractor Kian Hiap Construction and subcontractor Audi Construction went through several twists premised on a key issue: whether payment claims must be served on or by the day specified in the contract.

But Audi succeeded when the Court of Appeal ruled that the subcontractor's payment claim was valid even though it had been served two days before the specified day in the contract.

Under the terms of the contract, payment claims were to be served on the 20th day of each month. But because Nov 20, 2016, fell on a Sunday, Audi decided to serve its claim for that month on Nov 18, but post-dated it to Nov 20.

After Kian Hiap failed to reply, Audi filed for adjudication. The adjudicator rejected Kian Hiap's challenge that the claim had not been served on Nov 20, 2016, and found in Audi's favour in January last year.

Kian Hiap then applied to the High Court and won. The judge ruled that the claim had to be served on and not by Nov 20, 2016.

But Audi appealed, and the Court of Appeal found in its favour on Nov 13 last year.

In its grounds of decision issued Monday, the apex court found that the payment claim was "validly served" because Audi had "a good reason" for serving the payment claim before Nov 20.

"That day was a Sunday, and there was no dispute that (Kian Hiap's) office was closed on Sundays. Second, there could not have been any confusion as to the payment claim's operative date.

"The payment claim was correctly dated Nov 20, 2016, the day on which the contract entitled (Audi) to serve a payment claim," according to the three-judge panel comprising Chief Justice Sundaresh Menon and Judges of Appeal Tay Yong Kwang and Steven Chong.

And because Kian Hiap failed to file a payment response, that "constituted an unequivocal representation that it would not raise any objection to the payment claim", added the panel.

Malkin & Maxwell lawyer John Lim said the Court of Appeal's decision is to be "applauded for assisting contractors in overcoming practical difficulties in deciding when to serve payment claims, especially where the contracts are unclear."

Audi made headlines in late 2016 for failing to pay 50 workers on the project, and was hit with a defamation lawsuit for claiming it could not pay the workers because it had not been paid by Kian Hiap. But a settlement has been reached.

Mr Seah Choo Meng, chairman of ThreeSixty Cost Management and ThreeSixty Contract Advisory under the Surbana Jurong Group, noted that there are more than 500 payment claims made each year under the Building and Construction Industry Security of Payment Act.

Each claim can vary from a few thousand dollars to a few hundred million dollars, he added.

A version of this article appeared in the print edition of The Straits Times on January 24, 2018, with the headline 'Subcontractor wins appeal over post-dated payment claim'. Print Edition | Subscribe