IMPORTANCE OF PAYMENT RESPONSE
The recent High Court decision in Sito Construction Pte Ltd (trading as Afone International) v PBT Engineering Pte Ltd  SGHC 7 (“Sito v Afone”) is yet another reminder of the importance of raising jurisdictional objection as early as possible for respondents under the Building and Construction Industry Security of Payment Act (“SOP Act”).
Brief facts: The respondent, PBT Engineering Pte Ltd (‘PBT”) was a subcontractor for the supply and installation of building works and drainage works.
PBT entered into a contract with a sole proprietorship, Afone International (“Afone”) which was owned by one Mr. Loke.
One month later, Mr Loke sold Afone International to the applicant, Sito Engineering Pte Ltd (“Sito”). Sito retained all the employees of Afone and Mr Loke became an employee of Afone until August 2018.
Afone continued to carry out its obligations under the contract with the respondent.
Thereafter, Afone issued a payment claim to Sito. However, Sito did not serve any payment response in respect of the payment claim.
Sito then lodged an adjudication application and obtained an adjudication determination in its favour. During the adjudication, PBT did not dispute that the contract was not binding between Afone and PBT.
When PBT failed to pay the adjudicated amount, Sito filed an originating summons under section 27 of SOP Act to enforce the adjudication determination.
PBT then applied to set aside both the adjudication determination as well as the court order granting leave to enforce the adjudication determination on jurisdictional grounds.
Want of jurisdiction. One of PBT’s arguments in support of its setting aside application is that PBT had entered into a contract with Mr. Loke trading as Afone, and not Sito trading as Afone. Since there was no novation or assignment between Sito and PBT, there was no contractual relationship between them to bring the adjudication application under the SOP Act.
Whether the Respondent had waived its rights to raise a jurisdictional objection. In this regard, at  Sito v Afone onwards, where the High Court addressed whether “[PBT], by not raising the argument during the adjudication that the Payment Claim and the subsequent AA were invalid because of the absence of a contract between the parties, had effectively waived its rights to raise this jurisdiction objection.”
Applying the Court of Appeal’s decision in Audi Construction Pte Ltd v Kian Hiap Construction Pte Ltd  1 SLR 317 (“Audi”), the High Court:
a. Disagreed with the respondent that Audi was to be “limited to the broad meaning of jurisdictional objections pertaining questions of irregularity of procedure or contingent jurisdiction or non-compliance with statutory condition precedents to the validity of a step in litigation” ( –  Sito v Afone); and
b. Held that Comfort Management Pte Ltd v OGSP Engineering Pte Ltd  1 SLR 979 (“Comfort Management”) did not limit the ambit of Audi, on the basis that Comfort Management was dealing with patent errors, a ground of challenge different from a jurisdictional objection ( Sito v Afone).
Waived on the facts. On the facts, the High Court then found that PBT had waived its rights to make this jurisdictional challenge, as the respondent could have raised this challenge during adjudication. Not only was the respondent aware of the change in sole proprietorship when it filed its adjudication response, the respondent could have (but did not) raise this challenge during adjudication itself ( –  Sito v Afone).
Timing important. However, it is also important to note that at  Sito v Afone, the High Court appeared to accept that PBT did not have to raise the challenge in the payment response.
This is because “when the Payment Claim was served on the respondent on 14 July 2015, the applicant had not lodged a change of sole proprietor of Afone International with ACRA as this was only done on 16 July 2018. Thus, it would not be fair to expect the respondent to raise its jurisdictional objection in its payment response.” ( Sito v Afone).
Implication. Sito v Afone is yet another reminder that all objections (including jurisdictional objections) must be raised as early as possible.
However, the other takeaway is not all objections must be found in the payment response. This is important to note as some respondents may regard Audi as saying that unless an objection is found in the payment response, the objection cannot be raised. Sito v Afone highlights that the test in Audi is not so straightforward.
Tags: Building and Construction Industry Security of Payment Act; Adjudication; Payment Response; Waiver; Estoppel; Jurisdictional Objection; Patent error; Comfort Management.
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