Unit 5 : ADJUDICATION

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1 Unit 5 : ADJUDICATION WHAT IS ADJUDICATION? Adjudication is a quick and inexpensive process in which an independent third party makes binding decisions on construction contract disputes. The adjudicator s powers are defined by the parties in dispute and these powers only relate to the contract under which he has been appointed. Adjudication was introduced into the UK by the Housing Grants, Construction and Regeneration Act 1996 which came into effect on 1 May S108 of the Construction Act requires all construction contracts made from that date to provide for adjudication as a first instance formal dispute resolution procedure. In plain terms the aim behind the Act s compulsory adjudication provisions was to prevent perceived abuses by the contractor (and the employer above him) of sub-contractors ie delayed payments. Adjudication is not however confined to payment issues. The Act applies to construction operations which includes not only building and civil engineering contracts but also consultancy, project management, construction management and facilities management. Certain operations are excluded from the Act: notably contracts where the primary activity involves oil and gas extraction and also contracts for residential property when one party is occupier. The rules relating to the adjudication process in the UK can be summarized as follows: A party has the right to refer disputes to adjudication at any time. It is mandatory to appoint an adjudicator within 7 days of a notice of intention to refer. The adjudicator must reach a decision within 28 days of referral, though this may be extended by agreement of the referring party by 14 days. The adjudicator must act impartially. The adjudicator is allowed to act inquisitorially. The decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, arbitration or agreement. The Act does however state that the parties may agree to accept the adjudicator s decision as final and binding. The adjudicator cannot be held liable for mistakes as long as he was acting in good faith. Adjudication is mandatory unlike other forms of ADR (expert determination, negotiation, conciliation, mediation) which require the consent of the parties to the dispute.

2 INITIAL FEARS IN RELATION TO THE INTRODUCTION OF ADJUDICATION IN THE UK Prior to the Construction Act coming into force there were many concerns about its application. Despite its theoretical advantage there was the fear that it would not stand up in practical use and be subject to legal challenge. In 1999 a crucial ruling in the TCC (Technology and Construction Courts) was made just 9 months after the Construction Act came into force - Macob Civil Engineering Ltd v Morrison Construction Ltd. In that case not only was the adjudicator s decision enforced but the court also decided that summary judgment was an appropriate method to decide on jurisdiction challenges. As a result of this ruling the numbers of disputes referred to adjudication significantly increased. Another key ruling was when an adjudicator s decision was enforced even when the adjudicator made a mistake in Bouygues (UK) Ltd v Dahl Jenson (UK) Ltd [2000]. This sent out a clear message to the construction industry that if the adjudicator correctly addresses the matter in question in the adjudication then his decision will be enforced even if it is demonstrably incorrect. No doubt the fact that adjudication has had the full support of the judiciary in UK has led to its increase. Ambush was a buzz word at the time meaning that the referring parties might prepare in advance large volumes of relevant information which the responding could not possibly address in the time scale. Whilst there was no doubt some such cases these on the whole were dealt with by the well trained adjudicator telling the referring party that a decision was not possible in the time given and requesting summary submissions. Another worry was that there may at the outset be a flood of adjudications overwhelming available adjudicators. In reality this proved not to be the case and there was ample capacity of adjudicators to meet the demand (subject to specialist field requirements). CURRENT CONCERNS WITH THE ADJUDICATION PROCESS There has been an increasing trend for large and complex disputes to be referred to adjudication such as delay, disruption and acceleration claims. Some disputes, particularly at the completion of project, are too complex to permit a fair adjudication process within the time limits of the scheme. The ability to refer complicated disputes to adjudication has led some members of the judiciary to

3 suggest that it is not suitable for all disputes and parties should consider using arbitration and litigation where appropriate (see for example R G Carter v Edmund Nutall Bowsher J) However, the size and complexity of construction disputes should not necessarily deter a party from using adjudication. What is necessary is an understanding and recognition of the limitations and management of the process accordingly, eg. Referring the dispute earlier or referring few issues. There is some evidence to suggest that there is an increase in respondent s success rate. This may reflect the increase of the number of more complex disputes with their inherent uncertainty. Statutory Adjudication in Singapore: An Overview With the introduction of statutory adjudication in Singapore, many are hopeful that the problems of non-payment of contractors, sub-contractors and suppliers in the construction industry can be avoided. What is surprising from the published adjudication determinations is that the adjudication applications by consultants exceeded that of contractors. This article looks at the initial eleven published adjudications with a view of giving useful feedback Introduction With the enactment of the Building and Construction Industry Security of Payment ('SOP') Act and its coming into operation on 1 April 2005, statutory adjudication has been introduced. In this article, the framework for statutory adjudication is set out followed by an analysis of the published cases on adjudication determinations. Observations of the published cases are made and the article is completed with brief concluding remarks. Statutory Adjudication Framework The framework set out below is presented in three sub-heads. The first sub-head called 'Jurisdictional points', defines the type of dispute that can be resolved by way of statutory adjudication. The second sub-head called 'the role of parties', explains what the claimants and respondents are expected to do and the consequences of non-compliance. The last sub-head called 'the role of adjudicators', describes what is expected of the adjudicator after being appointed as one.

4 Jurisdictional points In statutory adjudication, the right to have the matter determined by the adjudicator is limited to what has been expressly provided in the SOP Act. Thus, it is provided that not every contract is to be bound by the provisions of the SOP Act. Unlike the UK Housing Grants Act, the SOP Act does not allow the reference to statutory adjudication, it disputes it. Statutory adjudication under the Singapore SOP Act is limited to a payment claim dispute involved in the defined contracts. Existence of the affected contract In particular, under s 4(1), the Act applies to: (a) construction contracts1 that include the building contracts and sub-contracts and service contracts with consultants; and (b) supply contracts2 that include sale of goods contract entered into by building materials suppliers. Further the SOP Act applies to 'any contract that is made in writing', where 'in writing' has been given a very wide interpretation in s 4(3). However, there is no requirement that the contract must be executed.3 Further, if a contract is otherwise than in writing, it nevertheless satisfies the 'in writing' requirement, if there is a reference to terms which are in writing. This may refer to say, standard forms of building contract or the usual or standard terms and conditions in building materials supply contracts that parties have used in their previous dealings.4 Indeed by s 4(4), the 'in writing' requirement is satisfied if a contract is not wholly in writing but the matter in dispute between the parties is in writing. By way of an exclusion provision, construction contracts are not governed by the provisions of the SOP Act if the construction works are carried out outside Singapore or if goods and services are supplied in relation to construction works to be carried out outside Singapore. Payment claim dispute Whilst s 13(1) identifies the nature of dispute as a payment claim dispute, it does not describe in detail what form the dispute may take. The nature of dispute may be identified from ss 10 and 12. The starting point of what can be disputed must be what the claimant is allowed to claim under a payment claim, as prescribed by s 10 of the SOP Act. By s 10(1) read with s 10(4), an amount can only be claimed if it is the subject matter of the current payment claim or had been the subject

5 matter of a previous payment claim. Thus, any amount not included in an earlier previous payment claim that ought to have been included but was not so included, cannot be claimed by way of the statutory adjudication process. The amount that a claimant is allowed to claim in a payment claim is called the 'claimed amount'. By s 2, 'claimed amount' has two components, (a) the whole or part of any progress payment claimed by a claimant in a payment claim; and (b) any interest payable under s 8(5). Section 8(5) provides that The interest payable on the unpaid amount of a progress payment that has become due and payable (a) shall be at the rate specified in or determined in accordance with the terms of the contract; or (b) where the contract does not contain such provision, shall be at the rate prescribed in respect of judgment debts under the Supreme Court of Judicature Act (Cap. 322). In s 12,disputes in a construction contract are set out in three categories, namely, (a) a failure to pay an agreed sum represented by the claimant accepting the response amount offered by the respondent;5 (b) a claimant disputes the payment response given by the respondent;6 and (c) the respondent fails to provide a payment response.7 In the case of categories (b) and (c), the claimant's right to statutory adjudication crystallises only upon the expiry of the dispute settlement period as defined in s 12(5) where the situation remains unsettled or the payment response remains unserved respectively. Section 12 also identifies two categories of dispute in the supply contracts. These are: (a) where a claimant fails to receive payment by the due date of the claimed amount;8 and (c) where the claimant disputes the response amount where the response amount is less than the claimed amount.9 Procedural requirements It would appear from the above analysis that a payment claim cannot be served until the due date for payment under s 8(1) has expired since the claimed amount which is the subject matter of dispute referable to statutory adjudication can only be in dispute when the progress payment is not paid on the due date as provided in s II of the SOP Act.

6 By the combined effect of ss 10(1) and 10(4), there appears to be a limitation period set for the claimant to serve a payment claim that leads to his entitlement to refer the payment claim dispute to statutory adjudication. Therefore, the claimant must put in his payment claim by the time prescribed for its service in s 10(2). There is a corresponding limitation period to make an adjudication application prescribed by s 13(3). In addition, there is a condition precedent prescribed by s 13(2), namely, the claimant must notify the respondent of his intention to apply for adjudication. Roles of parties It may be said that there are three schemes created by the SOP Act. The first scheme may be called the statutory payment scheme. The second scheme is the statutory adjudication scheme. The last scheme is the statutory enforcement scheme. The statutory payment scheme can operate on its own without the parties doing anything. However, the SOP Act provides for the parties to regulate the formula for the valuation of works done or goods or services supplied as well as to fix due dates for payment within the constraints imposed. These provisions are to be found in Part II of the Act. The statutory adjudication scheme is largely a self-help scheme where the inactive party would be penalised. The scheme may be divided into two. Part III provides for the claimant to avail himself of the entitlement to statutory adjudication. Part IV provides for the statutory adjudication process itself. Thus in Part III, a claimant may be deprived of his right to the use of the statutory adjudication scheme if he does not serve his payment claim within the prescribed time. 10 Similarly, the respondent may be deprived of his right to rely on any cross-claim, counterclaim and set-off if he fails to file a payment response containing the same. 11 In Part IV, a claimant is not entitled to proceed with the adjudication application if he fails to give the necessary notice in writing to the respondent indicating his intention to apply for adjudication of the payment claim dispute.

7 12 The statutory enforcement scheme is to help fulfil the object of the SOP Act, that is to facilitate payment. The claimant is given assistance in several ways in Part V of the SOP Act. There are three types of measures prescribed. First, the measure concerns the adjudication determination that may be enforced in the same manner as a judgment or an order of court to the same effect. 13 Under the Rules of Court, this is an ex parte application. Interestingly, it is open to the claimant to make if he obtains the adjudicator's determination or in the event that the determination is reversed at the review of the adjudicator's determination, the respondent may similarly make the application. Second, the measure concerns the contract entered into, between the claimant and the respondent, namely, (a) exercising a lien on the goods supplied by the claimant under s 25; and (b) suspending the carrying out of the construction work or the supplying of the goods or services. This right is subject to s 24(3) which takes into account whether the claimant has been served with the requisite notice that the principal intends to make a direct payment to the claimant based on s 24. Before the two measures may be taken, the claimant is required to serve a notice in writing to the respondent of the claimant's intention to pursue the specified measure in the notice. 14 Third, the measure extends to the contract between the principal and the respondent whereby the principal may arrange to pay the claimant direct under s 24. In this case, the principal15 is required to follow the procedure prescribed by s 24(2). The principal must first serve a notice of payment on the claimant, with a copy on the respondent, stating that the principal shall make a direct payment to the claimant. Role of the adjudicator The role of the adjudicator is to give a determination in respect of four things as required by s 17(2). He must determine the adjudicated amount, that is, as defined by s 2, the amount of a progress payment that is payable.16 He must then identify the date on which the adjudicated amount is payable,17 together with the interest payable18 on the adjudicated amount. Finally, the adjudicator must determine the issue of cost to be paid.19

8 However, he cannot begin the adjudication the process of determination if the adjudication application has not been made in accordance with the statutory requirements set out in s 13(3)(a), (b) or (c).20 If he passes this hurdle, then he must be guided by s 16(3). The first guideline requires him to act independently, impartially and in a timely manner.21 The second guideline requires him to avoid incurring unnecessary expenses22 while the third guideline requires the adjudicator to comply with the principles of natural justice.23 Given the possibility that the requirement to comply with natural justice may in certain circumstances be necessarily inconsistent with the first and second guideline, it is submitted that the three requirements must be read in the order so that the need to comply with natural justice must be in the light of the short time prescribed for the?adjudication process. Indeed, the adjudicator is not free to look at any piece of evidence that is given to him. The constraints imposed on him are to be found in s 17(3) as set out below: Subject to subsection (4), in determining an adjudication application, an adjudicator shall only have regard to the following matters: a) the provisions of this Act; b) the provisions of the contract to which the adjudication application relates [This is subject to section 17(4) where it is provided that the adjudicator is not bound by any payment response or any assessment in relation to the progress payment that is provided by the contract to be final and binding]; c) the payment claim to which the adjudication application relates, the adjudication application, and the accompanying documents thereto; d) the payment response to which the adjudication application relates (if any), the adjudication response (if any), and the accompanying documents thereto [This is subject to section 16(2)(b) which provides that any adjudication response that is not lodged within the period referred to in section 15(1) must be rejected] ; e) the results of any inspection carried out by the adjudicator of any matter to which the adjudication relates; f) the report of any expert appointed to inquire on specific issues;

9 g) the submissions and responses of the parties to the adjudication, and any other information or document provided at the request of the adjudicator in relation to the adjudication; and h) Any other matter that the? Adjudicator reasonably considers to be relevant to the adjudication. Analysis of Adjudication Determinations There are presently, posted on the website of the Singapore Mediation Centre, the only Authorized Appointing Body for the appointment of adjudicators under the SOP Act, 11 cases. The first two cases have been referenced with the date of the determination. The other nine have been given an 'SOP/AA' number with a link to the year presumably when the decision was given. In this section, the analysis will follow the sub-heads used in the above discussion of the framework for the statutory adjudication. 1 Dated 9 December Dated 7 February Dated 3 March 2006 aka SOP/AA02 of Dated 19 May 2006 aka SOP/AA03 of Dated 18 May 2006 aka SOP/AA04 of Dated 9 June 2006 aka SOP/AA05 of Dated 29 June 2006 aka SOP/AA06 of Dated 18 August 2006 aka SOP/AA07 of Dated 21 August 2006 aka SOP/AA08 of Re-dated 28 September 2006 aka SOP/AA10 of Dated 25 September 2006 aka SOP/AA11 of The cases thus far have involved four cases concerning consultant service contracts,24 two main contracts25 and five sub-contracts.26

10 In the four cases concerning consultant service contracts, the claimant's claim in the first case was rejected because the claim was for an amount where the design is for construction work outside Singapore.27 Such contracts are excluded from the application of the Act.28 The adjudicator, however, took pains to explain that it did not mean that the claimant has no other legal recourse. The remaining cases were also not successful in obtaining in full the amount claimed. In the adjudication determination referenced SOP/AA07 of 2006, the claim in respect of two of the tax invoices was rejected because the payment claim was served out of time and the amount claimed in respect of the third invoice was reduced from $238,560 to $59,640. In the adjudication determination referenced SOP/AA08 of 2006, the claim in respect of four tax invoices was given in full while the claim for one tax invoice was rejected. In the adjudication determination referenced SOP/AA10 of 2006, the claim was rejected except for $95,424. In the two adjudications concerning main contracts, the claimant contractor was able to obtain in full the amount claimed in the first case29 while in the second case,30 the claimed amount of $67, was reduced to $67,083.08, the adjudicated amount. In the adjudications concerning sub-contracts, the sub-contractors were more successful, with three sub-contractors obtaining in full the claimed amount,31 one obtaining a reduced amount32 and one had its claim rejected.33 Jurisdictional points Whilst the statutory adjudication process promises a very quick resolution to a payment claim dispute so as to facilitate payment by use of the supporting statutory enforcement measures, a respondent is entitled to challenge whether a proper claim has been brought before the adjudicator on a jurisdictional ground. In the recent cases, respondents have been successful in some cases where the issue of jurisdiction came in the form of whether the contract that is required by the Act before a claimant can refer the payment claim dispute to adjudication exists. Other respondents have challenged the adjudicator's right to hear the dispute since the claimants have failed to comply with mandatory procedural provisions. Existence of the affected contract By s 4, the contracts governed by the Act are referred to as 'any contract that is made in writing'. The definition of the affected contract is found in s 2 and includes a construction contract34 and a

11 supply contract.35 These are further defined under ss 2 and 3.36 In the first case, the adjudicator in adjudication determination dated 9 December 2005 was invited to decide whether there existed an affected contract since a Letter of Award was not signed where there was a provision for the claimant to affix their signature indicating their agreement. Nevertheless, the adjudicator held that there existed a contract that entitled the claimant to pursue statutory adjudication. In the second case, the adjudicator in adjudication determination referenced SOP/AA03 of 2006 decided that there did not exist a contract that entitled the claimant to pursue statutory adjudication pursuant to s 4(2)(b)(ii) as the construction work, with which the consultant's service contract was required for, was carried out outside Singapore. The next case is important as the adjudicator decided that the Act is applicable even when the contract has been terminated. Thus, it is possible to submit a payment claim after the date of termination of the contract. In the adjudication determination referenced SOP/AA10 of 2006, the contract was terminated on 6 July 2006 and the payment claim served on 26 July At para 13, the adjudicator held that, 'Nonetheless, I am of the view that the Act does apply even after the contract? is terminated. 'In an earlier case that involved the submission of a payment claim after the termination of the contract, the adjudicator appeared not to have been asked whether the Act still applied after the termination of the contract. In that adjudication determination referenced SOP/AA08 of 2006 at para 39, it was stated that, ' by then the Claimant's services had already been terminated by the respondent and there is no basis for charging time spent at the meeting and making copies of documents and drawings.' However, it would appear that it was not raised as an issue whether there exists an affected contract to qualify the claimant to refer the claims to statutory adjudication. Procedural requirements In this section, there are two cases that illustrate how a failure to comply with the procedural requirements led to the rejection of the claims. The first case concerns the service of an adjudication application out of time as required under s 13(3). The second case concerns the failure to serve the notice of intention to apply for adjudication under s 13(2).

12 Thus, in the adjudication determination referenced SOP/AA07 of 2006, the claimant failed in their application because the adjudication application was served out of time visà-vis two of the payment claims. On this point, the adjudicator held as set out below: 12. Section 13(3) of the Act provides that an adjudication application:- (a) shall be made within 7 days after the entitlement of the claimant to make 'an adjudication application first arises under section 12; ' 13. Under Section 12 subsections (2) and (5) of the Act, the Claimant's entitlement to make an adjudication application would arise 14 days (7 days for the payment response and 7 days for the dispute settlement period) after the payment claim was served. 14. As the 1st tax invoice was served on 16th June 2006 and the 2nd tax invoice was served on 30th June 2006, the respective Notice of Intention to Adjudicate and the Adjudication Application should be served and lodged in respect of the 1st tax invoice and the 2 nd tax invoice by 7th July 2006 and 21st July However, the Notice of Intention to Adjudicate and the Adjudication Application for both these tax invoices were served and lodged on 27th July Section 16(2) of the Act provides that an adjudicator shall reject any adjudication application that is not made in accordance with section 13(3)(a), (b) or (c) of the Act. In the next case, adjudication determination dated 7 February 2006, the claimant failed in their application because they failed to give notice of intention to apply for adjudication in the form that is required by s 13(2). The adjudicator held as set out below. 6. According to rule 7(1) of the Building and Construction Industry Security of Payments Regulations (the "Regulations"), every notice of intention must contain the following particulars: a) the names and service addresses? of the claimant and the? respondent; b) the date of the notice; c) the particulars of the relevant? contract, comprising - i. the project title or reference, or a? brief description of the project; ii. iii. the contract number or a brief? description of the contract;? and the date the contract was? made;

13 d) the claimed amount; e) the response amount (if any);? and f) a brief description of the? payment claim dispute. 7. In their Adjudication application, the Claimant has relied on a letter (ref: SD/205.6TSC/06) dated 19 January 2006 to the Respondent as the requisite notice of intention to refer to adjudication... The letter concludes with the statement that 'if [they] do not hear from [the Respondent] tomorrow, [they] will not hesitate to instruct [their] solicitor to take necessary action to recover payment from [the Respondent's] company.' 8. Not only does the letter not contain the particulars listed in rule 7(1) of the Regulations, there is no express reference or intimation by the Claimants that they were intending to refer the dispute to adjudication. Roles of parties Judging from the statistics of the cases published thus far, it would appear that many are still in the dark as regards the operation of the Act. It is to be noted that in eight of the 11 cases, the respondents failed to serve a payment response.37 Another indication of unfamiliarity with the Act also saw two respondents failing serve an adjudication response.38 However, in adjudication determination referenced SOP/AA08 of 2006, an payment response appeared to have been accepted as valid by the adjudicator. More importantly, in adjudication determination referenced SOP/AA10 of 2006, it was decided that the effect of the failure to serve a payment response only prevented the respondent from being able to rely on the reasons for withholding payment; it did not prevent the respondent from raising legal arguments. In the case, the respondent challenged the arbitrator's right to hear the case on a jurisdictional ground. Role of the adjudicator By s 17(2), the adjudicator must determine four things, namely, (a) the adjudicated amount which is essentially the amount of a progress payment that is payable; (b) the due date on which the adjudicated amount is payable; (c) interest payable on the adjudicated amount; and (d) the cost of the adjudication to be payable by each party.

14 Adjudicated amount What appears to be common in the cases heard so far except for one39 is that adjudicators generally entertain claimants' claims that are in respect of works carried out over a period of time extending beyond the one-month period that is set by the regulations for the service of payment claims.40 This begs the question whether all the amounts claimed under separate documents may qualify as one progress payment, which by the definition given by s 2 is tied to a payment that is based on an event or a date. This is further supported by s 10(1) which allows only the service of one payment in respect of one progress payment. It is humbly submitted that unless there is a good reason for doing so, it is likely that the decisions of adjudicators who dealt with more than one claim as represented by the separate amounts shown in tax invoices or other documents may not have complied with the Act. In the leading case of SOP/AA07 of 2006, three tax invoices dated respectively 16 June 2006, 30 June 2006 and 6 July 2006 were part of one adjudication application. It was held by the adjudicator that two out of the three invoices are not valid claims since the adjudication application would be out of time in respect of each of the two claims. [See above] Another interesting case involved an adjudicator deciding on a claim based on final accounts without first going into the jurisdictional point of whether the Act allowed the adjudicator to do so. Thus, in SOP/AA11 of 2006, the claimant effectively based his claim on the final accounts dated 15 May The payment claim dated 20 July 2006 appeared to comprise works completed and a sum that appeared to represent a variation that required socketing into rock. The sequence appeared to be the submission of the first claim on 19 December 2005, second claim on 20 December 2005, final account on 15 May 2006, and the payment claim on 20 July Unlike the New South Wales Act ('NSW Act") from which the Singapore Act is modelled after, the Singapore Act does not expressly provide for the Act to apply to final payments as is the case in the NSW Act. Due date of adjudicated amount As the adjudicated amount is by definition the progress payment that is determined to be payable, the due date for the adjudicated amount must be the due date of the progress payment. This in turn requires the adjudicator to be familiar with s 8 which regulates the due date for payment in respect of each progress payment. Quite obviously, the due date of the progress payment must occur before

15 the date of the determination of the adjudicator, otherwise there would be no dispute since there is no amount due and unpaid. Nevertheless it is interesting to note that there are five cases in which the adjudicators have determined that the adjudicated amount is due only after the date of their determination. These five cases comprise three cases of sub-contracts,41 one case each of main contract42 and a consultant service contract.43 It is humbly submitted that these determinations cannot be right. Fortunately, there are four cases where the due dates precede the respective dates of determination. This involved two cases of consultant service contracts,44 one case each of main contract45 and sub-contract.46 The remaining two cases had the claims rejected. The first case concerns a sub-contract where the claimant failed to serve the intention to refer the payment claim dispute to adjudication under s 13(2) read with reg 7(1).47 The second case concerns a consultant's service contract where the claimant's work was procured for construction work to be carried out outside Singapore. Accordingly, such contracts are excluded from the application of the Act under s 4(2)(b)(ii).48 As observed above, eight of the 11 adjudications found the respondents having failed to serve a payment response. This has an impact on the outcome of the adjudication since by s 15(3)(a), the adjudicator shall not consider any reason for withholding any amount unless the reason was included in the relevant payment response. Three of these cases are able to show the effect of a failure to serve a payment response. Thus in SOP/AA11 of 2006 the respondent's claim against the claimant in respect of liquidated damages was rejected as the payment response was not served. More interestingly, the adjudicators in SOP/AA07 of 2006 and SOP/AA10 of 2006 were asked to stretch the ban imposed by the failure to serve a payment response to also prevent the respondents from relying on their right to a jurisdictional challenge in SOP/AA07 of 2006, it was held that the effect of failing to submit a payment response does not mean that the respondent cannot have a procedural challenge in respect of s 16(2). Again in SOP/AA10 of 2006, the adjudicator explained why a respondent is not prevented from relying on a jurisdictional challenge as it was not caught by the statutory ban imposed on the respondent for the failure to serve a payment response since 'a jurisdictional objection to the adjudicator is not itself a reason for withholding payment under a contract.'

16 Evidence As already set out above, the adjudicator is guided by the list set out in s 17(3) when determining the adjudicated amount. By s 5, the claimant is entitled to a statutory progress payment only upon the carrying out of construction work or the supplying of any goods or services. In the absence of any contrary provision, it is submitted that the adjudicator must make a decision based on the proof of work being carried out or goods or services supplied. Indeed, the adjudicator is empowered by s 16(4)(f) to 'carry out an inspection of any construction work, construction site, goods or any other matter to which the adjudication relates.' It is noted that such inspections were either not carried out and/or not reported in the determinations. On the face of the published determinations, the adjudicators had relied on the documentary proof put before them. In SOP/AA02 of 2006, the adjudicator, ' observed that the Claimant does not submit the QP's completion certificate though the Claimant claims that completion of the Works, including the Variations, was certified by the QP.' However, he held that, 'Nonetheless, in the absence of any contrary evidence or challenge from the Respondent, I accept the Claimant's position that the Works, including the Variations, was completed as certified by the QP.' It would appear that the adjudicator decided in favour of the claimant based on an allegation by the claimant that the works were carried out. Does it not beg the question as to why an inspection of the works as provided for by the Act was not carried out? In another case, SOP/AA06 of 2006, the adjudicator held that he had 'no basis to reject the quantum of work alleged to have been carried out by the Claimants for the works and the variations as being incorrect.' Again, on the face of the published determination, there is no indication whether an inspection was carried out or not. Further, the adjudicator also held that as he was not 'provided with the schedule of rates for the original works or the variations ordered' and 'In the absence of any payment response or adjudication response from the Respondents, I have no grounds to reject the rates adopted by the Claimants in their variation claims and in their claim for Works as deviating from the terms of the Sub Contract.' Unless there is a good reason for doing so, it is submitted that the adjudicator may have exposed himself to the allegation that he had failed to consider s 7(1)(a) where it is provided that in the absence of the contract price, any other rate or price in the contract, rates or prices prevailing in the

17 building and construction industry at the time the construction work was carried out or the goods or services were supplied. Thus, it is not submitted here that the adjudicator is obliged to unilaterally find the information, but it is submitted that the claim should be rejected as the claimant having failed to discharge their burden of proof. Observations In deciding whether an adjudicator has the necessary jurisdiction to hear a case, the starting point must be whether there exists what I would term an affected contract, that is, one that is governed by the Act and the claimant may invoke the Act to assist his pursuit of statutory adjudication. Accordingly, the adjudicator must be guarded against, inter alia, two things, namely, whether contract exists, or in the usual legal parlance of whether a contract has been formed, and whether a contract still exists or conversely whether the contract has been terminated. It is submitted that the claimant cannot invoke statutory adjudication under the Act because there is no affected contract in existence: (a) if the contract failed to be formed although the claimant may still be entitled to a claim of quantum meruit under the many letter of intent cases that failed to produce a contract; and (b) if the contract is terminated leaving the parties with no contract to rely on, except parties who have wisely and in anticipation, provided clauses that regulate posttermination of contract relationship between the parties. It is rather unfortunate that the cases so far have not had the opportunity to express the interpretation as regards to whether the Act applies to a final payment instead of a progress payment although, as mentioned above, there is already a case, though not argued on the point, where a determination has been given in favour of the claimant that is based on a final account. It is rather disturbing to note that while the adjudicator in SOP/AA07 of 2006 did consider the issue of one claim for one adjudication application, the other adjudicators, where relevant, did not consider this matter at all. Since it is a question of jurisdiction, it is uncertain whether the issue should be considered only where there is a challenge from the respondent. One approach is to interpret s 16(2) as a statutory obligation on the part of the adjudicator to question unilaterally whether an adjudication application should proceed when there are 'multiple claims'. It is further submitted that the adjudicator

18 concerned may not find the immunity from suits offered by s 32(1) comforting since it is conditional upon the adjudicator acting in good faith in the discharge or purported discharge of his functions or duties under the Act in the light of possible non-compliance with s 16(2). It is equally disturbing to note that the due dates for the adjudicated amount have been determined to come after the dates of determination. It begs the consideration as to why the matter is before the adjudicator if the adjudicated amount is yet to be due, since that would mean that there can be no payment claim dispute as no amount is already due and unpaid. On the other hand, the cases have thrown up an important distinction between barring a respondent from using at the adjudication a reason to withhold payment because a payment response was not served as against validly raising a jurisdictional challenge. Accordingly, a payment claim can be defeated by way of a jurisdictional challenge although the respondent had failed to serve a payment response. The last point is also a troubling one in that, on the face of the published determinations, the adjudicators appear, subject to any contrary explanations not given in the said published determinations, to have accepted that the claimants have discharged their burden of proof by their submissions of their claims especially in cases where the payment response has not been served. As there are many cases where payment responses have not been filed, it is therefore submitted that the need to be strict about imposing the burden of proof on the claimant becomes an important consideration for making each and very such determinations. These do not include the situations where the parties have agreed to either quantum of work carried out or the valuation of the works carried out. Conclusion This overview of the statutory adjudication process has unraveled some of the intricacies of the framework used. It shows that the users of the process are not familiar with the system and it would take time to get the users accustomed to the various procedures and rules of evidence. The record of cases has enabled a useful analysis of the cases to be carried out with a view to making the system work better.