Bintai Kindenko Pte Ltd v Samsung CT Corp [2018] SGCA 39

Sushant Shukla

Case Details

Citation: [2018] SGCA 39
Case Number: Civil Appeal No 211 of 2017
Decision Date: 9 July 2018
Court: Court of Appeal of Singapore
Coram: Sundaresh Menon CJ, Tay Yong Kwang JA, Steven Chong JA
Judgment Delivered By: Sundaresh Menon CJ (delivering the grounds of decision of the court)
Appellant(s): Bintai Kindenko Private Limited
Respondent(s): Samsung C&T Corporation
Counsel for Appellant: Chong Kuan Keong and Sia Ernest (Chong Chia & Lim LLC)
Counsel for Respondent: Aw Wei Keng Kelvin and Lee Kok Wee, Eugene (Morgan Lewis Stamford LLC)
Legal Areas: Building and Construction Law; Civil Procedure
Statutes Referenced: Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed); Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed); Rules of Court (Cap 322, R 5, 2014 Rev Ed)
Key Provisions: Building and Construction Industry Security of Payment Act, ss 13(3)(c), 16(2)(a), 16(3)(c), 27(1), 27(2); Building and Construction Industry Security of Payment Regulations, reg 7(2)(d); Rules of Court, O 59 r 8(1)
Disposition: Appeal dismissed; High Court decision affirmed; costs to respondent; personal costs orders against counsel for both parties.
Reported Related Decisions: Bintai Kindenko Pte Ltd v Samsung C&T Corp [2017] SGHC 321

Summary

This case concerned an appeal against a High Court decision to set aside an adjudication determination made under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) ("SOP Act"). The core dispute arose from a construction subcontract where Bintai Kindenko Private Limited ("Bintai"), the subcontractor, sought payment from Samsung C&T Corporation ("Samsung"), the main contractor. Bintai initiated adjudication proceedings, primarily seeking the release of retention monies. Samsung, in its adjudication response, raised several issues, including backcharges and variation works, which would have resulted in a net balance in its favour.

The Adjudicator, while finding in favour of Bintai on the retention monies and rejecting Samsung's preliminary objection, explicitly stated that the dispute "centers solely on the claim for release of the first retention monies" and failed to consider the issues of backcharges and variation works. The High Court subsequently set aside the adjudication determination, finding that the Adjudicator's failure to consider these essential issues constituted a breach of natural justice under s 16(3)(c) of the SOP Act, which was material and prejudiced Samsung. Bintai appealed this decision to the Court of Appeal.

The Court of Appeal dismissed Bintai's appeal, affirming the High Court's decision. It held that the Adjudicator's conscious decision to exclude essential issues from consideration amounted to a breach of the fair hearing rule, a fundamental principle of natural justice. The Court reiterated that such a failure, as distinct from an error of law, warrants curial intervention. Furthermore, the Court found the breach to be material, as the unconsidered issues had a "real as opposed to a fanciful chance" of altering the outcome, given their significant financial value. In a notable ancillary ruling, the Court also imposed personal costs orders against counsel for both parties for their unreasonable and undiscerning conduct in preparing an excessively voluminous and unedited Agreed Bundle of Documents for the appeal, in breach of court directions.

Timeline of Events

3 December 2012: Samsung engaged Bintai as a subcontractor for mechanical, electrical, and plumbing works for additions and alterations to Suntec City’s convention centre and retail podium.
19 May 2017: Bintai submitted Payment Claim No 59 (PC 59) for a claimed amount of $13,479,366.43.
9 June 2017: Samsung submitted Payment Response No 59 (PR 59), stating a response amount of "($2,190,963.62)", indicating a net balance in Samsung’s favour, which included backcharges and reassessed variation works.
7 July 2017: Bintai served notice of intention to apply for adjudication and lodged Adjudication Application No 190 of 2017, seeking payment of $2,146,250.00 for the release of the first half of retention monies, but also identifying backcharges and variation works as issues in dispute.
11 July 2017: The Adjudicator was appointed by the Singapore Mediation Centre.
17 July 2017: Samsung filed its Adjudication Response, maintaining its response amount and addressing the preliminary objection, retention monies, backcharges, and variation works.
15 August 2017: The Adjudicator rendered the Adjudication Determination, finding in favour of Bintai for $2,146,250.00 (retention monies), but explicitly stating that the dispute "centers solely on the claim for release of the first retention monies" and making no findings on the backcharges or variation works.
28 August 2017: Bintai filed Originating Summons No 975 of 2017 (OS 975/2017), seeking leave to enforce the Adjudication Determination.
30 August 2017: An assistant registrar granted Bintai's application in OS 975/2017, allowing leave to enforce the Adjudication Determination.
18 September 2017: Samsung filed Summons No 4276 of 2017 (the Setting Aside Application), seeking to set aside the Adjudication Determination on the sole ground that the Adjudicator had failed to consider the issues regarding backcharges and variation works, amounting to a breach of natural justice.
[Date of High Court Decision, not specified in extract]: The High Court allowed Samsung's Setting Aside Application, setting aside the Adjudication Determination.
9 April 2018: The Court of Appeal heard the appeal.
9 July 2018: The Court of Appeal dismissed Bintai's appeal, affirming the High Court's decision and providing its grounds of decision.

What Were the Facts of This Case?

The appellant, Bintai Kindenko Private Limited ("Bintai"), a mechanical and electrical engineering company, was engaged by the respondent, Samsung C&T Corporation ("Samsung"), a building construction company, as a subcontractor for works related to additions and alterations to Suntec City’s convention centre and retail podium. The subcontract, formalised by a letter of acceptance dated 3 December 2012, was for a sum exceeding $85 million.

A payment dispute arose when Bintai submitted Payment Claim No 59 ("PC 59") on 19 May 2017, claiming $13,479,366.43. In response, Samsung submitted Payment Response No 59 ("PR 59") on 9 June 2017, stating a response amount of "($2,190,963.62)". This indicated that Samsung believed there was a net balance owed to it, rather than by it. Samsung's computation in PR 59 included backcharges of $585,252.20 for Bintai's alleged failure to provide scaffolding and a reassessment of variation works that had previously been certified and paid.

On 7 July 2017, Bintai initiated adjudication proceedings under the Building and Construction Industry Security of Payment Act ("SOP Act"). In its Adjudication Application, Bintai stated that while it disputed Samsung’s overall response amount, it was primarily seeking payment of $2,146,250.00, representing the release of the first half of retention monies. Crucially, Bintai also identified the backcharges for scaffolding and the recomputed variation works as issues in dispute for the adjudication. Samsung, in its Adjudication Response, maintained its position on the backcharges and variation works, and also raised a preliminary objection to the validity of Bintai's application.

On 15 August 2017, the Adjudicator rendered the Adjudication Determination. The Adjudicator rejected Samsung's preliminary objection and found that Bintai was entitled to the $2,146,250.00 for the retention monies. However, the Adjudicator explicitly stated at [28] of the determination that "[i]n this adjudication, the payment claim disputes [sic] centers solely on the claim for release of the first retention monies" and consequently did not consider or make any findings regarding the backcharges or the variation works. This omission became the central point of contention.

Following the Adjudication Determination, Bintai obtained an order from the High Court on 30 August 2017, granting it leave to enforce the determination. Samsung subsequently filed an application to set aside the Adjudication Determination, arguing that the Adjudicator's failure to consider the issues of backcharges and variation works constituted a breach of natural justice. The High Court agreed with Samsung, allowing the setting aside application on the basis that the Adjudicator's failure to consider these two essential issues amounted to a breach of natural justice and was contrary to s 16(3)(c) of the SOP Act. Bintai then appealed the High Court's decision to the Court of Appeal.

What Were the Key Legal Issues?

The appeal before the Court of Appeal primarily concerned the validity of an adjudication determination under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) ("SOP Act") and the professional conduct of legal counsel.

The Court had to determine the following key issues:

Whether the Adjudicator acted in breach of natural justice under s 16(3)(c) of the SOP Act by failing to consider the issues regarding backcharges and variation works that had been properly raised by Samsung in its adjudication response.
Whether any such breach of natural justice by the Adjudicator was sufficiently material as to cause prejudice to Samsung, thereby warranting the setting aside of the adjudication determination.
Whether counsel for both Bintai and Samsung should be held personally liable for costs under O 59 r 8(1) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) due to unreasonable or improper conduct in preparing the Agreed Bundle of Documents for the appeal.

How Did the Court Analyse the Issues?

The Court of Appeal first addressed the question of whether the Adjudicator had acted in breach of natural justice. It began by affirming the well-established principle that a court has the power to set aside an adjudication determination if an adjudicator breaches the duty to comply with natural justice, as mandated by s 16(3)(c) of the SOP Act. The Court noted that Samsung's challenge relied on the fair hearing rule, which requires an adjudicator to receive and consider the submissions of both parties and, arguably, to give reasons for decisions on material issues.

Crucially, the Court distinguished between an adjudicator's "failure to even consider" an argument and a decision to "reject an argument" (whether implicitly or explicitly, rightly or wrongly). Citing its earlier decision in AKN and another v ALC and others and other appeals [2015] 3 SLR 488 ("AKN v ALC") at [47], the Court emphasised that only the former constitutes a breach of natural justice, while the latter is merely an error of law. The Court further reiterated from AKN v ALC at [46] that an inference of a failure to consider an important pleaded issue must be "clear and virtually inescapable." Although these principles originated in the context of arbitration, the Court confirmed their applicability to challenges against adjudication determinations under the SOP Act.

Applying these principles, the Court found that the Adjudicator had indeed failed to consider the issues regarding backcharges and variation works. The Adjudicator had explicitly stated in the determination that the dispute "centers solely on the claim for release of the first retention monies" (at [20]). This was not a case of implied rejection or a mere omission to state reasons, but a "conscious decision to exclude both issues from his scope of consideration" (at [26(c)]). The Court concluded that this amounted to a clear and inescapable inference of a failure to consider essential issues, thereby constituting a breach of natural justice (at [36]).

Next, the Court considered whether this breach of natural justice was sufficiently material as to cause prejudice to Samsung. The Court referred to its decision in L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal [2013] 1 SLR 125 at [54], which established that the test for materiality is "whether the breach of natural justice was merely technical and inconsequential or whether as a result of the breach, the arbitrator was denied the benefit of arguments or evidence that had a real as opposed to a fanciful chance of making a difference to his deliberations." It is not necessary to show that a different result would *definitely* ensue, but rather that the material *could reasonably* have made a difference.

The Court found the breach to be material and prejudicial to Samsung. It highlighted that Samsung's adjudication response amount, which incorporated the backcharges and variation works, was "($2,190,963.62)", an absolute value greater than Bintai's claim of $2,146,250.00 (at [62]). Had the Adjudicator properly considered these issues, he "could reasonably have found that Samsung’s response was valid, such that even if Bintai’s claim for the release of the first half of the retention monies were valid, Samsung would still not be liable to pay Bintai any sum of money" (at [62]). This demonstrated a real chance that the outcome could have been different, thus satisfying the materiality test.

Finally, the Court addressed the personal liability of solicitors for costs. It invoked O 59 r 8(1) of the Rules of Court, which empowers the court to make personal costs orders against solicitors for costs incurred unreasonably, improperly, or wasted by a failure to conduct proceedings with reasonable competence and expedition. The Court applied the three-step test from Ridehalgh v Horsefield [1994] Ch 205, as adopted in Singapore jurisprudence. It identified two types of situations warranting such orders: advancing disingenuous cases and thoughtless preparation of documents.

In this case, counsel for Bintai had filed a 13-volume Agreed Bundle of Documents (almost 4,000 pages), despite a clear direction to include "affidavits relevant to the issue(s) in the appeal (with exhibits edited for relevance)" (at [64], [70]). Counsel for Bintai conceded their mistake, and counsel for Samsung admitted their responsibility for not objecting to the inclusion of the entirety of the affidavits (at [71]). The Court found that this fell squarely within the second situation, concluding that counsel for both parties had acted unreasonably and improperly by failing to conduct proceedings with reasonable competence and expedition. The voluminous, unedited bundle demonstrated a clear lack of effort to comply with the directions (at [73]). While Bintai's counsel bore greater responsibility for filing the bundle, Samsung's counsel was also responsible for failing to object to its contents (at [73]).

What Was the Outcome?

The Court of Appeal dismissed Bintai Kindenko Private Limited's appeal, thereby affirming the High Court's decision to set aside the adjudication determination. The Court found that the Adjudicator's failure to consider essential issues regarding backcharges and variation works constituted a material breach of natural justice, causing prejudice to Samsung C&T Corporation.

As for costs, the Court fixed the party-and-party costs of the appeal in favour of Samsung in the sum of $20,000 (including disbursements). Additionally, the Court made personal costs orders against counsel for both parties for their unreasonable conduct in preparing the Agreed Bundle of Documents. Specifically, 90% of the photocopying charges and stamp fees for the Agreed Bundle of Documents were disallowed from Bintai's counsel to Bintai, and Samsung's counsel was ordered to contribute 20% of the photocopying charges and stamp fees that Bintai's counsel had to bear.

75 For these reasons, we dismissed the appeal. As for the costs of the appeal, we fixed the party-and-party costs to Samsung in the sum of $20,000 (including disbursements). We also ordered that 90% of the photocopying charges and the stamp fees for the ABD was not to be charged by Bintai’s counsel to Bintai, and that Samsung’s counsel was to contribute to 20% of the photocopying charges and stamp fees that Bintai’s counsel was to bear.

Why Does This Case Matter?

This decision is significant for practitioners in Singapore's building and construction industry, particularly concerning adjudication under the SOP Act, and for general civil procedure. The case stands as authority for the proposition that an adjudicator's conscious failure to consider essential issues properly raised by a party in an adjudication determination constitutes a material breach of natural justice, warranting the setting aside of the determination. This reinforces the principle that while adjudication is designed for swift resolution, it must still adhere to fundamental fairness, particularly the audi alteram partem rule.

Doctrinally, the Court of Appeal explicitly extends and applies principles developed in arbitration law (e.g., from AKN and another v ALC and others and other appeals [2015] 3 SLR 488 on "failure to consider" versus "error of law," and from L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal [2013] 1 SLR 125 on the test for materiality) to the context of SOP Act adjudications. This harmonisation provides a clearer framework for challenging adjudication determinations on natural justice grounds. The case also builds on the lineage of decisions (e.g., Prometheus Marine Pte Ltd v King, Ann Rita and another appeal [2018] 1 SLR 1) where the courts have demonstrated a willingness to impose personal costs orders on solicitors for professional misconduct in litigation.

For litigation work, this case provides crucial guidance on the grounds for setting aside adjudication determinations. It clarifies that a "failure to consider" an essential issue, especially one that could significantly alter the financial outcome, is a strong basis for challenge. Practitioners must ensure that adjudicators address all material arguments, and if an adjudicator explicitly or implicitly disregards key points, this judgment provides a clear pathway for recourse. For transactional work, while less direct, the case underscores the importance of clearly defining the scope of disputes in any pre-adjudication communications or agreements, to minimise ambiguity for adjudicators.

Beyond the SOP Act, the decision serves as a stark reminder to all practising lawyers regarding their professional obligations in preparing court documents. The imposition of personal costs orders for the indiscriminate filing of voluminous and unedited documents, even an "Agreed Bundle of Documents," highlights the court's intolerance for inefficiency and lack of discernment. This impacts litigation strategy by demanding meticulous attention to document relevance and conciseness, and has direct implications for billing practices and client relationships, as lawyers may be personally liable for unnecessary costs incurred due to their own conduct.

Practice Pointers

For Adjudication Respondents: Always clearly and comprehensively articulate all essential issues, counterclaims, and their financial implications in your adjudication response. Ensure the adjudicator is fully aware of and addresses all these points. If the adjudicator indicates a narrower scope, seek clarification on record or object to ensure all material issues are considered.
For Adjudication Applicants: While you may focus your payment claim, be prepared for the adjudicator to consider all issues properly raised by the respondent, including counterclaims or set-offs, even if they result in a net negative amount. The adjudicator's role is to determine the "payment claim dispute," which encompasses the entire financial position between the parties as presented.
Setting Aside Adjudication Determinations: When challenging an adjudication determination for breach of natural justice, focus on demonstrating a "failure to consider" an essential issue, rather than merely an error of law or reasoning. The inference that the adjudicator failed to apply his mind to an important aspect of the dispute must be "clear and virtually inescapable."
Proving Materiality and Prejudice: To establish that a breach of natural justice is material and caused prejudice, demonstrate that the unconsidered arguments or evidence had a "real as opposed to a fanciful chance" of making a difference to the adjudicator's deliberations. Quantify the financial impact of the unconsidered issues, especially if they could negate the claimant's entitlement or result in a net payment to your client.
Meticulous Document Preparation for Appeals: Counsel must exercise extreme diligence in reviewing and editing all documents, particularly affidavits and exhibits, for relevance to the specific issues on appeal. Do not include entire lower court bundles indiscriminately, even when preparing an "Agreed Bundle of Documents." This applies to both the party primarily responsible for compilation and the party reviewing it.
Duty to Object to Irrelevant Documents: If opposing counsel prepares an excessively voluminous or irrelevant bundle, object promptly and clearly. The Court of Appeal held that shared responsibility for an "agreed" bundle means both parties' counsel can face personal costs orders for its deficiencies.
Cost Implications of Poor Document Management: Be acutely aware that indiscriminate document filing and failure to comply with court directions regarding document relevance can lead to personal costs orders under O 59 r 8(1) of the Rules of Court. Such orders can disallow costs as between solicitor and client and even require solicitors to indemnify other parties, directly impacting profitability and professional reputation.

Subsequent Treatment

This case serves as a significant authority in Singapore for the application of natural justice principles in the context of adjudication determinations under the Building and Construction Industry Security of Payment Act (SOP Act). It codifies and applies established principles from arbitration law, particularly the distinction between an adjudicator's "failure to consider" an essential issue (a breach of natural justice) and an "error of law" (not a ground for setting aside). This framework has been consistently applied in subsequent High Court and Court of Appeal decisions when assessing challenges to adjudication determinations on grounds of natural justice.

Furthermore, the Court's robust stance on professional conduct, particularly regarding the preparation of court documents and the imposition of personal costs orders on counsel, reinforces a growing trend in Singapore jurisprudence. This aspect of the judgment builds upon and is frequently cited alongside other cases like Prometheus Marine Pte Ltd v King, Ann Rita and another appeal [2018] 1 SLR 1 and Tommy Wong Poh Choy @ Wong Pau Chou and others v Devagi d/o Narayanan @ Devaki Nair and another Civil Appeal No 75 of 2017. It underscores the judiciary's commitment to ensuring efficient and competent conduct of litigation, and its willingness to hold legal professionals personally accountable for unreasonable or improper actions that lead to wasted costs or inconvenience to the court.

Legislation Referenced

Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)
- Section 13(3)(c)
- Section 16(2)(a)
- Section 16(3)(c)
- Section 27(1)
- Section 27(2)
Building and Construction Industry Security of Payment Regulations (Cap 30B, Rg 1, 2006 Rev Ed)
- Regulation 7(2)(d)
Rules of Court (Cap 322, R 5, 2014 Rev Ed)
- Order 59 rule 8(1)

Cases Cited

AKN and another v ALC and others and other appeals [2015] 3 SLR 488: Distinguished between an arbitral tribunal's failure to consider an argument (breach of natural justice) and its decision to reject an argument (error of law); held that the inference of a failure to consider must be "clear and virtually inescapable."
AM Associates (Singapore) Pte Ltd v Laguna National Golf and Country Club Ltd [2009] SGHC 260: Discussed the two aspects of natural justice principles, namely the fair hearing rule and the no bias rule, in the context of adjudication.
AQU v AQV [2015] SGHC 26: Applied principles from Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd and TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd regarding an arbitral tribunal's duty to deal with essential issues.
ASG v ASH [2016] 5 SLR 54: Applied the "clear and virtually inescapable" inference test from AKN and another v ALC and others and other appeals.
Bintai Kindenko Pte Ltd v Samsung C&T Corp [2017] SGHC 321: The High Court decision that allowed Samsung's application to set aside the adjudication determination, which was the subject of the present appeal.
Citiwall Safety Glass Pte Ltd v Mansource Interior Pte Ltd [2015] 1 SLR 797: Affirmed that the court has the power to set aside an adjudication determination if an adjudicator has acted in breach of natural justice.
CMC Ravenna Singapore Branch v CGW Construction & Engineering (S) Pte Ltd [2018] 3 SLR 503: Discussed the two aspects of natural justice principles, namely the fair hearing rule and the no bias rule, in the context of adjudication.
Fisher, Stephen J v Sunho Construction Pte Ltd [2018] SGHC 76: Applied the "clear and virtually inescapable" inference test from AKN and another v ALC and others and other appeals.
Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd [2010] SGHC 80: Set aside an arbitral award on the ground of a breach of natural justice because the arbitrator failed to consider the grounds of a counterclaim due to a mistaken belief of abandonment.
Gas & Fuel Corporation of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385: Cited for the proposition that consideration of the pleaded issues is an essential feature of the rule of natural justice encapsulated in audi alteram partem.
Ho Kon Kim v Lim Gek Kim Betsy and others and another appeal [2001] 3 SLR(R) 220: Cited for the three-step test for imposing personal liability for costs on a solicitor.
L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appeal [2013] 1 SLR 125: Clarified the test for whether a breach of natural justice is sufficiently material, focusing on whether the unconsidered arguments had a "real as opposed to a fanciful chance of making a difference."
Metropole Pte Ltd v Designshop Pte Ltd [2017] 4 SLR 277: Cited for the requirement for an adjudicator to receive and consider the submissions of both parties.
Prometheus Marine Pte Ltd v King, Ann Rita and another appeal [2018] 1 SLR 1: An example where a personal costs order was made against a solicitor for advancing a wholly disingenuous case.
Ridehalgh v Horsefield [1994] Ch 205: Laid down the three-step test for imposing personal liability for costs on a legal representative.
SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2010] 1 SLR 733: Affirmed the court's power to set aside an adjudication determination for breach of natural justice and discussed the adjudicator's duty to have regard to submissions.
Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86: Cited for the proposition that consideration of the pleaded issues is an essential feature of the rule of natural justice encapsulated in audi alteram partem.
Tang Liang Hong v Lee Kuan Yew and another and other appeals [1997] 3 SLR(R) 576: Cited for the three-step test for imposing personal liability for costs on a solicitor.
TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972: Clarified that an arbitral tribunal need only deal with essential issues and arguments, and may resolve an issue implicitly if it flows from a logically anterior issue.
Tommy Wong Poh Choy @ Wong Pau Chou and others v Devagi d/o Narayanan @ Devaki Nair and another Civil Appeal No 75 of 2017 (28 February 2018): An example where a personal costs order was made against solicitors for thoughtless and undiscerning preparation of documents.

Source Documents

Written by Sushant Shukla

Topics

Singapore SLW Case Law Building and Construction Law Civil Procedure