On 19 May 2020, the Singapore High Court in CFA v CFB [2020] SGHC 101 granted an application by a respondent to an adjudication application, to set aside an adjudication determination on the ground of fraud.

Background

On 3 August 2018, the respondent, CFB, had subcontracted the claimant, CFA, to procure and install facade panels for a construction project. The contract called for the supply and installation of 864 window panels.

On 25 September 2019, CFA served a payment claim on CFB claiming payment for all 864 window panels on the ground that it had completed all the supply works although some of the window panels were not installed but allegedly stored at CFA’s warehouses.

Subsequently on 10 October 2019, CFA lodged an adjudication application, which was followed by two adjudication conferences on 25 October and 6 November, 2019.

In an adjudication determination recorded on 15 November 2019, the adjudicator held that although there were 489 missing window panels, in the sense that they were undelivered and not installed at the time of the adjudication determination, the missing window panels were nonetheless payable.

It later transpired after the adjudication determination, however, that approximately 169 window panels were not in CFA’s warehouses but were actually withheld in China by CFA’s supplier due to a dispute. This meant it was not true that the missing window panels were in CFA’s warehouses at the time of lodgment of the adjudication application, contrary to what CFA had claimed. In fact, just seven days after the adjudication determination was recorded on 15 November 2019, CFA’s supplier contacted CFB directly on 22 November 2019 offering to sell the remaining window panels in its possession.

The issue before the High Court was whether CFA’s claim in the adjudication application amounted to fraud and if so, whether the adjudication determination should be set aside.

The High Court’s Decision

The High Court held that fraud was a ground to set aside an adjudication determination where new facts were discovered after the adjudication determination was recorded or where it was reasonably clear that fresh evidence would have resulted in the opposite verdict.

Allowing CFB’s application and setting aside the adjudication determination, the High Court found that CFA’s conduct in the adjudication application amounted to fraud:

• 169 window panels not in Singapore
  • At the time the adjudication determination was recorded, 169 window panels remained in possession of CFA’s Chinese supplier and were yet to be delivered to Singapore. Despite this, CFA’s payment claim was for the entire supply of the entire contract quantity of 864 window panels. This meant the scope of the payment claim included a claim for the missing 169 window panels which CFA was not in any position to deliver, at any point during the adjudication proceedings.
• Adjudicator would have decided differently if facts known
  • The High Court held that the adjudicator would have arrived at an opposite verdict had the facts relating to the missing window panels been made known by CFA to the adjudicator. The High Court distinguished between a situation where contractors may make a claim for payment for fabrication of materials that had not been delivered or affixed to the property as yet, and a situation where the delivery was not and could not be secured, as was the present case.
  • The High Court held that the adjudication mechanism cannot be abused by contractors who are not able to fulfil the contractual obligations for which they are seeking payment. This amounted to fraud and cannot be allowed to stand.

Our Comments

By its decision in CFA v CFBM [2020] SGHC 101, the High Court has made it clear that it will not allow the adjudication process and the court processes to be used to facilitate fraud, because fraud unravels all. In making this decision, the High Court also considered the recent 2018 amendments to the Building and Construction Industry Security of Payment Act, in particular the new s 27(6)(h) which expressly stipulated that an adjudication determination induced or affected by fraud or corruption is liable to be set aside. This was the first case since the 2018 amendments where the Courts have relied upon and applied the new s 27(6)(h) in proceedings to set aside an adjudication determination.