The applicability of the statutory definition of "day" in the SOP Act in the interpretation of construction contracts

Singapore

The word “day” is defined in the Building and Construction Industry Security of Payment Act (Cap 30B) (“SOP Act”) as “any day other than a public holiday within the meaning of the Holidays Act (Cap 126)”.

The statutory definition clearly excludes public holidays in the calculation of timelines under the SOP Act. This is contrasted with the plain and ordinary meaning of “day” in most construction contracts, in which public holidays are included in the calculation. There have been conflicting authorities on the applicability of this statutory definition in contract interpretation. A failure to abide by the correct time periods under the SOP Act can lead to potentially onerous consequences.

This article examines this issue in light of the recent Singapore High Court decision of Trustee of the estate of Tay Choon Huat, deceased v Soon Kiat Construction & Maintenance Pte Ltd (2020) SGHC 212 (“Tay Choon Huat”).

Background

The estate of the employer (“Employer”) successfully applied to the High Court to set aside an adjudication determination made in favour of Soon Kiat Construction & Maintenance Pte Ltd (the “Contractor”), on the basis that the Contractor had filed its adjudication application out of time.

The construction contract incorporated the Articles and Conditions of Building Contract of the Singapore Institute of Architects (Lump Sum 9th Ed) (“SIA Conditions”).

Article 9 of the SIA Conditions defined “payment claim” and “payment response” as having the same meaning and effect as those terms used in the SOP Act and regulations thereunder. However, there was no express adoption of the statutory definition of “day” in the contract (i.e. the SIA Conditions only adopted some but not all the definitions in the SOP Act).

Section 11(1)(a) of the SOP Act states that a respondent to a payment claim shall provide a payment response “by the date as specified or determined in accordance with the terms of the construction contract, or within 21 days after the payment claim is served under section 10, whichever is the earlier.”

Clause 31(15)(a) of the SIA Conditions concerning the service of the payment response states:

Within 21 days after the interim payment claim is served on the Employer by the Contractor, the Employer shall respond to the interim payment claim by providing… a payment response to the Contractor…”

The Court at [20] queried whether the 21-day period in Clause 31(15)(a) of the SIA Conditions was the same as the 21-day period in Section 11(1)(a) of the SOP Act. If the statutory definition of “day” was adopted in Clause 31(15)(a), then the two periods would be the same. But if “day” in the SIA Conditions included public holidays, then the time period under the SIA Conditions would be shorter than that under Section 11(1)(a) of the SOP Act.

Crucially, there were 2 public holidays during the period the payment response was required to be provided under Clause 31(15)(a).

The inclusion or exclusion of public holidays in the timeline for providing a payment response in turn affected the time periods for both the dispute settlement period and the Contractor’s entitlement to lodge an adjudication application.

Holding

It was held at [38 – 43] that the word “day” in clause 31(15)(a) of the SIA Conditions includes public holidays (i.e. the statutory definition was not adopted):

  • Section 11(1)(a) of the SOP Act expressly allows parties to contractually agree on a more stringent deadline for the provision of a payment response.
  • The drafters of the SIA Conditions had incorporated the statutory definitions of “payment claim” and “payment response” but chose not to incorporate the statutory definition of “day”.
  • Moreover, the parties agreed on terms where the respective definitions of “day” included public holidays, namely (i) the contract period and (ii) liquidated damages. A consistent treatment of these terms would avoid ambiguity and be preferable.

As public holidays were included in the calculation of the time periods, it was found that the adjudication application was filed a day late. Accordingly, the adjudication determination was set aside.

Existing Authorities

In coming to this decision, the Court examined the existing authorities, including 2 adjudication determinations in which the underlying contracts also incorporated the SIA Conditions.

In AFR Pte Ltd v AFS Pte Ltd [2011] SCAdjR 70 at [24 – 28] (“AFR”), the learned adjudicator had interpreted “day” in Clause 31(15)(a) of the SIA Conditions as including public holidays. The learned adjudicator reasoned that the SOP Act allows for the time period for payment claim and certification to be defined on the terms of the contract. There is nothing in the SOP Act that prevents a party from stipulating a shorter timeline than 21 days for making a payment response.

It was similarly found in ATY Pte Ltd v ATZ Pte Ltd [2016] SCAdjR 39 at [57 – 65] (“ATY”) that the word “day” should be given its plain and ordinary meaning (i.e. days include public holidays). The learned adjudicator reasoned, inter alia:

  • If the word “day” were to be interpreted as having the same meaning as the statutory definition, express words have to be used to make that intention clear.
  • The drafters of the SIA Conditions could not have intended the term “day” in one clause to have a different meaning when used in another clause within the same contract. This can only lead to confusion and ambiguity if a “pick and choose” approach was adopted (the “Consistency Point”).

The Court was persuaded by the Consistency Point, and referred to Clause 31(2)(b) of the SIA Conditions:

If the time for the submission of any payment claim under the preceding paragraph falls due on a … Public Holiday the Contractor shall submit the payment claim either on the day before or next following that date which itself is not a… Public Holiday.

The Court reasoned that if the statutory definition of “day” was adopted, then the time for submission of any payment claim under Clause 31(2)(b) could never fall due “on a day which is a public holiday” since such a day would, by definition, have been excluded, and the reference to public holidays in Clause 31(2)(b) would thus be meaningless.

The Court also distinguished 2 High Court decisions relied on by the Contractor, which did not incorporate the SIA Conditions.

In Fujitec Singapore Corp Ltd v GS Engineering & Construction Corp [2016] 1 SLR 1037 at [10] (“Fujitec”), it was held that the term “calendar day” in the contract included public holidays and did not mean the same as “day”. However, the Court observed that there was no suggestion that the contract in Fujitec expressly adopted only certain definitions in the SOP Act (unlike in Tay Choon Huat).

In UES Holdings Pte Ltd v KH Foges Pte Ltd [2018] 3 SLR 648 (“KH Foges”), it was held that parties had contracted with Section 11(1) of the SOP Act in mind:

99 … the legal and regulatory backdrop of a contract is part of its context. In particular, a statutory definition may form part of the context of a contract such that a term used in the contract should be interpreted in accordance with the statutory definition…

100 … When parties contract with the provisions of a statute in mind, and when the terms of those statutory provisions are defined by that statute, then generally, if the contract uses the same terms, the terms should be interpreted in accordance with the statutory definitions, unless the context yields a different interpretation.

101 In this case, it is beyond doubt that parties contracted with s 11(1) of the Act, which provides for the timeline for payment responses, in mind. For by cl 19.1, the parties expressly acknowledged that s 11(1), which is one of the “relevant provisions” of the Act which cl 19.1 refers to, would apply to the Subcontract… In light of the foregoing, in my judgment, the word “days” in Para 2h should be interpreted in accordance with the Statutory Definition unless the context indicates otherwise.

In distinguishing KH Foges, the Court noted at [36] that the contract in that case contained a clause stating that “the relevant provisions of the SOPA shall apply.” As the statutory definition was fundamental to the provisions of the SOP Act relevant to payment claims and payment responses, the parties in KH Foges had expressly acknowledged that those provisions would apply.

In contrast, Article 9 of the SIA Conditions was more limited in only providing for “payment claim” and “payment response” to “have the same meaning and effect” as those words in the SOP Act. The statutory definition therefore did not apply to the interpretation of the contract in Tay Choon Huat.

Commentary

The decision of Tay Choon Huat is a welcome endorsement of the principles in AFR and ATY. Insofar as contracts incorporating the SIA Conditions or its equivalent are concerned, it is now reasonably clear that the statutory definition will be inapplicable.

Tay Choon Huat is also a validation of the holding in Fujitec that there is nothing in the SOP Act compelling the use of the statutory definition in any construction contract, although parties are free to adopt this definition by express provision.

Prior to Tay Choon Huat, the holding in Fujitec was arguably difficult to reconcile with the decision in KH Foges. In relying on KH Foges, it is possible to assert that mere references to the SOP Act and to “payment claims” or “payment responses” in a contract should mean that these terms should be interpreted in accordance with the statutory definition. However, this is arguably tantamount to compelling the use of the statutory definition in a construction contract and is inconsistent with Fujitec.

The holding in KH Foges will likely be circumscribed by Tay Choon Huat. The statutory definition of “day” is now unlikely to apply unless one can find an express acknowledgement by parties that the “relevant provisions of the SOP Act shall apply”, as was the case in KH Foges.

That said, it remains possible that the statutory definition still applies in contracts that do not incorporate the SIA Conditions or its equivalent. As succinctly stated at [37] of Tay Choon Huat, “ultimately, the particular contract in each case stands to be construed.”

Amongst other things, parties should ensure consistency in the use of the word “day” amongst the various terms and should selectively adopt only certain definitions of the SOP Act in their contracts.

The clearest solution, of course, is for parties to expressly define “day” in their contracts as including public holidays.

Conclusion

As the consequences of filing a payment response or adjudication application out of time are severe, it is not surprising for parties to argue that the statutory definition applies, if doing so means that they gain an additional day due to the exclusion of public holidays in the calculation of timelines. However, such arguments come at the expense of introducing uncertainty in the interpretation of terms of the contract.

Parties should seek the necessary advice to ensure that they do not run afoul of the strict time periods imposed by the SOP Act.