Justice Philip Jeyaretnam: Speech delivered at the International Statutory Adjudication Forum Joint Conference

SCL(S)-ISAF Joint Conference 2023

21 September 2023

KEYNOTE ADDRESS ON STATUTORY ADJUDICATION AND CONTRACTUAL DISPUTE BOARDS IN THE CONTEXT OF COLLABORATIVE CONTRACTING

Anchoring quick “good enough” methods for dispute resolution within fair and efficient commercial justice systems

The Honourable Justice Philip Jeyaretnam^*
Judge
Supreme Court of Singapore
President, Singapore International Commercial Court

I.       Introduction

1. I congratulate the organisers of this conference which offers an opportunity to discuss and brainstorm practical innovations in relation to dispute resolution procedures for the benefit of the construction industry. My address concerns how the construction industry may develop and expand appropriate methods to achieve quick “good enough” outcomes with the support of commercial courts. My argument is that fast “good enough” methods of dispute resolution are indeed practical, useful and important for the construction industry but must be anchored by a fair and efficient court system that offers litigants the possibility of ultimate justice.
   
   
2. With this practical aspect in mind, I begin with the challenge of complexification highlighted by Chief Justice Sundaresh Menon generally in his 2021 Goff Lecture,_⁽²⁾ and again in the particular context of construction projects in his speech to the International Academy of Construction Lawyers earlier this year._⁽³⁾ The importance of responding to this challenge by adapting procedures to the context and needs of construction disputes has informed the design of the Singapore International Commercial Court’s “Technology, Infrastructure and Construction List” (“SICC” and “TIC List”)._⁽⁴⁾ Our rules, protocols, and procedures have addressed the complexity of construction disputes as well as the context of multiparty involvement. Flexibility and adaptability are key features. For example, parties to proceedings in the SICC have the choice of pleadings or memorial tracks, schedules and witness conferencing are readily employed, and facilitative protocols are also available, such as the Litigation-Mediation-Litigation (“Lit-Med-Lit”) Framework established in collaboration with the Singapore International Mediation Centre (“SIMC”), as well as our Simplified Adjudication Process Protocol._⁽⁵⁾ 
   
   
3. I will attempt the following within the short compass of this speech:
   1. to look briefly at statutory and contractual adjudication;
   2. to outline quickly the key elements of collaborative contracting;
   3. to offer some thoughts on appropriate dispute resolution; and
   4. finally, to make a suggestion for Society of Construction Law (Singapore) (“SCL(S)”) and International Statutory Adjudication Forum (“ISAF”) to consider and, if thought useful for the industry, to bring forward, namely the crafting of a model clause that links the contractual adjudication process to a chosen court.
4. Before I do so, let me recap the underlying trend of increased complexity to which professionals engaged in the resolution of disputes must respond. First, there is increasing technical complexity. While technology gives us new capabilities and makes our lives easier and more convenient as consumers, it has also helped drive the increasing specialisation of skills and compartmentalisation of knowledge. To be an expert today means to know more and more about less and less. This increased specialisation is true of construction as well. The number of trades, sub-trades, disciplines, and sub-disciplines required to successfully complete a large project has mushroomed over the past few decades. This is because our built environment involves more and more interconnected networks which themselves have become more complex – district cooling systems, building access systems, wind, and temperature sensors – the list goes on and on. Buildings have become vastly more complex over the past few decades. They integrate numerous mechanical and electrical services and must take account of new codes, including environmental standards. New buildings have been required to incorporate a living element in the form of green spaces and plants._⁽⁶⁾
   
   
5. Secondly, with the increase in the number of interconnected elements in our built environment, organisational complexity has continued to increase. Construction is a complex exercise, which necessarily involves numerous skills and trades. These must all be coordinated in time and space. Traditionally, this coordination has been achieved through breaking tasks down into linear paths for each trade, with bilateral contracts between a single main contractor or project manager and each of the subcontractors responsible for a particular series of tasks. This has begun to change with the rise of collaborative contracting.
   
   
6. Collaborative contracting has been a response to the perceived misalignment of incentives within traditionally organised construction projects. Among the hallmarks of collaborative contracting is a multilateral contract, with elements of partnership, or at least references to the use of best endeavours and good faith, and the adoption of mechanisms for profit and loss-sharing of some description. Even without bringing into consideration collaborative multilateral contracting, the mapping of bilateral contracts onto the performance of a project does not eliminate the interplay of the different skills and trades in the real world. Almost every delay claim, for example, will involve assertions about the performance of other players on the building site beyond the contracting parties. I will say more about this when I turn to collaborative contracting.
   
   
7. The third complexity is the explosion of recorded communications: first emails and now direct messaging platforms. In the past, the universe of documents would be limited to daily records of specific activities, minutes of weekly meetings, and monthly progress reports. All these records would comprise contemporaneous summaries, ie, note-taking that would facilitate later comprehension. Today, there is a vast and ever-growing thicket of electronic communications that largely remains in a raw uncondensed state right up until the time a dispute erupts.
   
   
8. The combination of these complexities leads to an information overload on decision-makers. This includes judges and arbitrators faced with determining legal rights and wrongs when disputes arise from a project. Statutory and contractual adjudication, and indeed collaborative contracting, are all responses to this challenge of complexification.
   
   
   II.     Statutory and contractual adjudication 
   
   
9. The word “adjudication” has both a broad meaning and a narrow meaning. Its broad meaning refers to any formal judgment or legal decision on a disputed matter. Its narrow meaning refers to statutory adjudication under national statutes such as Singapore’s Building and Construction Industry Security of Payment Act 2004 (2020 Rev Ed).
   
   
10. Statutory adjudication is at its core a fast and inexpensive method of enforcing payments for work done or related goods and/or services supplied in the construction industry on a provisional basis, with the full merits of the dispute deferred to arbitration or court process. Contractors use statutory adjudication to obtain a quick, rough and ready answer to the question of how much they are due, an answer that is temporary and subject to further review in arbitration or court, but which facilitates payment such that the contractor, rather than the owner, has use of the money pending final determination of the merits. Its impetus was concern about blockage of cash flow for contractors and subcontractors when owners or contractors higher up within the chain withheld or delayed payments for work done. Strikingly, however, the temporary answer given by statutory adjudication is often accepted by parties as a “good enough” outcome for everyone, without subsequently going through the wringer of a full proceeding. This fact has demonstrated that a quick rough and ready answer given within a few months may in fact be more useful to businesses in the construction industry than an in-depth and forensically meticulous answer achieved only years later.
    
    
11. In this connection, I commend ISAF on the work it has done in relation to a draft Model Law on Statutory Adjudication (“Model Law”).
    
    
12. This preference in some circumstances for a quick and inexpensive good-enough answer drives the quest for contractual mechanisms for contracts or claims that are not within the scope of statutory adjudication. Indeed, such contractual mechanisms pre-date statutory adjudication. One example is that of the dispute board, which first gained popularity with the growth of international construction projects. In such projects, participants were typically from different countries. Projects were large in scale and required years to complete. Demand grew for ways to address issues as they arose quickly so as to forestall their escalation into project-threatening fights. A successful example is that of the dispute boards that are such an important feature of FIDIC contracts. In our context, one may refer to the Singapore Infrastructure Dispute Management Protocol (“SIDP”) which is incorporated into Optional Module E to the Public Sector Standard Conditions of Contract. Optional Module E is an example of collaborative contracting, to which I now turn.
    
    
    III.    Collaborative contracting
    
    
13. As the name suggests, collaborative contracting is about putting in place a contractual framework that fosters teamwork, open communication, and mutual trust among owner, designer, contractors, and other stakeholders to achieve project goals. The aim is to create a working environment that prioritises problem-solving over fault-finding.
    
    
14. Today, the tasks of design, planning, coordination, and instruction are all aided by computer programs. These programs effectively extend the capacity and improve the efficiency of the human mind. Without them, the construction of complex buildings would be nigh on impossible and would certainly take far longer than they do today. The number of trades and disciplines that have to be coordinated is also far greater than in the twelfth century, with numerous internal networks required for any building to meet the electrical, ventilation, sanitation, and communication needs of its occupants and users.
    
    
15. Each of the steps involved in a modern building project, such as design, planning, seeking approvals, procurement, construction, commissioning, handover, and maintenance, subdivides into a myriad of tasks that have to be carried out by different people in coordination with each other. Health and safety obligations must be met. Sustainability requirements must be fulfilled. It is a wonder and a marvel that we build so much and so quickly.
    
    
16. Traditional methods of contracting seek to define and demarcate in advance the responsibilities of each participant, with a concomitant allocation of risk. There is little or no financial incentive to do additional or different things within one’s own sphere of responsibility that serve only to aid or assist the work of another in their separate sphere of responsibility. In addition to lateral divisions of responsibility, there are temporal ones too, with the design phase separated from the construction phase, and little or no opportunity for the contractor to influence the buildability of the project during the design phase. If a concern about the design arises during the construction phase, the contractor is typically not rewarded if he finds a practical solution for the owner.
    
    
17. It is this misalignment of individual project participants’ incentives versus the interests of the project as a whole that has been the primary driver in the rise of collaborative contracting.
    
    
18. Optional Module E to the Public Sector Standard Conditions of Contract was introduced by Singapore’s Building and Construction Authority (“BCA”) in 2020. This module aims to reduce cost, minimise variations, and expedite completion by encouraging teamwork and cooperation among stakeholders. Early sharing of information and open communication are intended to facilitate the early identification of risks as well as prompt solving of problems that occur during construction. Moreover, with the SIDP (to which I have already referred) processes are put in place to help avoid full-blown disputes and encourage early dispute resolution. The SIDP provides for the empanelling of a dispute board that deals with disputes on an interim basis during the course of construction.
    
    
19. Clause E2.0 of Module E obliges parties “to use their best endeavours to work together in a collaborative environment and act in a spirit of mutual trust and cooperation”. To this end, key officers, including key officers of subcontractors, must participate in “Partnering Workshops”. This express obligation akin to one of good faith is an expected feature of long-term relational contracts such as those governing substantial large-scale infrastructure projects. One may anticipate much ink being spilled in the coming years as the parameters and implications of such best endeavours and good faith obligations are worked out.
    
    
20. An example of the successful adoption of collaborative contracting in the Singapore context is the Punggol Digital District. My understanding is that the early involvement of the dispute board has been considered effective by project participants.
    
    
    IV.    Appropriate dispute resolution
    
    
21. I turn now to appropriate dispute resolution methods: how parties may choose the best way to resolve their dispute, or the best ways (plural) to resolve different parts of their dispute. Lawyers for the parties are under an ethical duty to guide their clients towards the most cost-effective and expeditious methods of dispute resolution. I would like to highlight another option that parties can adopt as an example of what might be called collaborative dispute resolution. I am referring to a having a professional “signalperson” who in the interests of the project directs parties to the appropriate tracks for resolving particular disputes that arise in the course of the project. By this I mean the appointment, at the time of contracting, of a person who does not themselves act as mediator, member of a dispute resolution board, evaluator, or arbitrator, but instead assesses disputes as they arise and channels parties to what in his or her assessment is the most appropriate mode of dispute resolution for that dispute, be it mediation, neutral evaluation, interim adjudication, arbitration, or litigation. In the context of construction projects, such a person could channel bilateral disputes to an arbitrator, while funnelling multiparty disputes to a court that readily accommodates such multiparty disputes such as the SICC. It can be difficult to establish and manage multiparty disputes in arbitration.
    
    
22. Where international construction projects are concerned, the SICC maintains the TIC List for trials of technically complex issues and questions, including construction and engineering disputes. How cases are tried once placed on the TIC List as well as the opportunities for mediation or neutral evaluation, makes it a good fit for projects involving collaborative contracting.
    
    
23. It is to the utility of mediation and neutral evaluation (especially for parts of disputes) that I now turn. Courts and other tribunals find their origin in the human desire that injustices be remedied. We speak of doing justice but what we really mean is remedying injustice: stopping one person from infringing the rights of another or compensating the victim for the infringement. Mediation in and of itself has only an indirect relationship to justice because it focuses on the interests of the parties and not merely their rights. On one hand, this makes mediation attractive, with the potential to rescue parties from the zero-sum game of a formal adjudication where one party must lose for the other to win. On the other, however, if mediation is unmoored from the legal system and the possibility of redress in court is cut off, it may favour the party with greater bargaining power and so advantage the strong over the weak. Where seeking legal remedies takes too long or is too costly, then mediated outcomes that give up some of one’s rights become more attractive, but not for the correct or proper reasons. Hence, it is necessary to anchor mediation within the broader context of a fair and efficient court system. Parties who know that the legal case can in principle be fully litigated within a reasonable time will be better placed to reach just mediated outcomes, accommodating both parties’ interests and not overriding either party’s desire for justice.
    
    
24. Given this context, mediation of disputes that have already been brought before a court, done with the encouragement and ultimately the supervision of that court, carries the benefit that parties knowing and understanding their rights may nonetheless find it in their interests to resolve their dispute without pursuing the fight to the bitter end. Commercial relationships may be preserved, and time and costs may be saved.
    
    
25. Mediating in the context of an ongoing litigation at the suggestion or direction of the court has several additional benefits. One is that because mediation is suggested or directed by the court the problem that neither party wants to be the first to suggest it (in case this is perceived as weakness) is sidestepped. A second benefit is that filing proceedings helps parties shape and define the contours of their case, so that the issues for mediation are properly established. A common difficulty with mediating in the early stages of a dispute is that parties do not have enough information, not just about their own case, but also about that of the opposing party.
    
    
26. I would make three additional observations. First, it is important to stress that mediation must be something that takes place separately from the proceedings happening in front of those mandated to adjudicate on the dispute. Successful mediation requires the mediator to be let in to the confidence of each side in turn in the absence of the other. This is antithetical to the general principles of fair hearing on which adjudicative processes are based.
    
    
27. Secondly, while in principle courts may direct unwilling parties to mediate, a course of action which is no more objectionable than enforcing a prior agreement to mediate contained in a contract, in practical terms ordering a mediation where one of the parties is adamant that it will not settle and wants to litigate its rights, is likely to be a waste of time, and thus merely delays that adamant party’s access to justice without any countervailing benefit.
    
    
28. Thirdly, while it can be said that there is a time in any dispute where parties are more likely to settle successfully, a sweet spot if you like, occurring after they know enough about their respective cases and before they have descended into an unbridgeable hostility, exactly when this sweet spot occurs is likely to differ from case to case and from party to party. This means that pre-determining whether by contract or by rules of court when mediation should occur may not be the best approach. Instead, there should be procedural flexibility of two kinds: first, in the processes of the adjudicative body, to consider with counsel the desirability of mediation at different stages; and second, in the processes of the mediating body, to carry out mediation quickly and efficiently regardless of the stage of the dispute. I am happy to report that the SICC and the SIMC’s Lit-Med-Lit Framework achieves the requisite procedural flexibility.
    
    
29. Let me then return to the point that some disputes are of such complexity that they are difficult to resolve fairly and efficiently by one mode alone. For such disputes, the possibility of mediating certain aspects of a dispute while leaving others to be fully litigated is truly beneficial. A good example would be technically complex construction disputes where there are contractual aspects, defects aspects, and delay aspects. It can be difficult to the point of impossibility (or at least inefficiently costly) for all aspects of such a dispute to be determined by the same adjudicator (here I use the word in its broad meaning) in one big, set-piece battle. In these circumstances, parts of the dispute can be hived off for other modes of dispute resolution. To take an example, one aspect of a construction dispute might be numerous defects claims, but what counts as a defect may also involve an element of contractual interpretation.
    
    
    V.      Suggestion
    
    
30. One concern with contractual adjudication is that the enforcement of a determination may be cumbersome and convoluted. Typically, decisions and determinations of a dispute board must first proceed to an arbitration award and only after that to court enforcement. How could we achieve the effect envisaged by Art 51 of the draft Model Law which provides that “[a] party who has secured a decision in its favour is entitled to have it enforced summarily upon application to the Court” in the absence of an applicable statutory regime? One cannot directly grant judgment for the money that has been contractually adjudicated because that would be a final decision and would raise an issue estoppel if and when the dispute proceeds for fuller determination on its merits. The conceptual answer is for the court to be asked to grant specific performance of the obligation to comply with the temporary determination of how much should be paid. That would be a final order but its result is simply that the paying party has performed its obligation to comply and the subsequent adjustment (if any) would then take account of that compliance in the same way that happens when the obligation is complied with voluntarily. My suggestion is that ISAF and SCL(S) explore crafting an effective model clause to this effect, perhaps specifically referring to a specific court and process. Such a clause should include an express obligation to comply with the outcome of the contractually mandated adjudication process pending a final resolution of the dispute. This would be particularly useful in international construction projects where there is no statutory adjudication regime in the country where the construction is taking place. For example, there could be express choice of the statements tracks under the SICC rules. This could potentially simplify the enforcement of contractual adjudication decisions in international construction projects. The suggestion is essentially court-agnostic: what is required is that there be express choice of a court whose powers, rules, and processes fit with the task of summary enforcement of the obligation to comply with contractual adjudication decisions. If your research reveals that there needs to be some reform or adaptation on the part of the chosen court, then any such needed reform or adaptation should then be appropriately pursued by your organisations.
    
    
    VI.    Conclusion
    
    
31. Current times are challenging indeed for the construction industry. It is not enough to build quickly and profitably. It is also necessary to do so safely and sustainably. Technology continues to advance at a quickening pace. We are on the cusp of significant deployment of artificial intelligence, at the design and construction stages and both embedded within construction machinery and within buildings being constructed. Technological advances bring many benefits but add to complexity, increasing the overload on individual human capacity. For these reasons and more, the need to adopt flexible and appropriate dispute resolution procedures is heightened and accentuated. Part of the answer is to adopt, adapt, and expand “good enough” methods, such as statutory or contractual adjudication, that offer business users relative speed and affordability. At the same time, such methods cannot be detached from and must remain underpinned by fair and efficient court systems. I again commend the efforts of both ISAF and SCL(S) on this front, and challenge them and all of you to think innovatively and robustly about reforms that will benefit the construction industry and so ultimately, society.