Construction

COVID-19 (Temporary Measures Act) 2020

8 April 2020

On 7 April 2020, Parliament passed the wide-ranging COVID-19 (Temporary Measures) Act 2020 (the “Act”) to provide temporary, targeted relief to alleviate the immense pressures caused to individuals, firms and businesses as a result of the COVID-19 disease.

While the reliefs provided are wide ranging and cover several both persons and industries, this article focuses on how the Act affects the construction industry, and covers the following: 

 

(click on any section to be taken directly to that section)

1. Application to the Construction Industry & Commencement of Temporary Reliefs

2. Period of Temporary Relief

3. Types of Temporary Reliefs Provided

4. No Temporary Relief from Adjudication Proceedings

5. Qualifying for Temporary Reliefs

6. Effects of Temporary Reliefs

7. Additional Reliefs for the Construction Industry

8. Consequences of Contravening a Valid Temporary Relief Notification

9. Contesting the Temporary Relief Notification

 

Application to the Construction Industry & Commencement of Temporary Reliefs

The Temporary Reliefs set out in Part 2 of the Act will apply to construction and supply contracts in the construction industry, so long as the contracts are entered into before 25 March 2020.

For brevity, all construction and supply contracts will be referred to as “construction contracts” in this article.

Starting from 20 April 2020, any party seeking temporary relief under the Act can do so,  as long as that party complies with the statutory and regulatory requirements.

The applicable regulations are set out in the COVID-19 (Temporary Measures) (Temporary Relief for Inability to Perform Contracts) Regulations 2020 (“Regulations”).

 

Period of Temporary Relief

The period of temporary relief for the construction industry (the “Temporary Relief Period”) is presently set to last for 6 months, starting from 20 April 2020.

 

The Minister for Law may extend or reduce the Temporary Relief Period, although the maximum Temporary Relief Period will be capped at one year from 20 April 2020.

Types of Temporary Reliefs Provided 

Starting from 1 February 2020, where a party (Party A) is unable to perform a contractual obligation for another party (Party B) due to a COVID-19 Event, Party A can obtain the following temporary reliefs against Part B (amongst others):

  • Commencing or continuing court/arbitration proceedings or against Party A (or Party A’s guarantor/surety);

  • Enforcing a Court judgment, arbitral award (under the Arbitration Act), or an adjudication determination (under the SOP Act) against Party A (or Party A’s guarantor/surety).

  • Enforcing any security over immovable property, or movable property used for the purpose of a trade, business or profession;

  • Applying for schemes of arrangement / judicial management / winding up / bankruptcy in relation to Party A (or Party A’s guarantor/surety);

  • Appointing a receiver or manager over any property or undertaking of Party A (or Party A’s guarantor/surety);

  • Commencing or levying of execution, distress or other legal proceedings against the property of Party A (or Party A’s guarantor/surety), except with leave of Court;

 

(hereinafter referred to as “Temporary Reliefs”).

 

As an example, such contractual obligations that have been materially affected by the COVID-19 Event could include construction companies which:

Additionally, any Temporary Relief will not affect court/arbitration proceedings unrelated to the COVID-19 Event.

  • For example, if there are court proceedings that comprise of both a COVID-19 Event and non COVID-19 Event, the non COVID-19 Event can continue.

Similarly, enforcement of any security that is not affected by a COVID-19 Event can continue.

 

A COVID-19 Event is defined as:

1. the COVID-19 epidemic or pandemic; or

2. the operation of or compliance with laws, orders or directions (in Singapore or elsewhere) that have been made in relation to COVID-19.

Additionally, the Temporary Reliefs will not affect any other action that the parties can take in relation to the COVID-19 Event, including actions under the Frustrated Contracts Act (Cap. 115) or (if applicable) a force majeure clause in the contract

 

No Temporary Relief from Adjudication Proceedings

Notably, adjudications under the SOP Act are not included under the Act and can continue.

 

This is notwithstanding the practical difficulties arising from the extended circuit breaker from 7 April 2020 to 1 June 2020.

 

However, any enforcement of the adjudication determination may be constrained as they are covered under this Act.

 

Qualifying for Temporary Reliefs

In order to qualify for the Temporary Reliefs set out in above, Party A must:

 

1. Ensure that Party A’s inability to perform a contractual obligation is one that starts from 1 February 2020 and is materially due to a COVID-19 Event; and

 

2. Serve a notification for temporary relief in accordance with s 9(1) and s 19 of the Act (“Temporary Relief Notification”) on (a) the other parties to the contract, (b) any guarantor or surety for Party A’s obligation in the contract; and (c) such other person prescribed under the Act.

 

Once Party B receives Party A’s Temporary Relief Notification, Party B will not be able to take any action set out in paragraph 10 (notwithstanding Party B’s contractual or legal right to do so). The limitation on Party B will last until:

1. The expiry of the Temporary Relief Period;

2. Party A withdraws the Temporary Relief Notification; or 

3. An assessor determines that Party A’s application for Temporary Relief was not one to which the Act applied.

 

Effects of Temporary Reliefs 

A. Extension of Statutory Limitation Period

Upon Party A serving the Temporary Relief Notification, any statutory limitation period will be extended from the Temporary Relief Notification’s date of service until the earlier of: 

1. The expiry of the Temporary Relief Period;

 

2. Party A’s withdrawal of the Temporary Relief Notification; or

 

3. An assessor’s determination that Party A’s application for Temporary Relief is not one to which the Act applies.

B. Stay of Legal Proceedings

Additionally, any pending court proceedings or arbitration (under the Arbitration Act) will be stayed once Party A lodges the Temporary Relief Notification with the Court or arbitral tribunal. These proceedings will be stayed until the earlier of:

1. The expiry of the Temporary Relief Period;

2. Party A’s withdrawal of the Temporary Relief Notification; or

3. An assessor’s determination that Party A’s application for Temporary Relief is not one to which the Act applies.

Having said that, it is presently unclear as to how quickly the assessment process will take as the relevant regulations have not been issued as of the date of this article.

 

Additional Reliefs for the Construction Industry 

In addition to the Temporary Reliefs set out above, the construction industry has been provided with three additional reliefs, which are set out below.

A. Limitation in Calling Performance Bonds

For one, where Party A is unable to perform its contractual obligations due to a COVID-19 Event, Party B cannot call on the performance bond (even if contractually allowed to) at any time:

1. Earlier than 7 days before the performance bond’s expiry date; or

2. Where the performance bond is extended under this Act, earlier than 7 days before the performance bond’s extended expiry date.

3. Party B’s limitation in calling on the performance bond will end and Party A will not be entitled to extend the performance bond under the Act if:[29]

3.1.  Party A withdraws the Temporary Relief Notification; or

3.2. An assessor determines that Party A’s application for Temporary Relief is not one to which the Act applies.

B. Extension of Performance Bonds

Notwithstanding its contractual terms, Party A can also extend the performance bond to 7 days after the Temporary Relief Period or alternatively, a date as agreed between Party A, Party B, and the performance bond issuer.

 

In order to extend the performance bond, Party A must:

 

1. Apply to the performance bond’s issuer to extend the said performance bond 7 days before its expiry; and

2. Serve a notice of the application on Party B at the same time.

C. Defences to Liquidated Damages or Other Damages & Other Defences

Party A will not be liable to pay liquidated damages or other damages under the contract for the duration that Party A is unable to perform its obligations (starting from 1 February 2020) due to the COVID-19 Event. This will apply until the end of the Temporary Relief Period.

Additionally, Party A will have a defence to a claim for breach of contract if its inability to perform its obligations (starting from 1 February 2020 until the end of the Temporary Relief Period) is to a material extent caused by the COVID-19 Event.

However, Party A’s defence to any breach of contract (as set out in paragraph 28) will not any affect any party’s contractual right/obligation before 1 February 2020 and after the Temporary Relief Period.

Party A’s defence to any breach of contract (as set out in paragraph 28) will also not affect any court judgment, arbitral award, adjudication determination or settlement made before Party A serves the Temporary Relief Notification.

Consequences of Contravening a Valid Temporary Relief Notification

Any party that contravenes any Temporary Reliefs set out in paragraph 10  after receiving a valid Temporary Relief Notification shall be liable on conviction to a fine not exceeding $1,000, unless that party had a reasonable excuse in doing so. 

Additionally, any proceedings in breach of the Temporary Reliefs will be dismissed upon lodgment of the Temporary Relief Notification with the court/arbitration tribunal.

 

Other actions taken after receiving a valid Temporary Relief Notification will also be void, including:

1.  Appointment of a receiver or manager over any property or undertaking of a person;

2. A call on a performance bond or equivalent;

3. Forfeiture of a deposit or part of a deposit; and

4. Enforcement of any security.

 

Contesting the Temporary Relief Notification

Party B to the construction contract (or any party to the contract dissatisfied with Party A’s Temporary Relief Notification) can apply for the appointment of an Assessor to determine whether Party A is entitled to the Temporary Reliefs.

A. Application for an Assessor’s Determination 

An application for an assessor’s determination must:

1. Comply with the form and manner specified by the Act’s regulations;

2. Be accompanied by the prescribed fee (although applications are presently free); and

3. Be served on (a) the other parties to the contract; (b) any guarantor or surety for Party A’s obligations in the contract; and (c) other prescribed persons.

 

In making a determination, the Assessor can consider various factors:

 

1. Party A’s ability and financial capacity to perform the obligation that is subject of the application, and other prescribed factors; and

 

2. The Assessor must seek to achieve an outcome that is just and equitable in the circumstances of the case.

 

3. No party may be represented by lawyers in the proceedings with the Assessor, and each party must bear its own costs.

B.    Effect of an Assessor’s Determination

Importantly, the Assessor’s determination is non-appealable and binding on all the parties to the application and all parties claiming under or through them.

If the Assessor finds that Party A’s Temporary Relief Notification is valid, the Assessor may make further determinations in order to achieve a just and equitable outcome, including:

1. Requiring a party to the contract to do anything or pay any sum of money to discharge any contractual obligation; and

 

2. Other further determinations which are not expressly stated in the Act but which achieves a just and equitable outcome.

 

(hereinafter referred to as a “Further Determination”).

 

The Assessor’s Further Determination may (with the court’s leave) be enforced in the same manner as a judgment or court order.

 

Any party who fails to comply with a Further Determination without reasonable excuse for such non-compliance shall be liable on conviction to a fine not exceeding S$1,000.

Conclusion

Parliament has moved quickly to react to the COVID-19 pandemic that has caused widespread delay to construction projects, due to various movement control measures across the world which has affected manpower availability, often through no fault of the various construction parties. Similarly, supplies of construction material have also been materially affected due to the worldwide supply disruption.

In light of the severity of these issues, the Act is timely in providing the far-reaching reliefs to the construction industry and targets the drastic cash-flow issues that the construction industry is likely to face in this COVID-19 pandemic.

 
 
 
 
 
 
 
 
 

Authors

tcy.jpg
jt.jpg

Justin Tan

Senior Associate

justintan@eversheds-harryelias.com

+65 6361 9877

ak_edited.jpg

Andrea Koh

Senior Associate

andreakoh@eversheds-harryelias.com

+65 6361 9336

 
 

Subscribe for Updates

Note

By using or accessing this Website you agree to be bound by the following terms and conditions, as they may be amended from time to time.

This Website and all web pages thereunder, including the information, content, graphics and other materials displayed therein and any functionality or facility provided therein (collectively "Content") are provided on an "as is" and "as available" basis for general information purposes and not as legal or other professional advice. No warranties of any kind are given in respect of the Website or the Content.

No part of the Website or Content may be reproduced, distributed, mirrored or framed, save that Content may be downloaded, printed or used for personal and non-commercial purposes.

Content may be modified, suspended or removed without prior notice.

These terms and conditions shall be governed by and construed in accordance with Singapore law.