Singapore: Recent amendments to the COVID-19 (Temporary Measures) Act 2020

In this article, we provide an update on the amendments to the COVID-19 (Temporary Measures) Act 2020 (the “Act”) and related subsidiary legislation that came into force on 30 September 2020. In particular, this article will focus on the implications these amendments have with respect to specified contracts affected by construction delays as well as suppliers. 

The new amendments to the Act have strengthened the arsenal of legal reliefs and remedies available to businesses and individuals affected by COVID-19 and who are parties to contracts scheduled under the Act. These amendments also provide welcome clarity on the legal framework and mechanisms already in place vis-a-vis other dispute resolution proceedings, including those which have been set up by the new Part 8 of the Act.

Broadly, the amendments to the Act seek to: 

a) Institute a new mechanism for relief under Part 8 of the Act in respect of certain specified contracts which themselves have been materially affected by a delay or breach to a construction, supply or related contract due to COVID-19;

b) Reconcile the mechanism of Part 8 of the Act in respect of other dispute resolution mechanisms, including adjudication proceedings pursuant to the Building and Construction Industry Security of Payment Act (Chapter 30B) (the "SOPA"); and 

c) Expand the powers of Registrar of assessors and the Registrar of rental relief assessors 

d) Expand the powers of rental relief assessors appointed pursuant to the Act.

Targeted Relief For Certain Specified Contracts

A significant amendment to the Act consists of the introduction of a new Part 8 entitled "Contracts Affected By Delay In The Performance or Breach Of Construction Contract, supply Contract Or Related Contract" 

Part 8 of the Act must be read together with the COVID-19 (Temporary Measures) (Part 8 Relief) Regulations 2020 (the "Part 8 Regulations").

It is clear that these new provisions introduced by Part 8 of the Act (and the aforementioned subsidiary legislation) are part of Parliament's attempt to address the severe repercussions of COVID-19 on the construction industry in Singapore.  

In particular, Part 8 is applicable to (i) parties of a prescribed lease agreement or goods rental contract, (ii) which has been affected in the prescribed manner by a delay in the performance to or a breach of any construction or supply contract; and (iii) in situations where the aforementioned delay or breach is to a material extent caused by a COVID-19 event (the "Affected Contract").[1]  

The amendments provide targeted relief to individuals who have been affected by a delay or breach to a construction or supply contract in the following prescribed manner:[2]   

a) Renters of goods used for construction work who are liable for additional rental expenses;

b) Tenants of non-residential property who are unable to carry out or complete renovation or fitting out works during their rent-free period; and

c) Landlords who are unable to deliver possession or allow use of the property under a lease or licence of non-residential property

To qualify for relief, the lease agreement or goods rental contract in question must contain the following term: 

a) Lease agreement: A term providing that the lessor is to deliver possession or allow use or occupation of the non residential immovable property to the lessee by or on a date stated in the lease agreement or a term providing for a reduced rent period

b) Goods rental contract: A term providing that the lessee must return the goods to the lessor by or on a date specified in the goods rental contract or a term providing that the lessee must pay moneys to the lessor as rent for any period that the lessee has possession of the goods and the amount of the rent or the rate at which the rent is to be determined.

To be eligible for relief under Part 8, the following time-sensitive criteria must also be met:

a) The Affected Contract must have been entered into before 25 March 2020 ;[3] 

b) The Affected Contract must be in force at any time from 1 February 2020 to 31 March 2021 (the  "Prescribed Period") ;[4] 

c) The delay or breach in the construction or supply contract must have occurred during the Prescribed Period

We note that there is no prescribed timeline /  requirement to demonstrate when the Affected Contract was actually impacted by the delay or breach to the construction  contract or supply contract, as long as the delay or breach to the former occurred during the Prescribed Period.

If the above conditions are satisfied, parties to the Affected Contract may apply for relief under Part 8 for a determination as to whether Part 8 applies to their situation. This is to be done by submitting an application to the Registrar within the prescribed timeframe. Applications must be submitted by 31 May 2021.

To avoid parallel proceedings, an application for relief under Part 8 triggers a temporary moratorium in respect of the Affected Contract such that the other party to the Affected Contract may not take the prohibited actions listed under Pat 8 in relation to the same. Some of these prohibited actions include, inter alia, the commencement or continuation of a court action, arbitration proceedings and / or adjudication proceedings under the SOPA, as well as the making of an application for judicial management, winding up or bankruptcy.

The Assessor appointed by the Registrar shall determine[5]:

a) Whether it is just and equitable in the circumstances of the case for a prescribed obligation or prescribed right under the Affected Contract to be performed or exercised in a manner other than in accordance with the terms of the contract, and if so that the obligation or right is to be performed or exercised in the manner determined by the Assessor; or

b) Whether it is just and equitable in the circumstances of the case for a prescribed term in the affected contract to be varied, or for a party to the contract to be released or discharged from that term, and if so that the term is to be varied in the manner determined by the Assessor, or the party is to be released or discharged from that term, as the case may be.

Notably, such a determination may, with the leave of the court, be enforced in the same manner as a judgment or an order of the court to the same effect.

It should be noted that Part 8 stops short of conferring powers on the Assessor to make a determination on the final amount owed by one party to another.  

Reconciliation Between SOPA Proceedings and Part 8 Of The Act

After a determination is made by the Assessor, the parties may rely on the Assessor’s determination in subsequent Arbitration or Court proceedings, to the extent that the Court or Arbitral tribunal make such orders as it considers appropriate, having regard to the determination and any action taken by a party to the contract in good faith and in reliance on the determination.[6] 

In particular, as regards adjudication proceedings under SOPA, the Act clarifies that where a determination under the Act has been issued to modify any manner in which an obligation is to be performed, or to vary or release or discharge a party from a term in the contract, any subsequent application or determination made by an Adjudicator pursuant to SOPA must be based on the adjusted contract terms.[7]  

In addition, where a SOPA application is made before the other party seeks relief under the Act, the adjudicator appointed pursuant to SOPA will have powers to grant relief similar to that of the Assessors appointed by Part 8 (such as making equitable adjustments to the date by which the renter must return the goods and/or the rental rate payable for the duration that the renter holds possession of the goods) to account for the effects of COVID-19 and to ensure a just and equitable outcome for all parties.[8] 

Parties should take note that any adjudication application or adjudication review application which intends to rely on an Adjudicator's determination pursuant to Part 8 of the Act must be accompanied by a copy of the said determination. 

Expanded Powers Of Registrar Of Assessors And Registrar Of Rental Relief Assessors

The Act has been amended to provide for additional powers of the Registrar of assessors and the Registrar of rental relief assessors (collectively, the "Registrar"). 

The Registrar is now empowered, when deciding whether to appoint an assessor to determine an application, to request the applicant to provide further information within a specified time.

Pursuant to section 12, the Registrar of assessors now has the power to reject an application on the following specified grounds:

a) the application is incomplete or not in accordance with the Act; 

b) the application is not made within the period prescribed by regulations to the Act; 

c) the applicant fails to satisfy the Registrar that service of the application on the relevant parties is complied with; 

d) the applicant fails to comply with the Registrar’s request for further information; 

e) any part of the application is inconsistent with any information contained in the notification for relief served by the applicant (if applicable); 

f) the Registrar reasonably suspects that any information provided by the applicant to the Registrar is false or misleading in a material particular; or 

g) it appears to the Registrar, from the application or any information provided by the applicant pursuant to the Registrar's request, that —

(i) the contract in question is not a scheduled contract;

(ii) the contract in question is a contract excluded by the Act at section 4(1);

(iii) the obligation or right in the contract in question is to be performed or exercised before 1 February 2020; or

(iv) the application is frivolous or an abuse of process. 

In turn, section 19M also permits the Registrar of rental relief assessors to reject an application on the following grounds:

a) the application is incomplete or not in the form prescribed or within the time prescribed by the Act; 

b) the applicant fails to satisfy the Registrar that service of the application on the relevant parties is complied with; 

c) the applicant fails to comply with the Registrar’s request for further information; 

d) the Registrar reasonably suspects that any information provided by the applicant to the Registrar is false or misleading in a material particular; 

e) it appears to the Registrar, from the application or any information provided by the applicant, that the application is frivolous or an abuse of process; or 

f) where the application is for a determination mentioned in subsection (4) — it appears to the Registrar that the application is made in breach of ongoing court or arbitral proceedings or where a judgement or award has been issued, or where there has been a settlement on the matter.

The Registrar's power to reject an application is an especially welcome development to prevent unmeritorious, frivolous or abusive applications under the Act. 

Nonetheless, the amendments do not deal with a situation in which a party files an unmeritorious notification for relief, and which triggers a legal moratorium under the Act, thereby stymieing ongoing legal proceedings. The amendments to the Act will still require the counterparty to file an application for an Assessor's determination as the Registrar is not empowered to discharge a notification for relief on their own motion.

Expanded Powers Of Rental Relief Assessors

In addition, it was the case before 30 September 2020 that rental relief Assessors were only empowered to make determinations relating to the following issues: 

a) With respect to Tenants -  Whether the tenant satisfies the prescribed criteria to qualify for rental relief or additional rental relief; 

b) With respect to Landlords - Whether the landlord satisfies the criteria of financial hardship in order to qualify for a reduction of the additional rental relief which is borne by the landlord

However, the new Section 19M of the Act now provides that both a landlord and tenant may apply to the Registrar to appoint a rental relief Assessor to make a determination on either of the following issues:  

a) The actual amount of rent due under the lease agreement; and

b) The actual amount of any component of the formula used to compute the prescribed amount of rent waived under Section 19H or 19J of the Act

It is expected that such expanded powers will enable rental relief Assessors to make holistic determinations that will better assist landlords in discharging their duties and obligations under the Act with respect to the implementation of the Government's rental waiver framework. 

Specifically, it is foreseeable that both landlords and tenants will benefit from greater clarity in the area of the calculation of the quantum of rental waiver entitlement according to the formulae prescribed in the COVID-19 (Temporary Measures) (Rental and Related Measures) Regulations 2020.

This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. Please note that the information in this article is accurate as at 9 October 2020. We will continue to monitor the situation and provide updates on any changes as soon as these are communicated to us. Please contact our lawyers if you have any specific queries.

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[1] Section 36(a)(iii) of the Act

[2] Section 3(3) of the Part 8 Regulations

[3] Section 2 of the Part 8 Regulations

[4] Section 3(2) of the Part 8 Regulations 

[5] Section 38 of the Act

[6] Section 38D of the Act

[7] Section 38B of the Act

[8] Section 38C of the Act