Second Reading Speech by Second Minister for Law, Mr Edwin Tong, on the COVID-19 (Temporary Measures) (Amendment No. 2) Bill

04 SEP 2020

04 Sep 2020 Posted in Parliamentary speeches and responses

Mr. Speaker, I beg to move, “That the Bill be now read a Second time.”

Introduction

Sir, when the Government first put the COVID-19 (Temporary Measures) Act before this House, we explained that the sanctity of contract is fundamental for Singapore, and a key aspect of the rule of law. We do not lightly intervene in contracts. But sanctity of contract is also not absolute, and intervention is needed when there is a need to safeguard the fundamental integrity of our economic structure for the common good.

The Act, which was passed for the first time in April this year, was a major intervention in certain types of contracts, in response to the economic shock caused by COVID-19. It recognised the reality of the situation: that almost nobody, no one, could have anticipated or prepared for the impact of COVID-19 in Singapore and in the world. The assumptions that one had made in entering into those contracts at the time they did, went out the window with COVID-19. If we did not intervene, and people insisted on strict contractual rights in respect of contracts made prior to the onset of COVID-19, many would suffer. Good businesses could go under. Bankruptcies and insolvencies could rise dramatically. More jobs would be lost.

So we moved this Bill, first in April and, subsequently in June, we made further amendments. The fundamental idea underpinning the reliefs was that a fair sharing of obligations would be necessary, given the exceptional times that we found ourselves in. Without such an arrangement, many Small and Medium Enterprises (SMEs) would suffer. This would be detrimental to our economy as a whole.

The Bill today builds on the reliefs that we have already put in place, by ensuring that they can be implemented more smoothly and more efficiently, and to make sure that the reliefs get to the ground in the best possible way.

This Bill consists of two main parts.

a. First, it makes a number of technical amendments to facilitate the implementation and the delivery of reliefs.

b. Second, it introduces temporary measures for the Minister to extend certain collective sale deadlines, on a case-by-case basis.

Technical amendments to enhance implementation of reliefs in COVID-19 (Temporary Measures) Act

I will briefly recap the key reliefs before dealing with the amendments.

In April, we introduced temporary and targeted measures to alleviate the impact on parties who were unable to perform their contractual obligations because of COVID-19. This was a “legal circuit breaker”, to temporarily hold in abeyance the imposition of strict legal rights, and strict enforcement of legal rights. It was intended to give businesses at that point in time some cash flow relief, some breathing space to find the possibility of negotiating a mutual and acceptable settlement.

We set up the Panel of Assessors for COVID-19 Temporary Relief, or “PACT”, to adjudicate disputes quickly and effectively between parties, taking into account the particular circumstances that exist between the parties, and ultimately having regard to the justice of the situation between the parties. PACT assessors were therefore empowered to make determinations that would be just and equitable in the circumstances.

We also introduced measures to facilitate alternative meeting arrangements. This ensured that organisations and entities could continue to fulfil their regulatory as well as corporate governance functions, even where personal attendance at meetings might not be viable or practicable due to the safe distancing measures that we had put in place.

In June 2020, we introduced a rental relief framework for SMEs and specified non-profit organisations. This addressed the growing need to provide tenants with immediate rental relief from their accumulated rental obligations.

Let me just briefly summarise the framework that is in place, so that Members can appreciate the context in which we seek to make the amendments in this Bill:

a. The rental relief framework mandated an equitable co-sharing of rental obligations between the Government, landlords and tenants;

b. It provided additional rental relief for tenants who were substantially impacted by COVID-19; and also

c. Facilitated the appointment of a panel of rental relief assessors to consider disputes between parties in the manner I outlined earlier.

The relief measures have been a lifeline for many Singaporeans and local businesses. Let me just give Members a sense of the numbers of the cases that have gone through the system. As at 1 September 2020, 7,046 Notifications for Relief, or “NFRs” had been served through MinLaw’s electronic system. There are others which are done manually, which we are unable to track in the system. Out of these, 1,272 applications for determinations by assessors have been filed.

So out of the slightly more than 7,000, 1,200 had sought assessments by assessors. Of this number, almost 60% have been disposed of in the space of about four months. We believe the reason why there is a much smaller number of applications for assessments than there are Notifications for Relief, is because we provided a framework in the legislation for parties to assess for themselves what might work for them. We encouraged them to actively look within that framework to find a solution, without having to come to assessors.

Most of the determinations have been issued quickly. From the day an application for an assessor’s determination is filed, parties can generally expect the determination to be issued within 4 weeks, if they file the documents requested, and also provide the substantiation for the claims that they make. Some cases take a little longer because the nature of the cases was a bit more complicated, more complex.

The process has worked well in most cases, and we record our sincere thanks to the many volunteer assessors as well as the Registry staff who have come forward in the last few months to offer their services and who sat as assessors in many of these cases.

These measures come on top of the various relief measures totalling approximately $100 billion across 4 Budgets since May, including the Jobs Support Scheme, the Jobs Growth Incentive as well as the COVID-19 Support Grant. The measures that we have put in place in April and in June ought to be looked at and seen in the context of the other measures that have also been put in place to assist businesses and to assist employees.

Feedback from businesses on the measures so far has been positive. For what it’s worth, there have been some surveys done, by UOB, Accenture and Dun & Bradstreet – these are all not commissioned by the Government or MinLaw – and based on these surveys, we gathered that approximately 72% of the companies that were polled said they were satisfied and happy with the relief measures that had been rolled out.

On the rental relief front, we have been actively engaging landlords and SME tenants, both before the Bill was constructed, as well as after, to continue the engagement process, to explain how it works and assist with ironing out problems on the ground.

This Bill today does not introduce major changes to the policy framework and to the intent that I’ve outlined, but makes a number of clarificatory and also technical amendments to facilitate a better delivery of the reliefs. Many of these arise from our interactions with the assessors, understanding how better we can deliver the services on the ground, and also appreciating the process which has taken place in the last few months.

I will now highlight the key amendments.

Key amendments to enhance implementation of relief measures

(A) Expansion of the powers of rental relief assessors

Clause 8 expands the powers of the rental relief assessors.

At present, only three distinct matters may be determined by a rental relief assessor:

a. Whether the tenant satisfies the prescribed criteria to qualify for rental relief;

b. Whether the tenant satisfies the prescribed additional criteria for the additional rental relief; and

c. Whether the landlord satisfies the criteria for a reduction of the additional rental relief.

The Bill expands the powers of the rental relief assessors, to allow them to make determinations on a wider range of matters in order to better assist landlords and tenants implement the rental waivers in a fair manner.

The Bill will empower the assessors to determine:

a. The amount of rent to be waived pursuant to lease agreements. This will address instances where service or maintenance charges are not broken down under the lease agreement. The reason for this, if I may explain to Members, is that the relief that’s been given – two months from Government and two months from the landlords – covers the base rent without the charges. The reason for not requiring the landlords to waive the charges is because these charges continue to be due to the service providers in the form of maintenance or service charges. Sometimes, the lease agreement itself might not stipulate which portion is base rent and which portion are these service charges. These amendments seek to empower the assessors to make a determination as to which portion ought to be waived.

b. In addition, the rental relief regulations, which I’m sure Members have studied carefully, also provide a series of formulae which apply to the different scenarios for rental waivers to take place, sometimes depending on when the tenant has moved in or moved out, or whether or not the business is of one nature or another, depending on the criteria. This Bill enlarges the assessors’ powers so that should the assessor come across these cases, they will not lack the jurisdiction to address all of these disputes holistically.

(B) Reconciling the operation of Part 8 with the SOPA

Clauses 15 to 17 of the Bill reconcile the operation of Part 8 of the Act with the Building and Construction Industry Security of Payment Act, commonly known as “SOPA”.

Part 8 has not yet come into force. MinLaw is working to finalise the details of the reliefs under Part 8. When it comes into force, Part 8 will provide relief for prescribed contracts that have been affected by delays in construction, supply or related contracts. This was introduced in light of the severe impact that COVID-19 had on the construction industry. The extent to which a tenant is able or unable in some cases to move in because of the landlord’s inability to renovate or retrofit: these are scenarios that could be captured in Part 8.

Part 8 will allow assessors limited prescribed powers to adjust the terms of a contract that has been impacted by COVID-19. So in the scenario I outlined, should there be a reason for not being able to allow the tenant to move in because you have not made good the premises, the assessors can make some adjustments to the contract. The overriding and overarching consideration is to achieve a just and equitable outcome for both parties.

To give one further example, a contractor may have rented equipment from a supplier and the equipment is un-used during the circuit breaker because the site was closed. There can be significant unfairness in this situation, if the contractor must continue to pay rental even though he was unable to use the equipment throughout the period because of COVID-19 restrictions.

Some suppliers that we spoke to said that they would waive the rental for the period where the contractor cannot use the equipment due to COVID-19 restrictions. They felt that it was not right for them to continue charging rental at the expense of the contractor. We applaud these suppliers for responding to COVID-19 in the right spirit, and certainly in the context of assisting holistically the entire industry.

At the same time, we have also come across many situations where suppliers continue to insist on the full rental throughout the period despite the conditions prevailing at that point in time. This is where Part 8 can come in, to play a part to resolve the matter in a just and equitable manner between the parties.

I would emphasise to Members that the powers of the assessor in this context are narrowly defined. The categories of contracts that the assessor can adjust under Part 8 are circumscribed by subsidiary legislation. Further, applicants will also be required to show that the contract was affected in the first place by a delay in the performance of a construction or supply contract, or a breach of such contract, and that this was materially caused by COVID-19-related restrictions. Parties will also have the opportunity to be heard before the assessor on any points of disagreement between the claimant and respondent, before the assessor makes a decision. The assessment process will also be subject to a rigorous review internally. If I may share with Members, in the last few months, we have had many briefings with the assessors so that there is alignment across the process. Both Minister Shanmugam and myself have also met with assessors to go through the cases and we do that on a regular basis, to achieve alignment and a fair degree of consistency across the cases.

In this Bill, we have provided for how proceedings and the determination under Part 8 will interact with other legal proceedings. For example, clause 15 of the Bill provides that an application for relief under Part 8 will trigger a temporary moratorium on the commencement of other proceedings. This is necessary as otherwise, there could be parallel proceedings, one under Part 8 of this Bill and another either under SOPA, or as the case may be, in judicial proceedings. The moratorium will therefore apply until the Part 8 application is rejected or withdrawn, or until a determination has been issued. This will, as I mentioned earlier, mitigate and reduce the risk of parallel proceedings.

In the construction industry, many contracting parties rely on SOPA adjudication proceedings. The amendments will also provide SOPA adjudicators with the same powers to adjust contract terms as an Assessor under Part 8 may have. This applies as long as the contract has not previously gone through the Part 8 process. In other words, you can’t go through Part 8, get a result, perhaps not happy with it, and then go apply for a further adjustment through the SOPA proceedings. That would not be allowed. This amendment, in empowering the SOPA adjudicators the same bandwidth as the Assessors to make the same adjustments, will allow for SOPA adjudicators to have the same ability to reach a just and equitable outcome in those cases. In many of these SOPA cases, the issues are similar – whether or not performance has been affected by events like COVID-19, and whether or not the payments are due, how much is due and at what stage. Because of the twinning of these issues that arise in such typical SOPA claims, we felt that it was appropriate to clothe the SOPA adjudicator with the same level of discretion and also powers to make those adjudications.

Mr Speaker Sir, the construction sector in Singapore is currently going through challenging times. The Government is committed to working closely with the industry to get through this difficult period.

We will do all we can to continue to cushion the impact of COVID-19 on the industry, and to help the industry emerge from this as best as it can, and perhaps stronger from this crisis.

Sir, I move on now to touch on the provisions that cover the alternative meeting arrangements, which the Bill does by amending Part 4 of the Act. Part 4 provides for alternative arrangements to enable meetings to be held by electronic means, where personal attendance would otherwise have been required.

Members would know that many entities, whether large corporates or smaller societies or charities, they don’t have a constitutional document that would automatically allow them to hold virtual meetings without physical presence.

These arrangements are therefore critical for those entities to allow them to carry on business and also to proceed with governance functions and obligations safely through this pandemic. They can proceed with the meetings virtually, and also through that virtual platform make important collective decisions, while still complying with safe distancing regulations.

The alternative arrangements are currently linked to the duration of a control order. We have received feedback that this creates some uncertainty, because some companies have their financial year-end at the end of this year, and they have until March or April to hold their meetings.

Many of these entities must plan for these meetings months in advance and make the appropriate arrangements.

Clause 12 therefore amends section 27 to delink the alternative arrangements from the control orders. It enables alternative arrangements to be prescribed if the Minister for Law considers it necessary or expedient to limit or prevent the spread of COVID-19, even where there is no control order in force, for the purposes of these alternative arrangements for meetings.

With this amendment, we intend to extend the Meetings Order further, to 30 June 2021. This will cover the period of time that I mentioned earlier, for all the meetings to take place, including in the context of some, the adjourned meetings as well, up till June 2021. The possibility of a further extension might be considered, but we can take that assessment depending on the prevailing conditions subsequently.

This extension will give entities the option to hold virtual meetings in place of physical meetings.

(D) Miscellaneous amendments

Lastly, the Bill also introduces further amendments to the Registrar’s powers, in response to feedback from the PACT Registry in operationalising the Act.

These amendments seek to facilitate the efficient and effective operation of the Act and will apply to both the PACT Registry as well as the Rental Relief Registry.

Currently the Registrars have the power to reject applications that do not comply with the form and manner prescribed by the regulations.

However, this power is limited. What the Registrars and the assessors have seen has been certain defective applications which have come through, not falling within the original prescription, but nonetheless defective or failed in some way. These applications still make their way through the system because there is no power to dismiss them ab initio, as of right. They therefore drain the time and resources of the Registry and also the volunteer assessors.

Clauses 5, 8 and 14 therefore provide that the Registrar will have discretionary rejection powers on certain grounds, such as:

a. where the contract is not a scheduled contract (it doesn’t come within the ambit of the Act altogether),

b. if the application is incomplete or,

c. if the application is materially false or misleading, frivolous, or is an abuse of process. Members would know that this closely aligns with the kinds of standards that we prescribe for filing papers in judicial proceedings.

These amendments seek to achieve a balance between an optimum use of limited resources - as I mentioned earlier, many of them are volunteer resources as well – and also fairness to the parties.

The Bill also makes certain clarificatory amendments, in line with the Regulations which have been promulgated. Section 7A provides for a cap on late payment interest and charges. There was some doubt as to the time period when this cap would apply. We have made that clear. Clause 3 makes clear that the cap on late payment interest applies to interest accruing from 1 February to the end of the prescribed period.

Response to points raised during debate on the motion of thanks to the President

Sir, at this juncture, let me just acknowledge two suggestions raised by Mr Edward Chia during the earlier debate, which pertain directly to the issues in this Bill.

Mr Chia proposed extending the statutory repayment scheme beyond rental arrears, to help businesses who want to restart. Currently we have a statutory repayment scheme that applies only to rental arrears, but Mr Chia is proposing that we go beyond this.

We are aware of this suggestion, it’s been raised with us. We wanted to proceed very carefully because this opens up a significant amount that will be subject to the repayment scheme, or that could be termed out in the repayment schedule, possibly to the detriment of creditors as well. We want to balance the cash flow needs of these creditors, against those businesses who have fallen into debt. We will study this further and determine if this is appropriate and if so, on what kind of scale.

Mr Chia also made reference to whether we could provide relief for Directors from liability for insolvent trading in this period. Mr Chia would be pleased to know that the Act that was passed in April already covers that. A company is not to be treated as incurring liabilities without a reasonable prospect of meeting them in full during the prescribed period. That is the threshold for insolvent trading liability for an individual Director.

Temporary powers to extend deadlines for collective sales stipulated within the Land Titles (Strata Act)

Let me move on now to the amendments on collective sales, very briefly.

Clause 18 of the Bill introduces a new Part 9, that expressly empowers the Minister for Law to extend collective sale deadlines on a case-by-case basis, by way of Ministerial Order. This will also cover deadlines that have already passed, provided that the other requirements for extension are also met.

This measure is intended to apply to address feedback from some Collective Sale Committees, or “CSCs”, that they require extensions to the deadlines specified in the Land Titles Strata Act.

Ordinarily, these deadlines ensure that the CSC follows through with the collective sale process in a timely manner, minimising uncertainty for the owners in the development.

However, we have received some feedback from CSCs that their ability to complete the sales process could have been genuinely and also materially impacted by COVID-19. For example, they may have been unable to secure a buyer due to travel restrictions and possibly the circuit-breaker measures.

All applications for extensions will be evaluated very carefully, and only in those cases where the CSC had been genuinely and materially impacted by COVID-19 will an extension be granted. The process and procedure for such an application will be set out in Subsidiary Legislation.

Conclusion

Sir, let me now conclude.

Over the past few months, as Members would appreciate, we have had to respond very quickly to the pandemic. We’ve had to be agile, act quickly to provide effective relief to businesses and individuals, to help as far as possible to cushion the impact of COVID-19. Thus far, we have seen encouraging and also tangible results from the reliefs that we have introduced in the first two rounds.

We have seen how the Act has provided breathing space and also provided for a way in which the two parties can use a framework that is published in the legislation to work through their own difficulties. The numbers bear out that proposition.

This Bill builds on the amendments introduced earlier in April and June, and effectively give us more leeway in how we administer the cases on the ground, to deliver the reliefs in a way in which the Act has contemplated.

With that, Mr. Speaker, I beg to move.

Last updated on 04 Sep 2020