Legislation Update: COVID-19 (Temporary Measures) Act 2020

If your business has been affected by COVID-19, consider if you may seek temporary relief under the new law or object to another party relying on such relief.

First, determine if your contract falls within the Scheduled Contracts.

Second, analyse or get legal advice on whether the inability to perform obligations is to a material extent due to a COVID-19 event.

Third, if you are the defaulting party, serve a notification for relief. If you are the non-defaulting party, consider whether to apply to the assessor for determination if such relief is entitled.

Fourth, if you have ongoing legal or arbitral proceedings or action, consider if you are barred from continuing further steps.

If your organisation requires the conduct of meetings (e.g., Annual General Meetings), take note of alternative arrangements for the conduct of meetings which would be compliant with circuit breaker and other measures.

If you are a property owner or tenant, consider if you may be required or entitled to pass or receive the benefits of property tax reductions.

Introduction

The COVID-19 (Temporary Measures) Act 2020 (“CTMA”) was urgently passed in the Singapore Parliament yesterday (7 April 2020).

The CTMA provides for the following:

1. temporary relief for inability to perform contracts;
2. temporary relief for financially distressed individuals, firms and other businesses;
3. temporary measures for conduct of meetings;
4. temporary measures for court and Syariah court proceedings;
5. temporary measures concerning remission of property tax; and
6. COVID-19 control orders.

Temporary relief for inability to perform contracts

Section 5 of the CTMA prohibits certain legal actions from being taken against a party to a scheduled contract (“A”) who is unable to perform a contractual obligation to a material extent caused by a COVID-19 event (the “subject inability”) and party A has served a notification for relief on relevant other parties.

This applies to obligations to be performed on or after 1 February 2020 in contracts entered into or renewed (other than automatically) before 25 March 2020.

The CTMA defines “COVID-19 event” as —

1. the epidemic or pandemic that is COVID-19; or
2. the operation of or compliance with any law of Singapore or another country or territory, or an order or direction of the Government or any statutory body, or of the government or other public authority of another country or territory, being any law, order or direction that is made by reason of or in connection with COVID-19.

Another party to the contract (“B”) cannot take such action until after the prescribed period ends, A withdraws the notification, or an assessor determines that the case does not fall within section 5 of the CTMA.

Legal Actions Prohibited

Certain legal actions are prohibited under section 5(2) of the CTMA, including but not limited to:

1. court action against A or A’s guarantor or surety;
2. arbitration under the Arbitration Act against A or A’s guarantor or surety;
3. enforcement of security over immovable property;
4. enforcement of security over movable property used for purpose of trade, business or profession;
5. application for a scheme of arrangement under section 210(1) of the Companies Act;
6. application for winding up or bankruptcy of A or A’s guarantor or surety;
7. termination of a scheduled contract (lease or licence of immovable property) where the subject inability is non-payment of rent or other moneys; or
8. enforcement of judgment, arbitral award under Arbitration Act or determination under the Building and Construction Industry Security of Payment Act (“SOPA”).

Note the following observations:

1. Arbitrations that are not commenced under the Arbitration Act (e.g., international arbitrations under the rules of the Singapore International Arbitration Centre) are not prohibited.
2. Schemes of arrangement may still be commenced by party A since the prohibition is against party B.
3. If party B already has judgment, arbitral award or SOPA determination by such time that the CTMA comes into force, the subject inability has to be the underlying contractual obligation that was to be performed on or after 1 February 2020, not the judgment debt.

The prohibition does not apply to matters other than the subject inability in any proceedings though they may be included in the same proceeding — section 5(5), CTMA.

Limitation periods and other statutory periods are extended for such time that the relief is applicable — section 5(7), (9), (10), (11) CTMA.

Party B may not call on any performance bond in relation to a construction contract or supply contract in relation to the subject inability — section 6(1), CTMA.

The applicable period will be disregarded in calculating liquidated damages e.g. for delay in respect of the subject inability — section 6(5), CTMA.

The fact that a subject inability was to a material extent caused by a COVID-19 event is a defence to a breach of contract claim — section 6(7), CTMA.

Deposits may not be forfeited in respect of event or tourism-related contracts on the basis of the subject inability — section 7(1), CTMA.

Forfeited deposits will have to be restored — section 7(3), CTMA.

It is an offence to contravene the above provisions without reasonable excuse — section 8(1), CTMA.

Party A must serve a notification for relief containing certain prescribed information on the relevant other parties — section 9(1), CTMA.

Assessors

Assessors may determine applications on whether a matter falls within sections 5 or 7 of the CTMA — section 13, CTMA.

Assessors may take into account the ability and financial capacity of party A — section 13(2), CTMA.

Assessors may make determination to achieve just and equitable outcomes in the circumstances of the case, including making a party do anything or pay any sum to discharge obligations, etc. — section 13(3), CTMA.

There is no appeal from an assessor’s determination — section 13(10), CTMA.

Lawyers may not represent parties in proceedings before an assessor — section 14, CTMA. But lawyers certainly can advise parties and help parties prepare their applications and case!

Parties must bear their own costs for assessor proceedings — section 15, CTMA.

Scheduled Contracts

Under the CTMA, “scheduled contracts” are:

1. loan facility by banks or finance companies to an enterprise, where such facility is secured, wholly or partially, against any commercial or industrial immovable property located in Singapore;
2. loan facility by banks or finance companies to an enterprise —
   
   1. where such facility is secured, wholly or partially, against any plant, machinery or fixed asset located in Singapore; and
   2. where such plant, machinery or fixed asset, as the case may be, is used for manufacturing, production or other business purposes;
3. a performance bond or equivalent that is granted pursuant to a construction contract or supply contract;
4. a hire-purchase agreement or conditional sales agreement as defined under the Hire-Purchase Act (Cap. 125), where the good hired or conditionally sold under the agreement is —
   
   1. any plant, machinery or fixed asset located in Singapore, where such plant, machinery or fixed asset, is used for manufacturing, production or other business purposes; or
   2. a commercial vehicle.
5. an event contract (a defined term);
6. a tourism-related contract (a defined term);
7. a construction contract or supply contract; and
8. a lease or licence of non-residential immovable property.

“Enterprise” is defined as any body corporate or unincorporated registered and carrying on business in Singapore where at least 30% of its shares or ownership interest are held by Singaporeans and/or permanent residents, and the turnover of the group does not exceed $100 million in the latest financial year.

Note the focus on business enterprises in Singapore which have loans secured by trade assets or hire-purchase of trade assets. Unsecured loans and loans to individuals are not included.

“Event contract” means a contract for the provision of a venue, accommodation, amenities, transport, entertainment, catering or other goods or services for —

1. a business meeting, incentive travel, conference, exhibition, sales event, concert, show, wedding, party or other social gathering, or sporting event; or
2. the participants, attendees, guests, patrons or spectators of any of the events mentioned in paragraph (a).

“Tourism-related contract” means a contract for —

1. the international carriage of passengers by sea or land;
2. the provision of transport, short term accommodation, entertainment, dining, catering, tours or other tourism-related goods or services for visitors to Singapore, domestic tourists or outbound tourists; or
3. the promotion of tourism in Singapore or the distribution for the purposes of trade or retail of products related to such tourism.

Temporary measures for conduct of meetings

The Minister may prescribe alternative arrangements for meetings which otherwise involves personal attendance provided for in any written law or legal instrument (includes company or society constitution, and trust deed) — section 27(1), CTMA.

Alternative arrangements may include (among others):

1. meetings held by electronic communication, video conferencing, etc.;
2. reduction of quorum;
3. voting by electronic means or proxy; or
4. questions to be tabled and responses to be provided at meetings by writing or electronic communications.

Temporary measures concerning remission of property tax

A property owner given property tax remission in response to COVID-19 in relation to any property is obliged to pass the benefits of the tax reduction to tenants of the property (whether leased or licensed) — section 29(2), CTMA.

The owner must keep records evidencing compliance for up to 3 years — section 29(5), CTMA.

Any dispute regarding whether the owner is required to pass any benefit, the amount, extent, manner or time of passing of such benefit, or any non-compliance with section 29(2), may be determined by a Valuation Review Panel — section 30, CTMA.

A limitation period applies to such applications for determination — section 30(5), CTMA.

Control Orders

The COVID-19 (Temporary Measures) (Control Order) Regulations 2020 (“COR”) were passed pursuant to section 34(1) of the CTMA.

Under the COR, every individual (not subject to a movement control measure) “must stay at or in, and not leave, his or her ordinary place of residence in Singapore”, subject to exemptions in paragraph (3) — COR Regulation 4(2).

To put it plainly, STAY AT HOME unless you are doing certain permitted activities.

An individual may leave home only to the extent necessary for certain purposes (COR Regulation 4(3)):

1. to work for or with an essential service provider (defined term, including those specified at this website), a specified school or an early childhood development centre;
2. to procure any goods or services from an essential service provider or a specified school;
3. to obtain —
   
   1. medical treatment for a suspected COVID-19 infection at a hospital, medical clinic or any other place, designated by the Director for the treatment of COVID-19; or
   2. medical treatment that is of a pressing nature;
4. to engage in any recreational activity in an open-air stadium (defined term), public path (defined term) or public park (defined term) alone or with any other individual who lives with the firstmentioned individual;
5. where an individual works for or with an essential service provider, to bring the individual’s child or children to a place where the child or children are to be cared for;
6. to assist any individual who has a physical or mental disability, or is below 12 years of age or above 60 years of age, with his or her daily needs;
7. to report for enlistment or service under the Enlistment Act (Cap. 93);
8. to report to any law enforcement officer or to attend at any court in accordance with any warrant, summons or order made under any written law or order of a court;
9. to be present at any place in accordance with a requirement under any written law;
10. to seek or render help in an emergency;
11. to move to another place of accommodation;
12. to leave Singapore; or
13. to do anything reasonably connected with and for the purposes of the matters in sub-paragraphs (a) to (l).

COR Regulation 4(4) mandates that an individual must not permit any other individual to enter his or her ordinary place of residence for any reason other than —

1. for the purposes of enabling the provision or supply of any essential service at the place of residence;
2. for the purposes of providing the care of any child mentioned in paragraph (3)(e);
3. to receive any assistance mentioned in paragraph (3)(f); or
4. to receive help in an emergency mentioned in paragraph (3)(j).

Regarding Regulation 4(3)(f), i.e., leaving home “to assist any individual who has a physical or mental disability, or is below 12 years of age or above 60 years of age, with his or her daily needs”, some questions arise:

1. What constitutes mental disability? It is not a defined term. Is someone with diagnosed or undiagnosed depression or feeling suicidal included?
2. What about victims of domestic violence (although not so much daily needs)? Or single pregnant women?

Unless otherwise permitted under these Regulations, a person must not meet another individual not living in the same place of residence for any social purpose: COR Regulation 6.

COR Regulation 7(1): Where an individual leaves his or her place of residence for one of the permitted purposes in regulation 4(3), the individual must keep a distance of at least one metre from any other individual in any public place or common property of any subdivided building, except in —

1. any lift;
2. any motor vehicle or other mode of conveyance; or
3. any premises used in connection with the provision of public transport.

COR Regulation 7(2) states that an individual must not, without reasonable excuse —

1. sit on a seat that is not fixed to the floor and that is less than one metre away from another seated individual in a public place;
2. sit on a fixed seat in a public place that is demarcated as not to be occupied; or
3. stand in a queue less than one metre away from another individual in the queue in a public place.

Section 34(7), CTMA specifies that breaches of control orders are offences:

1. To a fine up to $10,000 and/or imprisonment up to 6 months;
2. For subsequent offences, fine up to $20,000 and/or imprisonment up to 12 months.

This legislation update was first published on www.ronaldjjwong.com and has been adapted with permission.

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