March 2022
Elizabeth Pai and Jiselle Ong
In a government procurement project jointly participated by several suppliers, if the owner refuses to pay for a particular phase of work or (under circumstances of the rescission or termination of the contract) refuses to pay relevant damages while the amount such owner refuses to pay only relates to a specific supplier, can such a supplier (for the purpose of seeking payment or compensation from the owner) apply for mediation or bring an action against the owner alone? Or is it true that all the members of the joint tendering team are required to jointly apply for mediation or jointly file a lawsuit to seek compensation in order to meet legal requirements? Currently, there are no provisions under laws and regulations in Taiwan that directly provide for this. In practice, when a member of the joint tendering team who is denied payment/compensation by the owner intends to seek payment/compensation from the owner by resorting to a dispute resolution mechanism, since the other members of the joint tendering team may not necessarily agree to cooperate in a joint action or the operating efficiency is not desirable even if they agree to take the action together, the member concerned has the need to apply for mediation to resolve the performance disputes or bring an action against the owner alone. This article hereby consolidates relevant practical opinions in Taiwan for the reference of suppliers.
The Public Construction Commission under the Executive Yuan (hereinafter, the “PCC“) issued an opinion[1] in 2015, holding that to avoid different results when the disputes of the same case are handled, members of the joint tendering team seeking to file an protest, complaint or mediation in accordance with the Government Procurement Act are required to do so in the names of every and all members of the joint tendering team.
However, a court previously held[2] that since the construction works handled by each of the suppliers (such as building construction work or plumbing and electrical construction work) have been specified in the project procurement contract, the joint tender agreement, and relevant documents, and the project payment claimed by the supplier filing the lawsuit only relates to the project items handled by the supplier alone and has no bearing on the other members of the joint tendering team, the lawsuit is obviously filed for reasons and facts related to the supplier per se. Therefore, Article 275[3] of the Civil Code does not apply, and it is also not necessary to further apply the provisions on the adjudication of a claim with respect to all co-parties under Article 56, Paragraph 1[4] of the Code of Civil Procedure. Hence, the supplier at issue (plaintiff) is an eligible party and the lawsuit filed by the supplier alone is appropriate.
Based on our review of subsequent court judgments, we found that the courts[5] tend to adopt similar opinions of the view described in the preceding paragraph. According to the content of the joint tender agreement (e.g., the percentage of contract value for each supplier, the project items handled, the price of each project item, etc.), billing method (the supplier separately issues its invoice for the representative supplier to collectively claim payment), the supervisor’s progress payment estimation method (the progress payment estimation are conducted based on the construction progress separately reported by each member of the joint tendering team), and the actual payment method of the owner (remittance of contract payments separately to the respective accounts of each suppliers), although the members of the joint tendering team have formed a consortium with an internal relationship similar to a partnership, still they are separate independent entities. Their respective claims of payment from the owner for the project items they respectively handle and their respective damage are debts that can be separated. For a lawsuit filed for such purposes, there is no need to treat the joint tendering team as a whole, and a joint action is not inherently required. Some courts[6] also mentioned that court rulings are not bound by interpretation circulars issued by administrative agencies (see Constitutional Interpretation of Judicial Yuan No. 216). Therefore, citing the aforementioned PCC circular and arguing that the plaintiff (who filed a complaint separately) should not be an eligible party is groundless.
Our observation of recent PCC interpretation circulars[7] suggests that the PCC’s position has changed. Although it still considers that mediation of disputes, in principle, should be jointly applied by all the members of the joint tendering team in order to resolve the disputes once and for all, if it is indeed difficult to file the joint application and the items claimed do not involve the other joint suppliers, individual supplier may apply alone on a case-by-case basis.
Based on the above interpretation circulars of the PCC and the court judgments, in the scenario where the members of the joint tendering team would like to apply to the relevant authority for mediation or to bring an action at a court against the owner to claim payment, if the project items respectively handled by the member of the joint tendering team/consortium are obviously separable and the disputed portions are only related to the member, the member in question to whom payment is rejected by the owner may, based on the current practical opinions, choose the option of “applying for mediation alone or single-handedly bringing an action against the owner alone,” and it is not true that all the members of the joint tendering team/consortium must act jointly in order to be legally compliant.
[1] The PCC’s Gong-Cheng-Qi-Zi Circular No. 10400251220 of October 30, 2015
[2] The Civil Judgement of the Shilin District Court (100) Jian-Zi No. 82
[3] Article 275 of the Civil Code provides: “If there is a final judgment rendered in favor of one of the joint debtors and if it is not based on such debtor’s personal affairs, this judgment operates in favor of all the other debtors.”
[4] Article 56, Paragraph 1 of the Code of Civil Procedure provides: “Wherever a claim must be adjudicated jointly with regard to all co-parties, the following subparagraphs shall apply:
1. Any act conducted by one of the co-parties in the interest of all co-parties will be effective with regard to all of them; any act conducted by one of the co-parties against the interests of all co-parties will have no effect with regard to all of them.
2. Any act conducted by the opposing party against one of the co-parties will be effective with regard to all of them;
3. Any reason for a stay of proceeding, either by operation of law or by a court ruling, that arises with regard to one of the co-parties, will take effect with regard to all of them.”
[5] The Civil Judgement of the Taiwan High Court Taichung Branch (106) Jian-Shang-Zi No. 50, the Civil Judgement of the Taiwan High Court (104) Jian-Shang-Geng-1-Zi No. 22, the Civil Judgement of the Taiwan High Court (102) Jian-Shang-Zi No. 89, the Civil Judgement of the Taipei District Court (108) Jian-Zi No. 184, the Civil Judgement of the Shilin District Court (103) Jian-Zi No. 65, the Civil Judgement of the Shilin District Court (102) Jian-Zi No. 75, the Civil Judgement of the Shilin District Court (101) Jian-Zi No. 38.
[6] The Civil Judgement of the Taipei District Court (108) Jian-Zi No. 184
[7] The PCC’s Gong-Cheng-Qi-Zi Circular No. 1080100744 of August 29, 2019