China Zhejiang Construction Group (HK) Ltd v Zhejiang Construction Investment (S) Pte Ltd

• Judge: Chan Seng Onn J
• Judgment Date: 27 August 2019
• Neutral Citation: [2019] SGHC 195
• Citation: [2019] SGHC 195
• Court: High Court (Singapore)
• Published date: 17 October 2019
• Docket Number: Companies Winding Up No 89 of 2019
• Plaintiff Counsel: Tan Tho Eng (TSMP Law Corporation)
• Defendant Counsel: The defendant absent and unrepresented,Sharon Wong (Millennium Law LLC),Kavitha Kandesan
• Subject Matter: Companies,Winding up
• Hearing Date: 05 July 2019

Chan Seng Onn J:

On 5 July 2019, I made an order for the defendant, Zhejiang Construction Investment (S) Pte Ltd (“Zhejiang SG”), to be wound up and for Mr Tee Wey Lih of Acres Advisory Pte Ltd to be appointed as the liquidator of Zhejiang SG (“the liquidator”). The plaintiff is China Zhejiang Construction Group (HK) Ltd (“Zhejiang HK”), a creditor of Zhejiang SG. The debt owed by Zhejiang SG to Zhejiang HK in the sum of S$7,760,717.66 was undisputed.¹ No one appeared on behalf of Zhejiang SG to contest the winding-up application brought by Zhejiang HK. However, a non-party, Chiu Teng Construction Co. Pte Ltd (“Non-Party”), applied for the dismissal of the winding up application, on the basis that the winding-up application had been brought for a collateral purpose.

The Non-Party has now appealed against my order. I thus set out the reasons for my order below.

Winding-up Application

As at 28 March 2019, Zhejiang SG owed a total sum of S$7,760,717.66 to Zhejiang HK through four loan agreements (“the Loan Agreements”), including the loan interest and the accrued interest for late payment.² On 2 April 2019, Zhejiang HK, through its solicitors, served a statutory demand issued pursuant to s 254(2)(a) of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”) by hand on Zhejiang SG at its registered office.³ The sums owed to Zhejiang HK remained unsatisfied after the lapse of three weeks from 2 April 2019.⁴ On 30 April 2019, Zhejiang HK filed the winding-up application.

Non-Party’s Application

The Non-Party and Zhejiang SG entered into a joint venture agreement dated 5 August 2010, with a third party, Etong Construction (S) Pte Ltd (“Etong Construction”).⁵ Under the joint venture agreement, all three parties agreed to work together on building works for the erection of 495 Housing and Development Board (“HDB”) dwelling units at Sengkang (“the Project”), which was awarded by HDB. The Non-Party, Zhejiang SG and Etong Construction agreed to carry out the Project on a “profit/loss sharing basis”.⁶ The Project was completed in March 2013.⁷

The Non-Party claimed that Zhejiang SG failed to manage its sub-contractors during the course of the Project, leading to delays and losses suffered by the Non-Party. The Non-Party also claimed that as a result of Zhejiang SG’s failure to properly complete its scope of the works, extensive rectifications were required and the Non-Party had to bear the costs of the said rectifications.⁸ On 14 November 2018, the Non-Party, through its solicitors, served a letter of demand on Zhejiang SG for the sum of $978.717.94.⁹ On 20 November 2018, Zhejiang SG responded to deny the said claim. Zhejiang SG disputed the basis of the claim, the calculations and breakdown of the sum claimed, the apportionment of the alleged loss and proof of the alleged loss.¹⁰ The Non-Party and Zhejiang SG were in negotiations over the payment claims and amounts owed up until January 2019, when the Non-Party was alerted about the winding-up application by Zhejiang HK.¹¹

The Non-Party alleged that Zhejiang HK had a collateral purpose for its winding-up application against Zhejiang SG and submitted that the Court should exercise its residual discretion to dismiss the winding-up application: Lai Shit Har and another v Lau Yu Man [2008] 4 SLR(R) 348 (“Lai Shit Har”).

The Non-Party based its allegation on the fact that Zhejiang SG and Zhejiang HK shared the same directors and had the same controlling shareholder. As of 17 January 2019, an Accounting and Corporate Regulatory Authority (“ACRA”) search showed that Mr Guan Manyu and Mr Chu Ping had been directors of Zhejiang SG since 1 July 2014.¹² However, an ACRA search dated 2 April 2019 subsequently revealed that Mr Guan Manyu and Mr Chu Ping were no longer reflected as directors of Zhejiang SG.¹³ A Companies Registry Annual Return Form dated 1 September 2018 and an ICRIS Cyber Search dated 17 May 2019 reflected that Mr Guan Manyu and Mr Chu Ping were also directors of Zhejiang HK.¹⁴ Further, I noted that as of 17 January 2019, Mr Guan Manyu and Mr Chu Ping were not the only two directors of Zhejiang SG. Two other directors had been appointed since 2012.¹⁵ Finally, Zhejiang Construction Investment Group Co. Ltd (“Zhejiang China”) owned 70% of the ordinary shares of Zhejiang SG and 100% of the ordinary shares of Zhejiang HK.¹⁶

As for the Loan Agreements, the Non-Party averred that they were all signed by Mr Chu Ping in his capacity as Zhejiang HK’s representative, while he was a director of Zhejiang SG.¹⁷ However, I found that this assertion was not sufficiently evidenced by the Mandarin signatures on the Loan Agreements, which were illegible and did not clearly represent Mr Chu Ping’s name.¹⁸

I further noted that one of the loans extended by Zhejiang HK to Zhejiang SG for the sum of RMB 12,774,704.08 (S$2,554,940.82) from the period of 18 December 2017 to 17 December 2018, was used towards the repayment of Zhejiang SG’s loan amount and interest owed to Zhejiang China.¹⁹

The Non-Party also submitted that these related party transactions were not reflected in the Financial Statements of Zhejiang SG of 2016 and 2017, and the Financial Statements had extensive qualifications by the auditors which shed no further light on the “Related Party Transactions”.²⁰ For instance, in the Financial Statement of 2016, an amount of $628,786 was incurred due to “Settlement of liabilities on behalf for a related party.”²¹ In the Financial Statement of 2017, an entry of $321,405...