Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd

• Court: Court of Appeal (Singapore)
• Judge: Tay Yong Kwang JCA
• Judgment Date: 21 June 2021
• Neutral Citation: [2021] SGCA 61
• Citation: [2021] SGCA 61
• Defendant Counsel: Kris Chew Yee Fong and Isabel Su Hongling (Zenith Law Corporation)
• Plaintiff Counsel: Luo Ling Ling and Sharifah Nabilah binte Syed Omar (Luo Ling Ling LLC)
• Hearing Date: 01 February 2021
• Published date: 26 June 2021
• Docket Number: Civil Appeal No 119 of 2020
• Subject Matter: Winding up,Building and Construction Law,Statutes and regulations,Insolvency Law

Quentin Loh JAD (delivering the grounds of decision of the court): Introduction

This appeal questions the extent to which the temporary finality of an adjudication determination under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”) must be given effect and enforced. In particular, would an adjudication determination judgment debtor (“ADJ debtor”) be able to stave off a winding-up petition brought by an adjudication determination judgment creditor (“ADJ creditor”) by raising a cross-claim against the latter or by disputing the adjudication debt?

The appellant, Diamond Glass Enterprise Pte. Ltd (“DGE”), a subcontractor, secured an adjudication determination in its favour in respect of sums due under a payment claim, Payment Claim 17 (“PC 17”) which it promptly, (as it was perfectly entitled to), applied to enforce by way of a judgment entered under s 27(1) of the SOPA (“s 27(1) SOPA Judgment”). DGE then served a statutory demand on the contractor, Zhong Kai Construction Company Pte. Ltd (“ZK”), demanding payment of the judgment debt. When ZK failed to pay the same, DGE filed a petition to wind up ZK in HC/CWU 95/2020 (“CWU 95”).

ZK subsequently applied in HC/SUM 1577/2020 (“SUM 1577”) for the winding up petition to be stayed unconditionally or dismissed. The High Court Judge (“the Judge”) allowed ZK’s application and ordered that CWU 95 be stayed unconditionally pending the determination of a High Court suit between ZK and DGE, on the basis that ZK had raised a genuine cross-claim against the judgment debt therein. DGE appealed against the Judge’s decision. We heard the appeal on 1 February 2021 and dismissed the appeal, but varied the Judge’s order by imposing the condition that ZK pay into court the amount stated in the statutory demand made by DGE within 14 days from the date of the hearing before us for CWU 95 to be stayed. We now give our detailed grounds for our decision.

Facts Parties and contractual matrix

DGE and ZK are both Singapore-incorporated companies in the building and construction industry. ZK is a company carrying on the business of building and construction, while DGE is engaged in the design, manufacture, supply, installation and maintenance of architectural glass.¹

By a letter of award dated 7 November 2016 (“the Subcontract”),² ZK engaged DGE as a subcontractor for the supply of materials, equipment and tools to carry out and complete the external facade aluminium cladding, blast/ballistic doors and windows, aluminium door and window works (“the Subcontract Works”) for a project (“the Project”) valued at S$558,055. As the Project involved works at Changi Airport, further up the contractual chain, there was a main contract based upon the Public Sector Standard Conditions of Contract (“PSSCOC”), with the Civil Aviation Authority of Singapore (“CAAS”) as principal. There was also a Superintending Officer, Surbana Jurong Infrastructure Pte Ltd (“SO”), who had the final say over important matters like interim payments, variations, extensions of time, choice and approval of material, etc. There are appropriate references in the Subcontract and its Annexes to the CAAS, SO and the main contract. For completeness, ZK was itself a subcontractor in the Project.

The Project was divided into two phases, Phase 1 (an 8-storey Equipment Building) and Phase 2A (a 2-storey Annex Building, excluding an Airport Emergency Service Watchroom). The Subcontract was expressed to commence immediately and, pursuant to cl 4 of the Subcontract, the scheduled dates for the completion of Phases 1 and 2A of the Project were to be no later than 31 July 2017 and 20 February 2017 respectively.³ Pursuant to cl 6 of the Subcontract, DGE was liable to pay liquidated damages for late completion of the Subcontract Works, calculated at the rate of S$1,800 per day of delay for Phase 1, and S$800 per day of delay for Phase 2A. Clause 6 also provided that ZK was “entitled to deduct or set-off against any monies due to [DGE] under the Subcontract… or to recover such amount or amounts from the [Subcontract] as a debt; for such damages as incurred by [DGE] arising from such delay”.⁴

Background to the parties’ dispute

We now proceed to briefly narrate the events which led to the present proceedings between the parties. It is important to note that we make no binding or final findings of fact in the following paragraphs or elsewhere in these grounds of decision. We merely record what we see in contemporaneous documents put before us and we have borne in mind that the picture is not complete. All these allegations will no doubt be fully explored during the course of the legal proceedings between the parties, and we make reference only to the details that are necessary for our purposes.

There is little evidence on the Project in its earlier stages. As noted above, the Subcontract provided for immediate commencement, ie, 7 November 2016, and fairly short completion dates. Not unexpectedly, the Subcontract also provided that the Subcontract Works were to be carried out strictly in accordance with the “Master Programme” (of the main contractor). There were 16 payment certificates before PC 17, and counsel for DGE confirmed that DGE had not taken out any adjudication application to enforce interim payments until PC 17.

However, based on the documents before us, we can surmise that the disagreements between the parties most likely began in early 2018. There is correspondence showing allegations from DGE that, from that period onwards, there were delays in its completion of the Subcontract Works because of late approvals, changes to specifications, unsigned variations and slow or inadequate payment by ZK.⁵ DGE also claimed there was “zero” certification for work it had completed up until Progress Claim 12, and a “negative” certification in respect of Progress Claim 13.⁶ On the other hand, there is evidence that ZK made advance payments or loans to DGE with repayment being effected through set-offs or partial set-offs against certified progress payments and amounts due to DGE.⁷ ZK also exhibited a number of emails complaining of DGE’s delays. For example, in an email dated 16 February 2017, ZK complained of, inter alia, DGE’s late delivery of cladding material and its slow bracket and runner installations, and requested for DGE to catch up with its work.⁸ In another email dated 1 March 2018, ZK complained that DGE had yet to complete outstanding works despite ZK making it advance payments of S$50,000 on 11 August 2017, S$22,000 on 1 February 2018 and S$30,000 on 13 February 2018 to support DGE’s purchase of material and to assist DGE in paying its staff and workers in advance.⁹ In the same email, ZK also noted that DGE had submitted Payment Claim 11 late on 8 February 2018 even though it had been due on 28 January 2018. ZK stated that its email was a “[l]ast warning” for DGE to complete its outstanding works, failing which ZK would engage third parties to complete the same on their behalf.

The correspondence between the parties shows that matters came to head towards the end of April 2018. There was, perhaps amongst others, an issue over the purchase of cabin glass. This is not the correct forum to go into the rights and wrongs of that issue. But what we see is an email from DGE dated 25 April 2018 stating that due to no payments being received, it was unable to continue to pay for the cabin glass.¹⁰ In reply, ZK enclosed the SO’s Instruction (“SOI”) 033 dated 24 April 2018 issued pursuant to Clause 2.5 of the PSSCOC, which noted delays to R3 Tower Cabin Glass and their knock-on effects on other works.¹¹ Observing that “cancel[ling] the purchase order for cabin glass [would have a] a serious impact… [on] overall completion of work”, ZK stated it would help DGE purchase the cabin glass, and that the sums spent would be deducted from DGE’s progress claims.¹² Notably, there are two ZK cheques to Singapore Safety Glass Pte Ltd (“SSG”), one dated 25 May 2018 for S$19,927.56 and the other dated 27 April 2018 for S$41,713.14 included in the documentary evidence.¹³

Thereafter, the parties’ exchanges became increasingly heated. The following exchanges of emails and letters evidence the breakdown and eventual termination of the Subcontract: On 30 May 2018, DGE sent a letter to ZK in response to the email of 24 April 2018 referred to at [10] above. It refuted the allegations made by ZK in relation to the cabin glass, stating that “there was no delay by DGE” and that “the SOI [ZK] enclosed [was] inapplicable”. DGE also complained that despite their progress claims, no payment had been made on an outstanding sum of S$261,006.74 in relation to variation works, and it accused ZK of refusing to approve the same. It further alleged that the Subcontract Works were almost completed and demanded payment of S$149,436.99, being the balance after deducting S$111,569.75 for the cabin glass, by 12pm on 5 June 2018, failing which DGE “[would] treat this [Subcontract] as terminated and… proceed to enforce [its] rights as [it] [saw] fit.”¹⁴ This was followed by an email exchange, ZK on the one hand asking how DGE had derived its figures and DGE on the other maintaining that it had explained many times before how its figures were derived: On 26 June 2018, ZK sent an email (at 12.21pm) maintaining that DGE’s calculation of the outstanding sum due to DGE was incorrect. ZK stated: “If tomorrow still no man allocation on site to carry all the outstanding work, we will engaged [sic] third party to carry out on behalf, all cost will back charge accordingly to [DGE].”¹⁵ DGE responded the same day (at 2.51pm) claiming ZK was in breach of contract in not making payment when it was due: “[ZK] is in breach of contract and this being a repudiatory breach we will terminate the contract and claim all losses from [ZK].”¹⁶ ZK responded later (at 7.19pm) stating that even if it...