Harmonious Coretrades Pte Ltd v United Integrated Services Pte Ltd

• Jurisdiction: Singapore
• Judge: Tay Yong Kwang JA
• Judgment Date: 26 November 2019
• Neutral Citation: [2019] SGCA 77
• Plaintiff Counsel: Lynette Chew and Grace Lu (Holborn Law LLC)
• Docket Number: Civil Appeal No 126 of 2019
• Date: 26 November 2019
• Hearing Date: 19 September 2019
• Subject Matter: Civil Procedure,Inherent powers,Garnishee orders
• Published date: 12 December 2019
• Citation: [2019] SGCA 77
• Defendant Counsel: Lee Mei Yong Debbie and Wong Qiao Ling Sharon (Millennium Law LLC)
• Court: Court of Appeal (Singapore)
• Year: 2019

Tay Yong Kwang JA (delivering the grounds of decision of the court): Introduction

This appeal concerns the circumstances in which a court will exercise its power to set aside a garnishee order that has been made final. The appellant, Harmonious Coretrades Pte Ltd (“HCPL”), obtained a final garnishee order (“the Final Garnishee Order”) against the respondent, United Integrated Services Pte Ltd (“UIS”). UIS subsequently applied to set aside the Final Garnishee Order on the ground that the debt which it owed to a third party, Civil Tech Pte Ltd (“CTPL”), which was the debt underlying the Final Garnishee Order, was extinguished. Specifically, UIS contended that while it initially owed a debt to CTPL pursuant to a first adjudication determination (“AD1”) under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“the SOPA”), a second adjudication determination (“AD2”) superseded AD1 and thus extinguished the debt arising from AD1. In the High Court, the Judge granted UIS’ application and set aside the Final Garnishee Order. HCPL appealed.

After hearing the parties’ submissions, we were of the view that it could not be said that the debt underlying the Final Garnishee Order was extinguished. We therefore allowed the appeal and restored the Final Garnishee Order. We now give the reasons for our decision.

Background facts Parties to the dispute

UIS was engaged as the main contractor for a construction project. It engaged CTPL to carry out construction works for the project. CTPL in turn engaged HCPL as its sub-contractor for the project to carry out reinforced concrete works.¹

Procedural history HCPL obtaining the Final Garnishee Order

On 31 August 2018, HCPL obtained against CTPL an adjudication determination in Adjudication Application No 288 of 2018 under the SOPA. Pursuant to the adjudication determination, CTPL was to pay HCPL $1,261,096.71, as well as adjudication fees and interest.²

CTPL failed to make payment.³ On 10 September 2018, HCPL commenced Originating Summons No 1113 of 2018 (“OS 1113”)⁴ seeking the following reliefs: 1. Leave be granted to the Applicant to enforce the adjudication determination made by Mr Chow Kok Fong on 31 August 2018 and served on parties on the same day, in respect of Adjudication Application No. SOP/AA 288 of 2018, in the same manner as a judgment or an order pursuant to section 27(1) of the Building and Construction Industry Security of Payment Act (Cap. 30B) ("Act"), and to enter a judgment in terms of the said adjudication determination pursuant to section 27(2) of the Act. 2. Judgment be entered for the Applicant against [CTPL] (“Debtor”) as follows:

That the Debtor do pay the Applicant:

a. The sum of S$1,261,096.71 (including GST) ("Adjudicated Amount"); b. Interest on the Adjudicated Amount or such unpaid part thereof at the rate of 5.33% per annum for the period between 8 September 2018 and the date of full payment of the Adjudicated Amount; c. The sum of S$449.40 (including GST) being 70% of the Adjudication Fee of S$642.00 (including GST); and d. The sum of S$13,369.65 (including GST) being 70% of the Adjudicator Fee of S$19,099.50 (including GST). 3. Fixed costs at $2,000.00 and reasonable disbursements to be paid by the Debtor to the Applicant; and 4. Such further or other relief that this Honourable Court deems fit.

On 13 September 2018, by Order of Court No 6013 of 2018 (“ORC 6013”), the court granted HCPL leave to enforce the adjudication determination and ordered that judgment be entered against CTPL in the sum of $1,261,096.71 with costs and interest.⁵

On 12 October 2018, HCPL commenced garnishee proceedings against UIS by way of Summons No 4781 of 2018 (“SUM 4781”).⁶ HCPL sought an order that all debts due from UIS to CTPL be attached to answer ORC 6013. The application was premised on HCPL’s belief that UIS, being CTPL’s main contractor, would be indebted to CTPL for works carried out on the project.⁷ On 15 October 2018, a provisional garnishee order was made against UIS for the sum of $1.277m (“the Garnished Sum”).⁸ On 25 October 2018, the provisional garnishee order was served on UIS and CTPL.⁹

On 2 November 2018, HCPL and UIS attended before assistant registrar Bryan Fang (“AR Fang”) for UIS as the garnishee to show cause. At the hearing, counsel for UIS informed AR Fang that UIS had no objections to the application.¹⁰ Accordingly, by an order of court of the same date, the provisional garnishee order was made final in respect of the Garnished Sum. This was the Final Garnishee Order referred to above (at [1]).¹¹

Response to the Final Garnishee Order

After the garnishee order was made final, HCPL had discussions with UIS’ assistant general manager, Mr Wang Haw-Li, regarding payment of the Garnished Sum. Mr Wang Haw-Li informed HCPL that UIS was in the midst of preparing the payment pursuant to the Final Garnishee Order.¹²

Although UIS initially had no objections to the making of the Final Garnishee Order, it changed its position subsequently because it formed the view that CTPL was insolvent and owed money to UIS (instead of UIS owing money to CTPL).¹³ Ultimately, UIS did not make payment on the Final Garnishee Order.

On 22 November 2018, UIS filed Original Summons No 1433 of 2018 (“OS 1433”) as well as Summons No 5522 of 2018 (“SUM 5522”) against CTPL and HCPL. UIS sought substantially the same reliefs in OS 1433 and SUM 5522, namely: 1. Pending the outcome of an arbitration between [UIS] and [CTPL] (the “Parties”) relating to the contract between the Parties for the execution of “Reinforcement Concrete, Structure, Structure Steel, Architectural and external works” (the “Works”) for the “proposed additions & alterations to existing semi-conductor factory development involving new erection of A 4-storey production building (FAB), single-storey central utility building (CUB) and high level link bridge at 3RD storey of existing production building & new production building on Lot 02281K & 02283X (PT) MK 29 at 70, Pasir Ris Industrial Drive” (the “Project”): a. Any and all enforcement proceedings against [UIS] by [CTPL] arising from any Judgment or Order of Court obtained as a result of any determination under the Building and Construction Industry Security of Payment Act (Cap.30B) (the “Act”) be stayed; and b. Any and all applications by [CTPL] to have [UIS] wound up, arising from any determination under the Act be stayed; and/or c. The further enforcement of the Final Garnishee Order obtained by [HCPL] in HC/OS 1113/2018 (HC/SUM 4781/2018), by any means of enforcement whatsoever, including any application by [HCPL] to have [UIS] wound up, be stayed. 2. In the alternative, pending the outcome of all current applications to the High Court of the Republic of Singapore to have [CTPL] wound up: a. Any and all enforcement proceedings against [UIS] by [CTPL] arising from any Judgment or Order of Court obtained as a result of any determination under the Act be stayed; and b. Any and all applications by [CTPL] to have [UIS] wound up, arising from any determination under the Act be stayed; and/or c. The further enforcement of the Final Garnishee Order obtained by [HCPL] in HC/OS 1113/2018 (HC/SUM 4781/2018), by any means of enforcement whatsoever, including any application by [HCPL] to have [UIS] wound up, be stayed.

In Mr Wang Haw-Li’s affidavit filed on 22 November 2018 in support of OS 1433 and SUM 5522, he stated that UIS had grounds to believe that CTPL was in financial difficulties, noting that UIS had taken over CTPL’s sub-contractors, that CTPL failed to pay foreign worker levies and that there were winding up applications against CTPL.¹⁴ He also stated that UIS had terminated CTPL’s sub-contract on 4 October 2018, on account of various breaches by CTPL. He estimated that CTPL owed UIS about $7m due to CTPL’s incomplete works on site.¹⁵ This sum was based on a payment response issued by UIS on 23 October 2018 (“the Payment Response”),¹⁶ in response to CTPL’s payment claim issued on 10 October 2018 for approximately $6.8m (“the Payment Claim”).¹⁷ In the Payment Response, UIS indicated that CTPL in fact owed it approximately $7.1m as a result of amounts previously paid, back charges and liquidated damages, among other things.

This is a good juncture to introduce and explain the relevance of AD1 and AD2. In an affidavit filed on 10 December 2018, Mr Wang Haw-Li explained that the Final Garnishee Order, granted on 2 November 2018, was premised on money owed by UIS to CTPL due to an adjudication determination that was rendered on 23 October 2018. This was AD1, which was for a sum of $1,369,987.02. However, by virtue of an adjudication determination rendered on 23 November 2018 (ie, AD2), it was claimed that UIS no longer owed CTPL any debt.¹⁸ AD2 was the result of an adjudication application made by CTPL against UIS, based on the Payment Claim. UIS counterclaimed against CTPL, taking the same position as it had adopted in the Payment Response, ie, contending that CTPL instead owed UIS approximately $7.1m.¹⁹ Specifically, the adjudicator in AD2 took into consideration the values determined in AD1 and nonetheless arrived at a finding that CTPL owed UIS $1,176,050.67.²⁰

Coming back to SUM 5522, although the reliefs prayed for were framed generally in terms of a stay of any or all enforcement proceedings against UIS arising from any judgment obtained as a result of any determination under the SOPA, for all intents and purposes, UIS was seeking a stay of enforcement of AD1 by CTPL against it.

On 15 January 2019, HCPL, UIS and CTPL attended before the Judge in relation to SUM 5522. The Judge made the following orders:²¹ A stay of enforcement of AD1 by CTPL against UIS, unless CTPL obtains an order setting aside AD2. No stay of enforcement in relation to the Final Garnishee Order that had been...