Lim Poh Yeoh (alias Lim Aster) v TS Ong Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Edmund Leow JC
• Judgment Date: 01 September 2016
• Neutral Citation: [2016] SGHC 179
• Plaintiff Counsel: Joseph Ignatius and Chong Xin Yi (Ignatius J & Associates)
• Docket Number: Originating Summons (Bankruptcy) No 66 of 2015 (Registrar’s Appeal No 350 of 2015)
• Year: 2016
• Hearing Date: 01 April 2016,27 July 2016,06 May 2016,07 March 2016,15 August 2016
• Subject Matter: Building and Construction Law,Statutes and regulations
• Date: 15 August 2016
• Defendant Counsel: Alvin Chang and Carmen Chen (M&A Law Corporation)
• Court: High Court (Singapore)
• Citation: [2016] SGHC 179
• Published date: 16 June 2017

Edmund Leow JC: Introduction

The appellant, Ms Lim Poh Yeoh @ Aster Lim, was the owner of a property located at 40 How Sun Drive (“the property”). She engaged the respondent, TS Ong Construction Pte Ltd, to perform certain building works on her behalf via an agreement dated 3 May 2011 (“the Contract”). The dispute arose when the appellant failed to make payment in respect of one of the progress payments and the respondent submitted the matter for adjudication under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”).¹ The respondent obtained an adjudication determination for the sum of $138,660.16 (“the AD”). In May 2013, the respondent entered judgment in the terms of the AD and sought to enforce payment but was largely unsuccessful. Separately, the appellant commenced Suit No 92 of 2015 (“S 92/2015”) in January 2015 against the respondent claiming a sum of approximately $400,000 in respect of damages arising out of alleged breaches of the Contract. Several months later, the respondent issued a statutory demand (“the SD”) for the outstanding amount owed under t AD.²

The appellant then brought Originating Summons (Bankruptcy) No 66 of 2015 (“OSB 66/2015” or “the present application”) to seek, among other things, to set aside the SD under r 98(2) of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) (“BR”), arguing that she had a valid cross demand against the respondent by virtue of the claims brought in S 92/2015. The Assistant Registrar (“the AR”) held that the claims in S 92/2015 were not really genuine cross demands but were instead defences to the original action so r 98(2)(a) of the BR did not apply. The AR dismissed the summons and awarded costs to the respondent.³ Dissatisfied, the appellant appealed.

The issue in this appeal was whether the appellant had a cross demand within the meaning of r 98(2)(a) of the BR. Ostensibly, this turned on whether the AR was correct in construing the claims in S 92/2015 in the way he did. However, in the course of the oral hearings, it quickly became apparent that the deeper question was whether a statutory demand issued in respect of a judgment entered in the terms of an adjudication determination made under the SOPA could ever be set aside on the ground that the debtor had a cross demand which it was pursuing in a separate suit; and if it could, the question which then arose was whether the court ought to treat the statutory demand any differently because the judgment in question was one obtained under the SOPA. These were difficult questions of legal policy the resolution of which required consideration of two competing policy interests.

The first is the legislative policy which undergirds the SOPA, which is to improve cash flow in the construction industry. Central to this is the “pay first, argue later” philosophy, which accords “temporary finality” to adjudication determinations pending the final resolution of a dispute. It would seem that in order to give effect to this, adjudication determinations, particularly those embodied in judgments of the court, ought not to be easily set aside and should be readily enforceable. The second consideration, which lies at the heart of our bankruptcy regime, is that the bankruptcy procedure should not be abused as a means to prevent debtors from litigating genuine claims. Underpinning this is the well-established principle that the bankruptcy process is not an appropriate forum for the resolution of contested matters, so debtors who have genuine cross claims ought not to face bankruptcy proceedings (which could detrimentally affect their ability to carry on their suit) and should instead be entitled to pursue their claims unfettered.

As this was a novel issue which had yet to be considered by our courts, I directed that the parties file further submissions and I record my appreciation for their assistance. After careful consideration of their arguments, I held that as a matter of principle, it was possible for a statutory demand founded on an adjudication determination to be set aside on the basis that the debtor (the respondent in an adjudication) had a valid cross demand which it was prosecuting in a separate suit. I also held that on the facts of this case, S 92/2015 presented genuine triable issues and therefore constituted a valid cross demand within the meaning of r 98(2)(a) of the BR. Given that the amount claimed by the appellant in S 92/2015 exceeded the value specified in the SD, I allowed the appeal and set the SD aside. In the light of the important point of principle involved, I granted the respondent leave to appeal to the Court of Appeal and now set out the reasons for my decision, beginning with a more detailed recitation of the relevant facts.

Background facts

The appellant had desired to subdivide the property into two separate lots. To that end, she engaged the respondent to construct two semi-detached houses for the appellant on the property for the sum of approximately $1m.⁴ Pursuant to the Contract, the works in question were to be completed within 8 months and a temporary occupation permit was to be obtained no later than 31 January 2012.⁵ However, the works were neither completed within 8 months nor was the temporary occupation permit obtained by the stated date.

On 1 November 2012, the respondent issued a progress payment claim for a sum of $138,660.16 for work done in April 2012. This was supported by an interim certificate dated 17 May 2012. The appellant did not submit any payment response.⁶ On 6 December 2012, the respondent referred the matter to adjudication and a copy of the adjudication application was served on the appellant the next day. Under s 15(1) of the SOPA, the appellant had 7 days to file her adjudication response (ie, by 14 December 2012) but she did not do so within the stipulated time.

The appellant’s failure to submit either a payment response or an adjudication response gave rise to two important consequences. First, the adjudicator was required to render an adjudication determination within 7 days of the deadline for the filing of the adjudication response (ie, by 21 December 2012), notwithstanding the fact that no adjudication response had been submitted (see ss 16(1) and 16(7) of the SOPA). Second, the adjudicator was enjoined to reject any adjudication response filed outside the stipulated period or – and this is crucial – from considering any reasons for withholding payment which was not contained in a payment response (see ss 15(3) and 16(2)(b) of the SOPA). Nevertheless, the adjudicator wrote to the appellant on 19 December 2012 to invite him to raise any point which might be relevant to the adjudication by the next day. Over the next two days, the adjudicator received several emails from the appellant’s solicitors of which the last (sent at 3.40pm on 21 December 2012) set out several reasons why the respondent’s claim was allegedly unsustainable.⁷

On 21 December 2012, the adjudicator held that the respondent’s claim was valid and that it had complied with the statutory requirements under the SOPA. The adjudicator therefore determined that the appellant was liable to pay the appellant the whole of the claimed sum of $138,660.16 plus interest and costs. In the AD, the adjudicator explained that he did not consider the points raised by the appellant as he was enjoined from considering any reason for withholding any amount that was due unless the reasons were contained in a payment response.⁸ The appellant did not pay the adjudicated amount.⁹

Enforcement proceedings

On 14 May 2013, the respondent successfully applied under s 27 of the SOPA for judgment to be entered in the terms of the AD (“the Judgment”). It then took the following steps to enforce payment of the judgment debt:¹⁰ On 11 September 2013, the respondent successfully applied for a garnishee order and recovered a sum of $30,722.86 from the appellant’s bank account. On 24 October 2014, the respondent applied for an Order of Examination Debtor against the appellant. On 22 January 2015, the respondent obtained a writ of seizure and sale against the property. However, the respondent said that it was unable to execute the sale of the property as the property was mortgaged and the mortgagor-bank did not consent to the sale.

On 28 January 2015, shortly after the respondent obtained the writ of seizure and sale, the appellant commenced S 92/2015. In her statement of claim (“SOC”), the appellant listed a litany of complaints, ranging from the delay in the completed of the works to the poor workmanship and omissions to supply certain contractually stipulated fixtures. For these, the appellant claimed for more than $400,000 in damages.¹¹ In its Defence and Counterclaim (“Defence”) the respondent denied liability and counterclaimed for a sum of $248,195.40 which it said it was still owed under the Contract.¹²

On 22 April 2015, the appellant applied, via Summons No 1903 of 2015 for a stay of execution of the Judgment pending the determination of S 92/2015. This was heard and dismissed by the same Assistant Registrar who heard the present application in the first instance. The appellant appealed in Registrar’s Appeal No 155 of 2015 and her appeal was heard and dismissed by Foo Chee Hock JC on 26 May 2015.¹³ I will refer to the summons and the appeal collectively as the “stay application”.

Meanwhile, the respondent took steps to prepare and serve the SD. The SD was dated 27 July 2015 and it specified that the appellant owed the respondent a total sum of $144,609.13. This sum comprised the outstanding amount on the judgment debt (after making a deduction for the sum recovered under the garnishee order) plus interest and costs.¹⁴ On 27 July 2015, the respondent’s solicitors wrote to the appellant’s solicitors to ask if they had instructions to accept service of process. They asked for a reply by noon the next day failing...