Ng Tai Tuan and Another v Chng Gim Huat Pte Ltd

• Jurisdiction: Singapore
• Judge: Chao Hick Tin JC
• Judgment Date: 28 September 1990
• Neutral Citation: [1990] SGHC 70
• Docket Number: Companies Winding Up No 254 of 1989
• Date: 28 September 1990
• Published date: 19 September 2003
• Year: 1990
• Plaintiff Counsel: Richard Chia (Chia Tan & Yek)
• Citation: [1990] SGHC 70
• Defendant Counsel: Susan Kong and Aw Ee Tuan (Shook Lin & Bok)
• Court: High Court (Singapore)
• Subject Matter: Whether counterclaims substantial and bona fide,Company unable to pay its debts,Winding up,Debtor company ignoring creditor company's statutory demand for payment,s 254(2)(a) Companies Act (Cap 50, 1988 Ed),Companies,Words and Phrases,Whether petition for winding-up should be stayed,'Neglected'

This is a petition to wind up Chng Gim Huat Pte Ltd (hereinafter called the company), on the ground that the company is deemed insolvent under s 254(1)(e) read with s 254(2)(a) of the Companies Act (Cap 50, 1988 Ed). After hearing the parties, I ordered that the petition be stayed pending the determination of certain counterclaims. I now give my reasons.

The nominal capital of the company is $1m divided into 10,000 shares of $100 each. The paid-up capital of the company is $700,000. The main area of activities of the company would appear to be in the construction field.

The company and the petitioners had for several years been engaged in a kind of business relationship where the company would obtain construction works and each of the projects so secured would be entirely sub-contracted to the petitioners. Under the arrangement and as a consideration therefor, the petitioners would allow an agreed margin of the tendered price as profit to the company. As part of the arrangement, the company would also provide financial assistance to the petitioners when they required it, order and supply material to the petitioners on credit and make miscellaneous payments on behalf of the petitioners. Under such a kind of arrangement, the parties had proceeded on five projects at the following locations: (i) Telok Blangah/Temenggong Road; (ii) People`s Park Katong; (iii) Chinatown Centrepoint; (iv) North Bridge Road; and (v) Hotel Grand Central.

The debt which is the subject of this petition, arose under two judgments totalling $544,346.43 - $149,972.49 in Suit No 10074/85 and $394,393.94 in Suit No 10075/85. These two sums were admitted by the company and were in relation to the North Bridge Road and the Telok Blangah projects. On 28 July 1989, the petitioners, through their solicitors, served the statutory notice of demand upon the company requiring the company to pay the aforesaid sum within 21 days from the date thereof, failing which the petitioners would commence winding-up proceedings against the company without further reference. Three weeks elapsed and the company had still not satisfied the total sum demanded.

In an affidavit filed on 13 October 1989 by one Chng Beng Siong, a director of the company, it is admitted that the company owes the petitioners a total sum of $544,346.43 under the two judgments. Mr Chng deposed that the petitioners were the sub-contractors in several projects where the company was the main contractor. Three suits have been taken out by the petitioagainst the company, ie Suit No 2689/84 in respect of the People`s Park Chinatown project, Suit No 10074/85 in respect of the North Bridge Road project and Suit No 10075/85 in respect of the Telok Blangah project. In Suit No 2689/84 the claim of the petitioners is for a sum exceeding $5m. In Suit No 10074/85 and Suit No 10075/85 the claims are for $269,972.49 and $501,428.75 respectively. The petitioners applied for summary judgment in respect of all three actions. Leave to defend has been granted to the company in Suit No 2689/84. In respect of the other two actions, as mentioned above, the company admitted that a sum of $149,972.49 is due to the petitioners in Suit No 10074/85 and $394,393.94 in Suit No 10075/85. Accordingly, judgment was entered for the petitioners in those sums and the company was granted unconditional leave to defend the rest of the petitioners` claims in those two actions. In granting summary judgement on those two sums admitted by the company, the learned assistant registrar ordered that execution of the said two judgments be stayed pending the hearing of certain counterclaims by the company against the petitioners. I would add that the same counterclaims were raised by the company early in the proceedings in the three suits.

The petitioners successfully appealed to the judge-in-chambers against that part of the assistant registrar`s decision that the execution of the judgments be stayed pending the hearing of the company`s counterclaims against the petitioners. The company has since appealed to the Court of Appeal against the decision of the judge-in-chambers lifting the stay of the execution of the judgments. The company says that by virtue of their bona fide counterclaims which in their totality are for an amount very much exceeding the debt owing by the company to the petitioners under the two judgments, the company is justified in not complying with the statutory demand served by the petitioners.

The arguments before me centred on two main issues. First, are the counterclaims of the company against the petitioners bona fide and based on substantial grounds? Second, even if the counterclaims are based on substantial grounds, is that a sufficient basis to dismiss the petition or to order a stay?

I will now deal with the first issue. The counterclaims of the company against the petitioners are in relation to three projects as follows:

(a) Chinatown Centrepoint $ 3,769,569.40

(b) Hotel Grand Central $ 9,336.40

(c) People`s Park Katong $ 1,352,323.90

Total $ 5,131,319.70

In respect of the Chinatown Centrepoint project the counterclaim is based on material bought and supplied on credit by the company to the petitioners and on advance payments made by the company on behalf of the petitioners in relation to miscellaneous matters. The company says that these amount to $3,604,840.33. Taking into account an amount of $105,180.96 due from the company to the petitioners in respect of work done, there is a balance of $3,499,659.37. In addition the company says that in relation to the project, it had given to the petitioners advances amounting to $270,000. All that add up to a grand total of $3,769,659.37 (I should point out that there is an insignificant discrepancy of3 cents in the company`s calculation). In support of this counterclaim, various invoices have been exhibited as evidence thereof. On the evidence before me it has not been satisfactorily shown that the counterclaim of the company, in respect of the material cost and miscellaneous payments, is not bona fide. It seems to me to be based upon substantial grounds. The petitioners have not filed any affidavit in reply to the affidavit of Chng Beng Siong, though the petitioners had asked that the court files relating to the three suits be placed before me and references were made to them at the hearing of this petition.

I do not think it is necessary to touch on the counterclaim involving the Hotel Grand Central project as the amount involved is quite insignificant. As regards the counterclaim concerning the People`s Park Katong project, here again the counterclaim essentially relates to the cost of material supplied to the petitioners and miscellaneous payments made on their behalf for that project which in toto amounts to $2,670,297.83. After subtracting various sums due to the petitioners in respect of work done there is a balance of $1,352,323.90 which formed the subject of the counterclaim. As in the case of the Chinatown Centrepoint project, here the company has also exhibited various invoices to show material supplied to and miscellaneous payments made on behalf of the petitioners. Again, it seems to me that the counterclaim is bona fide.

Accordingly, on the first issue which I had to decide, I held that the counterclaims in respect of the Chinatown Centrepoint and the People`s Park Katong projects are bona fide and based on substantial grounds and either of the two counterclaims...