Re Sanpete Builders (S) Pte Ltd

JudgeChao Hick Tin JC
Judgment Date05 January 1989
Neutral Citation[1989] SGHC 4
Date05 January 1989
Subject Matters 254(1)(e), 254 (2)(a) & 254(2)(c) Companies Act (Cap 50),s 254(1)(e), 254(2)(a) & 254 (2) (c) Companies Act (Cap 50),Insolvency Law,Just and equitable ground,Insolvency and inability to pay debts,Companies,Whether respondent company insolvent and unable to pay debts,Opposition by respondent company
Docket NumberCompanies Winding Up No 92 of 1987
Published date19 September 2003
Defendant CounselHarry Elias (Harry Elias & Partners) and Yang Lih Shyng (Koh & Yang)
CourtHigh Court (Singapore)
Plaintiff CounselKelvin Chia (Chor Pee & Co)

Cur Adv Vult

This is a petition by Nakano Singapore (Pte) Ltd (Nakano) to wind up Sanpete Builders (S) Pte Ltd (Sanpete) on three grounds:

(i) Sanpete has failed to pay a debt of $4,149,778.35 demanded by Nakano in their statutory notice dated 23 August 1986;

(ii) in any event, Sanpete is insolvent and unable to pay its debts;

(iii) it is just and equitable that Sanpete be wound up.

This petition is opposed by Sanpete.
However, there are no other creditors of Sanpete which either support or oppose the petition.

First let me set out briefly the background to the case.
Sanpete was the main contractor for an Urban Redevelopment Authority (URA) project called the People`s Park Chinatown Centrepoint which was under development by the People`s Park Chinatown Development Pte Ltd (PPCD) under a contract entered into between Sanpete and PPCD dated 16 July 1984. Subsequently Sanpete entered into a sub-contract dated 14 January 1985 with Nakano. By cl 2(1) of that subcontract Nakano was appointed as the main subcontractor for `the whole of the works, plant, equipment, goods, materials and obligations to be carried out, supplied or completed with, under ... the main contract.` Under the terms of the sub-contract, Nakano was to complete the works by 25 July 1986.

On 5 September 1985, an accident occurred at the worksite due to the collapse of the scaffolding.
It caused the death of three workers. Sixteen others were injured. As a result on 6 September 1985, the Factory Inspectorate of the Ministry of Labour issued a stop work order. All works on site came to a halt. This order was only lifted on 30 September 1985: a loss of 24 days. On 11 August 1986, Nakano pleaded guilty to three charges under the Factories Act 1973 and was accordingly convicted and sentenced.

Sanpete alleged that following the accident on 5 September 1985, Nakano did not proceed with the work with due diligence.
At a site meeting on 8 July 1986 it was minuted that the works were 343 days behind schedule. On 25 July 1986, the architect granted an extension of six months with effect from that day to complete the works.

In the meantime and pursuant to the main contract, interim certificates were issued by the architect.
Nakano claims payment of the sum of $3,166,554.84 based on certificate nos 11-20 as follows:

Architect`s certificate No Date due $ Amount

11 11 Aug 1985 651,203.75

12 15 Sept 1985 800,857.30

13 16 Oct 1985 290,572.29

14 24 Nov 1985 555,651.90

15 15 Dec 1985 15,696.00

16 16 Jan 1986 341,072.10

17 21 Feb 1986 101,721.60

18 17 Mar 1986 183,394.80

19 19 Apr 1986 52,522.20

20 15 May 1986 173,322.90

$ 3,166,554.84

In addition, Nakano also claims a sum of $983,223.52 being accrued interest due pursuant to cl 3 of Part 2 of the Schedule to the sub-contract in respect of the deferred payments due on architect`s certificate nos 4-12.
The breakdown of this claim for interest is set out in para six of the amended petition.

On 23 August 1986, through its solicitors M/s Chor Pee & Co, Nakano issued a notice in pursuance of s 254(2)(a) read with s 254(1)(e) of the Companies Act demanding payment from Sanpete of the total sum of $4,149,778.35 within 21 days from the date thereof.
No payment was made by Sanpete in response to the notice. Nor was any arrangement made to secure or compound for it.

On 29 August 1986, PPCD was wound up by an order of court in Companies Winding-Up No 301/86 pursuant to a creditor`s petition.
On 16 September 1986, Sanpete, in accordance with cl 26(1) of the main contract, gave notice of termination to PPCD. On 4 October 1986, Sanpete, pursuant to cl 11(4) of the sub-contract, gave notice of termination to Nakano.

The present petition was filed by Nakano on 18 February 1987.
The petition was amended pursuant to an order of court made on 22 January 1988 to include another ground based on the general insolvency of Sanpete.

Sanpete`s grounds to oppose petition

The grounds advanced by counsel for Sanpete to resist this petition may be put under the following heads:

(i) no payment is due to Takano under architect`s certificate nos 11-20;

(ii) Sanpete is entitled to claim liquidated damages against Nakano for delay and to set those off against payments due to Nakano under the certificates;

(iii) Sanpete is entitled to claim against Nakano for damages for breach of contract;

(iv) clause 18 of the sub-contract provides for the submission of disputes between the parties to arbitration and accordingly, Nakano is precluded from presenting the present petition.

Two other grounds were also raised in the affidavits filed on behalf of Sanpete:

(i) the fact that an earlier winding-up petition was filed by Nakano, which was subsequently withdrawn; and

(ii) the entitlement by Sanpete to set off certain amounts which were due from Nakano to Sanpete on account of site expenses.

At the hearing before me, counsel for Sanpete indicated that it would not be pursuing these two grounds.
I will now proceed to deal with each of the four main grounds seriatim.

Payments due under architect`s certificates

Under the terms of the sub-contract, payment by Sanpete to Nakano for works done is based on 85% of the value certified by the architect pursuant to the main contract. However, in respect of the first twelve certificates of the architect, the sub-contract provides for a scheme of deferred payment. Under that scheme Sanpete is required to furnish promissory notes for the sums due and is to pay interest for the deferred payments. I think it is important for me at this juncture to set out in full the relevant provisions of the sub-contract governing payments:

Clause 12(2) and (3) of sub-contract:

(2) The value of the first twelve (12) certificates (hereinafter called `the deferred payments`) issued or to be issued by the architect under the main contract less the agreed deduction of 15% shall be deferred and paid in the manner stated in Part II of the schedule hereto and save as aforesaid the sub-contractor will (unless the schedule hereto provides to the contrary) be paid the value of the said works as certified by the architect less the agreed deduction of 15% within fourteen (14) days commencing from the expiry date of each period for honouring certificates as provided in condition 30 of the conditions to the main contract following certification by the architect. (Emphasis added.)

(3) The contractor shall notwithstanding anything in this sub-contract be entitled to deduct from or set off against any money due or to become due from him to the sub-contractor (including any retention money) any sum or sums which the sub-contractor is liable to pay to the contractor under this sub-contract.

Part II of schedule to sub-contract

1 Payment of the first twelve (12) architect`s monthly certificates to be issued by the architect under the main contract shall be deferred for a period not exceeding twelve (12) months commencing from the expiry date of each period for honouring certificates as provided in condition 30 of the conditions to the main contract plus fourteen (14) days.

2 Within fourteen (14) days of receipt by the contractor of each of the first twelve (12) architect`s certificates as aforesaid the contractor shall issue and deliver to the sub-contractor a promissory note (hereinafter called the note) for the amount certified by the architect in the said certificate (less 15% as aforesaid) guaranteed by an insurance company, bank or other financial institution ... .

3 The deferred payments shall carry interest at 12% from the expiry date of each period for honouring certificates ... .

4 Upon the maturity of the notes, payment shall be made forthwith by the contractor upon presentation and delivery of the relevant note.

There were delays in the issue by Sanpete of the promissory notes in respect of the first ten certificates.
Further, in respect of certificate nos 11 and 12, to date no promissory note has yet been issued. Payments on the first ten certificates have an been paid except for the interest accrued on certificate nos 4-10. It is not disputed that the architect has issued certificate nos 11-20. The argument that is being advanced on behalf of Sanpete is that as the certificates issued by the architect are not in favour of Nakano but in favour of Sanpete, there is therefore no payment due from Sanpete to Nakano. In my judgment there is no merit at all in this argument. Clause 12(2) and para 2 of Part II of the Schedule quoted above expressly provide that payment to Nakano would be based on the certificates issued by the architect pursuant to the main contract, less 15%.

There are two further related arguments advanced by Sanpete.
The first is that as they have not issued a subsidiary certificate in favour of Nakano, Nakano is not entitled to any payment under the certificates issued by the architect. The second is that in respect of certificate nos 18-20, Sanpete has yet to submit the certificates for payment to PPCD.

I would observe that there is no requirement in the sub-contract that a subsidiary certificate need be issued by Sanpete before payment is due to Nakano.
Sanpete argues that in respect of the first ten certificates there was the practice of issuing subsidiary certificates. In my view this practice cannot alter the terms of the sub-contract. More importantly, I am surprised to hear Sanpete relying on its own default in denying what is due to Nakano Similarly,, I do not see how a default by Sanpete to present certificates to PPCD for payment should entitle it to deny what is due to Nakano. I must stress that nowhere in the sub-contract is it provided that payment by Sanpete to Nakano is dependent upon Sanpete presenting the architect`s certificates to PPCD, although I recognize that under cl 30(1) of the main contract, Sanpete must present certificates to PPCD before PPCD is obliged to pay Sanpete. Clause 12(2)...

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