SECC Holdings Pte Ltd v Helios PV (Asia Pacific) Pte Ltd (Sinohydro Corporation Limited (Singapore Branch), garnishee)

CourtDistrict Court (Singapore)
JudgeLewis Tan
Judgment Date03 November 2022
Neutral Citation[2022] SGDC 258
Citation[2022] SGDC 258
Docket NumberDistrict Court Originating Summons No 19 of 2022 (Summons No 688 of 2022)
Hearing Date27 October 2022
Plaintiff CounselVishi Sundar and Andrea Seet Sze Yuen (WongPartnership LLP)
Defendant CounselChing Meng Hang and Lee Tze En Chrystal (Rajah & Tann Singapore LLP)
Subject MatterContract,Formation,When tripartite agreement was concluded,Credit and Security,Remedies,Garnishee orders,Whether dispute should be summarily determined or tried
Published date15 November 2022
Deputy Registrar Lewis Tan: Introduction

The butterfly effect describes the unexpected consequences that may result from a single act. This effect played out in reality when the judgment debtor, a subcontractor for a project, became unable to pay its own subcontractors due to the unwillingness of the main contractor to pay up on a progress payment certified in favour of the subcontractor. According to the main contractor, this was to protect the interests of other sub-subcontractors as there were liquidity concerns pertaining to the subcontractor.

Such good intentions were potentially counterproductive. For one, the judgment creditor, a sub-subcontractor, was not paid by the subcontractor as a result of the main contractor’s withholding of the progress payment. In an attempt to seek repayment, the judgment creditor obtained an adjudication determination against the subcontractor, which determination it now seeks to enforce against the main contractor by way of a garnishee application.

However, much of the progress payment sum was allegedly assigned to a third party, who was also unpaid by the subcontractor, pursuant to a tripartite agreement. This newfound hurdle, and in particular when such a tripartite agreement was entered into, is the subject of significant contention between the main contractor and the judgment creditor at the show cause hearing for the garnishee application.

Background facts

Before addressing the issues raised, I provide a summary of the key facts in the dispute.

The Land Transport Authority of Singapore appointed Sinohydro Corporation Limited (Singapore Branch) (the “Garnishee”) as the main contractor for its project (“the Project”). To complete the Project, the Garnishee appointed Helios PV (Asia Pacific) Pte Ltd (the “Judgment Debtor”) as its subcontractor.

In December 2021, the Garnishee issued an interim certificate for the sum of $508,304.57 (“Progress Payment”) in favour of the Judgment Debtor.1 However, the Garnishee refused to release this Progress Payment until the Judgment Debtor “provide[d] clear evidence of payment to [the Judgment Debtor’s] subcontractors”.2

The withholding of the Progress Payment had downstream consequences, as the Judgment Debtor thus became unable to make progress payment to its own subcontractors, such as SECC Holdings Pte Ltd (the “Judgment Creditor”).3

As a result of the non-payment, the Judgment Creditor initiated adjudication proceedings against the Judgment Debtor, pursuant to the Building and Construction Industry Security of Payment Act 2004. By an adjudication determination in January 2022, the Judgment Debtor was ordered to pay $249,560.94 with interest accruing at 5.33% per annum to the Judgment Creditor (“Adjudication Determination”).4

The Judgment Creditor notified the Garnishee of the Adjudication Determination, but despite such notice, the latter refused to release the sum thereunder. The Judgment Creditor thus commenced the present proceedings to enforce the Adjudication Determination against the Judgment Debtor, and followed this by taking out this garnishee application to attach any debt due or accruing due from the Garnishee to the Judgment Debtor to satisfy the debt under the Adjudication Determination.

The Judgment Creditor obtained a provisional garnishee order attaching the sum of $251,012.38 plus interest on 2 March 2022 (“PGO”), which PGO was served on the Garnishee on 10 March 2022.

The service of the PGO was insufficient to compel the Garnishee to pay up. Instead, the Garnishee strenuously contested its liability to the Judgment Debtor, arguing in the main that a large portion of the Progress Payment that had been certified in the Judgment Debtor’s favour (see [6] above) had been assigned to a third party or had yet to crystallise.

Principles governing the garnishee application

There are two stages in proceedings for a garnishee order under the Rules of Court 2014 (“ROC 2014”).

First, a judgment creditor has to apply by ex parte summons supported by an affidavit for a provisional garnishee order. Once this provisional garnishee order is obtained, it “shall bind in the hands of the garnishee as from the service of the order on him on any debt specified in the order [emphasis added] (O 49 r 3(2) of ROC 2014). As such, the provisional garnishee order “operates as an injunction” so that “the garnishee is not entitled, upon service of the [provisional garnishee order], to deal with the debt specified in the order in a way that is inconsistent with the order” (SCK Serijadi Sdn Bhd v Artison Interior Pte Ltd [2019] 1 SLR 680 at [29] (“SCK v Artison”), citing Choice Investments Ltd v Jeromnimon (Midland Bank Ltd, garnishee) [1981] 2 WLR 80 at 83).

After the provisional garnishee order is obtained, a show cause hearing will be fixed. At this second stage, “[i]f the garnishee does not attend or attends but is unsuccessful in disputing his liability, the provisional order will be converted into a final order: O 49 r 4(1) [of ROC 2014]”: Telecom Credit Inc v Midas United Group Ltd [2019] 1 SLR 131 (“Telecom Credit”) at [30]. Alternatively, “[i]f the garnishee disputes his liability to pay the debt, the court may determine the matter summarily or order that it be ‘tried in any manner in which any question or issue in an action may be tried’, before deciding the appropriate order to be made: O 49 r 5 [of ROC 2014]”: Telecom Credit at [30].

Therefore, if a garnishee attends the show cause hearing and disputes his liability to pay the debt, the court may summarily determine the matter in finalising or setting aside the provisional garnishee order. Alternatively, it may order that any question or issue in the action be tried.

As one of two options available to the Court at the show cause stage, summary determination is not to be lightly ordered, and the onus is on the judgment debtor and/or the garnishee “to put up an arguable defence that ought to be resolved at trial”. In other words, the Court is concerned at this juncture on whether the parties “should be allowed their day in court to prove [their] claim” (Teleoptik-Ziroskopi and others v Westacre Investments Inc and other appeals [2012] 2 SLR 177 (“Teleoptik”) at [35]). This is not a high threshold, and as the Court of Appeal observed in the same decision, “[g]enerally speaking, there are two ways in which a defence may be shown to be hopeless. The first is if it unsustainable on a cursory examination of the facts. The second is, assuming it is arguable on the facts, it nonetheless has no basis in law” (Teleoptik at [36]).

This position has been echoed in subsequent decisions, such as Telecom Credit Inc v Star Commerce Pte Ltd [2017] SGHCR 3, where in borrowing from summary judgment principles, the learned Assistant Registrar Bryan Fang observed (at [4]) that “if, once all the evidence is in, the court is satisfied that the garnishee has at least an arguable defence, a trial will be ordered” [emphasis in original removed, emphasis added in italics]. At [5] of the same judgment, the principles were summarised thus:

… Viewing garnishee proceedings through the same lens [as in a summary judgment application], … I think that a judgment creditor necessarily establishes the prima facie existence of the debt sought to be garnished once he obtains a provisional garnishee order because such an order would plainly not have been granted if he could not even adduce sufficient evidence to cross this threshold in the first place. This places a tactical burden on the garnishee at the show cause hearing to challenge the judgment creditor’s prima facie case by adducing contrary evidence to discredit it, advancing legal submissions to show that it is misconceived, or employing a combination of both. The judgment creditor may then do likewise to undermine whatever defence the garnishee has mustered. Ultimately, the court must be satisfied based on all the evidence put before it that the garnishee has a defence that is at least arguable or, to put it another way, one that is not hopeless, before a trial may be ordered.

Whether an oral agreement was concluded before the service of the PGO

Having summarised the principles, I turn to consider the parties’ submissions in greater detail. Both the Garnishee and the Judgment Creditor have submitted that the present matter can be summarily determined in their respective favour. For the purposes of this judgment, I begin with the Garnishee’s arguments.

In support of his client’s case, counsel for the Garnishee, Mr Ching Meng Hang (“Mr Ching”), submitted that the Garnishee, Judgment Debtor and one Nexon Engineering Pte Ltd (“Nexon”) entered into a three-party concerning the Progress Payment (the “Tripartite Agreement”). This Tripartite Agreement provided that $256,105.23 (“the Assigned Sum”) of the Progress Payment sum would be transferred by the Garnishee to Nexon. As regards the remaining sum, the Garnishee and Judgment Debtor agreed that $239,250.93 (“the Reserved Sum”) would be “temporar[il]y reserved as estimated on-site implementation cost and w[ould] be released after [the Judgment Debtor] completed all outstanding works”.5

This Tripartite Agreement, it is submitted, was concluded by way of a 3 February email, a 9 February email and/or the signed Tripartite Agreement dated 17 February 2022, with “each constituting a binding oral / written contract”.6 Given the presence of the Tripartite Agreement, it is asserted that the Garnishee is only indebted to the Judgment in the sum of $12,948.41 (“the Remaining Sum”), being the remainder of the Progress Payment after deducting the Assigned Sum and the Reserved Sum.7

The central thrust of the Garnishee’s submissions, therefore, is that there was a concluded Tripartite Agreement before the PGO was served. This is crucial because the PGO would, from the time of service, operate as an injunction on any debt due or accruing due to the...

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