Strategic Construction Pte Ltd v JH Projects Pte Ltd

• Jurisdiction: Singapore
• Judge: Tan Siong Thye J
• Judgment Date: 27 September 2017
• Court: High Court (Singapore)
• Docket Number: Companies Winding Up No 70 of 2017 (Summons No 1659 of 2017)
• Date: 27 September 2017

Strategic Construction Pte Ltd

and

JH Projects Pte Ltd

[2017] SGHC 238

Tan Siong Thye J

Companies Winding Up No 70 of 2017 (Summons No 1659 of 2017)

High Court

Building and Construction Law — Statutes and regulations — Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“Act”) — Claim underlying winding-up action arose under Act — Whether winding-up action and cross-claim should run concurrently to give effect to policy behind Act — Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)

Companies — Winding up — Stay of proceedings pending winding-up order — Whether solvency of applicant prerequisite to obtaining stay

Companies — Winding up — Stay of proceedings pending winding-up order — Whether triable issue that cross-claim was genuine and exceeded sums in main claim

Held, allowing the application:

(1) JHP need not have shown that it was solvent as a prerequisite to obtaining a stay. The authority cited by SCPL concerned an application for the stay of a winding-up order that had already been made but had not yet been executed, whereas the present situation concerned an application to stay winding-up proceedings where winding-up orders had not yet been made: at [19], [21] and [23].

(2) JHP could rely on its cross-claim even though SCPL's underlying claim and JHP's cross-claim did not arise from the same contract. SCPL's winding-up action in CWU 70 was not premised on SOPA but rather on the Companies Act (Cap 50, 2006 Rev Ed). While cross-claims under the SOPA regime were limited to cross-claims within a single contract, this did not apply to CWU 70, which was commenced under the insolvency regime. Thus, the court could consider the cross-claim as long as it was a genuine one that exceeded the amount of the statutory demand: at [31] and [32].

(3) JHP had shown that there was a triable issue in the form of a genuine cross-claim for unrectified defects under the Tuas project. The correspondence between the parties indicated that both JHP and SCPL proceeded on the assumption that SCPL admitted liability towards JHP in respect of the unrectified defects. SCPL's submission that the inconsistencies in the quoted rectification costs and the total amount claimed indicated that JHP's cross-claim was not genuine was rejected. Only the quantification was different, and JHP appeared to have had good reasons for the variation: at [36] and [38].

(4) SCPL's submission that Suit 311 was filed in order to forestall CWU 70 and not for the genuine purpose of pursuing its rights under the contract was also rejected. JHP was justified in pursuing its claim under Suit 311 because SCPL had by that time filed CWU 70, and JHP had wanted to pursue the claim in Suit 311 before it became impossible to do so by virtue of it having been wound up. Furthermore, the correspondence indicated that the parties were at an impasse in relation to the methods of rectifying the defects by that time and thus JHP had good reason to pursue the claims in court: at [41] and [42].

(5) SCPL's submission that upon a correct quantification of the cross-claim, the sums in the cross-claim were less than the claimed sum was rejected. JHP's quantification of its cross-claim was based on its own surveyors' estimates and SCPL did not challenge the bona fides of these surveyors. Which of these sums accurately represented the costs of the rectification works was a triable issue: at [45].

(6) SCPL's submission that since its underlying claim was under SOPA, CWU 70 and Suit 311 should be allowed to run in parallel was rejected. The parliamentary debates during the second reading of the SOPA indicated that Parliament had expressly intended that where a claim under SOPA conflicted with a claim under the insolvency regime, the latter would prevail because the insolvency regime had far-reaching consequences, including that of preferring certain creditors over others due to their security over the company's assets. Thus, it made no difference that SCPL's underlying claim arose out of SOPA, since CWU 70 was commenced under the insolvency regime: at [57] and [61].

(7) JHP was ordered to pay the amount that SCPL claimed in its statutory demand within seven days of the stay: at [62].

[Observation: JHP's argument that SCPL had brought the winding-up proceedings for the collateral purpose of ensuring that there would also be no further claim against SCPL in relation to the defects was rejected. By the time CWU 70 was filed, SCPL had already agreed to take on the task of rectifying the defects and was only negotiating how to do so. If SCPL wanted to avoid the obligation of rectifying altogether, it would have commenced CWU 70 much earlier: at [49].]

Case(s) referred to

Denmark Skibstekniske Konsulenter A/S I Likvidation v Ultrapolis 3000 Investments Ltd [2011] 4 SLR 997 (refd)

Engineering Construction Pte Ltd v Sanchoon Builders Pte Ltd [2011] 1 SLR 681 (refd)

Hua Rong Engineering Pte Ltd v Civil Tech Pte Ltd [2018] 3 SLR 778 (refd)

Lim Poh Yeoh v TS Ong Construction Pte Ltd [2017] 4 SLR 789 (refd)

Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR(R) 268; [2007] 2 SLR 268 (refd)

Nanfri. The [1978] QB 927 (refd)

Pacific Rim Investments Pte Ltd v Lam Seng Tiong [1995] 2 SLR(R) 643; [1995] 3 SLR 1 (refd)

Phang Choo Ong v Gilcom Investment Pte Ltd [2016] 3 SLR 1156 (refd)

Facts

Strategic Construction Pte Ltd (“SCPL”), the subcontractor of JH Projects Pte Ltd (“JHP”), made payment claims under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”) for amounts due for work done in a construction project for a military camp at Upper Jurong Road but which JHP had failed to pay. When payment was not forthcoming, SCPL took out Companies Winding Up No 70 of 2017 (“CWU 70”) on 5 April 2017 to wind up JHP. In response, JHP took out Suit No 311 of 2017 (“Suit 311”), claiming that it had suffered loss and damage by reason of SCPL's failure to rectify defects in breach of another contract between the parties relating to a project in Tuas South Street (“the Tuas project”). JHP also filed Summons No 1659 of 2017 (“SUM 1659”), asking the court to stay or restrain CWU 70 pending the disposal of the action in Suit 311.

JHP argued that a stay of CWU 70 was warranted as it had a genuine cross-claim in Suit 311 against SCPL. JHP further contended that SCPL had taken out CWU 70 for the collateral purpose of circumventing its contractual liability for the rectification of the defects in the Tuas project, and that this should not be allowed. SCPL argued that JHP could not obtain a stay as it was insolvent. It further argued that the cross-claim was not genuine, being filed purely to stall CWU 70, and was not valid, as it did not arise from the same contract as SCPL's claim. Finally, SCPL also argued that because its underlying claim was based on SOPA, the court should give effect to the policy behind SOPA of allowing efficient resolution of disputes by allowing CWU 70 and Suit 311 to run in parallel.

Legislation referred to

Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)

Companies Act (Cap 50, 2006 Rev Ed) ss 254(1)(e), 258, 279(1)

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 59 r 3(2)

Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) ss 34(2)(a), 34(2A), 34(2A)(a)

Andy Chiok (Michael Khoo & Partners) for the plaintiff in CWU No 70/2017 and for the respondent in Summons No 1659/2017;

Kris Chew Yee Fong (Zenith Law Corporation) for the defendant in CWU No 70/2017 and for the applicant in Summons No 1659/2017.

27 September 2017

Tan Siong Thye J:

Introduction

1 The plaintiff, Strategic Construction Pte Ltd (“SCPL”), was the subcontractor of the defendant, JH Projects Pte Ltd (“JHP”), in a construction project for a military camp at Upper Jurong Road (“the Upper Jurong project”). SCPL made payment claims under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”) for amounts due for work done under the Upper Jurong project but JHP failed to pay. SCPL then commenced adjudication and, on 1 February 2017, obtained an adjudication award (“the AA”) for the amount of $156,979.24 (including GST). SCPL was granted leave to enforce the AA on 10 March 2017, and issued a statutory demand for a sum of $172,803.07 on 13 March 2017, which included the adjudicated sum, interest, and relevant costs.

2 When payment was not forthcoming, SCPL took out Companies Winding Up No 70 of 2017 (“CWU 70”) on 5 April 2017 to wind up JHP. In response, JHP took out the following applications:

(a) On 6 April 2017, JHP filed DC Summons No 1164 of 2017 (“DC SUM 1164”), in which JHP applied to pay the judgment debt in monthly instalments over 24 months.

(b) On 10 April 2017, JHP took out Suit No 311 of 2017 (“Suit 311”), claiming that it had suffered loss and damage by reason of SCPL's failure to rectify defects in breach of another contract between the parties relating to a project in Tuas South Street (“the Tuas project”).

(c) On 10 April 2017, JHP also filed Summons No 1659 of 2017 (“SUM 1659”) asking the court to stay or restrain CWU 70 pending the disposal of the action in Suit 311. Alternatively, JHP asked the court to adjourn CWU 70 until DC SUM 1164 was determined.

JHP eventually withdrew DC SUM 1164. There was, therefore, no need to consider its alternative application under SUM 1659. Thus, the only application that I had to consider was whether to stay or restrain CWU 70 pending the disposal of Suit 311.

3 After hearing the parties' submissions, I gave brief reasons why I allowed JHP's application and ordered CWU 70 to be stayed pending the disposal of JHP's action in Suit 311. As a condition of the stay, JHP was to pay the amount claimed in SCPL's statutory demand dated 13 March 2017 into court. SCPL is...