Tarkus Interiors Pte Ltd v The Working Capitol (Robinson) Pte Ltd

• Jurisdiction: Singapore
• Judge: Valerie Thean J
• Judgment Date: 30 April 2018
• Neutral Citation: [2018] SGHC 105
• Court: High Court (Singapore)
• Docket Number: Companies Winding Up No 9 of 2018
• Year: 2018
• Published date: 12 May 2018
• Hearing Date: 02 March 2018
• Plaintiff Counsel: Pancharatnam Jeya Putra and Shakti Krishnaveni Sadashiv (AsiaLegal LLC)
• Defendant Counsel: Yeo Lai Hock Nichol and Qua Bi Qi (JLC Advisors LLP)
• Subject Matter: Companies,Winding up
• Citation: [2018] SGHC 105

Valerie Thean J:

The plaintiff in this case brought an application to wind up the defendant on the ground that it was unable to pay its debts, relying on a statutory demand served on 25 October 2017. The defendant’s primary defence to this application was that the plaintiff could no longer rely upon the statutory demand in the light of an agreement subsequent to the statutory demand. On 2 March 2018, I granted the plaintiff’s application. The defendant has appealed and I accordingly furnish the grounds of my decision.

Facts

The plaintiff, Tarkus Interiors Pte Ltd, is a company incorporated in Singapore.¹ The defendant, The Working Capitol (Robinson) Pte Ltd, was incorporated in October 2015,² and is in the business of, inter alia, commercial and industrial real estate management.³

On 18 November 2016, the defendant’s project manager accepted, on behalf of the defendant, the plaintiff’s offer for building and construction work to be carried at the premises of 140 Robinson Road for $7,800,000.00 (“the Construction Contract”). Pursuant to this contract, the plaintiff issued five progress payment claims, duly certified by the project consultants, to the defendant for a total sum of $7,349,758.05.⁴ Four other invoices were issued for additional works, for a total of $31,899.91.⁵ In all, the defendant owed the plaintiff $7,381,657.96. Of that sum, the defendant repaid $2,608,357.93 in February and March 2017.⁶

A meeting was held on 11 July 2017 where Mr Dennis Ong (the plaintiff’s director), Mr Vincent Yeo (the plaintiff’s assistant project director) and Mr Benjamin Gattie (the defendant’s chief executive officer) discussed the details of these debts.⁷ On 12 July 2017, Mr Gattie sent an email to Mr Yeo and Mr Ong, thanking them for meeting with him. In that email, Mr Gattie explained that the defendant had faced “significant setbacks” as a result of their main investor pulling out at the “last minute”. Mr Gattie also apologised, stating that the defendant was “regrettably not in a position to make payment on [its] outstanding dues to [the plaintiff]”. He however expressed optimism at finding another investor for the company, stating that they would “conclude this transaction within 8 weeks”. He then assured the plaintiff that the defendant was “doing everything within [its] power to make payment within the next 8 weeks”. Furthermore, he requested that the plaintiff let him know “the cost of funds that may be associated with an 8 week deferment of payment”.⁸ The contents of the email were repeated in an undated letter sent by Mr Gattie to Mr Ong and Mr Yeo.⁹

On 25 August 2017, Mr Gattie sent another email to Mr Ong, Mr Yeo, amongst others, setting out a plan for debt repayment by instalments. Under the plan, the defendant would pay the plaintiff a total of $5,390,093 from September 2017 to April 2018.¹⁰ The defendant then proceeded to make partial payment of the remaining outstanding sum via a cheque dated 4 September 2017, for the sum of $200,000.¹¹

The plaintiff proceeded to serve a statutory demand for the sum of $4,573,300.03 (which excludes various retention and other sums)¹² on the defendant on 25 October 2017, pursuant to s 254(2)(a) of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”).

Notwithstanding the statutory demand, Mr Gattie and Mr Ong continued to engage over the issue of payment. On 16 November 2017, Mr Gattie and Mr Ong emailed each other in relation to giving the defendant time to pay $4,573,300.03, the amount demanded for in the statutory demand.¹³ On 21 November 2017 the plaintiff acknowledged receipt of a cheque of $3,000,000, while asking for the remaining six cheques and warning that they would take “the necessary legal action” if the cheque for $3,000,000 did not clear by 3 January 2018.¹⁴

On 3 January 2018, however, the plaintiff received a notice of dishonour from its bank in relation to the cheque for $3,000,000 previously issued by the defendant. The reason stated was “payment stopped”.¹⁵ The plaintiff’s solicitors then wrote to the defendant’s solicitors, claiming that that the defendant had breached “the terms of the Settlement Agreement reached between our clients dated 21 November 2017”, and stating that the plaintiff would commence winding-up proceedings pursuant to the statutory demand.¹⁶

Issues

The plaintiff relied upon the statutory demand served on 25 October 2017, and applied for the defendant to be wound up on the basis of s 254(1)(e) read with s 254(2)(a) of the Companies Act. These read as follows:

Circumstances in which company may be wound up by Court

254.—(1) The Court may order the winding up if —

…

(e) the company is unable to pay its debts;

…

Definition of inability to pay debts

(2) A company shall be deemed to be unable to pay its debts if — (a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding $10,000 then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorised requiring the company to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor;

Resisting the winding up, the defendant raised the following defences: that the winding up was an abuse of process because the underlying debt is disputed; that the winding up was an abuse of process because the plaintiff ought to have commenced action under the Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”); that the parties had settled the matter, which agreement superseded the statutory demand; and that, rebutting the presumption created by s 254(2)(a), the defendant was not, in fact, insolvent.

Where a debtor resists a winding-up application in this way, the test in determining whether there is a substantial dispute is the same as that for resisting summary judgment; a triable issue must be raised in order to obtain a stay or dismissal of the winding-up application: see Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal [2008] 2 SLR(R) 491 at [23]). I should mention that the defendant initially applied for an adjournment to file a summons to enjoin the winding up on the basis of the defences at [10]. I explained, as did the judge who granted parties a previous adjournment, that filing a fresh application for an injunction was not necessary. The purpose of such an injunction is to forestall a winding up application where none has been filed, as such action carries the need for advertisement and may adversely affect the reputation and the business of the debtor company. It gives effect to the policy consideration that “the commercial viability of a company should not be put in jeopardy by the premature presentation of a winding-up petition against it” where there is a bona fide dispute over the debt: Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR(R) 268 at [82]. In this case, the winding-up application having been filed, the defendant needed only to establish a triable issue in order to obtain a stay or dismissal. This it did not do, and I explain why by dealing with each of the arguments in turn below.

Was there a bona fide dispute as to the underlying debt?

The defendant’s first two arguments raised an underlying dispute. It was common ground that if the underlying debt is disputed, a winding-up application would be an abuse of process: BNP Paribas v Jurong Shipyard [2009] 2 SLR(R) 949 at [7]. The defendant contended the plaintiff’s work under the Construction Contract was defective, as follows:¹⁷ The thermostats for the air-conditioner control units were installed at the wrong location. The automated lighting control system and air-conditioning system were not functional. The rubber flooring at level 16 of 140 Robinson Road was defective. The wall panels and floor of the offices at level 13 of 140 Robinson Road were infested with wood-boring beetles. It was the defendant’s case that this alleged breach would entitle it to damages or a claim for loss of value, which could be set off against the debt owing to the plaintiff.¹⁸ For the reasons that follow, I was of the view that this dispute over the debt was neither substantial nor bona fide.

First, these allegations were raised extremely late in the day, and in all the circumstances, lacked credibility. In fact, the defendant had ceded liability on these issues on multiple prior occasions, as follows: through partial payments by the defendant of some $2,608,357.93 in February and March 2017; on 11 July 2017, during a meeting where details of payment and an instalment plan were discussed; in an email dated 12 July 2017 that admitted the sum and also promised to compensate the plaintiff for its “cost of funds” for the delay; in an undated letter using the defendant’s letterhead which referenced the 11 July 2017 meeting; in a 25 August 2017 email where Mr Gattie asked for an instalment plan; through another partial payment of $200,000 by a cheque dated 4 September 2017; in an email on 16 November 2017, after the statutory demand was issued; furnishing a cheque dated 4 September 2017 for $3,000,000 on 17 November 2017; and finally, the sum of $4,573,300.03 in the statutory demand was used as the basis for the instalment plan which was attached to the plaintiff’s 21 November 2017 letter. The defendant did not refute the items within the instalment plan until after the commencement of the winding-up action.

Within the context of these multiple concessions, only one of these alleged breaches was brought to the plaintiff’s attention, sometime in July 2017. This was the claim, mentioned at [12](d) above, that the wall panels and floor of the offices at level 13 of 140 Robinson Road were infested with wood...