IN THE COURT OF APPEAL OF THE REPUBLIC OF SINGAPORE

[2021] SGCA 61

Civil Appeal No 119 of 2020

Between

Diamond Glass Enterprise Pte Ltd

… Appellant
And

Zhong Kai Construction Co Pte Ltd

… Respondent

In the matter of Companies Winding Up No 95 of 2020

Between

Diamond Glass Enterprise Pte Ltd

… Applicant
And

Zhong Kai Construction Co Pte Ltd

… Respondent

GROUNDS OF DECISION
[Insolvency Law] — [Winding up]
[Building and Construction Law] — [Statutes and regulations]
 TABLE OF CONTENTS

FACTS...............................................................................................................2
PARTIES AND CONTRACTUAL MATRIX .............................................................2
BACKGROUND TO THE PARTIES’ DISPUTE ........................................................4
PROCEDURAL HISTORY ..................................................................................10
Progress Claim No 17 and Suit 917 of 2019............................................10
Adjudication Application 339 of 2019 .....................................................11
Suit 1282 of 2019 and the Consolidated Suit ...........................................12
OS 223 of 2020.........................................................................................13
CWU 95 and SUM 1577...........................................................................14

DECISION BELOW ......................................................................................14

THE PARTIES’ ARGUMENTS ON APPEAL...........................................15

ISSUES TO BE DETERMINED ..................................................................16

THE APPLICABLE STANDARD OF REVIEW FOR A CROSS-

CLAIM ............................................................................................................18

THE APPROACH TO WINDING-UP PETITIONS FOUNDED

ON ADJUDICATION DETERMINATIONS .............................................26
LOCAL POSITION ...........................................................................................29
POSITION IN OTHER JURISDICTIONS ...............................................................32
The Australian position ............................................................................32
The English position.................................................................................34
OUR ANALYSIS AND THE CORRECT APPROACH ..............................................35

i
WHETHER ZK HAS A CROSS-CLAIM AGAINST DGE
WHICH JUSTIFIES THE STAY OR DISMISSAL OF CWU 95 ............44

CONDITIONS OF STAY..............................................................................53
POWER TO ORDER CONDITIONAL STAY ..........................................................54
WHETHER A CONDITIONAL STAY OUGHT TO BE GRANTED .............................55

CONCLUSION...............................................................................................57

ii
 This judgment is subject to final editorial corrections approved by the
court and/or redaction pursuant to the publisher’s duty in compliance
with the law, for publication in LawNet and/or the Singapore Law
Reports.

Diamond Glass Enterprise Pte Ltd

v
Zhong Kai Construction Co Pte Ltd

[2021] SGCA 61

Court of Appeal — Civil Appeal No 119 of 2020

Tay Yong Kwang JCA, Woo Bih Li JAD and Quentin Loh JAD
1 February 2021

21 June 2021

Quentin Loh JAD (delivering the grounds of decision of the court):

Introduction

1 This appeal questions the extent to which the temporary finality of an

adjudication determination under the Building and Construction Industry
Security of Payment Act (Cap 30B, 2006 Rev Ed) (“SOPA”) must be given
effect and enforced. In particular, would an adjudication determination
judgment debtor (“ADJ debtor”) be able to stave off a winding-up petition
brought by an adjudication determination judgment creditor (“ADJ creditor”)
by raising a cross-claim against the latter or by disputing the adjudication debt?

2 The appellant, Diamond Glass Enterprise Pte. Ltd (“DGE”), a

subcontractor, secured an adjudication determination in its favour in respect of
sums due under a payment claim, Payment Claim 17 (“PC 17”) which it
promptly, (as it was perfectly entitled to), applied to enforce by way of a
Diamond Glass Enterprise Pte Ltd v [2021] SGCA 61
Zhong Kai Construction Co Pte Ltd

judgment entered under s 27(1) of the SOPA (“s 27(1) SOPA Judgment”). DGE
then served a statutory demand on the contractor, Zhong Kai Construction
Company Pte. Ltd (“ZK”), demanding payment of the judgment debt. When ZK
failed to pay the same, DGE filed a petition to wind up ZK in HC/CWU 95/2020
(“CWU 95”).

3 ZK subsequently applied in HC/SUM 1577/2020 (“SUM 1577”) for the

winding up petition to be stayed unconditionally or dismissed. The High Court
Judge (“the Judge”) allowed ZK’s application and ordered that CWU 95 be
stayed unconditionally pending the determination of a High Court suit between
ZK and DGE, on the basis that ZK had raised a genuine cross-claim against the
judgment debt therein. DGE appealed against the Judge’s decision. We heard
the appeal on 1 February 2021 and dismissed the appeal, but varied the Judge’s
order by imposing the condition that ZK pay into court the amount stated in the
statutory demand made by DGE within 14 days from the date of the hearing
before us for CWU 95 to be stayed. We now give our detailed grounds for our
decision.

Facts

Parties and contractual matrix

4 DGE and ZK are both Singapore-incorporated companies in the building

and construction industry. ZK is a company carrying on the business of building
and construction, while DGE is engaged in the design, manufacture, supply,
installation and maintenance of architectural glass.1

1 Record of Appeal (“ROA”) Vol II at pp 62 and 80.

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5 By a letter of award dated 7 November 2016 (“the Subcontract”),2 ZK

engaged DGE as a subcontractor for the supply of materials, equipment and
tools to carry out and complete the external facade aluminium cladding,
blast/ballistic doors and windows, aluminium door and window works (“the
Subcontract Works”) for a project (“the Project”) valued at S$558,055. As the
Project involved works at Changi Airport, further up the contractual chain, there
was a main contract based upon the Public Sector Standard Conditions of
Contract (“PSSCOC”), with the Civil Aviation Authority of Singapore
(“CAAS”) as principal. There was also a Superintending Officer, Surbana
Jurong Infrastructure Pte Ltd (“SO”), who had the final say over important
matters like interim payments, variations, extensions of time, choice and
approval of material, etc. There are appropriate references in the Subcontract
and its Annexes to the CAAS, SO and the main contract. For completeness, ZK
was itself a subcontractor in the Project.

6 The Project was divided into two phases, Phase 1 (an 8-storey
Equipment Building) and Phase 2A (a 2-storey Annex Building, excluding an
Airport Emergency Service Watchroom). The Subcontract was expressed to
commence immediately and, pursuant to cl 4 of the Subcontract, the scheduled
dates for the completion of Phases 1 and 2A of the Project were to be no later
than 31 July 2017 and 20 February 2017 respectively.3 Pursuant to cl 6 of the
Subcontract, DGE was liable to pay liquidated damages for late completion of
the Subcontract Works, calculated at the rate of S$1,800 per day of delay for
Phase 1, and S$800 per day of delay for Phase 2A. Clause 6 also provided that
ZK was “entitled to deduct or set-off against any monies due to [DGE] under

2 ROA Vol IIIA at p 75.

3 ROA Vol IIIA at p 76.

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the Subcontract… or to recover such amount or amounts from the [Subcontract]

as a debt; for such damages as incurred by [DGE] arising from such delay”.4

Background to the parties’ dispute

7 We now proceed to briefly narrate the events which led to the present
proceedings between the parties. It is important to note that we make no binding
or final findings of fact in the following paragraphs or elsewhere in these
grounds of decision. We merely record what we see in contemporaneous
documents put before us and we have borne in mind that the picture is not
complete. All these allegations will no doubt be fully explored during the course
of the legal proceedings between the parties, and we make reference only to the
details that are necessary for our purposes.

8 There is little evidence on the Project in its earlier stages. As noted

above, the Subcontract provided for immediate commencement, ie, 7 November
2016, and fairly short completion dates. Not unexpectedly, the Subcontract also
provided that the Subcontract Works were to be carried out strictly in
accordance with the “Master Programme” (of the main contractor). There were
16 payment certificates before PC 17, and counsel for DGE confirmed that DGE
had not taken out any adjudication application to enforce interim payments until
PC 17.

9 However, based on the documents before us, we can surmise that the
disagreements between the parties most likely began in early 2018. There is
correspondence showing allegations from DGE that, from that period onwards,
there were delays in its completion of the Subcontract Works because of late
approvals, changes to specifications, unsigned variations and slow or

4 ROA Vol IIIA at p 78.

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inadequate payment by ZK.5 DGE also claimed there was “zero” certification
for work it had completed up until Progress Claim 12, and a “negative”
certification in respect of Progress Claim 13.6 On the other hand, there is
evidence that ZK made advance payments or loans to DGE with repayment
being effected through set-offs or partial set-offs against certified progress
payments and amounts due to DGE.7 ZK also exhibited a number of emails
complaining of DGE’s delays. For example, in an email dated 16 February
2017, ZK complained of, inter alia, DGE’s late delivery of cladding material
and its slow bracket and runner installations, and requested for DGE to catch up
with its work.8 In another email dated 1 March 2018, ZK complained that DGE
had yet to complete outstanding works despite ZK making it advance payments
of S$50,000 on 11 August 2017, S$22,000 on 1 February 2018 and S$30,000
on 13 February 2018 to support DGE’s purchase of material and to assist DGE
in paying its staff and workers in advance.9 In the same email, ZK also noted
that DGE had submitted Payment Claim 11 late on 8 February 2018 even though
it had been due on 28 January 2018. ZK stated that its email was a “[l]ast
warning” for DGE to complete its outstanding works, failing which ZK would
engage third parties to complete the same on their behalf.

10 The correspondence between the parties shows that matters came to

head towards the end of April 2018. There was, perhaps amongst others, an
issue over the purchase of cabin glass. This is not the correct forum to go into
the rights and wrongs of that issue. But what we see is an email from DGE dated

5 ROA Vol IIIE at p 104; ROA Vol IIIB at p 69.

6 ROA Vol IIIE at p 104.
7 ROA Vol IIIE at p 41 (Adjudication Determination at para 146).
8 Respondent’s Supplemental Core Bundle (“RSCB”) at p 58.
9 RSCB at p 89.

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25 April 2018 stating that due to no payments being received, it was unable to
continue to pay for the cabin glass.10 In reply, ZK enclosed the SO’s Instruction
(“SOI”) 033 dated 24 April 2018 issued pursuant to Clause 2.5 of the PSSCOC,
which noted delays to R3 Tower Cabin Glass and their knock-on effects on other
works.11 Observing that “cancel[ling] the purchase order for cabin glass [would
have a] a serious impact… [on] overall completion of work”, ZK stated it would
help DGE purchase the cabin glass, and that the sums spent would be deducted
from DGE’s progress claims.12 Notably, there are two ZK cheques to Singapore
Safety Glass Pte Ltd (“SSG”), one dated 25 May 2018 for S$19,927.56 and the
other dated 27 April 2018 for S$41,713.14 included in the documentary
evidence.13

11 Thereafter, the parties’ exchanges became increasingly heated. The

following exchanges of emails and letters evidence the breakdown and eventual
termination of the Subcontract:

(a) On 30 May 2018, DGE sent a letter to ZK in response to the

email of 24 April 2018 referred to at [10] above. It refuted the allegations
made by ZK in relation to the cabin glass, stating that “there was no
delay by DGE” and that “the SOI [ZK] enclosed [was] inapplicable”.
DGE also complained that despite their progress claims, no payment had
been made on an outstanding sum of S$261,006.74 in relation to
variation works, and it accused ZK of refusing to approve the same. It
further alleged that the Subcontract Works were almost completed and

10 RSCB at p 107.
11 RSCB at p 109.
12 RSCB at p 106.
13 RSCB at pp 114 and 115.

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demanded payment of S$149,436.99, being the balance after deducting

S$111,569.75 for the cabin glass, by 12pm on 5 June 2018, failing which
DGE “[would] treat this [Subcontract] as terminated and… proceed to
enforce [its] rights as [it] [saw] fit.”14

(b) This was followed by an email exchange, ZK on the one hand

asking how DGE had derived its figures and DGE on the other
maintaining that it had explained many times before how its figures were
derived:

(i) On 26 June 2018, ZK sent an email (at 12.21pm)

maintaining that DGE’s calculation of the outstanding sum due
to DGE was incorrect. ZK stated: “If tomorrow still no man
allocation on site to carry all the outstanding work, we will
engaged [sic] third party to carry out on behalf, all cost will back
charge accordingly to [DGE].”15

(ii) DGE responded the same day (at 2.51pm) claiming ZK

was in breach of contract in not making payment when it was
due: “[ZK] is in breach of contract and this being a repudiatory
breach we will terminate the contract and claim all losses from
[ZK].”16

(iii) ZK responded later (at 7.19pm) stating that even if it

calculated the amount due to DGE “on the basis of 100%” (ie,
on the assumption that there were no incomplete or defective
works) and included all the variation order entitlements, the

14 ROA Vol IIIB at p 80.

15 ROA Vol IIIE at p 113.
16 ROA Vol IIIE at p 113.

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Zhong Kai Construction Co Pte Ltd

balance due to DGE would only be S$14,465.08. Further, if ZK

set off the amounts it had paid to SSG on behalf of DGE (which
totalled S$162,113.02 before GST), there would be nothing
owing to DGE. ZK also reiterated its ultimatum at [11(b)(i)]
above, stating: “Scaffold was ready, mobile crane is ready, no
manpower was on site from DGE. Please bear in mind, work
keep delaying from [DGE] and DGE must bear all the serious
consequences which arises from all parties.”

(iv) DGE replied again (at 9.29pm on the same day) restating
its position that it did not agree to the figures calculated by ZK.
It also said that since it had yet to be paid by ZK, it was unable
to “proceed for allocation of manpower to site”.17

(c) Three days later, on 29 June 2018, DGE sent ZK a letter by email
stating that it had no choice but to accept ZK’s repudiatory breach and
terminate the Subcontract. However, DGE added that as a gesture of
goodwill, it was willing to move forward on the condition that:

You [ZK] give us [DGE] written assurance that upon

completion of the works (including any minor
rectifications that may be due), full payment
contractually due to us (inclusive of all variation claims
made by us) will be paid without ANY deduction
whatsoever and we receive at least SGD$50,000.00
immediately pending the completion, certification and
final payment of the works. We repeat that we also need
all work completion Forms signed IMMEDIATELY with
defects noted, should there be any, and given to us
before any more work is done. All defects will be rectified

17 ROA Vol IIIE at p 111.

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Diamond Glass Enterprise Pte Ltd v [2021] SGCA 61
Zhong Kai Construction Co Pte Ltd

during Defects Liability Period to your satisfaction.

[emphasis in original in italics]

The letter also stated that this would be the parties’ last correspondence
on the matter as “all [of DGE’s] earlier correspondence ha[d] been
ignored, refuted without justification and/or left unanswered”.18

(d) In response, ZK sent DGE an email on 30 June 2018 at 5.08pm19

which stated: “This reply served as a reply and notification that given no
choice we are engaging a third party to complete all your incomplete and
defective works.” The email attached a letter from ZK to DGE dated the
same day refuting DGE’s claims with details, especially in relation to
the variation claims and the deductions. In the letter, ZK stated the
following: 20

(i) “We are surprised to see your letter dated 29th June 2018,
in which all the figures and matters reflected are untrue and
misleading” [emphasis added].

(ii) “We have repeatedly reminded [DGE] to expedite the

remaining outstanding works by deploying sufficient manpower
to the works, however, since 06th June 2018, there has been no
manpower deployed on site from [DGE], despite our numerous
reminders on your defects and incomplete works that has been
chased by the client and consultants.”

(iii) “As informed through our emails dated 22nd June 2018
9:59AM, 26th June 2018 12:21PM & 7:19PM, 27th June 2018

18 ROA Vol IIIE at pp 104–107.

19 ROA Vol IIIE at p 110.
20 ROA Vol IIIE at p 108.

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9:32AM by no choice, in order to complete the remaining works,

we will mobilize the 3rd parties to complete the remaining works,
incomplete works, defect works and etc. on your behalf, to hand
over to our client. [DGE] is responsible for the [sic] whatever
consequences caused.”

(iv) “All our rights are reserved.”

(e) On 10 July 2018, DGE sent another letter to ZK, explaining that
DGE had stopped work on the Project because ZK had refused to pay
the sum owed to DGE. DGE also stated that ZK’s calculations in the
letter dated 30 June 2018 were incorrect, and reiterated that the contract
between them had been terminated.21

Procedural history

Progress Claim No 17 and Suit 917 of 2019

12 On 28 August 2019, almost 14 months after ZK’s letter of 30 June 2018

set out at [11(d)] above, DGE served PC 17 on ZK, claiming a sum of
S$261,006.74 for Subcontract Works.22 Pursuant to cl 5 of the Subcontract, the
due date for ZK to submit a payment response to PC 17 was 18 September 2019.
Thereafter, pursuant to ss 12(2), (4) and (5) SOPA, DGE was entitled to make
an adjudication application against ZK after the expiry of the dispute settlement
period, ie, 25 September 2019.

13 However, on 14 September 2019, without having responded to the

payment claim, ZK commenced a High Court suit, HC/S 917/2019 (“S 917”),

21 ROA Vol IIIE at p 126–128.

22 ROA Vol IIIB at pp 80–83.

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through their then solicitors, Messrs Peter Ong Law Corporation, against DGE.
In the Statement of Claim for S 917, ZK claimed the sum of S$317,559.90 for
“goods sold and delivered and services rendered to [DGE] at [DGE’s]
requests”.23 Despite ZK’s rather odd characterisation of its claim, the particulars
given show items like “Supply Mobile Crane”, “Mobile Crane Operator
Overtime”, “Supply [of] Workers”, “Safety Issues”, “Annex Building”, “BCA
Submissions”, “Re-erect[ion] [of] scaffold”, “Third Party labour and Material”,
“Supply [of] capping cladding [at] R3 Cabin” and “Rental of Boomlift” making
up the S$317,559.90.

14 On 16 September 2019, ZK served its payment response on DGE, but

did not state the total response amount.24 In its payment response, ZK either
completely declined to certify, or did not certify in full the amounts claimed in
respect of various items listed in PC 17. The reasons cited for this included,
amongst others, differences in quantity, defective works, incomplete works,
failures to provide product and/or workmanship indemnities and warranties, and
failures to conduct final handovers.25

Adjudication Application 339 of 2019

15 On 1 October 2019, DGE commenced Adjudication Application No 339

of 2019 (“AA 339”) under the SOPA to claim against ZK the sum of
S$264,789.08 for the Subcontract Works.26 ZK challenged AA 339 on the basis
that DGE had “failed to carry out multiple works”, resulting in a situation where

23 ROA Vol II at pp 12–14.

24 ROA Vol IIIB at p 7 (Rasanathan’s OS 223 Affidavit at para 12); ROA Vol IIB at p
90.
25 ROA Vol IIIB at pp 88–92.
26 ROA Vol IIIB at p 101 (Claimant’s Written Submissions for AA 339 at para 14).

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ZK had to “engage a third party contractor to (i) rectify the defects of [DGE’s]
construction works, (ii) complete [DGE’s] construction works that were left
incomplete, and (iii) prepare the construction works for final handing over”.27

16 By an Adjudication Determination dated 15 November 2019 (“the

AD”), it was determined that the sum of S$197,522.83 (“the Adjudicated
Amount”), as well as interest, costs and adjudicator’s fees, was payable by ZK
to DGE.28 Pursuant to paragraph 3(b) of the AD, the due date for ZK to pay the
Adjudicated Amount to DGE was 35 days from the date of submission of a tax
invoice from DGE to ZK for the Adjudicated Amount. DGE alleged that it
served the said tax invoice on ZK via email on 21 November 2019 at 6.53pm,
and that the due date for payment of the Adjudicated Amount was thus
27 December 2019.29

Suit 1282 of 2019 and the Consolidated Suit

17 ZK did not pay DGE the Adjudicated Amount. Instead, on 19 December

2019, ZK commenced a second High Court suit, HC/S 1282/2019 (“S 1282”),
through another set of solicitors, Messrs Zenith Law Corporation, against DGE.
In S 1282, ZK claimed against DGE (a) liquidated damages amounting to
S$501,800 for DGE’s late completion of the Subcontract, as well as (b) the sum
of S$358,870.25 for additional costs and expenses in having to engage
replacement or substitute subcontractors to carry out and complete works which
were allegedly abandoned or improperly carried out by DGE. ZK also sought a

27 ROA Vol IIIB at p 112 (Respondent’s Written Submissions for AA 339 at para 24).
28 ROA Vol IIIB at p 171–173 (Adjudication Determination at paras 152–161).
29 ROA Vol IIIB at p 9 (Rasanathan’s OS 223 Affidavit at para 21).

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declaration that the Adjudicated Amount was not due and owing to DGE and/or
was wrongly determined.30

18 On 11 March 2020, ZK applied for and was granted an order for the
proceedings in S 1282 and S 917 to be consolidated, with S 1282 as the lead
suit. The consolidated proceedings are hereinafter referred to as “the
Consolidated Suit”. The sums claimed in the Consolidated Suit are identical to
those claimed in S 1282.31

OS 223 of 2020

19 On 17 January 2020, DGE obtained a court order (“DC/OS 5/2020”)

pursuant to s 27(1) of the SOPA to enforce the AD as a judgment.32

20 On 7 February 2020, DGE served a statutory demand dated the same

day (“the Statutory Demand”) on ZK, requiring ZK to make payment of the sum
of S$211,044 (“the Judgment Debt”), being the Adjudicated Amount plus
interest for late payment, costs of DC/OS 5/2020, and 80% of the costs of
adjudication (as provided under the adjudication), within three weeks of the date
of service of the Statutory Demand.33

21 On 18 February 2020, ZK filed HC/OS 223/2020 (“OS 223”) to set aside

the Statutory Demand or, alternatively, seek an order or declaration that DGE

30 ROA Vol II at p 58.

31 ROA Vol II at p 75.
32 ROA Vol IIIB at pp 182–183.
33 ROA Vol IIIB at pp 187–188.

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was precluded from issuing a statutory demand in so far as S 1282 was not
discontinued.34

CWU 95 and SUM 1577

22 ZK did not meet the Statutory Demand by the stipulated deadline. Thus,
on 23 March 2020, DGE commenced CWU 95 to wind up ZK on the basis that
ZK had not satisfied the Statutory Demand and was deemed under s 254(2)(a)
read with s 254(1)(e) of the Companies Act (Cap 50, 2006 Rev Ed) (“CA”) to
be unable to pay its debts.35 CWU 95 was served on ZK and its solicitors on 24
March 2020.36

23 On 1 April 2020, ZK filed SUM 1577 seeking:

(a) an order dismissing CWU 95;

(b) alternatively, an order that CWU 95 and all related proceedings

be stayed or restrained pending the disposal of the Consolidated Suit; or

(c) alternatively, an order that the hearing for CWU 95 be adjourned

pending the disposal of the Consolidated Suit.

Decision below

24 On 24 June 2020, the Judge heard both OS 223 and SUM 1577. The
Judge dismissed OS 223 but allowed ZK’s application in SUM 1577 to stay
CWU 95 until the determination of the Consolidated Suit and any appeal
thereof. Her brief grounds of decision (“Judgment”) are set out in a minute sheet

34 ROA Vol II at p 59.

35 ROA Vol II at p 77.
36 ROA Vol IIID at p 151 (Cai’s SUM 1577 Affidavit at p 44).

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dated the same day. For present purposes, we summarise only the Judge’s
findings vis-à-vis SUM 1577.

25 The Judge found that ZK had a bona fide and serious cross-claim against
DGE based on substantial grounds, and that the value of this cross-claim might
exceed the Judgment Debt. In her view, the cross-claim raised triable issues
such as (a) whether it was ZK or DG who was in repudiatory breach of the
Subcontract; (b) whether ZK could rely upon cl 6 of the Subcontract to claim
liquidated damages; (c) whether some of ZK’s claims even arose from the
Subcontract; and (d) whether certain costs and expenses incurred by ZK could
be claimed against DGE. The Judge was also of the view that ZK’s pleadings
were sufficiently particularised to set out its cause of action against DGE
(Judgment at [24]).

26 The Judge further held that it could not be definitively concluded that
ZK was abusing the court process by commencing S 917 and S 1282 against
DGE. Although it was DGE who had first served a payment claim on ZK, ZK
had commenced S 917 even before DGE commenced AA 339 (Judgment at
[25]). Accordingly, the Judge found that it was appropriate to grant the stay
sought by ZK.

The parties’ arguments on appeal

27 On appeal, DGE challenged the Judge’s decision to grant a stay of

CWU 95. In this regard, DGE’s principal argument was that ZK did not have a
genuine cross-claim against DGE, and that it was merely using the Consolidated
Suit to avoid paying the Judgment Debt to DGE.

28 DGE also made the alternative argument that, even if ZK was found to
have a valid cross-claim against DGE, CWU 95 ought to be stayed only on the

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condition that ZK first paid the sum of S$211,044 (being the value of the
Judgment Debt) into court as security.

29 In response, ZK submitted that:

(a) ZK’s cross-claim was serious and bona fide as it raised numerous
triable issues;

(b) there were no special circumstances justifying a refusal of a stay

of CWU 95; and

(c) there were no valid grounds for a conditional stay for CWU 95.

Issues to be determined

30 The appeal before us arises only from SUM 1577 which, as stated at [23]
above, is an application to dismiss CWU 95 or, alternatively, to stay or adjourn
the hearing for CWU 95 pending the disposal of the Consolidated Suit.

31 Before us, both parties accepted that the court is generally empowered
to stay a winding-up application against a debtor on two grounds: (a) first, where
the debtor bona fide disputes the debt in the statutory demand on substantial
grounds (see Pacific Recreation Pte Ltd v S Y Technology Inc and another
appeal [2008] 2 SLR(R) 491 (“Pacific Recreation”) at [16]–[19]); and/or
(b) secondly, where the debtor has a serious cross-claim against the creditor
based on substantial grounds (see Metalform Asia Pte Ltd v Holland Leedon Pte
Ltd [2007] 2 SLR(R) 268 at [82] (“Metalform”)).

32 It should be noted that ZK, correctly in our view, did not attempt to
dispute the debt comprised in the AD or the s 27(1) SOPA Judgment obtained
thereon. It is not open to ZK to dispute that debt at this juncture before this Court

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because s 21(1) of the SOPA confers temporary finality on the AD and there are
presently no legal proceedings afoot to invalidate the AD on legal grounds: see
W Y Steel Construction Pte Ltd v Osko Pte Ltd [2013] 3 SLR 380 (“W Y Steel
Construction”) at [71]. The AD and the s 27(1) SOPA Judgment can only be
challenged before an arbitral tribunal or a court seised of the final resolution and
determination of all disputes between the parties in relation to this project,
which usually takes place after the contract is completed or terminated as the
case may be.

33 Accordingly, the primary question before this Court is whether ZK has

a cross-claim against DGE which justifies the dismissal of CWU 95, or a stay
or adjournment thereof. This question engages the following subsidiary issues:

(a) What is the applicable standard of review for a cross-claim that

is raised by a debtor to stay or dismiss a winding-up petition?

(b) Should the requirements for obtaining a stay of a winding-up

application (including the applicable standard of review mentioned in
(a) above) be modified in cases where the debt underlying the winding-
up petition arises from an adjudication determination under the SOPA?

(c) On the facts, does ZK have a cross-claim against DGE which

equals or exceeds S$211,044 (being the value of the Judgment Debt) and
meets the requisite standard of review?

(d) If ZK is granted a stay of CWU 95, should that stay be

conditional or unconditional in nature?

We address these issues in turn.

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The applicable standard of review for a cross-claim

34 We begin by examining the applicable standard of review for a cross-

claim which is raised by a debtor to stay or dismiss a winding-up petition against
it. In our view, this question merits particular attention in light of this Court’s
recent pronouncement in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public
Joint Stock Co) [2020] 1 SLR 1158 (“AnAn”), which significantly altered the
law in this area in so far as cross-claims or disputed debts which are the subject
of arbitration agreements are concerned. Prior to AnAn, our courts have
expressed varying formulations of the standard of proof to be applied in such
cases.

35 In De Montfort University v Stanford Training Systems Pte Ltd [2006] 1

SLR(R) 218 (“De Montfort University”), disputes arose between Stanford
Training Systems Pte Ltd (“STS”) and De Montfort University (“DMU”), an
English university which delivered courses in Singapore through STS. DMU
served a statutory demand on STS claiming that the latter owed it £91,931.28.
STS responded that it would be able to raise various counterclaims, including
but not limited to a claim in respect of losses suffered as a result of DMU’s
failure to deliver various programmes as agreed between the parties. DMU then
proceeded to file a petition to wind up STS on 17 May 2005. On 13 June 2005,
STS commenced a civil action against DMU. Tay Yong Kwang J (as he then
was) ordered a stay of the winding-up petition pending the determination of the
civil action. In his decision, Tay J cited the following authorities:

(a) Re Sanpete Builders (S) Pte Ltd [1989] 1 SLR(R) 5 (“Re

Sanpete”) for the rule that the mere fact that a defendant obtained leave
to defend an action relating to a debt in an application under O 14 of the
Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”) might not per se

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suffice to show that his defence is not a frivolous one, or that the debt is
disputed on substantial grounds;

(b) Re Great Britain Mutual Life Assurance Society (1880) 16 Ch D

246, where Jessel MR said (at 253): “[I]t is not sufficient for the
Respondents, upon a petition of this kind, to say ‘We dispute the claim.’
They must bring forward a prima facie case which satisfies the Court
that there is something which ought to be tried, either before the Court
itself, or in an action, or by some other proceeding”; and

(c) Malayan Plant (Pte) Ltd v Moscow Narodny Bank [1979–1980]

SLR(R) 511, where the Privy Council said (at [18]): “There is no
distinction in principle between a cross-claim of substance … and a
serious dispute regarding the indebtedness imputed against a company,
which has long been held to constitute a proper ground upon which to
reject a winding-up petition.”

36 Having reviewed the above authorities, Tay J stated (at [28]):

…I prefer the view that once unconditional leave has been

granted and the order stands, either because the plaintiff
decides not to appeal or because the order is affirmed on appeal,
another forum should not revisit and reopen the same issues.
If unconditional leave to defend has been given to a defendant
in a claim on a debt, surely that means that there is a bona fide
or a genuine dispute. Of course, it does not mean that the
defendant will probably succeed in his defence at the trial of the
action. It merely means that his defence is not a frivolous one
or, in the words of Chao JC [in Re Sanpete], the debt is ‘disputed
on some substantial grounds’.

37 In another first instance decision, LKM Investment Holdings Pte Ltd v

Cathay Theatres Pte Ltd [2000] 1 SLR(R) 135 (“LKM Investment”), Judith
Prakash J (as she then was) similarly ruled that the statutory presumption of
insolvency could not be invoked against a company served with a statutory

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demand if the company bona fide disputed the debt. However, it was not an
abuse of process for a judgment creditor to serve a statutory demand on a
judgment debtor merely because the judgment was under appeal. If enforcement
of that judgment had not been stayed, the judgment creditor was entitled to take
all legal steps open to him to recover the amount of the judgment debt. Prakash J
also opined that once the matter had been tried at first instance and decided
against the judgment debtor, the prima facie position was that the debtor had no
defence to the claim and any further dispute over the debt would not be bona
fide (at [21]).

38 Both the courts in De Montford University and Re Sanpete espoused the

principle that a winding-up petition should not be used as a means to enforce
payment of a debt which is bona fide disputed or which can potentially be
extinguished by a cross-claim, and that to do so is an abuse of the process of the
court. This Court later echoed the same view in BNP Paribas v Jurong Shipyard
Ltd [2009] 2 SLR(R) 949 (“BNP Paribas”), decrying the use of “a shortcut by
the backdoor to try and enforce a contested claim by issuing a s 254(2)(a) [CA]
statutory notice” and stating in no uncertain terms that had this been done in the
case before them, “it would have amounted to an abuse of the court’s winding-
up jurisdiction” (at [7]). This Court further opined that a court’s function in a
winding-up petition is not to adjudicate on or decide a disputed claim, and held
that once the recipient of a statutory notice had offered to secure the disputed
debt, the issue of substantiality or insubstantiality of the dispute fell by the
wayside and was no longer a relevant consideration given that the debtor was
not unable to pay its debts (at [7]).

39 In the subsequent case of Metalform, the appellant, Metalform Asia

(“MA”), owed the respondent, Holland Leedon Pte Ltd (“HL”), a sum of money
for the supply of steel to MA. HL served a statutory demand on MA under

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s 254(2)(a) of the CA and MA applied for an injunction to prevent HL from

presenting a winding-up petition until MA’s claim for damages against HL
arising from another sale and purchase agreement had been determined. MA
claimed, inter alia, that it had a bona fide cross-claim on substantial grounds
which exceeded the disputed debt. This Court held (at [87]) that the standard of
proof which an applicant had to meet in order to stay a winding-up application
on the basis that he had a serious cross-claim on substantial grounds was that
the winding-up application was unlikely to succeed, or it was likely that the
court would hold over the petition in order to allow the cross-claim to be
determined first (collectively referred to hereafter as the “unlikely to succeed”
standard).

40 The approach in Metalform may be juxtaposed with that in Pacific

Recreation, where this Court held (at [23]) that the applicable standard of proof
for staying a winding-up application on the basis that the applicant had a
substantial and bona fide dispute over the debt claimed by the petitioning
creditor was “no more than that for resisting a summary judgment application,
ie, the debtor… need only raise triable issues in order to obtain a stay or
dismissal of the winding-up application” (referred to hereafter as the “triable
issue” standard).

41 The decision in Pacific Recreation did not clarify whether the “triable
issue” standard was distinct from the “unlikely to succeed” standard which had
earlier been held to apply to cross-claims in Metalform. However, the two
standards were treated as equivalent in several High Court cases that followed.
In Denmark Skibstekniske Konsulenter A/S I Likvidation (formerly known as
Knud E Hansen A/S) v Ultrapolis 3000 Investments Ltd (formerly known as
Ultrapolis 3000 Theme Park Investments Ltd) [2011] 4 SLR 997 (“Ultrapolis”),
it was concluded at [26] (referring to Ashworth v Newnote Ltd [2007] EWCA

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Civ 793 at [33]) that any linguistic divergence between the “triable issues”
standard in Pacific Recreation and the “unlikely to succeed” standard in
Metalform was “a distinction without difference”. The same view was later
taken in Strategic Construction Pte Ltd v JH Projects Pte Ltd [2018] 4 SLR
1192 (“Strategic Construction”) (at [20]), and by this Court in AnAn (at [27]).

42 In AnAn, this Court sat with a specially convened five-judge coram to

consider the differing standards of proof applied by the courts when addressing
a stay application in relation to winding-up petitions where the debtor’s cross-
claim or dispute over the creditor’s claim is the subject of an arbitration clause.
After comprehensively reviewing the authorities in Singapore, England, Hong
Kong, the Eastern Caribbean and Malaysia, this Court decided that a lower
prima facie standard of review should be applied in lieu of the “triable issue”
standard in such cases. Under the prima facie standard, the winding-up
proceedings would be stayed or dismissed as long as (a) there was a valid
arbitration agreement between the parties; and (b) the dispute fell within the
scope of the arbitration agreement, provided that the dispute was not being
raised by the debtor in abuse of the court’s processes (AnAn at [56]). It is worth
setting out the relevant passages of AnAn that explain the rationale for this
approach:

No differing standards for disputed debts and cross-claims

58 Before detailing our reasons for adopting the prima facie

standard of review, we pause to emphasise that the standard of
review applies equally to disputed debts and cross-claims,
which are the two bases that a debtor may raise to resist a
winding-up application.

59 … Whether a cross-claim or disputed debt is raised, the

debtor is simply asserting that the debt claimed is insufficient
to prove its insolvency, and that the winding-up order ought
therefore not to be granted. There is therefore no justifiable
basis for applying a different standard of review to cross-claims
on the one hand, and disputed debts on the other. As this court

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had observed in Pacific Recreation ([15] supra) at [25], the “tests

for both of the situations” must “necessarily mirror each other”.

Coherence in the law

60 Adopting the lower standard of review would, in our view,

promote coherence in the law concerning stay applications, so
that parties to an arbitration agreement are not encouraged to
present a winding-up application as a tactic to pressure an
alleged debtor to make payment on a debt that is disputed or
which may be extinguished by a legitimate cross-claim.

(1) Coherence is to be preferred to prevent abuse of winding-

up proceedings

61 In this regard, the prima facie standard has been adopted

for stay applications under s 6 of both the Arbitration Act (Cap
10, 2002 Rev Ed) (“AA”) and the IAA. In Tomolugen Holdings Ltd
and another v Silica Investors Ltd and other appeals [2016] 1
SLR 373 (“Tomolugen”) at [63], this court held that the prima
facie standard of review applies when hearing a stay application
under s 6 of the IAA. The prima facie standard similarly applies
for stay applications under s 6 of the AA: Sim Chay Koon and
others v NTUC Income Insurance Co-operative Ltd [2016] 2 SLR
871 (“Sim Chay Koon”) at [5]. Hence, if a creditor claims for a
debt simpliciter before the court, the debtor would simply have
to demonstrate on a prima facie basis that there is an
arbitration clause and that the dispute is caught by that clause.
Once such a burden is discharged by the debtor, the court will
grant a stay of the claim and defer the actual determination of
the dispute to an arbitral tribunal.

62 However, if the same debt is relied on as the basis for

presenting a winding-up application, as discussed, some
authorities suggest that the triable issue standard may apply,
such that the debtor would have to demonstrate a substantial
and bona fide dispute before the winding-up application can be
stayed.

63 In our judgment, there is no principled basis to apply

differing standards to what is essentially the same disputed
debt. Under the present dichotomy of standards, the
applicable standard of review would depend solely on the
creditor’s arbitrary or tactical choice – if the creditor
pursues an ordinary claim for debt, the prima facie
standard would apply; if the creditor applies, on the basis
of the same disputed debt, for the debtor to be wound up,
the higher triable issue standard would apply. This would
in turn encourage the abuse of the winding-up jurisdiction

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of the court, which is not the appropriate forum to

adjudicate on disputed claims that are subject to
arbitration (see BNP Paribas v Jurong Shipyard Pte Ltd [2009]
2 SLR(R) 949 at [7]); as Etherton C observed in Salford ([30]
supra) at [40], applying the triable issue standard:

… would inevitably encourage parties to an arbitration

agreement – as a standard tactic – to bypass the
arbitration agreement … by presenting a winding-up
petition. The way would be left open to one party,
through the draconian threat of liquidation, to apply
pressure on the alleged debtor to pay up immediately or
face the burden … of satisfying the [court] that the debt
is bona fide disputed on substantial grounds.

[emphasis in original in italics; emphasis added in bold italics]

43 Although the ratio of AnAn concerned cross-claims and disputed debts

that were subject to an arbitration agreement in the context of a winding-up
application, it is clear this Court’s ruling there went beyond that narrow issue.
This was evident from the specially convened five-judge coram, as well as the
court’s comprehensive review of the authorities, the policies involved and the
articulated aim of coherence in the law on stay applications (AnAn at [60],
reproduced above). In arriving at its decision, this Court considered stay
applications in both international and domestic arbitration, and noted that the
adoption of the prima facie standard would align the law governing exclusive
jurisdiction clauses, forum non conveniens and stay applications under the
International Arbitration Act (Cap 143A, 2002 Rev Ed) and the Arbitration Act
(Cap 10, 2002 Rev Ed) (AnAn at [52] and [74]).

44 In our view, the prima facie standard of review should also apply in
building and construction cases like the present where the cross-claim is not the
subject of an arbitration agreement. It would make little sense for the prima
facie standard of review to apply where the dispute comprised in the cross-claim
or disputed debt is the subject of an arbitration agreement, and for the higher
triable issue standard to apply where it is not. The case for a consistent approach

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is also compelling in building and construction cases where the winding-up

proceedings in question are premised on a debt which is incurred during the
project, and the final determination of disputes in relation to the whole project
is subject to resolution either by arbitration or through the courts, usually at
some later stage (see Comfort Management Pte Ltd v OGSP Engineering Pte
Ltd [2018] 1 SLR 979 (“Comfort Management”) at [63] and Orion-One
Residential Pte Ltd v Dong Cheng Construction Pte Ltd and another appeal
[2021] 1 SLR 791 (“Orion-One”) at [53]).

45 Thus, an applicant debtor who seeks to stay or dismiss a winding-up

petition in a case like the present only needs to show, on a prima facie standard,
the existence of a justiciable cross-claim that is likely to equal or exceed the
claim against the debtor, and provided that the said dispute or cross-claim is not
being raised in an abuse of the court’s process.

46 Having said that, we acknowledge that the foregoing statement of the

rule may potentially surface a conflict in cases, like the present, which involve
winding-up petitions founded on adjudication determinations under the SOPA,
as the policies underpinning the SOPA, specifically the philosophy of
maintaining cash flow in the construction industry, seemingly contradict an ADJ
debtor’s entitlement to stave off winding-up proceedings under the insolvency
regime when it refuses to pay the stipulated sum in the AD or any judgment
obtained thereon. We have already explained how the temporary finality of an
adjudication determination means that an ADJ debtor cannot dispute the
adjudication determination, or any judgment obtained thereon (see [32] above).
It follows that such a debtor also cannot dispute the same to challenge a
winding-up proceeding premised on the adjudication determination. However,
in the context of cross-claims, the interface between the SOPA and insolvency
regimes requires a careful and principled approach, which we deal with below.

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The approach to winding-up petitions founded on adjudication

determinations

47 Having established the standard of review which applies to cross-claims

in general, we turn to consider the specific approach which this court should
adopt when considering stays or dismissals of winding-up petitions which are
founded on adjudication determinations. When or under what circumstances
would an ADJ debtor be allowed to stay or dismiss a winding-up petition
premised on a debt arising from the adjudication determination, by alleging a
cross-claim on a prima facie basis? Although the parties did not focus on this
issue in their submissions, we think it necessary to address it in some detail in
order to reconcile the seemingly conflicting approaches in policy underpinning
the court’s winding-up jurisdiction and the SOPA. The resolution of this
apparent conflict is clearly salient to the outcome of the present appeal.

48 The purposes and aims of the statutory adjudication regime under the
SOPA have been well-articulated in many judgments of this Court and need
little rehearsing. The SOPA, inter alia, invalidates the pernicious and hitherto
prevalent pay-when-paid clauses, and facilitates cash flow to contractors,
subcontractors and suppliers in building and construction industry by providing
a quick, low cost adjudication system to resolve interim payment disputes in
construction projects. It is well-recognised that this efficient and speedy process
is necessarily “rough and ready justice” and that, given the compressed
timelines and sometimes voluminous evidence and documents, adjudicators
may get things wrong. However, their adjudication determinations have
temporary finality. This means that unless an adjudication determination is set
aside by a court on legal or technical grounds, it is final and binding on the
parties to the adjudication until their differences are finally and conclusively
determined or resolved by an arbitral tribunal or a court, usually after the project

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is at an end. If a sum is determined by an adjudicator as due from A to B, A has

to make payment even if A has reason to say the adjudication determination has
errors; this can be found in the pithy adage “pay now, argue later”. This
promotes the SOPA’s ultimate objective of facilitating cash flow in the building
and construction industry: see W Y Steel Construction at [18] and [20].

49 The first key to reconciling the ostensible conflict is to remember that

the concept of temporary finality is, by its very meaning, only temporary. It is
not for all time. An adjudication determination can be “opened up” by the
tribunal or the court finally determining all the disputes between the parties at
the end of their project: see s 21(1)(b) of the SOPA. That court or tribunal has
the ability, the time and the means, which are not available to adjudicators, to
examine the disputes with more thorough deliberation, and with all the
processes and procedures in place to define the issues and explore the evidence.
If the court or tribunal disagrees with the adjudication determination, it can
amend or alter the determination or certificate, revoke any part or finding or
determination by the adjudicator or certifier, or even overrule the determination
altogether. This is settled law (see Orion-One at [53], Comfort Management at
[63] and W Y Steel Construction at [22]).

50 It is clear that temporary finality ends when the arbitral tribunal or court
finally determines all the parties’ disputes, rights and obligations. When that
happens, any judgment previously obtained under s 27 of the SOPA to enforce
that adjudication determination must also cease to have effect; as common sense
dictates, the fruit must fall with the tree.

51 At the other end of the scale is the situation where the project is ongoing
and the ADJ debtor fails to make payment. This is the classic situation SOPA
was enacted to redress. Besides the remedies spelt out under SOPA and common

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law, the ADJ creditor is entitled to levy execution on its judgment and this
includes serving a statutory demand and failing payment, proceeding to apply
to wind-up the ADJ debtor. Short of having the adjudication determination set
aside on legal or technical grounds, the ADJ debtor is in no position to dispute
the debt comprised in the adjudication determination; it has to pay the
adjudicated sum or face the consequences.

52 The real difficulty comes when the project comes or is coming to an end
or has been terminated, and the downstream party takes out an adjudication
application and secures an adjudication determination. To readily allow the ADJ
debtor to halt enforcement of the adjudication determination by alleging a cross-
claim on the prima facie standard might enable upstream parties to evade their
payment obligations all too easily. This would end up stifling the cash flow and
frustrate the “pay now, argue later” philosophy underlying the SOPA regime.
There is every likelihood that that would revert the law to its position prior to
the enactment of the SOPA, wherein upstream contractors could withhold
payment to downstream contractors simply by asserting a set-off or cross-claim:
see Harmonious Coretrades Pte Ltd v United Integrated Services Pte Ltd [2020]
1 SLR 206 at [50], citing Civil Tech Pte Ltd v Hua Rong Engineering Pte Ltd
[2018] 1 SLR 584 at [23]–[32].

53 It is not surprising to see that this is not the first occasion on which this
conundrum has been in issue before the Singapore courts. There are two prior
High Court decisions which directly address the issue that we have highlighted
above. It is to these decisions which we now turn.

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Local position

54 In Lim Poh Yeoh (alias Lim Aster) v TS Ong Construction Pte Ltd [2016]
5 SLR 272 (“Lim Poh Yeoh”), the respondent commenced an adjudication
application against the appellant under the SOPA and subsequently obtained an
adjudication determination in its favour. The respondent then entered judgment
in the terms of the adjudication determination and issued a statutory demand
against the appellant for the outstanding amount owed under the judgment debt.
The issue was whether the appellant could set aside the statutory demand under
r 98(2) of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) on the basis that
she had a valid cross-claim against the respondent in a separate High Court suit.

55 One of the respondent’s key contentions was that the court ought not to
set aside the statutory demand, even in the face of an ostensible competing
cross-claim, because this would be contrary to the “pay now, argue later”
philosophy undergirding the SOPA. After considering authorities from
Australia, England and New Zealand, Edmund Leow JC concluded (at [69])
that:

[A]n argument (however genuine and strong) that the

adjudicated amounts were not as a matter of contractual right
due and payable can never be a ground for setting aside a
statutory demand based on a judgment obtained on an
adjudication determination… This principle also applies with
equal force to preclude the setting aside of statutory demands
on the basis of cross claims which seek to deny the validity of
the judgment debt. [emphasis added]

56 However, Leow JC recognised that the policy of facilitating cash flow

in the construction industry was not one that Parliament intended to be achieved
at all costs. Leow JC considered that this was evident from the parliamentary
debates which took place during the second reading of the Building and
Construction Industry Security of Payment Bill 2004 (No 54/2004) (“the SOP

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Bill”). During the debates, then-Minister of State for National Development,

Mr Cedric Foo Chee Keng, had clarified that the SOPA regime would not upset
the existing system of creditor priorities under the insolvency regime (see
Singapore Parliamentary Debates, Official Report (16 November 2004) vol 78
at cols 1118–1119). In response, Dr Amy Khor Lean Suan, a then-Member of
Parliament, had inquired whether this limitation to the scope of the SOP Bill
would jeopardise subcontractors’ legitimate interests in being paid. To this, Mr
Cedric Foo replied (at col 1133):

… She [ie, Dr Amy Khor] also asked why insolvency is not dealt
with here, although payment woes in the construction industry
are indeed a form of injustice. But in the area of insolvency, there
is a higher justice that must be served. There is an established
priority of payments that have to be made to different parties
who have suffered as a result of a party going insolvent. So this
priority should not be upset just because of the payment woes
in the construction industry. So we have therefore left insolvent
cases alone so as not to disrupt a process which is working well.
[emphasis added]

57 In Leow JC’s view, the passages cited above indicated that “to the extent
that there [was] a normative conflict between the legislative policy of
facilitating cash flow in the construction industry and the wider purposes of the
insolvency process… [Parliament was of the view that] the former must yield
to the latter” (at [73]). Thus, Leow JC concluded that a debtor was not precluded
from setting aside a statutory demand on the basis that he had a valid cross-
claim against a creditor which, if successful, would liquidate the debt in the
statutory demand, provided that such a cross-claim did not seek to deny the
validity of the adjudication judgment debt. Since the appellant’s cross-claim
gave rise to triable issues, was sufficiently quantified in monetary terms and was
“clearly broader in scope than the adjudication”, Leow JC held that the statutory
demand could be set aside (at [76]).

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58 In the subsequent decision of Strategic Construction, the plaintiff

commenced an adjudication application against the defendant for amounts due
for work done in a construction project. The defendant, in turn, commenced a
High Court suit against the plaintiff, claiming that it had suffered loss and
damage by reason of the plaintiff’s failure to rectify certain defects.
Subsequently, the plaintiff obtained an adjudication determination in its favour,
which it applied to enforce by way of a judgment. When the defendant refused
to pay the judgment debt, the plaintiff took out a winding-up application against
the defendant. The defendant sought a stay of the winding-up petition pending
the disposal of the action in the High Court suit. One of the issues before the
High Court was whether it was relevant that the plaintiff’s underlying claim had
arisen under the SOPA. In this regard, the plaintiff asserted that it was entitled
to “simply want [its] money” since this would give effect to the SOPA’s
underlying purpose of expediting cash flow.

59 Relying on the parliamentary debates for the SOP Bill (see [56] above),
Tan Siong Thye J reached the same conclusion as Leow JC that Parliament had
intended for the insolvency regime to prevail over the SOPA regime in the event
of a conflict between the two. He thus held (at [57]) that:

[E]ven though the policy underlying SOPA is expeditious

dispute resolution for quick cash flow, it cannot override the
scheme under the Companies Act, which gives a company that
is the subject of winding-up proceedings a chance to prove its
cross-claims before a winding-up order is made and the
attendant consequences flow, if it can show that there is a
triable issue as to the cross-claim.

60 Tan J also considered that the defendant’s willingness to pay the

adjudicated amount into court as security, which was a procedural prerequisite
that it would have had to fulfil if it had wanted to challenge the adjudication
determination in court, was significant because it meant that the defendant’s

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actions would not lead to a circumvention of the SOPA (at [60]). Tan J thus
allowed the defendant’s application for a stay on the basis that it had established
a triable issue in the form of a genuine cross-claim, the value of which exceeded
the amount claimed in the statutory demand.

Position in other jurisdictions

61 The issue of whether an ADJ debtor can resist winding-up proceedings

which are founded on a judgment debt arising from an adjudication
determination has also been explored in a number of foreign jurisdictions, albeit
in the context of applications to set aside statutory demands (as opposed to
applications to stay insolvency proceedings pending the determination of a
cross-claim or a dispute against the judgment debt). We briefly consider some
of the foreign authorities which are relevant for our purposes.

The Australian position

62 In Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014]
WASCA 91 (“Diploma”), the applicant debtor was issued with a statutory
demand based on a judgment entered in the terms of two adjudication
determinations under the Construction Contracts Act 2004 (Western Australia)
(“WA CCA”). The applicant sought to aside the statutory demand on the basis
that it had an offsetting claim against the petitioning creditor. The Supreme
Court of Western Australia held that an adjudication determination under the
WA CCA gave rise to debts which were “due and payable” and which,
accordingly, could not be challenged in bankruptcy proceedings on the basis
that there was a “genuine dispute” as to their validity (at [59] and [62]).
However, the court held that where a debtor had “genuine” offsetting claims
against the petitioning creditor “arising from transactions separate from those
that gave rise to judgment debt based upon an adjudication under the [WA

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CCA]”, there was no doubt that the debtor could successfully apply to set aside
the statutory demand (at [68]). As to the test for a “genuine” offsetting claim,
the court held that this meant that the offsetting claim had to be “bona fide… [it
could not be] “spurious, hypothetical, illusory or misconceived” (at [52]).

63 Diploma was subsequently affirmed and applied by the New South

Wales Supreme Court (Equity Division) in Re Douglas Aerospace Pty Ltd
[2015] NSWSC 167 (“Douglas”). In that case, Bereton J affirmed the Supreme
Court of Western Australia’s holdings in Diploma, which he distilled to the
following three propositions:

(1) an argument - however genuine and strong - that the

adjudicated amounts were not in truth as a matter of
contractual right due and payable, cannot give rise to a genuine
dispute as to the existence or amount of the resultant judgment
debt; and (2)(a) while a statutory demand founded on such a
judgment debt can be set aside or varied if the company can
show that it has a genuine offsetting claim sounding in money,
(b) a contention that the adjudicated amount is not in truth as
a matter of right due and payable is not a genuine offsetting
claim. …

Bereton J thus recognised that the existence of a “genuine” offsetting claim –

being one that admitted the debt arising from the adjudication determination,
but asserted that there was a countervailing liability – would justify the setting
aside of a statutory demand (at [98]).

64 The principles in Diploma and Douglas were followed and further

expounded upon by the New South Wales Supreme Court (Equity Division) in
Re J Group Constructions Pty Ltd [2015] NSWSC 1607 (“J Group”). In that
case, the applicant debtor sought to rely on several offsetting claims to set aside
a statutory demand that was, as in Diploma and Douglas, founded on a judgment
enforcing an adjudication determination. One of the issues before Robb J was
how the court ought to treat some of the applicant’s offsetting claims which had

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already been considered and rejected by the adjudicator during the adjudication.
Robb J held (at [168]) that the NSW SOPA only conferred temporary finality
on the adjudicated amount – it did not “clothe the adjudicator’s reasoning with
any finality that must be accepted by the court” [emphasis added]. Accordingly,
“[t]he apparent determination by the adjudicator that [the debtor] was not
entitled to succeed on its offsetting claims did not in any way bind [the] court
on an application to set aside the statutory demand” (at [171]). On the facts, the
applicant’s cross-claims were genuine, and that it was therefore permitted to
rely on them to set the statutory demand aside.

65 J Group is notable for its, with respect, correct view that, allied to the
concept of temporary finality and rough justice handed down within tight
timelines, decisions by an adjudicator on the validity of cross-claims are not
necessarily binding for all time nor on a court considering the merits of a
winding-up petition.

66 It ought to be noted that in New South Wales, the test for determining
whether a “genuine” offsetting claim exists is whether the court is satisfied that
there is a serious question to be tried that a party has an offsetting claim, or that
the claim is not frivolous or vexatious: see BBB Constructions Pty Ltd v
Frankipile Australia Pty Ltd [2008] NSWSC 982 at [4].

The English position

67 We now turn to consider the English authorities. In Shaw and another v

MFP Foundations & Piling Ltd [2010] EWHC 9 (“Shaw”), the applicant debtor
sought to rely on a cross-claim to set aside a statutory demand based upon an
adjudication determination and ensuing judgment under the United Kingdom’s
Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”). The

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respondent argued that, in order to give effect to the HGCRA’s purpose of

facilitating cash flow, the court ought to approach the application on the
presumption that a debtor was not entitled to rely on a substantial and genuine
cross-claim save where it would be oppressive to prevent him from so doing.
Stephen Davies J rejected this approach and held (at [50]) that the HGCRA’s
“pay now, argue later” philosophy did not displace the ordinary position under
the corporate and personal insolvency regimes, under which the existence of a
serious and genuine cross-claim could be relied upon to prevent a winding-up
or bankruptcy petition from going forward.

68 Shaw has been followed in R & S Fire and Security Services Limited v
Fire Defence plc [2013] EWHC 4222 at [13] and Cosmur Construction
(London) Limited v St Lewis Design Limited [2016] EWHC 2678 at [5]. In the
latter case, Christopher Nugee J defined a “genuine” offsetting claim as one that
was “of substance” (citing In re Bayoil S.A. [1999] 1 WLR 147).

Our analysis and the correct approach

69 Based on the discussion above, it is apparent that courts in Singapore,

Australia and England have, to date, consistently adopted the position that an
ADJ debtor can resist or stay winding-up proceedings by raising a genuine or
bona fide cross-claim, notwithstanding that the debt underlying the winding-up
petition is founded on an adjudication determination. Furthermore, at least in
Australia, a cross-claim will ordinarily be regarded as “genuine” as long as it is
not frivolous or vexatious. This appears to us to be similar in effect to the prima
facie standard of review (coupled with the abuse of process control mechanism)
that we have endorsed at [45] above.

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70 However, it remains for us to determine whether this position, though

seemingly accepted in practice, is justified in principle. Specifically, does such
an approach satisfactorily reconcile the apparent tension between the policy of
temporary finality, created by statute to address pressing ills besetting the
construction industry, and the draconian consequences of a winding-up order
based upon a sum that might ultimately be met or exceeded by a cross-claim or
a final tribunal setting aside or amending or reducing the adjudication
determination?

71 We stated above that the first key to reconciling this conflict is an

appreciation of the true nature of temporary finality under SOPA (see [49]
above). The second key is an examination of the true nature of the winding-up
jurisdiction of the court. In this regard, it is apposite to refer to the following
observations made by this Court in BNP Paribas (at [4]–[5]):

(a) The power to wind-up a company on the petition of a creditor is

clearly discretionary under s 253(1)(b) of the CA by the use of the word
“may” in that provision: “[a] company may be wound up under an order
of the Court on the application of any creditor, including a contingent or
prospective creditor, of the company” [emphasis added].

(b) The court may order the winding-up of a company under

s 254(1)(e) of the CA only if the latter is unable to pay its debts.

(c) A creditor serving a statutory demand under s 254(2) of the CA

utilises a statutory presumption to prove that the company is unable to
pay its debts; that provision states that a company is deemed to be unable
to pay its debts if such debt is more than S$10,000 and the company has
for three weeks after service of the statutory notice neglected to pay the

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sum or to secure or compound for it to the reasonable satisfaction of the

creditor.

It cannot be clearer that this route involves the invocation of a presumption,

which can be rebutted by proof to the contrary.

72 In BNP Paribas, there were disputes over foreign exchange contracts

entered into by the respondent shipyard’s director and the appellant bank (“the
Bank”). The losses on these contracts were, by agreement, closed out at
approximately US$50m. Upon being served by a statutory demand by the
appellant bank to pay that sum, the respondent shipyard offered to place in
escrow sufficient funds to meet any judgment obtained by the appellant bank on
its claim. The respondent shipyard applied for and was granted an injunction to
enjoin the appellant bank from commencing any winding-up proceedings. This
Court firmly held that the respondent shipyard was not insolvent and that this
was confirmed by its offer to secure the claim. Where an offer to secure the debt
had been made, the issue of substantiality or insubstantiality of the dispute fell
by the wayside; it was no longer a consideration because the debtor was not
unable to pay its debts (at [7]). In such circumstances, the filing of a winding-
up petition would have amounted to an abuse of the court’s winding-up
jurisdiction. The court further held (citing Mann v Goldstein [1968] 1 WLR
1091 at 1098–1099) that the Bank should have commenced court proceedings
instead as it was settled law that the court’s winding-up jurisdiction was not to
be used for the purpose of deciding a disputed debt.

73 This Court added in BNP Paribas that there were wider public policy
considerations which had to be borne in mind when creditors threatened
companies with winding-up petitions in circumstances where the claims or
debts were not admitted, or where there were bona fide cross-claims equal to or

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exceeding the creditors’ claims. In support of this point, this Court referred to
its earlier decision in Metalform where it observed (at [84]) that a creditor’s
winding-up petition implies insolvency and is likely to damage the company’s
creditworthiness or financial standing with its other creditors or customers (BNP
Paribas at [17]). This Court further elaborated that a winding-up petition might
trigger cross-default clauses in the company’s own financing instruments or in
other companies within the same group as the company. At the end of the day,
many other economic and social interests might be affected, such as those of the
company’s employees, non-petitioning creditors, the company’s suppliers,
customers and shareholders (BNP Paribas at [18]–[19]). As such, in cases
where a company was temporarily insolvent, the winding-up court might
adjourn the hearing of a winding-up application under s 257(1) of the CA to
allow the company time to resolve the issues at hand, or order an injunction of
limited duration to restrain a winding-up petition from being presented if
irreparable harm could flow from its presentation (BNP Paribas at [20]).

74 In Pacific Recreation, this Court agreed with the appellant’s arguments

that a winding-up petition was not an appropriate means of enforcing a disputed
debt and that it would be an abuse of the process of court to allow a creditor to
wind-up a company on a disputed debt (at [16]). This Court also agreed that a
winding-up court was generally not in the best position to adjudicate on the
merits of a commercial dispute without a proper ventilation of the evidential
disputes through a trial.

75 Having set out the true nature of the winding-up jurisdiction of the court
and the principles upon which that power is exercised, we next turn to the
provisions of SOPA.

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76 We have already examined the characteristics of an adjudication

determination and the nature of its temporary finality (see [48]–[50] above).
There have been numerous cases decided on the basis of the principles set out
in the SOPA, the cardinal rule being that during the course of the construction
project, interim payments have to be honoured and paid in order to preserve the
claimant’s cash flow. If the claimant is not paid, it can suspend work (see
s 26(1)(d) of the SOPA) or take a lien on goods supplied (see s 25(2)(d) of the
SOPA). Moreover, if the respondent wants to set aside the adjudication
determination on legal or technical grounds, it has to pay into court the
adjudicated sum or the unpaid portion pending the challenge (see s 27(5) of the
SOPA). The claimant can also seek enforcement by the entry of a judgment
under s 27(1) of the SOPA, whereupon the usual execution processes like
garnishee orders are available avenues to recover that debt. In such an event, the
ADJ debtor is bound by the temporary finality of the adjudication determination
and cannot dispute the debt, which must be paid.

77 The ADJ creditor can also serve a statutory demand giving the ADJ
debtor three weeks to pay the debt, failing which it may, as in this case, proceed
to file a petition to wind-up the ADJ debtor. However, because the winding-up
of a company is a draconian order to make, with, as acknowledged by the courts,
wider economic and social ramifications (not least of all being the complete
demise of the corporate entity in question), different considerations and rules
come into play. As we have seen above, the courts will entertain an application
for an injunction to restrain the ADJ creditor from commencing winding-up
proceedings or, if the ADJ debtor is too late for that, the court will hear
applications for a dismissal of the winding-up petition or a stay of the same.
Needless to say, even if the winding-up application is stayed or dismissed, the
other avenues to obtain satisfaction of the judgment debt still remain.

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78 Despite the court’s strong backing of the “pay now, dispute later”
approach, a blind enforcement of ADs, whatever the facts of circumstances of
a case may be, has never been the rule. In W Y Steel Construction, Sundaresh
Menon CJ (delivering the judgment of this Court) said (at [61]–[62]):

61 In Brodyn ([41] supra), the New South Wales Court of

Appeal, after finding against Brodyn (the respondent to the
payment claim in that case), noted that it was not left without
recourse and identified the general principle of law on granting
a stay of enforcement thus (at [85] per Hodgson JA):

A court in which judgment for recovery of money has

been given can stay execution of that judgment. A party
against whom there was a substantial judgment could
apply for a stay of execution on the grounds that it had
a greater claim against the judgment creditor, for which
it would shortly obtain judgment, and that, if the
judgment money was paid, it would be irrecoverable;
and the court could in its discretion grant a stay, on
terms if it thought appropriate. I see no reason why a
judgment under s 25 of the [NSW] Act could not be
stayed on that kind of basis, although the policy of the
[NSW] Act that progress payments be made would be a
discretionary factor weighing against such relief.

62 Section 25(4)(b) of the NSW Act is, for present purposes,

similar to our s 27(5), and as a general proposition, we agree
with the principle stated in the above passage from Brodyn that
enforcement of an adjudication determination may be stayed in
appropriate circumstances. Undoubtedly, the claimant who
successfully secures an adjudication determination in his
favour has a right to be paid, but there is a competing
residual right on the part of the respondent to have his
claims ventilated in full in court or in some other dispute
resolution proceeding.

[emphasis in original in italics; emphasis added in bold italics]

We accept that cases in which the enforcement of an adjudication determination

is stayed are the exception and not the rule.

79 Once a project has commenced, the interim payment regime kicks in.
The primary source for the interim payment procedure and obligations will be

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the contract (see Shimizu Corp v Stargood Construction Pte Ltd [2020] 1 SLR
1338 at [2]). Where the contract is deficient or silent, the provisions of the
SOPA, like ss 5–8 and ss 10–12, will apply subject to the terms of the contract.
In the great majority of cases, whilst the project is on-going, interim payments
are made and if necessary, enforced through adjudication applications, leading
to adjudication determinations. Often, the upstream party makes payment in the
interest of getting on with the project. The upstream party can, if it thinks it has
the grounds to do so, challenge the adjudication determination in court
proceedings on legal or technical grounds, whereupon the whole adjudication
determination may be set aside, but until then it cannot dispute the amount stated
in the adjudication determination. If the contract allows a party to commence
arbitral proceedings before the end of the project, it may be possible for that
party to issue a notice of arbitration to challenge the adjudication determination,
but it will have to pay the adjudicated sum first.

80 The first exception to this rule has been referred to above, where the
ADJ debtor applies to court to set aside or annul the adjudication determination
on legal or technical grounds under s 27(6) of the SOPA. As noted above, whilst
it does so, it has to pay the adjudicated sum into court (see s 27(5) of the SOPA).
Not many succeed on the grounds set out under s 27(6) of the SOPA as case law
has gradually ironed out the uncertainties caused by rival interpretations of those
provisions. If the adjudication determination has been set aside, it follows there
is no more debt arising from the adjudication determination.

81 The second exception occurs after the construction project has come to
an end or has been terminated. In this regard, it is worth reiterating this Court’s
remarks in Orion-One at [53] (which we have referred to earlier at [49] above)
that the parties’ rights and obligations will be conclusively determined after the
termination of the contract:

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It is trite that an adjudication determination has only

temporary finality. This makes sense in the context of the SOPA
regime, which ordinarily operates while a project is underway
and the contractor requires payment on a more expedited basis.
Indeed, we have observed that the temporary finality conferred
on an adjudication determination is a corollary of the expedited
nature of its process (see [W Y Steel Construction] at [22]). At the
end of the day, however, the parties’ rights and obligations are
conclusively and finally determined in substantive proceedings
conducted after the project has been completed…

82 We note that downstream parties are allowed to make a payment claim

not later than 30 months after (a) the date on which the goods and services to
which the amount in the payment claim relates were last supplied; or (b) the
latest of the following: (i) the date on which the construction work to which the
amount in the payment claims relates was last carried out, (ii) the issuance date
of the last document, as at the time the payment claim is served, certifying
completion of the construction work under contract, or (iii) the issuance date of
the last temporary occupation permit as at the time the payment claim is served
(see s 10(2)(b) of the SOPA). Often, however, one of the parties has already
commenced arbitration or court proceedings to finally determine and resolve all
issues between the parties well before that date. Once this process has been
started, parties should be encouraged to conduct a cost-benefit analysis prior to
pursuing the adjudication route when the disputes are already subject to a
pending arbitration: see Orion-One at [4]. In that case, Steven Chong JCA
(delivering the judgment of this Court) also remarked on the futility of applying
for an adjudication of a payment claim more than two years following the
termination of the contract, as the adjudication determination, by its nature, was
not final and was in fact subject to a pending arbitration. If, on a prima facie
standard, there are genuine cross-claims or set-offs before the arbitral tribunal
or court, no court will proceed to grant the winding up petition. An almost
similar situation occurs where the upstream party is about to commence an
arbitration or legal proceedings to finally determine all the disputes between the

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parties. Failing to carry out a careful cost-benefit analysis “would only serve to
introduce a further layer of costs with no apparent benefit.” (Orion-One at [4])
and we add that there may be cost consequences in appropriate cases.

83 In our view, applying the prima facie standard of review represents a

practical and workable solution to the apparent opposing considerations of the
winding-up jurisdiction of the court and the temporary finality of adjudication
determinations, in situations where an ADJ debtor raises a cross-claim against
the ADJ creditor in order to challenge a winding-up petition founded on the
adjudication debt. On one hand, reviewing the cross-claim in accordance with a
lower prima facie standard acknowledges the reality that the adjudication
determination will, in all likelihood, be ‘opened up’ when the contract between
the parties is coming or has come to an end or has been terminated. On the other
hand, the requirement that the cross-claim or dispute (as the case may be) cannot
constitute an abuse of the court’s process provides a useful check on parties
trying to game the system. We have no doubt that courts will be able to sift out
disputes or cross-claims that are raised merely to delay winding up those
companies which, despite raising such disputes or cross-claims, are hopelessly
insolvent. Thus, save for the fact that an ADJ debtor cannot dispute the
adjudication determination as a ground for staying or setting aside a winding-
up petition founded on that adjudication determination, there is no need to
modify the general approach which we have endorsed at [45] above in building
and construction cases like the present. In so far as cross-claims are concerned,
the general approach continues to work well when we consider the true nature
of the temporary finality under SOPA, and bear in mind that the jurisdiction of
the winding-up court is not to decide cross-claims or set offs.

84 For completeness, we state our view that we do not think that the
parliamentary debates for the SOP Bill which were referred to in Lim Poh Yeoh

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(see [56] above) and Strategic Construction (see [59] above) go so far as to
imply that the insolvency regime will inevitably prevail over the SOPA regime
in the event of any conflict between the two. We also think it unnecessary, for
present purposes, to determine whether any one regime takes precedence over
the other, because the approach that we have outlined above satisfactorily
reconciles the apparent tensions between the two.

Whether ZK has a cross-claim against DGE which justifies the stay or

dismissal of CWU 95

85 Having determined the approach that is to be taken towards winding-up

applications that are founded on adjudication determinations, we turn to assess
the evidence placed before us. To recapitulate, ZK’s cross-claim in the
Consolidated Suit encompasses the following demands (see [17]–[18] above):

(a) liquidated damages amounting to S$501,800 for DGE’s alleged

delay in completing the Subcontract Work; and

(b) damages amounting to S$358,870.25 for work allegedly done to

rectify work that was not properly carried out or not completed by DGE.

86 In support of the latter claim, ZK exhibited numerous invoices37

purportedly evidencing the costs which it had incurred as a result of having to
source and engage substitute sub-contractors to carry out and complete the
Subcontract Works which were not properly carried out or abandoned by the
defendant.

37 ROA Vol IIIG at pp 14–295.

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87 DGE contended that ZK’s cross-claim was not genuine and did not meet
the “triable issue” standard (which, DGE argued, was the relevant standard of
review) for the following reasons:

(a) ZK had not sufficiently particularised its claims in the Statement

of Claim for the Consolidated Suit.38

(b) Both of ZK’s claims were predicated on the assertion that DGE
had repudiated the Subcontract by abandoning the Subcontract Works
from 6 June 2018. However, there was no repudiatory breach on DGE’s
part since DGE had lawfully terminated the Subcontract of 5 June 2018
by virtue of ZK’s repudiatory breach.39

(c) In respect of ZK’s claim for delay, it was primarily ZK’s own
changes to the design and material specifications of the Project which
had resulted in delays to the completion of the Subcontract Works.
Furthermore, the computation of the sum of S$501,800 was based on
cl 6 of the Subcontract, which was an unenforceable penalty clause.40

(d) ZK’s claim for defective and incomplete Subcontract Works was
arbitrary and unsupported by the exhibited invoices. These invoices
“reflect[ed] work which could not have been attributed to DGE at all”.
They were also “sent belatedly and obviously contrived”.41

88 Before we turn to examine these arguments, we reiterate once again that

our views are not to be taken as findings of fact in any way and shall not bind

38 Appellant’s Case at para 45.

39 Appellant’s Case at para 37.
40 Appellant’s Case at paras 38–39.
41 Appellant’s Case at para 40.

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the trial judge in the Consolidated Suit. Whilst we may refer to various emails
or letters, these will no doubt be supplemented at trial by more complete
documentation and/or oral evidence. Furthermore, our comments or views must
be seen in the context of the applicable standard of proof, which as stated above,
is the prima facie standard. ZK need only adduce sufficient evidence to meet
that standard in order to justify the granting of a stay of a winding up petition.

89 In our judgment, ZK has clearly met the required prima facie standard
to resist a winding-up order being made. In fact, we would say that on the
evidence put before us, ZK has satisfied the triable issues test, if indeed that was
the standard to be adopted. We elaborate on the reasons for this conclusion
below.

90 DGE’s first contention was that ZK had not sufficiently particularised

(a) the terms and/or specifications of the Subcontract which were allegedly
breached by DGE; (b) the details of how or why DGE had failed to meet its
contractual obligations under the Subcontract; and (c) when and how the alleged
particulars of loss were incurred as a result of DGE’s breaches of the
Subcontract.

91 We do not find these submissions at all persuasive. In our judgment, the

Statement of Claim adequately sets out the necessary elements of ZK’s action
in breach of contract against DGE. DGE’s criticism that the Statement of Claim
was lacking in particulars as to the specific term(s) of the Subcontract which
had been breached by DGE is unfounded. The seven-page Subcontract with its
12 main clauses and annexures is not an overly complex contractual document.
The provisions which support ZK’s claim are pleaded. Consequently, DGE can
be in no doubt of the alleged breaches which ZK relies upon to support its claims
against DGE. For instance, paragraph 10 clearly states DGE failed, refused

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and/or neglected to carry out the Subcontract Works satisfactorily and in

accordance with the specifications and/or the requirement of the CAAS and/or
the main contract, with the result that the Subcontract Works were delayed and
not carried out in time and/or within the Master Schedule or any revision
thereto.42 Paragraph 11 further pleads that sometime in early June 2018, DGE
abandoned and/or deserted the balance of the Subcontract works, leaving such
works incomplete and/or with poor workmanship and/or with defects
unrectified. This is followed by a list of particulars setting out, inter alia, the
types of additional costs and expenses which ZK has had to incur as a result of
DGE’s abandonment of the Subcontract Works.43

92 DGE might complain that, for example, there are no particulars as to

exactly what works were left incomplete or exactly what works were defective
and in what respect they were defective. However, the remedy is simple. As we
highlighted to DGE during the hearing, the appropriate course of action would
have been for DGE to ask ZK for further and better particulars, failing which
they would have been entitled to take out an application for further and better
particulars under O 18 r 12(3) of the ROC. Such particulars are often dealt with
during case management conferences and it is standard fare for an order to be
made for the parties to draw up appropriate Scott Schedules. Having failed to
adopt this course of action, DGE cannot now rely upon the absence of
particulars in ZK’s claim as a basis for justifying the refusal of a stay.

93 We also add that the sums claimed by ZK are, in our view, clearly
quantified. It is apparent from the Statement of Claim that the claim for
S$501,800 is premised on the rates set out under cl 6 of the Subcontract (see

42 ROA Vol II at p 65.

43 ROA Vol II at pp 65–66.

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paragraph 19 of the Statement of Claim), and that the claim for S$380,870.25 is
derived by adding up the additional costs and expenses which ZK allegedly
incurred in engaging substitute sub-contractors to rectify or complete the
Subcontract Works (see paragraph 14 of the Statement of Claim). Details of
such claims will become clear during discovery.

94 DGE’s second contention was that ZK had refused to pay DGE for the
Subcontract Works in full and that it had thereby renounced the Subcontract
pursuant to Situation 2 in RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and
another appeal [2007] 4 SLR(R) 413. Consequently, DGE argued, there was no
basis for ZK’s claim that DGE had repudiated the Subcontract by walking off
the Project site and not sending workmen to the site after 6 June 2018. In
response to this argument, ZK averred that there were no payments lawfully due
and owing to DGE, as DGE had “cause[d] delays and defective works in the
course of carrying out the Subcontract Works”.44

95 These kinds of allegations and counter-allegations are not uncommon in

construction contracts of this nature. However, this is not the correct forum to
finally determine the rights and wrongs of either party. That is the function of
the trial judge in the Consolidated Suit. We need only look at the objective facts
to decide if there is a prima facie case that DGE’s cross-claim may exceed ZK’s
claim comprised in its AD and the ensuing s 27(1) SOPA Judgment.

96 As noted at [6] above, the contract completion dates for Phases 1 and
2A of the Subcontract were 31 July 2017 and 20 February 2017 respectively.
ZK’s primary contention, which it has maintained throughout these
proceedings, is that DGE walked off site and did not send any workers from 6

44 ROA Vol II at p 104.

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June 2018. Importantly, DGE does not deny this as a fact, but alleges that its
conduct was justified because of ZK’s repudiation of the contract by non-
payment. As a proposition of building and construction law, that is not
necessarily correct. There may be instances in which a persistent course of
payment delays, or a protracted delay in the payment of a very substantial sum
amounts to a repudiation of the contract: see for example AL Stainless Industries
Pte Ltd v Wei Sin Construction Pte Ltd [2001] SGHC 243 at [194], citing Chow
Kok Fong, Law and Practice of Construction Contract Claims (Longman, 2nd
ed, 1993) at p 264. However, not every instance of non-payment by a
contracting party will suffice to constitute repudiation. This was made clear in
Jia Min Building Construction Pte Ltd v Ann Lee Pte Ltd [2004] 3 SLR(R) 288
(“Jia Min”) at [55], where the court stated, citing Lubenham Fidelities and
Investments Co Ltd v South Pembrokeshire District Council (1986) 33 BLR 46:
“[i]t appears settled law that a contractor/subcontractor has no general right at
common law to suspend work unless this is expressly agreed upon. This is so
even if payment is wrongly withheld”. The court also cited Halsbury’s Law of
Singapore, vol 2 (LexisNexis Singapore, 2003 Reissue) at para 30.321, Keating
on Building Contracts (Sweet & Maxwell, 7th ed, 2001) at para 6-96 and
Hudson’s Building and Engineering Contracts, vol 1 (Sweet & Maxwell, 11th
ed, 1995) at para 4-223 for the same principle. The rationale for this, the court
explained, was that “the existence of such a right [to suspend work upon the
other party’s failure to make payment] could create chaos within the building
industry if contractors were to muscle their way through disputes with threats
or actual threats or suspension instead of having their disputes adjudicated” (at
[57]).

97 Another relevant consideration is that ZK advanced various sums of

money to DGE to support DGE’s purchase of material and to pay staff and

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workers (see [9] above). These advances are also alluded to at paragraph 146 of
the AD.45 On the evidence before us, we cannot rule out the possibility that some
of the sums that were allegedly due to DGE were liable to be offset by these
advance payments.

98 DGE’s third contention was that there was no basis for ZK’s claim for
delay. In our view, on the prima facie standard of review, the documents before
us do support the inference that there were delays on DGE’s part. We have
referred to ZK’s emails and one letter from the SO noting delays by DGE (see
[9] above), as well as ZK’s emails and letters complaining of the lack of DGE
workers on site (see [11] above). Moreover, we see that DGE did acknowledge
that there had been delays to the completion of the Subcontract Works. Its
primary defence was that these delays had been occasioned by ZK’s own failure
to obtain approval from the relevant authorities and that ZK had in any event
“agreed by conduct, if not expressly”, to the extensions of time sought by
DGE.46 However, there was no evidence of any such agreement save for a series
of correspondence between the parties ostensibly showing that, despite DGE’s
reminders, ZK had not sought approval from the Building and Construction
Authority for DGE to carry out certain works.47 Even if we accept that these
letters support DGE’s claims, we do not think that it can be conclusively
determined, based on this single instance, that DGE cannot be held liable for
any delay on its part.

99 The Subcontract clearly sets out the rates of liquidated damages for
delays on DGE’s part. We do not, without more, see that such provisions or

45 ROA Vol IIIB at p 170.

46 ROA Vol IIIE at pp 131–132.
47 ROA Vol IIIE at pp 132, 209 and 212–214.

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rates are penalties and therefore unenforceable, as alleged by DGE. Liquidated

damages clauses are commonly found in building and construction contracts.

100 Turning to DGE’s fourth contention regarding the invoices produced by

ZK in support of its claim for defective and/or incomplete works, there is
nothing to show that the invoices were obviously inauthentic, and DGE did not
offer any evidence to substantiate its claims in this regard. It is also apparent to
us that at least some of these invoices related specifically to cladding and glass-
related works for the Project, which originally fell within the scope of DGE’s
contractual obligations.48

101 On the other hand, we note that ZK’s case, as well as the sums claimed
by ZK, fluctuated several times during the course of the proceedings between
the parties. Prior to commencing court proceedings against DGE, ZK had
asserted, in its letter to DGE dated 30 June 2018, that there had been delays on
DGE’s part, and that some of the Subcontract Works were defective and
incomplete. In respect of the latter, ZK claimed “costs incurred on site”
aggregating S$42,623.50.49 However, in its Statement of Claim for S917 dated
14 September 2019, ZK claimed S$317,559.90. That sum was, rather
inappropriately, stated to be for “goods sold and delivered and services rendered
to [DGE] at [DGE’s] requests” (see [13] above).50 In its payment response for
the adjudication submitted two days later, on 16 September 2019, ZK again
appeared to change its story – this time, it raised issues pertaining to incomplete
and defective works, but failed to mention any delay on DGE’s part.51

48 ROA Vol IIIG at p 246.

49 ROA Vol IIIE at pp 108–109.
50 ROA Vol II at p 12.
51 ROA Vol IIIB at pp 91–95.

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102 In our view, the discrepancies in ZK’s case do not mean that its cross-
claim against DGE fails to meet the prima facie standard of review. As we
commented at [13] above, notwithstanding the strange formulation of the
Statement of Claim in S 917, the particulars that were pleaded therein show the
nature of ZK’s claim. ZK had changed solicitors before filing S 1282, and it was
therefore only in the Statement of Claim for S 1282 and the Consolidated Suit
that ZK’s claims crystallised into their current and more coherent form.

103 The correspondence between the parties also gives us reason to believe
that ZK’s cross-claim is bona fide. As noted at [11(a)] above, DGE had sent ZK
an ultimatum on 30 May 2018, demanding payment of S$149,436.99 by 12pm
on 5 June 2018 failing which it would treat the Subcontract as terminated. DGE
subsequently withdrew its workmen from site from 6 June 2018 onwards.
Although there was some grandstanding between the parties, DGE did not send
any more workmen to the site and on 30 June 2018, ZK sent a letter to DGE,
stating that since DGE had not deployed manpower on site since 6 June 2018
and its works were defective and incomplete, ZK would mobilise third parties
to complete the remaining and defective works and hold DGE responsible for
all consequences (see [11(d)] above). That letter could evince ZK’s acceptance
of DGE’s repudiation or termination of the Subcontract as expressed in DGE’s
email dated 30 May 2018. It is also significant that the key facets of ZK’s claim
– comprising delay on DGE’s part, as well as incomplete and defective
Subcontract Works – were raised as early as 30 June 2018, well before DGE
served PC 17 on ZK, some 14 months later, on 28 August 2019. In the
circumstances, we find that, contrary to DGE’s assertions, there was nothing to
show that ZK’s cross-claims were conjured up simply to stave off the winding-
up petition. ZK’s failure to mention DGE’s alleged delay in its payment

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response, as well as its unsubstantiated claim for “goods sold and delivered” in
the Statement of Claim for S 917, is only a factor to be taken into account.

104 We emphasise that we do not intend, by our decision above, to suggest

that ZK’s cross-claim is likely to succeed. Some or all of ZK’s claims may well
fail or be reduced in quantum. However, given the evidence that is before us,
ZK has satisfied the prima facie standard of proof to be entitled to a stay. In
fact, as noted above, if the standard was that of a triable issue, ZK has met that
higher standard. Whether ZK eventually succeeds or fails is a matter to be
determined in the Consolidated Suit.

Conditions of stay

105 It was argued by DGE that, even if this Court were to grant a stay of
CWU 95, it ought to do so only on the condition that ZK paid the Judgment
Debt of S$211,044 into court as security pending the outcome of the
Consolidated Suit.

106 Two reasons were proffered for this contention. The first was that,
pursuant to s 27(5) of the SOPA read with O 95 r 3 of the ROC, a party seeking
to set aside an adjudication determination made under the SOPA had to pay the
outstanding portion of the adjudicated amount into court as security. According
to DGE, since the Consolidated Suit was, in effect, commenced by ZK to
challenge the AD, granting an unconditional stay of CWU 95 would “defeat the
legislative intent of SOPA and render the adjudication determination
nugatory”.52

52 Appellant’s Skeletal Submissions at para 17.

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107 DGE also asserted that ZK might be at risk of insolvency given that the
value of the Judgment Debt was S$211,044 and ZK had a paid-up capital of
only S$300,000. Thus, “given time, it would be possible for ZK to clear its other
liabilities and close down, therefore totally abandoning its responsibility to pay
[the Judgment Debt] to DGE”.53

Power to order conditional stay

108 In considering the court’s powers to impose conditions on a stay of a

winding-up petition, we need to consider s 257(2)(f) of the CA, which was the
provision in force when SUM 1577 was filed. This provision states:

Powers of Court on hearing winding up application

257.—(2) The Court may on the winding up application coming

on for hearing or at any time on the application of the person
making the winding up application, the company, or any person
who has given notice that he intends to appear on the hearing
of the winding up application —

(f) give such directions as to the proceedings as the Court

thinks fit.

[emphasis added]

It cannot be made more plain by the words italicised above that the court’s
discretion as to what directions it may give in relation to a winding-up
proceeding is very wide, viz. as the court “thinks fit.” Indeed, our courts have
previously stayed winding up proceedings on condition that the sum of the debt
claimed in the statutory demand be paid into court: see for example Strategic
Construction at [62].

53 Appellant’s Case at para 27.

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109 We note that this position is also consistent with that expressed in the
bankruptcy regime: see Mohd Zain bin Abdullah v Chimbusco International
Petroleum (Singapore) Pte Ltd and another appeal [2014] 2 SLR 446 (“Mohd
Zain”) at [18], where this Court held that it was empowered to impose
conditions on a stay of bankruptcy proceedings pursuant to ss 64(1), 65(4) and
65(5) of the Bankruptcy Act (Cap 20, 2009 Rev Ed).

Whether a conditional stay ought to be granted

110 Under s 27(5) of the SOPA, an ADJ debtor who applies to court to set
aside an adjudication determination or the judgment obtained for its
enforcement pursuant to s 27(1) of the SOPA must pay into court the unpaid
portion of the adjudicated amount as security. However, we do not think it
appropriate to lay down a general rule that parties in the position of ZK should
pay the adjudicated amounts into court pending the resolution of the arbitral
tribunal or the court.

111 There may be circumstances which make this a just condition, yet there
may be other circumstances where making such an order would be unjust. One
example of the latter type of situation is where the project is at an end or in the
defects liability phase or has been terminated, and the downstream party
launches its payment claim which is, in effect, its final accounts for the project.
Many adjudicators dread this scenario where they are under tremendous
pressure to decide the final accounts of a project within the time strictures of
SOPA, as this task is well-nigh impossible except in the simplest construction
contracts. In such cases, the adjudicator’s endeavour to achieve rough and ready
justice may produce an erroneous adjudication determination which may be
very large in value. To make an ADJ debtor pay this sum into court may cause

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great financial stress; it can result in tying up large sums of money whilst the
matter is arbitrated or litigated.

112 Turning to the facts of this case, we take the view that it is appropriate
to require ZK to pay the sum of the Judgment Debt into court. We have borne
in mind ZK’s lack of a response to DGE’s payment claim, the strange pleadings
in S 917, the failure to state a total response amount and the varying amounts of
ZK’s alleged cross-claims. Some of these factors were ameliorated by the filing
of S 1282 and the Consolidated Suit which placed ZK’s cross-claim on a more
secure footing. We also note that the Judgment Debt was not inordinately high
or crippling. Although we are of the view that the evidence before us more than
meets the prima facie test, we consider it just to order ZK to pay the ADJ sum
into court on the analogy of s 27(5) of the SOPA. Upon ZK paying the sum of
the Judgment Debt into court, there can be no justification to presume that ZK
is insolvent on the basis that it is unable to pay its debts (see BNP Paribas at
[7], cited at [72] above).

113 For completeness, we clarify that we do not see any merit in DGE’s
submission that ZK is at real risk of insolvency as DGE did not offer anything,
apart from bare assertions, to support this claim. Clearly, the fact that ZK had a
paid-up capital of S$300,000 does not in itself demonstrate that ZK did not have
enough assets to discharge its liabilities. On the contrary, ZK’s balance sheet as
at 30 September 2019 shows that its total assets of S$3,156,585.31 far exceeded
its total liabilities of S$356,334.17.54 Further, there was no evidence before us
that any creditors aside from DGE had taken out winding-up applications
against ZK. We thus find that this particular contention is not an appropriate
reason to grant a conditional stay in the present case.

54 Appellant’s Core Bundle Vol IIH at p 13.

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Conclusion

114 For the reasons set out above, we varied the High Court’s decision and
upheld the stay only on the condition that ZK paid the sum of S$211,044 into
court within 14 days from the date of the hearing before us. As an alternative to
payment into court, we allowed parties to agree on any other form of security,
failing which the first order of payment into court would stand.

Tay Yong Kwang Woo Bih Li

Justice of the Court of Appeal Judge of the Appellate Division

Quentin Loh
Judge of the Appellate Division

Luo Ling Ling and Sharifah Nabilah binte Syed Omar (Luo Ling
Ling LLC) for the appellant;
Kris Chew Yee Fong and Isabel Su Hongling (Zenith Law
Corporation) for the respondent.

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