Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd: SOPA, Winding Up, and Cross-Claims in Construction Disputes

In Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd, the Singapore Court of Appeal addressed whether a judgment debtor from an adjudication determination under the Building and Construction Industry Security of Payment Act (SOPA) could avoid a winding-up petition by raising a cross-claim. Diamond Glass Enterprise Pte Ltd (DGE) secured an adjudication determination against Zhong Kai Construction Co Pte Ltd (ZK) and sought to wind up ZK after ZK failed to pay. The High Court stayed the winding-up petition, but the Court of Appeal varied the order, imposing a condition that ZK pay the judgment debt into court for the stay to remain in effect. The court dismissed the appeal.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal dismissed with variation; stay of winding-up petition conditional upon payment into court.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal case concerning the enforcement of adjudication determinations under SOPA and the validity of cross-claims in winding-up petitions.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Diamond Glass Enterprise Pte LtdAppellant, ApplicantCorporationAppeal Dismissed in PartPartial
Zhong Kai Construction Co Pte LtdRespondentCorporationStay of Winding-Up Petition Granted ConditionallyStayed

3. Judges

Judge NameTitleDelivered Judgment
Tay Yong KwangJustice of the Court of AppealNo
Woo Bih LiJudge of the Appellate DivisionNo
Quentin LohJudge of the Appellate DivisionYes

4. Counsels

Counsel NameOrganization
Luo Ling LingLuo Ling Ling LLC
Sharifah Nabilah Binte Syed OmarLuo Ling Ling LLC
Kris Chew Yee FongZenith Law Corporation
Isabel Su HonglingZenith Law Corporation

4. Facts

  1. Diamond Glass Enterprise Pte Ltd (DGE) was subcontracted by Zhong Kai Construction Co Pte Ltd (ZK) for facade works.
  2. Disputes arose between DGE and ZK regarding payments and delays.
  3. DGE obtained an adjudication determination in its favor against ZK under the SOPA.
  4. DGE served a statutory demand on ZK for the adjudicated amount.
  5. ZK failed to pay, leading DGE to file a winding-up petition against ZK.
  6. ZK claimed a cross-claim against DGE for liquidated damages and costs to rectify incomplete works.
  7. The High Court initially stayed the winding-up petition unconditionally.

5. Formal Citations

  1. Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd, Civil Appeal No 119 of 2020, [2021] SGCA 61

6. Timeline

DateEvent
Subcontract awarded to Diamond Glass Enterprise Pte Ltd by Zhong Kai Construction Co Pte Ltd
Scheduled completion date for Phase 2A of the Project
Scheduled completion date for Phase 1 of the Project
Diamond Glass Enterprise Pte Ltd states inability to pay for cabin glass due to lack of payments
Diamond Glass Enterprise Pte Ltd demands payment of S$149,436.99 from Zhong Kai Construction Co Pte Ltd
Diamond Glass Enterprise Pte Ltd sends letter accepting Zhong Kai Construction Co Pte Ltd’s repudiatory breach and terminating the Subcontract
Zhong Kai Construction Co Pte Ltd engages a third party to complete incomplete and defective works
Diamond Glass Enterprise Pte Ltd serves Payment Claim 17 on Zhong Kai Construction Co Pte Ltd
Zhong Kai Construction Co Pte Ltd commences High Court suit HC/S 917/2019 against Diamond Glass Enterprise Pte Ltd
Zhong Kai Construction Co Pte Ltd serves its payment response on Diamond Glass Enterprise Pte Ltd
Diamond Glass Enterprise Pte Ltd commences Adjudication Application No 339 of 2019
Adjudication Determination issued, ordering Zhong Kai Construction Co Pte Ltd to pay Diamond Glass Enterprise Pte Ltd S$197,522.83
Zhong Kai Construction Co Pte Ltd commences High Court suit HC/S 1282/2019 against Diamond Glass Enterprise Pte Ltd
Diamond Glass Enterprise Pte Ltd obtains court order to enforce the Adjudication Determination as a judgment
Diamond Glass Enterprise Pte Ltd serves a statutory demand on Zhong Kai Construction Co Pte Ltd
Order granted to consolidate proceedings in S 1282 and S 917, with S 1282 as the lead suit
Diamond Glass Enterprise Pte Ltd commences CWU 95 to wind up Zhong Kai Construction Co Pte Ltd
Zhong Kai Construction Co Pte Ltd files SUM 1577 seeking dismissal or stay of CWU 95
Judge allows Zhong Kai Construction Co Pte Ltd’s application in SUM 1577 to stay CWU 95
Court of Appeal hears and dismisses the appeal, varying the Judge’s order
Grounds of decision delivered by the Court of Appeal

7. Legal Issues

  1. Stay of Winding-Up Petition
    • Outcome: The Court of Appeal held that the stay of the winding-up petition was justified, conditional upon the respondent paying the judgment debt into court.
    • Category: Procedural
    • Sub-Issues:
      • Genuine cross-claim
      • Bona fide dispute of debt
      • Abuse of court process
  2. Enforcement of Adjudication Determination
    • Outcome: The court affirmed the principle of temporary finality of adjudication determinations under SOPA but allowed for exceptions where a genuine cross-claim exists.
    • Category: Substantive
    • Sub-Issues:
      • Temporary finality of adjudication determination
      • Pay now, argue later principle
  3. Repudiatory Breach of Contract
    • Outcome: The court did not make a definitive finding on whether there was a repudiatory breach, leaving it to the trial judge in the Consolidated Suit.
    • Category: Substantive
    • Sub-Issues:
      • Non-payment
      • Abandonment of works

8. Remedies Sought

  1. Winding-Up Order
  2. Stay of Winding-Up Petition

9. Cause of Actions

  • Breach of Contract
  • Winding Up

10. Practice Areas

  • Commercial Litigation
  • Construction Law
  • Arbitration
  • Insolvency Law

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Pacific Recreation Pte Ltd v S Y Technology IncCourt of AppealYes[2008] 2 SLR(R) 491SingaporeCited for the principle that a winding-up application can be stayed if the debt is bona fide disputed on substantial grounds.
Metalform Asia Pte Ltd v Holland Leedon Pte LtdCourt of AppealYes[2007] 2 SLR(R) 268SingaporeCited for the principle that a winding-up application can be stayed if the debtor has a serious cross-claim against the creditor based on substantial grounds.
W Y Steel Construction Pte Ltd v Osko Pte LtdHigh CourtYes[2013] 3 SLR 380SingaporeCited for the principle that an adjudication determination under SOPA has temporary finality and cannot be disputed in a winding-up proceeding unless set aside on legal grounds.
AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co)Court of AppealYes[2020] 1 SLR 1158SingaporeCited for establishing the prima facie standard of review for stay applications in winding-up petitions where the debt is subject to an arbitration agreement.
De Montfort University v Stanford Training Systems Pte LtdHigh CourtYes[2006] 1 SLR(R) 218SingaporeCited for the principle that a winding-up petition should not be used to enforce payment of a debt which is bona fide disputed or which can potentially be extinguished by a cross-claim.
Re Sanpete Builders (S) Pte LtdHigh CourtYes[1989] 1 SLR(R) 5SingaporeCited for the rule that obtaining leave to defend an action relating to a debt might not suffice to show that the defence is not frivolous or that the debt is disputed on substantial grounds.
Malayan Plant (Pte) Ltd v Moscow Narodny BankPrivy CouncilYesMalayan Plant (Pte) Ltd v Moscow Narodny Bank [1979–1980] SLR(R) 511SingaporeCited for the principle that a cross-claim of substance or a serious dispute regarding the indebtedness constitutes a proper ground to reject a winding-up petition.
LKM Investment Holdings Pte Ltd v Cathay Theatres Pte LtdHigh CourtYes[2000] 1 SLR(R) 135SingaporeCited for the principle that the statutory presumption of insolvency cannot be invoked if the company bona fide disputes the debt.
BNP Paribas v Jurong Shipyard LtdCourt of AppealYes[2009] 2 SLR(R) 949SingaporeCited for the principle that a winding-up petition is not to be used for the purpose of deciding a disputed debt and that it would be an abuse of the court’s winding-up jurisdiction to do so.
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)High CourtYes[2011] 4 SLR 997SingaporeCited for the principle that any linguistic divergence between the 'triable issues' standard and the 'unlikely to succeed' standard was a distinction without difference.
Strategic Construction Pte Ltd v JH Projects Pte LtdHigh CourtYes[2018] 4 SLR 1192SingaporeCited for the principle that any linguistic divergence between the 'triable issues' standard and the 'unlikely to succeed' standard was a distinction without difference.
Comfort Management Pte Ltd v OGSP Engineering Pte LtdHigh CourtYes[2018] 1 SLR 979SingaporeCited for the principle that 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.
Orion-One Residential Pte Ltd v Dong Cheng Construction Pte LtdCourt of AppealYes[2021] 1 SLR 791SingaporeCited for the principle that 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.
Lim Poh Yeoh (alias Lim Aster) v TS Ong Construction Pte LtdHigh CourtYes[2016] 5 SLR 272SingaporeCited for the principle that an argument that the adjudicated amounts were not due and payable can never be a ground for setting aside a statutory demand based on a judgment obtained on an adjudication determination.
Harmonious Coretrades Pte Ltd v United Integrated Services Pte LtdHigh CourtYes[2020] 1 SLR 206SingaporeCited for the principle that upstream contractors could withhold payment to downstream contractors simply by asserting a set-off or cross-claim prior to the enactment of SOPA.
Civil Tech Pte Ltd v Hua Rong Engineering Pte LtdHigh CourtYes[2018] 1 SLR 584SingaporeCited for the principle that upstream contractors could withhold payment to downstream contractors simply by asserting a set-off or cross-claim prior to the enactment of SOPA.
Diploma Construction (WA) Pty Ltd v KPA Architects Pty LtdSupreme Court of Western AustraliaYes[2014] WASCA 91AustraliaCited for the principle that an adjudication determination gives 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.
Re Douglas Aerospace Pty LtdNew South Wales Supreme Court (Equity Division)Yes[2015] NSWSC 167AustraliaCited for affirming the principles in Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd.
Re J Group Constructions Pty LtdNew South Wales Supreme Court (Equity Division)Yes[2015] NSWSC 1607AustraliaCited for the principle that the NSW SOPA only conferred temporary finality on the adjudicated amount and did not clothe the adjudicator’s reasoning with any finality that must be accepted by the court.
BBB Constructions Pty Ltd v Frankipile Australia Pty LtdNew South Wales Supreme CourtYes[2008] NSWSC 982AustraliaCited for 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.
Shaw and another v MFP Foundations & Piling LtdHigh CourtYes[2010] EWHC 9England and WalesCited for the principle 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.
R & S Fire and Security Services Limited v Fire Defence plcHigh CourtYes[2013] EWHC 4222England and WalesCited for following the principles in Shaw and another v MFP Foundations & Piling Ltd.
Cosmur Construction (London) Limited v St Lewis Design LimitedHigh CourtYes[2016] EWHC 2678England and WalesCited for following the principles in Shaw and another v MFP Foundations & Piling Ltd.
In re Bayoil S.A.Court of AppealYes[1999] 1 WLR 147England and WalesCited for defining a 'genuine' offsetting claim as one that was 'of substance'.
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte LtdCourt of AppealYes[2007] 4 SLR(R) 413SingaporeCited for the principle of renunciation of contract.
AL Stainless Industries Pte Ltd v Wei Sin Construction Pte LtdHigh CourtYes[2001] SGHC 243SingaporeCited for the principle that 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.
Jia Min Building Construction Pte Ltd v Ann Lee Pte LtdHigh CourtYes[2004] 3 SLR(R) 288SingaporeCited for the principle that a contractor/subcontractor has no general right at common law to suspend work unless this is expressly agreed upon.
Mohd Zain bin Abdullah v Chimbusco International Petroleum (Singapore) Pte LtdCourt of AppealYes[2014] 2 SLR 446SingaporeCited for the principle that the court was empowered to impose conditions on a stay of bankruptcy proceedings.
Shimizu Corp v Stargood Construction Pte LtdHigh CourtYes[2020] 1 SLR 1338SingaporeCited for the principle that the primary source for the interim payment procedure and obligations will be the contract.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Building and Construction Industry Security of Payment Act (Cap 30B, 2006 Rev Ed)Singapore
Companies Act (Cap 50, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Adjudication Determination
  • Statutory Demand
  • Winding-Up Petition
  • Cross-Claim
  • Security of Payment Act
  • Temporary Finality
  • Pay Now, Argue Later
  • Repudiatory Breach
  • Liquidated Damages
  • Prima Facie Standard

15.2 Keywords

  • SOPA
  • Winding Up
  • Construction
  • Adjudication
  • Cross-Claim
  • Singapore
  • Building and Construction Industry Security of Payment Act
  • Companies Act

17. Areas of Law

Area NameRelevance Score
Winding Up80
Insolvency Law75
Building and Construction Law70
Construction Law65
Company Law30
Civil Procedure25
Breach of Contract20
Building and Construction Contracts20
Contract Law15
Arbitration15

16. Subjects

  • Construction Dispute
  • Insolvency
  • Adjudication
  • Civil Procedure