In Industrial Floor & Systems Pte Ltd v Civil Tech Pte Ltd [2019] SGHC 50, the Defendant, Civil Tech Pte Ltd, was an established contractor in Singapore, which was awarded major public sector projects including the Thomson East Coast MRT Line and the Outram Community Hospital (part of the Outram Park Master Plan for Singapore General Hospital) projects.

A winding-up application was commenced against it. At the time of commencement, the Defendant owed substantial sums to sub-contractors under various Court judgments and Adjudication Determinations pursuant to the Building and Construction Industry Security of Payment Act (Cap. 30B). The Plaintiff, Industrial Floor & Systems Pte Ltd, was one of six creditors that commenced company winding up proceedings against the Defendant.

In a bid to stay afloat, the Defendant filed a last-minute application to stay all six company winding up proceedings. The Defendant’s primary basis for the stay application was that it intended to recover payment through adjudication under the Building and Construction Industry Security of Payment Act (Cap. 30B) from Penta-Ocean Construction Company Limited, a company which it entered into a joint venture in the Changi T5 project.

The Plaintiff and supporting creditors unanimously raised their objection to the stay application.

The High Court of Singapore was not persuaded by the Defendant’s argument, and found it would not be in the public interest for the Court to permit a heavily insolvent company to carry on its business operations and keep its debtors waiting indefinitely for any prospect of recovery. Accordingly, the Defendant was compulsorily wound up on 8 February 2019.

The High Court made two observations of note in its decision. Firstly, the Defendant had not adduced evidence to show why it was only contemplating adjudication against Penta-Ocean Construction Company Limited at such a late stage, when it was already in dire financial straits.

Secondly, although there were alternative statutory remedies available to the Defendant such as the judicial management regime, the Defendant had considered and dismissed the possibility of applying for the same.

This case demonstrates that a company seeking to recover payment through adjudication should do so expeditiously. Any attempt by a company to rely on imminent adjudication proceedings to stave off winding up proceedings may not be viewed upon favourably by the Court. Pertinently, a company facing the prospect of winding up should also be alive to the possibility of alternative statutory remedies such as judicial management and scheme of arrangements for the purposes of rehabilitation.

LIMN Law Corporation acted for one of the creditors in Industrial Floor & Systems Pte Ltd v Civil Tech Pte Ltd [2019] SGHC 50.