Application For Leave To Continue Action Against An Insolvent Defendant: A Balancing Act

A case study of W Y Steel Construction Pte Ltd v Tycoon Construction Pte Ltd (in liquidation) [2016] SGHC 80

Overview

The issue before the High Court was whether leave should be granted to the plaintiff to proceed with an action for breach of contract against an insolvent defendant. The court held that in deciding whether leave should be granted, it must balance the collective interest of the defendant's general body of creditors against the relative hardship and injustice which may be experienced by the plaintiff. As the liquidator had only about S$200,000 available prior to the hearing of the leave application, whereas the plaintiff's claim amounted to more than S$18 million, the court found that allowing the plaintiff to proceed with its claim would exhaust the insolvent defendant's funds even before the claim was concluded. The detriment caused to the general body of creditors would thus far exceed the hardship to the plaintiff. Consequently, the court refused to grant leave to the plaintiff.

Relevant facts

W Y Steel Construction Pte Ltd (plaintiff) was the main contractor for a Housing Development Board project. Tycoon Construction Pte Ltd (defendant) was the sub-contractor engaged by the plaintiff to carry out the construction works under the project.

On 9 October 2014, the defendant submitted a payment claim to the plaintiff for the sum of S$1,878,439.39. Although the plaintiff took the position that the payment claim was served out of time, it nevertheless issued a payment response, but certifying a negative sum of S$666,382.89. This led the defendant to lodge an adjudication application on 30 October 2014 (Adjudication Application). The...