A Pragmatic Stay Of Proceedings: The High Court Declines Jurisdiction Under Its Insolvency Regime In Favour Of Overlapping Arbitral Proceedings

In a recent decision Takenaka Corporation v Tam Chee Chong and another [2018] SGHC 51, Justice Aedit Abdullah granted a stay of proceedings under the Arbitration Act of Singapore (Cap 10, 2002 Rev Ed) (the “Arbitration Act“), for an appeal against the judicial managers’ rejection of a creditors’ proof of debt pursuant to Section 75 of the Companies Regulations. In particular, the High Court placed emphasis on the fact that the arbitration proceedings would fully determine the issues and cross -claims between the parties, whereas the court proceedings, being limited to an appeal against a rejection of a proof of debt, would not be able to do so.

Shook Lin & Bok LLP (David Chan and Daryl Fong) acted for the successful judicial managers of Acesian Star (S) Pte Ltd in obtaining a stay of proceedings under the Arbitration Act.

Background facts

The proceedings arose out of sub-contracts between Takenaka Corporation (‘Takenaka“), the main contractor for various projects involving addition and alteration works at Changi Airport, and Acesian Star (S) Pte Ltd (“ASPL“), a provider of engineering, mechanical, electrical and plumbing services for construction projects, where ASPL would perform air-conditioning works at Terminal 1 (the “T1E Subcontract“) and Terminal 4 (the “T4 Subcontract“) of Changi Airport (collectively the “Subcontracts“).

A dispute arose between Takenaka and ASPL in relation to payments due under the T4 Subcontract. Pursuant to an adjudication determination under the Building and Construction Industry Security Act (Cap 30B, 2006 Rev Ed), Takenaka was adjudged liable to ASPL for approximately S$7 million, but asserted that it was entitled to refuse further payments as it had a counterclaim for back charges and liquidated damages. Subsequently, Takenaka then terminated the T1E and T4 Subcontracts and ASPL applied for, and was placed under, judicial management.

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