PRINCIPLES OF SINGAPORE BUSINESS LAW THIRD EDITION Edited by Loo Wee Ling Australia • Brazil • Mexico • Singapore • United Kingdom • United States 1 Principles of Singapore Business Law, Third Edition Edited by Loo Wee Ling Regional Director, Marketing: Senior Marketing Manager: Charles Ho Senior Editorial Manager: Lian Siew Han Assistant Editorial Manager: Tanmayee Bhatwadekar Senior Development Editor: Kenneth Chow Development Editors: Ng Wei Yi Elaine Chew Iris Poh Senior Regional Manager, Production and Rights: Pauline Lim Production Executive: Rachael Tan Cover Designer: Lee Meng Hui Compositor: International Typesetters © 2020 The Authors ALL RIGHTS RESERVED. 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Printed in Singapore Print Number: 01 Print Year: 2019 3 To Our Students 4 Contents Preface to the Third Edition List of Authors Table of Cases Table of Singapore Legislation Table of Foreign Legislation Table of Treaties and Conventions PART I INTRODUCTION TO BUSINESS LAW Chapter 1Business, Society and the Law Gary Chan & Eugene K B Tan Chapter 2 An Overview of Singapore Legal History and Development Eugene K B Tan Chapter 3Legal Processes and Institutions Gary Chan PART II BUSINESS CRIMES AND BUSINESS TORTS Chapter 4Business Crimes Low Kee Yang & Melina Chew Chapter 5Business Torts Lee Pey Woan Chapter 6Negligence Gary Chan PART III THE LAW OF CONTRACT Formation of Contract Chapter 7Offer and Acceptance 5 George Shenoy & Eunice Chua Chapter 8Consideration and Intention to Create Legal Relations Loo Wee Ling Chapter 9Capacity and Privity of Contract Loo Wee Ling Contents of Contract Chapter Terms of the Contract 10 Loo Wee Ling Chapter Exemption Clauses 11 George Shenoy & Dorcas Quek Anderson Vitiating Factors Chapter Mistake 12 Lee Pey Woan & Kenny Chng Chapter Misrepresentation 13 Low Kee Yang Chapter Economic Duress, Undue Influence and 14 Unconscionability Pearlie Koh Chapter Illegality and Public Policy 15 Anne Magdaline Netto & Lau Kwan Ho Discharge of Contract Chapter Performance and Breach of Contract 16 Alvin See Chapter Frustration 17 Low Kee Yang Chapter Remedies for Breach of Contract 6 18 Alvin See Comparative Contract Law Chapter Comparative Contract Law 19 Howard Hunter PART IV SPECIAL AREAS OF BUSINESS LAW Chapter Agency 20 Pearlie Koh Chapter Business Organisations 21 Pearlie Koh Chapter Sale of Goods 22 Stephen Bull Chapter Intellectual Property 23 Saw Cheng Lim & Gladys Tan Chapter Information Technology 24 Warren Chik Chapter Competition Law 25 Howard Hunter Chapter International Business 26 Austin Pullé Subject Index 7 Preface to the Third Edition In 2006, the idea for the Principles of Singapore Business Law was born. It took root from a desire to have a suitable textbook for non-law undergraduates taking the Business Law course at the Singapore Management University (SMU). The vision was to go beyond laying out basic principles of Singapore business law to engaging the student in deeper reflection of some of the more complex legal issues. This vision was set in motion when Low Kee Yang, then Interim Dean of the soon-to-be SMU School of Law, encouraged myself and my erstwhile colleague, George Shenoy, to helm the project as co-editors. An initial team of 16 faculty and one adjunct member of the School of Law brought their years of experience in practice, industry and academia together in the writing of the first edition of 2009. As we embarked on the project, we realised that the lay business person, apart from Business Law students from SMU or other tertiary institutions, would have use for such a work. And so the needs of non-law students and the wider business community were reflected in the choice of topics in the initial and subsequent editions of the work. These included essential topics in contract law, business torts and crimes, and selected topics of relevance to business such as agency, business organisations, intellectual property, information technology and competition law. The topics of comparative contract law and international business provide the global perspective so necessary in this era. We worked in features to aid understanding of the legal concepts – diagrams, tables and figures that help to illuminate the inter-relationship of the many legal rules, and illustrative cases to provide elucidation. ‘Reflecting on the law’ boxes serve to nudge the reader to think about the more complex but practical issues and the unsettled ones. We took care to reduce legalese, where possible. The success of the first edition saw the bringing out of the second in 2013. With the retirement of George Shenoy, I now 8 bring to you, as the sole editor, the third edition in 2019. The law is as stated on 4 May 2019. As with the first and second editions, it is a collective effort. We sought to do more than update the law; we sought to improve upon the previous editions, making changes to enhance the pedagogical value. In line with this, a number of chapters in the 3rd edition were partially or substantially rewritten. Three chapters were written anew – Chapter 4 on ‘Business Crimes’ by Low Kee Yang and Melina Chew, and Chapters 16 and 18 on ‘Performance, Breach and Agreement’ and ‘Remedies for Breach of Contract’, respectively, by Alvin See. Several (other) new authors – Eunice Chua, Dorcas Quek Anderson, Gladys Tan and Kenny Chng – came on board to update and add their wisdom to existing chapters. The many who have faithfully contributed time and effort in bringing out this enhanced third edition deserve my heartfelt thanks. My special thanks go to the authors for their kind cooperation and dedication in this endeavour, despite their busy schedules. Special thanks too are due to the publishers, Cengage Learning and their staff, in particular their Senior Editorial Manager, Han Lian Siew, and Senior Development Editor, Kenneth Chow, for their unwavering efforts in ensuring a volume we can be proud of. The previous editions have served our intended readers well students and instructors of SMU and other educational institutions, and lay business persons. My hope is that the third edition will do likewise. School of Law Singapore Management University July 2019 9 Loo Wee Ling Editor List of Authors Stephen Bull LLM (Harvard University), Solicitor (England & Wales), Attorney-at-law (New York), Barrister and Solicitor (New Zealand), Associate Professor of Law (Practice) (SMU) Gary Chan LLM (SOAS, London), Attorney & Counselor-at-law (New York), Advocate & Solicitor (Singapore), Professor of Law (SMU) Warren Chik LLM (University College London), LLM (Tulane University), Advocate & Solicitor (Singapore), Attorney and Counselor-at-law (New York), Solicitor (England & Wales), Associate Professor of Law (SMU) Howard Hunter JD, Yale University 1971, Professor of Law Emeritus and former Dean (Emory University), former Professor of Law and President (SMU). Pearlie Koh LLM (Melbourne), Advocate & Solicitor (Singapore), Associate Professor of Law (SMU) Lau Kwan Ho LLM (New York University), Advocate & Solicitor (Singapore), Assistant Professor of Law (SMU) Lee Pey Woan BCL (Oxford), Advocate & Solicitor (Singapore), Associate Professor of Law (SMU) Loo Wee Ling LLM (Sydney), Advocate & Solicitor (Singapore), Associate Professor of Law (Education) (SMU) Low Kee Yang PhD (King’s College, London), Advocate & Solicitor (Singapore), Associate Professor of Law (SMU) 10 Anne Magdaline Netto PhD (King’s College, London), Barrister-at-Law (Lincoln’s Inn), Advocate & Solicitor (Singapore), Former Adjunct Faculty (SMU) Austin Pullé SJD (Harvard), Attorney-at-law (Dist. of Columbia), former Associate Professor of Law (Practice) (SMU) Saw Cheng Lim LLM (University of Cambridge), Advocate & Solicitor (Singapore), Associate Professor of Law (SMU) George Shenoy PhD (London), Advocate (Bombay High Court), former Associate Professor of Law (Practice) (SMU) Eugene K B Tan JSM (Stanford), Advocate & Solicitor (Singapore), Associate Professor of Law (SMU) Alvin See BCL (Oxford), LLB (Leeds), Associate Professor of Law (Education) (SMU) Eunice Chua LLM (Harvard University), Advocate & Solicitor (Singapore), former Assistant Professor of Law (SMU) Gladys Tan JD (SMU), Advocate & Solicitor (Singapore), BSc (Hons), Life Sciences (Biomedical Science) (NUS), Director, David Llewelyn & Co LLC Advocates & Solicitors Kenny Chng LLM (Harvard University), Assistant Professor of Law (SMU) Melina Chew LLB (Singapore Management University) Dorcas Quek Anderson LLM (Harvard University), Advocate & Solicitor (Singapore), Assistant Professor of Law (SMU) 11 Table of Cases A A Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308 Abuse of a Dominant Position by SISTIC.com Pte Ltd, CCS 600/008/07 (4 June 2010) ACB v Thomson Medical Pte Ltd [2017] 1 SLR 918 ACCC v April Int’l Mktg Servs [2011] FCA 153 Adam v Ward [1917] AC 309 Adams v Cape Industries plc [1990] 2 WLR 657 Adams v Lindsell (1818) 1 B & Ald 681 Addis v Gramophone Company, Ltd [1909] AC 488 Aero-Gate Pte Ltd v Engen Marine Engineering Pte Ltd [2013] 4 SLR 409 Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd and Securicor (Scotland) Ltd [1983] 1 WLR 964 Airbus Industrie GIE v Patel [1998] 2 WLR 686 Akerhielm v De Mare [1959] AC 789 Albazero, The [1977] AC 774 15.57 25.30 18.32 Box 25.1 5.82 21.27 7.62, 19.23 18.28 16.50, 18.11 11.29, 13.56 26.27 13.20 9.71, 9.72, 9.73, 9.74. 9.76 Box 25.2 6.77 14.53, 14.55, 15.59 14.9 15.12 9.73 Albrecht v Herald Co, 390 US 145 (1968) Alcoa Minerals of Jamaica Inc v Broderick [2002] 1 AC 371 Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd [1983] 1 WLR 87; affirmed [1985] 1 WLR 173 Alev, The [1989] 1 Lloyd’s Rep 138 Alexander v Rayson [1936] 1 KB 169 Alfred McAlpine Construction Ltd v Panatown Ltd [2000] 3 WLR 946 Allcard v Skinner (1887) 36 Ch D 145 14.31, 14.39 Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 671 21.64 Allianz Insurance Co (Egypt) v Aigaion Insurance Co SA [2008] 7.53 EWCA Civ 1455 Allplus Holdings Pte Ltd v Phoon Wui Nyen [2016] SGHC 144 18.52 Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd [2006] 3 26.102, 26.103 SLR 174 Alsagoff v Robin [1965] MLJ 56 12.29 Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd 22.71 [1976] 2 All ER 552 12 Alvin Nicholas Nathan v Raffles Assets (Singapore) Pte Ltd [2016] 2 SLR 1056 Anderson Ltd v Daniel [1924] 1 KB 138 Anglia Television Ltd v Reed [1972] 1 QB 60 Animal Concerns Research & Education Society v Tan Boon Kwee [2011] 2 SLR 146 Anns v Merton London Borough Council [1978] AC 728 18.3 15.9 18.10, Box 18.1 6.39 6.8, 6.9, 6.12, 6.13, 6.15 Anti-Corrosion Pte Ltd v Berger Paints Singapore Pte Ltd [2012] 11.11 1 SLR 427 Anwar Patrick Adrian v Ng Chong & Hue LLC [2014] 3 SLR 761 6.18 Aqua Art Pte Ltd v Goodman Development (S) Pte Ltd [2011] 2 15.23 SLR 865 Arcos, Ltd v E A Ronaasen & Son [1933] AC 470 16.7, 22.31, 22.43 Arctic Shipping Co Ltd v Mobilia AB, The Tatra [1990] 2 Lloyd’s 20.42 Rep 51 Armstrong v Jackson [1917] 2 KB 822 20.45 Armstrong v Strain [1952] 1 KB 232 13.33 ARS v ART [2015] SGHC 78 5.10 Arul Chandran v Chew Chin Aik (Suit 1896 of 1998, judgment 5.67 dated 19-06-2000) Arul Chandran v Gartshore [2000] 2 SLR 446 18.28 Ashford Shire Council v Dependable Motors Pty Ltd [1961] AC 20.11 336 Ashlock William Grover v SetClear Pte Ltd [2012] 2 SLR 625 26.28 Asia Hotel Investments Ltd v Starwood Asia Pacific 18.23 Management Pte Ltd [2005] 1 SLR(R) 661 Asia Pacific Publishing Pte Ltd v Pioneers & Leaders 23.8, 23.116, (Publishers) Pte Ltd [2011] 4 SLR 381 23.118 Aslakson v Home Savings Ass’n, 416 NW2d 786 (MNApp 1987) 19.74 Associated Electric & Gas Insurance Services Ltd v European 10.50 Reinsurance Company of Zurich [2003] 1 WLR 1041 Associated Japanese Bank (International) Ltd v Crédit du Nord 12.16, 12.17, SA [1989] 1 WLR 255 12.24, 12.29 Asylum (Colombia v Peru) 1950 ICJ 266 26.7 Atlas Express Ltd v Kafco (Importers and Distributors) Ltd 14.9 [1989] 1 All ER 641 Attorney General v Blake [2001] 1 AC 268 18.59 AUVI Trademark, Re [1992] 1 SLR 639 23.11 Awang bin Dollah v Shun Shing Construction & Engineering Co 6.62 Ltd [1997] 3 SLR 677 B B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 3 13 Box 12.3 Baker v Willoughby [1970] AC 467 Balfour v Balfour [1919] 2 KB 571 Bank Line v Arthur Capel [1919] AC 435 Bank of America v Djoni Widjaja [1994] 2 SLR 816 Bank of Credit and Commerce International SA v Aboody [1989] 2 WLR 759 Bank of East Asia Ltd, The v Mody Sonal M [2004] 4 SLR 113 Bank of India v Rai Bahadur Singh [1994] 1 SLR 328 Bannerman v White (1861) 10 CBNS 844 Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502 Barcelona Traction, Light and Power Company, Limited (Belgium v Spain) (1970) ICJ 3 Barclays Bank Plc v O’Brien [1994] 1 AC 180 Barker v Corus (UK) plc [2006] 2 AC 572 Barnes & Co v Toye (1884) 13 QBD 410 Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428 Barton v Armstrong [1976] AC 104 Basil Anthony Herman v Premier Security Co-operative Ltd [2010] 3 SLR 110 Beale v Taylor [1967] 3 All ER 253 Beattie v E & F Beattie Ltd [1938] Ch 708 Beckkett Pte Ltd v Deutsche Bank AG [2009] 3 SLR(R) 452 Beecham Group Limited’s (Amoxycillin) Application [1980] RPC 261 Beihai Zingong Property Development Co v Ng Choon Meng [1999] 1 SLR(R) 527 Bell Atlantic Corp v Twombley (2007) 550 US 544 Bell v Lever Brothers, Ltd [1932] AC 161 Benlen Pte Ltd v Authentic Builder Pte Ltd [2018] SGHC 61 Bennett, Ex parte (1805) 32 ER 893 Beswick v Beswick [1968] AC 58 Bigos v Bousted [1951] 1 All ER 92 BNJ v SMRT Trains Ltd [2014] 2 SLR 7 Bolam v Friern Hospital Management Committee [1957] 1 WLR 582 Bolitho v City and Hackney Health Authority [1998] AC 232 Bolton Partners v Lambert (1889) 41 Ch D 295 Bolton v Stone [1951] AC 850 BOM v BOK [2019] 1 SLR 349 14 6.72 8.71, 8.73 17.36 26.27 14.40 14.43, 14.49 9.7 10.27, 13.40 8.78 26.18 14.47 6.70 9.19 6.64 14.3, 14.23 5.74 22.44 21.60 5.34 23.55 18.51, 18.53 25.8 12.15, 12.18, 12.25, 21.54 8.38, 8.41 20.46 9.51, Box 9.3, 9.58, 9.69 15.26 6.23 6.53, 6.57, 6.58, 6.59, 6.60 6.58, 6.59, 6.60 20.24, 20.26 6.50 14.29, 14.57, 14.61 Bond Worth Ltd, Re [1980] Ch 228 22.71 Bowes v Shand (1877) 2 App Cas 455 22.19 BP Oil v Empire Estatal Petroleos 332 F3d 333 (5th Cir 2003) 19.15 Bradbury v Morgan (1862) 1 H & C 249 7.49 Brader Daniel John v Commerzbank AG [2014] 2 SLR 81 8.38, 8.40 Bridge v Campbell Discount [1962] AC 600 19.86 Brimelow v Casson [1924] 1 Ch 302 5.18 Brimnes, The [1975] QB 929 7.37 Brinkerhoff Maritime Drilling Corp v PT Airfast Services Indonesia 26.26 [1992] 2 DLR 776 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH 7.59 [1983] 2 AC 34 British Motor Trade Association v Salvadori [1949] Ch 556 5.9 British Northrop v Texteam [1974] RPC 57 23.11 British Sugar plc v James Robertson and Sons Ltd [1996] RPC 23.92 281 British Westinghouse Electric and Manufacturing Co Ltd v 18.45 Underground Electric Railways Company of London Ltd [1912] AC 673 Broadley Construction Pte Ltd v Alacran Design Pte Ltd [2018] 2 12.33, 13.15, SLR 110 13.30, 13.60 Brogden v Metropolitan Railway (1877) 2 App Cas 666 7.56 Brown v Gould [1972] Ch 53 7.80 Browning v Morris (1778) 2 Cowp 790 15.21 Browning v Provincial Insurance Co of Canada (1873) LR 5 PC 20.36 263 Bryan v Maloney (1995) 128 ALR 163 6.38 Buckman Laboratories (Asia) Pte Ltd v Lee Wei Hoong [1999] 3 15.45 SLR 333 Bunge Corporation, New York v Tradax Export SA Panama 10.61 [1981] 1 WLR 711 Butler Machine Tool Co v Ex-Cell-O Corporation (England) Ltd 7.74, Box 7.2 [1979] 1 WLR 401 Butwick v Grant [1924] 2 KB 483 20.33 Byrne v Deane [1937] 1 KB 818 5.65 Byrne v Van Tienhoven (1880) 5 CPD 344 7.34 C CAA Technologies Pte Ltd v Newcon Builders 10.68, 16.12 Pte Ltd [2017] 2 SLR 940 Calico Printers’ Association Ltd v Barclays 20.49 Bank (1930) 38 Ll L Rep 105 KBD Callisher v Bischoffsheim (1870) LR 5 QB 449 8.26 Campbell v Park [1954] 2 DLR 170 15.48 Canada Steamship Lines Ltd v R [1952] 1 All 11.31, 11.32, 11.34, 11.35, 11.67 ER 305 15 Caparo Industries plc v Dickman [1990] 2 AC 6.13, 6.15, 6.25, Box 6.1, 6.31, 605 6.32 Car & Universal Finance v Caldwell [1965] 1 22.76, 22.90 QB 525 Carlill v Carbolic Smoke Ball Company [1893] 7.12, 7.24, 8.13 1 QB 256 Carriernet Global Ltd v Abkey Pte Ltd [2010] 3 9.64 SLR 454 Cassa di Risparmio della Repubblica di San 13.13, 13.36 Marino SpA v Barclays Bank Ltd [2011] EWHC 484 Cassell & Co Ltd v Broome (1972) AC 1027 5.88 Cassidy v Daily Mirror Newspapers Ltd [1929] 5.54 2 KB 331 Catnic Components Ltd v Hill & Smith Ltd 23.61 [1982] RPC 183 CBS Songs Ltd v Amstrad Consumer 5.29 Electronics Plc [1988] AC 1013 CCS 400/001/08 (2 July 2008) 25.36 CCS 400/002/06 and 400/003/06 (5 March 25.24 2007) CCS 400/003/06 (10 January 2007) 25.10 CDL Hotels International Ltd v Pontiac Marina 23.111, 23.112 Pte Ltd [1998] 1 SLR(R) 975 Central London Property Trust Ltd v High 8.47 Trees House Ltd [1947] KB 130 Chai Cher Watt v SDL Technologies Pte Ltd 22.117 [2012] 1 SLR 152 Chan Chee Kien v Performance Motors Ltd 22.46, 22.119 [2015] SGHC 54 Chan Cheng Kum v Wah Tat Bank Ltd [1971] 1 10.54 SLR 22 Chan Cheng Wah v Koh Sin Chong Freddie 5.52 [2012] 1 SLR 506 Chan Gek Yong v Violet Netto [2018] SGHC 9.40 208 Chan Wing Seng v PP [1997] 1 SLR(R) 721 4.47, 4.49, Figure 4.1 Chandran a/l Subbiah v Dockers Marine Pte 6.52 Ltd [2010] 1 SLR 786 Chapelton v Barry Urban District Council Box 7.3, 11.13 [1940] 1 KB 532 Chaplin v Leslie Frewin (Publishers) Ltd [1966] 9.26 Ch 71 Chappell & Co Ltd v Nestlé Co Ltd (1960) AC 8.8, 8.20 87 Chapple v Cooper (1844) 13 M & W 252 9.17, 9.23 16 Chartbrook Limited v Persimmon Homes Limited [2009] 1 AC 1101 Charter v Sullivan [1957] 2 QB 117 Chase v News Group Newspapers Ltd [2003] EMLR 218 Che Som bte Yip v Maha Pte Ltd and another [1989] SLR 721 Cheese v Thomas [1994] 1 All ER 35 Cheng Albert v Tse Wai Chun Paul [2000] 4 HKC 1 Chia Kok Leong v Prosperland Pte Ltd [2005] 2 SLR 484 Chiam See Tong v Ling How Doong [1997] 1 SLR 648 Chin Bay Ching v Merchant Ventures Pte Ltd [2005] 3 SLR 142 China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd [1997] SLR(R) 103 Chng Suan Tze v Minister for Home Affairs [1988] 2 SLR(R) 525 Chromalloy Aeroservices v Arab Republic of Egypt 939 F Supp 907 (DDC 1996) Chua Choon Cheng v Allgreen Properties Ltd [2009] 3 SLR(R) 724 Chua Keng Mong v Hong Realty Pte Ltd [1993] 3 SLR(R) 317 Chua Kian Kok v PP [1999] 1 SLR(R) 826 Chwee Kin Keong v Digilandmall.com Pte Ltd [2004] 2 SLR 594, [2005] 1 SLR 502 CIBC Mortgages Ltd v Pitt [1994] 1 AC 200 City Chain Stores (S) Pte Ltd v Louis Vuitton Malletier [2010] 1 SLR 382 CLAAS Medical Centre Pte Ltd v Ng Boon Ching [2010] 2 SLR 386 Clarke Beryl Claire v SilkAir (Singapore) Pte Ltd [2002] 1 SLR(R) 1136 Clearlab SG Pte Ltd v Ting Chong Chai [2015] 1 SLR 163 Clements v L & NW Ry [1894] 2 QB 482 Clunis v Camden and Islington Health Authority [1998] QB 978 Clydebank Engineering v Don Jose Ramos [1905] AC 6 Coco v A N Clark (Engineers) Ltd [1969] RPC 17 19.36 22.104 5.53 9.40 14.44 5.74 6.98, 9.76 5.55 5.89 17.35 3.16 26.101 10.51 18.46 4.42 7.21, 8.81, 12.27, 12.28, 12.29, 12.35, 12.36, Box 12.2, 12.36, 12.37, 12.38, 12.57, 14.2, 24.22, 24.47, 24.51 14.32 23.94 9.59, 9.61, 15.37, 15.55, 15.64 4.13 23.74, 23.75, 23.80 9.25 6.82 19.86 23.73 41 Collen v Wright (1857) 8 E&B 647 Collusive Tendering for Termite Control, CCS 600/008/06 (9 January 2008) Columbia Asia Healthcare Sdn Bhd v Hong Hin Kit Edward [2014] 3 SLR 87 Comb v PayPal, Inc 218 FSupp2d 1165 (ND Cal 2002) Combe v Combe [1951] 2 KB 215 Comfort Management v PP [2003] 2 SLR(R) 67 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Computer Associates UK Ltd v The Software Incubator Ltd [2018] EWCA Civ 5181 Conor Medsystems Inc v Angiotech Pharmaceuticals Inc [2008] RPC 28 Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association [1992] 2 SLR 828 Co-op Insurance Society Ltd v Argyll Stores Holdings Ltd [1997] 2 WLR 898 Cooperatieve Centrale RaiffeisenBoerenleenbank BA (trading as Rabobank International), Singapore Branch v Motorola Electronics Pte Ltd [2011] 2 SLR 63 Cope v Rowlands (1836) 2 M & W 149 Coulls v Bagot’s Executor and Trustee Co Ltd [1967] ALR 385 Courtney & Fairburn v Tolaini Bros (Hotels) Ltd [1975] 1 All ER 716 Couturier v Hastie (1856) 5 HLC 673 Cowern v Nield [1912] 2 KB 419 Cremdean Properties Ltd v Nash (1977) 244 EG 547 Cresswell v Potter [1978] 1 WLR 255 Cristian Priwisata Yacob v Wibowo Boediono [2017] SGHC 8 Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] AC 435 CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 Cundy v Lindsay (1878) 3 App Cas 459 Currie v Misa (1875) LR 10 Exch 153 Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805 18 20.56 25.8, 25.18 9.62 24.29 8.10, 8.63 4.20 14.56 22.9 23.55 11.54 18.63 7.81 15.8 Box 9.3 22.21 12.11, 12.12 9.25 13.58 14.55 18.56 5.30 14.21 12.48, Figure 12.3 8.4 11.10 Cutter v Powell (1795) 6 Term Reports 320 CW Continental Corp v Patec Ltd [2016] SGHC 224 16.18, 16.19, 16.23 22.125 D D&C Builders v Rees [1966] 2 QB 617 Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2011] AC 763 Daniel v Drew [2005] 2 FCR 365 Darby v Boucher (1694) 1 Salk 279 Dardana Ltd v Yukos Oil Company [2002] 2 Lloyd’s Rep 326 Darlington Borough Council v Wiltshire Northern Ltd (1995) 3 All ER 895 Darwish M K F Al Gobaishi v House of Hung Pte Ltd [1995] 1 SLR(R) 623 Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231 Davis Contractors v Fareham UDC [1956] AC 696 DC Thomson & Co Ltd v Deakin [1952] Ch 646 De Bussche v Alt (1878) 8 ChD 286 De Francesco v Barnum (1890) 45 Ch D 430 DeJohn v The TV Corporation International et al 245 FSupp2d 913 (CD Ill 2003) Denmark Productions Ltd v Boscobel Productions Ltd [1967] CLY 1999 Derry v Peek (1889) LR App Cas 337 Development Bank of Singapore Ltd v Yeap Teik Leong [1988] 2 SLR(R) 201 DHKW Marketing v Nature’s Farm Pte Ltd [1999] 2 SLR 400 Dick Bentley Productions Ltd v Harold Smith [1965] 1 WLR 623 Dickinson v Dodds (1876) 2 Ch D 463 Dickson Trading (S) Pte Ltd v Transmarco Ltd [1989] 2 MLJ 408 Doctor’s Associates Inc v Lim Eng Wah (trading as SUBWAY NICHE) [2012] 3 SLR 193 Donoghue v Stevenson [1932] AC 562 Douglas v Hello! Ltd [2008] 2 WLR 920 Doyle v White City Stadium Ltd [1935] 1 KB 110 Dr. Miles Medical Co v John D Park & Sons Co (1911) 22 US 373 Dunlop Pneumatic Tyre Company, Limited v New Garage and Motor Company, Limited [1915] AC 79 Dynasty Line Ltd (in liquidation) v Sukamto Sia [2014] 3 SLR 19 8.62 26.103 14.26 9.24 26.101 9.72, 9.73 10.28 Box 7.1 17.6, 17.8, Box 17.1, 17.24 5.13 20.48 18.63 24.27 9.26 13.30 8.46 5.61 10.33 7.35, 19.29 Box 7.1 23.86 6.5, 6.6, 6.7, 6.9, 6.14, 6.100 5.37 9.26 Box 25.2 18.51, 18.52, 19.86 10.14 277 Dysart Timbers Ltd v Roderick William Nielsen [2009] 3 NZLR 160 7.48 E E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2012] 1 SLR 32 E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd (Orion Oil Ltd and another, interveners) [2011] 2 SLR 232 Eastern Resource Management Services Ltd v Chiu Teng Construction Co Pte Ltd [2016] SGHC 114 Ecay v Godfrey (1947) 80 Ll L Rep 286 18.62 14.4, 14.9 14.4 10.26, 13.40 Edgington v Fitzmaurice (1885) LR 29 Ch D 459 13.8, 13.23 Edward Wong Finance Co, Ltd v Johnson, Stokes and Master [1984] AC 6.54, 296 6.56 Edwards v Carter [1893] AC 360 9.29 Edwin Hill & Partners v First National Finance Corpn [1989] 1 WLR 225 5.19 Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage 17.40 & Towage) Ltd (The Sea Angel) [2007] 2 Lloyd’s Rep 517 EFT Holdings Inc v Marinteknik Shipbuilders (S) Pte Ltd [2014] 1 SLR 5.34 860 Eian Tauber Pritchard v Peter Cook [1998] EWCA Civ 900 10.34 Ei-Net Ltd v Yeo Nai Meng [2004] 1 SLR(R) 153 18.45 Eng Chiet Shoong v Cheong Soh Chin [2016] 4 SLR 728 16.24 Entores Ltd v Miles Far East Corporation [1955] 2 QB 32 7.57, 7.59 Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 15.58 269 Estate of Lee Rui Feng Dominique Sarron, deceased v Najib Hanuk bin 8.29 Muhammad Jalal [2016] 4 SLR 438 Eugenia, The [1964] 2 QB 226 17.39 Evening News Ass’n v Peterson, 477 FSupp 77 (DDC 1979) 19.72 Evergreen International SA v Volkswagen Group Singapore Pte Ltd 26.28 [2004] 2 SLR (R) 457 Evia, The (No 2) [1983] 1 AC 736 17.10 F Faccenda Chicken Ltd v Fowler [1987] Ch 117 Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 Farley v Skinner [2002] 2 AC 732 Fawcett v Smethurst (1914) 84 LJKB 473 FE Global Electronics Pte Ltd v Trek Technology (Singapore) Pte Ltd [2006] 1 SLR 874 20 15.42, 23.80 6.70 18.31, 18.33 9.20 23.51, 23.61 Federal Lands Commissioner v Benfort Enterprises [1998] 1 SLR 855 Felthouse v Bindley (1862) 11 CBNS 869 Fenner v Blake [1900] 1 QB 426 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour, Ltd [1943] AC 32 Financings Ltd v Stimson [1962] 1 WLR 1184 First Asia Capital Investments Ltd v Société Générale Bank & Trust [2017] SGHC 78 First Currency Choice Pte Ltd v Main-Line Corporate Holdings Ltd [2008] 1 SLR(R) 335 First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd’s Rep 194 Fisher v Bell [1960] 3 All ER 731 Fitch v Dewes [1921] 2 AC 158 Flamelite (S) Pte Ltd v Lam Heng Chung [2001] 4 SLR 557 Foakes v Beer (1884) 9 App Cas 605 Fong Maun Yee v Yoon Weng Ho Robert [1997] 2 SLR 297 Foo Jong Long Dennis v Ang Yee Lim Lawrence [2016] 2 SLR 287 Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR(R) 927 Forrest v Verizon Communications, Inc 805 A2d 1007 (DC 2002) Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Frost v The Aylesbury Dairy Co Ltd [1905] 1 KB 608 21.5 7.69 8.55 17.42, 22.85 7.47 10.14 23.54, 23.59, 23.61, 23.67 Box 20.1 7.26 15.44 23.11 8.43, 8.45 6.54, 6.55, 6.89 8.75 10.44, 10.48, 10.51 24.27 6.89 20.40 16.4 G Gan Cheng Chan v Gan Meng Hui [2005] SGHC 55 Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 Gator Shipping Corpn v Trans-Asiatic Oil SA (The Odenfield) [1978] 2 Lloyd’s Rep 357 Gaussen v Morton (1830) 10 B&C 731 Gay Choon Ing v Loh Sze Ti Terence Peter [2009] 2 SLR(R) 332 Geier v Kujawa, Weston & Warne Bros (Transport) Ltd [1970] 1 Lloyd’s Rep 364 Genelabs Diagnostics v Institut Pasteur [2001] 1 SLR 121 General Electric Credit Corp v Xerox, 490 NYS2d 407 (AD 1985) General Tire v Firestone Tyre [1972] RPC 21 14.39 20.8 16.57 20.60 7.8, 7.50, 7.74, Box 7.2, 8.41, 8.82, 14.59 11.17 23.51 19.73 23.51 457 George Mitchell (Chesterhall) Ltd v Finney 11.16 Lock Seeds Ltd [1983] 2 AC 803 GHSP Inc v AB Electronic Ltd [2010] EWHC 7.76 1828 (Comm) Glahe International Expo AG v ACS 17.40 Computer Pte Ltd [1999] 1 SLR 166, on appeal [1999] 2 SLR 620 Glamorgan Coal Co v South Wales Miners’ 5.17 Federation [1903] 2 KB 545 Glasbrook Bros v Glamorgan County Council 8.30 (1925) AC 270 Go Dante Yap v Bank Austria Creditanstalt 6.52 AG [2011] 4 SLR 559 Godfrey v Demon Internet Ltd [2000] 3 WLR 5.66 1020 Goh Lay Khim v Isabel Redrup Agency Pte 5.77 Ltd [2017] 1 SLR 546 Goldcorp Exchange, Re [1995] 1 AC 74 22.67, 22.68 Golden Season Pte Ltd v Kairos Singapore 5.59 Holdings Pte Ltd [2015] 2 SLR 751 Goldsoll v Goldman [1915] 1 Ch 292 15.65 Goldsworthy v Brickell [1987] 1 All ER 853 14.37 Gore v Gibson (1843) 13 M & W 623 9.40 Government of Zanzibar v British Aerospace 13.51, 13.58 (Lancaster House) [2000] 1 WLR 2333 Governors of the Peabody Donation Fund v 6.12 Sir Lindsay Parkinson & Co Ltd [1985] AC 210 Grace Electrical Engineering Pte Ltd v Te 6.62 Deum Engineering Pte Ltd [2018] 1 SLR 76 Grant v Australian Knitting Mills [1936] AC 85 22.44 Great Peace Shipping Ltd v Tsavliris Salvage 12.19, 12.20, 12.22, 12.23, 12.24, Ltd [2003] QB 679 12.25, 12.26, 12.27, Box 12.1, Figure 12.2 Greene v Keener, 402 SE2d 284 (GaApp 19.29 1991) Grist v Bailey [1967] 1 Ch 532 12.24 Gross v Lewis Hillman [1970] Ch 445 13.27 Gulf Petrochem Pte Ltd v Petrotec Pte Ltd 8.19, Figure 8.3 [2018] SGHC 83 GWK Ltd v Dunlop Rubber Co Ltd (1926) 42 5.11 TLR 593 H 22 H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791 H R Moch Co v Rensselear Water Co, 159 NE 896 (NY 1928) Hadley v Baxendale (1854) 9 Ex 341 18.44 19.61 18.40, 18.41, 18.42, 18.43, Box 18.2, 18.44, 22.99 5.80 22.54 Hady Hartanto v Yee Kit Hong [2014] 2 SLR 1127 Hamilton v Papakura District Council [2002] 3 NZLR 308 Hands v Slaney (1800) 8 TR 578 9.17 Hanna v OAMPS Insurance Brokers Ltd [2010] 15.66 NSWCA 267 Harlingdon and Leinster Enterprises Ltd v 22.45 Christopher Hull Fine Art Ltd [1991] 1 QB 564 Haron bin Mundir v Singapore Amateur Athletic 18.28 Association [1991] 2 SLR(R) 494 Harrington v Kent [1980] IRLR 353 17.27 Hartley v Ponsonby (1857) 7 El & Bl 872 8.34 Hartog v Colin & Shields [1939] 3 All ER 566 12.32 Harvela Investments Ltd v Royal Trust Co of 7.32 Canada [1986] 1 AC 207 Haynes v Harwood [1935] 1 KB 146 6.85 Healy v Howlett & Sons [1917] 1 KB 337 22.66 Hedley Byrne & Co Ltd v Heller & Partners Ltd 6.28, 6.32, 6.33, 6.35, 13.2, [1964] AC 465 13.3, 13.34 Helby v Matthews [1895] AC 471 22.11 Heller Factoring (Singapore) Ltd v Ng Tong Yang 15.40 [1993] 1 SLR(R) 495 Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 20.12, 20.40 Henderson v Merrett Syndicates Ltd [1995] 2 AC 6.96, 13.4 145 Herbert Morris Ltd v Saxelby [1916] AC 688 15.41, 15.43 Heskell v Continental Express Ltd [1950] 1 All ER 18.38 1033 Hewlett-Packard Singapore (Sales) Pte Ltd v Chin 10.15 Shu Hwa Corrina [2016] 2 SLR 1083 Heydon’s case (1584) 3 Co Rep 73 3.51 HIH Casualty and General Insurance v Chase 11.33 Manhattan Bank [2003] UKHL 6 Hii Chii Kok v Ooi Peng Jin London Lucien [2017] 6.60 2 SLR 492 Hilton v Tucker (1888) 39 Ch D 669 22.26 Ho Seng Lee Construction Pte Ltd v Nian Chuan 12.22, 12.29 Construction Pte Ltd [2001] 4 SLR 407 Ho Soo Fong v Standard Chartered Bank [2007] 2 6.77 SLR 181 23 Hoenig v Isaacs [1952] 2 All ER 176 Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd [2011] 2 SLR 106 Holland Leedon Pte Ltd (in liquidation) v C & P Transport Pte Ltd [2013] SGHC 281 Hollier v Rambler Motors (AMC) Ltd [1972] 2 QB 71 Holman v Johnson (1775) 1 Cowp 341 Hong Leong Finance Ltd v Tan Gin Huay [1999] 1 SLR(R) 755 Hong Leong Finance Ltd v Tay Keow Neo [1991] 2 SLR(R) 841 Hongkong & Shanghai Banking Corp Ltd v Jurong Engineering Ltd [2000] 1 SLR(R) 204 Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 Houghton v Trafalgar Insurance Co [1954] 1 QB 247 Household Fire and Carriage Accident Insurance Co v Grant (1879) 4 Ex D 216 Howard Marine & Dredging v Ogden & Sons (Excavations) [1978] QB 574 Howard v Pickford Tool Co Ltd [1951] 1 KB 417 Huckerby v Elliot [1970] 1 All ER 189 Hughes v Liverpool Victoria Legal Friendly Society [1916] 2 KB 482 Hughes v Lord Advocate [1963] AC 837 Hughes v Metropolitan Railway Company (1877) 2 App Cas 439 Hulton v Jones [1910] AC 20 Hutton v Warren (1836) 1 M & W 466 Huyton SA v Peter Cremer GmbH & Co [1999] 1 Lloyd’s Rep 620 Hyde v Wrench (1840) 3 Beav 334 Hyman v Hyman [1929] AC 601 Hyundai Heavy Industries Co v Papadopoulos [1980] 2 All ER 29 16.22, Box 16.1 17.24, 17.36 11.22 11.24, 11.30 15.2 18.51, 18.52 8.46 7.10, 8.79 10.60, Table 10.1, 22.18 11.27 7.63 13.38 16.52 4.27 15.19 6.75 8.50, 8.56, 8.65 5.58 10.54 14.19, 14.23 7.41 15.12 22.13 I ICI v Commission [1972] ECR 619, [1972] CMLR 557 ICI v Shatwell [1965] AC 656 Ikumene Singapore Pte Ltd v Leong Chee Leng [1993] 3 SLR 24 Imbree v McNeilly [2008] HCA 40 IMC Aviation Solutions Pty Ltd v Altain Khudder LLC [2011] 282 ALR 717 [2011] VSCA 248 24 25.8 6.85 6.31 6.48 26.103 Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2016] UKSC 67 Inche Noriah v Shaik Allie bin Omar [1929] AC 127 Industries and General Mortgage Co Ltd v Lewis [1949] 2 All ER 573 Ingram v Little [1961] 1 QB 31 Initial Services Ltd v Putterill [1968] 1 QB 396 Interfoto Picture Library v Stiletto Visual Programmes Ltd [1989] QB 433 Irawan Darsono v Ong Soon Kiat [2002] 2 SLR(R) 261 Irvine & Co v Watson & Sons (1880) 5 QBD 414 11.28 14.41 20.47 12.43, 12.44, 12.45, 12.47, Figure 12.3 23.76 11.21, 11.22 18.35 20.33 J J T Stratford & Sons Ltd v Lindley [1965] AC 269 5.12, 5.13 Jackson v Horizon Holidays [1975] 3 All ER 92 9.70 Jameel (Mohammed) v Wall Street Journal Europe Sprl [2007] 5.84 1 AC 359 Jarvis v Swans Tours Ltd [1973] QB 233 18.30 Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd [2005] 11.18 4 SLR 417 Jet Holding Ltd and others v Cooper Cameron (Singapore) Pte 6.89 Ltd [2006] 3 SLR 769 Jiang Ou v EFG Bank AG [2011] 4 SLR 246 11.57 JIO Minerals FZC v Mineral Enterprises Ltd [2011] 1 SLR 391 26.3, 26.26 Jobling v Associated Dairies [1982] AC 794 6.72 John Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 21.36 Johns-Manville Corporation’s Patent [1967] FSR 327 23.55 Johnson v Agnew [1980] AC 367 18.27, 22.89 Jolley v Sutton London Borough Council [2000] 1 WLR 1082 6.75 Jones Bros (Hunstanton) Ltd v Stevens [1955] 1 QB 275 5.15 Jones v Padavatton [1969] 1 WLR 328 8.72 Joscelyne v Nissen [1970] 2 QB 86, [1970] 2 WLR 509 12.56 Joseph Constantine v Imperial Smelting [1942] AC 154 17.28 Joseph Mathew v Singh Chiranjeev [2010] 1 SLR 338 24.44 JSI Shipping (S) Pte Ltd v Teofoongwonglcloong [2007] 4 SLR 6.49, 6.59 (R) 460 JTC v Wishing Star (No 2) [2005] 3 SLR 283 13.24, Box 13.1, 13.46 Jump Rope (Singapore) [2016] SGPDPC 21 24.57 Justlogin Pte Ltd v Oversea-Chinese Banking Corp Ltd [2007] 18.23 1 SLR(R) 425 K Kanchenjunga, The [1990] 1 Lloyd’s Rep 391 25 22.116 Kay Lim Construction & Trading Pte Ltd v Soon Douglas (Pte) Ltd [2013] 1 SLR 1 Kea Holdings Pte Ltd v Gan Boon Hock [2000] 3 SLR 129 Kearley v Thomson (1890) 24 QBD 742 Keighley, Maxsted & Co v Durant [1901] AC 240 11.55 Kelly v Partington (1833) 4 B & Ad 700 Kendall v Hamilton (1879) 4 App Cas 504 Kennedy v De Trafford [1897] AC 180 Kenrick v Lawrence (1890) 25 QBD 99 Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding Co Pte Ltd [1999] 1 SLR 214 Khoo Bee Keong v Ang Chun Hong [2005] SGHC 128 Khoo James, Dr v Gunapathy d/o Muniandy [2002] 2 SLR 414 King’s Norton Metal Co (Ltd) v Edridge, Merrett, and Co (Ltd) (1897) 14 TLR 98 Kiriri Cotton Co Ltd v Ranchhoddas Keshavji Dewani [1960] AC 192 Kleinwort Benson Ltd v Malaysia Mining Corp Bhd [1989] 1 WLR 379 Kleinwort Benson v Glasgow City Council (No 2) [1997] 4 All ER 641 Klerk-Elias v K T Chan Clinic Pte Ltd [1993] 1 SLR(R) 609 KLW Holdings Ltd v Straitsworld Advisory Ltd [2017] 5 SLR 184 Koenigsblatt v Sweet [1923] 2 Ch 314 Koh Lin Yee v Terrestrial Pte Ltd [2015] 2 SLR 497 Kong Thai Sawmill (Miri) Sdn Bhd, Re [1978] 2 MLJ 227 Krell v Henry [1903] 2 KB 740 Kwei Tek Chao v British Traders & Shippers Ltd [1954] 2 QB 459 21.54 15.25 20.20, 20.35 5.80 20.37 20.2 23.11 11.55 6.89 6.59 12.51 15.20, 15.22 8.78 13.11 16.56, 18.47 8.25 20.18 11.50, 11.56 21.66 17.22 22.122 L L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 L’Estrange v F Graucob Ltd [1934] 2 KB 394 Ladbroke v William Hill [1964] 1 WLR 273 Lam Chi Kin David v Deutsche Bank AG [2010] 2 SLR 896 HC Lam Chi Kin David v Deutsche Bank AG [2011] 1 SLR 800 CA Lambert v Lewis [1982] AC 225 Langel v Betz 250 NY 159 (1928) Larese v Creamland Dairies, 767 F2d 716 (10th Cir 1985) Latham v Credit Suisse First Boston [2000] 2 SLR 693 Latham v Credit Suisse First Boston [2000] 2 SLR(R) 30 Latimer v AEC Ltd [1953] AC 643 Laurence v Lexcourt Holdings Ltd [1978] 1 WLR 1128 Law Society of Singapore v Tan Guat Neo Phyllis [2008] 2 SLR(R) 239 26 10.64, 10.65 11.7, 12.53 23.24 8.54, 8.55 8.54, 8.59, 8.60, 8.61 18.39 19.75 19.73 10.14 10.14 6.51 12.24 3.15 Lawrence v Fox 20 NY 268 (1859) LB (Plastics) Ltd v Swish Products Ltd [1979] FSR 145 Le Lievre v Gould [1893] 1 QB 491 Leaf v International Galleries [1950] 2 KB 86 LED Linear (Asia) Pte Ltd v Krislite Pte Ltd [2017] SGHC 150 Lee Chee Wei v Tan Hor Peow Victor [2007] 3 SLR(R) 537 Lee Christina v Lee Eunice [1993] 2 SLR(R) 644 Lee Kien Meng v Cintamani Frank [2015] 3 SLR 1072 Lee Kuan Yew v Chee Soon Juan [2003] 3 SLR(R) 8 Lee Kuan Yew v Davies [1989] SLR 1063 19.57, 19.59, 19.60 23.23 13.30 13.47 10.68, 22.56 10.12 16.13 24.31 5.64, 14.20 5.51, 5.69, 5.72 7.64 16.24, 16.52 Lee Seng Heng v Guardian Assurance Co Ltd [1932] MLJ 17 Lee Siong Kee v Beng Tiong Trading, Import and Export (1988) Pte Ltd [2000] 3 SLR(R) 386 Leegin Creative Leather Products, Inc v PSKS, Inc (2007) 551 Box 25.2 US 877 Lefkowitz v Great Minneapolis Surplus Store (1957) 86 NW2d 7.24 689, USA Leiman, Ricardo v Noble Resources Ltd [2018] SGHC 166 9.77 Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd [2014] 3 SLR 15.67 27 Lemon Grass Pte Ltd v Peranakan Place Complex Pte Ltd [2002] 10.14 2 SLR(R) 50 Lew Chee Fai Kevin v Monetary Authority of Singapore [2012] 4.54 Lewis v Averay [1972] 1 QB 198 12.44, Figure 12.3 Li Siu Lun v Looi Kok Poh [2015] 4 SLR 667 5.31 Lian Kok Hong v Ow Wah Foong [2008] 4 SLR(R) 165 6.99 Lictor Anstalt v MIR Steel UK [2012] All ER (Comm) 54 11.33 Lifestyle 1.99 Pte Ltd v S$1.99 Pte Ltd (t/a ONE.99 SHOP) 23.113 [2000] 2 SLR 766 Lim Beng Cheng v Lim Ngee Sing [2016]1 SLR 524 8.26 Lim Eng Hock Peter v Lin Jian Wei [2010] 4 SLR 331 5.79 Lim Feng Chieh (formerly trading as Intra-Smit Agencies) v GS 21.6 Auto Supply Pte Ltd [1993] 2 SLR 489 Lim Geok Hian v Lim Guan Chin [1993] 3 SLR(R) 183 14.27, 14.57 Lim Kim Som v Sheriffa Taibah bte Abdul Rahman [1994] 1 SLR 17.25 393 Lim Sze Eng v Lin Choo Mee [2019] 1 SLR 414 10.15 Lim Weng Kee v PP [2002] 2 SLR(R) 848 4.58, 21.51 Linden Gardens Trust v Lenesta Sludge Disposals [1994] 1 AC 9.71 85 Lion Laboratories Ltd v Evans [1984] 2 All ER 417 23.76 Liverpool City Council v Irwin [1977] AC 239 10.50 LJ Korbetis v Transgrain Shipping BV [2005] EWHC 1345 (QB) 7.63 27 Lockett v Charles Ltd [1938] 4 All ER 170 London & Mashonaland Explorations Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165 London Artists Ltd v Littler Grade Organisation Ltd [1969] 2 QB 375 Lonrho v Fayed (No 5) [1993] 1 WLR 1489 Lonrho v Fayed [1990] 2 QB 479 Lonrho v Fayed [1992] 1 AC 448 Lotus (France v Turkey) (1927) PCIJ Rep (Ser A) No. 10 Love & Co Pte Ltd v The Carat Club Pte Ltd [2009] 1 SLR(R) 561 Low Peng Boon v Low Janie [1999] 1 SLR 761 Lowe v Lombank [1960] 1 WLR 196 Lubbe v Cape Plc [2000] 4 All ER 268 Lucky Realty Co Pte Ltd v HSBC Trustee (Singapore) Ltd [2016] 1 SLR 1069 Lumley v Gye [1853] E&B 216 22.13 21.54 5.73 5.31 5.36 5.33 26.7 23.85 21.66 13.60 26.21 10.15 5.5 M Magee v Pennine Insurance Co Ltd [1969] 2 QB 507 Magellan International Corporation v Salzgitter Handel GmbH, 76 FSupp2d 919 (NDIll 1999) [VIII ZR 304/00] Federal Supreme Court of Germany, 9 Jan 2002 Mahidon Nichiar bte Mohd Ali v Dawood Sultan Kamaldin [2015] 5 SLR 62 Mahmoud and Ispahani, Re [1921] 2 KB 716 Malik v Bank of Credit and Commerce International SA [1998] AC 20 Man Financial (S) Pte Ltd (formerly known as E D & F Man International (S) Pte Ltd) v Wong Bark Chuan David [2008] 1 SLR(R) 663 Manches v Trimborn (1946) 115 LJKB 305 Mano Vikrant Singh v Cargill TSF Asia Pte Ltd [2012] SGCA 42; [2012] 1 SLR 311 Mansource Interior Pte Ltd v CSG Group Pte Ltd [2017] 5 SLR 203 Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 Marc Rich & Co AG v Bishop Rock Marine Co Ltd [1996] AC 211 Maredelanto Compania Naviera SA v BergbauHandel GmbH, The Mihalis Angelos [1971] 1 QB 164 Marina Centre Holdings Pte Ltd v Pars Carpet Gallery Pte Ltd [1997] 2 SLR(R) 897 28 12.24 19.49 12.55 15.6 10.49, 10.50, 18.28 10.63, 10.65, 10.66, 15.33, 15.37, 15.41, 15.42, 15.47, 15.55, 15.60, 16.12 9.44 15.51 8.64 16.19, 16.47 6.36 10.65 11.34 Maritime National Fish v Ocean Trawlers [1935] AC 17.30 524 Marlow v Pitfield (1719) 1 P Wms 558 9.24 Marshall v NM Financial Management Ltd [1995] 1 15.63 WLR 1461 Mason v Provident Clothing and Supply Co Ltd [1913] 15.42, 15.43 AC 724 Maynard v West Midlands Regional Health Authority 6.53 [1984] 1 WLR 634 MCC-Marble Ceramic Center, Inc v Ceramica Nuova 19.38 D’Agostino, SPA, 144 F3d 1384 (11th Cir 1998) McDougall v Aeromarine of Emsworth, Ltd [1958] 3 22.28 All ER 431 McLoughlin v O’Brian [1983] 1 AC 410 6.44, 6.45 McRae v Commonwealth Disposals Commission 12.12, 12.17, 18.9, 18.11, (1951) 84 CLR 377 18.12 Mercantile Union Guarantee Corp Ltd v Ball [1937] 2 9.28 KB 498 Merck v Pharmaforte [2000] 3 SLR 717 23.51 Meridian Global Funds Management Asia Ltd v 21.21, 21.29 Securities Commission [1995] 2 AC 500 Merritt v Merritt [1970] 1 WLR 1211 8.73, 8.74 Metropolitan International Schools Ltd v 5.66 Designtechnica Corpn [2011] 1 WLR 1743 MFM Restaurants Pte Ltd v Fish & Co Restaurants 18.40, Box 18.2 Pte Ltd [2011] 1 SLR 150 Midgulf International Ltd v Group Chimique Tunisien 7.54 [2010] EWCA Civ 66 Midlink Development Pte Ltd v The Stansfield Group 7.50, 7.70 Pte Ltd [2004] 4 SLR(R) 258 Mid-South Packers, Inc v Shoney’s, Inc, 761 F2d 19.33 1121 (5th Cir 1985) Mineral Enterprises Ltd v JIO Minerals FZC [2010] 26.26 SGHC 109 Mitfam International Ltd v Motley Resources Pte Ltd 24.45 [2014] 1 SLR 1253 Mitsubishi Corp RTM International Pte Ltd v Kyen 22.11 Resources Pte Ltd [2019] SGHCR6 MK Distripark Pte Ltd v Pedder Warehousing & 18.23 Logistics (S) Pte Ltd [2013] 3 SLR 433 Mogul Steamship Co Ltd v McGregor Gow & Co 5.3 [1892] AC 25 Montgomery v Lanarkshire Health Board [2015] 2 6.60 WLR 768 Moorcock, The (1889) 14 PD 64 10.42 Morris v CW Martin & Sons Ltd [1966] 1 QB 716 9.87 29 Motor Insurers’ Bureau of Singapore v AM General Insurance Bhd (2018) 4 SLR 882 Motours Ltd v Euroball (West Kent) Ltd [2003] EWHC 614 Mountford v Scott [1975] 1 All ER 198 MP-Bilt Pte Ltd v Oey Widarto [1999] 1 SLR(R) 908 MSM Consulting Ltd v Tanzania [2009] EWHC 121 (QB) Muirhead v Industrial Tank Specialities Ltd [1986] QB 507 Multiplex Constructions Pty v Abgarus (1992) 33 NSWLR 504 Multiservice Bookbinding Ltd v Marden [1979] Ch 84 Murphy v Brentwood District Council [1991] 1 AC 398 Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 9.77 11.59 7.38 16.58, 18.48, 18.54 7.55 6.71 19.86 14.54 6.12 Box 14.1 N Nash v Inman [1908] 2 KB 1 9.19, Box 9.1, 9.35 Natferrous Pte Ltd v Tradelink Hardware Pte Ltd [2005] 22.47 SGHC 131 National Aerated Water Co Pte Ltd v Monarch Co Inc 15.33 [2000] 2 SLR 24 National Employers’ Mutual General Insurance 22.79 Association Ltd v Jones [1988] 1 AC 24 Nelson v Dahl (1879) 12 Ch D 568 10.54 Nema, The [1982] AC 724 17.23 Nettleship v Weston [1971] 2 QB 691 6.48 New Zealand Shipping Co Ltd v AM Sattherwaite & Co Box 7.3, 9.80, 19.54 Ltd (The Eurymedon) [1975] AC 154 Ng Buay Hock v Tan Keng Huat [1997] 2 SLR 788 13.38 Ng Giap Hon v Westcomb Securities Pte Ltd [2009] 3 10.36, 10.48 SLR(R) 518 Ng Koo Kay Benedict v Zim Integrated Shipping Services 5.53 Ltd [2010] 2 SLR 860 Ng Lay Choo Marion v Lok Lai Oi [1995] 3 SLR(R) 77 10.14 Ngiam Kong Seng v Lim Chiew Hock [2008] 3 SLR (R) 6.44 674 Niblett v Confectioners’ Materials Co Ltd [1921] 3 KB 387 22.35 Nippon Paint (Singapore) Co Pte Ltd v ICI Paint 23.113 (Singapore) Pte Ltd [2000] 3 SLR(R) 465 NLS Pty v Hughes (1966) 120 CLR 583 19.86 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co 15.35, 15.36, 15.37 [1894] AC 535 North Ocean Shipping Co Ltd v Hyundai Construction Co 14.4, 14.24 Ltd (The ‘Atlantic Baron’) [1979] QB 705 Norwest Holdings Pte Ltd (in liquidation) v Newport 7.6, 8.69, 12.22 30 Mining Ltd [2010] 3 SLR 956 Norwest Holdings Pte Ltd (in liquidation) v Newport 7.78 Mining Ltd [2011] 4 SLR 617 Nottebohm (Liechtenstein v Guatemala) (1955) ICJ Rep 4 26.17 Novelty Pte Ltd v Amanresorts Ltd [2009] 3 SLR(R) 216 23.89, 23.94, 23.114, 23.115, 23.119 NTUC Foodfare Co-operative Ltd v SIA Engineering Co 6.41 Ltd [2018] 2 SLR 588 O OBG Ltd v Allan [2008] 1 AC 1 Occidental Worldwide Investment Corp v Skibs A/S Avainti, Skibs A/S Glarona, Skibs A/S Navalis (The ‘Siboen’ and the ‘Sibotre’) [1976] 1 Lloyd’s Rep 293 Ochroid Trading Ltd v Chua Siok Lui (trading as VIE Import & Export) [2018] 1 SLR 363 Olivaylle Pty Ltd v Fllottweg AG (No 4) [2010] FCAFC 62 Olivine Capital Pte Ltd v Chia Chin Yan [2014] 2 SLR 1371 Olley v Marlborough Court Ltd [1949] 1 KB 532 Ooi Ching Ling v Just Gem Inc [2003] 1 SLR(R) 14 Ooi Han Sun v Bee Hua Meng [1991] SLR 824 Orchard Central Pte Ltd v Cupid Jewels Pte Ltd (Forever Jewels Pte Ltd, non-party [2013] 2 SLR 667 Orient Centre Investments Ltd v Societe Generale [2007] 3 SLR(R) 566 Oscar Chess Ltd v Williams [1957] 1 WLR 370 Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2013] 2 SLR 363 Overbrooke Estate v Glencombe Properties [1974] 1 WLR 1335 Oversea-Chinese Banking Corp Ltd v Chng Sock Lee [2001] 4 SLR 370 Oversea-Chinese Banking Corp Ltd v Tan Teck Khong [2005] 2 SLR 694 Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (Wagon Mound) (No 1) [1961] AC 388, (No 2) [1967] Overseas Union Enterprise Ltd v Three Sixty Degree Pte Ltd [2013] 3 SLR 1 Overseas Union Insurance Ltd v Turegum Insurance Co [2001] 3 SLR 330 31 5.7, 5.11, 5.13, 5.25, Figures 5.1 & 5.2, 5.35, 5.36, 5.37, 5.39 14.3, 14.6 15.13, 15.14, 15.26, 15.27, 15.28 7.60 12.28 11.14 18.56 6.62, 6.81 8.54 13.24 10.32, 13.40 18.40, 18.43, Box 18.2, Box 18.3 13.57 14.43, Figure 14.2 14.29 6.52, 6.73, 6.74 18.53 7.36 P Pacific Marine Shipbuilding Pte Ltd v Xin Ming Hua Pte Ltd [2014] SGHC 102 Panatron v Lee Cheow Lee [2001] 3 SLR 405 Pang Koi Fa v Lim Djoe Phing [1993] 3 SLR 317 Panwell Pte Ltd v Indian Bank (No 2) [2002] 4 SLR 963 Pao On v Lau Yiu Long [1980] AC 614 Paradine v Jane (1647) Aleyn 26 Paris v Stepney Borough Council [1951] AC 367 Parker v South Eastern Railway (1877) 2 CPD 416 Parkway Properties Pte Ltd v Page One – The Book Shop Pte Ltd [1985] SLR(R) 204 Parmiter v Coupland (1840) 6 M & W 105 Patel v Ali [1984] Ch 283 Patridge v Crittenden [1968] 1 WLR 1204 Pearce v Brooks (1866) LR 1 Ex 213 Peekay Intermark Ltd v ANZ Banking Group Ltd [2006] EWCA Civ 386 Peh Nam Kee v Peh Lam Kong [1996] 1 SLR 75 Percival v Wright (1902) 2 Ch 421 Perry Engineering PTY v Bernold AG [2001] SASC 15 Persimmon Homes Limited v Ove Arup & Partners Limited [2017] EWCA 373 Peter’s American Delicacy Co Ltd v Heath (1939) 61 CLR 457 Peters v Fleming (1840) 6 M & W 42 PH Hydraulics Engineering Pte Ltd v Airtrust (Hong Kong) Ltd [2017] 2 SLR 129 Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401 Phillips v Brooks, Ltd [1919] 2 KB 243 22.50 13.23, 13.24 6.47 7.44 8.15, Box 8.1, 14.7, 14.9, 14.12, 14.24 17.3 6.50 11.12 18.64 5.48 18.63 7.18 15.12 13.24, 13.60 14.39, 14.57 21.57 19.15 11.28 21.61, 21.65 9.17 18.3, 18.58, 18.60 7.27, 24.14 12.42, 12.43, 12.44, Figure 12.3 15.5, 15.8 Phoenix General Insurance Co of Greece SA v Administratia Asigurarilor de Stat [1988] QB 216 Pickfords Ltd v Celestica Ltd [2003] EWCA Civ 1741 7.39 Pilmore v Hood (1838) 5 Bing NC 97 13.17 Pinnel’s Case (1602) 5 Co Rep 117a 8.43, 8.44, 8.45, 8.47 PlanAssure PAC v Gaelic Inns Pte Ltd [2007] 4 SLR(R) 6.49, 6.59 513 Plus Group Ltd v Pyke [2002] EWCA Civ 370 21.54 Polo/Lauren Co, LP The v Shop-In Department Store Pte 23.93 Ltd, The [2006] 2 SLR(R) 690 Portuguese Consolidated Copper Mines Limited, Re 20.27 (1890) 45 Ch D 16 PP v Law Aik Meng [2007] 2 SLR 814 4.7 32 PP v Loh Soon Aik Andrew [2013] SGHC 16 PP v Low Tiong Choon [1998] 2 SLR(R) 119 PP v Monk Ping Wuen Maurice (1999) PP v Tan Fook Sam [1999] 1 SLR(R) 1022 PP v Teo Ai Nee [1995] 2 SLR 69 President Marine (Pte) Ltd v Kojima Singapore (Pte) Ltd [1994] SGHC 68 Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR 712 Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462 Proform Sports Management Ltd v Proactive Sports Management Ltd [2007] 1 All ER (Comm) 356 PST Energy 7 Shipping LLC v OW Bunker Malta Ltd (The Res Cogitans) [2016] 2 WLR 1193 PT Asuransi Jasa Indonesia v Dexia Bank SA [2007] 1 SLR 597 PT Master Mandiri v Yamazaki Construction (S) Pte Ltd [2000] 3 SLR(R) 797 PT Sandipala Arthaputra v STMicroelectronics Asia Pacific Pte Ltd [2018] 1 SLR 818 PT Soonlee Metalindo Perkasa v Synergy Shipping Pte Ltd [2007] 4 SLR(R) 51 PT Surya Citra Multimedia v Brightpoint Singapore Pte Ltd [2019] 3 SLR 461 4.8 4.48, 4.50 4.10 4.11 23.28 16.6 11.7, 11.55 14.1 9.27 22.11, 22.95 26.99 18.45 22.63 11.29 22.27 Q Qantas & Orangestar Co-operation Agreement, CCS 400/003/06 (10 January 2007) QB Net Co Ltd v Earnson Management (S) Pte Ltd [2007] 1 SLR(R) 1 Qingdao Bohai Construction Group Co, Ltd v Goh Teck Beng [2016] 4 SLR 977 25.10 23.73 5.47, 5.64 R R & B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321 R (Miller) v Secretary of State for Exiting the European Union [2017] UKSC 5 R Leslie Ltd v Sheill [1914] 3 KB 607 R v Attorney-General for England and Wales [2003] UKPC 22 R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet Ugarte (No 2) [2000] 1 AC 119 R v Clarke (1927) 40 CLR 227 33 11.49, 11.50 26.11 9.36 14.13, 14.26 26.16 7.71 R v P [2007] EWCA Crim 1937 4.28 R v Willans (1858) 3 Kyshe’s Report 16 2.11 Radcliffe v Evans [1892] 2 QB 524 5.41 Radford v De Froberville [1977] 1 WLR 1262 18.19 Raffles Town Club Pte Ltd v Lim Eng Hock 5.28 Peter [2012] 1 SLR 374 Raiffeisen Zentralbank Osterreich AG v Royal 13.58, 13.60 Bank of Scotland plc [2010] EWHC 1392 (Comm) Rainforest Trading Ltd v State Bank of India 8.16 Singapore [2012] 2 SLR 713 Rajabali Jumabhoy v Ameerali R Jumabhoy 14.27, 14.57 [1997] 3 SLR 802 Rama Corporation v Proved Tin and General 20.39 Investments Ltd (1952) 2 QB 147 Ramalingam Ravinthran v The Attorney3.15 General [2012] 2 SLR 49 Ramesh s/o Krishnan v AXA Life Insurance 6.18, 6.34 Singapore Pte Ltd [2015] 4 SLR 1 Ramesh s/o Krishnan v AXA Life Insurance 6.34 Singapore Pte Ltd [2016] 4 SLR 1124 Ramsgate Victoria Hotel v Montefiore (1866) 7.45 LR 1 Ex 109 Rapiscan Asia Pte Ltd v Global Container 11.29 Freight Pte Ltd [2002] 1 SLR(R) 701 RBC Properties Pte Ltd v Defu Furniture Pte 13.36, 13.39 Ltd [2015] 1 SLR 997 RDC Concrete Pte Ltd v Sato Kogyo (S) Pte 10.68, Table 10.1, 10.69, 10.71, Ltd [2007] 4 SLR(R) 413 10.72, 10.73, 10.74, 16.42, 22.17 Reckitt & Colman Products Ltd v Borden Inc 23.110 [1990] 1 All ER 873 RecordTV Pte Ltd v MediaCorp TV Singapore 23.26 Pte Ltd [2011] 1 SLR 830 Redgrave v Hurd (1881) 20 Ch D 1 13.24 Regal (Hastings) Ltd v Gulliver (1942) 1 All 21.55 ER 378 Regus (UK) Ltd v Epcot Solutions Ltd [2008] 11.60 EWCA Civ 361 Reichman v Beveridge [2006] EWCA Civ 16.57 1659 Resorts World at Sentosa Pte Ltd v Lee Fook 9.40 Kheun [2018] 5 SLR 1039 Review Publishing Co Ltd v Lee Hsien Loong 5.53, 5.82, 5.85 [2010] 1 SLR 52 Reynolds v Times Newspapers Ltd [2001] 2 5.84, 5.85 AC 127 34 Rickshaw Investments Ltd v Nicolai Baron 26.26 von Uexkull [2007] 1 SLR (R) 377. Roberts v Gray [1913] 1 KB 520 9.22 Robertson Quay Investment Pte Ltd v Steen 18.40 Consultants Pte Ltd [2008] 2 SLR(R) 623 Robin M Bridge v Deacons [1984] 1 AC 705 15.48 Robin v Goh Boon Choo [1965] MLJ 215 12.29 Robinson v Harman (1848) 1 Ex 850 18.3, 18.11 Roe v Minister of Health [1954] 2 QB 66 6.49 Rookes v Barnard [1964] AC 1129 5.21, 5.25 Rose & Frank Co v J R Crompton & Bros Ltd 8.76 [1923] 2 KB 261 Routh v Jones [1947] 1 All ER 179 15.48 Routledge v Grant (1828) 4 Bing 653 7.38 Routledge v McKay [1954] 1 WLR 615 10.29 Rover International Ltd v Cannon Film Sales 22.129 Ltd [1989] 1 WLR 912 Rowland v Divall [1923] 2 KB 500 22.118, 22.128 Royal Bank of Scotland plc v Etridge (No 2) 13.28, 14.25, 14.32, 14.33, 4.35, [2002] 2 AC 773 14.37, 14.38, 14.42, 14.43, 14.48, 14.49, 14.50, 14.51, 14.52 Royal British Bank v Turquand (1856) 6 E&B 21.43 327 RSP Architects Planners & Engineers v 6.38 Management Corporation Strata Title Plan No 1075 (“Eastern Lagoon”) [1999] 2 SLR 449 RSP Architects Planners & Engineers v 6.38 Ocean Front Pte Ltd [1996] 1 SLR 113 RTS Flexible Systems Ltd v Molkerei Alois 7.79 Muller GMBH [2010] UKSC 14 Rubicon Computer Systems Ltd v United 22.39 Paints Ltd (2000) 2 TCLR 453 Ruxley Electronics and Construction Ltd v 18.20, 18.30 Forsyth [1996] AC 344 S S Pacific Resources Ltd v Tomolugen Holdings Ltd [2016] 3 SLR 1049 Sadler v Whiteman [1910] 1 KB 868 Sainsbury v Street [1972] 1 WLR 834 Saloman v A Saloman & Co Ltd [1897] AC 22 Samsonite IP Holdings SARL v An Sheng Pte Ltd [2017] 4 SLR 99 San International Pte Ltd v Keppel Engineering Pte Ltd [1998] 3 SLR(R) 447 35 8.20 21.69 17.32 21.23, 21.27 23.101 16.35 Sandar Aung v Parkway Hospitals Singapore Pte 10.18 Ltd (trading as Mount Elizabeth Hospital) [2007] 2 SLR(R) 891 Sarika Connoisseur Cafe Pte Ltd v Ferrero SpA 23.93 [2013] 1 SLR 531 Saunders v Anglia Building Society [1971] AC 11.9, 12.54 1004 Scammell and Nephew Ltd v Ouston [1941] 1 All 7.82 ER 14 Schawel v Reade [1913] 2 IR 64 10.26 Scotson v Pegg (1861) 6 H & N 295 8.31 Scott v Davis (2000) 74 ALJR 1410 20.3 Scott v London & St Katherine Docks Co (1865) 6.62 3H & C 596 Scruttons Ltd v Midland Silicones Ltd [1962] AC 9.52, Box 9.3, 9.80 446 Sea-Land Service Inc v Cheong Fook Chee 8.38 Vincent [1994] 3 SLR 631 Seaver v Ransom, 224 NY 233 (1918) 19.58, 19.59 Seaward III Frederick Oliver v PP [1994] 3 SLR(R) 4.40 89 See Toh Siew Kee v Ho Ah Lam Ferrocement 6.23 (Pte) Ltd [2013] 3 SLR 284 Selectmove Ltd, Re [1995] 1 WLR 474 7.69, 8.45 Sembcorp Marine Ltd v PPL Holdings Pte Ltd 10.15 [2013] 4 SLR 193 SH Cogent Logistics Pte Ltd v Singapore Agro 5.28 Agricultural Pte Ltd [2014] 4 SLR 1208 Shanklin Pier LD v Detel Products LD [1951] 2 All 9.79 ER 471 Sharon Global Solutions Pte Ltd v LG 8.40, 14.15, 14.19 International (Singapore) Pte Ltd [2001] 3 SLR 368 Shaw v Lighthousexpress Ltd [2010] EWCA Civ 7.83 161 Shearson Lehman Hutton Inc v Maclaine Watson 22.102 & Co Ltd (No 2) [1990] 1 Lloyd’s Rep 441 Sheng Siong Supermarket Ltd v Carilla Pte Ltd 12.56 [2011] 4 SLR 1094 Shipton, Anderson & Co v Weil Bros [1912] 1 KB 16.8 574 Shirlaw v Southern Foundries (1926) Ltd [1939] 2 10.43 KB 206 Shogun Finance Ltd v Hudson [2004] 1 AC 919 12.44, 12.45, 12.46, 12.47, 12.49, Box 12.4, Figure 12.3, 12.57 36 Sim Tony v Lim Ah Ghee [1995] 2 SLR 466 Sim v Stretch [1936] 2 All ER 1237 Singapore Woodcraft Manufacturing v Mok Ah Sai [1979] 2 MLJ 166 Singsung Pte Ltd v LG 26 Electronics Pte Ltd [2016] 4 SLR 86 SISTIC.com Pte Ltd v Competition Commission of Singapore (Appeal No. 1 of 2010), Competition Appeal Board (28 May 2012) Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2011] 3 SLR 540 SM Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR(R) 651 Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart [2012] 4 SLR 308 Smith New Court Securities v Scrimgeor Vickers (Asset Management) [1997] AC 254 Smith v Eric S Bush [1990] 1 AC 831 Smith v Hughes (1871) LR 6 QB 597 Smith v Leech Brain & Co Ltd [1962] 2 QB 405 Smith v Littlewoods Organisation Ltd [1987] 2 WLR 480 Smith v Mawhood (1845) 14 M & W 452 Société des Produits Nestlé SA v Petra Foods Ltd [2017] 1 SLR 35 Société Italo-Belge pour le Commerce et l’Industrie SA v Palm and Vegetable Oils (Malaysia) Sdn Bhd, The Post Chaser [1982] 1 All ER 19 Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 3 WLR 59 Solle v Butcher [1950] 1 KB 671 Soon Kok Tiang v DBS Bank Ltd [2012] 1 SLR 397 South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 South Western General Property v Marton (1982) 263 EG 1090 Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701 Southern Ocean Shipbuilding Co Pte Ltd v Deutsche Bank AG [1993] 3 SLR 686 Spandeck Engineering (S) Pte Ltd v Defence 37 8.16 5.48 17.25 23.36, 23.110 25.30 20.35, 20.36 6.92, Box 20.1 24.43 10.15, 13.30 6.87, 11.53 12.34 6.76 6.27 15.10 23.87, 23.105 8.53, 8.61 26.27 12.23, 12.25, Box 12.2 7.15 18.36 13.59 21.46 7.70 6.7, 6.15, 6.20, 6.21, 6.22, Science & Technology Agency [2007] 4 SLR 6.39, 6.40, 6.42 100 Spartan Steel & Alloys Ltd v Martin & Co 6.11 (Contractors) Ltd [1973] QB 27 Specht v Netscape Communications Corp 306 24.28 F3d 17 (2d Cir 2002) Speedo Motoring Pte Ltd v Ong Gek Sing [2014] 2 22.52, 22.133, 22.136, SLR 1398 22.141, 22.145 Speelman v Pascal 10 NY2d 313, 178 NE2d 723 19.77 (1961) Spencer v Harding (1870) LR 5 CP 561 7.31 Spice Girls v Aprilia World Service [2002] EWCA 13.16, 13.18 Civ 15, CA Spiliada Maritime Corp v Cansulex Ltd [1987] AC 26.26 460 Sports Connection Pte Ltd v Deuter Sports GmbH 10.68, 10.69, 10.71, 10.73, [2009] 3 SLR(R) 883 10.74, 10.75, 10.76, 10.78, Table 10.1, 16.42, 22.17 Spring v Guardian Assurance plc [1994] 3 All ER 6.33, 6.34 129 Springwell Navigation Corp v JP Morgan Chase 13.60 Bank [2010] EWCA Civ 1221 Spurling v Bradshaw [1956] 1 WLR 461 11.21, 11.23 St Albans City & DC v International Computers Ltd 22.9 [1996] 4 All ER 481 Standard Chartered Bank v Coopers v Lybrand 6.31 [1993] 3 SLR 712 Standard Chartered Bank v Pakistan National 13.30, 13.31 Shipping (No 2) [2002] 3 WLR 1547 State Oil Co v Khan (1997) 522 US 3 Box 25.2 Staywell Hospitality Group Pty Ltd v Starwood 23.90, 23.99, 23.112 Hotels & Resorts Worldwide Inc [2014] 1 SLR 911 Steinberg v Scala (Leeds) Ltd [1923] 2 Ch 452 9.12, 9.30, 9.35 Stevenson v McLean (1880) 5 QBD 346 7.42 Stilk v Myrick (1809) 2 Camp 317 8.32, 8.33, 8.35, 8.36, 8.37, 8.40, Box 8.2, Table 8.1, 8.42 Stocznia Gdanska SA v Latvian Shipping Co 16.51, 16.52 [2002] 2 Lloyd’s Rep 436 Stone & Rolls Ltd v Moore Stephens [2009] 1 AC 6.82 1391 Straits Engineering Contracting Pte Ltd v Merteks 18.23 Pte Ltd [1995] 3 SLR(R) 864 Stratech Systems Ltd v Nyam Chiu Shin (alias 15.46 Yan Qiuxin) [2005] 2 SLR 579 38 Su Ah Tee v Allister Lim and Thrumurgan [2014] SGHC 159 Sudbrook Trading Estate v Eggleton [1983] 1 AC 444 Suiker Unie v Commission, [1975] ECR 1663; [1976] 1 CMLR 295 Sun Qi v Syscon Pte Ltd [2013] SGHC 38 Sunrise Crane, The [2004] 4 SLR 715 Super Coffeemix Manufacturing Ltd v Unico Trading Pte Ltd [2000] 2 SLR(R) 214 Super Servant Two, The [1990] 1 Lloyd’s Rep 1 Sutherland Shire Council v Heyman [1985] 60 ALR 1 18.26 7.80 25.8 22.119 6.24, 6.25, Box 6.1, 6.52 23.113 17.30 6.12 T Tam Tak Chuen v Khairul bin Abdul Rahman [2009] 2 SLR(R) 240 Tamiz v Google [2013] 1 WLR 2151 Tamplin Steamship v Anglo-Mexican Petroleum Products [1916] 2 AC 397 Tan Soo Leng David v Lim Thian Chai Charles [1998] 1 SLR(R) 880 Tan Tze Chye v PP [1997] 1 SLR(R) 876 Tan Yeow Khoon v Tan Yeow Tat (No 1) [2000] 3 SLR 341 Tang Siew Choy v Certact Pte Ltd [1993] 3 SLR 44 Tay Joo Sing v Ku Yu Sang [1994] 3 SLR 719 Taylor v Bhail [1996] C.L.C. 377 Taylor v Bowers (1876) 1 QBD 291 Taylor v Caldwell (1863) 3 B & S 826 Tekdata Interconnections Ltd v Amphenol [2009] EWCA Civ 1209 Tembusu Growth Fund Ltd v ACTAtek Inc [2018] 4 SLR 1213 Temple of Preah Vihear (Cambodia v Thailand) (1962) ICJ 6 Teng Ah Kow v Ho Sek Chiu [1993] 3 SLR 769 Teo Keng Pong v Public Prosecutor [1996] 2 SLR(R) 890 Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd [1992] 3 SLR(R) 194 Thake v Maurice [1986] QB 644 The “Bunga Melati 5” [2016] 2 SLR 1114 The “Cherry” [2003] 1 SLR(R) 471 The “Feng Hang” [2001] 3 SLR(R) 864 The “STX Mumbai” [2015] 5 SLR 1 The Achilleas [2008] 3 WLR 345 39 14.9 5.66 17.5 16.48, 16.55, 16.58, 16.59, 18.45, 18.55 4.34 7.80 23.80 18.27 15.12 15.24 17.3 7.75 16.34, 16.37 26.9 6.62 3.36, 4.14 20.3 16.5 20.42 18.35 18.35 16.37 Box 18.2 The Commissioners of Inland Revenue v Muller & Co’s 23.111 Margarine Ltd [1901] AC 217 The Heron II [1969] 1 AC 350 18.38 The Wellness Group Pte Ltd v OSIM International Ltd 5.34 [2016] 3 SLLR 729 Thomas v Bradbury, Agnew & Co Ltd [1906] 2 KB 627 5.74 Thompson Ltd v Robinson (Gunmakers) Ltd [1955] Ch 22.103, 22.104 177 Thompson v London, Midland and Scottish Railway Co 11.16 [1930] 1 KB 41 Thomson Plaza (Pte) Ltd v Liquidators of Yaohan 7.78, 14.2 Department Store Singapore Pte Ltd [2001] 3 SLR 437 Thorne v Motor Trade Association [1937] AC 797 14.20 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 Box 7.3, 11.15, 11.20, 11.22 Ticketmaster Corp v Tickets.Com, Inc 54 USPQ2d 1344 24.28 (CD Cal 2000) Ting Siew May v Boon Lay Choo [2014] 3 SLR 609 15.7, 15.14, 15.15 Tinn v Hoffmann & Co (1873) 29 LT 271 7.72 Tjong Mark Edwards v PP [2015] 3 SLR 375 4.50 Tong Guan Food Products Pte Ltd v Hoe Huat Hng 23.116 Foodstuff Pte Ltd [1991] 1 SLR(R) 903 Tong Seak Kan v Jaya Sudhir a/l Jayaram [2016] 5 SLR 8.54 887 Torquay Hotel Co Ltd v Cousins [1969] 2 Ch 106 5.14 Tozzi Srl v Bumi Armada Offshore Holdings Ltd [2017] 5 5.10 SLR 156 Trade Facilities Pte Ltd v Public Prosecutor [1995] 2 SLR 21.26 475 Transniko Pte Ltd v Communication Technology Sdn Bhd 7.59 [1996] 1 SLR 580 Transocean Drilling UK Ltd v Providence Resources plc 11.28 [2016] EWCA 372 Trefileurope v Commission, Case T-141/89 [1995], ECR 25.16 II-791 Trek Technology (Singapore) Pte Ltd v FE Global 23.54 Electronics Pte Ltd [2005] 3 SLR(R) 389 Triangle Auto Pte Ltd v Zheng Zi Construction Pte Ltd 18.50 [2000] 3 SLR(R) 594 Tribune Investment Trust Inc v Soosan Trading Co Ltd 5.7, 12.48 [2000] 3 SLR 405 Trident Turboprop (Dublin) Ltd v First Flight Couriers Ltd 11.39 [2009] EWCA Civ 290 Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1960] 2 QB 17.19, Box 17.1, 318 17.24 TSC Europe (UK) Ltd v Massey [1999] IRLR 22 15.33 40 Tulk v Moxhay (1848) 2 Ph 774 Turf Club Auto Emporium Pte Ltd v Yeo Boong Hua [2018] 2 SLR 655 Turner v Grovit [2002] 1 WLR 107 TV Media Pte Ltd v De Cruz Andrea Heidi [2004] 3 SLR 543 Tweddle v Atkinson (1861) 1 B & S 393 9.88 18.3, 18.11, 18.12, 18.24, 18.60 26.27 6.71, 6.94 8.18, Box 9.3, 9.58 U Ultramares Corporation v Touche 255 NY 170; NE 441 (1931) Union Carbide Corp, Re 809 Fed 195 (2d Cir 1987) United Bank of Kuwait v Hammond [1988] 1 WLR 1051 United Overseas Bank Ltd v Bank of China [2006] 1 SLR(R) 5 United Project Consultants Pte Ltd v Leong Kwok Onn (trading as Leong Kwok Onn & Co) [2005] 4 SLR 214 Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 University of London Press Ltd v University Tutorial Press Ltd (1916) 2 Ch 601 UOL Development (Novena) Pte Ltd v Commissioner of Stamp Duties [2008] 1 SLR(R) 126 6.9 26.21 20.40 20.42 6.83 16.36 14.7, 14.8, Figure 14.1 23.11 7.31 V Vancouver Malt and Sake Brewing Co Ltd v Vancouver Breweries Ltd [1934] AC 181 Varley v Whipp [1900] 1 QB 513 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 Virtual Map (Singapore) Pte Ltd v Suncool International Pte Ltd [2005] 2 SLR 157 Vita Food Products Inc v Unus Shipping Co Ltd [1939] AC 277 Vizetelly v Mudie’s Select Library Ltd [1900] 2 QB 170 Volk v Vervaecke, Case 5/69 [1969] ECR 295 15.56 22.43 18.42, Box 18.3 23.11 26.23 5.86 25.19 W W J Alan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189 Wade v Simeon (1846) 135 ER 1061 Wait, Re [1927] 1 Ch 606 Wakley v Cooke [1849] 4 Exch 511 Walker v Wimborne (1976) 3 ACLR 529 Walters v Morgan (1861) 3 GF & J 718 Walton International Group (Singapore) Pte Ltd v Yau Kwok Seng Winston [2011] SGHC 144 41 8.53 8.27 22.88 5.67 Box 21.1 13.14 5.39 Ward Ltd v Bignall [1967] 1 QB 534 22.64, 22.94, 22.109 Warner Brothers Pictures Inc v Nelson [1937] 1 18.64 KB 209 Wartsila Singapore Pte Ltd v Lau Yew Choong 11.18, 11.19, 14.4 [2017] 5 SLR 268 Watson v Davies [1931] 1 Ch 455 20.28 Watson v Park Royal (Caterers) Ltd [1961] 1 21.5 WLR 727 Watt v Longsdon [1930] 1 KB 130 5.81 Wee Poh Hueh Florence v Performance Motors 18.26, 18.30 Ltd [2004] 2 SLR(R) 58 Wee Richard v Wong Meng Meng & Partners 5.80 [1995] 3 SLR 68 Wee Soon Kim Anthony v Lim Chor Pee [2005] 24.44 4 SLR(R) 367 Weller v Denton [1921] 3 KB 103 21.5 Wellmix Organics (International) Pte Ltd v Lau 12.30, Box 12.2 Yu Man [2006] 2 SLR 117 White and Carter (Councils) Ltd v McGregor 16.54, 16.57 [1962] 2 AC 413 White v Bluett (1853) 23 LJ Ex 36 8.24 Whittington v Seal-Hayne (1900) 82 LT 49 13.39 William Morton & Co v Muir Brothers & Co 10.49 [1907] SC 1211 Williams v Roffey Bros & Nicholls (Contractors) 8.35, 8.37, 8.38, 8.39, 8.40, Ltd [1991] 1 QB 1 8.41, Box 8.2, Table 8.1, 8.45, 8.81, Box 14.1 Wilsher v Essex Area Health Authority [1988] 6.53 AC 1074 Win Line (UK) Ltd v Masterpart (Singapore) Pte 20.8 Ltd [2000] 2 SLR 98 Win Supreme Investment (S) Pte Ltd v Joharah 17.40 bte Abdul Wahab [1997] 1 SLR 679 Windsurfing International v Tabur Marine [1985] 23.54 RPC 59 Wing Joo Loong Ginseng Hong (Singapore) Co 23.83 Pte Ltd v Qinghai Xinyuan Foreign Trade Co Ltd [2009] 2 SLR(R) 814 Winn v Bull (1877) 7 Ch D 29 7.78 With v O’Flanagan [1936] Ch 575 13.18 Wolero Pte Ltd v Lim Arvin Sylvester (2017) 5.39 [2017] 4 SLR 747 Wong Lai Keen v Allgreen Properties Ltd [2009] 12.22 1 SLR(R)148 Wong Seng Kwan v PP [2012] 3 SLR 12 4.34 Woo Kah Wai v Chew Ai Hua Sandra [2014] 4 18.57 42 SLR 166 Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 All ER 571 Wooldridge v Sumner [1963] 2 QB 43 Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 WT Lamb & Sons v Goring Brick Co [1932] 1 KB 710 Wu Yang Construction Group Ltd v Zhejiang Jinyi Group Co, Ltd [2006] 4 SLR 451 Wyatt v Kreglinger & Fernau [1933] 1 KB 793 9.70 6.85 18.24 20.6 14.7 15.62 X Xia Zhengyan v Geng Changqing [2015] 3 SLR 732 10.15, 10.21, 18.51 Y Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd [2015] 5 10.15 SLR 1187 Yan Jun v Attorney-General [2015] 1 SLR 752 5.64 Yap Boon Keng Sonny v Pacific Prince International Pte Ltd [2009] 1 18.30 SLR(R) 385 Yasuda Fire and Marine Insurance Co of Europe Ltd v Orion Marine 20.8 Insurance Underwriting Agency Ltd (1995] 2 WLR 49 Yeo Boong Hua v Turf Club Auto Emporium Pte Ltd [2018] 3 SLR 806 5.10 Yeo Peng Hock Henry v Pai Lily [2001] 4 SLR 571 6.53, 6.65 Yeo Yoke Mui v Ng Liang Poh [1999] 3 SLR 529 6.54 Yokogawa Engineering Asia Pte Ltd v Transtel Engineering Pte Ltd 8.55 [2009] 2 SLR(R) 532 Yong Vui Kong v Public Prosecutor [2010] 3 SLR 849 26.7, 26.11 Yuen Kun Yeu v Attorney-General of Hong Kong [1988] AC 175 6.12 Z Zheng Yu Shan v Lian Beng Construction (1988) Pte Ltd [2009] 2 SLR (R) 587 Zhou Weidong v Liew Kai Lung [2018] 3 SLR 1236 Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 43 6.52 18.56 10.10, 10.15, 10.16 Table of Singapore Legislation A Application of English Law Act (Cap 7A, 1994 Rev Ed) Apportionment Act (Cap 8, 1998 Rev Ed) Arbitration (Foreign Awards) Act (Cap 10A, 1985 Rev Ed) (repealed) Arbitration (International Investment Disputes) Act (Cap 11, 2012 Rev Ed) 2.34, 9.16, 9.32, 10.52, 11.4, 13.3, 22.2 16.23 2.45 26.82 B Bills of Exchange Act (Cap 23, 2004 Rev Ed) s 26 Bills of Lading Act (Cap 384, 1994 Rev Ed) s2 Business Names Registration Act 2014 (No 29 of 2014) s4 4(1)(m) 4(1)(n) 5(1) 20 31 31(5) 35 Business Trusts Act (Cap 31A, 2005 Rev Ed) 20.55 9.68 21.4 21.4 21.4 21.4 21.4 21.5 21.5 21.6 21.1, 21.79 C Civil Law Act (Cap 43, 1988 Rev Ed) 5 Civil Law Act (Cap 43, 1999 Rev Ed) s 4(8) 6 6(d) 21 28(4) 35(1) 35(4)(a)-(d) Community Mediation Centres Act (Cap 49A, 1998 Rev Ed) 44 2.34, 2.35 9.83 19.42 24.43 6.80 18.53 9.7 9.8 2.49 Companies Act (Cap 50, 2006 Rev Ed) s4 17(3) 18(1) 19 19(5) 19(6A) 20A 22 23 23(1) 23(1A) 23(1B) 25 25(3) 25A 25B 25C 25D 37 39 41 41(1) 41(2) 145 145(1) 156 157 157A 159 162 163 184 184A–184F 184G 205A 205C 216 216A Thirteenth Schedule Companies (Model Constitutions) Regulations 2015, S833/2015 First Schedule Art 73 Art 74 Art 83(1) 45 4.55, 21.48 21.8, 21.14, 21.15 21.3 21.14 21.16 21.16 21.11 21.16 21.17 9.47 21.19 21.19 21.19 9.46, 9.47, 21.19, 21.20 21.20 21.42, 21.44 21.43, 21.44 21.44 21.44 21.17 9.56, 21.59 9.49, 20.21 9.49 9.49, 20.55 21.45 21.16 21.53 4.57, 21.51, 21.56 21.36 21.52 21.14 21.14 21.31 21.31 21.29 21.14 21.14 21.63, 21.65, 21.66 21.58 21.14 21.17 21.45 21.45 21.32 Art 85 Art 94 Competition Act (Cap 50B, 2006 Rev Ed) s 2(1) s 34 s 47 s 47(3) s 48–53 s 54 21.53 21.29 3.35, 25.3, 25.4, 25.9, 25.20, 25.22, 25.39 25.9 25.3, 25.6, 25.10, 25.19, 25.20, 25.21, 25.23, 25.45 25.3, 25.14, 25.26, 25.27, 25.30, 25.31, 25.32, 25.33, 25.45 25.27 25.26 25.3, 25.14, 25.35, 25.37, 25.39, 25.42, 25.45 25.36, 25.39 25.38 25.35 25.22 25.35 25.36 25.22 2.28 2.32 3.7 s 54(5) s 54(7) s 55 s 92 ss 56–60 ss 54(2)(a) to (c) Third Schedule Constitution (Amendment) Act (Act 8 of 1965) Constitution (Amendment) Act (Act 19 of 1969) Constitution (Amendment) Act (Act 28 of 2016) Constitution of the Republic of Singapore (1999 Reprint) 35(8) 4.5 39(1)(c) 2.40 39A 2.40 Consumer Protection (Fair Trading) Act (Cap 52A, 3.35, 11.61, 11.68, 22.6, 2009 Rev Ed) 24.29 Part III Table 22.3, 22.132, 22.133, 22.145 s 2(1) 11.61 4 11.62 6(1) 11.63 11(1) 11.63 12A(5)(c) 22.145 12B(3) 22.134 12C(1) 22.138 12C(2) 22,138 12C(4) 22.139 12D 22.142 12D(3) 22.142 12E 22.143 12F 22.141 46 13 11.64, 22.145 15(1) 11.64 16 11.63 First Schedule 11.61 Second Schedule 11.62 Consumer Protection (Fair Trading) (Amendment) 11.66 Act 2016 (Act 25 of 2016) Contract (Rights of Third Parties) Act (Cap 53B, 3.35, 9.53, 9.55, 9.68, 9.91, 2002 Rev Ed) 19.55 s 1(2) 9.56 1(3) 9.56 2 9.65 2(1)(a) 9.58 2(1)(b) 9.58, 9.59, 9.60, 9.62 2(2) 9.58, 9.59, 9.60, 9.62 2(3) 9.58 2(4) 9.57 2(5) 9.53, 9.64 2(6) 9.63, 9.82 3(1) 9.65 3(3) 9.61 3(3)(a) 9.65 3(3)(b) 9.65 4(6) 9.63 7(1) 9.56 7(2) 9.56 7(2A) 9.56 7(3) 9.56 7(4) 9.56 8(1) 9.54 8(2) 9.67 Contributory Negligence and Personal Injuries Act (Cap 54, 2002 Rev Ed) s3 6.88 Copyright Act (Cap 63, 2006 Rev Ed) 23.5, 23.9 Part V 23.37 Division 6 23.39 s 7(1) 23.8, 23.16, 23.33 7(2) 23.32 7(2A) 23.32 7A 23.8 10(1) 23.24 16 23.12 17 23.12 25A 23.20 26 23.19 47 26(1)(c) 27 27(1) 27(2) 27(4) 28(2) 28(3) 28(6) 30(2) 30(3) 30(4) 30(5) 30(6) 31 32 33 35 35(2) 35(3) 35(4) 36 37 82 82(1)(b) 83 84 85 86 87 88 89 92 93 94 95 96 97(2) 98(2) 119 119(2)(a) 119(2)(b) 119(2)(c) 119(2)(d) 119(4) 119(5) 120 23.20 23.11 23.13 23.13 23.13 23.15 23.15 23.15 23.16 23.17 23.17 23.17 23.17 23.22, 23.25 23.27, 23.28 23.27, 23.28 23.29 23.30, 23.31 23.31 23.31 23.29, 23.33 23.29, 23.33 23.20 23.20 23.20 23.20 23.20 23.20 23.13 23.13 23.13 23.15 23.15 23.15 23.15 23.15 23.16 23.16 23.22 23.37 23.37 23.37 23.37 23.37 23.37 23.37 48 120A 123 136 136(1) 136(2) 136(3) 136(4) 136(3A) 136(6A) 136(6B) 140B(1) 140B(4) 140B(7) 140M(1) 184 193A 193B 193C 193C(2)(b) 193D 193D(1)(a) 193D(1)(b) 193D(2)(b) 193D(4)(b) 193DA 193DA(2) 193DB 193DC 193DD 193DDA 193DDB 193DDC 193DE 194(3) 200(1) 252CDA 252CDB 252CDC Copyright (Border Enforcement Measures) Regulations (Cap 63, Rg 5, 2009 Rev Ed) Copyright (Flagrantly Infringing Online Location) Regulations 2014 (S802/2014) Copyright (International Protection) Regulations (RG2, 2009 Rev Ed) Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65A, 49 23.37 23.22 23.38 23.38 23.38 23.38 23.38 23.38 23.38 23.38 23.39 23.39 23.39 23.39 23.14 23.41 23.41 23.41 23.42 23.41 23.41 23.41 23.42 23.42 23.41 23.42 23.41 23.41 23.41 23.44 23.44 23.44 23.41 23.18 23.35, 23.36 23.44 23.44 23.44 23.39 23.44 23.14 20.47 2000 Rev Ed) 52(2) Countervailing and Anti-Dumping Duties Act (Cap 65B, 1997 Rev Ed) Part III s2 3 Criminal Procedure Code (Cap 68, 2012 Rev Ed) s 303 359 s 11 4.23 26.34, 26.37 26.38 26.37 26.45 3.45 3.36 4.5 D Defamation Act (Cap 75, 2014 Rev Ed) s4 5 7 8 9 10 12 5.47 5.43, 5.47 5.87 5.67 5.71 5.88 5.83 E Electronic Transactions Act (Cap 88, 2011 Rev Ed) Part III IV V VI s2 4 5 6 7 8 9 10 11 12 13 13(1)(a) 13(1)(b) 13(2) 13(3) 14 50 24.12, Table 24.2 24.42 24.40, 24.42 24.46 24.52 24.36, 24.45 24.13, 24.43 24.13 24.13, 24.36 24.13, 24.36, 24.36 24.36, 24.45 24.36, 24.45 24.13 24.13 24.22 24.22 24.22 24.22 24.22 24.15, 24.48 15 16 16(1) 16(2) 17 18 19 First Schedule Second Schedule Third Schedule Fourth Schedule Employment Claims Act (Act 21 of 2016) Employment of Foreign Manpower Act (Cap 91A, 2009 Rev Ed) s5 Employment of Foreign Workers Act (Cap 91A, 1997 Rev Ed) s 5(3) Enterprise Singapore Board Act 2018 (No 10 of 2018) Evidence Act (Cap 97, 1997 Rev Ed) 65 93 94 94(b) 94(c) 94(d) 94(e) 94(f) 24.49 24.51 24.51 24.51 24.41, 24.42 24.41, 24.42 24.41, 24.42 24.13, 24.43 24.40 24.40 24.40 3.35 4.59 4.20 11.66 10.6 10.9 10.6, 10.9, 10.10, 10.11, 19.35 10.8, 10.9, 10.10, 10.11, 10.14, 10.17, 19.35 10.14 10.14 10.14 10.14 10.14, 10.15, 10.17, 10.22 F Factors Act (Cap 386, 1994 Rev Ed) s 2(1) 8 9 Frustrated Contracts Act (Cap 115, 1985 Rev Ed) s 2(2) 2(3) 3(4) 3(5) 3(5)(c) 22.74 22.78 22.79 17.42, 17.43, 17.51 17.44, 17.47 17.46 17.48 17.49 22.85 H Hire-Purchase Act (Cap 125, 1999 Rev Ed) 51 22.14 6(1) 6(2) 6(3) 11.46 11.46 11.46 I Income Tax Act (Cap 134, 2014 Rev Ed) s 36A International Arbitration Act (Cap 143A, 2002 Rev Ed) Interpretation Act (Cap 1, 2002 Rev Ed) s 9A 6.83 21.77 26.89, 26.99 3.51, 3.52 L Land Acquisition Act (Cap 152, 1985 Rev Ed) Legal Aid and Advice Act (Cap 160, 2014 Rev Ed) Legal Profession Act (Cap 161, 2001 Rev Ed) s 111 Limitation Act (Cap 163, 1996 Rev Ed) 24A 24A(3) 24B 24B(3) Limited Liability Partnerships Act (Act 42 of 2005) Limited Liability Partnerships Act (Cap 163A, 2006 Revised Ed) s4 4(3) 5(1) 8 9(1) 9(2) Limited Partnerships Act (Cap 163B, 2010 Revised Ed) s 6(1) 6(2) 6(3) First Schedule Box 1.1 3.60 24.44 6.97, 6.98 6.97 6.97 6.97 9.56 21.1, 21.75 21.76 21.76 21.76 21.76 21.77 21.77 21.1, 21.73 21.74 21.74 21.74 21.74 M Maintenance of Parents Act (Cap 167B, 1996 Rev Ed) Maritime and Port Authority of Singapore Act (Cap 170A, 1997 Rev Ed) Minors’ Contracts Act (Cap 389, 1994 Rev Ed) s2 3(1) 3(2) Misrepresentation Act (Cap 390, 1994 Rev Ed) 52 3.9 21.8 9.32 9.39 9.34, 9.36, 9.37, Box 9.2, 9.38 9.33 13.3, 13.34 s 2(1) 2(2) 2(3) 3 Misuse of Drugs Act (Cap 185, 2008 Rev Ed) s 8A Motor Vehicles (Third Party Risks and Compensation) Act (Cap 189, 2000 Rev Ed) s 9(1) 6.42, 10.25, 13.35, 13.36, 13.37, 13.43, 13.50, 13.53 13.43, 13.49, 13.50, 13.51, 13.52, 13.53 13.53 13.55 26.14 9.68 P Parliament (Privileges, Immunities and Powers) Act (Cap 217, 2000 Rev Ed) s7 8 Partnership Act (Cap 391, 1994 Rev Ed) s1 5 8 9 Patents Rules 1995 (Cap 221, R1, 2007 Rev Ed) r 47(1) Patents Act (Cap 221, R1, 2005 Rev Ed) s 2(1) 13(1) 14(1) 14(2) 14(4) 14(5) 14(5A) 14(5B) 15 16(1) 16(2) 16(3) 17 17(1) 25(4) 30(1)(a) 33 34 34(1) 66 66(1)(a) 53 5.76 5.76 21.68 21.70 21.70 21.71 23.63 23.45 23.52 23.48 23.49 23.49 23.52 23.52 23.52 23.52 23.53 23.56 23.56 23.56 23.50 23.50 23.47 23.63 23.57 23.57 23.57 23.62 23.62 66(1)(b) 66(1)(c) 66(2) 66(2)(a) 66(2)(b) 66(2)(g) 66(2)(i) 67 67(1)(a) 67(1)(b) 67(1)(c) 67(1)(d) 67(1)(e) 69(1) 71 71(1) 71(2) 71(3) 76(1) 76(3) 77 77(3)(a) 77(3)(b) 77(3)(c) 113(1) Penal Code (Cap 224, 2008 Rev Ed) 24 25 120A 161–165 405 415 499 499(1) Personal Data Protection Act 2012 (Act No. 26 of 2012) s2 3 4(4)(a) 4(4)(b) 4(6) 11 13 14 15 54 23.62 23.62 23.64 23.64 23.64 23.64 23.64 23.66 23.66 23.66 23.66 23.66 23.66 23.67 23.65 23.65 23.65 23.65 23.63 23.63 23.68, 23.69 23.68 23.68 23.68 23.59 4.32 4.35, 4.42 4.42 5.27 4.43 4.32 4.39 5.47 5.47 24.52, 24.55 24.55, 24.58 24.57 24.58 24.58 24.56 24.57 Table 24.3 24.59, Table 24.3 24.59, Table 24.3 16 17 18 20 21 22 23 24 25 26 36 37 43(3) 44 45 Second Schedule Third Schedule Fourth Schedule Fifth Schedule Sixth Schedule Eighth Schedule Part IV Part V Part VI Part IX Personal Data Protection (Do Not Call Registry) Regulations of 2013 (S709/2013) Personal Data Protection (Exemption from Section 43) Order of 2013 (S817/2013) Practice Statement on Judicial Precedent 1994 Prevention of Corruption Act (Cap 241, 1993 Rev Ed) s5 6 8 37(1) Professional Engineers Act (Cap 253, 1992 Rev Ed) s 11(1) 24.59, Table 24.3 24.59, Table 24.3 24.59, Table 24.3 24.59, Table 24.3 Table 24.3 Table 24.3 Table 24.3 Table 24.3 Table 24.3 Table 24.3 24.63 24.63 24.63 24.63 24.63 Table 24.3 Table 24.3 Table 24.3 Table 24.3 Table 24.3 24.64 Table 24.3 Table 24.3 Table 24.3 24.62 24.63 24.63 3.40 4.43, 20.47 4.44, 4.45 4.46 4.51 4.51 15.4 R Rapid Transit Systems Act Reciprocal Enforcement of Commonwealth Judgments Act (Cap 264, 1985 Rev Ed) 55 25.22 26.29 26.98 Reciprocal Enforcement of Foreign Judgments Act (Cap 265, 2001 Rev Ed) Republic of Singapore Independence Act (Act 9 of 1965) s7 Residential Property Act (Cap 274, 2009 Rev Ed) Rules of Court (Cap 322, R5, 2006 Rev Ed) 26.29, 26.98 2.29 15.23 2.44 S Sale of Goods Act (Cap 393, 1999 Rev Ed) 2(1) 3(1) 3(2) 3(3) 4(1) 6 7 8 9 10 10(1) 11 11(2) 11(3) 12 12(1) 12(2)(a) 12(2)(b) 12(3) 12(4) 12(5) 13 13(1) 13(3) 14 14(2) 14(2B) 14(2C) 14(3) 15 15(2) 15(2)(a) 15(2)(c) 15A 9.16, 10.1, 10.52, 22.2, 22.3, 22.4, 22.5, 22.7, 22.9, 22.10, 22.11, 22.12, 22.14, 22.16, 22.18, 22.23, 22.33, 22.59, 22.61, 22.86, 22.88, 26.48, 26.50 22.10, 22.21 9.16, 22.15 9.21, Box 9.1, 9.23 9.17, 9.43 22.15 22.15 22.83, 22.85 22.21 22.22 Table 22.1, 22.27 22.58, 22.92 22.55 22.20 22.118 11.46, 22.41, 22.55, 22.56, 22.113 10.52, Table 22.1, 22.34, 22.36, 22.37, 22.118, 22.128 Table 22.1, 22.38, 22.39 Table 22.1, 22.39 22.40 22.40 22.40 11.46, 22.27, 22.55, 22.56, 22.113, 22.134 10.52, Table 22.1, 22.42, 22.44, 22.46 22.44 11.46, 22.49, 22.52, 22.55, 22.56, 22.113, 22.134 10.52, Table 22.1, 22.50, 22.52, 22.54 22.50, 22.51 22.53 Table 22.1, 22.54 11.46, 22.27, 22.47, 22.55, 22.56, 22.113, 22.134 Table 22.1, 22.47, 10.52 22.48 22.49, 22.53 22.6, 22.18, 22.27, 22.56, Table 22.3, 22.113, 22.115 56 16 17 18 19 20 20(1) 20(2) 20A 21(1) 23 24 25 27 28 29(1) 29(2) 29(3) 29(4) 30 30(1) 30(2) 30(2A) 30(5) 31(1) 31(2) 32 34 35(1)(b) 35(2) 35(4) 35(5) 35(6) 35A 36 37(1) 38(1) 39 41 42 43 44 47 48 48(2) 48(3) 49 22.63 22.63 22.64, 22.69 22.70 22.81 22.81, 22.83 22.82 22.68, 22.69 22.72, 22.73, 22.75 22.76, 22.77 22.78 22.79, 22.90 22.24, 22.57, 22.115 16.16, 22.30, 22.58 22.25 22.25 22.28 22.26 Table 22.1 16.25, 22.31 22.31 22.6, 22.31, 22.115 16.25 22.32 16.46 22.26 22.117 22.118 22.48, 22.57, 22.117 22.119 22.119 22.118 22.121 22.117 22.106 22.107 22.107 Table 22.2, 22.107 Table 22.2 Table 22.2 Table 22.2, 22.108 Table 22.2 Table 22.2 22.110 22.109 22.58, Table 22.2, Table 22.3 57 49(1) 49(2) 50 50(1) 50(2) 50(3) 51 51(3) 52 53 54 57(2) 61 61(1) 61(5) 62(2) Sale of Goods (United Nations Convention) Act (Cap 238A, 2013 Rev Ed) Securities and Futures Act (Cap 289, 2006 Rev Ed) s2 218 218(2) 219 219(2) 221 232 Singapore Regulations 1823 Spam Control Act (Cap 311A, 2008 Rev Ed) s3 4 5 6 7 First Schedule State Courts Act (Cap 321, 2007 Rev Ed) State of Singapore Act 1958 Supply of Goods Act (Cap 394, 1999 Rev Ed) 22.95 22.95 Table 22.2, 22.124 22.98 22.99 22.99, 22.101, 22.102, 22.103, 22.104, 22.124 Table 22.3, 22.124 18.16, 22.124 Table 22.3, 22.130 Table 22.3, 22.126 Table 22.3, 22.106, 22.127 7.30 22.9, 22.62 22.25 22.64 22.8, 22.15, 22.85 10.52, 22.3 Table 24.2, 26.48 4.52, 21.15 4.53 4.52, 4.54 4.53 4.52, 4.54 4.53 4.52 4.52 2.9 24.62 24.65 24.65 24.65 24.65 24.68 24.68 3.44 2.20 22.14 58 s2 Supreme Court of Judicature Act (Act 24 of 1969) Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) 11.47 2.32 3.38 T Terrorism (Suppression of Financing Act (Cap 325, 2003 Rev Ed) Third Charter 1855 Trade Marks Act (Cap 332, 2005 Rev Ed) Part VI s 2(1) 2(7) 2(8) 2(9) 4(1) 4(2) 5(2) 5(4) 7 7(1) 7(1)(a) 7(1)(b) 7(1)(c) 7(1)(d) 7(2) 7(3) 7(4) 7(5) 7(6) 8 8(1) 8(2) 8(4) 8(9) 9(1) 10(1) 15(2) 18 19 22 22(1)(a) 59 Box 4.1 2.13 23.82 23.103 23.83, 23.84, 23.89, 23.94 23.89, 23.99 23.89, 23.99 23.89, 23.99 23.82 23.109 23.96 23.97 23.84 23.84 23.84 23.84, 23.86 23.84, 23.86 23.84, 23.86 23.86 23.87 23.88 23.88 23.88 23.84, 23.89, 23.99 23.89, 23.90 23.89, 23.90 23.94 23.95 23.95 23.96 23.97 23.97 23.97 23.97 23.97 23 23(4) 26(1) 27 27(1) 27(2) 27(3) 28 28(1)(a) 28(1)(b) 28(1)(c) 28(2) 28(3) 28(4) 29 31 31(2)(a) 31(2)(b) 31(2)(c) 31(2)(d) 31(3) 31(5)(c) 32 32(1) 32(3) 33 33(1) 34 34(1) 35 35(1)(a) 35(1)(b) 35(1)(c) 35(2)(a) 35(2)(b) 35(2)(c) 36 38(1) 38(2) 38(3) 39(2) 39(3) 39(4) 42(2) 42(3) 46(1) 23.97 23.97 23.98 23.99 23.99 23.99 23.99 23.100 23.100 23.100 23.100 23.100 23.100 23.100 23.101 23.102 23.102 23.102 23.102 23.102 23.102 23.102, 23.108 23.102 23.102 23.102 23.102 23.102 23.102 23.102 23.104, 23.105 23.105 23.105 23.105 23.104 23.104 23.104 23.106 23.106 23.106 23.106 23.108 23.108 23.108 23.107 23.107 23.103 60 46(2) 47 23.103 23.103 U Unfair Contract Terms Act 10.36, 11.4, 11.5, 11.28, 11.36, 11.37, 11.38, 11.39, (Cap 396, 1994 Rev Ed) 11.41, 11.51, 11.57, 13.55, 22.31, 24.29 s 1(1) 11.41 1(3) 11.37, 11.40, Figure 11.1 2 11.37, 11.39, 11.41 2(1) 6.87, 11.42, Figure 11.1 2(2) 6.87, 9.66, 11.39, 11.43 s 2(3) 6.86 2–4 11.39 2–7 11.40 3 11.44 3(1) 11.44, Figure 11.1 3(2) 11.45 4 11.39 6 11.46, 11.52, 22.55 6(1) 11.46, 22.41 6(2) 11.46 6(3) 11.46 7 11.39, 11.47, 11.52 7(2) 11.47 7(3) 11.47 7(3A) 11.47 7(4) 11.47 8 13.55 11 11.43 11(1) 11.51, 11.52, 13.55 11(2) 11.52 11(5) 11.51 12 11.37, 11.50 12(1) 11.48 12(1)(a) 11.50 12(1)(b) 11.50 12(2) 11.48 12(3) 11.48 14 11.40, 11.42, 11.46 26 11.39 First Schedule 11.39, Figure 11.1 para 1 11.39 para 2 11.39 para 3 11.39 para 4 11.39 Second Schedule 11.52, 11.53, 11.58, 13.59, 22.55 61 W Workplace Safety and Health Act (Cap 354A, 2007 Rev Ed) Workplace Safety and Health Act (Cap 354A, 2009 Rev Ed) 62 4.55, 4.56 3.35 Table of Foreign Legislation A Age of Majority Act 1971 (Malaysia) 9.7 B Berne Convention for the Protection of Literary and Artistic Works Build-Operate-Transfer Law [Republic Act No 7718] (Philippines) 23.14 26.69 C Competition Act 1998 (c 41) (UK) Constitution of the United States of America (US) Art II, s 2 14th Amendment Contract (Rights of Third Parties) Act 1999 (UK) 25.2 26.11 26.17 19.55 E Electronic Signatures in Global and National Commerce Act 2000 (US) 24.38 F Family Law Reform Act 1969 (UK) Fertilisers and Feeding Stuffs Act, 1906 (UK) 9.7 15.8 L Law Reform (Enforcement of Contracts) Act 1954 (UK) 2 & 3 Eliz 2, Ch 34 Law Reform (Frustrated Contracts) Act 1943 (UK) Limited Partnerships Act (UK) 19.42 17.42 21.73 M Misrepresentation Act 1967 (UK) 13.3 N New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 Art V V(I) 63 2.45, 26.89, 26.98, 26.100 26.89, 26.101 26.104 V(II) North American Free Trade Agreement 26.105 26.33 P Protection of Birds Act 1954 (UK) 7.18 R Rent Restriction Ordinance 1949 (Uganda) Restatement of Contracts, §42 (1932) (US) Restatement (First) of Contracts §133 (1932) (US) Restatement (Second) of Contracts §43 (1981) (US) Restatement (Second) of Contracts §302 (1981) (US) Restatement (Second) of Contracts §309 (1981) (US) Restatement (Second) of Contracts §311 (1981) (US) Restatement (Second) of Contracts §317 (1981) (US) Restatement (Second) of Contracts § 318(2) (1981) (US) Restatement (Second) of Contracts §321 (1981) (US) Restatement (Second) of Contracts § 328 (1981) (US) 15.20 19.29 19.59 19.29 19.59 19.63 19.62 19.69 19.71 19.76 19.74 S Sale of Goods Act 1893 (UK) Second Charter of Justice 1826 (UK) Sherman Anti-Trust Act (1890) Statute of Frauds 1677 (UK) 22.2, 22.18 2.10, 2.11 Box 25.2 19.41, 19.42, 19.44 U UK competition law (Competition Act 1998 (c 41) (UK)) Unfair Contract Terms Act 1977 (UK) Uniform Commercial Code (US) Art 1-203 2 2-205 2-207 2-210 2-210(4) 2-718 9-204 Uniform Electronic Transactions Act 1999 (US) US Foreign Account Tax Compliance Act (26 USC §6038D) 64 25.2 11.4, 11.36, 11.67 19.32, 19.35, 19.43, 19.48, 19.50 19.13 19.17, 19.47 19.33 19.47 19.69 19.74 19.88 19.76 24.38 26.14 Table of Treaties and Conventions A Agreement on Subsidies and Countervailing Measures Agreement on Trade Related Investment Measures Anti-Dumping Agreement 26.39 26.80 26.36 C Convention on the Use of Electronic Communications in International Contracting Art 11 12 13 14 24.11 24.15 24.49 24.26 24.51 G General Agreement on Tariffs and Trade General Agreement on Trade in Services 26.30, 26.36 26.80 H Hague-Visby Rules 6.36 I International Centre for the Settlement of Investment Disputes Art 25 26.81, 26.83 26.82 M Model Law on Electronic Commerce 1996 Model Law on Electronic Signatures 2001 Art 7 Model Law on International Commercial Arbitration 1985 Art 1(1) 1(3) 5 8 9 18 65 24.10, 24.11, 24.34, 24.48 24.33, 24.35, 24.36 24.34 2.45, 26.89, 26.94, 26.99, 26.101, 26.105 26.90 26.90 26.91 26.92 26.93 26.95 22 28 28(3) 30 26.95 26.96 26.96 26.97 U UNIDROIT Principles of International Commercial Contracts 2010 Art 1.7 2.4(2) 2.6(2) 2.11 2.17 2.20 2.21 2.22 7.4.13 Uniform Domain Name Dispute Resolution United Nations Convention on Contracts for the International Sale of Goods Part II III Art 1(1)(a) 2 3 3(2) 6 7 8 18(2) 9 15(2) 16(1) 16(2) 18(2) 19 19(1) 19(2) 19(3) 24 25 30 31–44 35 41 53 66 19.16, 19.32 19.13 19.33 19.25 19.51 19.40 19.51 19.51 19.51 19.89 10.52, 19.14, 19.32, 19.38, 19.39, 19.40, 19.43, 19.50, 22.3, 22.4, 22.5, 26.48 26.52 26.53 26.50 26.51 26.51 19.15 19.15 19.14 19.37 19.25 19.37 19.27 19.27, 26.52 19.33, 26.52 19.27, 26.52 19.48, 19.49, 19.51 19.48 19.48, 26.52 19.48, 26.52 Table 24.2 26.53 26.54 26.54 26.54 26.54 26.55 54 57 58 66–70 71 72 74 82 United Nations Convention on the Use of Electronic Communications in International Contracts United States of America–Singapore Free Trade Agreement 2003 Chapter XV Art 15.4.1 26.55 26.55 26.55 26.56 26.57 26.58 26.58 26.58 19.14 26.8, 26.19, 26.33, 26.79, 26.82 26.79 26.79 V Vienna Convention on the Law of Treaties 1969 67 26.6 PART I Introduction to Business Law 68 Chapter 1 Business, Society and the Law 1.1 1.2 1.3 1.4–1.5 1.6–1.7 1.8–1.9 1.10 Introduction What is Law? Law as Norms Positivism Natural Law Positivism and Natural Law: The Middle Road Other Schools of Thought 1.11 1.12 1.13–1.17 1.18–1.19 1.20–1.21 1.22 1.23 Ethics and Law Ethics as Norms The Differences between Legal and Ethical Norms (1) Authority and processes (2) Scope of application (3) Sanctions Legal Enforcement of Morality Positivist Law and Ethics 1.24 1.25 1.26–1.35 1.36–1.38 1.39–1.41 1.42–1.44 Relationship between Law and Society Society’s Code of Conduct Obedience to Laws Factors Determining Law–Society Linkages Legal Structures Legal Cultures Legal Traditions 1.45–1.48 Relationship between Law and Economic Development Law and the Management of Risk 69 1.49–1.50 1.51 Law and Economic Development in Singapore Conclusion INTRODUCTION 1.1 The law is an amalgam of theory and practice. At a theoretical and philosophical level, the meaning and foundation of “law” pose a weighty and perplexing question for philosophers, lawyers, judges and law academics alike. Each of us is also keenly aware of the profound and practical effects of the law in our everyday lives. It is inextricably connected to the overlapping domains of ethics, sociology and economic development, amongst others. Law is thus a “many-splendoured” thing that traverses several disciplines. This brief chapter hopes to elucidate “law” within the broader canvas of its interactions and web of relations amongst these various fields. WHAT IS LAW? 1.2 The fundamental question of the meaning of “law” invites numerous queries. Within the narrow scope of this section, we can only hope to provide a brief sketch as to how one might approach the issue. What follows is a very condensed summary of the major developments concerning the foundations of “law”. This is known as the study of jurisprudence, the legal philosophy or science of law. We hope that it will serve as a precursor to a deeper appreciation of the bases of law and its interactions with business and society. Law as Norms 1.3 Let us begin with the rudiments. It is generally accepted that “law” is, at its core, a set of norms which prescribe a course of conduct. These norms state what should or ought to happen. In this regard, they may be 70 distinguished from the laws of natural science such as “water boils at 100 degrees Celsius” which are amenable to factual verification. Legal norms, on the other hand, cannot be either true or false. Instead, they essentially prescribe what ought to be. For instance, “one ought not to kill another person” is a legal norm in most, if not all, societies. Positivism 1.4 Having established the basic core of the “law” as a set of norms, we can explore the various jurisprudential approaches and perspectives. One school of thought, known as positivist jurisprudence, treats the “law” as a set of norms that are created and maintained pursuant to some legal authority within a legal system. The legal positivist, John Austin (1790–1859), defined “law” (in John Austin, The Province of Jurisprudence Determined (1954)) as a set of coercive commands from a determinate person or body of persons (known as the sovereign) which are habitually obeyed by the population. These coercive commands constitute a type of norms broadly defined. Hans Kelsen (1881–1973), another legal positivist, contended in The Pure Theory of Law (translated by Max Knight, 1967), that the legal system consists of norms backed by sanctions which are derived from or validated by higher norms. This leads us ultimately to the “basic norm” (grundnorm) from which we cannot derive any higher norm. This basic norm, according to Kelsen, is selected on the basis of its efficacy within the legal system as a whole (ie, the people generally conform to the basic norm). In some jurisdictions, this basic norm may underlie the highest law of the land embodied in the respective written constitutions. 1.5 H L A Hart (1907–1992), in his work Concept of Law (1961), argued for a more sophisticated conception of a legal system as a system of rules. Apart from the “primary” rules which impose duties on the population 71 (which are quite similar to Austinian coercive commands), Hart observed that there are also “secondary” rules within a legal system that create, determine, eliminate or modify the primary rules. Examples of “primary” rules are those found in criminal law (see Chapter 4) and the law of torts (see Chapters 5 and 6). “Secondary” rules include those which stipulate the powers and duties conferred on the Legislature, Executive and Judiciary (see Chapter 3) as well as rules which facilitate the making of contracts (see Chapters 7–9). These “secondary” rules are subdivided into three categories, namely, rules of adjudication (to confer power on officials to pass judgment and implement the rules), rules of change (to confer power to pass legislation to effect changes) and rules of recognition (to ascertain the criteria by which the rules within the legal system are validated). Apart from the requirement that the rules of the legal system must be generally obeyed by its private citizens, these latter rules of recognition must be accepted by the officials within the legal system from an “internal point of view”. This “internal point of view” refers to the critical reflective attitude of an official to certain patterns of social behaviour as a common standard. The official, when he or she reflects on social behaviour, inquires whether one ought to do (or omit) certain acts and the underlying reasons. Natural Law 1.6 Another major jurisprudential school of thought is that of natural law. In contrast to positivism, natural law jurists take the view that positivist laws within a legal system are not necessarily “law”, but that there are objective and higher standards or criteria which must be fulfilled before a norm may be regarded as “law”. These standards or criteria are generally based on truths about human nature, ethics and reason. Natural law jurists have since time immemorial relied on the existence of a supernatural deity or God, some human life-purpose and its underlying reasons or certain self-evident truths. For example, John Finnis contends in his seminal work Natural Law and 72 Natural Rights (1980) that natural law is the set of principles based on practical reasonableness in the ordering of human life and community. There are certain forms of self-evident human good (ie, objects of value to humans) such as life, knowledge, sociability, aesthetic experience, religion and practical reasonableness, and Finnis suggests that the purpose of “law” is to realise the common good of the human community. 1.7 Thus, whilst the positivist would treat a legal norm as binding insofar as it is created or made in a certain manner (for example, by Parliament passing a piece of legislation), the natural law jurist would instead look towards certain ethical standards (usually of general or universal application) to resolve the issue. An oft-cited illustration of the difficulties in subscribing to a pure positivist stance concerns the status of the laws of the Nazi Germany regime. These Nazi laws may be consistent with pure positivism, but the natural law jurist would ask whether such Nazi laws ought to be regarded as “law”. From a natural law point of view, some, if not all, may contend that the so-called Nazi laws were so oppressive and unfair that they should not be regarded as “law”, even though they had been duly passed by the relevant authorities. Yet, at the same time, the so-called objective standards within a pure naturalist theory may be vulnerable to criticisms of vagueness and subjectivity. Positivism and Natural Law: The Middle Road 1.8 Some jurists have thus tended towards a middle path between pure positivism and naturalism. A few examples would suffice here. Lon Fuller’s (1902–1978) “internal morality of law” suggested that in order to qualify as a legal system, the statutes must satisfy specific procedural requirements: the statutes have to be sufficiently general, made known to the public, prospective in effect, clear and without contradictions, capable of being complied with and so on (see The Morality of Law (1964)). These procedural requirements, as the reader would be aware, 73 go beyond the pure positivist position that norms are “laws” as long as they emanate from competent authorities within a legal system. Hart, in his Concept of Law, described a model of the conditions that are sufficient and necessary for the existence of a legal system. Indeed, he referred to this work as “an essay in descriptive sociology”. Yet, at the same time, Hart argued that, to prevent society from descending into chaos, there should be a “minimum content” of natural law based on certain human facts (such as human vulnerability, approximate equality, limited altruism, limited resources, etc). According to Hart, there is a natural necessity for certain minimum forms of protection for persons, property and contracts. 1.9 In addition, Hart would concede that his system of rules is not all-embracing since the scope of some rules may be uncertain. For example, the rule that no “vehicle” may be brought into the park may be unclear as to whether bicycles are disallowed as well, although the central core of the rule may be clear. Ronald Dworkin, a renowned legal philosopher, countered that Hart had overlooked the significance of “principles” (such as “no man may profit from his own wrong”) as an important component of the legal system. Principles, he said, argue in a certain direction but do not necessarily lead to a particular legal outcome as compared to rules that are applied in an “allor-nothing” fashion. These relatively more flexible and malleable principles can, arguably, accommodate natural law precepts, although Dworkin appeared to suggest that there is one right answer to any particular legal problem (see, eg, Dworkin’s Law’s Empire (1986)). Other Schools of Thought 1.10 Apart from the above, there are numerous other jurisprudential approaches which must be mentioned (if only in passing) such as American Realism which focuses on the use of empirical facts and law to make predictions as to how courts will decide, the Law and Economics 74 approach which is based on the economic efficiency of outcomes, the Corrective versus Distributive justice approaches to particular areas of law such as torts, and the approaches embodied in Sociological Jurisprudence and Sociology of Law relating to the interactions between law and society. The above examples represent only some of the possible approaches and perspectives towards the exploration of “law” and legal systems. Nonetheless, we hope it provides a flavour of the potential richness and complexity of jurisprudence and legal philosophy which the reader might wish to delve further into. ETHICS AND LAW Ethics as Norms 1.11 We have mentioned above that “law” is a set of norms that prescribe a course of conduct and that the norm “one ought not to kill another person” is one example of a legal norm. The reader may legitimately ask: is not the norm against killing also an ethical norm? As a starting point, we note that “ethics” and “law” are similar in at least one respect, that is, they are both norms prescribing a certain course of conduct. Within the legal context, these legal norms may be referred to as “rules”, “principles”, “guidelines” and other similar terms. For instance, a rule that companies are required to register with the relevant authorities prior to commencing business is a legal “norm”. Similarly, within the ethical sphere, we may also refer to ethical norms as “rules”, “principles” or “guidelines”. For example, the rule or principle that one ought not to lie is an ethical norm. In relation to “form”, there does not appear to be any significant difference between the disciplines of ethics and law. The Differences between Legal and Ethical Norms 75 1.12 But are there not material differences between legal and ethical norms? Let us examine this issue by reference to questions of the “what, who, how and why” variety: Who or which body creates or authorises an ethical or legal norm (“the authority”)? How are ethical and legal norms created, maintained or modified (“the processes”)? To whom are ethical and legal norms applied (“the scope of application”)? What are the respective sanctions for a breach of ethical and legal norms (“the sanctions”)? (1) Authority and processes 1.13 Let us discuss questions relating to “authority” and “processes” together. Assume that “legal norms” are positivist in nature. From the perspective of the legal positivist, the relevant authorities within a legal system are the legal institutions, bodies or persons within a particular jurisdiction that are conferred specific legal powers. For example, the Legislature is empowered to pass legislation in Parliament which prohibits anticompetitive agreements in Singapore. The Executive may be entitled to issue ministerial regulations. The judge is empowered to pass judgment in a courtroom on the appropriate compensation to a victim of a road accident. Hence, we can say that the norms created by the relevant authorities via the accepted legal processes constitute the set of “legal norms” within the parameters of the legal system. 1.14 With respect to ethical norms, however, the determination of the authority and processes is more controversial. The moral actor may determine for himself the appropriate course of conduct when faced with a particular problem. Sometimes, the appropriate ethical response may be obvious, intuitive or largely experiential, such as saving one’s baby from threatened danger. The moral actor may, alternatively, choose to look towards ethical reasoning for 76 guidance and direction when he encounters a more intractable dilemma. Since time immemorial, philosophers such as Aristotle, Immanuel Kant, Confucius, John Stuart Mill and others have pondered over these ethical issues and endeavoured to construct and develop theories and frameworks to determine how one should conduct oneself in a consistent and rational manner. 1.15 Mill’s general theory of utilitarianism, for instance, advocated that one should act to the extent that doing so promotes general happiness. That is, if the pleasure or benefits accruing from an action outweighs the pain or costs, then the action should be undertaken. Instead of the model of utilitarianism, one may find a distributive justice model more persuasive. A proponent of the distributive justice model may argue, for instance, that the needy in society should obtain proportionately more of the benefits than the wealthy. Alternatively, one might rely on Kantian ethical imperatives that one ought to act according to a rule of conduct that one would will to be the universal standard for everyone else, and that one should respect human beings as ends in themselves, rather than only as a means to one’s end. For instance, slavery ought to be abolished since no rational person would desire to be a slave or to be treated as one; in addition, to treat another human being as a slave is to treat him or her as a means only. These are merely examples of the many theories and modes of ethical reasoning. 1.16 Essentially, the discipline of ethics is a search for underlying objective standards and reasoning for taking, or not taking, a particular course of action or conduct in any given situation. As can be seen, there is potentially, a great diversity of ethical theories, outlooks and judgments on any issue. It may be difficult to accommodate these diverse (and sometimes contradictory) “ethical” theories, outlooks and judgments within a set of precepts applicable to a particular jurisdiction by consensus. The potential diversity gives rise to relatively greater 77 uncertainty concerning the acceptance and legitimacy of ethical norms within a society, when compared to legal positivist norms which may be more easily “located” within the positivist legal system. 1.17 Further, there is no generally accepted process by which ethical norms are created, maintained or modified. The creation and evolution of ethical norms are likely to take place in a more diffuse and indeterminate manner. There is an absence of formal processes for the creation, maintenance and modification of ethical standards and values. (2) Scope of application 1.18 In terms of the “scope of application”, ethical norms may be of general (or universal) or specific application. Ethical norms, such as the Kantian ethical imperatives mentioned above, are of universal application. Ethical norms may also address specifically the obligations and rights of persons in specific capacities or roles, such as the employees or directors of a company in relation to business ethics. Legal norms, similarly, have both general and specific application. Most of the provisions stipulating criminal offences (such as murder and cheating) normally apply to all persons within the jurisdiction, and do not usually single out particular types or groups of persons for separate treatment. In fact, to do so might invite accusations of unfairness and discrimination. There are also legal norms (as in company law) that specifically address the duties of a director of a company, similar to ethical norms. 1.19 The material difference between ethical and legal norms in terms of the “scope of application” is that legal norms, due to the historical development of sovereign states, tend to emphasise their “territorial” scope or jurisdiction, unlike ethical norms. The domestic laws of one country apply generally to its citizens or to activities undertaken within its territorial boundaries and may differ quite 78 significantly from the laws of another (foreign) country. These divergences in the respective domestic laws can create inconvenience or, worse, chaos especially in transnational affairs and transactions. Thus, countries attempt to seek, where possible, the harmonisation of these disparate laws in this increasingly globalised world we live in. Public international law is the set of laws which governs and regulates the relationships between sovereign states and the international legal system (eg, an international convention regulating the interpretation and effects of treaties signed by states). Private international law, on the other hand, deals with cases involving foreign elements such as issues relating to the applicable governing law in Internet defamation or transborder litigation. Not surprisingly, natural law has played a significant role in the international legal system in the search for universal objective standards applicable to all, such as the development of human rights. It is generally less common for one to speak of ethical norms as having specific “territorial boundaries”, though we are aware that historical and cultural factors have at times been employed in attempts to “differentiate” one value system from another à la the “Asian versus Western values” debate of the 1990s. (3) Sanctions 1.20 Legal sanctions are normally specific and formal. The main sanctions under criminal law are capital punishment, imprisonment, fines and other penalties. In civil law, the main sanction is the obligation of the person who commits the civil wrong to compensate the other party for losses or damage. For example, the party who breaches a contractual obligation may be required to compensate the other party for the latter’s loss of profits resulting from the breach. Other legal sanctions may include the specific performance of the legal obligation or the perpetrator may be restrained via an injunction from carrying out particular acts. The extent by which legal sanctions are enforced in a particular case may vary from jurisdiction to jurisdiction. 79 1.21 On the other hand, the sanctions for a breach of an ethical norm are usually more informal compared to legal sanctions. These may include the social disapproval of an action or reprisals from other persons. For instance, lying to friends might invite social disapproval from one’s peers but only some forms of lying, such as cheating offences and misrepresentations which induce another to enter into a contract, attract legal sanctions. Legal Enforcement of Morality 1.22 A related question arises: should all morality be enforced by the law? Mill argued, in On Liberty (1859), that legal enforcement should be undertaken only for the purpose of preventing harm to others. The UK Wolfenden Report on Prostitution and Homosexuality (1957) (“the Report”) stated that there is a realm of private life which should not be subject to legal control and enforcement. This subsequently led to the now famous Devlin-Hart debate. Lord Devlin disagreed with the Report and countered that the law’s function is to maintain public morality, which constitutes an important aspect of human society. He argued that conduct provoking feelings of “intolerance, indignation and disgust” should be suppressed by the law, lest the fabric of the society crumbles as a consequence. Hart, on the other hand, doubted the broad connections drawn by Devlin and cautioned against unduly curtailing freedoms in the name of public morality, though Hart conceded that there should be some core shared morality in any society, such as the prohibition of murder. Positivist Law and Ethics 1.23 We can now examine, in a general fashion, the relationship between positivist law and ethics. In modern societies, ethical and positivist legal norms would overlap partially. Indeed, some moral norms, such as the concept of equity and fairness, are embedded in positivist legal norms, though the scope and manner of application may vary. Outside this overlapping area, the legal norms are 80 distinct from ethical norms. The reasons why these norms do not correspond perfectly may lie in the difficulty of translating certain moral norms into positivist law, the conscious decision to leave certain conduct to individual moral conscience, or that positivist law has not kept pace with the development of ethical norms within the society. There could also be other practical reasons (such as limited parliamentary time and resources). RELATIONSHIP BETWEEN LAW AND SOCIETY Society’s Code of Conduct 1.24 It is a truism that no society can function without a system of rules, norms and values (we shall refer to them collectively as “code of conduct”). This code of conduct need not always be enshrined as law for it to be observed and effective. Although commonly used, laws are not the only means by which desirable and desired behaviour of individuals, businesses, governments and other organisations can be encouraged. Consider, for a moment, how families and ethnic business networks regulate their conduct vis-à-vis family members and other businessmen. In these social and economic groupings, there is little use of the formal processes of law. Informal rules govern. Even though they do not have the force of law (understood typically as laws found in statute books), they can help to regulate behaviour towards desired ends. Obedience to Laws 1.25 What is it that makes people obey laws (formal and nonformal) and how can we enhance compliance? People obey the law for various reasons, including obedience to a legitimate authority, abiding by their personal convictions and the fear of sanctions imposed by the law for non-compliance. The law, understood here as legislation passed by a competent legislature, does not offer a one-size-fits-all solution to the issues and 81 problems faced by any society. Often, the law sets the minimum standard of behaviour expected as well as provides a set of sanctions if the law is breached. Let us take the management of road traffic in cities as an example. Laws can be passed to prevent traffic violations such as illegal parking and drink-driving, and to manage the volume of traffic entering the city area during certain designated periods. How do people and businesses react to the traffic law regime? How do the law enforcement agencies respond to the road users’ behaviour on the roads? What follows is an outline of some factors that can determine the utility of laws in fostering desired behaviour and the intimate linkages between law and society. Factors Determining Law–Society Linkages 1.26 First is clarity and knowledge of the law. Are the laws in question clear or ambiguous? If the laws are ambiguous on the expected behaviour, then non-compliance could result because road users might be unaware that they are committing traffic violations. If so, the legislation can and should be amended to remove the ambiguity and to make clear the scope of the law. Secondly, are the traffic laws and sanctions for violations widely known by the road users? How accessible are the laws? While ignorance of the law is no excuse, it is essential that non-compliance is not due to road users’ ignorance of the applicable laws. If so, making the laws accessible and embarking on an educational and publicity drive might be necessary. 1.27 Second is the concept of deterrence. The current laws may not have the requisite deterrent effect. The intuitive regulatory response to a situation of (traffic) “lawlessness” is to increase the legal sanctions or punishment. More severe disincentives would act as “sticks”, discouraging would-be violators. This would be relevant in cases where the punishment is too light to serve as a serious deterrent. However, as studies have shown, there is an upper limit to deterrence. Even with punitive sanctions, hard core or irrational violators will not be deterred by 82 sanctions that other law-abiding and rational road users otherwise would. 1.28 It should come as no surprise that there is a regulatory pyramid with a range of sanctions, from deterrent to incapacitative measures, for the different types of traffic violations. For instance, as drink-driving is a very serious problem, severe punishments ranging from suspension and revocation of driving licences to jail terms, reflect the level of moral culpability of such violators and society’s abhorrence of such conduct. Also, there is a need for proportionality in the sanctions meted out. Legal sanctions that are excessively harsh might affect the legitimacy of the laws. Law enforcers may then be reluctant to enforce them, resulting in the sanctions being paradoxically underused. Hence, it is critical for the legal system to be sensitive to the dynamic interactions between the law and the adaptive strategies of those that the law in question seeks to regulate. This would enable the authorities to better calibrate the effective zones of deterrence. Another complementary approach is to provide incentives or “carrots”, for example, lower insurance premiums, for motorists who obey the laws and have good driving records. 1.29 Third is the need for consistent and fair enforcement of the law. A well-drafted set of laws clearly sets out the expected minimum behaviour. Such laws require effective and impartial enforcement to achieve their desired effect. Non-compliance may well be an issue of enforcement (especially the lack of it). Weak and ineffectual enforcement of traffic laws translate into road users’ perceptions that they can get away with their violations. Studies have shown that the extent of a proscribed activity (in this case, traffic violations) is negatively correlated to the perceived certainty of punishment. Therefore, there will be fewer violations when road users perceive or believe that active enforcement is in place resulting in offenders being more likely to be caught. 83 1.30 Enforcement can also be aided through the use of technology, such as closed circuit TVs, and giving the police more enforcement powers such as requiring mandatory blood tests or breath analysis of suspected drink-drivers. The intent is to demonstrate that there is a commitment to the enforcement of traffic laws, with increased surveillance being facilitated by technology. This must be supported by effective and efficient law enforcement, otherwise violations would resume once the lackadaisical commitment and efforts towards enforcement are noticed. In some societies, there may also be a problem of corruption where violators get away with their offences by bribing law enforcement officers. If so, then efforts would also have to be directed towards curbing the corrupt practices of the law enforcement officers. 1.31 Fourth, the legal system has to manage perceptions. In deciding whether to obey a law, a person’s perceptions on the likelihood of his transgression being caught would matter. While media blitzes and intensive enforcement crackdowns would result in “deterrence effectiveness”, success is often temporary unless the enforcement efforts are sustained. Furthermore, if keen enforcement is accompanied by publicity campaigns and blitzes, the perception of the likelihood of punishment is likely to be positive for law enforcement efforts as public consciousness of the law and its enforcement is raised (“the sermon effect”). However, such efforts will see declining utility if they are accompanied by poor or inadequate enforcement, as was discussed earlier. Using traffic law as an example, there is the need for such laws to have regulatory credibility and their acceptance as a legitimate source of regulatory authority. This requires that the laws are — and are seen to be — just and for the common good (public safety considerations) as well as their being applied fairly without undue harshness or laxity. 84 1.32 Fifth, as legislative fiats cannot be completely effective in inculcating desired legal norms, informal and decentralised sanctions such as social norms and peer pressure can complement the formal legal framework. Such informal controls are potentially a more effective mode of enhancing compliance. In a weak legal environment, particularly, social norms and informal sanctions can have the desired regulatory effect in preventing opportunistic behaviour. Where formal laws are in alignment with community standards of appropriate behaviour, the fear of external non-legal sanctions and social disapproval has a significant regulatory and conforming effect. 1.33 An appeal to one’s own moral commitment to obey laws can also engender strong compliance effects. As laws cannot compel compliance, the objective of internal compliance is to socialise road users through the internalisation of the desired norms and an appreciation of the public good that the traffic laws seek to uphold and promote. Informal sanctions are likely then to be more effective in dealing with minor transgressions, such as not coming to a complete stop at stop signs. 1.34 Given the practical limits to policing and prosecution, such an internally driven mode of compliance could be far more effective. Even for more serious violations, social norms — in addition to formal, legal sanctions — can raise compliance levels through the social stigma and shame attached to such illegal and socially (and morally) repugnant conduct. For instance, drink-driving can be targeted through demonstrating the moral callousness and culpability and the negative repercussions of such an act. Here, moral suasion provides an additional layer of deterrence and informal sanctions on violators. 1.35 The above example of managing traffic issues demonstrates that law is not always a panacea for the multifaceted societal problems. Indeed, there is a patent need to consider law in its societal context. What would 85 be apparent is that no legal system is fully autonomous in that it is completely independent of the society in which it operates. While law matters immensely in a legal system, such a system cannot be effective if it ignores considerations such as ethics and pressure from interest groups serving business, civil society and economic interests. These social forces operating outside of the legal system provide a better understanding of the interface and interaction of law, society and business. The rest of this section looks at common explanatory concepts used, namely, legal structures, culture (including legal culture) and legal traditions, in helping us to better understand the relationship between law and society. Legal Structures 1.36 A legal system’s structure can be regarded as its “hardware”. Legal structures are the composite units that do the work of legal systems and include legal actors, for example, lawyers, legislators, police, judges, legal scholars, etc (J H Merryman, “On the Convergence (and Divergence) of the Civil Law and the Common Law” (1981) 17 Stanford Journal of International Law 357). The structure determines the patterns and framework of processes, actions and outcomes of the legal system. Blankenburg’s innovative comparative socio-legal studies of the then West Germany and the Netherlands, two countries similar in socio-economic terms and attitudinal cultures, demonstrate how the legal infrastructure can create incentives and disincentives for the use of the formal legal system (E Blankenburg, “The Infrastructure for Avoiding Civil Litigation: Comparing Cultures of Legal Behaviour in the Netherlands and West Germany” (1994) 28 Law and Society Review 789). Usage of the court system is effected through the inculcation of either a litigation-avoiding (Dutch) or a litigation-prone (West German) mindset. The Dutch “infrastructure of avoidance” has “filtering institutions” in the form of more alternatives, such as pre-court conflict institutions, many forms of legal consultation beyond the formal legal system, the 86 “routinising” of issues such as traffic cases to displace them from the court calendars, and “dejudicialisation” in which social institutions rather than the courts regulate private conflict. The German system, on the other hand, draws conflicts into the courts by discouraging alternative dispute resolution and by consciously keeping the courts effective (efficient and inexpensive), creating little incentive for disputants not to use them. 1.37 The legal structure interacts intimately with the legal culture to condition the Dutch legal actors’ attitudes, values and beliefs towards alternative modes of dispute resolution. This interaction is demonstrated in Haley’s classical study of the “reluctant Japanese litigant” myth where he shows that there are cultural attributes in Japanese social organisation and values — shame, communitarian consciousness and fear of community ostracisation — that make the Japanese relatively litigation-averse (J O Haley, “The Myth of the Reluctant Litigant” (1978) 4 Journal of Japanese Studies 359). However, there are also structural factors that reinforce these cultural inhibitions to litigation, including institutional incapacities, such as delays in the court system, the lack of lawyers, the courts’ limited ability to enforce their decisions and provide adequate relief, affecting access to justice. Consequently, the widely held belief, inside and outside Japan, is that the Japanese are a non-litigious people. Thus, we have a legal structure aiding in, and in turn supported by, the successful transmission of a mythic aspect of Japanese legal culture! 1.38 While legal systems can be fruitfully studied by examining formal processes, much can be gained from a study of informal systems of regulation, enforcement and social norms. Such alternative structures tend to occur in places where the legal infrastructure is not well developed. Here, “moral communities” develop with their particularistic networks of insiders (usually kinsmen) and in-built compliance mechanisms centred on trust. Macaulay’s classical study of the use of non-contractual relations in 87 American business is an excellent case in point, where informal regulatory mechanisms either lower transaction costs or provide additional informal governance structures to reduce opportunistic behaviour (S Macaulay, “NonContractual Relations in Business: A Preliminary Study” (1963) 28 American Sociological Review 55). However, one should not ignore prejudices, cultural preferences, bias and the importance of closed family networks for business transactions in the structuring of these mechanisms. There is a close nexus between formal and informal controls. The former is likely to supplement, and perhaps substitute for, the latter when informal controls become inadequate. Legal Cultures 1.39 Legal culture refers to the “historically conditioned, deeply rooted attitudes about the nature of law and about the proper structure and operation of a legal system that are at large in the society” (J H Merryman, “On the Convergence (and Divergence) of the Civil Law and the Common Law” (1981) 17 Stanford Journal of International Law 357, at 381). It is the “ideas, values, attitudes, and opinions people hold, with regard to law and the legal system” and forms the basis for the creation and sustenance of legal norms which either promote inertia or change in the legal system and legal actors (L M Friedman, “Is There a Modern Legal Culture?” (1994) 7 Ratio Juris 117). The internal legal culture of legal actors, such as lawyers and judges, impact upon the legal system as well. Lawyers are both transmission and transformation agents and they can affect how clients perceive the law (the external legal culture). Hence, the management of the legal actors’ deeply rooted and firmly held attitudes in many societies is important in helping to entrench the norms desired. This is well demonstrated in Abe’s study of the Japanese judiciary’s internal control mechanism in the selection, training and promotion of legal personnel resulting in the self-production of the judiciary’s internal legal culture, ensuring a perpetuation 88 and transmission of norms (M Abe, “The Internal Control of a Bureaucratic Judiciary: The Case of Japan” (1995) 23 International Journal of the Sociology of Law 303). Through a careful process of central control, the legal personnel are socialised, and shared norms are maintained and sustained in an environment where organisational autonomy is critical amidst antagonistic political forces. 1.40 Although legal culture is malleable, it is slow to change. Transition economies in the former communist bloc countries often have to deal with the lack of a culture of legality and legal consciousness among the legal system’s actors and users. Because it is perceived to be an instrument of the state, post-Soviet Russia’s legal system lacks legitimacy, fails to inspire confidence and is not depended upon for organising economic relations (K Hendley, “Legal Development in Post-Soviet Russia” (1997) 13 Post Soviet Affairs 228). Markovits’ sensitive treatment of the then East German legal system highlights how the internal legal culture (and structure) influences the Judiciary’s view of their role (I Markovits, “Last Days” (1992) 80 California Law Review 55). They resolved social crises rather than adjudicated on individual rights. The courts functioned as a “schoolhouse” to protect public order, which might seem alien to another legal tradition. Contrary to popular perceptions, East German courts were not kangaroo courts, especially in non-political cases. The outcomes arising from their resolution of legal disputes may have differed but they reflected a different ideological system and its particularistic systemic objectives. In socialist legal systems, law is often used by the communist party as an instrument of control and to improve governance. These two objectives are not regarded as mutually exclusive; in fact, they are seen as being complementary. 1.41 Social change impacts upon the legal culture, influencing changes in the legal system. For instance, given the pervasive and influential role of the media, Macaulay 89 poignantly shows the images of law in everyday American life that the education system and the mass media portray (S Macaulay, “Images of Law in Everyday Life: The Lessons of School, Entertainment, and Spectator Sports” (1987) 21 Law and Society Review 185). These alternative, particularistic and anecdotal representations of law and the legal system affect people’s understanding and deserve closer scrutiny. These perceptions and assumptions of the legal system constitute the external legal culture and influence the users’ perceptions of the legal system’s legitimacy and relevance. In turn, this affects how they interact with the legal system and the legal actors. Legal Traditions 1.42 Legal traditions, such as the common law, civil law, socialist, Islamic and Talmudic, originate from different sources and influences. They contribute to the persistence of distinctive styles of legal thought and practice in a legal system. Thus, legal systems, including legal transplants, from the same legal tradition exhibit common characteristics in the legal processes and operations of the legal system. Legal culture and legal tradition collectively constitute the “software” of a legal system. It is this “software” that helps explain why countries with similar socio-political ideals and legal traditions may approach similar issues such as crime and punishment, defamation and privacy issues in very different ways (see J Q Whitman, “Enforcing Civility and Respect: Three Societies” (2000) 109 Yale Law Journal 1270; and J Q Whitman, Harsh Justice: Criminal Punishment and the Widening Divide between America and Europe (2003)). 1.43 In a similar vein, although Singapore, the US and the UK share a common legal tradition, their contrasting approaches in dealing with defamation of public figures reflect deeper political values and different legal and historical developments leading to a variegated 90 understanding of freedom of expression, journalistic freedom and culture, and the public interest. Even then, legal tradition alone has inadequate explanatory power. Structural differences and particularistic developments in the politico-economic and bureaucratic systems in different societies can provide a nuanced understanding of why societies with similar legal traditions diverge rather than converge in different facets of societal life. 1.44 Legal culture, structure and traditions are not only of theoretical interest; they enable us to have a holistic understanding of how the legal system actually works. Each concept, on its own, lacks the nuanced explanatory power for the differential evolution and development of legal systems. The mutual interactions among culture, structure and traditions affect the development of the legal system and vice versa. Legal structures develop from legal cultures and traditions and, in turn, they help mould the evolution of legal culture and tradition. Thus, notwithstanding the apparent tendency towards the convergence of legal systems globally, legal pluralism remains a persistent reality in today’s globalised world. RELATIONSHIP BETWEEN LAW AND ECONOMIC DEVELOPMENT Law and the Management of Risk 1.45 The rule of law and the legal system provide a necessary but insufficient condition for good governance. Simply put, the rule of law means and requires that everyone, including the government, is subject to the law. There is a vast literature on the relationship between law and economic development, and this section can only touch on some of the key ideas on the role of law in economic development. A distinction should be drawn between “risk” and “uncertainty”. Law and institutions, if properly applied, help to manage risk and reduce uncertainty. To political economists, “risk” (when quantified, measured and priced with a degree of confidence) represents economic activity that is conducted by those able and 91 willing to bear the potential threats and insecurities, with the promise of commensurate returns from such riskbearing activity. With risk properly managed, economic actors can project their time and investments over the long term rather than engage in speculative economic activity (H L Root, Capital and Collusion: The Political Logic of Global Economic Development (2006)). Thus, a viable legal system helps ensure that risk, rather than uncertainty, prevails in the economic environment. Where “uncertainty” prevails, the proper allocation of risk and the expectation of returns on investment become more problematic. No investor or individual is prepared or incentivised to put their money in business ventures, bank deposits, etc, in such an economic environment. 1.46 On the other hand, if uncertainty rather than risk prevails, individuals and business entities will not be willing to pool their resources together (that is, to share the risk) to invest in larger economic activity outside of their parochial confines of family and closed communities. But it is this pooling of resources over a longer time horizon that makes economic progress possible through the mobilising of the sources of production to generate economic activity that benefits more people. Besides developing a viable and legitimate legal system, the management of risk also requires investments and innovations in social and political structures. All these work together to provide a property rights regime that inspires confidence. A property rights regime is, in essence, one that respects ownership rights and the ability to deal with that property (whether real or personal). Such a regime recognises the individual’s right to property and the appropriate protection of such a right. 1.47 This connection of risk to property rights assumes that individuals and businesses have information for which they can then make appropriate decisions. In reality, information asymmetry — where one party to a transaction knows more than another party about it — is common. A stable business environment, undergirded by 92 the rule of law and institutions, helps to ensure that asymmetric information is not widespread or is minimised. With risk ably managed, capital can then be applied productively; otherwise, capital will be used speculatively which may benefit individuals and organisations in the short term but will otherwise compromise a society in the long run. Box 1.1 Reflecting on the law Should the right to property be a constitutional right? The right to property has been considered as part of man’s natural rights and on par with the right to life and liberty. Many constitutions, such as the American and Malaysian, provide for the constitutional right to property. However, the Singapore Constitution does not provide for such a constitutional right to property. The approach has been a communitarian one in which the rigid adherence to property rights is seen as being detrimental to economic development in land-scarce Singapore. The larger public good is to be preferred over the individual interest. This utilitarian approach is also evident in that, under Singapore’s Land Acquisition Act (Cap 152, 1985 Rev Ed), the state can compulsorily acquire land if it is needed for economic development. This weighting in favour of public interest enabled the massive transformation of Singapore through extensive infrastructure works such as industrial estates, land transport and public housing development in the 1960s and 1970s. Consider whether a constitutional right to property would enhance the management of risk with regard to real property. Or is such a right a luxury in small city-states like Singapore? 1.48 In short, a society that wishes to promote economic development will need to have good laws, a stable legal system, a viable ethical framework, and sustainable political and economic institutions with the goal of allocating capital efficiently under the rule of law. There also needs to be adequate investments in education and public health as economic development entails not just a legal framework but non-market improvements as well. 93 This ensures that economic development is accompanied by equity, fair play and adequate social safety nets. Law and Economic Development in Singapore 1.49 Singapore’s economic development highlights the interplay of the issues raised above. Since its modern founding in 1819 by Sir Thomas Stamford Raffles, Singapore has transformed from a colonial seaport to being the second richest Asian country, with one of the world’s most competitive economies. But this development did not come about by chance or good fortune. The development of a sustainable framework for economic progress was meticulously planned and determinedly implemented. Bold decisions have been taken and innovative changes implemented since Singapore’s independence in 1965 in the drive to develop an autochthonous legal system that responds to the needs of the people who live, work and do business in Singapore. Singapore’s economic development drive necessitated the establishment of an efficient and effective legal system, complemented by political will and economic ingenuity, to support the varying needs of commerce and trade. Technology, supported by a facilitative set of laws, is also harnessed to good effect. Undergirding all these is the commitment to the rule of law. 1.50 Today, Singapore is consistently one of the most business-friendly places in the world, as measured by the World Bank’s Doing Business indicators. Her laws and legal system provide a robust framework for doing business and is a key building block of the economy, which is heavily dependent on international trade and investments. The economic competition will become even more intense and the law, with society, must respond with nimbleness to keep the economic lifeblood flowing. CONCLUSION 94 1.51 Laws and the legal system do not exist in a vacuum. This chapter has attempted to demonstrate that together they constitute a social system continually having to respond to the needs of society. Much as most business people view law as a set of rules, appreciating the law in its socio-economic, cultural and political context provides us with a better understanding of the structure of the legal system and how it can facilitate or impede economic activity. Most importantly, laws, working in tandem with an individual and society’s ethical values, play a big role in ensuring that economic activity can benefit society and the people who live, work and play there. 95 Chapter 2 An Overview of Singapore Legal History and Development 2.1–2.2 2.3–2.9 2.10– 2.15 2.16 2.17– 2.22 2.23– 2.26 2.27– 2.32 2.33– 2.37 2.38– 2.42 2.43– 2.49 2.50 Introduction Legal and Constitutional Development Singapore in the Pre-colonial and Early Colonial Eras The Fledgling Legal System From the British to the Japanese and Back (1942– 1945) The Emergency and Path to Self-government (1948– 1963) Merger: Singapore in Malaysia (1963–1965) Independence and Initial Tasks of Nation-building Development of an Autochthonous Legal System (1989 –present) Constitutional Remaking since the 1980s Overview of Alternative Dispute Resolution in Singapore Conclusion INTRODUCTION 2.1 The impact of a legal system on the development of business activity in an economy can be significant. If developed intelligently and judiciously, it can facilitate and 96 enhance economic activity and development by providing a predictable and stable environment for business activities. At the same time, the legal and regulatory framework should have a sufficient level of flexibility to encourage innovation and creativity, which are vital ingredients for successful businesses in a knowledgebased economy. The growing role of new technologies, such as artificial intelligence and blockchain technology, is dependent on the legal and regulatory environment acting as a catalyst. Overly stringent laws and a rigid approach to implementing laws may unnecessarily stifle the creative development of business activity as well as the economy. 2.2 This chapter sketches the milestones in Singapore’s legal and constitutional development to give the reader a sense of the evolution of Singapore’s legal development within the larger context of Singapore’s progress, since its modern founding in 1819. Such an overview necessarily means that much detail has been omitted. In a nutshell, it hopes to capture the past and present of the Singapore legal system as well as the current developments and innovations (whether legal or otherwise) that continue to influence its future direction. Given the space constraints of this chapter, the discussion in the various sections will inevitably have to be concise and succinct. The interested reader is therefore encouraged to refer to the more detailed references provided, especially A Phang, The Development of Singapore Law: Historical and SocioLegal Perspectives (1990); K Y L Tan (ed), The Singapore Legal System (2nd ed, 1999) and Essays in Singapore Legal History (2005); and C M Turnbull, A History of Modern Singapore, 1819–2005 (2009), for a more thorough discussion of the development of Singapore law, society and socio-political institutions. LEGAL AND CONSTITUTIONAL DEVELOPMENT Singapore in the Pre-colonial and Early Colonial Eras 97 2.3 From its modern founding by Sir Thomas Stamford Raffles, then Bencoolen’s Lieutenant-Governor, on 29 January 1819, to self-government in 1959 and its independence in 1965, Singapore’s legal development was intricately linked with its British colonial master. In the past, English legal traditions, practices, case law and legislation were adopted without much consideration as to whether they suited local conditions. Indeed, there was a “slavish adherence to English law” resulting in the “impoverishment of the common law in Singapore” (see A Phang, The Development of Singapore Law: Historical and Socio-Legal Perspectives (1990)). 2.4 With Singapore’s independence, and increasingly from the 1990s, there is a concerted movement towards developing an autochthonous legal system compatible with Singapore’s cultural, social and economic requirements. In this regard, the economic success of Singapore can be attributed, among others, to the wisdom of its political leadership and its use of laws and the legal system to build a new society. To ensure its economic prosperity, Singapore’s legal system strives to be attuned to the needs and expectations of the international business community. 2.5 Recent archaeological evidence in Singapore indicates the existence of an early thriving emporium in Singapore around the 14th century. The archaeological evidence also indicates that the settlement was abandoned at the end of the 14th century, when Malacca was founded and became the leading emporium in the Malacca Strait. This extension of Singapore’s history, by about 500 years prior to the modern founding of Singapore by Raffles, suggests that Singapore’s origins in the 14th century was as a port of call with connections to the region and the world. It was a part of the globalised trade, then driven by the Yuan and Ming dynasties in China. This was followed by a 200year period of decline when Singapore fell into oblivion. Subsequently, in the 1600s, Singapore was noted by European powers for its strategic location and the fine 98 natural harbour (see J Miksic, Singapore and the Silk Road of the Sea, 1300–1800 (2013); C G Kwa, Singapore Chronicles: Pre-Colonial Singapore (2017)). Prior to the arrival in the Malacca Straits of the Portuguese, the Dutch and the British imperialists from the 17th century in search of spices and trade, Singapore was primarily under the rule of the Johor sultanate, then based in upstream Johor before it moved to Tanjong Pinang on Bintan Island in what is now Indonesia. 2.6 Little is known, however, of Singapore’s legal history prior to the founding of Singapore by Raffles. What is often assumed is that Malay adat laws (localised traditional law and custom in Indonesia and Malaysia) formed the basis of a rudimentary legal system for a community of fishermen numbering no more than 200. 2.7 Against the backdrop of Anglo-Dutch economic rivalry in maritime Southeast Asia, Raffles presciently determined that Singapore was a suitable port given its strategic geopolitical location and deep, natural harbour. It would enable the British to ensure a good measure of control over the entrance to the Straits of Malacca as well as the main shipping route between South Asia and Northeast Asia. 2.8 Raffles acted without delay and, on 30 January 1819, concluded a preliminary treaty with Temenggong Abdu’r Rahman, the Johor Sultan’s representative in Singapore, to set up a trading factory in Singapore. On 6 February 1819, a formal treaty was concluded with Sultan Hussein of Johor and the Temenggong to formalise the earlier agreement. Singapore was placed under Bencoolen’s jurisdiction, which in turn was administered by the Governor-General in Calcutta, India. In 1824, Singapore was confirmed a British possession through the AngloDutch Treaty, and the Treaty of Cession with the Sultan and Temenggong. 99 2.9 Raffles sought to put in place a basic but functional legal system with a uniform law that was applicable to all inhabitants. He promulgated the “Singapore Regulations” in 1823. De facto English law prevailed between 1819 and 1826. Singapore rapidly evolved into a key trading port. The Fledgling Legal System 2.10 Up to this stage, Raffles and his successor Residents had no legal authority to establish any system for the administration of justice. Whatever regulations and system of justice established by Raffles and Resident John Crawfurd were ultra vires (that is, beyond their power or authority). This unsatisfactory state of affairs was resolved with the Second Charter of Justice (“the Second Charter”), granted by the British Parliament on 27 November 1826, on the petition of the East India Company (see further A Phang, From Foundation to Legacy: The Second Charter of Justice (2006)). 2.11 The Second Charter provided for the establishment of the Court of Judicature of Prince of Wales’ Island (Penang), Singapore and Malacca with civil and criminal jurisdiction on par with similar courts in England. Although it did not explicitly state that English law was to be applied in Singapore, the Second Charter had been assumed to provide the legal basis for the general reception of English law in Singapore. Local case law, following the landmark case of R v Willans (1858) in Penang, had adopted the legal position that English law (both common law and equity as it stood in 1826 as well as pre-1826 English legislation) was introduced to Singapore via the Second Charter. 2.12 Singapore and the British settlements of Malacca and Penang collectively became the Straits Settlements in 1826, under the direct control of British India. In 1833, the Governor-General of India was empowered to legislate for the Straits Settlements. During this period, the legal 100 system was characterised by “legal chaos of epic proportions” (see K Y L Tan (ed), The Singapore Legal System (2nd ed, 1999) at p 33). 2.13 The local business community was unhappy with the inadequate judicial framework which meted out justice infrequently and poorly. Although the Third Charter of Justice was granted in 1855 to help ease the increasing legal workload, it did not improve the state of affairs. With the abolition of the East India Company in 1858, the Straits Settlements was transferred to the Indian Government. There were pockets of unhappiness with the Straits Settlements being administered out of India as it tended to result in their interests being relegated, if not neglected. In 1867, the Straits Settlements became a Crown Colony under the direct jurisdiction of the Colonial Office in London. 2.14 In 1868, the Supreme Court of the Straits Settlements was established following the abolition of the Court of Judicature. In 1873, there was further reorganisation with the Supreme Court given the jurisdiction to sit as a Court of Appeal. Prior to this, appeals were to the King-inCouncil (the body of royal advisers in England, also known as the Privy Council). In 1878, the local courts were restructured accordingly to mirror those of the English High Court. 2.15 The popularity of the steamship for trade in the mid-1860s coupled with the opening of the Suez Canal in 1869 resulted in Singapore’s transformation from being a port of call for regional trade to one for international trade and, with it, the movement of people, ideas and finance. Singapore became a major port of call for ships plying between Europe and East Asia. With the growth of the rubber industry and Malaya being a major rubber exporter, Singapore became the main sorting and export centre in the world for rubber. Between 1873 and 1913, Singapore experienced unprecedented prosperity and trade expanded eightfold. This in turn attracted more 101 immigrants from Southeast Asia, China and India and farther away. From the British to the Japanese and Back (1942–1945) 2.16 During the Japanese Occupation of Singapore between February 1942 and September 1945, Singapore was renamed Syonan-to (Light of the South) by the Japanese military administration. The end of the Second World War resulted in the temporary rule of Singapore by the British Military Administration. With the disbanding of the Straits Settlements in 1946, Penang and Malacca became part of the Malayan Union proposal, and later the Federation of Malaya in 1948. However, given its strategic and economic importance, Singapore was not destined on the path of independence at the same pace as Malaya. Instead, it was made a Crown Colony with its own Constitution. Like many other British colonies, the real power to govern and legislate was vested in the hands of the Governor and colonial officials, with a modicum of local participation and representation through limited elected seats on the Legislative Council. The first such elections were conducted in 1948. The Emergency and Path to Self-government (1948–1963) 2.17 With the declared goal of taking over Malaya and Singapore through violence, the upsurge in communist united front activity led by the Communist Party of Malaya (CPM) resulted in the Malayan colonial authorities clamping down on the CPM during a period known as the Emergency (1948–1960). Draconian laws were enacted, including detention without trial, in the fight against communism. 2.18 The Progressive Party was then the leading political party in Singapore, having won the Legislative Council elections in 1948 and 1951. Interest in Singapore’s political life was nascent and tended to be drawn along the partisan lines of non-communist against pro- 102 communist. In 1953, a Constitutional Commission, headed by Sir George Rendel (“the Rendel Commission”), was formed to review the Colony’s constitution and to enlarge public participation in selfgovernance. The Government accepted most of the Rendel Commission’s recommendations including the transformation of the Legislative Council into a chamber comprising mainly of directly elected members. However, real power continued to be vested in the Governor and the official members of the Council of Ministers rather than the elected Assembly members. 2.19 In the first Legislative Assembly elections in 1955, the Labour Front — led by David Saul Marshall — won ten of the available 25 seats. The People’s Action Party (“PAP”), founded in the same year, won three seats. Marshall became the first Chief Minister of Singapore and drove the movement towards self-government. Constitutional talks on self-government began in 1956 in London. 2.20 However, Marshall’s Chief Ministership was short-lived. He resigned on 6 June 1956 after the breakdown of the London constitutional talks. Lim Yew Hock succeeded Marshall as Chief Minister and led the March 1957 constitutional mission. On 28 May 1958, the Constitutional Agreement was signed in London. The British Parliament passed the State of Singapore Act on 1 August 1958, paving the way for Singapore’s transition from a colony to a self-governing state in 1959. 2.21 In May 1959, Singapore had its first fully elected Legislative Assembly. The PAP had won 43 out of the 51 seats, garnering 53.4 per cent of the total votes. This marked the start of PAP’s political dominance in Singapore. On 3 June 1959, the new State Constitution was brought into force. The first government of the State of Singapore was sworn in on 5 June. Lee Kuan Yew became Singapore’s first Prime Minister. Yusof bin Ishak was appointed the Yang di-Pertuan Negara (Head of State). 103 2.22 Wee Chong Jin became the first local member of the Singapore Bar to be made a Puisne Judge (equivalent of a High Court Judge) in 1957. In 1963, Wee became the first Asian to be appointed Chief Justice of Singapore. Ahmad bin Mohd Ibrahim was appointed the first State Advocate-General of Singapore in June 1959 and became the first Attorney-General on Singapore’s independence until January 1967. Merger: Singapore in Malaysia (1963–1965) 2.23 On 27 May 1961, the Malayan Prime Minister, Tunku Abdul Rahman, proposed closer political and economic cooperation through the merger of the Federation of Malaya, Singapore, Sarawak, North Borneo and Brunei. The PAP favoured merger for reasons of economic survival and as a means of achieving political independence from the British. The pro-communists took the merger proposal as an imperialist plot. 2.24 By this time, the PAP was deeply mired in intra-party intrigues which split the party. The inevitable open split arose in July 1961 with the proposed merger with Malaya being the tipping point. The faction led by Lim Chin Siong broke away and formed the Barisan Socialis (Socialist Front). This defection and the Barisan Socialis’ subsequent boycott of the 1968 general elections paved the way for the PAP to be the only political party in Parliament between 1968 and 1981. 2.25 The main terms of the merger provided for the Federal Government in Kuala Lumpur to have responsibility for defence, foreign affairs and internal security with local autonomy in matters pertaining to finance, education and labour. Singapore would also have her own executive state government. A referendum in Singapore on 1 September 1962 gave the go-ahead for PAP’s plan of merger. 104 2.26 With Brunei having opted out, Malaysia — consisting of the Federation of Malaya, Singapore, Sarawak and North Borneo (now Sabah) — was formed on 16 September 1963. Indonesia and the Philippines opposed the merger. Indonesia’s President Sukarno subsequently launched the violent Konfrontasi (Confrontation) campaign against Malaysia. With merger, Singapore’s court system became part of Malaysia’s. Singapore’s Supreme Court was replaced by the High Court of Malaysia in Singapore. The final court of appeal was the Federal Court in Kuala Lumpur. Independence and Initial Tasks of Nation-building 2.27 Within two years, the merger was failing for a variety of reasons ranging from the internal politics of Malaysia, personality clashes and the different visions of ethnic politics in a multi-racial society. All of these, coupled with the threat and eruption of racial violence, as well as the receding threat of communism, prompted a negotiated departure of Singapore from the Federation of Malaysia on 9 August 1965. 2.28 The Singapore Parliament took several months to complete the constitutional formalities and legal procedures required for them to be in accord with Singapore’s independent status. On 22 December 1965, the Singapore Parliament passed the Constitution (Amendment) Act (No 8 of 1965), with retrospective effect to 9 August 1965, which provided, inter alia, for a simple majority requirement (rather than the typical two-thirds majority) to effect a constitutional amendment. It was ostensibly a pragmatic response to the rapid socioeconomic and political reengineering needed in the fledgling nation-state. The super-majority requirement for passing a constitutional amendment was only reinstated in 1979. 2.29 Parliament also passed the Republic of Singapore Independence Act (No 9 of 1965) (“the Act”), again 105 retrospectively, for the reception of executive and legislative powers which had previously been vested in the Malaysian Federal government. Section 7 of the Act provided for Malay, Mandarin, Tamil and English to be the four official languages in Singapore, and Malay to be the national language (also found in Art 153A Constitution of the Republic of Singapore (1999 Rev Ed) (“the Singapore Constitution”). Yusof bin Ishak was appointed the Republic’s first President on 22 December 1965. 2.30 The task of building a nation with no natural resources or domestic market and a multi-racial and multi-religious society occupied the Government’s attention. In the economic realm, Singapore initially pursued a labourintensive, import-substitution industrialisation programme, which quickly graduated to an increasing emphasis on foreign direct investment, capital-intensive, exportoriented industrialisation and the development of a services sector. Various investment incentives, to facilitate job creation and the transfer of technology, were put in place. The laws on employment were also amended to reduce the powers of the trade unions and to make strikes illegal. The goal was to make Singapore an investor-friendly destination through the promotion of industrial peace and discipline among the workforce. 2.31 The Government also established in December 1965 a Constitutional Commission, headed by Chief Justice Wee Chong Jin, to examine how the rights of the minorities (racial, linguistic and religious) could be constitutionally safeguarded. In its 1966 report, the Commission recommended, among others, that the constitutional provisions on fundamental liberties, the Judiciary, the Legislature, the general elections, minority rights, the special position of the Malays and the amendment procedures be entrenched. In other words, amending these provisions would require a two-step process: a twothirds majority in Parliament and a two-thirds majority at a national referendum. It also recommended the creation of the office of an Ombudsman as an independent check on 106 the actions and decisions of civil servants (for a more detailed discussion, see K Y L Tan (ed), The Singapore Legal System (2nd ed, 1999) at pp 49–51). One recommendation that was accepted resulted in the creation of an advisory body, now known as the Presidential Council for Minority Rights, to offer advice to Parliament on proposed legislation and its impact on the minorities. 2.32 With the passing of the Constitution (Amendment) Act (No 19 of 1969) and the Supreme Court of Judicature Act (No 24 of 1969) in December 1969, the anomaly of the Singapore High Court being part of the Malaysian Judiciary was finally resolved. These amendments also provided for the Judicial Committee of Her Britannic Majesty’s Privy Council as the highest court of the land. The Criminal Procedure Code (Amendment) Act 1969, which abolished the jury system, came into force on 5 January 1970. Development of an Autochthonous Legal System (1989– Present) 2.33 In the 1970s and early 1980s, there was a casual comfort with the inherited traditions, legal practices and laws of England. The drive to create an autochthonous legal system gained momentum in the late 1980s and accelerated with the appointment of Chief Justice Yong Pung How in September 1990. By 1989, appeals to the Privy Council had already been restricted. In 1993, the permanent Court of Appeal replaced the Privy Council as Singapore’s highest court. These changes can be explained by the increasing confidence, the growing maturity and international standing of Singapore’s legal system as well as the concern that Britain’s increasing links with the European Union would render English law incompatible with local developments and aspirations. 2.34 In November 1993, the Application of English Law Act (Cap 7A, 1994 Rev Ed) came into force and specified the 107 extent to which English law is applicable in Singapore. This Act also repealed s 5 Civil Law Act (Cap 43, 1988 Rev Ed), then the most significant reception provision in the statute books. The latter provided that if a question or issue on specific categories of law or in general mercantile law arose in Singapore, the law to be administered shall be the same as that administered in England at the corresponding period, unless other provisions are made by any law having force in Singapore. 2.35 Prior to the repeal of s 5 Civil Law Act, no one knew for certain the complete list of English statutes (even those that have been repealed in England) that applied here. This belated amendment has removed much of the uncertainty and unsatisfactory state of affairs that had prevailed over the applicability of English legislation and common law in post-colonial Singapore. 2.36 Given that political, social and economic circumstances have changed enormously since Singapore’s independence, the landmark Practice Statement on Judicial Precedent of 11 July 1994 declared that the Privy Council, Singapore’s predecessor courts as well as the Court of Appeal’s prior decisions no longer bound the permanent Court of Appeal. The Practice Statement reasoned that “[t]he development of our law should reflect these changes and the fundamental values of Singapore society”. In the same year, a new constitutional provision was passed to establish an ad hoc Constitutional Tribunal, consisting of at least three Supreme Court Judges, to which the President may refer for its binding opinion, any question on the effect of any constitutional provision which has arisen or which is likely to arise. Thus far, the tribunal has been convened once only where it provided a ruling on Art 22H pertaining to the President’s veto powers (see Constitutional Reference No 1 of 1995 (1995)). 108 2.37 In January 2015, the Singapore International Commercial Court (SICC) was established as a division of the Singapore High Court and a part of the Supreme Court of Singapore. The SICC is designed to deal with transnational commercial disputes and builds on the foundations of a legal and judicial system that is highly regarded. The SICC is an integral part of the endeavour to establish Singapore as an international and regional hub for dispute resolution in commercial matters. Constitutional Remaking since the 1980s 2.38 The late 1980s and early 1990s was a period of intensive constitutional remaking to develop an autochthonous government and parliamentary system of Singapore. The departure from the Westminster-inspired parliamentary system was evident through the institutional innovations which attempted to manage and mould the unique political circumstances here. 2.39 Between 1968 and 1981, the PAP was the only party in Parliament. The clamour for an alternative voice in Parliament resulted in the constitutional innovations to the electoral system. The first was the creation of NonConstituency Members of Parliament (“NCMPs”) in 1984. Here, up to six “best losers” in the general election (based on the highest percentage of votes polled) securing at least 15 per cent of the vote in the constituency contested may be invited to be NCMPs (s 52 Parliamentary Elections Act (Cap 218, 2011 Rev Ed)). 2.40 In 1988, to ensure that Singapore politics continued to keep faith with the ideal of multi-racialism, Parliament amended the Constitution to provide for the creation of the Group Representation Constituency (“GRC”) (Art 39A Constitution of the Republic of Singapore). Here, several candidates — one of whom must be of a minority race — compete as a team for an enlarged super-constituency (which in essence was an amalgamation of several singleseat constituencies). In 1990, another category of 109 Members of Parliament — the Nominated MP (“NMP”) — was created to provide a wider range of non-partisan views from non-politicians. Over the years, the number of NMPs has increased from two to nine (Art 39(1)(c) Singapore Constitution). 2.41 The final significant constitutional amendment relating to government was the conversion of the President’s office from a mere ceremonial head of state appointed by Parliament to one in which the President was popularly elected. The Elected President scheme had a long gestation period and was driven by the PAP Government’s fear of a “freak” general election resulting in the PAP being thrown out of power and replaced by a populist government which may lead Singapore to political and economic ruin. The ostensible objective of the Elected President was to institutionally safeguard Singapore’s foreign reserves and the integrity of the civil service. The Elected President’s custodial powers serve as a second “key” to the reserves and the Elected President is vested with the power of veto on key civil service appointments (for a fuller discussion, see P E Lam and K Y L Tan (eds), Managing Political Change in Singapore: The Elected Presidency (1997)). President Wee Kim Wee first exercised the powers of the Elected President when the Constitution was amended and the elected presidency implemented in 1991; Ong Teng Cheong won the first-ever Presidential elections in August 1993. S R Nathan was President between September 1999 and August 2011 as the two presidential elections in 1999 and 2005 were uncontested. In 2011, Tony Tan Keng Yam was elected President in the most keenly contested presidential election. 2.42 In 2016, a Constitutional Commission headed by Chief Justice Sundaresh Menon was established to study selected aspects of the elected presidency. The Commission proposed, among others, that the eligibility criteria for those seeking to contest in the presidential elections be enhanced. To safeguard the regular 110 representation of all major racial communities in the elected presidency, the Commission recommended a “hiatus-triggered” reserved election mechanism. When a particular race has not been represented in the elected presidency for five continuous terms, the following presidential election will be reserved for candidates from that race. The government accepted both recommendations and constitutional amendments were made to give effect to them. Madam Halimah Yacob was the only eligible candidate in the first reserved presidential election (for Malay candidates) in 2017. The constitutional amendments also provided for the number of NCMPs to increase to 12 (less the number of elected opposition MPs). OVERVIEW OF ALTERNATIVE DISPUTE RESOLUTION IN SINGAPORE 2.43 In commercial matters, litigation has been the dominant form of dispute resolution in Singapore and in many other common law jurisdictions. However, alternative dispute resolution (“ADR”) has grown in importance in Singapore and internationally as a means of dispute resolution for matters ranging from domestic and social conflicts to large-scale, cross-border legal disputes. It is now widely used in Singapore, especially in commercial disputes. ADR has gained importance as an effective, efficient and economical means of resolving a spectrum of disputes in a variety of settings. 2.44 The Singapore Government is a strong proponent of ADR and has put in place the institutional and infrastructural framework to support this. The Judiciary is also firmly behind ADR initiatives in settling disputes and its Rules of Court provide ample opportunity for ADR even within a litigation setting. In tandem with Singapore’s quest to be a total business centre, great efforts have been expended towards making Singapore a major centre for dispute resolution similar to London, New York and Paris. 111 2.45 In 1986, Singapore acceded to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”). Under this Convention, each contracting state is required to recognise and enforce arbitral awards made in another contracting state. As there are more than 156 Convention signatories, arbitral awards rendered in Singapore are potentially enforceable in more than 156 jurisdictions. The Arbitration (Foreign Awards) Act (Cap 10A, 1985 Rev Ed) was enacted in 1986 to give effect to the Convention. This Act was repealed in 1994 and replaced by the International Arbitration Act (Cap 143A, 2002 Rev Ed), which incorporated the United Nations Commission on International Trade Law’s (“UNCITRAL”) Model Law on International Commercial Arbitration. 2.46 In 1991, the Singapore International Arbitration Centre (“SIAC”) was established. In November 2014, the Singapore International Mediation Centre (“SIMC”) was officially launched as an independent, not-for-profit institution that specifically seeks to provide mediation services and products for parties involved in cross-border commercial disputes, especially those doing business in Asia. 2.47 On the domestic front, the Singapore Mediation Centre (“SMC”) was established in 1997. In 1994, mediation of civil disputes was first introduced in the then Subordinate Courts through the Court Mediation Centre. Since then, mediation is also routinely conducted in the Small Claims Tribunals, the Family Court, the Juvenile Courts, the Consumer Association of Singapore (“CASE”), and the Maintenance of Parents Tribunal at the Ministry of Social and Family Development. The Centre for Dispute Resolution was launched in 2015 at the State Courts (formerly the Subordinate Courts) to consolidate the ADR services. In line with the governmental emphasis on harnessing electronic technology, the Judiciary has also leveraged on technology to increase efficiency and productivity in resolving disputes. 112 2.48 In 1997, the Government’s multi-agency Committee on Alternative Dispute Resolution recommended that nonadversarial modes of dispute resolution be introduced and encouraged for all forms of commercial, social and community disputes. The explicit goal was to help prevent Singaporeans from becoming too litigious. Mediation was singled out as being in accord with Singapore’s Asian traditions and cultures. The development of an Asian model of mediation draws on the customary and influential role of the traditional leaders of the various races such as the penghulu (Malay kampong headman), the panchayat (the Indian community council) and the senior clansmen of the Chinese clan associations in mediating conflicts within those communities. 2.49 Since 1998, this abiding faith in ADR, especially mediation, motivated the establishment of Community Mediation Centres (“CMCs”) as part of the national effort to foster a mediation culture. Community mediation is envisaged as an effective means of settling relational disputes on the ground, especially in multi-racial, multireligious Singapore. The CMCs are regulated under the Community Mediation Centres Act (Cap 49A, 1998 Rev Ed). Box 2.1 Reflecting on the law Law as strategy and an economic tool The rule of law is seen as an economic asset in many societies to be valued in the same way as factors of production such as land and labour. Indeed, Singapore has used the integrity, standing and quality of its legal environment to create sustainable competitive advantage for the economy. Given that Singapore is without any natural resources and is heavily dependent on trade and foreign investments, the quality of her legal system is critical. Singapore is now promoting itself as a business and legal hub, leveraging on the reputation of the legal and business sectors. In 2006, the SingaporeLaw endeavour was launched. Officially formed and supported by the Singapore Academy of Law and the 113 Ministry of Law, SingaporeLaw seeks to increase the international profile of Singapore law and to promote Singapore as a centre for dispute resolution. The key focus of SingaporeLaw is to encourage parties to choose Singapore law as the governing law for their international commercial transactions such as where foreign parties are unable to agree which jurisdiction, and thus law, should govern their transactions and disputes, or when Singapore parties enter into agreements with foreign parties. Students are encouraged to consider the following questions: (1) Is legal autochthony vital in ensuring that Singapore’s legal development retains its resilience, legitimacy and appeal? (2) To what extent has the law played a leading role in Singapore’s development and transformation in the colonial era and since independence? (3) How can law continue to play a facilitative role in an era characterised by challenges posed to established ways of doing things, such as the advent of new technologies, a “sharing economy” (characterised by the sharing of underutilised assets, whether monetised or not, in ways that improve efficiency, sustainability and community) and greater global uncertainty? CONCLUSION 2.50 In the last 20 years, the Singapore legal system has gradually become less a copy of the English legal system — it has evolved its unique identity and role rapidly in serving the inhabitants of a multi-racial global city. The drive towards legal autochthony continues, and legal innovations will have to continue and be guided by the need for relevance to and compatibility with Singapore’s needs and local conditions. Further, with trade and investments being Singapore’s lifeblood, the legal system needs to provide adequate protection to all and inspire confidence in the international business community that it is both effective and efficient in according justice on the basis of fairness, equity and impartiality. Singapore recognises the importance of law in maintaining political and social order as well as engendering conducive conditions for economic activity. Indeed, law is also 114 regarded as a fundamental economic value, which must be carefully nurtured and harnessed to enhance Singapore’s aspirations to be a total global business centre. 115 Chapter 3 Legal Processes and Institutions 3.1 Introduction 3.2– 3.3 The Constitution and the Three Governing Arms 3.4– 3.8 3.9– 3.11 The Legislature The Parliamentary Law-making Process 3.12– 3.15 The Executive 3.16 3.17– 3.19 3.20– 3.28 3.29 3.30– 3.31 3.32 3.33– 3.35 3.36 3.37– 3.49 3.50 3.51– 3.53 The Judiciary The Common Law Tradition The Doctrine of Judicial Precedent Common Law and Other Legal Concepts (1) Common law versus equity (2) (3) Common law versus written law Civil law tradition versus common law tradition (4) Civil law versus criminal law The Court Structure and Hierarchy in Singapore Technology and the Courts Interpretation of Written Law 116 3.54– 3.61 3.62 The Legal Profession, Legal Education and Other Professional Bodies Conclusion INTRODUCTION 3.1 Following a brief historical sketch of the Singapore legal system in Chapter 2, this chapter seeks to provide an account of the process of law-making, its implementation and adjudication by the various legal institutions and bodies in Singapore. Apart from exploring the structure, composition and functions of these legal institutions, we will also briefly examine in the last section legal education and the legal profession, as well as other related professional bodies in Singapore. As the alternative dispute resolution mechanisms have already been discussed in Chapter 2, they will not be pursued here. THE CONSTITUTION AND THE THREE GOVERNING ARMS 3.2 The most fundamental legal document within the Singapore legal system is the Constitution, the supreme law of Singapore. Article 4 of the Constitution provides that any law enacted by the Legislature after the commencement of the Constitution that is inconsistent with the Constitution shall, to the extent of the inconsistency, be void. As the supreme law, the Constitution “breathes” life into the three main arms of the state: the Legislature (the Parliament), the Executive (the Government) and the Judiciary. At the same time, it delineates their respective powers, roles and responsibilities within the legal system. According to the Constitution, the main role of the Legislature is to enact written laws, the Executive to implement and enforce the laws and the Judiciary to adjudicate disputes between the litigating parties based on its interpretation of the laws (see Figure 3.1). 117 Figure 3.1 The Constitution and the three governing arms of State 3.3 The Constitution also entrenches certain fundamental rights, such as freedom of religion, freedom of speech and equal protection under the law. These individual rights are not absolute but qualified by public interest such as the maintenance of public order, morality and national security. In addition to the general protection of racial and religious minorities, the Constitution recognises the special position of Malays, as the indigenous people of Singapore. The provisions of the Constitution may be amended by the votes of two-thirds of the total number of elected Members of Parliament. As and when Article 5(2A) of the Constitution comes into force, the specific constitutional amendments seeking to amend the provisions on fundamental liberties will require, in addition, at least two-thirds of the total number of votes cast by the electorate in a national referendum. THE LEGISLATURE 3.4 The Legislature serves as the major law-making body in Singapore. It comprises the elected President and the Parliament. The law-making machinery operates via a unicameral (single-house) system. The Singapore Parliament, as the embodiment of representative democracy, consists of the Members of Parliament 118 (“MPs”) and the parliamentary proceedings are presided over by the Speaker of Parliament. 3.5 The elected MPs are drawn from candidates who have won in the general elections held every four to five years. Following the general elections in 2015, a majority of the 89 seats in Parliament is held by the ruling People’s Action Party (“PAP”) whilst the opposition Workers’ Party holds the balance. The elected MPs are drawn from a combination of single-member constituencies as well as Group Representation Constituencies (“GRCs”). 3.6 According to the Constitution, each GRC consists of three to six members, at least one of whom must be of a minority race. One official aim of the GRC scheme is to entrench multi-racialism in Singapore politics. This GRC scheme is, in practice, tied to the establishment of Town Councils, whose role is to manage the housing estates under the Housing & Development Board at the local level. A Town Council is usually formed from a grouping of constituencies under the GRC scheme. Candidates who have won in the general elections via the GRC ticket have often banded together to form a Town Council in order to achieve greater economies of scale. 3.7 There are two categories of non-elected MPs: the NonConstituency Members of Parliament (“NCMPs”) and the Nominated Members of Parliament (“NMPs”). To offer an alternative political voice in Parliament, NCMPs are appointed from the candidates who have secured at least 15% of the vote in the constituency and polled the highest percentage of votes amongst the “losers” in the general elections. Following the 2015 general elections, three NCMPs were appointed. According to the constitutional amendment in 2016 (Act 28 of 2016), the maximum permitted number of NCMPs from the opposition parties is 12. The NMPs, on the other hand, are non-politicians who have distinguished themselves in public life and have been nominated to provide a greater variety of nonpartisan views in Parliament. The Constitution stipulates 119 that NMPs shall not exceed nine in number. In contrast to the elected MPs and NCMPs, the NMPs do not enjoy voting rights on constitutional amendments, money bills and votes of no-confidence in the Government. 3.8 For the purposes of providing a more in-depth discussion of specific public issues or Bills, the Select Committee, whose members are nominated by the MPs, scrutinises legislation and submits reports on its findings to the Parliament. An example of a Select Committee hearing is the one concerned with the constitutional amendments on the establishment and roles of the Elected President (“EP”) in 1990. The Government Parliamentary Committees, formed at the initiative of the PAP and drawn exclusively from the PAP, focus on specific or specialised topics (such as education or transport) with a view to generating greater debate in Parliament. The Parliamentary Law-making Process 3.9 The law-making process begins with a Bill, normally drafted by the Government legal officers. Private member’s Bills are rare in Singapore. One exception was the private member’s Bill initiated by NMP Walter Woon in 1994 which eventually led to the enactment of the Maintenance of Parents Act (Cap 167B, 1996 Rev Ed). Subsequent amendments to the Maintenance of Parents Act were made in 2010 in order to emphasise conciliation and streamline the processes for claiming maintenance and enforcing maintenance orders pursuant to a Bill tabled by MP Seah Kian Peng and a group of ten MPs (at http://app1.mcys.gov.sg/MCYSNews/AmendmentstoMPA Passed.aspx). The Bill is initially introduced in Parliament at the First Reading. During the Second Reading, the Ministers usually outline the objectives of the Bill, defend the Bill and answer queries raised by the backbenchers. The Speaker of the Parliament is tasked to regulate the proceedings and enforce the Standing Orders of 120 Parliament. The MPs may, in some cases, decide to refer the Bill to a Select Committee for scrutiny. If the Select Committee’s proposed amendments to the Bill are approved by the Parliament, the Bill is accepted by the Parliament at the Third Reading and is passed. 3.10 The Presidential Council for Minority Rights (“PCMR”), established under the Singapore Constitution and presently chaired by the Honourable Chief Justice, has been tasked to scrutinise Bills (except for exempted ones) for any measures which may be disadvantageous to persons of any racial and religious communities without being equally disadvantageous to persons of other such communities, either directly by prejudicing persons of that community, or indirectly by giving advantage to persons of another community. If the report of the PCMR is favourable or a two-thirds majority in Parliament has been obtained to override any adverse report of the PCMR, the Bill proceeds, as a matter of course, for the assent by the EP. 3.11 Upon the assent by the EP, the Bill is formally enacted as “written law”. The legislation does not, however, come into force until the date of its publication in the Government Gazette or the commencement date specified in the legislation or the Gazette notification (s 10 Interpretation Act (Cap 1, 2002 Rev Ed)). The enacted law is known as primary or parent legislation (or an Act of Parliament). An Act of Parliament may stipulate that a particular Ministry or agency has powers to promulgate subsidiary legislation to implement the statutory provisions, provided such subsidiary legislation is not inconsistent with the Act of Parliament. The subsidiary legislation is usually published in the Government Gazette. Figure 3.2 shows the sequence of the typical stages in parliamentary law-making. 121 Figure 3.2 Typical stages in parliamentary law-making THE EXECUTIVE 3.12 The Executive consists of the EP and the Cabinet in whom executive powers are vested. The head of the Executive is the EP. The qualifications for the presidential office are fairly stringent. Apart from integrity, good character and other requirements, the presidential candidate must have held one of the following positions for not less than three years: 122 as a Minister, Chief Justice, Speaker of Parliament, Attorney-General, Chairman of Public Service Commission, Auditor-General, Accountant-General or Permanent Secretary; or as chief executive of a key statutory board and government company specified in the Constitution or a person with comparable experience and ability, and the person has the experience and ability to effectively carry out the functions and duties of the office of President; or as chief executive of a company which has a shareholders’ equity of at least S$500 million, and has made profits (after tax) for the abovementioned period; or an office in a private sector organisation in which the officeholder possesses comparable experience and ability to a chief executive of a company with the abovementioned minimum shareholders’ equity, and that officeholder has the experience and ability to effectively carry out the functions and duties of the office of President. A new Constitutional provision passed in 2017 states that the Presidential election is to be reserved for a community (such as the Chinese, Malay, Indian or other minority community) if no person belonging to that community has held office for the five most recent terms of office of the President. The 2017 presidential elections was one such reserved election (for the Malay community). Madam Halimah Yacob was elected unopposed as the other two Malay candidates did not satisfy the private sector threshold requirements. The Presidential Elections Committee has been set up to ensure the above requirements are adhered to. The EP is elected for a six-year term. He or she is to act in accordance with the advice of the Cabinet in discharging the EP’s constitutional functions except in specified areas. The EP may, in his or her discretion: 123 veto against budgets of statutory boards and Government companies which are likely to draw on past reserves (Art 22B(2) and Art 22D(2)); withhold assent to any Bill passed by Parliament providing, directly or indirectly, for the borrowing of money, the giving of any guarantee or the raising of any loan by the Government which is likely to draw on past reserves (Art 144); appoint the Prime Minister (Art 21(2)), specified constitutional appointees (eg, the Chief Justice and the Attorney-General) and other key civil service appointments (eg, Commissioner of Police) (Art 22); withhold consent to a request for a dissolution of Parliament (Art 21(2)); concur with the Director of Corrupt Practices Investigation Bureau to make any inquiries or to carry out any investigations into any information received by the Director, notwithstanding the Prime Minister’s refusal to consent (Art 22G); exercise certain powers pertaining to restraining orders made under the Maintenance of Religious Harmony Act (Cap 167A, 2001 Rev Ed) where the Cabinet’s advice is contrary to that of the Presidential Council for Religious Harmony (Art 22I). There are also counter-checks on the presidential discretion (eg, Parliament overruling, via a two-thirds majority of the total number of elected MPs, the presidential decision in certain instances). In discharging certain specified constitutional functions, the President is required to consult the Council of Presidential Advisers, a body set up under the Singapore Constitution. In other cases, the Elected President may in his discretion consult the Council of Presidential Advisers. 3.13 The Cabinet, consisting of Ministers under the helm of the Prime Minister (currently Lee Hsien Loong), is collectively responsible to the Parliament. The Prime Minister is someone the EP appoints if the EP finds him likely to 124 command the confidence of the majority of the MPs. There is no complete separation of powers between the Executive and Legislature in Singapore. In terms of composition, members of the Cabinet are typically drawn from the MPs. Parliamentary Secretaries are further appointed from amongst the MPs to assist the Ministers. Moreover, as mentioned above, the Ministers and the relevant Government agencies possess some “lawmaking” powers in the promulgation of subsidiary legislation in order to implement the parent legislation passed by the Parliament. 3.14 Each Minister is usually responsible for all government matters pertaining to one or more portfolios (such as education or trade and industry). In Parliament, the responsible Minister will have to justify the policies implemented by his or her Ministry, and is thus accountable to the Parliament. For the purposes of this chapter, one significant Ministry which should be mentioned is the Ministry of Law, which comprises the statutory boards of the Intellectual Property Office of Singapore and the Singapore Land Authority. Some important departments and bodies under the responsibility of the Ministry of Law include the Legal Aid Bureau, Insolvency and Public Trustee’s Office, Appeal’s Board (Land Acquisition) and the Copyright Tribunal. 3.15 The Government is advised and represented by the Attorney-General and the Solicitor-General in both civil and criminal matters. The Attorney-General possesses wide prosecutorial discretion, that is, to institute, conduct or discontinue any proceedings for any offence (Article 35(8) Constitution). The prosecutorial discretion is not absolute or unfettered but subject to constitutional provisions on fundamental rights of the individual (see Law Society of Singapore v Tan Guat Neo Phyllis (2008)). However, the Attorney-General is not obliged to disclose the reasons for his prosecutorial decision in a particular case (see Ramalingam Ravinthran v The AttorneyGeneral (2012)). 125 The Attorney-General is appointed by the EP if the EP, acting in his or her discretion, agrees with the advice of the Prime Minister. The Honourable Attorney-General Lucien Wong S C was appointed with effect from 14 January 2017. There are special divisions within the Attorney-General’s Chambers (www.agc.gov.sg) dealing specifically with the drafting of legislation, law reforms, financial and technology crimes, civil law matters and international affairs. The Attorney-General’s Chambers is staffed by State Counsel and Deputy Public Prosecutors who belong to the Singapore Legal Service. THE JUDICIARY 3.16 The primary role of the courts in Singapore is to adjudicate disputes between the litigating parties and serve as an independent check on the Legislature and the Executive within the adjudicative process. The Judiciary is empowered, for instance, to review the constitutionality of legislation as well as to review the decisions and actions of administrative authorities. As stated by the Court of Appeal (at [86]) in Chng Suan Tze v Minister of Home Affairs (1988), “the notion of a subjective or unfettered discretion is contrary to the Rule of Law. All power has legal limits and the Rule of Law demands that the courts should be able to examine the exercise of discretionary power.” According to the Constitution, judicial power is vested in the judges of the Supreme Court and the State Courts. The judge is the sole arbiter of both facts and the law, the jury system having been entirely abolished in Singapore since 1970. In the course of adjudication, the judge would be required to interpret and apply various sources of law such as the Constitution, legislation and prior court decisions in order to distil the legal rule or principle applicable to the particular facts of the case. Box 3.1 126 Reflecting on the law What is your verdict on the jury system? Some of the common criticisms of the jury system are as follows: • Juries tend to decide on legal liability or conviction based on prejudiced or stereotypical views and/or moral opinions. • There is a danger that juries may be overly influenced by a lawyer’s glib tongue. • The lack of availability of competent jurors. • The costs in instituting and maintaining the jury system. On the other hand, supporters of the jury system and trials have raised the following arguments: • The right to jury trial should be regarded as a significant human liberty. • Jury trials are important in directly involving the ordinary man in the administration of justice. • The “strength in numbers” argument: for very serious offences such as capital offences, the legal system should be slow to convict an accused based on the decision of one single judge, as compared to the majority decision of the jury panel. Question: Do you think there should be a right to jury trial in the first place? If so, to what extent, if at all, should there be restrictions to the right to jury trial? The Common Law Tradition 3.17 Under the common law tradition, the judge is required to consider the relevance and effect of previous court decisions in order to decide the outcome of the case in accordance with the doctrine of judicial precedent. The common law tradition is one of the major legal traditions in the world, apart from the civil law, socialist and other religious legal traditions. Singapore has its roots in the English common law tradition and enjoys the concomitant advantages of stability, certainty and internationalisation of the British system. Whilst Singapore shares with countries such as India, Malaysia, Myanmar and Brunei the English common law roots, the actual application and workings of the traditions will vary in each country. 127 3.18 Historically, the English common law tradition arose out of a need for England to develop laws to be applied equally to litigants in similar disputes. As a result, assize and later, circuit judges, who were sent to various parts of England to adjudicate disputes, applied the same laws to the resolution of the disputes before them. Further, these laws would be the same (or at least similar) regardless of the provinces or geographical areas in which the disputes took place. As a result, a “common” law gradually developed throughout the whole of England. 3.19 The strong influence of the English common law on the development of Singapore law is generally more evident in certain traditional common law areas (such as contract, tort and restitution) compared to other statutebased areas (such as criminal law, company law and the law of evidence). With respect to the latter, other jurisdictions such as India and Australia have influenced the interpretation of these statutes. However, the Singapore courts have, in recent times, significantly departed from the English common law in specific areas such as in the law of contract and torts. There is now a greater recognition of local jurisprudence in the development of the common law in Singapore. The Doctrine of Judicial Precedent 3.20 The doctrine of judicial precedent is integral to a common law jurisdiction such as Singapore. The doctrine of judicial precedent (also known as stare decisis, which means “standing decision”) requires judges to abide by the previous decisions made by the superior courts within the court hierarchy. 3.21 The doctrine promotes firstly uniformity and consistency of decisions within the court hierarchy as judges are not permitted to reach a decision in a dispute based merely on his or her whim or fancy, but on prior court decisions. Second, the resulting uniformity and consistency also lend a measure of certainty to the law for potential 128 litigants. Third, the doctrine is consistent with the respect accorded to the hierarchy within the court system, which is usually based on the experience and seniority of the judges. 3.22 How is a judicial decision reached? A judicial decision is simply a conclusion that resolves a legal dispute; such a conclusion is invariably based on a legal principle applied to the particular facts of the dispute. For instance, the legal principle may be that “a man who commits a criminal act cannot profit from the criminal act”. The facts of the dispute are that X has committed a criminal act and seeks to recover the “rewards” obtained from the commission of the criminal act. Hence, the judge may, applying the legal principle to the facts of the case, conclude that X shall not be entitled to recover the “rewards”. 3.23 The legal principle(s) upon which the judge’s conclusion is based, is referred to as the ratio decidendi (or “the reason for the decision”). Hence, in the above example, the legal principle that “a man who commits a criminal act cannot profit from the criminal act” is the ratio decidendi for the decision of the judge to disallow recovery by X. Obiter dictum, on the other hand, means a statement “made by the way” (or a “peripheral” or an “incidental” statement). Obiter dictum refers to a legal principle or judicial statement that is not directly applied to arrive at the outcome in a case. 3.24 The determination of the ratio decidendi and the obiter dictum can be significant. If the particular legal principle or statement in a previous decision is regarded as ratio decidendi, then the judge has to abide by the ratio decidendi of the prior decision, assuming that the previous decision is made by a higher court within the court hierarchy. In legal parlance, we say that the ratio decidendi in the previous decision by a higher court is “binding” on a lower court. If, however, the legal principle in a previous decision is merely regarded as obiter 129 dictum, the judge is not required to apply the obiter dictum in the present case, even if the previous decision is made by a higher court within the hierarchy. In legal parlance, we say that the obiter dictum is merely “persuasive”, and is not binding on the judge. 3.25 The doctrine of judicial precedent applies only to court decisions within the same court hierarchy. Hence, prior court decisions from England and foreign Commonwealth jurisdictions (such as Australia, Malaysia, India, Brunei and Canada) are not binding on Singapore courts. In practice, however, Singapore courts do treat relevant decisions from English and such Commonwealth courts as “persuasive”, though not “binding”. For instance, decisions from the UK Supreme Court (formerly the House of Lords in England) and the High Court of Australia respectively are generally “persuasive” precedents for Singapore judges adjudicating a similar dispute. 3.26 A situation may arise where the facts in the previous decision upon which the ratio decidendi is based may be materially different from those in the present case. Hence, the judge may regard the facts in the prior decision as being so materially different that the ratio decidendi of that previous decision should not be followed or applied in the present case. In legal parlance, we say that the judge has “distinguished” the prior decision from the present case. 3.27 In summary, under the doctrine of stare decisis, the ratio decidendi contained in the previous decision by a higher court binds the judge in his or her adjudication of the present dispute. However, the doctrine does not apply to bind the judge where: the facts of the present dispute can be materially “distinguished” from the facts in the previous decision of the higher court so as to render the ratio decidendi of the previous decision inapplicable; or 130 the legal principle embodied in the previous decision of the higher court and sought to be applied to the dispute at hand was merely obiter dictum, and hence not binding on the lower court. 3.28 The proper functioning of the doctrine of stare decisis depends on the publication of judicial precedents in a form accessible to the courts, lawyers and perhaps even laypersons. Hence, law reports containing prior court judgments are vital for the development of the common law in Singapore. Currently, the Singapore Law Reports is the main law reporter for Singapore. This was first published in 1992; prior to that, reports of local cases were published in the Malayan Law Journal since 1932. The judgments of the Singapore courts can also be accessed via a LAWNET subscription at www.lawnet.com.sg. Recent judgments of the Supreme Court and the State courts can also be accessed free of charge at Singapore Law Watch (at http://www.singaporelawwatch.sg/slw/index.php). Common Law and Other Legal Concepts 3.29 To avoid confusion, we should note that the term “common law” may be used as a contrast to or comparison with other legal concepts such as equity, written law, the civil law tradition and criminal law. For completeness, we also discuss the differences between civil and criminal laws in para 3.36. (1) Common law versus equity 3.30 Historically, in England, equity as a body of principles of fairness or justice was employed by the courts to ameliorate the defects or weaknesses inherent in the rigid common law system. In order for a claimant to bring a claim under the common law in England, he or she had to file a form known as a “writ” in the English courts according to rigid prescriptions. A case which could not fit into the inflexible categories under the writ was thus 131 thrown out. This meant that the claimant had no remedy. Hence, the Lord Chancellor was tasked to provide new writs to cover claims which could not fit into the rigid categories under the then prevailing common law writs. Despite initial complaints about the perceived abuses of discretionary power conferred on the Lord Chancellor, the rules and practices of equity utilised by the Chancery Courts gradually became more formalised and institutionalised. 3.31 According to the Singapore Civil Law Act (Cap 43, 1999 Rev Ed), the Singapore courts are empowered to administer the common law as well as equity concurrently. The practical effect is that a claimant can seek both common law remedies (damages) and equitable remedies (injunctions and specific performance) (see Chapter 18) in the same proceedings before the same court. It should also be noted that equity has played a decisive role in the development of specific doctrines in the law of contract, including the doctrines of undue influence (see Chapter 14) and promissory estoppel (Chapter 8). (2) Common law versus written law 3.32 The concept of “common law” can also be contrasted with the notion of “written law”. In Singapore, “written law” refers to the Constitution, Acts and subsidiary legislation, whilst “common law”, in this context, refers to judge-made law or case law. The written laws of Singapore can be accessed either via the website of the Attorney-General’s Chambers (www.agc.gov.sg) or via LAWNET (http://www.lawnet.com.sg). The law-making process by the Legislature has been discussed in paras 3.9–3.11. (3) Civil law tradition versus common law tradition 3.33 The common law system in Singapore bears material differences from that in some Asian countries which have imbibed the civil law tradition (the People’s Republic of 132 China, Vietnam and Thailand) or those with a mixture of civil and common law traditions (the Philippines). 3.34 Firstly, the civil law systems generally place relatively less weight on prior judicial decisions and do not abide by the doctrine of stare decisis, unlike the common law system as described in paras 3.20–3.28. Second, the common law courts of Singapore generally adopt an adversarial approach in litigation between the disputing parties, whilst the civil law judges tend to take a more active role in the finding of evidence to decide the outcome of the case. Third, whilst numerous legal principles have been developed by common law judges, civil law judges are more reliant on general and comprehensive written codes governing a wide spectrum of areas. 3.35 Having said that, the divergence between the common law and civil law systems is now less marked than in the past. Common law jurisdictions have, for instance, embarked upon legislative programmes to fill the perceived gaps of the common law. In this regard, Singapore has enacted various statutes to govern many specific areas of law, such as the Contract (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed), Competition Act (Cap 50B, 2006 Rev Ed), Consumer Protection (Fair Trading) Act (Cap 52A, 2009 Rev Ed), Workplace Safety and Health Act (Cap 354A, 2009 Rev Ed) and the Employment Claims Act 2016 (Act 21 of 2016). (4) Civil law versus criminal law 3.36 A criminal case is prosecuted by the State against the accused person, whereas a civil lawsuit is initiated by one party (the plaintiff) against the other disputing party (the defendant). Second, the general purpose of civil law is to compensate the innocent party for the damages or losses which he or she has suffered or incurred arising from the alleged wrongdoing of the other party. However, in criminal law, the primary purpose is to “punish” or deter potential criminals from committing offences. Third, we 133 speak in terms of “remedies” in civil law to compensate the innocent party. In criminal law, the offender may suffer the consequences of a jail term or a fine by the state or both; there is generally no direct compensation from the wrongdoer to the victim for the crime committed under the criminal law (but note that s 359 Criminal Procedure Code (Cap 68, 2012 Rev Ed) requires the court to “consider” whether to make victim compensation orders upon conviction). Finally, in a criminal trial, the prosecution has to prove beyond reasonable doubt that the accused has committed the offence as charged (Teo Keng Pong v Public Prosecutor (1996)). In a civil lawsuit, however, the plaintiff has to prove his or her case against the defendant merely on a balance of probabilities. The Court Structure and Hierarchy in Singapore 3.37 The Singapore Judiciary consists of the Supreme Court and the State Courts (see Figure 3.3). The efficiency and strength of the Singapore Judiciary have won her several accolades and a strong international reputation, as evidenced by the published rankings of the world’s legal systems by the Political and Economic Risk Consultancy (“PERC”) and the Institute for Management Development. Under the leadership of the former Chief Justice Yong Pung How and the former Registrar of the Supreme Court Chiam Boon Keng, strict case management and alternative dispute resolution (“ADR”) methods (see Chapter 2) have drastically reduced the problems associated with the backlog of cases in the early 1990s. Chan Sek Keong, Singapore’s third Chief Justice, who was appointed to head the Judiciary from 11 April 2006 to 5 November 2012, implemented various programmes with a view to enhancing access to justice and substantive jurisprudence in Singapore, including the establishment of community courts and the appointment of specialist judges to handle complex cases within the State Courts. The present Chief Justice, Sundaresh Menon, who took the helm on 6 November 2012, has been instrumental in spearheading the establishment of 134 the Family Justice Courts (FJC) (which comprise the former Family Division of the High Court, Family Courts and Youth Courts) in 2014. The FJC was established with a view to encourage parties to mediate their familyrelated disputes and for the judges to take on a more proactive role in directing the court proceedings. In 2015, Chief Justice Menon launched the Singapore International Commercial Court (SICC) to resolve disputes of an international and commercial nature based on the expertise and experience of the Singapore Supreme Court judges and international jurists from foreign countries. Figure 3.3 The judicial hierarchy in Singapore 3.38 The Supreme Court comprises both the High Court and the Court of Appeal (Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed)). As of May 2019, there were 20 Judges (including four Judges of Appeal and the Chief Justice), seven Judicial Commissioners and four Senior Judges on the Supreme Court Bench. Within the Supreme Court, a Constitutional Tribunal has also been set up to hear questions referred to the tribunal by the Elected President on the effect of provisions of the Constitution. The administration of justice in the Supreme Court is assisted by the Registrar and a team of deputy registrars, senior assistant registrars and assistant registrars. Since 1991, Justices’ Law Clerks have been appointed to provide research assistance to the Supreme Court judges. 135 3.39 Following the abolition of appeals to the Privy Council since 1994, the Singapore Court of Appeal is the highest court in the land. The Court of Appeal enjoys both appellate civil and criminal jurisdiction arising from the decisions of the High Court and the State Courts. The Court of Appeal comprises the Honourable Chief Justice and Judge(s) of Appeal. As the highest court of the land, the Court of Appeal is instrumental in maintaining and enhancing the administration of justice as well as the jurisprudential development of Singapore law. 3.40 The Practice Statement on Judicial Precedent issued by the Supreme Court on 11 July 1994 outlined the relevance of prior Privy Council and Court of Appeal decisions in Singapore. It stated that the Court of Appeal should not be bound by its own previous decisions and those of the Privy Council which, prior to 8 April 1994, were binding on it, “where adherence to such prior decisions would cause injustice in a particular case or constrain the development of law in conformity with the circumstances of Singapore”. Thus, the Court of Appeal will continue to treat such prior decisions as normally binding but will, whenever it appears right to do so, depart from such prior decisions. Bearing in mind the danger of retrospectively disturbing contractual, proprietary and other legal rights, this power to depart from prior Privy Council decisions will be exercised sparingly. 3.41 Apart from hearing cases at first instance, the High Court also hears civil appeals from the District and Magistrates’ Courts as well as other tribunals as prescribed by the written law. It also has appellate criminal jurisdiction over criminal appeals from the District and Magistrates’ courts and in respect of points of law reserved by special cases submitted by the District and Magistrates’ courts. 3.42 Under the doctrine of judicial precedent, the Singapore High Court is bound by the prior decisions of the Court of Appeal, unless the High Court judge is able to show that 136 either of the exceptions stated in para 3.27 apply. However, it is not bound by its own previous decisions. 3.43 The High Court judges enjoy security of tenure, whilst Judicial Commissioners are appointed on a short-term contract basis. Both, however, enjoy the same judicial powers and immunities. Their judicial powers comprise both original and appellate jurisdiction over both civil and criminal matters. The High Court judges and Judicial Commissioners possess expertise in various specialist areas such as Building and Construction, Shipbuilding, Complex and Technical Cases; Finance, Securities, Banking, Complex Commercial Cases; Company, Insolvency, Trusts; Intellectual Property/Information Technology; Shipping and Insurance; and Defamation, Professional Negligence, Statutory Tort. 3.44 The State Courts (consisting of the District, Magistrates’, Coroners’, Community and Youth Courts as well as the Small Claims Tribunals) have also been set up within the Singapore judicial hierarchy to administer justice amongst the people (State Courts Act (Cap 321, 2007 Rev Ed)). The administration of justice within the State Courts is aided by a team consisting of the Registrar and deputy registrars. 3.45 The District Courts and the Magistrates’ Courts share the same powers over specific matters such as contractual or tortious claims for a debt, demand or damage, and actions for the recovery of monies. However, the jurisdictional monetary limits in civil matters for the Magistrates’ Courts and District Courts are $60,000 and $250,000 respectively. The courts also differ in terms of criminal sentencing powers. Imprisonment terms imposed by the Magistrates’ Courts are limited to three years whilst the limit imposed on the District Courts is ten years (s 303 Criminal Procedure Code (Cap 68, 2012 Rev Ed)). 3.46 With the increased sophistication in business transactions and law, the Commercial Civil and Criminal District Courts 137 within the State Courts deal with more complex cases. Law academics and practitioners with the relevant expertise have also been appointed as specialist judges on an ad hoc basis to deal with specific complex cases. 3.47 We should also mention briefly the main roles and functions of the other State Courts. The Family Court, which is a District Court, deals with divorces, maintenance, custody, adoptions and applications for protection and exclusion orders in family violence cases. The Youth Courts hear cases involving offences committed by youths and seek to re-integrate the youths back into their families and the community. The conduct of inquiries to determine whether the deceased person(s) died of unnatural causes is within the purview of the Coroners’ Court. The Small Claims Tribunals (“SCTs”) offer a speedy, cost-effective and informal process (without legal representation) for the disposition of small claims with a monetary limit of only $20,000, provided the disputing parties consent in writing. The SCTs hear claims in respect of contracts for the sale of goods and the provision of services, tort claims in respect of property damage (excluding those arising out of or in connection with the use of a motor vehicle) and disputes relating to leases of residential premises for a lease period of two years or less. 3.48 Another of the State Courts — the Community Court — was established in 2006 to deal with particular types of cases (youthful offenders, offenders with mental disabilities, neighbourhood disputes, attempted suicide cases, family violence, carnal connection offences by youthful offenders, abuse and cruelty to animals and cases impacting race relations). One important purpose of this court is to allow such offenders to reintegrate more successfully into the community through the use of longterm community-based treatment rather than imprisonment, where appropriate. Subsequent legal reforms in 2009 have also enabled the Community Court to utilise more graduated sentencing options (such as 138 community service orders and day reporting orders) to deal with minor offences. 3.49 Other courts include the Subordinate Military Courts which hear cases at first instance involving military offences. Appeals against the decisions of the Subordinate Military Courts are heard by the Military Court of Appeal. The Industrial Arbitration Court was established to conduct arbitration proceedings with respect to trade disputes involving trade unions and employers. The Syariah Court administers Muslim law in specific personal legal matters governing marriages, divorces, the nullity of marriages, judicial separations, disposition or division of property on divorce or nullity of marriage in respect of Muslims or parties married under Muslim law. The High Court, however, has concurrent jurisdiction with the Syariah Court on specific matters relating to maintenance, custody and division of property, subject to the parties obtaining leave of the Syariah Court prior to commencing proceedings in civil courts. Technology and the Courts 3.50 The Singapore Judiciary as a whole has taken big strides in adopting information technology. The Electronic Filing System (“EFS”), a joint project by the Judiciary, Singapore Network Services and the Singapore Academy of Law, has, in the past, enabled the filing, extraction and service of court documents as well as the tracking of case information by electronic means. Pursuant to an EFS review in 2003, the EFS was reconstituted as the Electronic Litigation Systems (“ELS”) in order to further integrate technology into the litigation process. Information technology innovations have also been utilised to facilitate and streamline various criminal processes (including the payment of traffic fines and information flow and exchange between the State Courts and Home Team agencies). Certain technologically enabled courtrooms (Technology Courts) were set up to enable the sharing of information 139 by lawyers and judges and the giving of evidence by witnesses via video conferencing. The Supreme Court’s Digital Transcription System allows for the digital audio recording of court hearings with near real-time transcription. Moreover, the Electronic Queue Management System provides a fair and orderly queue system in the Supreme Court for chamber hearings before the Registrars. It notifies lawyers, on a first-comefirst-served basis, as to when their cases will be heard via display screens located within its premises. Centralised Display Management System (CDMS) iKiosks are displayed in the Supreme Court Building to provide up-todate information on hearing lists and court schedules via the Integrated Electronic Litigation System (eLitigation) which was launched in 2013. Interpretation of Written Law 3.51 The judge, in the course of adjudication, may be required to interpret the Acts of Parliament or subsidiary legislation to reach a decision in a particular case. A few general approaches to statutory interpretation have been used by judges for this purpose: literal rule: the words in the statutory provisions should be construed according to their plain and ordinary meaning; golden rule: the literal rule should be followed unless it leads to an absurd result; mischief rule (also known as the rule in Heydon’s case (1584)): the words should be considered in the light of the mischief which the enactment of the legislation was attempting to remedy; and purposive rule: the purpose or object underlying the statute should be examined to ascertain the meaning of the words (see s 9A Interpretation Act (Cap 1, 2002 Rev Ed)). 3.52 Some of these approaches have been encapsulated in the Interpretation Act (Cap 1, 2002 Rev Ed). According to 140 s 9A Interpretation Act, the judge can refer to, inter alia, the explanatory statement to the Bill, the speech made by the Minister in Parliament as well as the Parliamentary debates for the following purposes: to confirm the ordinary meaning of the provision of the written law, taking into account its context in the written law and the purpose or objective underlying the written law (ie, a combination of the literal rule and purposive rule); and to ascertain the meaning of the provision of the written law if: – the provision is ambiguous or obscure; or – the ordinary meaning of the provision would lead to a result that is manifestly absurd or unreasonable (ie, the golden rule). 3.53 There are also various specific technical rules which judges have used to interpret the written law, including: ejusdem generis rule: where general words follow specific words (eg, pens, pencils, erasers and “any object whatsoever”), the meaning of the general words will be confined to the class given by the preceding specific words; noscitur a sociis: this involves gathering the meaning of words from its context, that is, via association with its neighbouring words (eg, buses, “vehicles” and taxis); and expressio unius est exclusio alterius: words that are expressly mentioned in a statute suggest an intention to exclude those which have been omitted. THE LEGAL PROFESSION, LEGAL EDUCATION AND OTHER PROFESSIONAL BODIES 3.54 The legal profession in Singapore is “fused”. This means the Singapore lawyer may act as both an advocate (to 141 represent clients in the courts) as well as a solicitor (to assist clients in out-of-court work such as preparing and negotiating legal documentation). The Singapore lawyer is a versatile creature: he or she may serve as a legal or judicial officer in the Singapore legal service or as an inhouse counsel of a company, or practise law in a local or international law firm. Within the local set-up, the lawyer may handle litigation, corporate work, conveyancing and intellectual property work. 3.55 For the lawyer in private (legal) practice, one prominent feature of the legal landscape has been the proliferation of vehicles for the setting up of legal practices and the facilitation of tie-ups amongst the law practices. Apart from the sole proprietorships and partnerships, the legal profession has also seen the creation of the law corporation with the associated benefits of limited liability. Limited liability partnerships (“LLPs”) in Singapore offer another vehicle for legal practice. There also exists the avenue of forming joint law ventures (“JLVs”) and formal law alliances (“FLAs”) between a Foreign Law Practice (“FLP”) and Singapore Law Practice (“SLP”) with the attendant advantages of marketing the venture or alliance as a single service provider and centralised billing for clients. FLPs licensed as Qualified Foreign Law Practices (“QFLPs”) are entitled to practise Singapore law in certain permitted areas via Singapore-qualified solicitors employed by them. 3.56 A sound legal education is instrumental to the birth and subsequent development of the Singapore lawyer. The Singapore Institute of Legal Education (at http://www.sile.org.sg) was established in May 2011 to maintain and improve the standards of legal education in Singapore. To be admitted to the Singapore Bar, an aspirant has to first attain the status of a “qualified person” by obtaining a law degree from the National University of Singapore (“NUS”), the Singapore Management University (“SMU”), the Singapore University of Social Sciences (“SUSS”) or one of the 142 approved overseas universities of the United Kingdom, United States, Australia, Canada and New Zealand. In addition to the Bachelor of Laws (“LLB”) programme, SMU and SUSS offer a Juris Doctor (“JD”) programme for graduates with a first degree from other disciplines. Apart from a four-year LLB programme, NUS also offers a three-year graduate LLB programme for graduates with a first degree. 3.57 At present, law graduates from the approved universities will be required to pass a set of post-graduate law examinations known as Part B examinations and serve a six-month practice training period with a Singapore law practice pursuant to a practice training contract or through work as a Legal Service officer or under the supervision of a qualifying legal officer. Upon fulfilment of the above requirements, he or she can be admitted to the roll of Advocates and Solicitors. In 2018, the Committee for the Professional Training of Lawyers recommended a new regime which separates admission to the roll of Advocates and Solicitors from the qualification to practise law. The new regime will apply to law graduates from approved universities from 2023 onwards. Such law graduates will still be required to pass the Part B examinations in order to be admitted to the roll of Advocates and Solicitors. Upon admission, they may serve as in-house counsel or government legal officers but are not entitled to practise law in a Singapore law practice. If they wish to obtain a practising certificate to practise law, they will have to complete a 12-month training contract. 3.58 Foreign-qualified lawyers with at least three years of relevant legal practice or work in Singapore or overseas may apply for a Foreign Practitioner Certificate from the Attorney-General to practise in limited areas of Singapore law such as banking and finance, mergers and acquisitions, and intellectual property law. This is subject to their passing the Foreign Practitioner Examination (“FPE”). Foreign advocates may be granted ad-hoc 143 admission to argue commercial disputes in the Singapore courts. 3.59 The Singapore Institute of Legal Education administers a mandatory Continuing Professional Development (“CPD”) scheme for lawyers since 2012 which requires the young lawyers, as well as the more experienced lawyers, in legal practice to attend courses to keep abreast of the law and related developments. 3.60 Apart from the law schools, the Singapore Institute of Legal Education, and local and foreign law practices, two other important professional bodies — the Law Society of Singapore and the Singapore Academy of Law — should be specifically mentioned. The Law Society (www.lawsociety.org.sg), comprising primarily lawyers in legal practice, continues to uphold and advance the interests of the practising lawyers as well as to promote access to justice. In respect of criminal matters, the Law Society of Singapore operates the Criminal Legal Aid Scheme (“CLAS”) for needy accused persons. The Pro Bono Services Office of the Law Society of Singapore, established in 2007, coordinates and administers pro bono initiatives including CLAS, Project Law Help for voluntary welfare organisations, Community Legal Clinics at the Community Development Councils as well as initiatives to raise public awareness of the law. Apart from the Law Society, the Singapore Legal Aid Bureau (a government department established under the Legal Aid and Advice Act (Cap 160, 2014 Rev Ed)) provides civil legal aid to the needy based on “merits” and “means” tests. 3.61 The Singapore Academy of Law (“SAL”) (www.sal.org.sg), established by an Act of Parliament in 1988, seeks to advance the legal profession as a whole. Its members include practising lawyers, in-house counsel, government legal officers and law academics. The President of the SAL is the Honourable Chief Justice. Current and significant projects of the SAL include the promotion of 144 Singapore law in the Asian region, the continuing legal education of its members, law reform initiatives, the promotion of alternative dispute resolution, and the publication of law journals and case law in the Singapore Law Reports. Academy Publishing, set up under the auspices of the Singapore Academy of Law, has significantly contributed to the development of local jurisprudence with the publication of various Singapore law books including contract law, tort law, corporate law and constitutional law. CONCLUSION 3.62 The maintenance and development of the legal institutions and their processes in Singapore are likely to be influenced by a combination of factors: economic pragmatism and efficiency, values of fairness and equity, local circumstances and evolving external conditions. In view of the relative youth of these legal institutions, the willingness to adapt and innovate, undergirded by fundamental principles such as the Rule of Law, will be important. Whilst the laws and practices of other jurisdictions remain a source of knowledge in this age of globalisation, the Singapore legal institutions will also have to develop and modify their own solutions and processes to tackle particular legal, socio-economic, political and cultural issues appropriate to their unique circumstances. 145 PART II Business Crimes and Business Torts 146 Chapter 4 Business Crimes 4.1–4.2 4.3–4.11 4.12–4.14 Overview of Criminal Law What is a Crime? Objectives and Underlying Principles Distinctions between Crime, Tort and Contract 4.15 4.16 4.17 4.18–4.20 4.21–4.25 4.26–4.28 Anatomy of an Offence Introduction Actus Reus Mens Rea Strict Liability Corporate Criminal Liability Individual Liable with Company 4.29–4.30 4.31 4.32–4.38 4.39–4.42 4.43–4.51 4.52–4.54 4.55–4.59 Business Crimes Introduction Crimes Involving Dishonesty (1) Criminal breach of trust (2) Cheating (3) Bribery and corruption (4) Insider trading Crimes Involving Lack of Due Diligence 4.60 Conclusion OVERVIEW OF CRIMINAL LAW What is a Crime? 4.1 A crime is a wrong done to society. It can take the form of doing a prohibited act or failing to do a required act. It 147 affects the well-being of society at large such that there is a public interest in the suppression of the wrongdoing. Criminal law concerns the sets of rules which Parliament has legislated, designating certain conduct as criminal and wrongs to society. This, in turn, raises the question — what is it that leads to certain kinds of conduct being criminalised over others, or why are some interests considered so important as to warrant the protection of the law? 4.2 Laws in a democratic society are created by people and are not static. As society evolves, so do its laws. Where the consequences of a particular conduct are so potentially grave (for instance, murder), the need for criminalisation so as to prevent harm is without doubt. On the other hand, there has been a growing trend of using legislation to regulate conduct for reasons of expediency or endorsing certain policies. Objectives and Underlying Principles 4.3 Notwithstanding the evolving nature of criminal law, its objectives have largely remained constant. Criminal law and the criminal justice system together constitute the mechanism to redress grievances and to bring action against individuals for offences that have been committed against society. 4.4 An effective system defends society against harm which injures the interests and values integral to its proper functioning. As a crime is a wrong to society, it attracts the consequence of punishment. A good criminal justice system ensures that the punishment imposed is commensurate with the culpability of the offender, the seriousness of the offence as well as its impact on society. 4.5 Public prosecutors have the responsibility of being advocates for the state and the prosecution is entrusted with a wide scope of discretion in all aspects of the 148 criminal process (Art 35(8) Constitution of the Republic of Singapore (1999 Reprint) and s 11 Criminal Procedure Code (Cap 68, 2012 Rev Ed)). Prosecutorial discretion includes the decision of what charges to bring against an accused person and whether to appeal against sentences which have been passed by the court. This helps to ensure that the response of the law in each case is calibrated and proportionate and that the needs of both society and the offender are effectively and best served. 4.6 It would also be appropriate to briefly mention the key sentencing principles which underpin punishment — deterrence, retribution, incapacitation and rehabilitation. 4.7 First, deterrence has been identified as the cornerstone of Singapore’s sentencing jurisprudence (see PP v Law Aik Meng (2007) at [19]). There are two aspects to deterrence — general deterrence of would-be offenders and specific deterrence of the particular offender in question. The aim of punishment is to reduce the commission of crimes. 4.8 Second, under the principle of retribution, punishment is imposed on the offender as an institutionalised expression of society’s disapproval of the offender’s crime. Retributive justice is also based on the principle that the punishment must fit the crime (see PP v Loh Soon Aik Andrew (2013) at [8]) and hence be proportionate to the harm caused and the blameworthiness of the accused. 4.9 Next, under the principle of incapacitation, punishment is imposed on the offender primarily for the protection of the public. It is based on an assessment of the amount of risk that the offender will pose to society due to his propensity to reoffend. 4.10 Last, there is rehabilitation which, like deterrence, is concerned with the prevention of crime. However, it stems from a different theoretical foundation — rehabilitation 149 seeks to change the moral outlook of the offender, which is viewed as the underlying cause of the offender’s criminal behaviour. The principle of rehabilitation would be the dominant sentencing consideration where the offender in question is 21 years and below (see PP v Mok Ping Wuen Maurice (1999) at [21]). 4.11 In arriving at the appropriate sentence, the court takes into account the public interest as well as the interest of the offender. As was said in PP v Tan Fook Sum (1999) at [65] in relation to deterrence: The criminal law is publicly enforced, not only with the object of punishing crime, but also in the hope of preventing it. A proper sentence, passed in public, serves the public interest in two ways. It may deter others who might be tempted to try crime as seeming to offer easy money on the supposition, that if the offender is caught and brought to justice, the punishment will be negligible. Such a sentence may also deter the particular criminal from committing a crime again, or induce him to turn from a criminal to an honest life. Distinctions between Crime, Tort and Contract 4.12 As explained earlier, criminal law is concerned with regulating societal conduct and protecting its members from the ills of crime through deterring, punishing, incapacitating and rehabilitating offenders. In contrast, tort law concerns the regulation of conduct amongst members within society. Tort law seeks to protect and uphold the legal rights of persons which have been wrongfully infringed. Contract law serves similar objectives, upholding the legal rights and obligations of parties, specifically those which have been voluntarily undertaken by parties; in essence, the underlying thread is the existence of agreements. The basic aims of contract and tort law are largely similar as they are primarily compensatory in nature — redressing the loss or damage which has been caused by the infringing actions 150 of the counterparty. In short, tort law and contract law aim to compensate the victim while criminal law seeks to punish the wrongdoer. 4.13 One especially important difference lies in the standard of proof across criminal and civil cases. For civil claims, which involve a vindication of private interests between parties, the standard of proof is on a “balance of probabilities”. As to what proving something on a balance of probabilities would entail, this has been clarified to mean showing that one’s case “is more probably true than not true” (see Clarke Beryl Claire v SilkAir (Singapore) Pte Ltd (2002) at [58]). On a mathematical level, if a party can prove something to be at least 51 per cent (or, one could argue, 50.1 per cent) likely to be true, the matter has been proven on a balance of probabilities. 4.14 On the other hand, it is a fundamental principle of law in criminal proceedings that the prosecution has to establish its case against the accused “beyond reasonable doubt”. Proving something beyond reasonable doubt must be distinguished from proving something “beyond all doubt” and the question is whether any remaining doubts are real or reasonable, or merely fanciful (see Teo Keng Pong v PP (1996) at [68]). The reason for the higher standard of proof stems from the presumption of innocence of the accused, and the fact that as compared to the financial relief sought in civil cases, the consequences of a successful criminal proceeding are far more severe — the accused would face criminal sanctions such as imprisonment, which would impinge on his liberty. ANATOMY OF AN OFFENCE Introduction 4.15 An offence comprises component elements which must be established beyond a reasonable doubt by the prosecutor before an accused can be convicted of an offence. The elements would typically comprise the actus reus, the 151 mens rea and also other elements as specified in the particular legislative provision, such as causation. Actus Reus 4.16 Actus reus is the act (or sometimes the omission) indicated in the definition of the crime charged as being proscribed by the criminal law, such as hitting someone or throwing a piece of litter. An important requirement is that the prohibited conduct must have been performed voluntarily. This stems from the principle of individual autonomy and the fact that criminal law only ascribes criminal liability to individuals for choices and actions which they had control over. Box 4.1 Reflecting on the law Mens rea and the assistance of terrorists The mental element for a crime can take several forms. This is well illustrated by how the law deals with the subject of assistance of terrorists. Section 4 of the Terrorism (Suppression of Financing) Act (Cap 325, 2003 Rev Ed) provides: Every person who … provides … property or financial or other related services … intending that they be used, or knowing or having reasonable grounds to believe that they will be used … for the purpose of any terrorist act … shall be guilty of an offence (emphasis added) Here, there are three possible forms of the mental element for the offence: • intention; • knowledge; and • reason to believe. For each crime, the law has to decide on the degree of culpability that is sufficient to attract criminal liability. For assisting terrorists, it decides that even having reason to believe is enough to make one liable. Mens Rea 152 4.17 Mens rea refers to the mental element of the crime. Mens rea needs to be proved alongside actus reus, reflecting the principle of actus non facit reum, nisi mens sit rea (an act does not make a man guilty of a crime, unless his mind is also guilty). It can either refer to a subjective state of mind, for instance intention, knowledge or rashness, or an objective state of mind, for instance negligence. These four states of mind are the predominant descriptors of the fault elements referred to in criminal statutes. Strict Liability 4.18 There are also criminal statutes prescribing for offences which render the accused criminally liable upon proof of the actus reus alone, that is, the prosecution does not need to prove any form of mens rea. This represents a departure from the aforementioned principle. The rationale for doing so relates back to the need for an effective policing of public welfare offences as well as the protection of public interest in areas such as health, safety and morals. 4.19 On the matter of strict liability, the starting point is a presumption of law that mens rea is required before a person can be held guilty of a criminal offence, and this presumption would operate even more strongly where the offence is “truly criminal” in nature. The presumption can only be displaced if the statute is concerned with an issue of social concern and the creation of strict liability will be effective to promote the objects of the statute by encouraging greater vigilance to prevent the commission of the prohibited act. 4.20 As an example, in Comfort Management v PP (2003), the court was concerned with whether s 5(3) Employment of Foreign Workers Act (Cap 91A, 1997 Rev Ed), which states that “no person shall employ a foreign worker otherwise than in accordance with the conditions of the work permit”, provided for a strict liability offence. The 153 court concluded that it was and the reasons given included the following: the offence carried little social stigma and was not truly criminal in character; it was difficult for the statutory body to monitor and ensure compliance with the work permit conditions; and the maximum penalty, which is only a $5,000 fine, could not be described as severe or harsh. Corporate Criminal Liability 4.21 The criminal responsibility of companies (or corporations) is often considered a tricky matter. For many, the immediate response to the question of who can be convicted of a crime is to envisage a human being. It is true that there are several problems with ascribing criminal liability to companies — first, companies are incapable of receiving the full spectrum of punishment under criminal law, for instance imprisonment, and second companies cannot be held liable for the commission of certain offences which can only be committed by human conduct. Yet, the need for the recognition and imposition of corporate criminal liability cannot be denied. Responsibility and culpability need to be pinned where they belong, thus deterring corporate activities which harm the public interest. 4.22 There are two approaches by which criminal liability may be imposed on companies. First, the company may be held vicariously liable for the actions of its directors, employees or agents acting within the scope of their actual or apparent authority. Actual authority would stem from the agreement and relationship between the employee, agent or director and the company, and may be conferred either expressly or by implication. On the other hand, apparent authority is authority as it appears to those who deal with the company through the employee, agent or director, stemming from past conduct or the 154 position of the officer in the company which would typically carry with it the implied authority to perform acts of the kind in question. 4.23 The vicarious liability approach is typically utilised only when the statutory provision specifically so provides. For example, s 52(2) Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (Cap 65A, 2000 Rev Ed) provides: Any conduct engaged in or on behalf of a body corporate — (a) by a director, employee or agent of the body corporate within the scope of his actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee, or agent, shall be deemed, for the purposes of this Act, to have been engaged in by the body corporate. 4.24 Where the relevant statute does not expressly provide for the attribution of liability or conduct to the company and it is not possible to determine whether it was intended that criminal liability was to be applied vicariously, the identification approach may be used. Identification is the process or mechanism by which the conduct and mental state of one or more individuals who may be said to be the “directing mind and will” (or alter ego) of the company are attributed to the company. In such cases, the liability of the company is primary and direct, instead of vicarious, since the persons in question are essentially the embodiment of the company. 155 4.25 Companies have to take great care in the appointment, and perhaps even supervision, of persons whose criminal actions may be attributed to the company. INDIVIDUAL LIABLE WITH COMPANY 4.26 Conversely, an individual working or associated with a company may also risk having criminal liability on account of an offence committed by the company. When does such criminal liability attach to the individual? The following wording is typically used in legislation: Where an offence under this Act committed by a body corporate is proved — (a) to have been committed with the consent or connivance of an officer; or (b) to be attributable to any neglect on his part, the officer as well as the body corporate shall be guilty of the offence and shall be liable to be proceeded against and punished accordingly. 4.27 An officer consents to the commission of an offence by the company when he is well aware of what is going on and agrees to it (see Huckerby v Elliot (1970) at p 194). The officer must be shown to have known the material facts that constitute the offence committed by the company and to have agreed to its conduct of the business on the basis of those facts. In comparison, an officer connives at the offence committed by the company when he is well aware of what is going on but his agreement is tacit; in other words, while he is not actively encouraging it, he is letting it continue by not saying anything about it. 4.28 With respect to “neglect” on the part of the officer, the critical question is whether the officer ought to have been aware that he could and should have taken action to prevent the commission of the offence (see R v P (2007)). Hence, if by reason of the circumstances and the nature 156 and scope of the officer’s responsibilities, the officer ought to have been put on inquiry, the officer would be guilty of neglect if he did not take the appropriate preventive action. It is important for individuals who work in or with companies to make sure that they exercise care and not be drawn into any criminal conduct on the part of the company. BUSINESS CRIMES Introduction 4.29 There is no formal definition of a “business crime” or a “white-collar crime” in the context of Singapore legislation. Broadly characterised, these offences can be distinguished from offences against persons (for example, voluntarily causing hurt and murder) as they are nonviolent in nature, are committed often for financial gain and are typically committed during the course of business. 4.30 Business crimes encompass a wide range of criminality, from dishonesty and deception, to lack of due diligence or negligence, to strict liability, that is, liability irrespective of fault. Crimes Involving Dishonesty 4.31 Many crimes of dishonesty occur in the context of business. We will be looking at a few of the more common or prominent ones – criminal breach of trust (often abbreviated to CBT), cheating, bribery and insider trading. (1) Criminal breach of trust 4.32 The offence of criminal breach of trust is set out in s 405 Penal Code (Cap 224, 2008 Rev Ed) and it reads: 157 Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person to do so, commits criminal breach of trust. 4.33 The offence can be broken down into its constituent elements: Actus reus – misappropriation, – conversion, – use or disposal in violation of a direction of law, – use or disposal in violation of a legal contract, or – suffering (causing) any person to do any of the aforementioned; Mens rea – dishonesty, or – in the case of causing another person to commit the act — willfulness; and Entrustment of or dominion over property. 4.34 As to the element of “misappropriation”, this would mean “to set apart for or assign to the wrong person or a wrong use” (see Tan Tze Chye v PP (1997) at [37]). Conversion, on the other hand, refers to “an act in dealing with the [property] in a manner inconsistent with the rights of the true owner”; and usage would be one way of acting in an inconsistent manner (see Wong Seng Kwan v PP (2012) at [44]). 158 4.35 As to the mens rea, “dishonestly” is defined under s 24 Penal Code as having the “intention of causing wrongful gain to one person, or wrongful loss to another person”. 4.36 The element of entrustment has been liberally interpreted by the courts. Evidence must be adduced to show that the property was in the offender’s possession or control. As for dominion, a person is said to have dominion over property if he has a general degree of control over the property, and this dominion need not be exclusive and sole. 4.37 Last, it is important to correctly identify the relevant property alleged to have been misappropriated or converted by the accused. A property and its proceeds are not considered as the same thing for the purposes of the criminal breach of trust offence. 4.38 As mentioned earlier, it is important to identify all the requisite elements of a particular offence as the prosecution has to prove every element. If just one element is not satisfied, the offence is not made out. (2) Cheating 4.39 The offence of cheating is set out in s 415 Penal Code, which provides: Whoever by deceiving any person, whether or not such deception was the sole or main inducement (a) fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property or (b) intentionally induces the person so deceived to do or omit to do anything which he would not do or omit to do if he were not so deceived and which act or omission causes or is likely to cause damage or harm to any person in body, mind, reputation, or property, is said to cheat. The offence can be broken down into the following elements: 159 Actus reus – the victim was deceived and induced to deliver property to the accused or to any other person; or – the victim was induced to do or omit to do anything which causes or is likely to cause damage or harm to any person in body, mind, reputation or property; and Mens rea – for delivery dishonestly; of property — fraudulently or – for inducing an act or omission which causes harm — intentionally. 4.40 To deceive is to mislead or make one believe to be true what is in fact false. The question is whether the victim was deceived as a result of the accused’s conduct viewed as a whole. More importantly, a causal link must be established between the accused’s deception and the victim’s inducement. The inducement need not be oral, nor does it need to be express. Moreover, the inducement need not be the sole or main reason for the delivery of the property; it suffices that the accused’s deception played some part in inducing the victim to deliver the property (see Seaward III Frederick Oliver v PP (1994) at [28]). 4.41 There is no requirement that the property in question must be owned by the victim. The property also need not be delivered to the accused who committed the deception and inducement. 4.42 The term “fraudulently” is defined as doing something with the intent to defraud while “dishonestly” is defined as doing something with the intention to cause wrongful gain or wrongful loss (ss 25 and 24 Penal Code respectively). There appears to be a significant overlap between the two elements, and courts have commented that to distinguish between the two elements would be an exercise in the linguistic equivalent of splitting horse hair 160 (see Chua Kian Kok v PP (1999) at [24]). However, it is conceivable for a person to be dishonest without being fraudulent, such as where a speaker tells a white lie to the hearer in order to protect the hearer from harm. (3) Bribery and corruption 4.43 The main legislation dealing with bribery is the Prevention of Corruption Act (Cap 241, 1993 Rev Ed) (“PCA”). Sections 161 to 165 Penal Code deal with offences by or relating to public servants while the scope of the PCA is not limited to public servants. 4.44 Section 5 provides: Any person who shall by himself or by or in conjunction with any other person — (a) corruptly solicit or receive, or agree to receive for himself, or for any other person; or (b) corruptly give, promise to offer to any person whether for the benefit of that person or of another person, any gratification as an inducement to or reward for, or otherwise on account of – (i) any person doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed; or (ii) any member, officer or servant of a public body doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed, in which such public body is concerned, shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a term not exceeding 5 years or to both. 4.45 An offence under s 5 can be broken down into the following elements: Actus reus 161 • solicit or receive, or agree to receive a gratification, or • give, promise to offer a gratification; and Mens rea • the gratification is given or received corruptly; and • serves as an inducement to or reward for, or on account for any person doing or forbearing to do anything. 4.46 There is a separate section — s 6 — which deals with corrupt transactions in respect of an agent, that is, any person employed by or acting for another, and includes a trustee, administrator and executor, and a person serving the Government or under any company or public body. Bribery involving agents carry heavier punishment. 4.47 The courts have established a test in determining whether a gratification is given or received corruptly. The test involves two limbs — the existence of an objectively corrupt element in the transaction and the existence of the accused’s guilty knowledge that what he was doing was corrupt by the ordinary and objective standard (see Chan Wing Seng v PP (1997) at [25]). 4.48 The first inquiry of the existence of an objectively corrupt element can be further broken down into two sub-parts — ascertaining the intention of the giver or receiver (as the case may be) behind the transaction at the material time and determining whether such an intention tainted the transaction with an objectively corrupt element (see PP v Low Tiong Choon (1998) at [29]). 4.49 This begs the question of how the element of “corrupt” is to be defined. The courts have eschewed an exhaustive definition as the factual permutations of corruption can be endless. Instead, they refer to the natural and ordinary meaning of the word as a working guide and a starting point — to induce another to act dishonestly or 162 unfaithfully by bribery, or to pervert a person’s integrity in the performance of duty or work by bribery (see Chan Wing Seng v PP (1997) at [26]). Figure 4.1 shows the elements of bribery. 4.50 In analysing the corrupt element, the surrounding circumstances of the case may be paramount. Surreptitiousness or furtiveness of the transaction, the size of the gratification, the relationship between the parties and the breaking of a rule or code may, as far as relevant, form the necessary circumstances to be analysed and from which the intention of the parties may be inferred (see PP v Low Tiong Choon (1998) at [30]). As the case of Tjong Mark Edward v PP (2015) illustrates, there may be an offence of bribery even if there is no agreement or specific understanding between the giver and the recipient of the bribe. 4.51 The PCA also contains other interesting and important provisions which aid in the enforcement of law against bribery and corruption. For instance, s 8 establishes a presumption of corruption in relation to payments made to government servants, hence shifting the burden of proof to the accused to rebut the presumption. Further, s 37(1) PCA provides for the extraterritorial application of the PCA to Singapore citizens. What this means is that a Singapore citizen can be liable in Singapore for a bribery offence committed outside Singapore. The PCA can pose serious challenges for Singaporeans who travel abroad in the course of work. 163 Figure 4.1 Elements of bribery (4) Insider trading 4.52 Insider trading is essentially the misconduct of using confidential information of a listed company to transact in its shares and thereby benefit unfairly. The rules and provisions relating to insider trading are found in the Securities and Futures Act (Cap 289, 2006 Rev Ed), specifically ss 218 and 219. Section 221 prescribes the criminal liability for such contravention; alternatively, the Monetary Authority of Singapore may bring a civil penalty action against the contravening party under s 232. 4.53 In the case of a “connected person” (defined in s 2), s 218(2) provides the elements of the offence — the connected person is in possession of information 164 concerning that company that is not generally available but, if it were generally available, a reasonable person would expect it to have a material effect on the price or value of the securities of that company (“inside information”), and the connected person knows or ought reasonably to know that the information is inside information. Similarly, in the case of any other persons, s 219(2) provides for the elements of the offence — the person is in possession of inside information and the person knows that the information is inside information. 4.54 Sections 218 and 219 are driven by the “informationconnected” approach, which focuses on the nature of the information and whether it would have a material effect on the price of the shares in question. This is contrasted with the “person-connected” approach which Singapore had previously adopted. This approach emphasised a person’s connection with the company and made it difficult to secure the convictions of external persons who acquired price-sensitive information from an insider (see Lew Chee Fai Kevin v Monetary Authority of Singapore (2012) at [50]). The change in the insider trading regime was made to address the core evil of trading while in possession of undisclosed market-sensitive information (see Singapore Parliamentary Reports, Official Report (5 October 2001) Vol 73 at col 2136). Crimes Involving Lack of Due Diligence 4.55 Whilst intentional crimes are clearly reprehensible, criminal law also often (but not always) castigates negligent conduct. Here, we will discuss two offences — one under the Workplace Safety and Health Act (Cap 354A, 2007 Rev Ed) (“WSHA”) and another under the Companies Act (Cap 50, 2006 Rev Ed). 4.56 The WSHA aims to ensure health and safety at the workplace. It imposes the duty on occupiers and employers (and other persons) in a workplace to take “reasonably practicable” measures to ensure the safety 165 and health of those at the workplace. The term “practicable” means “possible”, and when qualified by the term “reasonably”, the net effect is that reasonable measures are required to be taken. The standard is an objective one. So, for example, an employer will be expected to take such measures as his peers would take. The breach of this duty is an offence under the Act. 4.57 Section 157 Companies Act mandates that a director “shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office”. (As a preliminary point, it is observed that the section combines the director’s duty of honesty with his duty of diligence. Our focus is on the latter duty.) The breach of the section attracts heavy sanctions. 4.58 For the duty to use reasonable diligence, the appropriate test is to ask whether the director has exercised the same degree of skill and diligence as a reasonable director found in his position (see Lim Weng Kee v PP (2002) at [28]). This is an objective test and the standard is not fixed. It is determined by factors including the director’s role in the company, the type of decision being made, the size of the company and the nature of its business. The standard will not be lowered to accommodate any inadequacies in the director’s knowledge or experience, but instead will be raised if the director did in fact hold himself out to possess or actually possesses some special knowledge or experience. 4.59 As explained above, there are statutory provisions which provide for strict liability offences, with the rationale of improving the effective policing of certain kinds of offences. Another is s 5 Employment of Foreign Manpower Act (Cap 91A, 2009 Rev Ed), which prohibits the employment of a foreign worker without a valid work pass or the employment of a foreign worker in contravention of the conditions in the work pass. 166 CONCLUSION 4.60 Criminal law affects individuals and entities, and applies in the personal as well as the business realms. In a modern society, there is an ever increasing body of laws that relate to business. Those involved in the running of a business need to be ever more aware of the applicable laws and to act honestly and diligently so as not to run foul of them. 167 Chapter 5 Business Torts 5.1 5.2– 5.4 5.5 5.6– 5.7 5.8– 5.13 5.14 5.15 – 5.16 5.17 – 5.19 5.20 5.21 5.22 5.23 5.24 5.25 – 5.26 5.27 – 5.28 Introduction Interference with Trade and Economic Interests General Framework Inducing Breach of Contract (1) Knowledge and intention (2) Procurement (3) (4) Breach Damage (5) Justification Inducing Breach of Other Obligations Intimidation (1) Threat (2) Unlawful conduct (3) Damage (4) Two- and three-party liability Conspiracy (1) 5.29 5.30 Conspiracy to injure (a) Combination (b) Predominant purpose to injure 168 5.31 5.32 5.33 5.34 5.35 5.36 5.37 – 5.39 5.40 5.41 5.42 5.43 5.44 5.45 – 5.47 5.48 – 5.49 5.50 5.51 – 5.57 5.58 – 5.61 5.62 – 5.66 (c) Damage (2) Conspiracy by unlawful means (a) Intention (b) Unlawful means Causing Loss by Unlawful Means (1) Intention (2) Unlawful means Malicious Falsehood Introduction Elements of Tort (1) Falsehood (2) Malice (3) Special damage Malicious Falsehood Distinguished from Defamation Defamation Introduction Elements of Tort (1) Defamatory statements (a) What constitutes a defamatory statement (b) (c) Form Interpretation (2) Reference to the plaintiff (3) Publication Defences 169 5.67 5.68 5.69 – 5.70 5.71 5.72 5.73 5.74 5.75 5.76 5.77 5.78 (1) (2) (3) (4) 5.79 5.80 – 5.81 5.82 5.83 5.84 – 5.85 5.86 5.87 5.88 – 5.89 5.90 Justification Fair comment (a) Comment (b) Comment is based on true facts (c) Comment is fair (d) Public interest (e) Effect of malice Absolute privilege (a) Parliamentary proceedings (b) Judicial proceedings (c) Executive matters Qualified privilege (a) Malice (b) Communications between persons with corresponding interests and duties (c) (d) (e) Statements made to protect self-interests Reports of proceedings Matters of public interest (5) Innocent dissemination (6) Offer of amends Remedies Conclusion INTRODUCTION 5.1 In this chapter, first is usually distinguishable usually involve we examine two categories of torts. The referred to as business torts that are from the tort of negligence in that they intentional conduct and, in some cases, 170 indirect harm. The second category — defamation — is primarily concerned with protecting a person’s reputation. INTERFERENCE WITH TRADE AND ECONOMIC INTERESTS General Framework 5.2 At the heart of intentional torts lies a complex policy question: where should the line be drawn between lawful and unlawful interference with another’s economic interests? Inherent in the notion of free competition is the acceptance that one should be able to advance one’s own interests even if it disadvantages others. Yet, it is also clear that competition has to be fair. Seen in this light, a key objective of this area of law is to define the boundaries of fair competition. Cases involving such business or “economic” torts continually seek to strike a proper balance between the two divergent aims of protecting a market participant’s economic interests and that of promoting competition. 5.3 For a start, it should be noted that a person does not commit a tort merely because his activity competes with, or adversely affects, the business of another. In Mogul Steamship Co Ltd v McGregor Gow & Co (1892), the plaintiff shipowners had to carry on their trade at a loss so as to match the extremely favourable terms offered by the defendants, who had formed an association to monopolise the trade. Even though the plaintiffs had clearly suffered economic harm as a result of the defendants’ cooperation, it was held that the defendants had committed no tort. Their action was aggressive and competitive, but not unlawful. 5.4 So when is competition unfair or unlawful? It would appear that competitive activities would only be unlawful if they are intentional, and either involve conduct that is independently unlawful (except for the tort of conspiracy to injure; see paras 5.29–5.31), or which interferes with another’s pre-existing legal rights. 171 Inducing Breach of Contract 5.5 If A, knowing that a contractual relationship exists between B and C, induces C to break his contract with B without any reasonable justification or excuse, and B sustains damage as a result, then A commits a tort as against B. In Lumley v Gye (1853), the plaintiff had contracted with Johanna Wagner, an opera singer, to perform exclusively at his theatre for a specified period of time. Subsequently, however, Wagner refused to honour her contractual obligation with the plaintiff but instead performed at the defendant’s theatre for a higher fee. The court held that the defendant could be liable to the plaintiff in tort if he had knowingly induced or procured Wagner to break her contractual obligation with the plaintiff. (1) Knowledge and intention 5.6 There are two distinct aspects to the mental ingredient of this tort. First, the defendant must be shown to have known of the existence of the contract. Such knowledge may be proven objectively. Thus, it is unnecessary to show that the defendant has actual knowledge of the contract; he may be deemed to possess such knowledge if the existence of the contract is obvious or may reasonably be inferred from the surrounding circumstances. Further, it is unnecessary to show that the defendant has knowledge of the precise terms of the contract. The requirement is also satisfied if a defendant does not in fact know of the existence of the contract at the time of the breach but subsequently learns of it whilst the breach is continuing. 5.7 The second aspect of the mental ingredient requires the defendant to have intended the breach of the contract (see Tribune Investment Trust Inc v Soosan Trading Co Ltd (2000)). This does not, however, mean that the defendant must have acted maliciously, in the sense of ill-will or spite, as the defendant’s motive is largely irrelevant. A defendant is said to have intended the breach of the claimant’s contract only if (1) he intended the breach of the claimant’s contract as an end in itself, or (2) he intended the breach 172 as a means to an end (see OBG Ltd v Allan (2008)). The element of intention will thus be satisfied where the defendant intends the breach of claimant’s contract, or deliberately turns a blind eye to it, but not if he honestly (though mistakenly) believes that the third party’s conduct would not amount to a contractual breach. In Tribune Investment Trust Inc v Soosan Trading Co Ltd (2000), the court observed (at [17]) that the procurer must have intended to interfere with the plaintiff’s contract and that it is “not sufficient that the resulting breach of contract was a mere natural consequence of the defendant’s conduct”. This observation is correct insofar as it reiterates the need for proof of intention to bring about a contractual breach, but it should not be interpreted to require an overly narrow concept of intention. Ordinarily, the relevant intention may be inferred when the defendant knows that a contractual breach is a natural or necessary consequence of his conduct, and that such breach is a necessary or effective means of achieving his desired end. Thus, a party who deliberately procures the breach of its competitor’s contracts so as to improve its own profits cannot then claim that his intention was not to cause the breach but only to enrich himself. (2) Procurement 5.8 Direct persuasion is the most common and straightforward means of procurement. Such persuasion is applied directly on one of the contracting parties and may take the form of peaceful dialogue, or it may be accompanied by bribes, bounties or threats. 5.9 It has been said that the tort may also be committed by a person who knows of a contract between the contract breaker and another, and yet deals with the contract breaker in a way that is inconsistent with that contract. In British Motor Trade Association v Salvadori (1949), the plaintiff association sold cars subject to resale restrictions. The defendants subsequently bought them from third parties in circumstances which they knew were in violation 173 of these restrictions, and were found to be liable for procuring the violation. 5.10 Where the contract breaker is a company, the inducement is direct if it is addressed to the managing director or alter ego of the company (see Yeo Boong Hua v Turf Club Auto Emporium Pte Ltd (2018) at [99]). This must be so since a company, being inanimate, can only act through one of its officers. In the case where a holding company is alleged to have procured its subsidiary’s breach of contract, it is not liable for inducing the breach of contract only because of the control it exercises over the subsidiary (see ARS v ART (2015) at [252]). However, a holding company could be liable for such inducement if the subsidiary had no employees of its own and acted entirely through the holding company’s employees who had not been formally appointed as the subsidiary’s representatives (see Tozzi Srl v Bumi Armada Offshore Holdings Ltd (2017) at [40] and [43]). 5.11 In the past, it was generally thought that a person who employs unlawful means to prevent another from performing his contractual obligations by, for example, kidnapping the contracting party or removing the only available tools needed for performance, is liable for inducing the latter’s breach. In GWK Ltd v Dunlop Rubber Co Ltd (1926), a motor car manufacturer had contracted with the claimants to exhibit, at a forthcoming motor show, cars which were fitted with the claimants’ tyres. Subsequently, however, the defendants unlawfully removed and substituted the claimants’ tyres with their own. The defendants were found liable for inducing the car manufacturer’s contractual breach. The classification of this decision as one involving the tort of inducing a breach of contract has, however, been discredited in OBG Ltd v Allan (2008). Since the defendants in the GWK case did not actually procure the car manufacturer to breach its contract, the claimants’ loss really arose from the defendants’ own unlawful act in the form of trespass against the manufacturer’s property. That being the case, 174 the GWK decision was really an instance of causing loss by unlawful means. 5.12 Similarly, cases involving indirect intervention, which were traditionally explained as instances involving the tort of inducing a breach of contract, should now be understood as instances of causing loss by unlawful means. Indirect intervention occurs when A procures B to commit a wrongful act against C with the intention of disabling C from fulfilling its contractual obligations with D. The intervention is indirect in this case as the defendant, A, does not directly approach the contracting party, C. In J T Stratford & Sons Ltd v Lindley (1965), the defendant trade union embargoed its members against handling goods on barges owned by the plaintiffs. This caused the plaintiffs’ customers (who hired the barges for the carriage of cargo) to breach their contracts of hire with the plaintiffs as they were unable to discharge the cargo and return the barges to the plaintiffs in time. The House of Lords held that the trade union could be liable for procuring these breaches of contracts between the plaintiffs and their customers, even though their interference was carried out indirectly through their members. 5.13 Where the intervention is indirect, liability will only arise if unlawful means are used. In the Stratford case above, this requirement was satisfied as the members who obeyed the embargo were in fact acting in breach of their employment contracts by refusing to handle the plaintiffs’ barges. By contrast, this element was absent in DC Thomson & Co Ltd v Deakin (1952), where the employees of Bowaters (a supplier of paper), who refused to deliver paper to the plaintiffs in response to a boycott organised by the defendant trade union, did not breach their employment contracts because Bowaters had not required the employees to make the deliveries to the plaintiffs. As a result, the trade unions were not liable for procuring the breach of Bowaters’ contract with the plaintiffs. It should, however, be noted that since the defendant’s liability in Stratford hinges on the use of unlawful means to harm 175 (albeit indirectly) the claimant, this category of cases should, following the OBG Ltd v Allan (2008) decision, be viewed as instances of causing loss by unlawful means. (3) Breach 5.14 By definition, the tort only arises where the defendant’s inducement results in the breach of a contractual obligation. The breach may be of a primary or secondary obligation (such as an obligation to pay damages arising from the breach of a primary obligation). It logically follows that there can be no tort where: (1) the induced party has a right to terminate the contract; (2) the contract is void, for instance, on the ground of illegality or incapacity; or (3) the induced party may avoid the contract on some other legitimate grounds. The element does not, however, require that the contract breaker (who acted in response to the defendant’s inducement) be actually liable to the plaintiff. In Torquay Hotel Co Ltd v Cousins (1969), the defendant trade union was found liable for causing Esso’s breach of its contractual obligation to deliver fuel to the plaintiff’s hotel, even though Esso was in fact exempted from liability as a result of an operative force majeure clause in the contract. (4) Damage 5.15 Finally, the plaintiff must prove that he or she has suffered damage as a result of the breach of contract. Thus, in one case, it was held that there was no actionable tort even though the defendant had induced the breach of the plaintiffs’ employment contract. The breach did not cause any loss to the plaintiffs because the employee would not in any event have returned to the plaintiffs’ service (see Jones Bros (Hunstanton) Ltd v Stevens (1955)). 5.16 The damages which are recoverable for this tort include all intended damages, as well as damages which are not too remote at the time of breach. Further, it is not necessary to prove particular damage; damage may be inferred from the circumstances if the breach were of such nature as 176 would in the ordinary course of events inflict injury on the innocent party. Further, the court may, upon the plaintiff’s request and subject to relevant conditions being satisfied (see Chapter 18, paras 18.61 and 18.64), grant injunctions to restrain the defendant from future interferences. (5) Justification 5.17 In exceptional cases, the defendant who has interfered with the plaintiff’s contract may be able to raise the defence of justification. In considering its availability, “regard might be had to the nature of the contract broken; the position of the parties to the contract; the grounds for the breach; the means employed to procure the breach; the relation of the person procuring the breach to the person who breaks the contract; and I think also to the object of the person in procuring the breach” (see Glamorgan Coal Co v South Wales Miners’ Federation (1903) at p 574). 5.18 The defence must relate to the fulfilment of a moral duty of the interferer, and not merely the protection of his personal interests. It is, therefore, insufficient to show that the defendant has acted honestly, or that a trade union or an association is acting in the interests of its members. In Brimelow v Casson (1924), the defendants had induced theatre proprietors to breach their contracts with the plaintiff, a theatrical manager, so as to compel the plaintiff to increase the wages of chorus girls, who were otherwise resorting to prostitution to supplement their meager earnings. The defendants’ conduct was justified as they had a duty to safeguard the moral standards of the theatrical profession. 5.19 Another instance in which justification may arise is where the defendant has to protect a legal right that is equal or superior to that of the plaintiff. In Edwin Hill & Partners v First National Finance Corporation (1989), the defendant bankers, who had made a secured loan to a property developer, was justified in asking the latter to dismiss the plaintiffs and appoint in their place a more prestigious firm 177 of architects for the development project. The reason was that the defendants’ rights to be repaid under the loan agreement were in fact secured by a mortgage over the property being developed, and hence such rights were superior to the plaintiffs’ contractual rights. Indeed, the plaintiffs would have been no better off if the defendants had exercised their right of sale under the mortgage. Inducing Breach of Other Obligations 5.20 Some cases suggest that the tort of inducing breach of contract may be extended to other types of enforceable obligations. Thus, a person may commit a tort if he knowingly and intentionally induces a breach of a statutory duty or an enforceable equitable obligation. As is the case for inducing breach of contracts, it would not be necessary to show that the defendant has employed unlawful means in procuring the breach of these other obligations. Intimidation 5.21 If X threatens to use unlawful means to cause Y to do or refrain from doing some act which he is entitled to do, resulting in harm to Y or a third party Z, X commits the tort of intimidation. In the leading case of Rookes v Barnard (1964), the defendants, executive members of a trade union AESD, threatened British Overseas Airways Corporation (“BOAC”) with a labour strike unless it ceased to employ the plaintiff (Rookes) as its draughtsman. The defendants’ motive was to punish Rookes for terminating his union membership. Fearing the adverse impact of a labour withdrawal, BOAC terminated the plaintiff’s employment by giving due notice in accordance with the employment terms. That being the case, the contract was terminated lawfully and the plaintiff did not have an action against the defendants for procuring breach of contract. However, the defendants’ threat of strike, if carried out, would in fact have been a breach of the workers’ employment terms. The House of Lords held the defendants liable for intimidation: their threat to BOAC involved the use of an unlawful means (that is, breach of 178 contract) which resulted in loss to the plaintiff. This decision extended the law significantly because previously, the tort of intimidation would only have arisen if there were threats of violence and other tortious acts. (1) Threat 5.22 To establish the tort, the relevant threat must be coercive in nature, that is, it has the effect of compelling another to comply with the defendant’s wishes so as to avoid adverse consequences which the defendant may otherwise bring about. For this purpose, “idle abuses” are not threats. Threats must also be distinguished from warnings or advice intended mainly to inform the recipient and therefore generally lack coercive force. In practice, however, this distinction is not always easy to draw. (2) Unlawful conduct 5.23 The threat must also relate to unlawful conduct or means. This element of unlawfulness lies at the heart of the tort. A person does not commit the tort merely because he has made a threat, or made it with ill motives, but because he has threatened the use of unlawful means. However, precisely which types of unlawful conduct would suffice for the purposes of this tort raises difficult issues which will be considered in paras 5.37–5.39. (3) Damage 5.24 The plaintiff must have sustained damage as a result of the defendant’s threat. Such damage would include all intended losses as well as those that are not too remote. (4) Two- and three-party liability 5.25 In Rookes v Barnard, the tort of intimidation arose in a three-party situation where the injured plaintiff was distinct from the victim of the threat. In OBG Ltd v Allan (2008), this three-party tort was explained as a species of causing loss by unlawful means. The tort of intimidation, however, 179 may also arise in a two-party situation. Thus, if A threatens to inflict physical harm on B so as to coerce B to cease a particular trade, B should, in principle, be able to seek damages against A on the ground of intimidation after succumbing to A’s threat. Figures 5.1 and 5.2 illustrate these two forms of the tort. Figure 5.1 Three-party intimidation Figure 5.2 Two-party intimidation 5.26 However, if the tort of intimidation occurs in a two-party situation, and the threatened act is one of a breach of contract, liability may arise in both contract and tort. This means that B may, in addition to the claim in tort, also claim against A in contract for anticipatory breach (see Chapter 16, para 16.43 onwards) or, where he has yielded to the threat, for economic duress (see Chapter 14). The possible overlap of contract and tort principles in such a situation has led a commentator to suggest that a threatened breach of contract should only constitute an unlawful act in a three-party but not a two-party situation (see H Carty, An Analysis of the Economic Torts (2nd ed, 2010) at pp 118–119). Conspiracy 5.27 The tort of conspiracy arises where two or more persons agree on a course of conduct to cause damage to another. A conspiracy to commit an illegal act or to do a legal act by illegal means may also be a criminal offence under s 120A Penal Code (Cap 224, 2008 Rev Ed). In the civil sphere, 180 the tort of conspiracy may take either one of two forms: (1) conspiracy to injure or (2) conspiracy by unlawful means. The distinction between these two forms of the tort is summarised in Table 5.1. Table 5.1 Elements of tort of conspiracy to injure and conspiracy by unlawful means: A Comparison Elements of the tort Conspiracy to injure Conspiracy by unlawful means ✓ ✓ ✓ ✓ ✓ ✗ ✗ ✓ ✓ ✓ Combination Intention to injure Predominant purpose to injure Use of unlawful means Damage 5.28 Because the tort of conspiracy to injure (or simple conspiracy) does not involve the use of any unlawful means, the wrongfulness of the tort lies solely in the fact that the conspirators have acted in concert to harm the plaintiff. This means that the same conduct, if committed by one person acting independently, would have been perfectly lawful. For this reason, this form of conspiracy is often said to be anomalous as it renders an otherwise lawful act unlawful merely by reason of the “magic of plurality”. Notwithstanding that, this tort has been applied by our courts (see Raffles Town Club Pte Ltd v Lim Eng Hock Peter (2012) and SH Cogent Logistics Pte Ltd v Singapore Agro Agricultural Pte Ltd (2014)) and thus appears well entrenched. (1) Conspiracy to injure (a) Combination 5.29 There must be a combination or some concerted action between two or more persons. The agreement between the conspirators need not be express but may be of a tacit nature. The conspirators need not join in at the same time and may indeed have different aims, as the essential 181 question in each case is whether they were aware of the plan and took part in its execution. Directors may conspire with their company since the latter is a separate legal entity. An employer is not conspiring with its employee where the latter merely goes about his or her business, though the employer could be vicariously liable for the conspiracy of his employees committed in the course of their employment. If one’s action facilitates another in causing harm to the victim, such facilitation does not by itself amount to a combination if the former does not have control over or interest in the latter’s acts (see CBS Songs Ltd v Amstrad Consumer Electronics Plc (1988), which concerns the issue of liability as joint tortfeasors, but the same principles appear to apply to the issue of complicity in the tort of conspiracy). Further, the requirement of combination is not satisfied by evidence of mere agreement between the defendants. It must be established that each of the alleged conspirators has acted or taken some step to further the common design of the parties. (b) Predominant purpose to injure 5.30 To establish the tort of simple conspiracy, it must be proved that the predominant purpose of the defendants’ conduct is to inflict damage on the victim. Thus, where it is established that the defendants have been acting in pursuit of a legitimate interest, the fact that damage to the plaintiff is an inevitable or foreseeable result of the defendants’ conduct is insufficient to prove conspiracy to injure. In Crofter Hand Woven Harris Tweed Co Ltd v Veitch (1942), the defendant trade union officials were informed by millowners (whose workers were members of the union) that they were unable to raise the wages of their workers due to competition from the plaintiffs, who operated at lower cost by importing their yarn supplies. Consequently, the defendants acted in combination with the mill-owners to prevent the plaintiffs from obtaining their yarn supplies. Such action did not, however, involve the use of any unlawful means. The House of Lords held that the combination was legitimate as the predominant purpose of the defendants was to protect the industry on 182 which the wages of the workers depended. This suggests that the pursuit of self-interest is generally regarded as legitimate for the purposes of this tort. However, once it is established that the defendants’ predominant motive is to injure the plaintiff, it is of no assistance to plead that their conduct also serves the subsidiary purpose of protecting their own interests. In practice, this requirement for predominant purpose severely restricts the scope of the tort as it is often not difficult to show that the defendants’ conduct is motivated principally by the desire to protect self-interests. (c) Damage 5.31 The tort is only actionable on proof of damage, that is, financial loss. However, the assessment of such damage does not require the proof of particular losses but may be inferred from the circumstances. In Lonrho v Fayed (No 5) (1993), it was held that the plaintiff could not claim damages for injury to reputation and feelings in an action for conspiracy as such damages are more appropriately dealt with under the rules relating to defamation, as discussed below. However, aggravated damages may be recoverable if the defendant’s conduct can be said to be “contumelious or exceptional” (see Li Siu Lun v Looi Kok Poh (2015)). (2) Conspiracy by unlawful means 5.32 This form of conspiracy shares the features of combination and damage, respectively discussed in paras 5.29 and 5.31. Unlike the tort of simple conspiracy, however, it involves the use of unlawful means but does not require the presence of a predominant purpose to harm the victim. The discussion which follows will focus on these two points of distinction. (a) Intention 5.33 A plaintiff seeking to establish liability for unlawful means conspiracy is not required to establish that the defendants 183 had a dominant motive to injure him. Instead, the mental element for this tort is the lower threshold of “an intention to injure” the plaintiff. In Lonrho v Fayed (1992), the plaintiff complained that the defendants had conspired and utilised fraudulent misrepresentations to foil the plaintiff’s plans to acquire a controlling stake in the holding company of Harrods (the famous departmental store in London). The defendants attempted to strike out the plaintiff’s claim, arguing that they had not acted with the predominant motive to injure the plaintiff. Although this was found to be true, the plaintiff nevertheless was allowed to proceed with his claim. It was not necessary to prove that the defendant had acted with the predominant motive to injure the plaintiff. In EFT Holdings Inc v Marinteknik Shipbuilders (S) Pte Ltd (2014), the Court of Appeal further clarified (at [101]) on the requirements of the tort’s mental element as follows: A claimant in an action for unlawful means conspiracy would have to show that the unlawful means and the conspiracy were targeted or directed at the claimant. It is not sufficient that harm to the claimant would be a likely, or probable or even inevitable consequence of the defendant’s conduct. Injury to the claimant must have been intended as a means to an end or as an end in itself. (b) Unlawful means 5.34 In general, the element of “unlawful means” has been construed broadly to include a wide range of unlawful acts such as a breach of contract, a breach of fiduciary duty, fraud, deceit, patent infringement and conversion. However, it is also clear that not every illegality will suffice. So how is “unlawful means” to be determined? One approach that was popular among commentators was to confine unlawful means to actionable civil wrongs (such as a breach of contract, a tort or a breach of equitably duty). Such an approach was based on the view that conspiracy was not an independent tort but a species of joint liability (that is, two or more persons being liable for the same 184 wrong). If accepted, this view would render the tort of conspiracy by unlawful means superfluous as it would add nothing to a claim based on the underlying tort. However, the Singapore courts have thus far preferred the broader approach that “unlawful means” may in this context be constituted by either a civil or a criminal wrong, whether or not such wrong is independently actionable (see Beckkett Pte Ltd v Deutsche Bank AG (2009), EFT Holdings Inc v Marinteknik Shipbuilders (S) Pte Ltd (2014) and The Wellness Group Pte Ltd v OSIM International Ltd (2016)). Given the breadth of “unlawful means” so defined, it is clear that other controlling mechanisms will have to be evolved to limit the scope of this tort. One possibility is to insist on a close causal link between the illegality applied and the plaintiff’s injury. Causing Loss by Unlawful Means 5.35 The tort of causing loss by unlawful means (previously known as unlawful interference with trade) is constituted by two elements, namely, “(a) a wrongful interference with the actions of a third party in which the claimant has an economic interest and (b) an intention thereby to cause loss to the claimant” (see OBG Ltd v Allan (2008) at [47]). Unlike the tort of inducing breach of contract, this tort does not necessarily involve the breach of any pre-existing legal duty owed by the third party to the plaintiff. Also, a defendant is only liable under this tort if he has employed unlawful means, while liability for inducing breach of contract simply requires him to have persuaded or procured the breach. As such, the tort of causing loss by unlawful means is not confined to protecting economic interests arising from contracts, but seeks to protect traders generally against any injury that is inflicted indirectly through an intermediary. The classic example is that of a three-party intimidation, where, for example, A threatens to beat up B if B does not cease its business dealings with C. On these facts, C may sue A for causing C harm through the unlawful threat of battery. The essence of the defendant’s wrongdoing lies in the use of unlawful 185 means to hinder or restrict a third party from dealing with the plaintiff. (1) Intention 5.36 In OBG Ltd v Allan (2008), the House of Lords held that the mental element of the tort requires proof that the defendant either (1) intended harm to the claimant as an end in itself, or (2) intended to harm the claimant as a means of achieving an ulterior purpose. However, it is not sufficient to show that the claimant’s damage is an inevitable, probable or even foreseeable result of the defendant’s conduct. The relevant intention to harm may only be inferred from such knowledge if the injury were also a necessary or effective means of achieving the defendant’s ultimate end. In Douglas v Hello! Ltd, one of the three appeals heard in OBG Ltd v Allan (2008), OK! magazine had contracted for the exclusive right to publish photographs taken at the wedding of Michael Douglas and Catherine Zeta-Jones. Whilst fully aware of this exclusive arrangement, Hello! magazine published a number of unauthorised photographs surreptitiously taken by a paparazzo. OK! sued Hello!, claiming (amongst others) damages for unlawful interference with its trade. Although Hello! was not found to be liable on this ground (see para 5.37), the House of Lords found that Hello! had intended to harm OK! because it knew full well that the publication of the unauthorised photographs would injure OK!’s interests under the exclusive arrangement. Hello! could not be heard to say that it was only acting to defend its own interests as such defence could only succeed at OK!’s expense. This is consistent with the view that there is no requirement for proof of a predominant interest to injure, so that the defendant’s motive in preserving or advancing its own interests does not, by itself, preclude the finding of an intention to injure (see Lonrho v Fayed (1990)). (2) Unlawful means 5.37 The use of unlawful means is the essence of the tort. It is also the most problematic aspect of the tort because not 186 every unlawful act or means would give rise to an action for unlawful interference. In OBG Ltd v Allan (2008), a majority of the House of Lords interpreted “unlawful means” narrowly to guard against the excessive expansion of the tort of unlawful interference. This interpretation is restrictive in two aspects. First, the requirement for unlawful conduct is not satisfied by mere proof of an unlawful act against a third party intermediary that causes loss to the claimant, but requires the additional evidence that the unlawful act is independently actionable by the third party. For this purpose, it suffices if an unlawful act is actionable even if the third party has not suffered any loss. Secondly, the unlawful act must also be one that affects the third party’s freedom to deal with the claimant. The application of this condition was demonstrated in Douglas v Hello! (2008), where the House of Lords held that Hello! was not liable for unlawful interference because it had not (despite its liability to the Douglases for breach of confidence) done anything to interfere with the Douglases’ liberty to deal with or perform the contract with OK!. Hello!’s conduct had merely made OK!’s exclusive contract with the Douglases less profitable. 5.38 Defining “unlawful means” in this way has the effect of narrowing the tort in two ways: first, it means that the tort will only apply to cases of indirect interferences, where the defendant strikes at the claimant through an intermediary; and second, requiring the unlawful act to be separately actionable by the intermediary means that criminal and statutory offences that do not also give rise to a cause of action in civil law would not count as “unlawful means”. More broadly, this interpretation of the tort also makes it clear that this tort is distinct from other business torts such as inducing breach of contract or conspiracy by unlawful means. 5.39 While it is clear that the majority Law Lords’ analyses in OBG Ltd v Allan (2008) have clarified the tort in important ways, difficulties remain as to its precise scope and rationale. For example, the restriction of “unlawful means” 187 to civil actionable wrongs is and will continue to be controversial, for as Lord Nicholls had observed in his dissent, “[in] seeking to distinguish between acceptable and unacceptable conduct, it would be passing strange that a breach of contract should be proscribed but not a crime” (see OBG Ltd v Allan (2008) at [152]). In addition, while the tripartite structure of the tort fits neatly with instances of three-party intimidation, it does not explain two-party intimidation. Does it then follow that two- and three-party intimidation are really two species of tort? In Singapore, the High Court appeared to have accepted in Walton International Group (Singapore) Pte Ltd v Yau Kwok Seng Winston (2011) and Wolero Pte Ltd v Lim Arvin Sylvester (2017) that the tort as expounded in OBG Ltd v Allan (2008) applied in Singapore. However, as the tort was not in fact established in both cases, the question as to how this tort will take shape in Singapore remains to be seen. MALICIOUS FALSEHOOD Introduction 5.40 The common law has long recognised that one’s trade and business interests may be harmed not just by conduct but also by words and representations. Thus we will see in Chapter 13 that the tort of deceit safeguards a person against any injury which directly results from relying on another’s fraudulent statements. In this section, we consider the tort of malicious falsehood, which arises in situations where false representations are made maliciously in order to injure the plaintiff’s goodwill or economic reputation. Elements of Tort (1) Falsehood 5.41 The claimant has to prove that the defendant had practised some form of falsehood. Such falsehood may take the form of oral or written statements or even misleading 188 conduct. Although the tort was originally conceived to protect interests relating to land, it has since been extended to apply to economic interests generally. Thus, a plaintiff’s loss of business resulting from the defendant’s false publication in the latter’s newspaper that the plaintiff has ceased business is actionable (see Radcliffe v Evans (1892)). Obviously, the false representation must bear some relation to the plaintiff, his property or trade. It must also have been published to third persons other than the plaintiff himself, since a publication to the plaintiff alone is unlikely to result in any actual financial damage. (2) Malice 5.42 A defendant acts maliciously if he makes a statement knowing that it is untrue or is reckless as regards its truth, that is, not caring whether it is true or false. However, mere negligence is not malice. Evidence of personal ill-will and spite, or an intention to injure would suffice in proving malice (see also para 5.79). Special damage 5.43 At common law, a plaintiff has to prove that he has suffered special damage as a result of the falsehood practised by the defendant. Such damage could include, for instance, diminution in asset values and general decline in sales and custom. This requirement for special damage has, however, been modified by legislation. Under s 5 Defamation Act (Cap 75, 2014 Rev Ed), it is not necessary to prove special damage in an action for malicious falsehood if the words or statements complained of are published in writing or permanent form, or where the words used are calculated to cause pecuniary damage to the plaintiff in respect of any office, profession, calling, trade or business held or carried on by him at the time of publication. Malicious Falsehood Distinguished from Defamation 189 5.44 As the tort of malicious falsehood is essentially concerned with protecting trade reputation, there is an obvious resemblance between this tort and the tort of defamation, which we shall examine in the following part. Indeed, these two torts may often overlap and in such situations, the plaintiff will have a choice of which action to pursue. Nonetheless, it must be remembered that the elements of the two torts are different. For malicious falsehood, the operative statements must be false, but they need not relate to either the plaintiff’s reputation or character, or impute a defamatory meaning. Further, malicious falsehood is actionable upon proof of malice, but malice is not generally an element of defamation. Finally, malicious falsehood is essentially founded on the proof of special damage resulting from the defendant’s false representations, but substantial damages may generally be claimed in a defamation suit without proof of particular damage (other than instances of slander, which require proof of particular damage). DEFAMATION Introduction 5.45 The law of defamation protects a person’s reputation and good name. Although it is not immediately concerned with the safeguard of economic interests, yet the relationship between a good name and economic interests is far from distant. Where individuals are concerned, a disparaging remark could, at worst, destroy a person’s livelihood. For businesses, reputation and goodwill are now commonly regarded as one of the most significant assets and thus any damage to these would in all likelihood translate directly into significant financial losses. 5.46 This section will only provide an introductory account of the law. However, the reader should note that this is in fact a complex subject as it strives to balance the competing demands of two very important concepts of liberty: the right to free speech and the right to protect one’s reputation. In modern economies, the difficulties 190 surrounding this delicate balancing exercise have been compounded by the revolutionary impact of the Internet, elevating the problems to a transnational level. 5.47 Several preliminary comments are in order. First, the law of defamation is essentially constituted by and developed through case law. The Defamation Act (Cap 75, 2014 Rev Ed) (“DA”) does not supplant the common law but merely modifies it in a limited number of ways. Secondly, the making of a defamatory statement may in some circumstance also constitute a criminal offence under s 499 Penal Code (Cap 224, 2008 Rev Ed) (“PC”). The elements of (and defences to) the criminal offence do, however, materially differ from the civil tort. For instance, it is an element of the criminal offence that the accused must have made the publication with the intention to harm the reputation of the defamed party, or knows or has reason to believe that such injury would result (see s 499(1) PC). By contrast, the defendant’s subjective state of mind is not an element of the civil wrong. The discussion that follows will focus on the civil tort alone. Thirdly, a defamatory publication may take either of two forms: where the publication is made in a permanent form, it is published as a libel; and where the mode of publication is temporal or transient, the tort is actionable as a slander. It is important to distinguish between these two forms because damages are presumed to result from a libel and hence it is actionable without proof of special damage, that is, actual and material loss capable of being measured in monetary terms. By contrast, an action for slander would require the proof of special damage unless it falls within certain common law and statutory exceptions (see, eg, ss 4 and 5 DA). Finally, although a defamation suit may be brought by both individuals and corporations, a corporation, unlike an individual, is not presumed to have a reputation. Thus, a corporation is required to prove that it has a trading reputation in this jurisdiction as a pre-requisite for bringing a defamation suit (see Qingdao Bohai Construction Group Co, Ltd v Goh Teck Beng (2016)). 191 Elements of Tort (1) Defamatory statements (a) What constitutes a defamatory statement 5.48 There is no single exhaustive test for determining whether a statement is of a defamatory nature, but it is often said that a defamatory statement is one which exposes the plaintiff to “hatred, contempt or ridicule” (see Parmiter v Coupland (1840) at p 108), or which “[lowers] the plaintiff in the estimation of right-thinking members of society” (see Sim v Stretch (1936) at p 1240) or which causes him to be shunned or avoided. A statement is defamatory if it has the tendency to excite adverse opinion against the plaintiff, though it is not necessary to prove that such adverse opinion has in fact arisen. The question whether a statement is defamatory must not be confused with the question of its truth. A statement is not defamatory by reason only that it is untrue, though a defendant may invoke the defence of justification by proving that the statement was true (see para 5.67). 5.49 The standard of opinion to be applied is the views of “rightthinking members” of society. This is an objective standard and hence the subjective intention of the maker of the statement is irrelevant. Thus, a statement is not defamatory merely because the maker of the statement intends to injure the plaintiff. The views of the community must be considered as a whole and not just that of a limited class. A statement is therefore not defamatory if it is only regarded as disparaging by a group whose views are so radical as not to be fairly representative of the community. Strong language, vulgarities and words spoken in the heat of the moment are not defamatory if a reasonable person would understand them to be no more than mere abuses or insults, the literal meaning of which is not intended. (b) Form 192 5.50 Other than spoken or written words, defamatory assertions may also take the form of cartoons, caricatures, visual images, statues, signs and gestures. In all cases, however, the test for determining whether a defamatory imputation arises remains the same. (c) Interpretation 5.51 To decide if a statement is defamatory, the court first construes or interprets the statement to ascertain its natural and ordinary meaning, that is, the meaning which would be conveyed to “ordinary persons using their general knowledge and common sense” (see Lee Kuan Yew v Davies (1989) at [33]). For this purpose, the court has to (somewhat artificially) ignore the fact that words may mean different things to different people and seek to ascertain its one and only meaning. In some cases, a statement is defamatory because its natural and ordinary meaning bears a clearly adverse imputation; for example, A is a liar or a murderer. In other cases, the disparagement does not arise directly but may be reasonably inferred by ordinary persons not guided by any special knowledge. 5.52 In Chan Cheng Wah v Koh Sin Chong Freddie (2012), the Court of Appeal identified (at [18]) the following as the relevant principles for determining the natural and ordinary meaning of words: (a) the natural and ordinary meaning of a word is that which is conveyed to an ordinary reasonable person; (b) as the test is objective, the meaning which the defendant intended to convey is irrelevant; (c) the ordinary reasonable reader is not avid for scandal but can read between the lines and draw inferences; (d) where there are a number of possible interpretations, some of which may be non-defamatory, such a reader will not seize on only the defamatory one; (e) the ordinary reasonable reader is treated as having read the publication as a whole in determining its 193 meaning, thus “the bane and the antidote must be taken together”; and (f) the ordinary reasonable reader will take note of the circumstances and manner of the publication. 5.53 When interpreting an allegedly defamatory statement, one has to be clear as to the precise level of defamatory meaning attributed to the statement. For example, a statement may suggest that a claimant has committed a wrongful act, or that there are reasonable grounds for suspecting that such an act has been committed, or that there are grounds for investigating whether the act has been committed (see Ng Koo Kay Benedict v Zim Integrated Shipping Services Ltd (2010) at [16]–[17], citing Chase v News Group Newspapers Ltd (2003)). Once a plaintiff has pleaded that an allegedly offending statement bears a particular meaning, the court may not ascribe to it a more defamatory meaning than that pleaded by the plaintiff. There is, however, no restriction on the imputation of a less injurious meaning (see Review Publishing Co Ltd v Lee Hsien Loong (2010) at [128]). 5.54 A defamatory imputation may also arise by way of an innuendo. This occurs where the words or expressions used are prima facie innocuous, but could in fact convey a disparaging meaning when made to persons who have knowledge of special facts which are not otherwise generally known. Such innuendos are commonly referred to as “true” or “legal” innuendos. In one case, the defendant newspaper published the picture of Mr C with Ms X together with an announcement that Mr C and Ms X were to be engaged. Although both the picture and the words were not objectionable in themselves, they were found to be defamatory of the plaintiff (Mrs C, the lawful wife of Mr C) as they suggested to those who knew that the plaintiff lived with Mr C as his wife that she was doing so out of wedlock and was therefore an immoral woman (see Cassidy v Daily Mirror Newspapers Ltd (1929)). The adverse imputation did not therefore arise directly from the published materials but as an extended meaning 194 established by reference to the special facts known to those to whom the publication was made. 5.55 Legal (or true) innuendos must be distinguished from “false” innuendos. The latter refers to inferences which may reasonably be drawn from the plain wording of the statements without any reference to external facts or evidence. False innuendos are therefore really part and parcel of the natural and ordinary meaning ascribed to statements. In practice, it is not always easy to distinguish between a legal and a false innuendo. However, a useful clue lies in whether the facts relied upon to support the innuendo are indeed known only to a select group of people or generally known to the public. In the latter case, the inference would be in the nature of a false innuendo. In Chiam See Tong v Ling How Doong (1997), the internal strife amongst the members of the Singapore Democratic Party (“SDP”) culminated in the issue of a statement by the defendants (members of the SDP’s executive committee) calling for the cessation of the claimant’s party membership. The claimant alleged that the statement gave rise to various defamatory innuendos including, inter alia, that he was a puppet, stooge or lackey of the People’s Action Party and that he was not a man of principle and honour as he had betrayed the interests of his own party. It was held, however, that the claimant could not rely on the events leading to the issue of the statement as “special facts” supporting the alleged legal innuendos since these facts were well-known to the public at large. Thus, the proper approach was to examine the statement and ask if the natural and ordinary meaning of the words would, having regard to the state of knowledge of the general public, give rise to the imputations alleged by the claimant. 5.56 It is important to distinguish between the different ways in which defamatory imputations arise because the evidentiary and pleading rules differ according to the type of imputation alleged. Thus, where it is alleged that words are defamatory on their natural and ordinary meaning, the plaintiff need only plead the words themselves. In fact, no 195 evidence regarding the sense in which the words are understood is admissible as such meaning should be apparent from the words themselves. In the case of false innuendos, the claimant will have to plead the meaning he ascribes to the words since such meaning will not be apparent from the bare words themselves. 5.57 As regards legal innuendos, the plaintiff will have to plead the special facts giving rise to the innuendo and adduce evidence that such facts were in fact known to one or more persons to whom the statement is published. It is possible that a particular publication may be defamatory both on its natural and ordinary meaning as well as on the basis of legal innuendos arising therefrom but such a pleading would in fact give rise to two separate causes of action. (2) Reference to the plaintiff 5.58 A defamatory statement must be one which has been published of and concerning the claimant. It is not necessary that the claimant be expressly identified in the statement; it is sufficient if ordinary and sensible people who are acquainted with the claimant or who have knowledge of the special facts might reasonably understand the words to be referring to him. Where the claimant is clearly identified, he may sue for defamation even if the statement was intended to refer to some other person with the same name or identification (see Hulton v Jones (1910)). Generally, the subjective intention of the maker of the statement is irrelevant in determining whether the statement is made with reference to the claimant. 5.59 A plaintiff cannot rely on “self-identification” to establish an action in defamation. Thus, if an allegedly defamatory publication does not specifically refer to the plaintiff but the plaintiff subsequently identifies himself (to third parties) as the subject of that publication, he cannot rely on his own identification to establish that the publication refers to him (see Golden Season Pte Ltd v Kairos Singapore Holdings Pte Ltd (2015) at [49]). 196 5.60 Where the defamatory statement is made in the course of a “thread” of conversation or comments, which commonly occurs in social media, the entire thread would usually constitute a singular publication so that it should be read as a whole to decide whether the publication sufficiently identifies the plaintiff. In Golden Season Pte Ltd v Kairos Singapore Holdings Pte Ltd (2015), the defendant initially made several Facebook posts complaining of cheating, malpractices and copyright infringement without identifying the plaintiff. However, the plaintiff responded to the posts in a manner that implicitly identified itself as the subject of the complaints. Although such self-identification was, by itself, insufficient, the defendant’s subsequent response had the effect of confirming the plaintiff’s identity and thus constituted adequate reference to the plaintiff. The court arrived at this conclusion by interpreting the initial Facebook post and its subsequent comments as a singular publication since that was, in its view, the norm amongst users of social media. 5.61 Where a castigating statement is made in respect of a class, it may be more difficult to prove that the statement refers to a particular member of that class. This is because such statements are often in the nature of exaggerated generalisations that are not intended to be taken seriously. Thus, a remark to the effect that all lawyers are liars is not usually actionable unless it could be proven to be referring to a particular individual. However, there is no rule that an individual may not sue for defamation on a statement directed at a class. Ultimately, the test is whether, on its true construction, the statement could be understood by a third person as referring to the plaintiff (see Knupffer v London Express Newspaper (1944)). This may be the case where the allegation is specific and the class is determinate. In DHKW Marketing v Nature’s Farm Pte Ltd (1999), the defendant had in its advertisement claimed that it was the only distributor of the “original” pycnogenol. This was found to be defamatory of all other distributors who had also advertised their products as “original” pycnogenol, as it suggested that the latter were passing off their products as those of the defendant. The plaintiff, one 197 of those other distributors, thus succeeded in its action against the defendant for defamation. Even though the advertisement did not make explicit reference to the plaintiff, it was sufficient that the plaintiff was a member of a determinate class of persons that the defendant had defamed. (3) Publication 5.62 An action for defamation also requires proof that the allegedly defamatory matter has been published, that is, that the defamatory matter has been made known to a third person other than the plaintiff. Thus, a person cannot complain of being defamed if the defamatory matter was communicated to him alone. The rationale is that a person’s reputation is the esteem with which others regard him and not his self-estimation. The requirement is only satisfied where the defamatory meaning of the words has been conveyed. For that reason, there is no publication if the person to whom the matter is communicated does not understand the language in which it is expressed. 5.63 It is not necessary to prove in every case that the defamatory matter has in fact been shown or communicated to a third person. It is sufficient if the plaintiff could show that the statement or material would, in the ordinary course of events, be reasonably expected to come to the attention of third parties. Thus, if a libel is written on the back of a postcard and sent by post, it may reasonably be assumed that its content has been read by third parties in the course of delivery. Similarly, it could be reasonably foreseen that a defamatory letter sent to a woman in a sealed envelope may be opened and read by her husband. Conversely, the original maker of the statement is not liable if it is not reasonable to anticipate that a statement would be communicated to a third party. Thus A is not liable if he sends a defamatory letter addressed to B but the letter is in fact opened by C, who is not authorised to do so. 198 5.64 To prove that materials disseminated through the Internet have been published in a particular jurisdiction, it is necessary to show that the materials have been accessed and downloaded by readers in that jurisdiction (see Qingdao Bohai Construction Group Co, Ltd v Goh Teck Beng (2016)). Publication may also be inferred if a site has many subscribers from that jurisdiction. However, the mere fact that the materials are publicly accessible is not sufficient. In practice, this does not impose an onerous burden of proof since all that is required is evidence that one person other than the defamed person has accessed the site. Likewise, an email is published in a jurisdiction when it has been received and read by someone other than the defamed party in that jurisdiction. It should, however, be noted that an action for defamation may be struck out as an abuse of process if the reputational damage caused by the publication is trivial due, for example, to its limited publication (see Yan Jun v AttorneyGeneral (2015)). Liability for defamation is not restricted to the original author. Once the fact of publication is established, every person who publishes, or procures or takes part in a publication is liable as a publisher. Where a defamatory statement has been reproduced, liability generally lies with the party responsible for the reproduction and not the original maker of the statement. Hence, the journalist, newspaper and printer of a libellous article are liable for repeating libellous remarks even when they have attributed such remarks to the original sources (though such attribution may be a relevant mitigating factor for purposes of assessing damages). Where, however, the originator of the statement has intended or authorised the third parties to whom the statements were made to publish them, then he will be liable for their subsequent publication together with the third parties (see Lee Kuan Yew v Chee Soon Juan (2003)). 5.65 A person may also be liable for publishing a defamatory statement if he has control over its publication but fails to withdraw it from third-party access even after he has been informed of its defamatory character (see Byrne v Deane (1937)). In the modern context where much of public 199 communication is transmitted through the Internet, the question has arisen as to whether providers of Internet publishing platforms could incur liability as “publishers” on this ground. In the UK, it is established that a provider is not liable as a secondary publisher if it does no more than facilitate the publication of a defamatory statement and has neither knowledge of nor control over its content (see Tamiz v Google (2013)). This is consistent with the defence of innocent dissemination at common law (see para 5.86). 5.66 In Singapore, this defence of innocent dissemination has been statutorily reinforced by s 26(1)(a) Electronic Transactions Act (Cap 88, 2011 Rev Ed) (“ETA”). The provision makes clear that a network service provider (“NSP”) is not liable for the “making, publication, dissemination or distribution” of third-party materials if the NSP has done no more than merely provide access to such materials. However, an NSP in the UK who fails to promptly remove untrue and offensive postings after having been informed of the same may not rely on the (English) statutory defence of innocent dissemination because its conduct could not fairly be said to be innocent (see Godfrey v Demon Internet Ltd (2000)). In Tamiz v Google (2013), the English Court of Appeal held that Google was a publisher of a defamatory blog post because it had failed to remove the post within a reasonable period of time after it had been alerted to its offensive content (although the claim was ultimately dismissed as an abuse of process as the resultant damage was likely trivial). Similar attempts have been made to impose liability on search engine providers as secondary publishers. In Metropolitan International Schools Ltd v Designtechnica Corpn (2011), the English High Court held that a search engine operator (Google) could not be liable for the snippets of libellous statements reproduced in the search results because it has taken no positive step except provide the use of a fully automated search service. Whether or not a search engine operator could be liable as a publisher after it has been notified of the offending material would depend on the action taken in response to 200 the complaint. In that connection, it is important to bear in mind that, unlike a web host, the operators of search engines do not have control over the content hosted on the Internet. While they may block the display (but not access) of specific websites, they have no control over the search terms entered by the users, and may not be able to block specific words without also blocking a huge amount of other non-offending material. Defences (1) Justification 5.67 As we have noted (see para 5.48), it is not part of the plaintiff’s case to prove that the defamatory statement is untrue. The defendant may, however, raise the defence of justification by proving that the defamatory statement is true in substance and in fact. The onus is on the defendant to demonstrate that the substance or gist of the charge is true, but he is not required to substantiate every detail or comment that does not materially add to the main charge (see further, s 8 DA). Obviously, the justification must relate to the precise words that are the subject of the claimant’s complaint and not a version which is materially different from that asserted by the plaintiff. It must also relate to the full breadth of the offending statement. Thus, the defence would fail in relation to an allegation that the plaintiff is a “libellous journalist” if it were merely proven that he had once incurred liability for libel because a single incident would not justify the imputation that the plaintiff is habitually libellous (see Wakley v Cooke (1849)). Where an innuendo is pleaded, both the basic facts of the offending statement and the innuendo will have to be justified. If a defamatory statement comprises a comment, the defendant must establish both the truth of the facts on which the comment was based and that the comment itself was warranted on those facts (but see para 5.70 on the distinction between this defence and that of fair comment). Generally, where justification is established, it acts as a complete defence against the plaintiff’s claims. Significantly, however, it has been observed, obiter, in the 201 unreported decision of Arul Chandran v Chew Chin Aik (2000) that exceptionally, public policy may intervene to defeat the defence of justification where the defendant has engaged in malicious muck-raking by resurrecting events of buried past with the sole intention of inflicting injury on the plaintiff. (2) Fair comment 5.68 This defence seeks to protect honest and fair criticisms on matters of public interest. The defence succeeds where it can be established that: (1) the words complained of are in the nature of a comment; (2) the comment is based on true facts; (3) the comment or opinion expressed is fair; and (4) it relates to a matter of public interest. (a) Comment 5.69 The defence only applies to statements which are in the nature of a comment or opinion, as opposed to assertions of facts. This distinction has to be determined objectively, that is, “whether an ordinary reasonable reader on reading the whole article would understand the words as a comment or a statement of fact” (see Lee Kuan Yew v Davies (1989) at [54]). This distinction is not always obvious, as the same words may be factual in one context and yet constitute a comment in another. This was illustrated by LP Thean J, who observed in Davies that “if it is said of a member of the Bar that he is unfit to be a member of the Bar, that statement by itself is one of fact. On the other hand, if the same statement was prefaced by a statement that the member of the Bar has been convicted of cheating, then the statement becomes a comment” (at [53]). Ultimately, the answer would depend on the nature of the imputation made, as well as the context and circumstances in which the words are published. 5.70 The restriction of the fair comment defence to expressions of opinion serves as an important distinction between the defences of fair comment and justification, since the latter 202 applies to both facts and opinions. Further, a defendant pleading fair comment is not required to prove the truth of the comment, but only that it is fair and honestly held. If justification is sought in respect of an opinion, the defendant will have to satisfy the more onerous burden of proving that the opinion expressed is correct. (b) Comment is based on true facts 5.71 A fair comment must be based on true facts. It is not necessary to prove that all the facts pleaded in support of the comment are true, but only those facts that are material and sufficient to form the basis of the comment (see further, s 9 DA). A defendant may not rely on facts which only arise subsequent to the publication to substantiate his comments. It seems, however, that reliance may be placed on facts which are publicly known at the time of the publication even if they are not specifically set out in the publication containing the offending comment. (c) Comment is fair 5.72 A comment is fair if it is an opinion which could be honestly held by a fair-minded person and “every allowance or latitude is to be given for any prejudice and exaggeration entertained by such a fair-minded man” (see Lee Kuan Yew v Davies (1989) at [70]) in making the assessment. This requirement does not therefore mandate a balanced or impartial view and may even admit comments that are biased, exaggerated or wrong. Ultimately, the honesty (or lack thereof) with which the opinion is held is the most critical factor in each case. (d) Public interest 5.73 A matter is of public interest if it is “such as to affect people at large, so that they may be legitimately interested in, or concerned at, what is going on; or what may happen to them or others” (see London Artists Ltd v Littler Grade Organisation Ltd (1969) at [391]). This requirement reflects 203 the rationale underlying the defence: that honest criticism is essential to the proper and efficient management of public institutions and offices. Examples of matters of public interests include matters relating to politics, religion, public acts of public figures, workings of public institutions, publications, performances and any other works intended for public consumption. (e) Effect of malice 5.74 The defence of fair comment will be defeated if the plaintiff succeeds in adducing evidence that the defendant’s comments are in fact motivated by malice. The presumption is that a comment that is coloured or distorted by malice cannot be fair. So long as the element of malice is established, the defence cannot stand even if the same comment could have been made by some other person honestly and without malice (see Thomas v Bradbury, Agnew & Co Ltd (1906)). It has previously been assumed that the test of malice is identical for both the defences of fair comment and qualified privilege (see para 5.79). In Cheng Albert v Tse Wai Chun Paul (2000), however, the Hong Kong Court of Final Appeal held otherwise. For the purposes of qualified privilege, malice is proved once the defendant misuses the privileged occasion for some purpose other than that for which the privilege is accorded. In comparison, a fair comment could only lose its immunity by proving that the defendant did not genuinely hold the view he expressed. Honesty of belief is thus the touchstone, and actuation by spite, animosity, intent to injure or other motivation did not of itself defeat the defence of fair comment. In Singapore, this distinction has also been affirmed by the Court of Appeal in Basil Anthony Herman v Premier Security Co-operative Ltd (2010). (3) Absolute privilege 5.75 This defence arose from the law’s recognition that there are occasions on which one must be assured complete liberty to express oneself without the fear of incurring liability for defamation. Once a communication or 204 publication falls within the recognised categories of protected occasions, no civil action may be commenced by anyone in respect thereof. The privilege accorded is absolute because it may not (unlike matters protected by qualified privilege as to which see para 5.79) be defeated even by evidence that the privileged publication has been actuated by malice. The various occasions on which absolute privilege arises are discussed in paras 5.76–5.78. (a) Parliamentary proceedings 5.76 Absolute privilege is accorded to all parliamentary proceedings pursuant to the provisions of the Parliament (Privileges, Immunities and Powers) Act (Cap 217, 2000 Rev Ed) (“PPIPA”). Members of Parliament are therefore immune from both civil and criminal law suits for any potentially slanderous remarks made in the course of parliamentary proceedings. The immunity is extended to all reports, papers and journals relating to such proceedings, the publication of which is directly authorised by Parliament. The reproduction of extracts from such materials is, however, only accorded qualified privilege (see ss 7 and 8 PPIPA). (b) Judicial proceedings 5.77 The privilege attached to judicial proceedings is founded primarily on the common law. No action may be brought against any person taking part in a legal suit including judges, counsels, witnesses and parties. The protection is available for all stages of judicial proceedings. The same privilege also attaches to statements made in the course of proceedings in tribunals or bodies recognised by law and acting judicially. Under s 11 DA, a fair, accurate and contemporaneous report of judicial proceedings which are publicly heard is absolutely privileged, and the same applies to any comment on such report if the comment is “fair and bona fide”. However, gratuitous complaints to prosecuting authorities are protected only by qualified privilege and not absolute privilege. This strikes an appropriate balance between encouraging the public to 205 report unlawful conduct to relevant authorities and ensuring that individuals are not vexed and harassed by malicious complaints (see Goh Lay Khim v Isabel Redrup Agency Pte Ltd (2017)). (c) Executive matters 5.78 Some cases have held that certain communications made by ministers and civil servants concerning the affairs of the state are absolutely privileged. Thus, the advice given by a minister to the Government and official communications made between officers of state in the course of their duty would fall within the province of this defence. The exact ambit of this head of absolute privilege is, however, unclear. The general view appears to be that it is not a blanket protection of all communications made within the civil service. (4) Qualified privilege (a) Malice 5.79 Unlike the defence of absolute privilege, qualified privilege does not afford the defendant complete immunity regardless of his motives. Thus, where it is shown that the offending communication is made by the defendant maliciously, the plea of qualified privilege cannot be maintained. Malice is the use of a privileged occasion for an indirect or wrongful purpose, that is, a purpose other than that for which the law confers protection. Thus, a defendant acts maliciously if he makes a statement with the dominant purpose of causing injury to the plaintiff, since such a purpose would clearly not be condoned by the law (see Lim Eng Hock Peter v Lin Jian Wei (2010)). A defendant who publishes a defamatory statement knowing it to be false acts maliciously for an improper motive unless he is under a legal duty to pass on the information without endorsing it. For this purpose, knowledge includes reckless indifference to the truth, but mere carelessness would not be sufficient. Malice may also be inferred from the publication itself, as where the words used are greatly 206 exaggerated or bear little or no relation to the facts, or where the publication is disseminated to a much wider group of people than is in fact warranted. Evidence of the parties’ relations before and after the publication, as well as the defendant’s conduct in the course of the proceedings, will also be relevant to the question of malice. (b) Communications between persons with corresponding interests and duties 5.80 If A has an interest or duty (whether legal, social or moral) to communicate information regarding B to C, and C has a corresponding interest or duty to receive that information, then such communication is protected by qualified privilege even if it is in fact defamatory of B. Since the privilege is founded on the respective interests and duties of the communicating parties, it logically follows that it will only extend to communication which is relevant to such duty and interests; extraneous and unconnected statements are therefore not protected. Character references given by employers in respect of former employees (see Kelly v Partington (1833)) and communications made by solicitors in furtherance of clients’ interests (see Wee Richard v Wong Meng Meng & Partners (1995)) are some examples of privileged communications. Announcements made by a listed company pursuant to the relevant listing rules would also be privileged as the company is under a legal duty to publish the information while the shareholders and investing public have corresponding interests in receiving the information (see Hady Hartanto v Yee Kit Hong (2014)). Ultimately, the question whether the parties have corresponding duties and interests to give and receive the relevant information is a factual enquiry, but “some vague, ill-defined sense of moral or social duty to communicate the said information” will clearly not suffice (see Goh Lay Khim v Isabel Redrup Agency Pte Ltd (2017) at [80]). 5.81 The reciprocity of duty or interest between the speaker and the recipient is an essential feature of this defence but that 207 does not require the respective interests or duties of the two parties to be identical. In Watt v Longsdon (1930), the defendant, a director of the Scottish Petroleum Company (“SPC”), received a letter from one B (a manager of SPC’s operations in Morocco), accusing the claimant (the managing director of the same operations) of immorality, drunkenness and dishonesty. The defendant replied to B stating his own suspicions of the same conduct and showed it to S, the chairman of SPC, as well as the defendant’s wife. All the allegations against the plaintiff were unfounded. It was held that the publication of the reply to B and S was clearly privileged. The defendant and B, being employees of the same company, had a common interest in the affairs of the company. The defendant also owed a moral duty to inform S, whose interest in the matter arose from the fact of the plaintiff’s employment by the company and the fact that he might be required to provide testimonials to the plaintiff’s future employers. The publication to the plaintiff’s wife was, however, not privileged. Whilst the wife undoubtedly had an interest in any information relating to her husband’s conduct, the defendant had no interest or duty to communicate the information to her particularly in view of the doubtful source from which the information was derived. (c) Statements made to protect self-interests 5.82 Qualified privilege is also conferred on statements made with a view to defending the defendant’s own interests. If, for instance, a defendant has been accused of cheating, he may legitimately respond by denying the accusation and accuse the plaintiff of lying. Again, such privilege would only be available to the extent necessary for the protection of the defendant’s interests and would not attach to excessive or extraneous remarks (see Adam v Ward (1917)). In other words, this defence “only enables the defendant to repel the charges made against him by the plaintiff, but not to bring fresh and irrelevant accusations against the plaintiff” (see Review Publishing Co Ltd v Lee Hsien Loong (2010) at [158]). Thus, a defendant who has been accused of cheating may counter 208 that the plaintiff is lying, but he may not assert that the plaintiff is himself a thief. (d) Reports of proceedings 5.83 At common law, reports of parliamentary and judicial proceedings which are fair and accurate are the subject of qualified privilege. Although there are now legislative provisions conferring absolute privilege on reports of both parliamentary and judicial proceedings (see paras 5.76– 5.78), the privilege conferred at common law remains relevant as it affects a much broader class of reports. Significantly, s 12 DA expressly preserves the availability of qualified privilege for newspaper reports of parliamentary and judicial proceedings and extends the privilege to similar reports of proceedings in the Commonwealth. (e) Matters of public interest 5.84 In the UK, the House of Lords decision in Reynolds v Times Newspapers Ltd (2001) was said to have ushered in a media-friendly regime that gave priority to free speech over the protection of reputation. In that decision, the court accepted that defamatory material may be privileged if it relates to a matter of public interest and if the defendant satisfies the “responsible journalism test”. In deciding whether the “responsible journalism test” is satisfied, the court has to take into account the seriousness of the allegation, the nature, source and status of the information, the steps taken to verify the information, the urgency of the matter, whether comment was sought from the plaintiff, whether the article contained the gist of the plaintiff’s side of the story, the tone of the article and the circumstances (including the timing) of the publication (see Reynolds v Times Newspapers Ltd (2001) at p 205). These factors are not individual hurdles that a defendant has to cross, but should be looked at as a whole in deciding whether the defendant has acted responsibly and fairly in the investigation and research of the subject matter (see 209 Jameel (Mohammed) v Wall Street Journal Europe Sprl (2007)). 5.85 In Review Publishing Co Ltd v Lee Hsien Loong (2010), the Court of Appeal clarified that the Reynolds privilege did not form part of the common law of Singapore. If the defence were to be adopted, it would have to be justified as an aspect of a citizen’s constitutional right to freedom of expression under Art 14(a) of the Singapore Constitution. Thus, the crucial question was whether a citizen’s constitutional right to free speech ought to be underpinned by the Reynolds rationale, so that “constitutional free speech becomes the rule and restrictions on this right become the exception” (see Review Publishing Co Ltd v Lee Hsien Loong at [266]). On the facts of the case, this was not an issue because the defendant, not being a Singapore citizen, did not have the standing to invoke a citizen’s constitutional rights. Nevertheless, the Court of Appeal acknowledged that it was an important question insofar as Singapore citizens were concerned, and one that was likely to be raised again in the future. When such occasion arises, the presiding court has to be mindful of the extent to which they could properly decide where the balance between free speech and protection of reputation ought to lie, bearing in mind that the question is ultimately one that calls for value judgment against the backdrop of local political and social conditions. (5) Innocent dissemination 5.86 A person who, not being the author, first or main publisher and printer of a defamatory statement, participated in the distribution of such a statement may be free from liability on account of innocent dissemination, if he can prove that he did not know that the printed material contained a libel, that there was nothing in the circumstances or the work that could have alerted him to its libellous content and that such ignorance was not due to any negligence on his part (see Vizetelly v Mudie’s Select Library Ltd (1900)). This defence generally protects innocent intermediaries such as retail vendors, libraries and delivery agents. 210 (6) Offer of amends 5.87 Section 7 DA allows a person who has innocently defamed another to acquire a defence against liability by making an “offer of amends”. Such an offer must include the offer to publish a public apology to the aggrieved party and to take such steps that may be reasonably practical to inform those to whom copies of the original publication have been distributed that the content of the publication is alleged to be defamatory of the aggrieved party. If the offer of amends is accepted by the aggrieved party and is duly performed, then the aggrieved party may not take any legal action, or in the event where such action has already been commenced, may discontinue such proceedings. If, however, the aggrieved party does not accept the offer of amends, then such an offer shall constitute a defence against any libel or slander suit instituted by the aggrieved party against the publisher. Remedies 5.88 Where a plaintiff succeeds in a defamation suit, damages would generally be awarded to compensate him for the loss of his reputation. Except for cases of slander, which require proof of special damage (see para 5.47), damages for defamation are said to be “at large”. This means that damages are not limited to proven monetary losses but may include substantial awards for “loss of reputation, injured feelings, bad or good conduct by either party, or punishment” (see Cassell & Co Ltd v Broome (1972) at p 1073). The award of damages may be aggravated by factors such as the defendant’s malicious motives, the standing and prominence of both the plaintiff and the defendant, the gravity of the libel, the manner and extent of the publication as well as the defendant’s conduct from the time of publication to the closure of proceedings. Conversely, the award may be mitigated by evidence of an honest belief in the truth of the publication, the publication of or an offer to publish an apology (see s 10 DA), any misconduct of the plaintiff at the material time and evidence of his general bad reputation. Exemplary or 211 punitive damages are not generally available in a libel suit except where the compensatory award is insufficient to “punish” the defendant for his outrageous conduct. Special damages may be recoverable in respect of particular pecuniary damage that a claimant suffers beyond that of general damage. However, such pecuniary losses must be due to his reputational damage and are subject to the usual conditions of causation and remoteness. 5.89 A successful plaintiff in a defamation suit may also seek an injunction to prevent the future publication of any defamatory matter where such further publication is reasonably apprehended. More rarely, an interlocutory injunction may be awarded to forestall the publication of an allegedly defamatory matter but the courts are understandably more guarded in dispensing such orders so as not to impose any undue restraint on the right of free speech. It is also possible, in exceptional circumstances, to obtain a mandatory injunction to compel the retraction of a defamatory statement (see Chin Bay Ching v Merchant Ventures Pte Ltd (2005)). CONCLUSION 5.90 The torts considered in the first part of this chapter — inducing breach of contract, conspiracy, intimidation and causing loss by unlawful means — are primarily intentional, and often indirect, torts. In recent years, litigating parties have often attempted to use these causes of action to extend liability beyond the original wrongdoer. Thus, the challenge confronting the courts in this area is the need to define these torts more clearly so as not to over-extend liability. The tort of defamation, on the other hand, has to contend with novel questions concerning the limits of free speech as communication grows exponentially with the rise of the new media. As such, the law in this context will increasingly have to grapple with the diverse and conflicting interests of commercial enterprises (in innovation and profit generation), private individuals (in 212 freedom of expression and reputational protection) as well as members of the public (in the free flow of information). 213 Chapter 6 Negligence 6.1– 6.2 Introduction 6.3– 6.4 The Legal Requirements 6.5– 6.6 Duty of Care 6.7– 6.14 6.15– 6.21 6.22 6.23– 6.27 6.28– 6.35 6.36– 6.37 6.38– 6.42 6.43– 6.47 The Main Judicial Formulations for Duty of Care 6.48 6.49– 6.52 6.53– 6.56 Breach of Duty of Care Factors to Determine the Standard of Care The Singapore Position Duty of Care: Various Scenarios (1) Negligent act or omission causing personal injury or physical damage (2) Negligent misstatements causing economic loss (3) Negligent misstatements causing physical damage (4) Negligent acts or omissions causing economic loss (5) Negligent acts or omissions causing nervous shock or psychiatric harm Standard of Care Relating to Professionals and Professional Standards and Practice 214 6.57– 6.60 6.61– 6.62 6.63 6.64– 6.67 6.68– 6.70 6.71– 6.72 6.73– 6.75 6.76– 6.77 6.78 6.79– 6.80 6.81– 6.83 6.84– 6.86 6.87 6.88– 6.89 6.90 6.91– 6.93 6.94– Use of Expert Evidence in Determining the Standard of Care Res Ipsa Loquitur Causation of Damage Factual Causation (1) “But for” test (2) Material contribution to damage Legal Causation Remoteness of Damage General Principles Special Circumstances of the Plaintiff Mitigation of Damage Assessment of Damage Defences Ex Turpi Causa Volenti Non Fit Injuria Exemption of Liability Contributory Negligence Other Issues Vicarious Liability Director’s Liability for Company’s Negligence 215 6.95 6.96 6.97– 6.99 6.100 Concurrent Liability in the Tort of Negligence and in Contract Limitation Periods Conclusion INTRODUCTION 6.1 In the previous chapter, we examined a category of torts known as business torts — these deal with legal liability that arises from a defendant’s intentional conduct that causes harm to the victim’s trade and economic interests. This chapter deals with legal liability and consequences arising from negligent conduct. The terms “negligent” or “negligence” connote, in layman’s language, conduct or acts performed carelessly or without proper care. However, not all forms or types of negligent conduct, acts or omissions will attract legal liability under the tort of negligence. There are legal rules that define the appropriate parameters relating to the range of potential defendants and the scope of liability. They serve to delineate the circumstances in which a careless act or omission that causes harm may result in legal liability under the tort of negligence. 6.2 The situations in which the tort of negligence may feature in our lives and society are varied. They include the typical car accident arising from the negligence of the driver, the negligent advice given by a professional such as an auditor or lawyer, the negligent construction or design of a house or building, and the negligent acts and omissions of manufacturers and distributors of products. The list is by no means exhaustive and the categories of negligence are not closed. THE LEGAL REQUIREMENTS 216 6.3 The legal requirements necessary for the plaintiff to establish an action in the tort of negligence are as follows: the existence of a duty of care owed by the defendant to the plaintiff; the defendant must have breached his or her duty of care to the plaintiff; and the defendant’s breach must have caused the damage suffered by the plaintiff. In addition, the resulting damage cannot be too remote. With respect to the quantification of damages, we also need to ascertain if the plaintiff had failed to take reasonable steps to mitigate its losses, in which case the plaintiff cannot claim that portion of the damages to the extent that it was not duly mitigated. 6.4 If the above legal requirements are met, the plaintiff would succeed in his action in negligence against the defendant unless the defendant can raise valid defences. The defences covered in this chapter are as follows: illegality (ex turpi causa); voluntary assumption of risk (volenti non fit injuria); exemption of liability; and contributory negligence. If either of the first two defences is proved, the defendant is not legally liable at all to the plaintiff under the tort of negligence. If the defence of contributory negligence is proved, the defendant will only be partially liable to the plaintiff. As for exemption of liability, it depends on whether the purported exemption entirely excludes or merely limits the extent of liability. DUTY OF CARE 6.5 The starting point for an action in the tort of negligence is the duty of care issue. Lawyers and judges have had to grapple with this thorny and complex concept since the 217 landmark English decision of Donoghue v Stevenson (1932). The central question is what would be an appropriate test to apply, to decide if a duty of care ought to be imposed on the defendant whose negligence resulted in harm to the plaintiff. The Singapore Court of Appeal in Spandeck Engineering Pte Ltd v Defence Science & Technology Agency (2007) decided upon a two-stage test that considers proximity and policy considerations, which is preceded by a preliminary requirement of factual foreseeability, for establishing a duty of care (see below). 6.6 This chapter will attempt to summarise, in chronological order, the development of what are generally regarded as the main judicial formulations or tests for establishing the duty of care in the tort of negligence, since Donoghue’s case in 1932. This is followed by an explanation of the tests involved and the legal jargon used in the judicial formulations. An understanding of what has gone before will be helpful for understanding (and analysing) the test the Singapore Court of Appeal had adopted in Spandeck. The Main Judicial Formulations for Duty of Care 6.7 We begin with Lord Atkin’s dictum in the abovementioned case of Donoghue v Stevenson (1932). In this case, the claimant suffered gastro-enteritis after consuming ginger beer from a bottle that had the decomposed remains of a snail in it. Her friend had purchased the ginger beer for her and so there was no contractual relationship between the claimant-consumer and the manufacturer. Nonetheless, she brought a claim for personal injury under the tort of negligence against the manufacturer. With respect to whether the manufacturer should owe a legal duty of care towards the consumer, Lord Atkin raised the question “Who is my neighbour?” and proceeded to outline the “neighbour principle” as follows (at p 580): You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be 218 likely to injure your neighbour … persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts and omissions which are called in question. [emphasis added] As the manufacturer of the ginger beer (product) should be able to reasonably foresee that his negligence in making the product would likely injure the ultimate consumers of the product (such as the plaintiff), the manufacturer should owe a legal duty to the consumer to take reasonable care to avoid the harm. 6.8 About 45 years later, in Anns v Merton London Borough Council (1978), the lessee of a flat claimed against the council for the latter’s negligent failure to carry out inspections which resulted in inadequate foundations of the structure. The question which arose was whether the defendant (council) ought to owe a duty of care to the plaintiff (lessee). Lord Wilberforce (at [751]–[752]) applied a general and broad two-stage test to establish a duty of care: (1) “whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter”? (2) If the answer to the above is “yes”, are there “any considerations which ought to negative, or to reduce or limit the scope of the duty or the class of persons to whom it is owed or the damages to which the breach of it may give rise”? [emphasis added] 6.9 The first stage in Anns had been interpreted by English courts as a reasonable foreseeability test (see, eg, the test in Donoghue above). The second stage in Anns requires a consideration of any cogent public policy 219 reasons for negating (ie, not imposing) a duty of care or to limit the scope of any duty imposed. Policy considerations include an examination of the interests of society such as promoting welfare and moral standards. Specifically, there is a concern for balancing fairness and justice for a victim of negligence and not overburdening the party who has been negligent with “liability in an indeterminate amount for an indeterminate time to an indeterminate class” (see Cardozo CJ in Ultramares Corporation v Touche (1931) at [17]). Overburdening the negligent party with liability might not promote the interests of society. For example, should the law impose a legal duty of care on the police to prevent crimes to members of the public? It may be argued that imposing such a duty would not benefit society. It would likely result in the diversion of significant police resources to dealing with legal actions against them by members of the public instead of preventing crime. This policy consideration provides a reason for not imposing (ie, negating) a duty of care on the police for the omission to prevent crimes. 6.10 In addition, imposing a duty of care in respect of certain types of losses could potentially “open the floodgates to liability” and expose the defendant to indeterminate liability in terms of the amount of loss, number of claimants and duration of liability. This could be a policy reason for being more cautious about imposing a duty of care in respect of pure economic loss (ie, financial loss not associated with any personal injury, physical damage or property damage) and psychiatric harm suffered by indirect victims (eg, one who was traumatised by witnessing her loved ones being injured by the defendant’s negligent act). 6.11 The case of Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd (1973) provides an illustration. The defendants (building contractors) negligently cut the electricity supply to the plaintiff’s steelworks, causing the plaintiff’s furnace to stop operating for a few hours. As a result, the steel in the furnace was ruined. The court held 220 that the loss of profit for subsequent batches of steel which might have been produced if electricity had not been halted (pure economic loss) was not recoverable, for fear of exposing the defendant to indeterminate liability for an indeterminate amount to an indeterminate class of persons. However, damages for the materials used in processing the particular batch of steel at the time when the accident occurred (direct physical loss) and the loss of profit on that batch of steel (consequential economic loss) were held to be recoverable. Hence, in this way, the court sought to limit the damage recoverable by reference to an overriding policy consideration. 6.12 Although the second stage of Anns test allowed for a more cautious approach to the imposition of a duty of care, doubts still arose in England as to the wisdom of adopting the broadly stated test (see Yuen Kun Yeu v Attorney-General of Hong Kong (1988); Governors of the Peabody Donation Fund v Sir Lindsay Parkinson & Co Ltd (1985)). The English courts regarded the first stage to be easily satisfied in any particular case, and considered public policy considerations at the second stage to be too “indefinable” or imprecise to ensure a sufficiently balanced approach in imposing a legal duty of care (see the English case of Murphy v Brentwood District Council (1991) quoting (at [461]) the High Court of Australia in Sutherland Shire Council v Heyman (1985) which rejected the Anns test). There was thus a “retreat” from Anns’s test in England. 6.13 In the subsequent decision of Caparo Industries plc v Dickman (1990), the House of Lords did not apply the test in Anns. The court preferred an incremental (and cautious) approach to developing new categories of negligence via an analogy to the established categories (of cases). The plaintiff, an existing shareholder of a company, bought additional shares in the company in reliance on the defendants’ audit report. It was alleged that the accounts of that company were negligently audited by the defendants (auditors). The plaintiff lost 221 monies as a result of the purchase of shares and claimed that the defendants, who were engaged by the company, owed a duty to the plaintiff to take reasonable care in auditing the accounts of the company. With respect to duty of care, Lord Bridge in Caparo (at [617]–[618]) stated: … in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of “proximity” or “neighbourhood” and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of another. [emphasis added] 6.14 The concept of foreseeability has already been mentioned in the case of Donoghue v Stevenson. “Proximity” refers to the closeness of the relationship between the parties. We will see in the next two sections what factors were considered to assess the closeness in the parties’ relationship in decided court decisions. The term “fair, just and reasonable” is similar to the concept of public policy considerations which have already been discussed in paras 6.9–6.11 above. It should be noted that the elements of foreseeability and proximity, and fairness, justice and reasonableness/policy considerations may overlap. In most cases, it is observed that the more foreseeable the harm, the more likely the courts will find that there is “proximity”. In turn, it is more likely the courts will hold that policy considerations will result in, or that the notions of “fairness, justice and reasonableness” call for, the imposition of a duty of care. The Singapore Position 222 6.15 Bearing in mind the above English developments, it is now timely to analyse the Singapore approach to duty of care. In the past, the Singapore courts have applied both a two-stage process akin to Lord Wilberforce’s two-stage test in Anns as well as the Caparo three-part test. As mentioned, the current Singapore approach is encapsulated in the Court of Appeal decision in Spandeck Engineering (S) Pte Ltd v Defence Science & Technology Agency (2007) (“Spandeck”). In this case, there was a building contract between a contractor and the employer (the party who commissioned the building project). A superintending officer was engaged by the employer to administer and supervise the building project. The contractor made a claim against the superintending officer for negligently undervaluing and under-certifying works carried out by the contractor, resulting in the contractor being underpaid. However, there was no contractual relationship between the contractor and the superintending officer. The issue arose as to whether the superintending officer owed the contractor a duty of care under the tort of negligence in the absence of a contractual relationship. 6.16 The Court (at [89]) preferred to apply a single test to determine whether to impose a duty of care and the scope of such duty in negligence cases, regardless of the type of damages claimed. This single test is the two-stage test premised on proximity and policy considerations, and the application of the test is to be preceded by a preliminary requirement of factual foreseeability. 6.17 For the preliminary requirement, the court will enquire whether the defendant, on the facts of the case, should be able to reasonably foresee that his negligence would likely result in harm (any kind of harm) to the class of people which included the plaintiff. The focus here is typically the foreseeability of the occurrence of harm and the class of persons who may be affected by the negligent act/statement or omission. According to the 223 Court (at [115]), the threshold requirement of “factual foreseeability” would likely be fulfilled in almost all cases. 6.18 With respect to the first stage of the test, the concept of “proximity” focuses on the closeness of the relationship between the plaintiff and defendant, including physical, circumstantial as well as causal proximity and encompasses the twin criteria of voluntary assumption of responsibility and reliance (at [78]). If the proximity requirement is satisfied, a prima facie duty of care arises (at [83]). In the subsequent case of Anwar Patrick Adrian v Ng Chong & Hue LLC (2014), the Court of Appeal referred to the relevance of other proximity factors (the defendant’s knowledge of the risk of harm or of the plaintiff’s reliance or vulnerability, and the defendant’s control over the situation giving rise to the risk of harm). It should be noted that not every factor/facet of proximity need be satisfied in order to establish proximity, and the relative importance of any factor would depend on the nature of the negligent deed and the type of harm that resulted (see Ramesh s/o Krishnan v AXA Life Insurance Singapore Pte Ltd (2015) at [244]–[247]). For example, the Singapore High Court in Ramesh observed (at [245]) that “the twin concepts of assumption of responsibility and reliance tend to be more useful for … cases involving negligent advice or provision of professional services … [but are] less important in cases where a careless act has caused physical harm or psychiatric injury to plaintiffs who were strangers at the relevant time.” 6.19 At the second stage, the court will consider whether there are any considerations that ought to negative or limit the duty that has arisen under the first stage. These policy considerations involve the “weighing and balancing of competing moral claims and broad social welfare goals” (at [85]). This refers to weighing the policy considerations mentioned earlier (see paras 6.9–6.11). 224 6.20 In addition, the Court stated (at [73]) that the single test should be applied “incrementally” (ie, when applying the test in each stage, judges ought to refer to decided cases in analogous situations). In a novel situation, the judge is not precluded from extending liability where it is “just and fair to do so”, taking into account the relevant policy considerations against indeterminate liability (at [73]). The Court reiterated (at [69]) that there should not be a general exclusionary rule against recovery of pure economic losses. Instead of focusing on the type of damages in order to determine duty of care, the court suggested (at [67]) that the circumstances in which the pure economic loss arises would be more important. The problem of indeterminate liability does not rear its ugly head in all pure economic loss cases (see para 6.38 onwards for a discussion of such cases). Thus, there should not be different tests for pure economic loss cases as distinct from physical damage. Nonetheless, the single test for duty of care in Spandeck may be applied differently depending on the type of damage and, more importantly, the circumstances giving rise to the damage, given the court’s exhortation to refer to analogous cases in applying the proximity and policy stages of the test. Possible analogous cases are considered in the next section. 6.21 The Court decided, on the facts of Spandeck, that the superintending officer did not owe any duty to the contractor. Although it was foreseeable that the negligent certification of the works would deprive the contractor of the moneys he was entitled to, the proximity requirement was not satisfied. This was because the building contract between the employer and contractor stated that in the event of a dispute related to the contract or the works, either the employer or contractor may refer to an arbitrator for resolution. The presence of the arbitration clause in the building contract and the contractual arrangement of the parties (the employer, contractor and superintending officer) led the court to hold that the superintending officer was not employed to exercise care 225 towards the contractor, and therefore had not assumed such responsibility towards the contractor (but towards the employer) (at [99]–[100] and [108]). The contractor, being content for its rights of compensation to be safeguarded by contractual arrangement with the employer, could not be said to have relied on the exercise of care by the superintending officer (at [99] and [108]). Under the policy consideration stage, the court noted that since the parties had chosen to regulate their relationship(s) by contractual arrangement, this should not be undermined by the imposition of a tortious duty of care on the superintending officer towards the contractor (at [101] and [114]). Duty of Care: Various Scenarios 6.22 As the Spandeck test is to be applied incrementally by analogy to decided cases, we will now examine the various scenarios and cases relevant to the issue of duty of care. Though the Spandeck test applies regardless of the type of damage, this does not necessarily mean that all types of damage arising from negligent conduct are equally recoverable, due to the greater fear of opening the floodgates to liability for certain types of losses. As mentioned, physical damage and property damage arising from positive acts are generally recoverable as compared to pure economic losses. Further, claims in negligence for psychiatric harm are normally more restrictive than a similar claim for personal injuries arising from the defendant’s negligent acts. “Physical damage” in this context refers to actual physical damage suffered, and does not include future or potential (physical) damage. Mere defects in construction or functionality (eg, inadequate foundations of a house or an engine) are not generally treated as “physical damage”, but as economic loss, because such defects may or may not subsequently lead to actual physical damage. (1) Negligent act or omission causing personal injury or physical damage 226 6.23 In cases where personal injury is caused by the positive act of the defendant, the requirement of “reasonable foreseeability” would normally be satisfied. In addition, there is unlikely to be a “floodgates” problem associated with indeterminate liability and indeterminate scope of potential defendants. Examples of such cases are the typical car accident where the plaintiff suffers personal injury (or damage to property) arising from negligent driving as well as personal injuries from the consumption of foods negligently manufactured by the defendant. Occupiers of premises may also owe a duty to take reasonable care to prevent physical injury to persons entering the premises (see See Toh Siew Kee v Ho Ah Lam Ferrocement (Pte) Ltd (2013); BNJ v SMRT Trains Ltd (2014)). 6.24 Not all cases pertaining to physical damage are straightforward and clear, as illustrated by the case of The Sunrise Crane (2004). The plaintiff’s steel tanker, the Pristine, was destroyed due to the transfer of nitric acid contaminated by hydraulic oil from the defendant’s vessel, The Sunrise Crane. No one on board The Sunrise Crane provided information that the substance was contaminated nitric acid which had to be disposed of by alternative means. There was also no contractual relationship between the plaintiffs and defendants. The defendants had requested the vessel’s Protection & Indemnity (“P & I”) Club for assistance, and the Club appointed a surveyor. The surveyor then engaged a contractor (Pink Energy) for the disposal job who, in turn, engaged another sub-contractor (Pristine Maritime) to remove the contaminated cargo. Neither the subcontractor (Pristine Maritime) that carried out the disposal nor the plaintiff was informed of the nature of the cargo. The Court of Appeal held by a majority (Prakash J dissenting) that The Sunrise Crane owed a duty of care in the tort of negligence to inform the Pristine of the nature of the cargo immediately prior to the transfer of the contaminated acid. The very dangerous nature of the cargo appeared to be a significant factor in the majority 227 decision. The fact that the defendant had informed the contractor (Pink Energy) of the nature of the cargo was insufficient to fulfil the duty of care. 6.25 The court in The Sunrise Crane (2004) appeared (at [73]) to have applied the Caparo three-part test. With respect to the proximity element, it referred to the physical proximity of the two vessels which were moored alongside when the disposal operation was in progress (at [77]), and to the fact that the act of transferring the contaminated cargo “directly affected” the plaintiff (at [50]). There was also a statement in the judgment, albeit without elaboration, that it was not unfair or unjust to impose a duty of care in the instant case (at [41]). Box 6.1 Reflecting on the law Controversy in The Sunrise Crane The dissenting judgment in The Sunrise Crane is significant and should be briefly mentioned. Similar to the approach of the majority judges in The Sunrise Crane, Prakash J applied the Caparo test. However, Her Honour arrived at a different conclusion. The learned judge ruled that the defendant could not have foreseen that the tanker sent to collect the cargo (Pristine) would not have been told of its nature, after having provided the contractor (Pink Energy) the requisite information. In a fairly unusual stance, Her Honour conceded that, despite the absence of foreseeability, physical, circumstantial and causal proximity were present in the case. With respect to the fairness element, the learned judge was of the view that it is not fair or reasonable or just to impose on a party, who engages a qualified person to undertake a task, the duty to countercheck, before the task commences, that the person actually sent to complete the task is aware of the task at hand and the equipment required. Imposing a duty would, according to the learned judge, make the employer responsible for carrying out the duty of the contractor (Pink Energy) to inform the sub-contractor of the nature of the cargo and thus, open the floodgates to claims against a whole new class of parties. Do you agree with the majority judgment or the dissenting judgment in The Sunrise Crane? 228 6.26 In contrast to positive acts, there is generally no duty of care arising from mere omissions. There is, for example, no legal duty placed on a passer-by to rescue a drowning man. One underlying reason for the current legal position against imposing a duty of care is that the law should not unduly interfere with a person’s liberty by requiring him to save another person with whom there is no prior relationship. The performance of altruistic (or heroic) acts may be laudable, but is generally not legally mandated. Further, there is the potential difficulty of ascertaining in (at least) some cases the particular defendant responsible where there are others who might have been able to effect the rescue. 6.27 The general principle of non-liability for the defendant’s omission to prevent the plaintiff from harming himself or to prevent a third party from harming the plaintiff is subject to certain exceptions. These exceptions include the following: where there is a special relationship between the plaintiff and defendant based on a voluntary assumption of responsibility by the defendant towards the plaintiff, or control by the defendant over the third party conduct; and where the defendant knew or ought to know that the third party has created a source of danger on the defendant’s premises and the defendant failed to take reasonable steps to prevent the danger from damaging the plaintiff’s property (see Smith v Littlewoods Organisation Ltd (1987)). (2) Negligent misstatements causing economic loss 6.28 One notable case on negligent misstatements is Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964). Here, the plaintiffs (advertising agents) wished to do some advertising work for a company called Easipower. The defendants (bankers for Easipower) negligently provided to the plaintiffs a reference on the creditworthiness of Easipower. The plaintiffs subsequently claimed for financial losses when Easipower went into liquidation. On the facts, there was a valid disclaimer clause that the 229 bank’s statement was made “without responsibility on the part of the bank or its officials”. Thus, the defendant bank was not liable for the negligent misstatement. However, if not for the disclaimer clause, the House stated that a duty of care would have been owed by the defendant bank to the plaintiff to take reasonable care in making statements which others could reasonably rely upon. The judgments of the law lords indicated that the following factors should be considered when determining whether a duty of care had arisen between the plaintiff and the defendant bank: the skill and expertise of the maker of the statement; whether the maker of the statement knows or ought to know that the other person will rely on the statement; and whether the maker of the statement voluntarily undertakes or assumes responsibility for making the statement. Further, where the relationship between the maker of the statement and the recipient is akin to contract, a duty of care is likely to arise. 6.29 The rationale for the above additional requirements in respect of negligent misstatements (as compared to negligent acts causing physical damage discussed at para 6.23) is that words are more “volatile” than deeds, whilst damage by negligent acts to persons or property is more “visible and obvious” (at p 534). For example, statements made to a particular party may be conveyed or transmitted by the recipient to a third party or parties, whose identities may not be known to the maker of the statements, and the impact of those statements on the recipients may not have been contemplated by the maker. On the other hand, the effects of physical injury or property damage arising from one’s negligent acts (such as negligent driving) are normally more obvious and direct. 230 6.30 The following statements of Lord Devlin (at p 529) are instructive as to the relevance of payment or lack thereof for the advice: Payment for information or advice is very good evidence that [the advice] is being relied upon and that the informer or adviser knows that it is. Where there is no [payment], it will be necessary to exercise greater care in distinguishing between social and professional relationships and between those which are of a contractual character and those which are not. It may often be material to consider whether the adviser is acting purely out of good nature or whether he is getting his reward in some indirect form. [emphasis added] 6.31 Another important case on negligent misstatements, Caparo Industries plc v Dickman (1990), held that there was no duty of care owed by the defendant auditors to the plaintiff (purchaser of additional shares in a company) in respect of the defendant’s negligent misstatement concerning the audited accounts of the company. The general principle is that no duty of care is owed by the auditors of a company to individual members of the public at large (including the plaintiff) who rely on the information to buy shares in the company (see p 627). It was held that the statutory accounts of the company were to be used at the general meeting for shareholders as a whole and were not intended for use by individual shareholders. This principle has been extended to preclude claims in negligence by lenders and guarantors (of credit facilities to audited companies) against auditors for negligently prepared audited statements (see also Standard Chartered Bank v Coopers & Lybrand (1993); Ikumene Singapore Pte Ltd v Leong Chee Leng (1993)). 6.32 In a similar vein as the decision in Hedley Byrne, the court in Caparo outlined (at p 638) some important requirements for establishing a duty of care: 231 the purpose (general or specific) was made known to the adviser at the time of the advice; the adviser knows or ought to know that his or her advice will be communicated to the plaintiff (specifically or as a member of an ascertainable class) for the above purpose; the adviser knows or ought to know that his or her advice will be acted upon by the plaintiff without independent inquiry; and the advice was acted upon by the plaintiff to his or her detriment. 6.33 The House of Lords decision in Spring v Guardian Assurance plc (1994) provides an interesting factual twist. It concerned a written reference given by the defendants (Guardian Assurance) to Mr Spring’s prospective employer. Mr Spring failed to get the job with the prospective employer and sued Guardian Assurance for negligent misstatement in respect of the reference. The House held that a duty of care was owed by Guardian Assurance to Mr Spring, its ex-employee. Lord Goff in that case appeared to have applied Hedley. However, it is noted that Hedley concerned a claim in negligence by the recipient of the bank’s advice. In Spring, it was not the recipient of the reference (prospective employer) but the subject of the reference (the plaintiff employee) who had sued for damages. Thus, it is suggested that the decision in Spring might be construed as an extension of the Hedley principle. 6.34 In the Singapore case of Ramesh s/o Krishnan v AXA Life Insurance Singapore Pte Ltd (2015), the High Court held that the employer (an insurance company) owed a duty of care to the ex-employee (former finance director) in providing reference checks on the latter’s employment history to prospective employers. This duty of care was based on causal and circumstantial proximity between the employer and ex-employee (which analysis was endorsed by the Court of Appeal: see Ramesh s/o Krishnan v AXA 232 Life Insurance Singapore Pte Ltd (2016)). Similar to Spring, the employer possessed special knowledge of the employee, provided the reference with the tacit consent of the ex-employee and the ex-employee relied on the employer to exercise due care and skill in preparing the reference. 6.35 The tort of negligence may be compared with the action based on negligent misrepresentation under the Misrepresentation Act (Cap 390, 1994 Rev Ed) (“MA”) (see Chapter 13). The MA typically applies to a scenario where a representee relies on a negligent representation made by the representor and enters into a contract with the representor (as opposed to a third party as in Hedley). According to s 2(1) MA, the representee would only need to show that the representation was false and the burden of proof would shift to the representor to show that he had reasonable ground to believe and did believe, up to the time the contract was made, that the facts represented were true. Hence, the burden of proof on a plaintiff in an action based on s 2(1) MA is considerably lighter than the plaintiff suing for negligent misstatement in tort. (3) Negligent misstatements causing physical damage 6.36 Claims for physical damage arising from negligent misstatements are, as one can imagine, relatively uncommon. In Marc Rich & Co AG v Bishop Rock Marine Co Ltd (1996), the issue was whether a classification society (a nonprofit organisation) owed a duty of care to the owner of cargo on a vessel in respect of the society’s negligent certification of a vessel’s seaworthiness. It transpired that the ship sank and the cargo was physically damaged as a result. The House of Lords (Lord Lloyd dissenting) held that there was no duty of care. In disallowing recovery, the House appeared to have emphasised the policy requirements at the expense of the proximity requirement. Their Lordships outlined the following public policy reasons against recovery: the higher costs of insurance to the classification society 233 which might be passed on to the ship owners; the fact that cargo owners already have contractual claims against the ship owners pursuant to the Hague-Visby Rules, which provide for the limitation of the ship owners’ liability to the cargo owners; the onerous duty of the classification society to promote the “collective welfare”, namely to ensure the safety of ships and lives; if the classification society were to be held liable, it might, as a result, adopt a defensive position and useful resources may be diverted elsewhere; and the fact that the classification society had no protection at all via limitation provisions, unlike the ship owners. 6.37 In another case involving negligent certification resulting in physical harm, Perrett v Collins (1998), however, the English court held that an association that was approved by a civil aviation authority to issue the certification owed a duty of care to a passenger on an aircraft in respect of the personal injuries he suffered. The court noted that the defendant had voluntarily assumed responsibility for issuing the certification and the certification was for the protection of members of the public. (4) Negligent acts or omissions causing economic loss 6.38 There are two notable Singapore cases relating to claims for pure economic losses arising from negligent construction. In RSP Architects Planners & Engineers v Ocean Front Pte Ltd (“Ocean Front”), the management corporation sued the developers for the costs of repair incurred due to defects in the common areas within a condominium project. The court held that a duty of care existed based on the proximity between the management corporation (the plaintiffs) and the developers (the defendants). Further, there were no public policy reasons to negate a duty of care. In that case, it was found that there was a determinate amount of recovery, a determinate class of persons and no transmissible warranty given to other parties. Similarly, in RSP Architects Planners & Engineers v Management 234 Corporation Strata Title Plan No 1075 (“Eastern Lagoon”), a duty of care existed based on the proximity between the management corporation (the plaintifs) and the architects (the defendants). It was found that there was sufficient reliance and assumption of responsibility to establish a duty of care. In addition, there were public policy reasons for supporting such a duty. These cases concern real property, which translates into greater financial investment and possesses permanence of structure as opposed to chattels, especially in the context of landscarce Singapore. In fact, it should be noted that these factors were also applied in the Australian case of Bryan v Maloney (1995), a case involving a subsequent purchaser of a house (ie, not the first owner) claiming against the builder, though Bryan discussed the above policy factors in the context of the proximity element. 6.39 In Animal Concerns Research & Education Society v Tan Boon Kwee (2011) (decided post-Spandeck), the criteria of voluntary assumption of responsibility and reliance were applied under the proximity requirement of the Spandeck test. A non-profit society engaged a company as contractor to construct a shelter for animals. The contractor appointed Tan, director of the company, as clerk of works for the building project. Under the contract, the contractor was obliged to level the site by using surplus earth (a process known as “backfilling”) but instead used materials which resulted in the pollution of the environment. As a result, the society had to excavate the contaminated portions of the site and thereby incurred economic losses. In the claim in negligence against Tan for the economic losses, the court held that the clerk of works owed a legal duty to the society to supervise the backfilling. 6.40 Applying the Spandeck test, the Court opined (at [35]) that it was reasonably foreseeable that the society would suffer some loss or damage if Tan did not take care in supervising the backfilling. On the proximity requirement, there was clearly physical proximity as the society was 235 lessee of the site and the clerk of works was obliged to be physically present at the site to carry out his duties. Tan, in procuring the contractor to appoint himself as clerk of works, was adjudged (at [63]) to have voluntarily assumed the responsibilities of a clerk of works and held himself out as having the qualifications and skills necessary to fulfil the role of a clerk of works. In addition, Tan, in declaring in a form submitted to the Building and Construction Authority that he was not linked to the contractor, knew or ought to have known that the society would rely on him to act in the society’s interests as the clerk of works (see [64]). 6.41 More recently, in NTUC Foodfare Co-operative Ltd v SIA Engineering Co Ltd (2018), the Singapore Court of Appeal decided that the respondent (an operator of airtugs at the airport) who negligently damaged a pillar of a building in the course of carrying out the operations, owed a duty of care to the appellant (the operator of a nearby food kiosk located within the building) in respect of the appellant’s loss of profits. The pillar was the structure supporting the floor of the airport transit lounge. The appellant had leased premises at the transit lounge to run a food kiosk. The leased premises including the kiosk were not damaged but the Building and Construction Authority issued a closure order over a part of the lounge that covered the leased premises. The appellant claimed for loss of profits arising from their inability to use the premises during the period of closure. 6.42 The court characterised the loss as “relational economic loss” and analysed it within the Spandeck framework. The term “relational economic loss” referred to pure economic loss that arose from damage to property (pillar of the building) which was not owned by the plaintiff (operator of food kiosk) but nonetheless affected the plaintiff’s economic interests. The duty of care was established based on (at [47]–[50]): (a) the physical proximity between the parties, (b) the causal proximity between the airtug operator’s negligence and the kiosk operator’s loss, 236 and (c) the airtug operator’s knowledge that if the airtug collided into the structures supporting the floor of the lounge, the occupiers on that floor would suffer economic losses flowing from their inability to use the premises. The court was satisfied that no policy factors against imposing a duty of care existed given that (at [53]–[57]): (a) there was a determinate class of claimants (operators of businesses in the lounge); (b) the mere fact that the claimants’ losses were insured would not negate a duty of care; and (c) the imposition of a tortious duty of care would not undermine the parties’ contractual arrangements. As the airtug operator was found liable in negligence, his employer was adjudged vicariously liable for the loss of profits. (5) Negligent acts or omissions causing nervous shock or psychiatric harm 6.43 This applies only to recognised psychiatric illnesses, not mere mental distress, anxiety or disappointment not associated with any physical injury suffered by the plaintiff arising from a negligent act or omission of the defendant. 6.44 A duty of care would arise only if the plaintiff satisfies the three proximity requirements stated in Ngiam Kong Seng v Lim Chiew Hock (2008) (at [101]–[103]) which generally follows the test laid down in the English case of McLoughlin v O’Brian (1983). The proximity requirements are as follows: the closeness of the relationship between the plaintiff and the primary victim, such as parent–child and husband–wife relationships, though this does not necessarily exclude the other types of relationships (circumstantial proximity); proximity of the plaintiff to the accident in time and space (ie, through sight and sound of the event or its immediate aftermath) (physical proximity); and the means by which the shock is caused (causal proximity). 237 6.45 With respect to the first proximity requirement, Lord Wilberforce in McLoughlin v O’Brian (1983) had stated (at [421]–[422]) that “[t]he closer the tie (not merely in any relationship, but in care) the greater the claim for consideration”. With respect to the second proximity, the party who suffered psychiatric harm need not have witnessed the accident and the victim’s injury contemporaneously. In McLoughlin, the plaintiff did not attend the scene of the car accident but saw her injured family members at the hospital soon after the accident. When the plaintiff met them at the hospital, the family members were still in pain. Thus, the House allowed recovery based on the “immediate aftermath” doctrine. 6.46 According to the court in Ngiam Kong Seng (at [95]), there should not be any distinction in the treatment of claims by a primary victim and a secondary victim (eg, one who witnessed the car accident caused by the defendant’s negligence and suffered psychiatric illness as a result). Instead, there should be a single test applying to both primary and secondary victims. However, it is not clear how the first proximity requirement would apply to a claim by a primary victim. In such a case, there does not seem be any relational proximity to speak of, as opposed to the case of a plaintiff who witnessed his loved one colliding with the negligent driver. However, the court (at [108]) emphasised that there was no one unique way to apply any particular factor, and that the application of the factors depended very much on the precise facts of the case. It is therefore suggested that in relation to a primary victim, the first proximity requirement should not be applied literally. Instead the relevant consideration is whether there is circumstantial proximity between the defendant and the primary victim that would justify recognising the primary victim’s claim. 6.47 The Singapore decision of Pang Koi Fa v Lim Djoe Phing (1993) involved medical negligence that eventually culminated in the death of the plaintiff’s daughter. Upon applying McLoughlin, the first proximity requirement was 238 clearly satisfied on the basis of a mother–daughter relationship. With respect to the second and third proximity requirements, the court observed that there was no accident or aftermath witnessed by the plaintiff in Pang Koi Fa, unlike in McLoughlin. Nevertheless, the court held that the plaintiff in Pang Koi Fa was proximate in both time and space to the tortious event (ie, the death of her daughter) as the plaintiff had witnessed throughout the effects of the defendant doctor’s negligent diagnosis, negligent operation and negligent post-operative treatment. In addition, the learned judge regarded her (at [62]) as a “percipient witness in terms of the elements of immediacy, closeness of time and space, visual and aural perception”. His Honour added (at [76]) that the above legal analysis and outcome in the case should be confined to medical negligence cases. BREACH OF DUTY OF CARE 6.48 In this section, we are concerned with the “standard of care” expected of the defendant in question. If the defendant’s conduct falls below that standard of care, we say that he has “breached” the duty of care. Generally, the standard of care is the objective standard of a reasonable person using ordinary care and skill. This will normally be the case even if the defendant is inexperienced in performing the activity or task in question (such as driving a car) (see Nettleship v Weston (1971); Imbree v McNeilly (2008)). Factors to Determine the Standard of Care 6.49 The standard of care, based on the test of the objective reasonable man, is dependent on what was reasonably foreseeable as measured by the prevailing knowledge at the material time of the event in question, and not after (see Roe v Minister of Health (1954); PlanAssure PAC v Gaelic Inns Pte Ltd (2007); JSI Shipping (S) Pte Ltd v Teofoongwonglcloong (2007)). Factors such as the likelihood of the injury, the severity of the injury as well as 239 the costs of avoiding the injury are relevant in determining the standard of care. 6.50 Where the likelihood of injury to the plaintiff is extremely low or remote, a high standard of care is not required to prevent the injury. In Bolton v Stone (1951), the plaintiff was injured by a cricket ball hit from a cricket ground that was surrounded by a high fence. It was found that the chance of a cricket ball hitting a person such as the plaintiff outside the grounds was very low. In the circumstances, it was held that the defendant (the cricket club) did not breach its duty of care to the plaintiff to prevent the accident occurring. Conversely, where the likely injury is serious, a higher standard of care would be required. In Paris v Stepney Borough Council (1951), the House of Lords held that the defendant employer should have reasonably taken into account the risk of greater injury to the plaintiff employee (who was already injured in one eye) by providing goggles for his work as a garage hand. The disability of the plaintiff employee increased the risk of the injury becoming more serious (ie, blindness) as compared to a normal person. Thus, the defendant employer had breached its duty in not providing goggles to the plaintiff. 6.51 The costs of avoiding injury on the part of the defendant is also a relevant factor, and this is to be balanced against the risk of harm occurring. In Latimer v AEC Ltd (1953), the plaintiff tripped and fell on the floor of a factory owned by the defendant and sued for negligence. The House determined that the defendant did not breach its duty of care. Based on the facts, the risk of injury to the plaintiff resulting from the slippery floor due to flooding did not justify the closure of the factory. The defendant in this case had already taken reasonable steps to remove the effects of the flood and it was unreasonable to expect them to close the factory. The Wagon Mound (No 2) (1967) case further illustrates this balancing exercise to determine the standard of care issue. It was stated that a reasonable man would only neglect a small risk provided 240 he had some valid reason for doing so, for example, because it would involve considerable expense to eliminate the risk. He would weigh the risk against the difficulty of eliminating it. 6.52 Other factors determining the standard of care include the following: the presence of potential hazards or dangers posed to the plaintiff (eg, the contaminated nitric acid in The Sunrise Crane); the presence of industrial standards and regulations (eg, in the context of employer’s duties to employees: see Chandran a/l Subbiah v Dockers Marine Pte Ltd (2010)); the level of the plaintiff employee’s experience, training and skills (eg, Zheng Yu Shan v Lian Beng Construction (1988) Pte Ltd (2009)); and the level of knowledge and commercial sophistication of the plaintiff clients (in the context of investment advice given by banks: see Go Dante Yap v Bank Austria Creditanstalt AG (2011)). Standard of Care Relating to Professionals and Professional Standards and Practice 6.53 With regard to professionals, the standard of care is that which is reasonably expected of a reasonably competent professional with respect to a particular field. That is, a specialist must exercise the ordinary skills of his specialty (see Maynard v West Midlands Regional Health Authority (1984); see also Yeo Peng Hock Henry v Pai Lily (2001) discussed below at paras 6.65–6.66). In the English case of Bolam v Friern Hospital Management Committee (1957), the court stated that the test is based on the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill at the risk of being found negligent. It is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art. The level of experience of the professional is not relevant in determining the standard of care (see Wilsher v Essex Area Health Authority (1988)). 241 6.54 What if the professional had acted consistent with the professional standards or practice of the professional body to which he or she belonged? It appears that the professional may still be found liable under the tort of negligence. The professional standards serve, at the most, as a guideline of what is expected of a reasonably competent professional. In the context of lawyer’s negligence, the courts have opined that the real issue is not the professional practice but the extent of the legal duty in a given situation which is a question of law (see Edward Wong Finance Co, Ltd v Johnson, Stokes and Master (1984); Fong Maun Yee v Yoon Weng Ho Robert (1997); Yeo Yoke Mui v Ng Liang Poh (1999)). 6.55 In Fong Maun Yee, the plaintiffs wished to purchase a piece of property and had paid monies in reliance on the defendant’s negligent misrepresentation that the latter had authority to act for the purported vendor. The defendant lawyer had obtained from a property agent an option to purchase and a resolution purportedly passed by the vendor’s directors authorising the sale of the property. The defendant did not know the purported vendor or its directors personally. Yet, the defendant did not verify his instructions to act for the purported vendor, though the defendant carried out a company search and confirmed to the plaintiffs that the persons who had signed the resolution and option were directors at the material time. As it turned out, the signatures on the resolution and option were forgeries and the property agent absconded with the plaintiff’s monies. 6.56 At the trial of the action in negligence, evidence was adduced from a conveyancing lawyer that it was not the practice in Singapore for lawyers to verify their instructions. Nonetheless, the Singapore Court of Appeal held that the defendant lawyer had breached his duty of care and skill to the plaintiffs. Applying the test in Edward Wong Finance Co Ltd, the Court of Appeal held that, in failing to verify his instructions, there was clearly a foreseeable risk that the defendant would be acting 242 without authority. The court observed that the defendant could have avoided the risks by taking steps to confirm his authority to act or if he could not do so, to at least warn the plaintiffs of the risk that he could be acting without authority. Use of Expert Evidence in Determining the Standard of Care 6.57 The court would generally determine the standard of care expected of professionals based on the evidence of experts within the same or similar profession. With respect to the standard of care expected of medical doctors, for instance, it was held that a doctor is not guilty of negligence if he has “acted in accordance with a practice accepted as proper by a responsible body of medical men skilled in that particular art … Putting it the other way around, a man is not negligent, if he is acting in accordance with such a practice, merely because there is a body of opinion that takes a contrary view” (see Bolam v Friern Hospital Management Committee (1957) (at [587]).) [emphasis added] 6.58 The Bolam test was confirmed in the decision of Bolitho v City and Hackney Health Authority (1998) with some refinements. The judge hearing the medical negligence case had to be satisfied that the medical opinion had a logical basis which would involve weighing the risks against the benefits to reach a “defensible conclusion”. Lord Browne-Wilkinson in Bolitho stated thus (at [243]): In the vast majority of cases the fact that distinguished experts in the field are of a particular opinion will demonstrate the reasonableness of that opinion. In particular, where there are questions of assessment of the relative risks and benefits of adopting a particular medical practice, a reasonable view necessarily presupposes that the relative risks and benefits have been weighed by the experts in forming their opinions. But if, in a rare case, it can be demonstrated that the professional opinion is not capable of withstanding 243 logical analysis, the judge is entitled to hold that the body of opinion is not reasonable or responsible. 6.59 The above Bolitho test was endorsed in the Singapore case of Dr Khoo James v Gunapathy d/o Muniandy (2002). With respect to the meaning of “defensible conclusion”, the Singapore court took the view (at [65]) that the medical opinion must be internally consistent on its face. At the same time, it must not ignore or controvert known medical facts or advances in medical knowledge. Subsequently, the Bolam and Bolitho tests have also been applied to assess the standard of care of auditors (see PlanAssure PAC v Gaelic Inns Pte Ltd (2007); JSI Shipping (S) Pte Ltd v Teofoongwonglcloong (2007)). 6.60 In the subsequent case of Hii Chii Kok v Ooi Peng Jin London Lucien (2017), the Singapore Court of Appeal made a distinction between diagnosis and treatment on the one hand, and the giving of information and advice to patients on the other. For diagnosis and treatment, the position in Gunapathy on the appropriate standard of care based on the Bolam and Bolitho tests continued to apply (at [100]-[102]). With respect to the giving of information and advice, the new approach required a consideration of either one of the following: (a) whether, from the patient’s perspective, the information in question would be relevant and material to a reasonable patient in his particular position; or (b) whether it was information that the doctor knew was important to the particular patient in question (at [132]). The personal circumstances of the patient were to be taken into consideration when evaluating what a reasonable person in the patient’s position would consider material. The Singapore approach is generally consistent with the current English position in Montgomery v Lanarkshire Health Board (2015). Res Ipsa Loquitur 6.61 The legal burden of proof is generally on the plaintiff to show on a balance of probabilities that the defendant had 244 breached the duty of care. In some circumstances, however, the plaintiff may experience difficulties in adducing direct evidence of the negligent act or omission. In such an instance, the doctrine of res ipsa loquitur (“the thing speaks for itself”) may be used in aid of the plaintiff. To establish the applicability of the doctrine, three criteria must be satisfied, namely: the defendant must have been in control of the situation or thing which resulted in the accident; the accident would not have happened, in the ordinary course of things, if proper care had been taken; and the cause of the accident must be unknown to the plaintiff. However, it should be noted that the defendant can displace the effect of the doctrine by giving evidence to show that he or she was not negligent. 6.62 A few illustrations shall suffice here. In Scott v London & St Katherine Docks Co (1865), sacks of sugar under the control of the defendant fell from a crane at the defendant’s warehouse. It was held that the doctrine of res ipsa loquitur applied as the accident could not, in the ordinary course of events, have occurred without the negligence of the defendant. The Singapore case of Teng Ah Kow v Ho Sek Chiu (1993) held that res ipsa loquitur is a rule of evidence. Thus, upon the fulfilment of the three criteria listed above, the effect of res ipsa loquitur results in the shift of the evidential burden of proof to the defendant to show that he or she was not negligent (see Ooi Han Sun v Bee Hua Meng (1991) and Awang bin Dollah v Shun Shing Construction & Engineering Co Ltd appeals (1997) in the context of occupier’s liability). The defendant may then rebut the presumption of negligence via an alternative explanation that indicates nonnegligence by the defendants (see Grace Electrical Engineering Pte Ltd v Te Deum Engineering Pte Ltd (2018)). However, the doctrine of res ipsa loquitur does not apply to a case where the accident could have 245 happened via a number of permutations, some consistent with the plaintiff’s negligence, the defendant’s negligence or a combination of the negligence of both parties (see Cheong Ghim Fah v Murugian s/o Rangasamy (2004)). CAUSATION OF DAMAGE 6.63 The third legal requirement to establish an action in negligence is that the damage suffered by the plaintiff must have been caused by the defendant’s breach. Causation is analysed by considering both factual and legal causation. Factual causation focuses on the causal link between the defendant’s negligent conduct and damage according to the laws of physics and natural science. There are two primary tests to determine the issue of factual causation of damage subject to certain exceptions (see paras 6.64–6.70). In addition to factual causation, the courts would have to consider the issue of legal causation (namely, to which cause should we ascribe legal responsibility). In this regard, the impact of a novus actus interveniens (or a “new intervening act”) of the plaintiff or a third party or even a natural event on the issue of causation will have to be assessed (see paras 6.71–6.72). Factual Causation (1) “But for” test 6.64 This test involves asking the question whether the plaintiff would have suffered harm if the defendant had not been negligent. If the question is answered in the affirmative, then we can conclude, based on the “but for” test, that the defendant’s alleged negligence did not cause the harm suffered by the plaintiff. In Barnett v Chelsea & Kensington Hospital (1969), a patient who had suffered from persistent vomiting was taken to hospital. The doctor negligently refused to examine the patient and the latter died of arsenic poisoning. It was found, based on the evidence adduced, that even if the correct medical 246 treatment had been given by the doctor at the relevant time, the patient would have perished from poisoning anyway. Thus, the court ruled that the doctor’s negligent omission in that case did not cause the death, since the “but for” test was not satisfied. 6.65 At times, the “but for” test of causation may not be fulfilled for other reasons. In Yeo Peng Hock Henry v Pai Lily (2001), the plaintiff (patient) consulted the defendant (general medical practitioner) and complained of fever, cough, cold as well as blurred vision and spots on her left eye. The defendant doctor suspected the plaintiff of having a detached retina and urinary tract infection but did not advise the plaintiff to consult an eye specialist or go to a hospital immediately. The plaintiff claimed damages for negligence on the grounds that the defendant’s failure to so advise her led to her losing the chance of an earlier diagnosis by a specialist which would have prevented her from losing her sight. In this regard, the court held that the defendant had fallen short of the standard of care required of a competent general practitioner. 6.66 The more controversial issue in the case relates to causation, that is, whether, if the plaintiff had been properly advised by the defendant, the plaintiff would have immediately gone to the hospital and saved her sight. In this case, the plaintiff did not in fact suffer from a detached retina but a rare infection known as endogenous klebsiella endophthalmitis (“EKE”) which resulted in her loss of vision. The klebsiella bacteria grows at an exponential rate within 24 hours. It was clear that such a rare disease could not have been detected by a reasonably competent general practitioner. Based on the evidence of expert witnesses, the court observed that whether the plaintiff’s eye could be saved was subject to three qualifications, namely (1) the correct diagnosis by the doctor at the hospital at the material time; (2) the appropriate treatment administered; and (3) the response of the eye to the treatment. The court concluded that the 247 plaintiff had not proven, on a balance of probabilities, that had the defendant advised her to go to the hospital immediately and had she done so as advised, the plaintiff’s eye would have been saved. 6.67 The application of the “but for” test may lead to incongruous results in certain multiple causation cases. For instance, assume that there are two fires which resulted in the damage to the plaintiff’s property. Let us also assume that each fire, on its own, would have been sufficient to cause the property damage. What is the cause of the property damage here? If one applies the “but for” test, strictly speaking, fire #1 would not be regarded as the cause of the damage on the basis that but for fire #1, the property damage would still have occurred (ie, due to fire #2). Based on similar reasoning, fire #2 would not be regarded as the cause of the property damage. Such an outcome, that neither fire is the cause of the property damage, would clearly be absurd. In such a situation, it is submitted that the second test below, namely whether each of the fires #1 or #2 had materially contributed to the property damage, is the preferred approach. (2) Material contribution to damage 6.68 This test considers the question as to whether the breach materially contributed to the damage. The word “material” indicates a non-negligible contribution to the damage. To satisfy this test, it is not necessary for the breach to be the sole or dominant cause of the plaintiff’s loss or damage. 6.69 In Bonnington Castings Ltd v Wardlaw (1956), the plaintiff suffered pneumoconiosis, alleging that the defendant employer failed to install safety equipment to prevent exposure to silicone dust. He was exposed to silicone dust at the employer’s premises. Science could not demonstrate the precise proportions of the source of dust due to the employer’s negligence and another non248 tortious source. But there is scientific evidence that the severity of the illness was proportionate to the level of exposure to the dust. The court thus concluded that the defendant’s negligence had materially contributed to the plaintiff’s pneumoconiosis. In a similar case, Holtby v Brigham & Cowan (Hull) Ltd (2000), where there were two or more employers, each employer was liable to the plaintiff employee for a portion of the damage proportionate to the relative time of exposure to the agent of harm (in that case, asbestos). 6.70 In addition, courts have used an alternative test of material contribution to the risks of damage: that where the plaintiff was exposed to the same risk involving the same agent of harm (eg, asbestos dust) by two or more defendants, the defendants may be jointly and severally liable, even when it is impossible to determine scientifically which of the sources actually caused the plaintiff’s damage (see Fairchild v Glenhaven Funeral Services Ltd (2003) and Barker v Corus (UK) plc (2006)). Legal Causation 6.71 In determining the issue of causation, one should also take note of the potential effect of a novus actus interveniens (“new intervening act”). This novus actus interveniens might be an act of the plaintiff, a third party or even a natural event that takes place between the defendant’s alleged negligence and the damage that ensued. Where an act or omission is of such a nature as to constitute a wholly independent cause of the damage, the intervening conduct may be regarded as a novus actus interveniens (see Muirhead v Industrial Tank Specialities Ltd (1986); TV Media Pte Ltd v De Cruz Andrea Heidi and another appeal (2004)). If there is a novus actus interveniens which is sufficient on the facts to break the chain of factual causation, the defendant’s breach would not be regarded as the cause of the plaintiff’s damage. Cases in which the alleged novus actus interveniens was sufficient to break the chain of 249 causation normally involve intervening acts that are unreasonable, deliberate, reckless or unforeseeable (see McKew v Holland & Hannen Cubitts (Scotland) Ltd (1969); Wright v Lodge (1993); Poh Kim Ngoh v Yap Chwee Hoe (1968–1970)). 6.72 Another legal causation issue involves situations where one tort is followed by another tort or a natural event. In Baker v Willoughby (1970), the plaintiff injured his left leg in a road accident. He was later shot in the same leg by an armed robber. It was held that the defendant remained liable for the injury, even though the effects of his negligence had been wiped out by the second tort. However, where the second event is a natural cause which wipes out the physical effects of the first tort, the tortfeasor’s liability ceases at the point when the natural supervening condition manifests itself (see Jobling v Associated Dairies (1982)). Otherwise, the defendant would be liable for damage which would have occurred naturally as part of the “vicissitudes of life”. The Singapore Court of Appeal is more inclined towards the Jobling approach in taking into account, when assessing damages, random events whether natural events or subsequent torts committed by a third party (see Salcon Ltd v United Cement Pte Ltd (2004)). REMOTENESS OF DAMAGE General Principles 6.73 The test for remoteness of damage is the “reasonable foreseeability” test laid down in the case of Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd (or Wagon Mound (No 1)) (1961). According to Wagon Mound (No 1), the loss would not be too remote where the type of loss which actually occurred was reasonably foreseeable, notwithstanding that the precise extent of the loss was not foreseeable. On the facts of Wagon Mound (No 1), the defendants (charterers of ship) breached their duty in spilling fuel oil which spread to the plaintiff’s wharf, 250 thereby causing damage to the wharf. The molten metal from the plaintiff’s welding works on the wharf had set fire to cotton waste floating on the oil. Though the fire damage was a direct consequence of the defendants’ breach, the plaintiff’s claim in negligence failed. This was because the Privy Council determined that it was not foreseeable that the fuel oil would burn in water. 6.74 In the subsequent case of Wagon Mound (No 2) (1967), the facts were largely similar except that the plaintiffs in this case were the shipowners. The defendants were found liable in Wagon Mound (No 2) due primarily to the evidence of the ship’s chief engineer that there was a real risk that fire will result. The court decided that the defendants could not neglect the risk if it was easy in the circumstances to eliminate those risks. 6.75 To further illustrate the concept of foreseeability as to the type of damage, let us examine the House of Lords decision in Jolley v Sutton London Borough Council (2000). The plaintiff, a schoolboy, suffered spinal injuries when an abandoned boat left on the grounds of a block of council flats owned by the defendant fell on the plaintiff. On the facts, the plaintiff and his friend were attempting to repair the boat that was propped up with a car jack by the boys. Unfortunately, the boat fell on the plaintiff, causing severe injuries. The Court of Appeal took the view that whilst it was foreseeable for the boys to be attracted to the abandoned boat and engage in “normal play”, it was not reasonably foreseeable that they would repair it and thereby sustain severe injuries due to its collapse. The House of Lords disagreed. Lord Steyn in Jolley stated that the boys’ activities were no different from normal play and can take the form of “mimicking adult behaviour”. His Lordship also cited the case of Hughes v Lord Advocate (1963) for the proposition that as long as the cause of the accident was a “known source of danger”, the defendant would be liable even if the accident was caused in a way which could not have been foreseen. Lord Hoffman in Jolley added that the actual injury was within the trial 251 judge’s broad description of the risk that the children would “meddle with the boat”. Hence, the defendants were liable. Special Circumstances of the Plaintiff 6.76 The general rule is that the defendant has to take the plaintiff as he or she is, with existing predispositions (known as the “eggshell skull rule”). In Smith v Leech Brain & Co Ltd (1962), the plaintiff burnt his lip due to the defendant’s negligence. As the plaintiff had a precancerous condition, the lip became cancerous due to the burn resulting in the plaintiff’s death. The defendant was held to be liable for the entire damage, and not merely for the burnt lip. 6.77 What if the plaintiff’s existing predisposition related to his (tight) financial condition? Assume that the defendant’s negligence destroyed the plaintiff’s property (a ship). If the plaintiff had enough capital, he would have purchased another ship as replacement and claimed damages from the defendant in respect of the total costs of the ship. However, as the plaintiff did not have sufficient capital to pay for the ship, he had to hire a ship instead. Assume that overall, it would have been cheaper to purchase the ship than to hire. Will the defendant be liable for the additional loss (based on the higher rates of hire) which the plaintiff suffered due to his impecuniosity? The Singapore Court of Appeal has confirmed that the plaintiff can recover the additional damages from the defendant (see Ho Soo Fong v Standard Chartered Bank (2007)). Similarly, in Alcoa Minerals of Jamaica Inc v Broderick (2002) a claim for increased costs in repairing the plaintiff’s roof was allowed even though the increased costs was due to the plaintiff’s delay in undertaking repair as he could not afford it at an earlier point in time. MITIGATION OF DAMAGE 252 6.78 It is the defendant’s burden to show that the plaintiff ought to have taken reasonable steps to prevent or reduce the plaintiff’s own loss. If the defendant is able to discharge its burden, the loss claimable by the plaintiff would be reduced accordingly. ASSESSMENT OF DAMAGE 6.79 The main purpose of damages in the tort of negligence is to compensate for losses suffered (ie, to restore the plaintiff as far as possible to the position he or she would have been if not for the defendant’s negligence). 6.80 In personal injury cases, the plaintiff can claim for general damages such as pain and suffering, loss of amenities (eg, the loss of capacity due to the loss of a limb) and future loss of earnings. In addition, special damages such as loss of earnings (pre-trial) and medical expenses that have been reasonably incurred may, subject to proof, be recovered. In death cases, a claim for bereavement expenses may be made for the benefit of certain specified dependents (s 21 Civil Law Act (Cap 43, 1999 Rev Ed)). The quantum of damages for property damage is normally based on the costs of repair or diminution in value of the property. Assessment of damages in economic loss cases is intimately connected to the ascertainment of the precise scope of duty of care in a particular case (eg, whether the duty was merely to supply information or to advise on a purported transaction) which may result in quite different quantifications of damages. DEFENCES Ex Turpi Causa 6.81 The phrase ex turpi causa non oritur actio means that no action ought to be founded on a wicked act. As a defence, it has a limited application in the tort of 253 negligence. The fact that the plaintiff is involved in some wrongdoing does not of itself provide a good defence to the defendant. For instance, a plaintiff who does not have a permit to work in Singapore does not prevent him from claiming damages against the defendant who had negligently caused the plaintiff’s injuries (see Ooi Han Sun v Bee Hua Meng (1991)). However, as stated by the court in Ooi Han Sun, public policy dictates that the plaintiff in such a case cannot be compensated on the basis of what he might have earned by working illegally in Singapore. 6.82 For the defence of ex turpi causa to arise, the plaintiff’s wrongdoing must be sufficiently serious and connected to the damage he suffered. There is also a principle that the damage caused by the defendant should be proportionate to the plaintiff’s wrongdoing. The English courts have allowed the defence in fairly exceptional cases such as Ashton v Turner (1981) (where the plaintiff suffered the injury in the course of committing a crime together with the defendant) and Clunis v Camden and Islington Health Authority (1998) (in which the plaintiff claimed against the health care authority for the latter’s negligent omission to provide him with psychiatric care which, it was alleged, resulted in the plaintiff killing a person). In Stone & Rolls Ltd v Moore Stephens (2009), the liquidator of the plaintiff company claimed that the auditors were negligent in failing to detect the fraud committed by S, a director and shareholder of the company against certain banks. S was the sole directing mind and will of the company and thus the fraud was imputed to the company. The auditors were adjudged not liable due to the defence of ex turpi causa. 6.83 In the Singapore decision of United Project Consultants Pte Ltd v Leong Kwok Onn (trading as Leong Kwok Onn & Co) (2005), the court opined that the defence of ex turpi causa could include, apart from criminal offences, other forms of reprehensible or grossly immoral conduct. On the facts of the case, the defence of ex turpi causa did not apply to defeat the action in negligence. The court found 254 that the plaintiff had not connived to cheat the IRAS and thus did not engage in an act so culpable as to attract the defence. The plaintiff had merely committed the statutory offence under the Income Tax Act (Cap 134, 2014 Rev Ed) of making incorrect tax returns which was not criminal in nature, reprehensible or grossly immoral. This was sufficient to deny the defence of ex turpi causa but the Court of Appeal went a step further. It observed that the defendant was engaged by the plaintiffs precisely to avoid the economic loss (namely, the penalty imposed by the IRAS) suffered by the plaintiffs. Thus, the defendant should not be allowed to rely on a consequence (ie, the penalty imposed by the IRAS) that was directly caused by the defendant’s own failure in the first place, in order to absolve the defendant from liability. Volenti Non Fit Injuria 6.84 The issue is whether the plaintiff had acted freely and voluntarily with full knowledge of the nature and extent of the risks of the defendant’s negligence and consented, whether expressly or impliedly, to those risks that resulted in the tort. If this is the case, the defendant has a complete defence. 6.85 The defence is generally applicable to absolve negligence liability for injuries suffered in the context of participation in sporting activities involving decisions and actions that have to be taken swiftly in the “agony of the moment”, though it is unlikely to cover intentional and reckless behaviour of the defendant (see Wooldridge v Sumner (1963)). The defence applied where the plaintiff was aware of the nature and extent of the risks and consented to those risks in the participation of inherently dangerous activities in deliberate breach of his employer’s orders and statutory regulations (see ICI v Shatwell (1965)). The defence did not, however, apply where the plaintiff took conscious risks to effect rescue in emergency circumstances that had arisen from the defendant’s negligent conduct (see Haynes v Harwood (1935)). The 255 court may take into consideration the brave acts of the plaintiff in such rescue cases. 6.86 Section 2(3) Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) (“UCTA”) provides that a person’s agreement to or awareness of a term or notice purporting to exclude or restrict liability does not necessarily constitute a voluntary acceptance of the risks. Full knowledge of the nature and extent of the risks and consent would have to be shown by the defendant in order to successfully raise the volenti defence. Exemption of Liability 6.87 In this section, we examine clauses or notices which seek to exempt the defendant from negligence liability. These exemption clauses or notices might either attempt to exclude liability entirely or to merely limit the liability of the defendant. For the defendant to rely on exemption clauses or notices to exempt liability, he would first have to show that these exemption clauses have been incorporated into the contract with the plaintiff or in a notice that the defendant had taken reasonable steps to bring to the attention of the plaintiff. Secondly, the defendant would have to show that the language of the clause or notice covers the situation in question. For instance, did the contract or notice sufficiently exclude liability for damages arising from the defendant’s negligence? Thirdly, the exemption clause or notice must not be rendered unenforceable by the UCTA. A defendant cannot exclude or restrict its liability for negligence which results in personal injury or death (s 2(1) UCTA). In respect of damage outside of personal injury or death (eg, property damage and financial losses), the effectiveness of the exclusion or limitation clause is subject to satisfying the requirements of reasonableness (s 2(2) UCTA) (see also Smith v Eric S Bush (1990)). Contributory Negligence 256 6.88 As indicated earlier, the doctrine of contributory negligence serves only as a partial defence. In this regard, s 3 Contributory Negligence and Personal Injuries Act (Cap 54, 2002 Rev Ed) reads: (1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage: Provided that — (a) this subsection shall not operate to defeat any defence arising under a contract; (b) where any contract or written law providing for the limitation of liability is applicable to the claim the amount of damages recoverable by the claimant by virtue of this subsection shall not exceed the maximum limit so applicable. [emphasis added] 6.89 A plaintiff’s negligence will result in a reduction of damages only where it is causally relevant to the damage which he or she has sustained. The apportionment of liability as between the plaintiff and the defendant depends on their respective causative potency and blameworthiness. Where the defendant’s liability in contract is concurrent with an identical tortious duty, the defendant could avail himself or herself of the defence of contributory negligence (see Fong Maun Yee v Yoong Weng Ho Robert (1997); Forsikringsaktieselskapet Vesta v Butcher (1989); Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd (2006)). To reduce damages based on contributory negligence, there is no need for the defendant to show that the plaintiff had been in breach of 257 a legal duty of care (see Khoo Bee Keong v Ang Chun Hong (2005)). OTHER ISSUES 6.90 We should examine the following issues related to the tort of negligence: vicarious liability, director’s liability for a company’s negligence, concurrent liability in tort and contract as well as the limitation periods for bringing an action in negligence. Vicarious Liability 6.91 Employers are vicariously liable for the torts committed by their employees in the course of their employment. This means that an employer is legally liable to the third party who suffers harm due to the employee’s negligence in the course of employment. Vicarious liability is based on various rationales: the employer has deeper pockets, exercises control over the employee and benefits from the employee’s work. 6.92 One criterion of vicarious liability is the existence of an employer–employee relationship. Apart from any relevant terms of the contract between the parties, the precise relationship depends on the degree and extent of control by the employer over the employee’s method of work, whether the worker is sufficiently integrated into the organisation of the employer and whether the employee is acting on behalf of the employer or on his own account. The other important criterion (ie, “in the course of employment”) relies on the test of “close connection” between the nature of the employment and the tort committed as well as several policy considerations (eg, compensation for vulnerable victims of the tort and deterrence against employers)(see Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd (2011)). 258 6.93 If the worker who committed the tort is not an employee of the defendant but merely an independent contractor, the defendant is not vicariously liable. It is nevertheless possible to claim against the defendant directly if the latter was negligent in engaging the independent contractor and that the negligence resulted in the plaintiff’s loss. Director’s Liability for Company’s Negligence 6.94 The director of a company is not generally liable for the company’s negligent conduct. The director is regarded in law as a separate entity from the company and hence the tortious acts or omissions of the company cannot normally be imputed to the directors. However, where the director in question is clearly the “controlling mind and spirit” of the company, the director may be personally liable for authorising, directing or procuring the company’s negligent acts, as was the case in TV Media Pte Ltd v De Cruz Andrea Heidi (2004). In that case, the director was also a principal shareholder of the company. Based on the above, the corporate veil was lifted. The Singapore Court of Appeal in the TV Media case also stressed that a director would be found liable in negligence for the company’s negligent acts only in exceptional circumstances and, as such, the decision would not open the floodgates of litigation. 6.95 Apart from the above case, a director may be personally liable in negligence if he is shown to have voluntarily assumed personal responsibility to the plaintiff, and the assumption of responsibility was reasonably relied upon by the plaintiff. Whether such assumption arises in a particular case depends on the parties’ conduct, words and the surrounding circumstances objectively construed (see Williams v Natural Life Health Foods Ltd (1998)). Concurrent Liability in the Tort of Negligence and in Contract 259 6.96 The oft-cited case on concurrent liability is Henderson v Merrett (1995). In that case, shorn of the detailed facts, the issue was whether the plaintiff, who had a contractual relationship with the defendants, could nevertheless sue the defendants in tort to avail himself of the more favourable limitation period for tort claims (as compared to contractual claims). The House of Lords gave an affirmative answer. The plaintiffs could select the tortious remedy which was more advantageous in the circumstances. The tort remedy would be applicable unless it is limited or excluded by the agreement of the parties concerned. Limitation Periods 6.97 According to s 6(a) Limitation Act (Cap 163, 1996 Rev Ed) (“LA”), an action founded on a tort shall not be brought after the expiration of six years from the date on which the cause of action accrued. In the context of negligence, this date refers to the date that the damage occurred. This section is, however, subject to other provisions in the Act, namely, s 24A, which provides that, with respect to a negligence claim for damages for personal injuries, the action shall not be brought after the expiration of: (1) three years from the date on which the cause of action accrued; or (2) three years from the earliest date on which the plaintiff has the knowledge required for bringing an action for damages in respect of the relevant injury, if that period expires later than the period mentioned in paragraph (1). For other claims for damages in negligence (eg, property damage and financial loss), the relevant limitation periods are six years from the date of the accrual of action and three years from the date of acquisition of both the knowledge required for bringing an action in respect of the relevant damage and knowledge of a right to bring such an action (s 24A(3) LA). (Note that there is an overriding time period of 15 years from the “start date” for 260 actions in damages for negligence, nuisance and breach of duty: see s 24B LA. This means that the action cannot be brought after the expiry of the overriding time period even if the cause of action had not yet accrued: see s 24B(3) LA). 6.98 Under s 24A, an action may not be time-barred if it can be shown that the action was instituted within three years from the earliest date in which the plaintiff had acquired knowledge of his rights to bring a claim for the damage. In Chia Kok Leong v Prosperland (2005), as the action was instituted in May 2002, the plaintiff has the burden to show that it had acquired the relevant knowledge on or after May 1999. The onus on the defendants, on the other hand, is to show knowledge on the part of the plaintiff at an earlier date. 6.99 Knowledge of the factual essence of the complaint (as opposed to the details of the claim or whether the plaintiff had a legal claim in negligence) would suffice. It must be shown that the plaintiff possessed knowledge of material facts about the damage that would lead a reasonable person to consider it “sufficiently serious” to invoke legal proceedings (see Lian Kok Hong v Ow Wah Foong (2008)). CONCLUSION 6.100 The tort of negligence has grown from its humble beginnings in Donoghue v Stevenson to be a very significant fault-based tort today. It is clearly instrumental in regulating business and other conduct and activities in Singapore. As we have seen, the courts have utilised legal mechanisms such as duty, breach, damage and defences to shape the contours of this expanding area of the common law whilst safeguarding the physical, mental, proprietary and economic interests of a person from the negligent conduct of another. In doing so, the courts endeavour to strike a suitable balance between the 261 application of concrete legal principles and the exercise of judicial discretion and policy to depart from those principles, if and when such departure facilitates the proper development of tort law and where fairness and justice require it. 262 PART III The Law of Contract 263 Chapter 7 Offer and Acceptance 7.1–7.2 Introduction to the Law of Contract 7.3–7.5 7.6–7.7 Basic Terminology Offer and Acceptance 7.8–7.10 7.11–7.13 7.14–7.16 7.17–7.24 7.25–7.29 7.30 7.31–7.32 7.33 7.34–7.40 7.41–7.43 7.44–7.45 7.46–7.48 7.49 7.50–7.51 7.52–7.54 7.55–7.60 7.61–7.67 Offer Definition and Nature of Offer Offers to Public at Large Offer Distinguished from Invitation to Treat (1) Advertisements (2) Displays of goods for sale (3) Auction sales (4) Tenders Termination of Offer (1) Introduction (2) Revocation (3) Rejection and counter-offer (4) Lapse of time (5) Failure of a condition (6) Death Acceptance Definition and Nature of Acceptance General Principles (1) Acceptance must be final and unqualified (2) Acceptance must be communicated to offeror (a) General rule (b) Exception: The postal acceptance rule 264 7.68–7.70 7.71 7.72 7.73–7.76 7.77–7.83 7.84 (c) (d) (e) (f) Acceptance by silence? Ignorance of offer Cross-offers Battle of forms Some Issues Relating to Offer and Acceptance Certainty and Completeness Conclusion INTRODUCTION TO THE LAW OF CONTRACT 7.1 In Part II we learnt about the two important branches of law — criminal law and civil law. In relation to criminal law, we learnt about business crimes, and in relation to civil law, we learnt about the law of torts. We now turn to another important branch of civil law — the law of contract. In Part III we shall consider what a contract is, how it is formed, what its contents are, how it can be terminated and what the remedies for breach of contract are. 7.2 What is a contract? A contract is a legally binding agreement, which means that the law requires both parties to do what they promised in the agreement. However, for an agreement to be legally binding or “valid”, it must satisfy certain requirements. These are as follows: (a) there must be a meeting of the minds or common understanding between the parties, as manifested through offer and acceptance (Chapter 7); (b) there must be consideration (ie, something given in exchange for the respective promises) and the intention to create legal relations (Chapter 8); (c) the parties must have the capacity to contract (Chapter 9); and (d) the parties must freely consent to the agreement. The factors that may destroy or “vitiate” the free consent of the parties are called “vitiating factors” and include mistake (Chapter 12), misrepresentation (Chapter 13), and duress and undue 265 influence (Chapter 14). Further, a contract must not suffer from illegality (Chapter 15). BASIC TERMINOLOGY 7.3 Before we proceed, it is necessary to understand some of the commonly used terms in the law of contract. In the paragraph above, we described a legally binding or valid contract as being an agreement that satisfies all the legal requirements. How do we refer to a contract that does not satisfy one or more of these requirements, or is affected by a vitiating factor? We do so in three main ways: (a) “void”; (b) “voidable”; and (c) “unenforceable”. A contract is void when the law treats the contract as null, as though it never existed at all, because of some serious flaw such as fundamental mistake. A contract is voidable where the law treats the contract as valid when made, but due to some reason one of the parties to the contract has the right not to go through with it (or to “avoid” it), for example, on the ground of misrepresentation. In such a case, only the party who was made (or “induced”) to enter into a contract through misrepresentation can avoid it, but not the other party. The party entitled to avoid it can also choose to continue with the contract. Lastly, an unenforceable contract is one that is valid and legally binding but which the court will not enforce for some reason, for example, because of a legal provision. As an illustration, under the law of limitation, one cannot recover a debt more than six years from the time it was due. 7.4 Then there are “bilateral” and “unilateral” contracts. All contracts are bilateral in the sense that there must always be at least two parties to a contract. There must be mutual promises between the parties before there can be an agreement between them. One party cannot impose his or her proposal on the other party if the other party is unwilling to enter into an agreement. The main feature of a bilateral contract is that the proposer of the agreement or the “offeror” makes a promise in return for a promise 266 on the part of the offeree. On the other hand, the term unilateral means one-sided. There is no such thing as a one-sided contract because one party cannot enter into a contract with himself or herself. What a unilateral contract really means is that one party to a prospective contract has already done all that he or she is required to do under the contract, leaving only the other party to do his or her part. Thus, in a unilateral contract, the offeror makes a promise in return for an act to be performed by the offeree. Performance of this act by the offeree constitutes both the acceptance of the offer as well as consideration. As an illustration, where a person advertises a reward for finding a lost purse, this is a unilateral contract because all that the other party has to do is to find the purse, and claim the reward. 7.5 Lastly, a word about the types of contracts. There are two categories of contracts, simple contracts and special contracts. Most contracts that are entered into for business and in everyday life are simple contracts. A reference to contract in this book is a reference to a simple contract, unless the context indicates otherwise. Simple contracts can be oral (also known as “parol contracts”) or in writing, or partly oral and partly in writing. Special contracts are formal contracts by deed (a type of legal document that is signed and delivered) or contracts under seal. Unlike simple contracts, they do not require consideration (see Chapter 8, para 8.46). They are used in a more formal setting such as a grant of a gift or purchase of land. Offer and Acceptance 7.6 We now turn to offer and acceptance, which are important requirements for a contract. A contract is an agreement where the parties strike a bargain for themselves. It happens when one party makes an offer that the other party accepts. This may look simple in everyday contracts like buying a loaf of bread, but may be difficult to establish in more serious contracts involving long-drawn 267 negotiations. Yet for the contract to exist, it must be established that there was a meeting of minds between the parties such that they have a common understanding as to what they have agreed to. Lawyers use the phrase consensus ad idem to describe this. Since it is not possible to look into the minds of parties, how offer and acceptance is determined depends not on what the parties subjectively intended, but what can be objectively ascertained. This “objective” test of agreement examines the external manifestation of the parties’ intentions through their actions as they may be reasonably understood by the other party. The Singapore High Court in Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd (2010) stated (at [34]) that the law is predominantly concerned with objective intentions of a party, and not his subjective or actual intentions. Specifically, the objective approach determines a party’s intentions by looking at the way in which all his words and conduct would be understood by the reasonable person in the position of the recipient, the party to whom the words and conduct were directed. 7.7 Consensus ad idem is established by applying the rules of offer and acceptance. Once the acceptance of a valid offer takes effect, a contract comes into existence provided other requirements are met. Both the parties will then be bound by their mutual promises. As to offer and acceptance in the context of electronic contracts, these are considered in Chapter 24. The framework in Figure 7.1 can be applied to study this topic: 268 Figure 7.1 Overview of concepts in offer and acceptance OFFER Definition and Nature of Offer 7.8 In Gay Choon Ing v Loh Sze Ti Terence Peter (2009), the Singapore Court of Appeal said (at [48]) that an offer “must consist of a definite promise to be bound, provided that certain specified terms are accepted”. An offer has also been defined as “an expression of willingness to contract on specified terms, made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed” (see E Peel, Treitel: The Law of Contract (14th ed, 2015) at p 10). 7.9 Thus, an offer is a proposal by one party indicating his willingness to be bound by certain terms provided they are unconditionally accepted by the other. The party making the offer is the “offeror” and the party to whom the offer is made is the “offeree”. The offer thus contains (1) a proposal of the terms of the exchange; and (2) an expression of willingness to be bound as soon as the recipient of the proposal accepts the terms. An offer puts the offeror at risk: it confers a power on the offeree to bind the offeror at the precise moment of acceptance; thereafter the offeror loses his ability to withdraw from or further negotiate the arrangement (see M Chen-Wishart, 269 Contract Law (6th ed, 2018) at p 55). An offer may be made orally, in writing or by conduct. 7.10 The critical issue in this context is whether there is an intention to be bound. As mentioned, an objective approach is used in ascertaining whether there is an intention to be bound. Accordingly, it is possible for a party, who had no actual intention to make an offer, to become bound by what was perceived objectively as an offer. This was recognised by the Singapore High Court in Hongkong & Shanghai Banking Corp Ltd v Jurong Engineering Ltd (2000). The objective approach embodies a principle of convenience because it is not possible to read a person’s mind to ascertain his subjective intentions. Offers to Public at Large 7.11 In most cases an offer will be made to a particular person and only that person may accept the offer and no one else, for example, an offer of employment. However, an offer may also be made to a group or to the whole world. In such a case any member of that group or any member of the public, may accept the offer. An example of an offer made to the public at large is where the owner of a lost purse offers a reward to anyone who finds and returns it. 7.12 The principle that an offer can be made to the whole world was laid down by the English Court of Appeal in the famous decision of Carlill v Carbolic Smoke Ball Company (1893), which has been followed in numerous Singapore cases. The defendants were the manufacturers and vendors of the Carbolic Smoke Ball, which they claimed could prevent influenza. They advertised in the newspapers stating that if anyone used their smoke ball three times daily for two weeks and in accordance with the printed directions supplied with each ball and still caught influenza, they would pay that person £100. To prove that they were serious about their claim, they said they had deposited £1,000 with their bankers. 270 Mrs Carlill bought the smoke ball and used it as directed and yet caught influenza. She claimed the £100 but the defendants refused to pay. 7.13 The court had to settle several issues in coming to a decision. First was the argument that the advertisement was not a serious contract (a mere “puff”) and that there was no intention to be bound. The court rejected this argument because the advertisement itself stated that the defendants had deposited £1,000 with the bank, which showed that they were serious about their promise. Second, whether the apparent promise by the defendants was indeed an offer since it was not made to any specific person or group of persons but to the world at large. The court held that an offer could indeed be made to the world at large. Third, whether the plaintiff should nevertheless fail in her claim because of her failure to notify her acceptance to the defendants. The court rejected this argument and stated that no such notification was required since this was a unilateral contract. Lastly, the contract was supported by consideration. Offer Distinguished from Invitation to Treat 7.14 Sometimes one party, instead of making an offer, may invite others to make an offer. This is known as an “invitation to treat”, which is simply an expression of willingness to negotiate with the other party. At this stage there is no intention to be bound. The distinction between the two is important in that if the proposal is an offer, a binding contract will come into existence without further negotiation upon its acceptance. Thereafter any attempt to escape from the contract would be a breach of contract. On the other hand, if the proposal is an invitation to treat, and if the response of the other party amounts to an offer, the person making the proposal may accept or reject the offer. 7.15 In determining whether a statement is an offer or invitation to treat, the words used in the statement are not 271 conclusive. In Soon Kok Tiang v DBS Bank Ltd (2012), a plaintiff investor made an application for a declaration that the series of notes known as “DBS High Notes 5” (“HN5”) was void at the time of their issuance and asked the court to order the defendant bank to repay each of the plaintiffs the principal amounts they had invested in HN5. To succeed in the claim, the plaintiff investor had to show that the launch of HN5 was an offer that had been accepted. The Singapore High Court was not persuaded that the launch of HN5 was an offer (at [19]). Although the launch of HN5 was termed an “offering” and the period for application was called the “Offer Period”, the defendant bank retained the right to reject or accept any application without the need to give reasons. The defendant bank thus had not indicated any intention to be bound, but was merely inviting interest in HN5. The launch of HN5 was, accordingly, an invitation to treat. It was the individual investor who, by submitting the application form, made an offer to the defendant to buy into HN5. The HN5 contract came into existence only when the defendant bank accepted that offer. 7.16 There are situations in everyday life when what appears to be an offer is held by law to be an invitation to treat. In many such established situations, the courts have already decided whether there is an offer or an invitation to treat by treating certain situations as indicating the presence or absence of the intention to be bound. Some of these situations are dealt with below. (1) Advertisements 7.17 It is now common for businesses to advertise in the media including newspapers and magazines, TV, radio and the Internet; also in the same category are catalogues, brochures and price lists. Generally, these advertisements are considered invitations to treat. 7.18 The case of Partridge v Crittenden (1968) is often cited for this principle. Partridge advertised in a magazine, 272 “Bramblefinch cocks and hens, 25s each”. He was charged with “offering for sale” a wild bird contrary to the provisions of the Protection of Birds Act 1954 and was convicted at the Magistrates’ Court. However, his conviction was quashed on appeal because the English High Court found that his advertisement was not an offer but an invitation to treat. According to Lord Parker, “when one is dealing with advertisements and circulars, unless they come from manufacturers, there is business sense in their being construed as invitations to treat and not as offers for sale”. 7.19 Advertisements placed in newspapers and magazines are usually considered invitations to treat on the basis that people who read the advertisements may want to negotiate further. Further, the intending seller may have a limited number of items to sell, with the result that he may not be able to sell to all who might respond to the advertisement. 7.20 Similar principles apply to electronic trading on the Internet or e-commerce. Advertisements posted on a website generally amount to invitations to treat (see s 14 Electronic Transactions Act (Cap 88, 2011 Rev Ed) discussed in Chapter 24, paras 24.15–24.16). Here the customer is said to be making the offer which the seller may accept or reject. So if a seller makes a mistake by quoting a ridiculously low price for the goods, he could refuse to sell the goods at the advertised price. It would be absurd if the seller were to honour all such “contracts”. 7.21 This principle was applied in the Singapore case of Chwee Kin Keong v Digilandmall.com Pte Ltd (2004). The defendant advertised on its website laser printers for sale. Because of an employee error, the price quoted was $66 each, instead of the correct price of $3,854 each. The six plaintiffs spotted the bargain and quickly placed orders on the website for 1,606 printers in total at $66 each. Upon receiving the orders, the defendant’s automated response system sent emails to the plaintiffs confirming each 273 purchase. When the defendant realised its error, it promptly removed the advertisement from the website. It informed all who had placed orders that the price was a mistake, and that it would therefore have to decline all orders. The plaintiffs sued, insisting that the confirmed orders were binding on the defendant. 7.22 The Singapore High Court considered whether existing contract principles applied to Internet contracts and said they could. However, the court cautioned against applying them the same way as to traditional contracts. The court further stated that Internet merchants must be cautious as to how they present an advertisement since this determines whether the advertisement will be construed as an invitation to treat or a unilateral contract. Loose language may result in inadvertently establishing contractual liability to a much wider audience (purchasers) than resources permit. The case was eventually decided in favour of the defendant on appeal based on unilateral mistake. However, the High Court’s views on Internet contracts mentioned above were not disputed and remain pertinent. 7.23 Hence, despite the general rule, it is still possible for an advertisement on the Internet to constitute an offer rather than an invitation to treat. This is especially so where the buyer is guided on screen step-by-step by the seller until he clicks “I accept” and pays the purchase price online. The key element in such cases is the intention of the parties to be gathered from the circumstances of the case. 7.24 Apart from Internet contracts, there are also other cases where advertisements may amount to an offer rather than an invitation to treat. This was the case in Carlill v Carbolic Smoke Ball Co (see para 7.12). In that case, the court found an intention to be bound. Similarly, in an American case, Lefkowitz v Great Minneapolis Surplus Store (1957), the advertisement stated: “Saturday, 9 am sharp; 3 brand new fur coats, worth $100, first come first 274 served, $1 each”. The plaintiff was the first customer to present himself at the appointed time, but the defendant refused to sell the coat to him. He successfully sued for breach of contract and the Supreme Court of Minnesota held that the advertisement amounted to an offer. Thus, in relation to advertisements, the question whether there is an offer or merely an invitation to treat turns on whether there is an intention to be bound. (2) Displays of goods for sale 7.25 Are the goods on display with price tickets on the supermarket shelves or in shop windows offers or invitations to treat? Holding it as the one or the other will result in a different outcome. If the goods on display are offers, the mere picking up of such goods might amount to an acceptance and result in a binding contract. If the goods on display are invitations to treat, there would be no contract until the customer makes an offer to purchase the item. 7.26 The general principle is that all such displays are regarded as invitations to treat rather than offers. The English case of Fisher v Bell (1960) is an example where this principle was applied. There, the defendant had displayed flick knives in his shop window and was convicted of the criminal offence of offering such knives for sale. However, his conviction was quashed on appeal. The court held that the display of goods with a price ticket attached in a shop window is an invitation to treat and not an offer to sell. 7.27 As there is no Singapore decision on this principle, let us consider the leading English case in this regard, Pharmaceutical Society of Great Britain v Boots Cash Chemists (1953). The defendants were charged with the offence of selling drugs, which could be sold only under the supervision of a qualified pharmacist. They operated a self-service shop where the goods for sale were displayed on shelves in packaging with the prices marked 275 on them. Customers entering the shop picked up whatever goods they wished to buy and took them to a cashier near the exit. There was no pharmacist present near the shelves, but a registered pharmacist was present near the cash desk and could prevent a customer from buying any listed drug. The English Court of Appeal in this case had to identify the precise time when a contract was concluded. This required them to decide whether the display of goods on the open shelves in a self-service store amounted to an offer of goods for sale or an invitation to treat. The court held that the display of goods was an invitation to treat. The customer made the offer to buy at the cash desk and the sale was completed when the cashier accepted the offer. If it were otherwise, then the customer concerned would be unfairly bound once the article was placed in the basket and would not be able to change his mind to substitute it with another. The shopkeeper also would be in deep trouble if he ran out of stock. 7.28 Two practical consequences of this rule are that, first, the shop does not have to sell the goods at the marked price especially where it has misquoted the price, and second, the buyer cannot insist upon buying an item on display even if the shop has run out of stock. 7.29 The court’s reasoning, however, has faced some criticism. Legal commentators have argued that a modern store or a supermarket is not a place for bargaining. There is also no reason to hold that the customer will be prejudiced by being automatically bound if he were to pick up priced goods, as that act is too equivocal to constitute an act of acceptance. Lastly, the argument that the shopkeeper would be unfairly bound if he were to run out of stock was not tenable. He could overcome this difficulty by holding that his “offer” was open only “while stocks last”. (3) Auction sales 276 7.30 At an auction sale, the call for bids by the auctioneer is an invitation to treat. The bids made by those present at the auction are offers. The auctioneer selects the highest bid and the contract is completed by the fall of the hammer. It follows from this that until the hammer fell, a bidder is free to withdraw his offer. This is now confirmed by s 57(2) Sale of Goods Act (Cap 393, 1999 Rev Ed). (4) Tenders 7.31 Large businesses and public authorities often award contracts by inviting interested parties to tender for the business. Such an invitation to tender is an invitation to treat and not an offer (see UOL Development (Novena) Pte Ltd v Commissioner of Stamp Duties (2008) referring to Spencer v Harding (1870)). The offer is made by the person who submits the tender. The acceptance takes place when the person inviting the tender accepts one of the tender bids. 7.32 However, there are circumstances where the courts have held that the invitation to tender was, in fact, an offer. In Harvela Investments Ltd v Royal Trust Co of Canada (1986), the invitation to tender promised that the highest bid would be accepted. In that case, which concerned the sale of shares, the House of Lords held that the invitation to tender constituted an offer to enter into a contract with the highest bidder. Nevertheless, because the higher bid was a “referential bid” in that it gave a figure and stated “or $100,000 in excess of any other offer”, that bid was invalid. The purpose of competitive tendering was to secure a sale at the best possible price. If both parties had submitted a referential bid it would have been impossible to conclude the contract. Termination of Offer (1) Introduction 7.33 Where an offer has been accepted, a binding contract comes into existence and the offer ceases to exist. It 277 would be a breach of contract to disclaim any obligations in the offer. However, if an offer is terminated prior to its acceptance no contract can come into existence. There are five ways in which an offer may be terminated. (2) Revocation 7.34 The offeror can revoke his offer at any time before it is accepted by the offeree. Once revoked, the offer ceases to exist and it is no longer possible for the offeree to accept it. To be effective, however, the revocation must be communicated to the offeree. In Byrne v Van Tienhoven (1880), the defendants, a Cardiff company, mailed a letter on 1 October to New York offering to sell to the plaintiffs 1,000 boxes of tinplates. The plaintiffs received the letter on 11 October and immediately accepted by telegram and confirmed by a letter posted on 15 October. (Acceptances by telegram are effective as soon as they are sent; see the postal rule at paras 7.61– 7.67). Meanwhile, on 8 October, the defendants had sent a letter revoking the offer, which reached the plaintiff on 20 October. The court held that there was a binding contract. The revocation was not effective since the contract had come into existence nine days before the letter of revocation reached the plaintiff. 7.35 It appears from case law that the revocation of an offer does not have to be communicated by the offeror himself; communication may be made by some other reliable source. Dickinson v Dodds (1876) appears to suggest that an implied revocation is possible. If the offeree comes to know of the revocation of the offer by the offeror through a third party, that would be sufficient to terminate the offer. In this case, the defendant offered to sell a house to the plaintiff, the offer “to be left open until Friday, June 12, 9 am”. However, on 11 June he sold the house to someone else. The plaintiff heard about the sale from his property agent the same day. Nevertheless, he purported to accept the defendant’s offer by forwarding a written acceptance before 9 am on 12 June. The English 278 Court of Appeal held that the defendant had validly withdrawn his offer and that the withdrawal had been validly communicated to the plaintiff through a third party. 7.36 In a Singapore case, Overseas Union Insurance Ltd v Turegum Insurance Co (2001), the plaintiff company had entered into reinsurance contracts with the defendants. The plaintiff was liable to certain claims under the reinsurance contracts and decided to negotiate with the defendants for a reduction of their liability. In March 1999, the defendant offered to accept a sum of US$220,000 from the plaintiff in reduction of the plaintiff’s outstanding liability. On 21 October 1999, the plaintiff purported to accept this offer. However, the defendant claimed that the offer had since been withdrawn by the defendant’s letter of demand, made on 5 October, to the plaintiff for payment of the plaintiff’s full liability. The Singapore High Court agreed with the defendant that the offer had been revoked. The court held that the maker of an offer is free to withdraw it at any time before it is accepted. Notice of withdrawal must be given and must reach the offeree to be effective. It is not necessary, however, that the notice of withdrawal be explicit. It is enough if the offeree is given information which shows that the offeror has changed his mind and no longer wants to proceed with the offer. This information need not even come directly from the offeror. 7.37 Although it is clear that the revocation must be brought to the attention of the offeree, there is uncertainty about the exact point at which it comes to his attention. For example, if revocation is made by post, revocation could be effective when the letter reaches his business or when he reads it. There is no clear authority on this point, but in The Brimnes (1975) the English Court of Appeal held that, in the case of a notice of withdrawal of a vessel sent by telex during ordinary business hours, the withdrawal was effective when it was received on the telex machine. There was no requirement that it be read by any person within the organisation. 279 7.38 There is no legal obligation on the part of the offeror to keep the offer open for a specified period even if he had promised to do so. In Routledge v Grant (1828), the defendant offered to buy the claimant’s house, giving the claimant six weeks to consider the proposal. The court held that he could withdraw the offer at any time before acceptance, even though the deadline had not yet expired. The claimant could not accept the offer after it had been withdrawn. This is on the basis that an offeree cannot enforce an offeror’s promise to keep his offer open unless there is a separate contract supported by consideration. Such contracts are called “options”. A legally binding option will be created if the offeree provides some consideration in return for the offeror’s promise to keep the offer open. Thus, in Mountford v Scott (1975), the purchaser of a house paid the seller £1 for an option to buy, exercisable within six months. The Court of Appeal held that the seller could not withdraw the offer before the option expired. 7.39 An offer may be revoked when it is replaced by a subsequent offer. The second offer must state that it supersedes the earlier offer, so that it can no longer be accepted (see Pickfords Ltd v Celestica Ltd (2003)). 7.40 The rule that revocation is effective only when it is communicated to the offeree causes some difficulty in unilateral contracts. In such cases acceptance is by performance of an act. The offeror is not aware if anyone has accepted or has started to accept the offer by looking for the lost item. Accordingly, two issues need to be considered: first, how revocation is to be validly effected, and second, whether a unilateral offer can be revoked once performance has begun. As to the first, it seems to be enough for the offeror to take reasonable steps to bring the withdrawal to the attention of such persons. Thus, if the offer of a reward for finding a lost item was made through a newspaper advertisement, it would suffice to place another similar advertisement withdrawing the offer, although there is no guarantee that everyone 280 concerned will see it. The second question is more complicated and has not been conclusively decided in Singapore. Box 7.1 Reflecting on the law Is it possible to revoke a unilateral offer once performance has started? Despite the traditional rule that an offeror can withdraw his offer any time before it is accepted, in the case of unilateral contracts, there is potential unfairness to people who may have spent considerable time and effort in response to an advertisement offering a reward for the recovery of a lost pet and in performing the conditions required in the advertisement. An alternative approach is that, if an offeree begins to perform his obligations within a reasonable time from the making of the offer, the offeror cannot revoke the offer. This is known as the “two-offer” approach, which was endorsed by the English Court of Appeal in Daulia Ltd v Four Millbank Nominees Ltd (1978). Under this approach, the offeror impliedly undertakes not to revoke the main offer once the offeree has commenced performance within a reasonable time. In Singapore, Chan Sek Keong JC (as he then was) referred to this approach approvingly, in obiter, in Dickson Trading (S) Pte Ltd v Transmarco Ltd (1989). Yet another suggested approach is to allow the offeror to withdraw his offer at any time before full performance of the required act subject to compensation being paid to the offeree who has commenced performance by way of a suitable sum for his trouble in quantum meruit. These different approaches have not yet been fully considered by the Singapore courts — which approach do you think is best? (3) Rejection and counter-offer 7.41 An offer is terminated when the offeree rejects it. This may be done either expressly as when the offeree states that he has no interest in the offer, or impliedly, where he purports to accept the offer with conditions attached or makes a counter-offer. A counter-offer has two distinct effects. As the facts of Hyde v Wrench (1840) illustrate, first, it acts as a rejection of the original offer and accordingly, the original offer lapses; and second, it stands as a new offer capable of being accepted by the 281 offeror. In this case, the defendant offered to sell his farm to the plaintiff for £1,000. The plaintiff made a counteroffer of £950, which the defendant refused. The plaintiff then purported to accept the original offer to buy for £1,000. The English court held that there was no contract. The counter-offer had the effect of rejecting the defendant’s original offer, causing it to lapse. 7.42 However, sometimes it may be difficult to decide whether the offeree is making a counter-offer or is merely asking for additional information on the offer, in which case there is no rejection of the offer. In Stevenson v McLean (1880), the defendant offered to sell a quantity of iron to the claimants for cash. The claimants asked whether they could have credit terms. When there was no reply to their enquiry, they accepted the terms of the original offer. However, the defendant sold the iron to someone else. The English court decided that the enquiry was a request for more information and not a rejection of the offer. Hence, the defendant was liable for breach of contract. 7.43 To distinguish between a counter-offer and a request for information, you can consider whether a new term is being introduced, or whether the request only clarifies what the offer is. (4) Lapse of time 7.44 Where the offeror has specified a time limit by which the offer must be accepted, the offer will lapse if not accepted within that time. This is subject to the offeror’s right to revoke it earlier and any binding agreement to keep the offer open. However, if it is clear from the offeror’s conduct and other evidence that the terms of the supposedly lapsed offer continue to govern the relationship after the specified period, then the offer is still valid and capable of acceptance after the deadline (see Panwell Pte Ltd v Indian Bank (No 2) (2002)). 282 7.45 Where the offeror has not specified a time limit, the offer will lapse after a reasonable period. What is a reasonable period would depend on the circumstances of each case. Thus, in dealing with commodities whose prices fluctuate daily, the period will be shorter. In Ramsgate Victoria Hotel v Montefiore (1866), the defendant applied for shares in the plaintiff company in June and paid a deposit into their bank. Having heard nothing from the company for five months, he was then informed in November that shares had been allotted to him and asked for the balance due on them. He refused to pay. The court upheld his argument that five months was not a reasonable time for acceptance of an offer to buy shares, as the price of shares fluctuates rapidly. (5) Failure of a condition 7.46 An offer may be made subject to conditions, which may be stated expressly by the offeror or implied by the courts from the circumstances of the case. If such conditions are not satisfied, the offer is not capable of being accepted. For example, when a person offers to buy goods, it is implied that the offer is conditional on the goods remaining in the same condition as when the offer was made until acceptance. If goods are damaged before acceptance, then the offer will cease to exist. 7.47 In Financings Ltd v Stimson (1962), the defendant saw a car at the premises of a dealer on 16 March, which he decided to buy. He signed a hire-purchase form provided by the plaintiff which stated that the agreement would be binding only when signed by the finance company. The defendant took possession of the car and paid the first instalment on 18 March. On 20 March, he returned the car because he was not satisfied with it. On 24 March, the car was stolen from the car dealership, but was later recovered badly damaged. On 25 March, the finance company signed the hire-purchase agreement, unaware of what had happened. The defendant argued that he was not bound by the contract and refused to pay the 283 instalments, and was sued for the breach of the hirepurchase agreement. The English Court of Appeal held that the hire-purchase agreement was not binding because the defendant’s offer to obtain the car on hirepurchase was subject to an implied condition that the car would remain in substantially the same state until acceptance. Since the implied condition had not been fulfilled at the time the finance company purported to accept, no contract had come into existence. 7.48 In Dysart Timbers Ltd v Roderick William Nielsen (2009) the New Zealand Supreme Court held that as a rule of law an offer can lapse if there has been a fundamental change in the basis of the offer. The court held that an offer to settle a case had not lapsed when the offeror’s leave to appeal was granted just before the offer was accepted. The change of circumstances was not sufficiently fundamental. (6) Death 7.49 Death of the offeror or the offeree may in some cases terminate the offer. However, the law is not entirely clear in this regard. It appears that the offer will terminate if the offeree knows that the offeror has died; it will not if the offeree has no notice of it (see Bradbury v Morgan (1862)). Whether an acceptance is valid if made without knowing about the death of the offeror depends on the nature of the contract. If the offer involved personal services of the offeror (eg, to paint a portrait), it cannot be accepted after the death of the offeror. However, other offers may be accepted and become binding on the personal representatives of the deceased (eg, to provide a loan) even after the death of the offeror. If the offeree dies before accepting the offer, the offer made to him can no longer be accepted. This is especially so if the offer is made only to the offeree and is not capable of acceptance by the deceased offeree’s estate or his personal representatives. 284 ACCEPTANCE Definition and Nature of Acceptance 7.50 An acceptance is a final and unqualified expression of assent to the terms of an offer (see Gay Choon Ing v Loh Sze Ti Terence Peter (2009) at [47]). It is an unconditional agreement to all the terms of the offer which bring a contract into existence, making both parties legally bound. Thereafter neither party can get out of the contract or vary its contents. Acceptance can be signified orally, in writing or by conduct. An acceptance must be made when the offer is still open, and it must be absolute and unqualified. Acceptance in a contractual setting must be ascertained objectively. When there is a history of negotiations and discussions, the court will look at the whole continuum of facts to decide whether a contract exists (see Midlink Development Pte Ltd v The Stansfield Group Pte Ltd (2004) at [48]). 7.51 The mode of acceptance depends on the type of contract. As mentioned earlier in the chapter, in the case of a unilateral contract, the acceptance is through the offeree’s performance of an act in return for a promise, while in the case of a bilateral contract it is through the offeree’s promise in return for a promise. General Principles (1) Acceptance must be final and unqualified 7.52 The offeree must agree to all the terms contained in the offer. Any attempt on his part to introduce new terms would result in a counter-offer. As already noted, a counter-offer destroys the original offer and simultaneously constitutes a new offer. 7.53 Sometimes when parties carry on lengthy negotiations it may be hard to say exactly when an offer has been made and accepted. In such cases the court must look at the whole correspondence and decide whether, on its true 285 construction, the parties have agreed to the same terms. In Allianz Insurance Co (Egypt) v Aigaion Insurance Co SA (2008) the parties in an insurance contract had previously agreed upon a warranty, but the final email between the parties made no reference to the warranty. The English Court of Appeal held that the emailed reply was intended to be the final reference point and that a reasonable reader of the email exchange would conclude that there was a contract between the parties which omitted the warranty. 7.54 The requirement that the acceptance must be unqualified does not, however, mean that there must be precise correspondence between offer and acceptance so long as there are no new terms. The question is whether what has been introduced would have been regarded by a reasonable offeror as introducing a new term into the bargain rather than acceptance of the offer (see Midgulf International Ltd v Group Chimique Tunisien (2010)). (2) Acceptance must be communicated to offeror (a) General rule 7.55 The general rule is that before a binding contract can come into existence, the acceptance must be communicated to the offeror. The acceptance is generally said to be validly communicated when it is brought to the notice of the offeror. A mere mental assent is insufficient. Where an offeror has prescribed that the offer can only be accepted in a specified way, he would not, in general, be bound unless the acceptance is made in that way. The offeror can, however, choose to waive any requirement as to the form of acceptance provided that the acceptance has not prejudiced the other party (see MSM Consulting Ltd v Tanzania (2009)). 7.56 Apart from the direct oral or written communication, acceptance can take place through conduct. In Brogden v Metropolitan Railway (1877), Brogden had supplied the railway company with coal for many years without any 286 formal agreement. The parties then decided to formalise their relationship and the railway company sent Brogden a draft agreement. Brogden filled some blanks, including the name of an arbitrator, marked it “approved” and returned it to the company. The company’s employee put the draft in his desk drawer where it remained for the next two years without anything being done about it. Meanwhile, Brogden continued to supply coal under the terms of the “agreement” and the railway company paid for it. Eventually, a dispute arose between the parties and Brogden refused to supply coal to the company holding that there was no binding contract between them. The House of Lords held that a contract had been concluded between them. Brogden’s amendments to the draft agreement amounted to an offer which was accepted by the company either when the first order was placed under the terms of the agreement or at the latest when the coal was supplied. The parties had indicated their approval of the agreement by their conduct. 7.57 The general rule that the communication must actually be received by the offeror applies to all modes of instantaneous communications including face-to-face negotiations and communications by telephone, telex and fax. This important principle was established in Entores Ltd v Miles Far East Corporation (1955). The plaintiffs in London telexed an offer to buy copper cathodes from the defendants in Amsterdam. The defendants telexed acceptance back to London. Later, when sued for breach of contract in England, the defendants argued that the English courts had no jurisdiction because the contract was concluded in Holland when they typed the acceptance on their telex machine. The plaintiffs, on the other hand, argued that the acceptance was not effective until it was printed out in London. The court held that the English courts had jurisdiction because where a contract is made by instantaneous communication the contract is complete only when the acceptance is received by the offeror. 287 7.58 As explained by Lord Denning in the above case, suppose the offeror shouts an offer to the offeree who is across the river and just as the offeree shouts back an acceptance a noisy aircraft flies overhead preventing the offeror from hearing the offeree’s reply; no contract has been made. The same would apply if the contract was made by telephone and the offeror failed to hear what the offeree said because of the interference on the line; there is no contract until the offeror knows that the offeree is accepting the offer. The main reason for this rule is that in the alternative people might be bound by a contract without knowing that their offers have been accepted, which would lead to future difficulties. However, the general rule will not apply strictly if the offeror is at fault, for example, where he failed to maintain his equipment in a proper condition. To hold it otherwise would not be fair to the offeree. 7.59 The decision in Entores was approved by the House of Lords in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH (1983). The facts were similar except for the location. In Brinkibon, the offer was made by telex from Vienna to London and accepted by a telex from London to Vienna. The House of Lords held that the contract was therefore made in Vienna. In both cases, the telex machines were in the offices of the parties, and the messages were received during the normal working hours. However, the House of Lords in Brinkibon said that a telex message sent outside working hours would not be considered instantaneous in certain exceptional circumstances. This and other exceptions were described by Lord Wilberforce in Brinkibon as follows (at [42]): Since 1955 the use of telex communication has been greatly expanded, and there are many variants of it. The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of 288 office hours, or at night, with the intention, or on the assumption, that they will be read at a later time. There may be some error or default at the recipient’s end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie … This position was accepted in Singapore in Transniko Pte Ltd v Communication Technology Sdn Bhd (1996). 7.60 Do the rules relating to instantaneous communication apply to email? In Olivaylle Pty Ltd v Flottweg AG (No 4) (2010), a decision of the Federal Court of Australia, Logan J noted (at [25]) that experience suggests that email is often, but not invariably, a form of near instantaneous communication. However, one could argue that email is not instantaneous because the contents of the email are conveyed in “packets” not necessarily at the same time (see Chapter 24, para 24.20). Email could also be argued to be no different from the normal post because it is subject to delivery delays and is to some extent outside the control of the contracting parties. Therefore, the position regarding email correspondence is not settled (see Chapter 24, para 24.21 and Table 24.2). (b) Exception: The postal acceptance rule 7.61 The postal rule of acceptance is an exception to the general rule that acceptance must be communicated to the offeror. Instead, acceptance takes place at the time when the letter of acceptance is posted and it does not matter whether the letter reaches the offeror at all. This exception applies equally to telegrams although this mode of communication is now hardly in use. 289 7.62 The postal rule was laid down in Adams v Lindsell (1818). On 2 September 1818, the defendants wrote to the plaintiffs offering to sell wool and requiring an answer by return post. In the normal course the letter would have reached the plaintiffs on 3 September but since the defendants did not address the letter correctly, it was delivered to them on 5 September. The plaintiffs posted their acceptance the same evening and it reached the defendants on 9 September. If the defendants had not misdirected the letter, then the reply by return post would have come by 7 September. Since they did not hear from the plaintiffs by this date, they sold the wool to a third party on 8 September. The court held that the contract was concluded on 5 September when the letter of acceptance was posted. 7.63 It makes no difference to the rule even if the letter of acceptance is lost in the post. In Household Fire and Carriage Accident Insurance Co v Grant (1879), the defendant by his letter agreed to buy 100 shares in a company. He paid 5 per cent of the price of £100. A letter accepting his offer was posted, but he never received it. The company subsequently went into liquidation and a demand was made for payment of the balance of £95. The English Court of Appeal held that a contract was formed when the letter was posted and therefore he was obliged to pay the balance. However, where a letter of acceptance is lost or delayed because it bears a wrong, or incomplete, address such misdirection will be due to the carelessness of the offeree and the postal rule should not apply to such cases (see LJ Korbetis v Transgrain Shipping BV (2005)). 7.64 The rationale for the postal acceptance rule is historical as it dates back to 19th century England when the communication through post was slower and less reliable than it is today. It was then, as it is now, easier to prove that the letter has been posted than to prove that it has been received. The rule continues to apply in England 290 and has been applied in Singapore (see Lee Seng Heng v Guardian Assurance Co Ltd (1932)). 7.65 The postal rule of acceptance will apply subject to two conditions. First, it will apply only where it is reasonable. An offer made by post may generally be accepted by post, but in some circumstances, it may be reasonable to accept through post offers made in other ways. The offeror is at liberty to prescribe the mode of acceptance and it is open to him to expressly exclude the application of the postal rule. Second, the letter of acceptance must be properly stamped and addressed as noted above. 7.66 Can a postal acceptance be recalled or revoked before it reaches the offeror? There are two sides to this issue. As we have seen before, a valid acceptance of an offer results in a contract. Thus, if the postal rule applies, a contract comes into existence immediately upon the posting of the letter of acceptance. In such a case, the offeree has no acceptance to revoke. Besides, it would not be fair to the offeror if the offeree could have the best of both worlds — to avail himself of the postal acceptance rule if it suited him, or to revoke his acceptance if it did not. On the other hand, it is possible to argue that if the letter of acceptance can be intercepted by faster means, there is no prejudice to the offeror since he would be unaware of the acceptance. In any case, the offeror had the choice of the medium. If he chooses the postal medium, he must bear the consequences. 7.67 Does the postal acceptance rule apply to communications via email? It depends on whether email is considered a mode of instantaneous communication or not. If so, then the general rule would apply, and if not, the postal acceptance rule would apply. Consequently, the position remains inconclusive. For a summary of judicial (obiter) and academic arguments on whether the general receipt rule or the postal rule should apply to email acceptances, please refer to Andrew Phang B L (ed), The Law of 291 Contract in Singapore (2012) Chapter 3, paras 03.194– 03.206. (c) Acceptance by silence? 7.68 Since acceptance is complete only when communicated to the offeror, it follows that acceptance must take some form of objective manifestation of intention through positive action. Accordingly, silence cannot normally be a mode of acceptance. 7.69 However, it could well be the intentions of the parties for silence to be a mode of acceptance. A strong case for inferring that the offeree wants his silence to be regarded as acceptance is where he says so. In Re Selectmove Ltd (1995) the English Court of Appeal found that it was in fact the offeree who had undertaken that he would communicate with the offeror if he did not desire to conclude the contract. This decision can be contrasted with Felthouse v Bindley (1862). There, the plaintiff who wanted to buy his nephew’s horse wrote to him: “If I hear no more about him, I shall consider the horse mine at £30 15s.” The nephew did not reply to this letter, but he did ask the auctioneer, whom he had engaged to sell his farming stock, not to sell the horse as he had sold it to his uncle. The auctioneer sold the horse to a third party by mistake and the uncle sued him for selling his property. The court held that there was no contract between the nephew and the uncle, and therefore the ownership of the horse had not passed to the uncle. Although the nephew had mentally accepted the offer, some form of positive action was required for a valid acceptance. The difference between the decision in Re Selectmove Ltd and the one in Felthouse v Bindley is that in Re Selectmove Ltd, it was the offeree who was seeking the possibility of acceptance by his silence while in the latter, it was the offeror who was seeking to impose on the offeree the term of acceptance by his silence. 292 7.70 In Singapore, the proposition that silence can in exceptional circumstances be construed as acceptance was recognised in Southern Ocean Shipbuilding Co Pte Ltd v Deutsche Bank AG (1993) (at [46]–[47]) and in Midlink Development Pte Ltd v The Stansfield Group Pte Ltd (2004) (at [50]–[52]). (d) Ignorance of offer 7.71 The general rule is that a person cannot accept an offer of which he has no knowledge. In such a case, it is not possible to reach an agreement resulting in a binding contract. The Australian High Court decision of R v Clarke (1927) is a leading case in support of this principle. There, the Australian Government offered a reward for information leading to the conviction of the murders of two policemen. There was also a promise of free pardon to an accomplice giving such information. Clark, who was an accomplice, gave the required information to obtain pardon without any thought of the reward at that time. He subsequently claimed the reward. The court held that he could not claim the reward as he was ignorant of it at that crucial time. (e) Cross-offers 7.72 The general principle is that there is no contract in the case of cross-offers (see Tinn v Hoffmann & Co (1873)). Cross-offers happen when two parties send offers to each other in identical terms and at about the same time, and their letters cross each other in transit. For example, A offers to purchase B’s antique clock for $5,000 and B offers to sell to A his antique clock for $5,000, and both offers are posted at the same time. The obvious reason would be that there is no meeting of the minds between them. Under the rules applicable to offer and acceptance, there can be no valid acceptance since the offeree has no knowledge of the offer at the relevant time. However, there is an alternative view that has not yet been accepted by the courts. Academics have pointed out that 293 in such a situation, each party does in truth contemplate legal relations upon an identical basis, and each is prepared to offer his own promise as consideration for the promise of the other. There is not only a coincidence of acts, but a unanimity of minds. (see M P Furmston, Cheshire, Fifoot and Furmston’s Law of Contract (17th ed, 2017) at p 75). (f) Battle of forms 7.73 Instead of negotiating terms each time a contract is made, businesses often enter into agreements using their standard forms of contract. This is convenient as it saves effort, time and money. Understandably, both parties would like to conclude the contract upon their own terms. Since the terms and conditions on these standard forms can be incompatible with each other, this will sometimes lead to offers and counter-offers. If counter-offers are constantly being made, no concluded contract can ensue as each counteroffer destroys the original offer and itself constitutes a new offer. This could lead to an endless exchange resulting in no contract. This situation is popularly known as the “battle of forms” where the contract is ultimately formed on the terms of the party who fires the last shot. 7.74 The leading decision is Butler Machine Tool Co v Ex-CellO Corporation (England) Ltd (1979), which was decided by the English Court of Appeal and later followed by the Singapore courts (see Gay Choon Ing v Loh Sze Ti Terence Peter (2009) at [63]). On 23 May 1969, the plaintiffs offered to sell to the defendant buyers a machine, delivery to be made in ten months. The offer was made on the plaintiff’s terms and conditions, which included a price variation clause and stated that these terms and conditions were to prevail over any terms and conditions in the buyer’s order. On 27 May the defendants ordered the machine on their order form that excluded the price variation clause. At the foot of the order form was a tear-off slip, which stated, “We accept 294 your order on the Terms and Conditions stated thereon.” On 5 June the plaintiffs signed the slip and sent it back to the defendants with a covering letter that stated that the order “is being entered in accordance with our revised quotation of 23rd May”. The machine was delivered. There was, in fact, a subsequent rise in costs, and the plaintiffs invoked the price variation clause, but the defendants resisted such a claim. 7.75 The court held that the contract was concluded on the defendants’ terms. Their letter of 27 May was a counteroffer, which had been accepted by the plaintiffs on 5 June. Though the plaintiff’s covering letter did refer to the offer of 23 May, the court held that it was only intended to identify the price and the identity of the machine. The majority of the judges in this case adopted the traditional offer, counter-offer and acceptance approach. Here, the acceptance is complete only when a party finally concedes by way of unqualified acceptance as opposed to a mere counter-offer. The English Court of Appeal has reaffirmed this rule in Tekdata Interconnections Ltd v Amphenol (2009). 7.76 In a situation where both sides insist on having the last word, a contract will not come into existence as agreement will never be reached. In such a situation, it is possible for the court to conclude that there is a contract, but on neither party’s terms. In GHSP Inc v AB Electronic Ltd (2010) the claimant’s terms imposed unlimited liability on the seller while the defendant’s terms effectively excluded such liability. The issue was whose terms applied. The court noted that there was a deadlock, but also noted that there was a contract that had been performed. The court filled the gap by implying the term contained in s 14(2) of the Sale of Goods Act 1979 concerning the quality of the goods supplied. Box 7.2 Reflecting Is there another approach to the “battle of the forms” 295 on the law situation? In Butler Machine Tool Co, although Lord Denning endorsed the traditional approach discussed above, he advocated a more radical approach. This requires looking at all the documents passing between the parties and gleaning from them and from the conduct of parties whether they had reached agreement on all material points, despite the differences between the terms and conditions printed on the back of the forms. However, although Lord Denning’s approach might give the judges flexibility, it has generally not found favour with the English courts, probably because it is too vague and may result in uncertainty. This approach has also not been favoured by the Singapore Courts. The Singapore Court of Appeal in Gay Choon Ing v Loh Sze Ti Terence Peter (2009) stated (at [63]) that there is no reason not to continue adopting the traditional approach in Singapore. Do you agree? SOME ISSUES RELATING TO OFFER AND ACCEPTANCE Certainty and Completeness 7.77 A contract will come into existence only if the terms of that agreement are both certain and complete. It should be possible to determine with certainty what exactly has been agreed upon between the parties. The court will not make a contract for the parties but rather decide through objective criteria whether the agreement is reasonably certain. Despite negotiations between the parties there may be no enforceable contract if the agreement is conditional, incomplete or vague. We will briefly consider these situations below. 7.78 Sometimes parties may enter into agreements “subject to contract” or “subject to a formal contract being drawn up by our solicitors”. These words postpone liability until such a document has been drafted and signed. Because of this, the general view is that no binding contract has been concluded (see Winn v Bull (1877); Thomson Plaza (Pte) Ltd v Liquidators of Yaohan Department Store Singapore Pte Ltd (2001); Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd (2011)). In Norwest, the 296 Singapore Court of Appeal noted (at [24]–[28]) that the question whether there was a binding contract between the parties should be determined by considering all the circumstances, including what was communicated between the parties by words or conduct, not just the inclusion of the stock phrase “subject to contract”. In this case, the documentary evidence of the communication between the parties contained several objective indications that they had not intended to be contractually bound until a formal Sale and Purchase Agreement was negotiated and executed. Hence, there was no binding contract between the parties. 7.79 Sometimes the parties may stipulate in their agreement that “terms and conditions will be agreed upon later”. In such cases there is presumed to be no contract unless there is clear evidence from the facts or the language used by the parties that they had intended to enter into a binding contract. In the English decision of RTS Flexible Systems Ltd v Molkerei Alois Muller GMBH (2010) the parties entered into a contract through a “letter of intent” while they were negotiating a full formal contract. A draft of the final contract was produced, which stipulated that it would be effective only when executed. However, the draft was never executed. Meanwhile the plaintiff carried out substantial work at the defendant’s factory after the expiry of the letter of intent and claimed for the work done. The Supreme Court (previously known as the House of Lords) found clear evidence of the existence of a contract because, among other things, it made no commercial sense to say that the parties agreed to the work without any relevant contract terms. The principle laid down in this case — that the parties can by their conduct waive reliance on the “subject to contract” term — was cited with approval by the Singapore Court of Appeal in Norwest (at [24]). 7.80 As regards completeness, though the courts will avoid making contracts for the parties, they are willing to uphold contracts where possible by filling the gaps. For this 297 purpose, the court may use a definite formula if there is one (Brown v Gould (1972)). The other factors that the court may consider include a previous course of dealing between the parties or a trade practice. In Sudbrook Trading v Eggleton (1983), a lease gave the tenant an option to buy the land absolutely, “at such price, not being less than £12,000, as may be agreed upon by two valuers one to be nominated by the lessor and the other by the lessee and in default of such agreement by an umpire appointed by the … valuers …”. The tenant exercised the option to purchase but the landlord refused to appoint a valuer. The House of Lords held that even if one of the parties refused to appoint a valuer according to the method specified under the terms of the lease, the court could nevertheless treat the agreement as if it were one to pay a reasonable price, which was to be reached by applying objective standards. The Singapore High Court followed this decision in Tan Yeow Khoon v Tan Yeow Tat (No 1) (2000). 7.81 In Cooperatieve Centrale Raiffeisen-Boerenleenbank BA (trading as Rabobank International), Singapore Branch v Motorola Electronics Pte Ltd (2011), the Singapore Court of Appeal affirmed (at [46]) that contracts might in certain cases be implied from a course of conduct or dealings between the parties, from correspondence, or from all relevant circumstances. Where it was alleged that an implied agreement existed, the court will scrutinise the evidence to determine whether all the elements of a valid contract (namely, offer and acceptance, consideration, intention to create legal relations, and certainty of terms), had been proven on a balance of probabilities (at [47]). 7.82 Vagueness sometimes overlaps with incompleteness since the agreement may be so vague as to be incomplete. In Scammell and Nephew Ltd v Ouston (1941), Ouston wanted to acquire a new van on hirepurchase. The agreement stated that “this order is given on the understanding that the balance of the purchase price can be had on hire-purchase terms over a period of 298 two years”. After some disagreements, Scammell refused to supply the van. Scammell argued that the agreement was not certain enough to amount to a contract. The House of Lords held that there was no contract between the parties because the agreement on hire-purchase terms was so vague that it could not be given a definite meaning. For instance, it left open such questions as whether payments would be made on a weekly, monthly or yearly basis; whether there would be an initial deposit; and what the interest rate would be. Hence, the parties would need to reach further agreement before there could be a completed contract. 7.83 Generally, the courts will try as far as possible to give effect to a contract particularly where the parties have acted on the agreement rather than to strike it down on the ground of vagueness. To declare a contract void for uncertainty is a last resort conclusion (see Shaw v Lighthousexpress Ltd (2010)). Box 7.3 Reflecting on the law Are the offer and acceptance rules too artificial? As we have seen, a contract comes into existence through consensus between the parties as manifested through offer and acceptance. Yet this theoretical framework may not neatly fit all contract situations and could result in artificiality. Lord Wilberforce in New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd (The Eurymedon) (1975) highlighted sales at auctions, supermarket purchases, boarding a bus, buying a train ticket, tenders for supply of goods, offers of rewards, acceptances by post, and manufacturers’ guarantees, as examples of such situations. He said, “These are all examples which show that English law, having committed itself to [a] rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into marked slots of offer, acceptance and consideration.” Although the courts will ordinarily apply the settled legal rules, at times they have resorted to “backwards” reasoning to achieve justice between the parties — see, for example, the two cases on exception clauses discussed in Chapter 11, Chapelton v Barry Urban District 299 Council (1940) and Thornton v Shoe Lane Parking Ltd (1971). In these cases, the respective courts held that the exception clauses were not part of the contract as they were introduced after the contract had been concluded. Difficulties with the offer and acceptance model sometimes arise because of the courts’ attempt to achieve multiple objectives simultaneously. These include the court’s wish to give effect to the parties’ intention, their desire to achieve a just result in each case, and the need to establish a clear rule which can be applied to all future cases. Nevertheless, the courts’ use of the model, despite occasional artificiality, has generally aided in achieving a just result. CONCLUSION 7.84 We started this chapter by defining a contract as a legally binding agreement and introduced various terms that are used in the context of the law of contract. We then considered the requirements of a valid contract and noted that the first of these is consensus ad idem, that is, the meeting of the minds. This is ascertained objectively through the requirements of offer and acceptance. We noted how each of these are governed by rules that may sometimes be difficult to apply in practice. We rounded off the chapter with a consideration of the courts’ approach to such practical difficulties in determining the existence of the offer and acceptance, especially where the agreement appears to be conditional, incomplete or vague. 300 Chapter 8 Consideration and Intention to Create Legal Relations 8.1–8.2 Introduction 8.3–8.9 Consideration 8.10 Consideration Must be Requested for by the Promisor 8.11– 8.17 Consideration Must Not be Past 8.18– 8.19 Consideration Must Move from the Promisee 8.20– 8.22 8.23– 8.24 8.25– 8.27 8.28– 8.30 8.31 8.32– 8.41 8.42– 8.45 Consideration Must be Sufficient Concept of “Sufficiency” Intangibles and Moral Obligations Forbearance and Compromise Existing Public or Legal Duty Existing Contractual Duty (1) Owed to third party (2) Owed to the promisor (a) In return for a promise for more (b) In return for a promise for less 301 8.46 8.47 8.48 8.49– 8.50 8.51– 8.60 8.61– 8.62 8.63– 8.64 8.65– 8.68 When Consideration is Not Required: The Exceptions Contract by Deed Promissory Estoppel (1) Meaning and origin (2) Elements of promissory estoppel (a) Clear and unequivocal promise (3) (b) Reliance (c) Inequitable to go back on promise (d) Shield, not sword Effect of promissory estoppel: to suspend or extinguish? 8.69– 8.70 Intention to Create Legal Relations 8.71– 8.74 Social and Domestic Agreements 8.75– 8.79 Business and Commercial Agreements 8.80– 8.82 Conclusion INTRODUCTION 8.1 In Chapter 7, we considered the circumstances in which the law would recognise that parties have come to an agreement. However, the law does not enforce all agreements. Generally, ideas of fairness, the concern to give effect to the intention of parties to the agreement (thus facilitating the “free market” economy) and public 302 policy concerns are relevant in deciding which agreements to enforce. 8.2 Hence, two other elements (in addition to the presence of an agreement) are required for the formation of a contract: consideration and intention to create legal relations. In this chapter, we shall consider the following questions for each of these legal requirements: What are these legal requirements and the rationale or justification for them? When, if at all, are these requirements not necessary for the enforcement of an agreement (“the exceptions”) and what are the justifications for allowing such exceptions? Is the law on these legal requirements and exceptions coherent and satisfactory? CONSIDERATION 8.3 The general rule is that a promise is only enforceable if it is supported by consideration, that is, where the promise is given in exchange for something of value. Such reciprocity is said to be the reason and justification for the enforcement of the promise. However, the reader should note that exceptions to the general rule exist and will be discussed in detail later (see para 8.46 onwards). 8.4 So what exactly is consideration? Consideration is defined as something that has value in the eyes of the law and given in exchange for a promise. Traditionally, the “benefit –detriment analysis” is used to explain consideration (see Currie v Misa (1875) at p 162): A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. 303 8.5 Take the example where A agrees to purchase B’s car at the price of $50,000 (see Figure 8.1). As is typical of most agreements, there are two promises. There is A’s promise to purchase B’s car at $50,000 and B’s promise to transfer ownership and possession of his car to A. For each promise to be enforceable, the recipient of the promise must provide consideration in exchange. The law refers to the maker of a promise as the “promisor” and the recipient of a promise as the “promisee”. To determine if each promise is supported by consideration and therefore enforceable, the benefit–detriment analysis is used as follows: In return for A’s promise: B provides consideration in the form of either a benefit conferred upon A (ie, A obtains the right to ownership and possession of the car) or a detriment suffered by B (ie, B having to part with the car). In return for B’s promise: A provides consideration either by conferring upon B a benefit (ie, the promise to pay B the purchase price), or by suffering a detriment (ie, A having to part with his money). Several observations can be made from the above example: In return for a promise, a promisee may often have conferred a benefit as well as suffered a detriment. However, the law only requires either a benefit or detriment to satisfy the requirement of consideration (see para 8.31 for an example where only a benefit exists to support a promise without a detriment being suffered by the promisee). In any one agreement, a party may be both a promisor and a promisee depending on the promise under discussion. Thus, it is important to specify the promise that is sought to be enforced when we are trying to decide if consideration exists to support that promise. 304 Figure 8.1 Two sets of promises in an agreement 8.6 Consideration may also be defined as the price for purchasing a promise. In the example above, A can be said to have bought B’s promise of sale and delivery of the latter’s car at the price or consideration of $50,000. Conversely, B can be said to have bought A’s promise of payment at a price or consideration equivalent to the car. 8.7 Consideration must be distinguished from a condition to which a promise is subject. If A says to B “I will buy you a car when you attain the age of 21”, the question is whether A is promising a gift subject to the fulfilment of a condition or making a contractual promise to be accepted by a reciprocal promise by B. In the example above where the fulfilment of the condition is not within the control of the promisee, the promise is likely to be a mere conditional gift. However, where the fulfilment of the condition involves the performance of some act by the promisee, it is not as clear. 8.8 The difficulty is illustrated by the differing views between the judges deciding the case of Chappell & Co Ltd v Nestlé Co Ltd (1960). The defendant company, Nestlé, offered to sell records of the tune “Rockin’ Shoes” for a nominal cash price and three wrappers of their chocolate bars. The court had to decide whether the chocolate wrappers formed part of the consideration for the purchase of the records. A majority of the judges thought so as Nestlé had (indirectly) benefitted from the receipt of the chocolate wrappers since its chocolate sales might have increased in connection with the promotion. The purchaser had also suffered a detriment having been put to the trouble of purchasing the chocolate bars in order to purchase the record. A minority of the judges, however, disagreed as they felt that the 305 requirement for the wrappers was merely a condition which a purchaser had to fulfil before he could purchase the records. 8.9 The definition of consideration is also significant in other ways (see Figure 8.2). First, consideration is defined as something given in exchange for a promise. The idea of exchange or reciprocity is said to indicate that the law will only enforce bargains as opposed to gifts. Thus gratuitous promises, that is, promises to confer some thing or service for nothing in return, are generally not enforceable (see exception in para 8.46). It also underlies other rules concerning consideration: a benefit or detriment must have been requested by the promisor in order to constitute a valid consideration; past consideration is no consideration; and consideration must move from the promisee. Second, consideration is defined as something that has value in the eyes of the law. What the layman may consider factually to be a benefit or detriment may not be accepted by the law as consideration. The law only recognises consideration which it deems to be sufficient (and it does not concern itself with the adequacy of the consideration). Thus whether consideration (and the related concepts of benefit and detriment) exists is a legal inquiry rather than a factual one. This has led commentators of the law to suggest that consideration is actually about the policy reasons that justify the enforcement of a promise (see R Halson, Contract Law (2001) at p 160). 306 Figure 8.2 Significance of the definition of consideration CONSIDERATION MUST BE REQUESTED BY THE PROMISOR 8.10 The idea of exchange requires that the benefit conferred or detriment suffered by the promisee must be requested by the promisor. Thus, in Combe v Combe (1951), the plaintiff was unsuccessful when she sued her ex-husband for breach of a promise to pay her an annual maintenance of £100 after their divorce. Relying on her ex-husband’s promise, she had refrained from applying to the court for maintenance (and thus had arguably conferred a benefit on her husband). However, the court held that the defendant ex-husband’s promise was not supported by any consideration as he had not requested her to so refrain. CONSIDERATION MUST NOT BE PAST 8.11 An act done prior to and independently of a promise cannot be regarded as valid consideration for the promise since it is not done in exchange for the promise. Hence, if A voluntarily washes B’s car and thereafter, B, impressed by A’s kindness, promises to pay $50 to A, the promise is not enforceable as the “consideration” provided by A occurred prior to B’s promise. Such past acts are conveniently referred to as “past consideration”. 8.12 Past consideration must be distinguished from executed consideration. To appreciate this distinction, we must understand the concepts of executory and executed consideration. For example, B promises to sell his car to A and deliver it in a month’s time in return for A’s promise to make payment on delivery. At the time the contract is formed, both A and B’s promises have yet to be performed. They are executory in nature but are still valid consideration for each other’s promise. If, at the time of agreement, A hands the purchase price to B, who delivers his car to A simultaneously, both parties have furnished 307 executed consideration; the consideration is performed at the time the contract is formed. 8.13 Typically, executed consideration is also the acceptance of an offer in a unilateral contract. In Carlill v Carbolic Smoke Ball Co (1893) (see Chapter 7, para 7.12), the plaintiff was held to have accepted the defendant’s unilateral offer by taking the smoke ball thrice daily for two weeks. This act of acceptance is also consideration for the defendants’ promise as the defendants benefitted from the sale of the smoke ball while the plaintiff suffered a detriment by using the smoke ball as instructed. Thus the consideration provided by the plaintiff was executed at the time the contract was formed. 8.14 Executed consideration is therefore an act or forbearance undertaken in return for the promisor’s offer unlike past consideration, which involves an act or forbearance undertaken without any reference to the promisor’s offer. 8.15 Are all acts or forbearance occurring before the promise invalid consideration for the promise? This may not be so. In Pao On v Lau Yiu Long (1980), the plaintiffs had agreed, at the defendants’ request, not to sell the shares of a company for a period of one year. Subsequently, the defendants agreed to indemnify the plaintiffs for any loss which they might suffer as a result of their earlier promise not to sell the shares. Eventually, the plaintiffs did suffer losses and sued the defendants on the indemnity. In defence, the defendants argued that their promise to indemnify the plaintiffs was not enforceable as it was not supported by consideration; the plaintiff’s promise not to sell the shares was given before the indemnity and was therefore past consideration. 8.16 The court rejected the defendants’ argument and held that the indemnity was enforceable. Even though the plaintiffs’ promise to hold the shares was given before the defendants’ promise to indemnify, it was still good consideration as it satisfied all the conditions below: 308 the act was done at the promisor’s request; there was an understanding between the parties, at the time the request was made, that the act would be compensated by payment or by some other benefit; and the promise of compensation would be enforceable if it had been made in advance of the act. This decision is often regarded as an exception to the rule that past consideration is no consideration and has been endorsed in Singapore (see Sim Tony v Lim Ah Ghee (1995); Rainforest Trading Ltd v State Bank of India Singapore (2012)). 8.17 The first and second conditions are easy enough to understand. If both conditions are satisfied, the requested act cannot truly be “past consideration” in the sense of an act that is independent of and without reference to the promise (see Box 8.1). The third condition, however, functions as a safeguard against enforcing a promise that would not have been enforceable for any other reason under contract law (eg, due to the lack of an intention to create legal relations or the presence of vitiating factors, etc), despite the first and second conditions having been satisfied. Box 8.1 Reflecting on the law Pao On’s decision — a true exception? If payment was contemplated by both parties at the time the act was requested, it would be more accurate to say that the promisee’s act was executed for a payment to be fixed in the future (ie, the promisee’s act is executed and not past consideration for the promised payment). Indeed, a strictly chronological view of the events should not be taken in deciding if an act is in fact past consideration. Rather, the more important question is whether the preceding act and the subsequent promise are in substance part and parcel of one and the same transaction. 309 CONSIDERATION MUST MOVE FROM THE PROMISEE 8.18 A person can only enforce a promise if the consideration for the promise is furnished by him. Hence, in Tweddle v Atkinson (1861), A and B, the respective fathers of a married couple, entered into a contract where each undertook to pay a sum of money to C (the husband). When C tried to enforce the contract against the estate of B after B’s death, he failed as the consideration for the promise was furnished by A and not by him. This decision can also be explained on a different ground; that C was unable to enforce the contract because he was not a party (or not privy) to the contract (on privity of contract, see Chapter 9, para 9.50 onwards). 8.19 While consideration must move from the promisee, it does not have to move to the promisor (see Gulf Petrochem Pte Ltd v Petrotec Pte Ltd (2018) at [171]). Hence, if A promises to pay B $50 if B washes C’s car, the consideration provided by B is valid even though it does not confer a direct benefit on A, the promisor (see Figure 8.3). Figure 8.3 Consideration moving from promisee to third party CONSIDERATION MUST BE SUFFICIENT Concept of “Sufficiency” 8.20 As mentioned, consideration must be sufficient but need not be adequate. The term “sufficient” refers to “legal validity”, that is, something having value in the eyes of the law. Once an act or forbearance is deemed sufficient consideration at law, it is not necessary to show that it is 310 also adequate — that it has a value comparable to the value of the promise (see S Pacific Resources Ltd v Tomolugen Holdings Ltd (2016) at [17]). The rationale is that contracting parties are taken to be perfectly able to assess the merits of their own bargains and the court’s role is to ascertain whether a bargain has been made, not whether it is a good bargain. This is consistent with the free market philosophy of minimal state interference into bargains that are freely and voluntarily made by its citizens. Hence, if A agrees to sell his car to B for $20,000 although it has a market value of $50,000, B’s payment of $20,000 is sufficient consideration even if it may not be a fair price for A’s car. A more extreme example can be found in Chappell & Co Ltd v Nestlé Co Ltd (1960) (see para 8.8), where it was held that even used chocolate wrappers which were discarded on receipt could constitute sufficient consideration for the sale of records. Thus a nominal consideration can be sufficient consideration as long as parties freely consented to it. 8.21 Sometimes, a grossly inadequate consideration may indicate that the promisor did not freely and willingly consent to a bargain but was in fact coerced or improperly influenced into such agreement. In such situations, the contract may be set aside on the ground of duress or undue influence. The relevant legal principles are considered in Chapter 14. 8.22 How then do we identify “value in the eyes of the law”? Clearly, where the consideration is given in monetary terms or is readily measured in economic terms, such consideration is sufficient in the eyes of the law. This is so in most commercial contracts, where consideration is furnished in the form of monetary payment or the provision of goods or services (with ascertainable market prices). Where such price tags cannot be readily ascertained, identifying such “value” becomes a much more difficult task. Table 8.1 provides a list of what may be considered sufficient or insufficient consideration and the underlying rationale. 311 Intangibles and Moral Obligations 8.23 Would natural love and affection, as well as other motives of a purely sentimental nature be sufficient consideration in return for a promise? The answer is generally not. The rationale is that such motives lack certainty for purposes of enforcement. Also, there is the policy concern that love and affection should not be held at ransom in return for a promise. Table 8.1 Sufficiency of Consideration Proferred and Rationale Promises/Acts proffered as consideration in return for a promise Is it sufficient? Rationale Of nominal value ✓ The law does not interfere with bargains freely entered into by private citizens in a free market economy. Intangibles ✗ Too uncertain for purposes of enforcement. Policy not to encourage extortionate behaviour (eg, holding of love and affection at ransom). Moral obligation ✗ Policy not to encourage extortionate behaviour (ie, holding moral/good behaviour at ransom). Existing public or legal duty ✗ Policy not to encourage extortionate behaviour by public officials or those under a legal duty. No benefit to promisor nor detriment to promisee. Going beyond existing public or legal duty ✓ No risk of extortionate behaviour by public officials or those under a legal duty. Benefit to promisor and detriment to promisee exist. Existing contractual duty owed to third party ✓ No risk of extortionate behaviour by promisee. Benefit conferred to promisor although promisee suffers no detriment. Existing ? Insufficient: Stilk v Myrick 312 contractual duty owed to promisor (traditional view) Policy not to encourage extortionate behaviour by contracting parties once a contract is concluded. No benefit to promisor nor detriment to promisee. Sufficient: Williams v Roffey (“practical benefits” enjoyed by promisor) Gives effect to commercial reality. Problem: Threatens to derail the traditional role of the doctrine of consideration. Going beyond existing contractual duty 8.24 ✓ No risk of extortionate behaviour by contracting parties. Benefit to promisor and detriment to promisee exist. Would the promisee’s promise of an act which he is already under a moral obligation to perform be sufficient consideration in support of a promisor’s promise? In White v Bluett (1853), a father who was wearied by his son’s frequent complaints that he had distributed his assets unfairly among his children, agreed to release the son from his debt obligation under a promissory note if he would cease complaining. The court held that the father was not bound by his promise — it was his right to distribute the property as he wished and the son had no right to complain. In ceasing his complaints, the son was only doing what he was morally obliged to do and that was no consideration for his father’s promise. As a matter of policy, the law would not allow moral obligations or good behaviour to be used to extort a favourable promise from the other party. Forbearance and Compromise 8.25 Where a party has a legal claim against another, he may agree to refrain (forbear) from enforcing the claim, or to surrender the claim in consideration for a promise given by the latter. Parties to a dispute may consider it more beneficial to enter into a settlement (compromise) of their dispute in such manner, as costly and time-consuming 313 litigation to enforce the claim can be avoided. In a compromise, the promisor’s agreement not to pursue a claim (forbearance) is good consideration for the promises given in exchange (see KLW Holdings Ltd v Straitsworld Advisory Ltd (2017) at [53]). 8.26 Forbearance is sufficient consideration as long as the forbearing party can establish that he: has reasonable grounds for his claim; honestly believes that he has a fair chance of success; and has not concealed from the other party any fact which he knows may affect the validity of the claim (see Callisher v Bischoffsheim (1870); Lim Beng Cheng v Lim Ngee Seng (2016) at [58]). Sufficient consideration lies not in giving up a valid claim, but rather, in giving up a right to claim. This approach makes sense as most compromises relate to doubtful claims, the validity of which could not be ascertained without a complete trial. 8.27 However, where a person promises not to enforce an invalid claim and it is shown that he knew such claim to be invalid at the time of his promise, such forbearance is no consideration (see Wade v Simeon (1846)). The rationale is that the surrender of a groundless claim is neither a benefit to the other party nor a detriment to the one purporting to give up the claim. Existing Public or Legal Duty 8.28 In general, where A makes a promise to B in consideration for B’s promise to do something which B is already legally obliged to do, B’s promise is not good consideration. The rationale appears to be that an act obliged by law is neither a benefit to A nor a detriment to B. Also, such a rule is said to be necessary to prevent public officers from extorting money for services which they were legally bound to render. 314 8.29 In Singapore, the rule was more recently applied in the tragic case of Estate of Lee Rui Feng Dominique Sarron, deceased v Najib Hanuk bin Muhammad Jalal (2016). A national serviceman suffered an acute allergic reaction and died, upon inhaling fumes released from smoke grenades in a Singapore Armed Forces’ (SAF) military training exercise. The deceased’s estate sued the SAF for an alleged breach of contract of service. The Singapore High Court held (at [76]–[78]) that there was no enforceable contract for lack of sufficient consideration — a full-time national serviceman’s promise to perform national service was not sufficient consideration as it was a promise to perform an existing duty imposed by the (statutory) law. 8.30 Where the act or conduct in question exceeds the requirements of the legal duty, it may constitute good consideration. In Glasbrook Bros v Glamorgan County Council (1925), the appellant mining company agreed to pay the respondent police authority to maintain a stationary troop at its mine to protect workers returning to work during a strike. Later, the appellant refused to make the promised payment and argued that the police authority had provided no consideration for the promise as they were merely discharging their legal duty to protect life and property. The House of Lords rejected this argument; it held that the police were only legally obliged to provide a mobile force in the circumstances, and by providing a stationary force, had gone beyond their legal duty. Existing Contractual Duty (1) Owed to third party 8.31 The performance of, or the promise to perform, an existing contractual duty owed to a third party is sufficient consideration for a promise given in exchange. In Scotson v Pegg (1861), A contracted with X to deliver a cargo of coals to X or his nominee, and X nominated B to accept the goods. B later contracted with A that if A would deliver the same coals to B, B would unload them from the ship at 315 a rate of four tons per working day. B did not honour his promise and A sued for breach of contract. B contended that A had provided no consideration because in delivering the coals, A was merely performing his existing contractual duty to X (the third party). The court disagreed. When A promised B to perform an existing contractual duty which A owed to X (the third party), such a promise benefits B in ensuring the delivery of the coals to B. Note that A would not have suffered a detriment in performing the act as A is already contractually obliged to X to so perform. However, it should be recalled that the law only requires either a benefit conferred or a detriment suffered to constitute consideration. (2) Owed to the promisor (a) In return for a promise for more 8.32 What if the alleged consideration lies in the performance, or a promise to perform, an existing contractual duty owed to the promisor? The traditional view is that such a promise is generally not regarded as sufficient consideration — the promisor derives no benefit from a performance to which he is already entitled and the promisee suffers no detriment for doing what he is already bound to do. In Stilk v Myrick (1809), the captain of a ship, unable to replace two crewmen who had deserted in the course of a voyage, promised to divide the wages of the deserters equally among the rest of the crew if they would work the ship safely back to London. One of the seamen sued to enforce this promise after the completion of the voyage. The court rejected the claim, holding that the seamen were already bound under the terms of their existing contracts to complete the voyage and hence a subsequent promise to do the same was no consideration for the captain’s promise. 8.33 It has been suggested that the rationale behind Stilk v Myrick’s decision is to discourage seamen from holding their employer to ransom by threatening to breach their contracts and aggravating the perils of seafaring. A party 316 should not be encouraged to extort further concessions from the other party after having already concluded a contract. 8.34 However, any performance which is over and above the promisee’s existing contractual duty is sufficient consideration for a promise given in exchange. In Hartley v Ponsonby (1857), the remaining crewmen were also promised additional wages to continue on a voyage which had become too hazardous after the desertion of 17 (out of 36) sailors. The promise was held to be binding because in such circumstances, the remaining crew members were no longer bound to complete the voyage and in agreeing to do so, they have done more than what was required under their original contractual undertakings. 8.35 Stilk v Myrick should be contrasted with the controversial case of Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991). The defendants (Roffey Bros) were building contractors who were awarded a contract to refurbish 27 flats. For that purpose, they engaged the plaintiff (Williams) as sub-contractor to carry out the carpentry work for £20,000. Shortly after commencing work, the plaintiff got into financial difficulty; the agreed price of £20,000 was too low to enable him to carry out the work satisfactorily and this was aggravated by the slow progress of the work due to his own inadequate supervision. The defendants, being aware of the plaintiff’s problems, were concerned that if the plaintiff did not complete the carpentry work on time, the defendants would incur a delay penalty under the main contract. After some negotiation, the defendants agreed to pay the plaintiff an additional sum of £10,300 at the rate of £575 for each flat completed. Thereafter, the plaintiff resumed work and substantially completed the work on eight more units but received only one further payment of £1,500 from the defendants. The plaintiff then ceased works and brought an action to enforce the defendants’ promise of additional payment. 317 8.36 Relying on Stilk v Myrick, the defendants resisted the plaintiff’s claim on the ground that no consideration was furnished for the defendants’ promise of additional payments — the plaintiff was already bound to complete the carpentry work under the original sub-contract. However, the English Court of Appeal disagreed. Clearly, the defendants had agreed to the additional payment because they considered it advantageous to do so. They stood to enjoy practical or factual benefits from the plaintiff’s promise to complete the work on time such as avoiding the need to engage another sub-contractor and, more importantly, the avoidance of liability for delay to the owners under the main contract. Such practical or factual benefits were held to be sufficient consideration for the defendants’ promise. The result of this decision is that the promise to perform an existing contractual duty owed to the promisor may constitute sufficient consideration if the promisor derived “practical benefits” from the performance. As summarised by Glidewell LJ (at pp 15–16): (1) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (2) at some stage before A has completely performed his obligations under the contract, B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and (3) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and (4) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (5) B’s promise is not given as a result of economic duress or fraud on the part of A; then (6) the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding. 8.37 Clearly, Williams v Roffey marks a significant departure from the traditional position represented by Stilk v Myrick. 318 The defendant in Stilk v Myrick had also benefitted from the crew’s promise to sail the vessel back to the destined port, yet such benefit was not held to be sufficient consideration. These two decisions are (despite denials of the judges in Williams v Roffey to the contrary) clearly inconsistent with each other. At present, the inconsistency remains unresolved. 8.38 The principle in Williams v Roffey has been applied in many local decisions (see, eg, Brader Daniel John v Commerzbank AG (2014) at [71]–[72]; Benlen Pte Ltd v Authentic Builder Pte Ltd (2018) at [49]–[50]). In the first Singapore Court of Appeal decision to apply the principle, Sea-Land Service Inc v Cheong Fook Chee Vincent (1994), the defendant employer issued a 30-day termination notice to the plaintiff employee stating that his severance benefit included an enhanced severance payment of $14,340 (which was not an existing contractual entitlement). Subsequently, after serving out the notice period, the defendants refused to pay the enhanced severance payment but offered an ex gratia allowance of $4,780 instead. The plaintiff sued to enforce the enhanced severance payment, arguing that the defendants had in fact benefitted from his services during the last month of his employment which constituted consideration for the promised payment. 8.39 The Court of Appeal disagreed. It regarded Williams v Roffey as a “limited exception” (see [11]–[14]) and held that in this case, the defendants derived no benefit from the plaintiff’s work in the last month because a company would only retrench employees who were no longer essential to its operations and hence the value of such employee’s work in the final month was at best minimal. This reasoning suggests that the concept of “practical benefits” ought to be understood narrowly such that only a real and significant benefit (and not just any benefit) would constitute sufficient consideration under the principle established in Williams v Roffey (see J Carter, A Phang 319 and J Poole, “Reactions to Williams v Roffey” (1995) 8 Journal of Contract Law 248). 8.40 Subsequent lower court decisions applied the Williams v Roffey exception without mention of the requirement of a “real and significant” practical benefit (see, eg, the High Court decisions in Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd (2001) and Brader Daniel John v Commerzbank AG (2014)). Further, none of the local cases, including Sea Land Service, attempted to reconcile Williams v Roffey’s approach with that in Stilk v Myrick. 8.41 Despite remaining ambiguities, the Williams v Roffey exception is clearly a part of Singapore law. The Singapore Court of Appeal acknowledged as much in Gay Choon Ing v Loh Sze Ti Terence Peter (2009) when it observed (at [118]) that a diluted doctrine of consideration represented the current state of Singapore law. The traditional role played by the doctrine of consideration in guarding against extortionate behaviour is diluted if practical or factual, as opposed to legal, benefit is accepted as sufficient consideration in return for a promise for more. However, it cannot be denied that the Williams v Roffey approach is better aligned with the expectations of parties in the commercial context, who modified or varied their contract terms voluntarily (see “Implications of Williams v Roffey” in Box 8.2). In recognition of this, Singapore courts in current times are more ready to find the existence of consideration, especially in commercial transactions (see, eg, Benlen above at [49]). Box 8.2 Reflecting on the law Implications of Williams v Roffey (1) Doctrine of Consideration Theoretically, the captain in Stilk v Myrick could sue the sailors for breach if they decided to discontinue the voyage, but the practical value of such action is minimal compared to the loss, expense and inconvenience which 320 could result from a delayed or abandoned voyage. Thus the sailors’ promise to sail the ship to the destined port was undoubtedly a factual benefit. But the court appears to have construed consideration as a legal rather than a factual concept. By accepting “practical benefits” as sufficient consideration, the court in Williams v Roffey has shifted the focus of enquiry from “Has the promisee provided something that has value in the eyes of the law?” to “Did the promisor in fact benefit from the promisee’s promise?” This is a broader and more flexible understanding of the concept of consideration which arguably accords with commercial reality — parties do often agree to pay more for the same goods or services (or render more services for the same price) where it is beneficial to do so. Yet, if the slightest benefit could constitute consideration, almost all modifications of (especially commercial) contracts will be upheld as the promisor would almost always benefit more from the promisee’s continued performance than a breach of his contractual duty. In practice, this will mean that the requirement for consideration will cease to have a meaningful role in defining the kinds of agreements which are enforceable at law. (2) Contract Modification and Economic Duress The inconsistency between these two cases is also reflective of the tension between two legitimate concerns when deciding whether a contract modification is valid and enforceable. On the one hand, there is concern that such modification might have resulted from one party’s exploitation of the other’s weaker bargaining position. In Stilk v Myrick, the court dealt with such risks by insisting on the presence of consideration, the assumption being that where fresh consideration has been furnished, the variation is less likely the result of duress or coercion. However, a counter-argument is that a freely agreed modification should be upheld even in the absence of consideration. If one party encounters problems in the performance of his contractual obligations, should he not seek a solution by negotiating with the other party for a modification of the contract terms? Such self-help methods are likely to be more time and cost effective than formal dispute resolution processes such as litigation. Indeed, some commentators have argued that the concept of consideration is no longer necessary to curb such risks, as this function is more aptly performed by the doctrine of economic duress (see Chapter 14, Box 14.1). See R Halson, “Sailors, Sub-Contractors and Consideration” (1990) 106 Law Quarterly Review 183; A Phang, “Whither Economic Duress? Reflections on Two Recent Cases” (1990) 53 Modern Law Review 107; and A Phang, “Consideration at the Crossroads” (1991) 107 Law Quarterly Review 21. They argue that instead of depending on the presence or absence of consideration, such modification is valid as long as it can be shown that both parties intended to be bound by the modification and that no improper pressure has been applied on the 321 promisor in the bargaining process. This reasoning is persuasive in that, if accepted, it will bring the law closer to commercial reality. (b) In return for a promise for less 8.42 A owes B $1,000. A pays $700 to B, which B accepts as complete discharge of A’s debt. Can B later sue A for the unpaid balance of $300? In other words, can A hold B to his promise to accept $700 as complete discharge of A’s debt? In this situation, A does not rely on B’s promise to seek additional payment (unlike the case in Stilk v Myrick) but to avoid part of his liability. 8.43 The general rule laid down in Pinnel’s case (1602) is that the payment of a lesser sum is not a complete satisfaction of the debt. The rationale is that a promisor is not bound by his promise to forego the unpaid portion of the debt as the promisee has not furnished any consideration for the promise — in making part payment, the promisee has done no more, and in fact, less than what he is contractually bound to do. Thus, such contract modifications are not enforceable in the absence of consideration, and in the example above, B may insist on the full repayment of A’s debt despite his promise to the contrary. The rule in Pinnel’s case has been affirmed and applied by the House of Lords (now known as the Supreme Court) in Foakes v Beer (1884). 8.44 The rule in Pinnel’s case does not apply where the debtor has provided something different to the creditor, at the creditor’s request. Thus if A owed B $1,000 and B agreed to treat the debt as discharged in full if A washes B’s car, or make partial payment of $500 and washes B’s car, the rule in Pinnel’s case would not apply since A would have furnished consideration for B’s promise to forgive the debt or forgo the balance. Alternatively, partial repayment of a debt at a different place or on an earlier date would suffice as fresh consideration for the creditor’s promise. 322 8.45 The rule in Pinnel’s case has been criticised on the ground that it runs counter to the ordinary expectations of the business community. As Lord Blackburn observed in Foakes v Beer (at p 622): All men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than to insist on their rights and enforce payment of the whole. Even where the debtor is perfectly solvent, and sure to pay at last, this often is so. Where the credit of the debtor is doubtful it must be more so. Thus, it is reasonable to ask whether the principle in Williams v Roffey should apply to contract variations resulting in a promise to accept less. In other words, why should the practical benefit of receiving a partial payment not be accepted as good consideration for the promise to forgive the whole debt? In Re Selectmove Ltd (1995), the English Court of Appeal acknowledged the force of this argument but did not extend the principle in Williams v Roffey to situations involving partial payment of debts as that would in effect be overruling the House of Lords decision in Foakes v Beer, which the Court of Appeal had no power to do. The court thus correctly adhered to the doctrine of precedent but unfortunately left the inconsistency between Williams v Roffey and Foakes v Beer unresolved. In principle, it is difficult to see why the law should differentiate between these two situations as the practical benefits which a promisor may derive from the receipt of part payment is no less real than the benefits of receiving a promised performance (see J Carter, A Phang and J Poole, “Reactions to Williams v Roffey” (1995) 8 Journal of Contract Law 248). The law in Singapore on this point also remains unresolved. WHEN CONSIDERATION IS NOT REQUIRED: THE EXCEPTIONS Contract by Deed 323 8.46 An exception to the legal requirement of consideration are contracts by deed, that is, formal documents in writing which have been signed by the parties before a witness or witnesses, sealed and delivered. A gratuitous promise (that is, a promise given for nothing in return) made by deed may be enforced (see, eg, Development Bank of Singapore Ltd v Yeap Teik Leong (1988); Hong Leong Finance Ltd v Tay Keow Neo (1991)). The rationale for exempting such contracts from the requirement of consideration is that having gone through such elaborate steps, the party making the gift would be well aware of what he is doing and would seriously intend to be legally bound to make the gift. Promissory Estoppel (1) Meaning and origin 8.47 An important exception to the rule in Pinnel’s case, the equitable doctrine of promissory estoppel prevents a person from going back on his promise even though the promise is not supported by consideration. The origin of this doctrine is often traced to Denning J’s (as he then was) obiter remarks in Central London Property Trust Ltd v High Trees House Ltd (1947). In that case, a 99-year lease was granted by the plaintiffs to the defendants in 1937 for a block of flats at a rent of £2,500 per year. In January 1940, the plaintiffs agreed to halve the rent as the defendants were encountering difficulty securing subtenants for the flats owing to the war conditions then prevailing. The defendants thereafter paid the reduced rent. However, the flats were again fully let by early 1945 and the plaintiffs sought to restore the rent to £2,500 from mid-1945. Denning J held that the plaintiffs were entitled to do so as the reduced rent was intended to apply only while the adverse conditions persisted. More importantly, Denning J observed that if the plaintiffs had claimed for the full rent for the period prior to 1945, they would have been estopped from doing so as they could not go back on a promise that was intended to be binding and which was in 324 fact relied upon by the defendants as it would have been inequitable for them do so under the circumstances. (2) Elements of promissory estoppel 8.48 To successfully invoke the doctrine, all of the following elements must be present: a clear and unequivocal promise by the promisor not to insist upon his original contractual rights; reliance by the promisee; such that it is inequitable for the promisor to go back on his promise; and the doctrine is invoked as a shield, not a sword. Each of these elements, as well as the effects of promissory estoppel, will be considered in turn. (a) Clear and unequivocal promise 8.49 The promisor must have made a clear and unequivocal promise which is intended to affect the future conduct of the parties’ relationship. Obviously, the clearer the promise, the more likely it is that the promisee will act in reliance on it and render it inequitable for the promisor to retract his promise. Whether a promise is sufficiently clear and certain is judged objectively, that is, it is sufficient if a promisee could reasonably have been so induced in the circumstances. 8.50 Silence or mere inaction would not generally constitute a clear promise as it lacks certainty. Thus, a mere failure to enforce a contractual obligation does not amount to a promise to abandon such a right of enforcement. However, a promise does not have to be express but can be implied by words or conduct. In Hughes v Metropolitan Railway Company (1877), a landlord gave his tenant six months’ notice to repair the premises but thereafter, the parties commenced negotiations for the sale of the lease to the landlord. The tenant had indicated that he would not effect the repairs whilst negotiations continued. And in fact, in the 325 course of negotiations, the landlord raised the state of disrepair of the premises as a reason for objecting to the tenant’s asking price for the lease. Soon after, the negotiations broke down and the landlord sought to forfeit the lease as the tenant had not carried out the repairs on the expiry of the original six months’ notice. It was held that the landlord could not do so as it could reasonably be inferred from his conduct in entering into negotiations with the tenant that the notice period would not run while the negotiations continued, and would only continue to run after the negotiations ended. (b) Reliance 8.51 The second requirement is that the promisee must have acted in reliance on the promise. Generally, such reliance is evidenced by the promisee’s change of position on the faith of the promise, that is, by doing or omitting to do something which he would otherwise not have done or omitted to do. 8.52 Is it sufficient for the promisee to merely alter his course of action in reliance on the promise made, or must he also have suffered some detriment or disadvantage as a result? Some cases suggest that detrimental reliance is necessary. The rationale is that only where the promisee has suffered such detriment would it be inequitable for the promisor to go back on his word (see paras 8.61–62). 8.53 The English position does not require detrimental reliance. In W J Alan & Co Ltd v El Nasr Export and Import Co (1972), Lord Denning rejected the suggestion that a promisee must adduce evidence of detriment in order to invoke promissory estoppel; all he needed to demonstrate was that he had, in reliance on the promise, acted differently from what he otherwise would have done. Similar observations were made in Société Italo-Belge pour le Commerce et l’Industrie SA v Palm and Vegetable Oils (Malaysia) Sdn Bhd, The Post Chaser (1982) by Goff J (as he then was) (at p 27): 326 To establish such inequity, it is not necessary to show detriment; indeed, the representee may have benefited from the representation, and yet it may be inequitable, at least without reasonable notice, for the representor to enforce his legal rights. Take the facts of [the High Trees case] 8230; the representation was by a lessor to the effect that he would be content to accept a reduced rent. In such a case, although the lessee has benefited from the reduction in rent, it may well be inequitable for the lessor to insist on his legal right to the unpaid rent, because the lessee has conducted his affairs on the basis that he would only have to pay rent at the lower rate. 8.54 In Singapore, however, detrimental reliance is required. The High Court clarified the issue in Lam Chi Kin David v Deutsche Bank AG (2010) and its position was implicitly endorsed by the Court of Appeal (see Lam Chi Kin David v Deutsche Bank AG (2011)), as noted in Orchard Central Pte Ltd v Cupid Jewels Pte Ltd (Forever Jewels Pte Ltd, non-party) (2013) at [49], and Tong Seak Kan v Jaya Sudhir a/l Jayaram (2016) at [40]–[41]. 8.55 In Lam Chi Kin (2010), the Singapore High Court noted (at [55]–[56]) that conflicting views on the requirement of detriment arose because some courts used the word “detriment” in a narrow sense while others used it in a broad sense. The narrow sense was used in situations where the promisee was put to some trouble in acting (or relying) upon the promisor’s promise and thus already suffered a detriment prior to any indication that the promisor wished to resile from his promise. For example, the promisee had to incur expenditure of money (see, eg, Yokogawa Engineering Asia Pte Ltd v Transtel Engineering Pte Ltd (2009)) or time, or was placed in a position of disadvantage such as incurring legal obligations (see, eg, Fenner v Blake (1900)). The broad sense was used in situations where the promisee did not suffer any immediate trouble or disadvantage in acting (or relying) on the promisor’s promise; instead, the promisee might have 327 enjoyed a benefit from doing so. “Detriment” or disadvantage to the promisee would only arise if the promisor was permitted to go back on his promise (see, eg, Hughes v Metropolitan Railway Company (1877) and WJ Alan Co Ltd v El Nasr Export and Import Co (1972)). 8.56 The facts of Hughes v Metropolitan Railway Company (see para 8.50) may be used to illustrate the difference. Relying on the landlord’s implied promise not to insist on repairs to the leased premises during the period of negotiations for the sale of the lease, the tenant did not effect the repairs within the notice period. Was there detrimental reliance? There was no “detriment” in the narrow sense of the word — the promisee-tenant did not suffer any detriment in relying on the promise. Instead, the tenant enjoyed the benefit of not being put to the trouble and expense of effecting repairs, which might be rendered unnecessary (and wasted) had the negotiations resulted in a successful sale of the lease. Nevertheless, “detriment” in the broad sense existed — the tenant’s reliance on the implied promise to suspend the notice period for repairs had resulted in a change of the tenant’s position; the tenantpromisee would suffer detriment, that is, the prospect of eviction for failing to effect repairs within the original notice period, if the landlord was permitted to go back on his word. 8.57 Steven Chong JC (as he then was) distilled (at [57]) an overarching principle that ran through the cases in which the doctrine of promissory estoppel had been applied: The overarching principle … is that the doctrine has consistently been held to apply in circumstances when it was inequitable either in the narrow or broader sense of “detriment” for the promisor to resile from his promise and to enforce his strict legal rights. Thus conceived, the requirement of detriment would be satisfied whether it took the form of detriment in the “narrow” or “broad” sense. More significantly, the finding of detriment provided the justification for establishing the last 328 element of the doctrine — that it would be inequitable to allow the promisor to resile from his promise (see para 8.61). 8.58 On appeal, the Court of Appeal implicitly approved of the “overarching principle” identified by the High Court (see [38]) although they reached a different conclusion when applying the principle to the facts of the case. 8.59 The brief facts of Lam Chi Kin are as follows: Deutsche Bank promised to extend a “48-hour grace period” to Lam Chi Kin (“Lam”), their private banking client, to respond to a “margin call” in the course of complex foreign exchange trades. The “grace period”, a more generous time allowance than that permitted under the original contract term governing the parties, was valuable given the volatility of foreign exchange rates and the financial impact they would have on Lam’s investments. The Court of Appeal found (at [38]) that various actions taken by Lam resulted in a change of his position: Lam provided additional business to the bank by obtaining from them a credit line of USD200 million to carry on foreign exchange trades, placed large cash deposits with the bank as collateral for the credit line and entered into risky leveraged foreign exchange trades to the tune of multiple millions of several currencies, something Lam would not have done if not for the promised grace period. On this basis, the Court of Appeal concluded that Lam relied on the bank’s promise and thereby suffered sufficient detriment to make it inequitable to permit the bank to resile from their promise. 8.60 In an interesting turn, the Court of Appeal went on, obiter, to introduce a novel approach to establish promissory estoppel. The Court held that in the absence of detrimental reliance, Lam could rely on an alternative, “broader principle” to establish promissory estoppel, that is, on the basis that the promisor-bank had obtained an advantage from the promisee-Lam’s reliance on the promisor-bank’s promise. Emphasising the particular relevance of the 329 “broader principle” to the facts of Lam Chi Kin, Chan Sek Keong, CJ (as he then was) stated, at [40]: We are of the view that this principle is particularly relevant in the context of private banking where if banks and financial intermediaries engaged in the business of wealth management cannot be trusted with their words, they should not allowed to be in this business. The courts should not allow a bank to claim that “my word is not my bond”, and should be sufficiently astute to find inequity, and where it is possible to do so within legal limits, to hold the promisor to his word in a case, such as the present, where the respondent has obtained an advantage from his promise at the expense of the promisee. Applied to the facts, the court found that the bank’s promise of a grace period enabled them to attract and induce Lam to use their wealth management services. Since the bank had benefitted considerably as a result of Lam’s reliance on their promise, the court concluded that it was inequitable for the bank to resile from their promise. Here, one may pause to note that although there was sound basis for the application of the “novel approach” on the facts of Lam Chi Kin, the limits of the approach remain unclear (see Box 8.3). Box 8.3 Reflecting on the law Implications of the “novel approach” Various observations on the “novel approach” are pertinent. First, the focus of the broader principle is on the attainment of an advantage (or benefit) by the promisor as a result of the promisee’s reliance on the promise — and whether this circumstance makes it inequitable for the promisor to resile from his promise. This is in stark contrast to the traditional focus on whether the promisee had suffered a detriment as a result of his reliance on the promise. Traditionally, promissory estoppel is used to protect the promisee from disadvantage in relying on the promisor’s promise and not to prevent the promisor’s advantage as a result of such reliance. 330 Second, the “broader approach” raises a number of interesting questions: What sort of “advantage” will trigger the operation of promissory estoppel? Will it result in greater availability of the doctrine constrained only by the need to link the promisor’s enjoyment of advantage to the resulting inequity if the promisor is to go back on his promise? It may be fair to say that a promisor would enjoy an advantage or benefit in not insisting on his original contractual rights in most, if not all, voluntary contract modification scenarios. Indeed, academics have commented, inter alia, that the Court of Appeal’s novel approach is likely to further dilute the role played by the doctrine of consideration (see, eg, Yeo Tiong Min, “The Future of Promissory Estoppel in Singapore Law” Fifth Yong Pung How Professorship of Law Lecture, Singapore Management University, 16 May 2012). (c) Inequitable to go back on promise 8.61 Consistent with promissory estoppel being an equitable doctrine, an essential element is that it must be inequitable for the promisor to go back on his word. Inequity or injustice is a broad concept and overlaps substantially with the concept of “detrimental reliance” (see paras 8.52–8.59, and the “overarching principle” in Lam Chi Kin above). Where a promisor makes a promise upon which the promisee relies and suffers detriment as a result, these facts would render it inequitable to allow the promisor to recede on his word. Notably, in The Post Chaser (see para 8.53) although the court held that detriment was not necessary, it nonetheless held that it was not inequitable for the promisor to recede on his promise because the lapse of two days between the time of the promisee’s reliance and the time at which the promisor retracted his promise was too short to have caused any prejudice to the promisee. Thus, even if one accepts as correct the English position that detriment is unnecessary, detriment remains an important factor in the general assessment of whether it is just and equitable to permit the promisor to go back on his word. 8.62 Ultimately, the issue of inequity must be determined by taking into account all the relevant circumstances. Any factor that could tip the balance one way or the other must 331 be considered. D&C Builders v Rees (1966) is a useful illustration. The defendant owed the plaintiffs £482 but offered, through his wife, to pay £300 in full settlement of the account, stating in effect that the plaintiffs would get nothing if they did not accept the lesser sum. The plaintiffs were then on the verge of bankruptcy and the defendant’s wife was well aware of that fact. For lack of a real option, the plaintiffs accepted the payment but subsequently brought an action to recover the balance of the debt. Lord Denning held that it was not inequitable for the plaintiffs to resile from their promise as the defendant had improperly procured the plaintiffs’ agreement by taking advantage of their weak financial position. (d) Shield, not sword 8.63 The principle of promissory estoppel is often metaphorically described as one which acts only as a shield but not as a sword. This means that the principle may only be invoked to defend or resist a claim, but it cannot be used to create a new cause of action where none existed before. In Combe v Combe (1951) (see para 8.10), the plaintiff could not enforce her ex-husband’s promise as she had not furnished consideration for the promise and thus no contract existed between them in the first place. The court also rejected her further argument that the defendant was estopped from breaking his promise since to do otherwise would amount to creating a contractual relation between them when none existed before. 8.64 One may question why the doctrine of promissory estoppel is limited to operate only as a shield but not as a sword. If the rationale is to protect reasonable reliance placed on a promise, why should such protection be allowed only by way of a defence but not as a cause of action? Some other jurisdictions such as Australia have allowed the doctrine to be used as a sword. Thus far, Singapore has not adopted this bold approach (see Mansource Interior Pte Ltd v CSG Group Pte Ltd (2017) at [62]-[63]). 332 (3) Effect of promissory estoppel: to suspend or extinguish? 8.65 A number of cases suggest that promissory estoppel merely suspends the enforcement of an obligation such that it may be revived by the promisor upon giving due notice to the promisee. This is observed in the High Trees case (see para 8.47), where the court held that it was possible to restore payment of the full rent for the future and in the Hughes case (see para 8.50), where the tenant’s obligation to repair is not lost but is resurrected upon the giving of notice and more time. What constitutes sufficient notice in each case would depend on its particular facts. An express notice is not necessary and precise time need not be specified for it to take effect. Generally, it would suffice if the promisor has by his conduct made clear his intention to withdraw his concession and the promisee is given a reasonable time to make the necessary adjustments thereafter. 8.66 It should be noted, however, that in the High Trees case, the court was prepared only to allow a restoration of the landlord’s rights to future rental at the full rate. Lord Denning was of the view that the landlords would not have been able to recover the full rent for the war years. This indicates that the payment obligations falling within the duration of the suspension were actually extinguished. This is inconsistent with the view that promissory estoppel is suspensory in nature. 8.67 Perhaps a better view is to determine the effects of the doctrine by reference to the nature, intent and circumstances of the promise made. In exceptional circumstances, an obligation may be extinguished because the reliance placed on the promisor’s assurance makes it impossible for the promisee to perform his original obligation or highly inequitable for him to do so (see E McKendrick, “Contract: In General”, in A S Burrows (ed), English Private Law (Oxford: OUP, 3rd ed, 2013, at para 8.54). 333 8.68 In cases such as High Trees, which involved periodic payments, a distinction may have to be drawn between the payments which accrued before the notice and those accruing thereafter. Where it is not possible to recover the former payments, the right to these payments is therefore extinguished, but the general right to future payments is merely suspended and may be revived upon reasonable notice. The suspensory effect is justifiable by the fact that the promises were given in response to acute and temporary circumstances and thus it is likely that the said promises were only intended to be binding while the extenuating circumstances lasted. In the case of one-off payments, where a creditor accepts a lesser sum in satisfaction of a larger debt, the effect of promissory estoppel should ultimately depend on whether the creditor’s intention (objectively determined) is to forgive the entire debt or merely to allow the debtor more time to pay. INTENTION TO CREATE LEGAL RELATIONS 8.69 Even where an agreement is supported by consideration, it is not necessarily enforceable unless the parties intended the agreement to be legally binding. Whether the parties to an agreement did intend to create legally binding relations is a question to be determined by the facts of the case on an objective basis. The parties are said to have the intention to create legal relations if an objective view of the relevant facts suggests that such an intention exists, even if one of the parties should assert otherwise. In Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd (2010), the Singapore High Court reiterated this principle and its rationale, and highlighted an exception to the objective approach. Belinda Ang J observed (at [34]) thus: in finding an intention to enter into legal relations, … the law is predominantly concerned with the objective intentions of a party, and not his subjective or actual intention. … Specifically, the objective approach determines a party’s intentions by looking at all of his words and conduct directed towards his counterparty 334 from the perspective of a reasonable person versed in business. The obvious rationale for the objective approach is to enable parties to deal in reliance with each others’ manifest intentions. It follows from this rationale that there is an exception to the objective approach where a party’s actual intention differs from his apparent intention, and this is actually known to his counterparty. 8.70 Generally, the agreements are analysed under two broad categories: agreements made in social and domestic contexts and agreements arising in business and commercial contexts. SOCIAL AND DOMESTIC AGREEMENTS 8.71 For social or domestic arrangements, there is a presumption that the parties do not intend the agreement to be legally binding. In Balfour v Balfour (1919), the defendant husband who was leaving for an overseas assignment promised to pay his wife, the plaintiff, a monthly sum of £30 until she joined him overseas. The defendant later failed to honour his promise and the plaintiff sued for breach of contract. The court held that the agreement was motivated mainly by the parties’ natural love and affection for each other and not the intention to create legal obligations, and thus the plaintiff’s claim failed. Atkin LJ was also of the view that the courts should not interfere with domestic agreements because the parties do not usually intend such agreements to have legal consequences and that to do so would unduly overload the judicial system. 8.72 In Jones v Padavatton (1969), a mother’s agreement to maintain her adult daughter on the condition that the latter studied to become an advocate was also held not to be enforceable as it was merely an informal family arrangement, where each party depended on the other’s good faith for the performance of the promises. 335 8.73 However, the presumption against contractual intent can be rebutted by clear evidence of the parties’ intention to create legal obligations. In Merritt v Merritt (1970), a husband who had deserted his wife agreed to pay her a monthly maintenance of £40 and to transfer the house to her when she had fully repaid the outstanding mortgage, as well as other expenses related to the house. At the wife’s insistence, the husband wrote the agreement on a piece of paper and signed against it. The court held that in these circumstances, the presumption against creating legal relations did not apply and the agreement was binding. Unlike the facts of Balfour v Balfour, where the couple were living in amity at the time of the agreement, the couple in Merritt v Merritt was estranged when the agreement was made. As such, they were clearly making a serious bargain and not merely relying on the other’s affection and good faith for the fulfilment of the promises. 8.74 As the issue of contractual intent is a question of fact, all the surrounding facts of a case are relevant in considering whether the presumption against contractual intent has been displaced. It is not possible to list all the relevant factors but cases have shown that two factors are of particular significance. The first is the certainty of the terms of the agreement. The more certain the terms, the more likely that the parties would have carefully considered the content and effects of the agreement. Conversely, vague and imprecise terms are likely to be construed as evidence of lack of contractual intent. The second factor is the actual reliance placed on the agreement; evidence of such reliance will tend to suggest that the parties intended the agreement to be binding. Both factors were present in Merritt v Merritt; the court found that the agreement was written with sufficient certainty and that the wife had acted in reliance on the husband’s promises in settling the mortgage loan and other related expenses. BUSINESS AND COMMERCIAL AGREEMENTS 336 8.75 Where business and commercial agreements are concerned, the presumption is that the parties intend to create legally enforceable obligations. In Foo Jong Long Dennis v Ang Yee Lim Lawrence (2016), the Singapore High Court summarised (at [81]) the principles for establishing the existence of contractual intent in commercial arrangements: (a) As a starting point, in matters of commerce, there is a rebuttable presumption that the parties intend to create legal relations in any commercial arrangement that they propose … (b) The onus on a party who asserts that a commercial arrangement is not to have legal effect is a heavy one … (c) Where the parties perform the terms of the commercial arrangement, it is likely that they intend to enter into legal relations pursuant to the commercial arrangement … 8.76 It is not uncommon for parties to expressly state in their agreement that they have no intention to create legal relations. Where this is done in clear terms, the presumption is effectively rebutted. In Rose & Frank Co v J R Crompton & Bros Ltd (1923), the parties included the following clause (commonly known as an “honour clause”) in their agreement: This arrangement is not entered into as a legal or formal agreement, and shall not be subject to legal jurisdiction in the Law Courts but is only a definite expression of and record of the purpose and intention of the parties concerned to which they each honourably pledge themselves. The court held that the arrangement was not enforceable as a contract as it was clear from the honour clause that they did not intend the agreement to have any legal consequence. 337 8.77 The issue of contractual intention frequently arises in relation to a letter of comfort. Typically, such letters are issued by a parent company or a substantial shareholder to encourage a financial institution to extend a loan facility to its subsidiary or investee company. The precise legal effect of a comfort letter depends on the intention of the parties as evidenced by the surrounding circumstances and the text of the letter. 8.78 In Kleinwort Benson Ltd v Malaysia Mining Corp Bhd (1989), the defendant parent company issued a comfort letter which contained the statement that “It is our policy to ensure that the business of [our subsidiary] is at all times in a position to meet its liabilities to you under the above arrangements.” Upon examining the wording of the letter, the English Court of Appeal held that the statement did not amount to a contractual promise. In contrast, the Australian Supreme Court upheld a letter of comfort containing a similarly worded statement as having contractual force in Banque Brussels Lambert SA v Australian National Industries Ltd (1989). In the Australian case, Rogers CJ disapproved of the English court’s approach in attempting to resolve a commercial dispute with excessive emphasis on the text of a document. Rogers CJ also took the view that generally commercial agreements which resulted from hard bargaining should be given significant weight and not be lightly reduced to a “merely honourable engagement” except in the clearest of circumstances. 8.79 Significantly, the Singapore High Court has declined to give legal effect to a letter of comfort in the case of Hongkong and Shanghai Bank Corporation Ltd v Jurong Engineering Ltd (2000). Though the court acknowledged that the letter of comfort should, as a commercial document, be presumed to have legal effect, it nonetheless held that the presumption was displaced by two important considerations. First, the evidence showed that the parties did not seriously place any reliance on the comfort letter; and secondly, the text of the letter was not sufficiently 338 certain to support the creation of binding obligations. This decision suggests that our courts may be more inclined towards a restrictive approach in interpreting letters of comfort, such that documents of this nature are unlikely to be given contractual force except where there is irrefutable evidence of such intention. CONCLUSION 8.80 The reader should realise by now that the need for the concept of consideration has been much questioned. Although the concept has not been abandoned, its role in contract law has been considerably whittled down. 8.81 A traditional argument in favour of consideration is that it is good evidence of the contracting parties’ intention to create legal relations. A counterargument to this is that where other circumstantial evidence shows such intention, there is no reason why agreements should be denied legal validity simply for lack of consideration. Indeed, it is often the need to give effect to the parties’ intention in such situations that prompted judges to “invent” consideration. In Chwee Kin Keong v Digilandmall.com Pte Ltd (2004), it was observed by the Singapore High Court (at [139]), in obiter, that: The modern approach in contract law requires very little to find the existence of consideration. Indeed, in difficult cases, the courts in several common law jurisdictions have gone to extraordinary lengths to conjure up consideration. (See for example the approach in Williams v Roffey Bros & Nicholls (Contractor) Ltd …). The High Court went on to suggest (at [139]) that: Indeed, the time may have come for the common law to shed the pretence of searching for consideration to uphold commercial contracts. The marrow of contractual relationships should be the parties’ intention to create a legal relationship. 339 8.82 Perhaps the fate of the doctrine of consideration lies more tellingly in the obiter comments of the Singapore Court of Appeal in Gay Choon Ing v Loh Sze Ti Terence Peter (2009). Andrew Phang JA observed (at [117]) that the doctrine of consideration has survived much criticism and remains an established part of Singapore and the common law, even though legal reform is needed to iron out the theoretical incoherence and practical difficulties in application. Further (at [118]), that having a range of legal options available to determine which contractual promises to enforce — a diluted doctrine of consideration and alternative doctrines such as promissory estoppel, economic duress, undue influence and unconscionability — is the most practical way to achieve a fair and just result, as no doctrine is itself free of difficulties. 340 Chapter 9 Capacity and Privity of Contract 9.1– 9.4 9.5 Introduction Incapacity 9.6– 9.13 9.14 9.15 – 9.23 9.24 9.25 – 9.27 9.28 – 9.30 9.31 9.32 – 9.33 9.34 – 9.38 9.39 Minors 9.40 – 9.44 Mental Incapacity Binding Contracts (1) Beneficial contract for necessaries (2) (a) Loans for necessaries Beneficial contract of employment, apprenticeship or education and analogous contracts Voidable Contracts Ratified Contracts Remedies Against a (Protected) Minor (1) Section 3(1) Minors’ Contracts Act (2) Section 2 Minors’ Contracts Act 341 9.45 – 9.49 Corporations 9.50 – 9.54 Privity of Contract and Third Parties 9.55 9.56 – 9.57 9.58 – 9.63 9.64 9.65 9.66 – 9.67 9.68 9.69 – 9.78 9.79 9.80 – 9.82 9.83 9.84 9.85 Third Party Enforcement of Benefits under Contract: Techniques to Get Around the Privity Rule Statutory Techniques (1) Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) (a) Scope of application (2) (b) Rights of third party to enforce contractual term (c) (d) (e) Remedies available to a third party Variation and rescission of contract Other provisions Other statutes Some Common Law Techniques (1) Action by promisee on behalf of third party (2) (3) Collateral contracts Himalaya clause (4) (5) (6) Assignment Tort of negligence Agency 342 9.86 (7) 9.87 9.88 9.89 Imposing Burdens on Third Parties: Techniques to Get Around the Privity Rule Sub-bailment Contracts Land Law Unlawful Interference with Contractual Rights 9.90 – 9.92 Law of trusts Conclusion INTRODUCTION 9.1 Having considered the legal ingredients necessary for the formation of a contract, we go on to examine the questions of who has the right to sue and enforce promises under the contract, and who is liable to be sued. In this chapter, we will be looking at two separate and distinct situations. The first involves an individual or corporation who is a party to the contract but whom the law regards as lacking the legal capacity to contract. The second concerns an individual or corporation who is not a party to the contract. 9.2 Generally, parties to a contract are entitled to sue and, conversely, are liable to be sued in respect of promises made under the contract. However, the law seeks to protect certain individuals, namely minors below the age of 18 and the mentally incapacitated, whom it regards as being too vulnerable to fully appreciate what they are committing themselves to in a contract. To do this, the law limits their capacity to enter into contracts. Where corporations are concerned, the law seeks to protect the owners’ investment in a corporation by placing limits on the corporation’s capacity to contract. Such limits generally result in the individual or the corporation not being liable under contracts entered into. Exceptions to the general rule exist to ameliorate any unfairness that 343 may be caused to parties dealing in good faith with the individual or corporation. 9.3 As mentioned, only parties to a contract are entitled to sue and are liable to be sued under a contract. It follows then that an individual or corporation who is not a party or, in legal parlance, not privy to a contract cannot sue or be sued under that contract. Such an individual or corporation is also known as a “third party”. However, strict adherence to the “privity of contract” rule may result in unfairness to the third party especially where a term or terms of the contract confer a benefit upon the third party. Hence, various techniques have been utilised to get around the privity rule. 9.4 In this chapter, we shall first consider the effect of incapacity upon an individual or corporation’s ability to sue or be sued under a contract to which it is a party. We shall then go on to consider the ability of an individual or corporation (ie, the third party) to sue or be sued under a contract to which it is not a party and some of the common techniques employed to get around the privity rule. INCAPACITY 9.5 In a free market system, the law provides certainty to commercial dealings when contracts are upheld. Nevertheless, this ideal has to be counterbalanced against the need to protect the inexperienced and/or vulnerable individuals who may not be able to protect their own interests in the commercial arena. Investors in a corporation also deserve protection against their investment being applied towards unintended purposes by the persons running the corporation. But what of the interest of the party who dealt fairly with the individual or the corporation? A fine balancing act is required between these equally valid concerns. As will be observed, however, the law on incapacity, especially that concerning 344 minors, is not entirely satisfactory and is considered by many textbook writers as requiring reform. MINORS 9.6 Minors comprise one of the groups considered vulnerable and requiring legal protection against improvident contracts. The premise is that they lack experience in commercial matters and maturity of judgment. The general common law approach is to deem minors as lacking the legal capacity to enter into contracts so that young people below the age of majority are protected. Some examples of countries that adopt this approach are the UK, Hong Kong and Malaysia. 9.7 In the UK, Hong Kong and Malaysia, the age of majority is 18 years (see s 1 UK Family Law Reform Act 1969; s 2 read with s 4 Malaysian Age of Majority Act 1971; and s 2 read with ss 3 & 4 Hong Kong Age of Majority (Related Provisions) Ordinance 1990). In the past, Singapore adopted a similar approach — that is, extending protection to all who are below the age of majority. However, the age of majority in Singapore is 21 (see Bank of India v Rai Bahadur Singh (1994)). This had the curious result of young people in Singapore aged 18 to 20 being regarded as still requiring legal protection in contracting while their counterparts in the UK, Hong Kong and Malaysia were not. Whether or not Singapore law actually reflected reality on the ground (then) was never verified by any empirical study. Regardless, the “anomaly” in Singapore law was removed in 2009. Legal amendments that took effect on 1 March 2009 decoupled the age of contractual capacity in Singapore from the age of majority. In other words, the age from which contractual capacity is conferred is no longer the age of majority. Instead, s 35(1) Civil Law Act (Cap 43 Rev Ed 1999) (“CLA”) provides that the age of contractual capacity is 18 years for most contracts. Legal protection is no longer 345 extended to all minors in Singapore; only minors below 18 years of age are protected. 9.8 There remain some contracts that all minors continue to lack legal capacity to enter into. These exceptions are stipulated in s 35(4)(a) to (d) CLA. For example, all minors continue to lack capacity to enter into contracts dealing with interests in land (except for contracts for leases of land of three years or less) and for the sale or use, as collateral, of a minor’s beneficial interest under a trust (see s 35(4)(a) to (c) CLA). 9.9 Notably, the 2009 legal amendments only lowered the age of contractual capacity but left unchanged the general law pertaining to minors’ contracts. The sole impetus behind the amendments was to encourage and facilitate entrepreneurship among the young in Singapore. As already alluded to, the existing law on minors’ contracts is not wholly satisfactory. As such, the limited scope of the 2009 amendments have prompted some criticism for, inter alia, failing to consider holistic reform (see Loo W L, “Use of Age for Conferment of Capacity” (2010) Singapore Journal of Legal Studies at pp 328–351). 9.10 Singapore law on minors’ contracts generally tracks the English common law. Thus in the sections to follow, English case authorities are highlighted in the discussion of the scope of law on minors’ contracts. However, the reader is cautioned that as the UK still confers contractual capacity from the age of majority, English cases inevitably refer to parties lacking legal capacity as minors (as a whole) and to their raising the defence of minority. The reader should bear in mind the crucial difference that, in Singapore, only some minors (those under 18 years) as opposed to minors as a whole, may raise the “defence of minority”. 9.11 What is the significance of a lack of contractual capacity? The general rule is that contracts entered into by one who 346 lacks capacity are not enforceable against him. This means that the other contracting party (“the counterparty”) will not be able to sue the party lacking capacity for breach of contract and obtain remedies for breach (eg, claims for the price of goods or services provided, damages or equitable remedies). Thus, generally, a minor in Singapore is not liable under a contract entered into while he is under 18 years of age. 9.12 A (relevant) minor is only allowed to set up his minority as a “defence” to a claim by the counterparty while his obligation is still executory, that is, where the minor has yet to perform his obligations under the contract. Hence, where the minor has already performed (executed) his obligations, he cannot plead his minority in order to recover any money paid or goods delivered unless there has been a total failure of consideration on the part of the counterparty. In Steinberg v Scala (Leeds) Ltd (1923), a minor applied for and was allotted shares in a company. She made partial payment for the shares but thereafter decided to terminate the contract on the ground of her minority and to claim the return of the partial payment. The court rejected her claim. Although she was allowed to terminate the contract and therefore free herself from liability to pay the balance of the price of the shares, she was not allowed to claim back the amount paid as there was no total failure of consideration. She received her shares and thus got something in return for her money. 9.13 Even if a contract cannot be enforced against a minor, the minor is nevertheless entitled to enforce the contract against the counterparty, that is, the counterparty is always bound under the contract. Obviously, this may result in unfairness towards the counterparty and certain rules have evolved through case law and statute to provide the counterparty with remedies against the minor (see discussion under the heading “Remedies Against a (Protected) Minor” at para 9.32 onwards). Certain exceptions to the general rule on the incapacity of minors have also evolved not only to prevent unfairness to the 347 counterparty but also to shield minors from being prejudiced by, ironically, the very protection accorded to them. Traders may be deterred from contracting with minors given their lack of legal capacity but minors still have need for essentials such as food, clothing and employment. These exceptions are discussed under the three headings below: binding contracts voidable contracts ratified contracts Binding Contracts 9.14 The law recognises some contracts to be fully binding and enforceable against a (protected) minor. The types of contract that fall within this category are beneficial contracts for necessaries, beneficial contracts of employment, apprenticeship and education, and contracts analogous to the latter category. (1) Beneficial contracts for necessaries 9.15 The rationale behind the binding effect of a contract for necessaries is said to be that unless the minor is bound, traders will not give the minor credit for necessaries. Necessaries can comprise either goods supplied or services rendered. However, the question whether the goods or services contracted for are necessaries is not a straightforward one. Rather, it is a question of law and fact. Two considerations are pertinent: first, are the goods or services in question capable of being “necessaries” at law? Second, does the minor, in fact, have actual need for the goods or services? The supplier bears the burden of proving both in the affirmative. To be binding, the terms of the contract for necessaries must also, on the whole, benefit the minor. 9.16 In relation to goods, s 3(3) UK Sale of Goods Act (applicable in Singapore by virtue of the Application of 348 English Law Act (Cap 7A, 1994 Rev Ed) and reprinted locally as Cap 393, 1999 Rev Ed) (“SGA”) defines necessaries to be “goods suitable to the condition in life of the minor … concerned and to his actual requirements at the time of the sale and delivery”. This is a statutory codification of the common (case) law definition. It should be noted that s 3(1) SGA provides that “the capacity to buy and sell is regulated by the general law concerning capacity to contract and to transfer and acquire property”. Thus, all references to a minor in s 3 SGA are to be understood as referring to a minor below 18 years of age. 9.17 At common law, items capable of being necessaries (at law) are “such articles as are fit to maintain the particular person in the state, station and degree … in which he is” (see Peters v Fleming (1840) at p 46) while, as noted above, s 3(3) SGA makes reference to “goods suitable to the condition in life of the minor”. These definitions indicate that necessaries encompass more than just the basic necessities of life and that the social status of the minor is relevant in its determination. Thus what may be necessaries for a “prince” may not be necessaries for a “pauper”. To illustrate, English cases have held the following items, supplied to minors from well-to-do families, to be capable of being necessaries at law: rings, pins and a watch-chain (Peters v Fleming) and a servant’s uniform (Hands v Slaney (1800)). However, articles of mere luxury cannot be necessaries although luxurious articles of utility may sometimes be (see Chapple v Cooper (1844) at p 258). 9.18 Obviously, what may be considered suitable or fit to the condition in life of a minor would change with the times and the old English cases may now be of limited use as a guide. It is also not easy to distinguish articles of mere luxury from luxurious articles of utility. This led to a suggestion that the real question is “whether it was reasonable for the minor, however rich, to be supplied with articles of the kind in question” (see Edwin Peel, 349 Treitel: The Law of Contract (14th ed, 2015) at para 12– 005). 9.19 As mentioned, the supplier has the unenviable task of proving both that the goods or services supplied are capable of being “necessaries” at law and that the minor has actual need of them before he can successfully claim against the minor. If the minor is already adequately supplied, then he will not be liable for the price even though the supplier did not know this (see Barnes & Co v Toye (1884)). In Nash v Inman (1908), a Savile Row tailor failed in his claim against a minor (a Cambridge undergraduate and the son of an architect of good position) for payment of eleven fancy waistcoats supplied by him. The minor’s father had given unrefuted evidence that the minor was already adequately supplied with clothes at the time of sale and delivery. The burden placed on the supplier to prove the minor’s actual need has been criticised as being unduly harsh as such facts would usually not be within the supplier’s knowledge (see Edwin Peel, Treitel: The Law of Contract (14th ed, 2015) at para 12–006). 9.20 Even if the supplier succeeds in proving that the contract with the minor is for necessaries, the contract only binds the minor if it contains terms that, overall, benefit the minor. Thus, in Fawcett v Smethurst (1914), it was held that a contract for the hire of a car for the transport of a minor’s luggage did not bind the minor even though it was a contract for necessary services. It contained a harsh term making the minor liable for damage to the car “in any event”, that is, regardless of whether he was at fault. The court held that the contract, as a whole, was not to the minor’s benefit. 9.21 An unsettled question is whether a contract for necessaries that remains executory on the part of the counterparty binds the minor. These are cases where the counterparty has yet to perform his obligations under the contract, for example, he has not delivered goods or 350 rendered services contracted for. For necessary goods, s 3(2) SGA provides that “[W]here necessaries are sold and delivered to a minor … he must pay a reasonable price for them” [emphasis added]. As the minor’s obligation to pay arises upon both sale and delivery, the minor is thus only liable when the contract for necessaries is executed (for other arguments for and against this conclusion, refer to Box 9.1). Box 9.1 Reflecting on the law Should executory contracts for necessaries bind the minor? Where the supplier has yet to perform his obligations under a contract for necessaries, the question is whether the minor is bound so that he cannot repudiate the contract on the ground of his minority. A plain reading of s 3(2) SGA appears to suggest that an executory contract for necessary goods would not bind a minor. Proponents of this view argue that a minor is liable for the price not because he has contracted (“contractual basis”) but because he has been supplied (“restitutionary basis”). That is why a minor is only liable to pay a reasonable price instead of the contracted price for necessary goods (see s 3(2) SGA). However, there is conflicting dicta on the basis of a minor’s liability (see Nash v Inman where Moulton LJ (at p 8) held that a minor’s liability rests upon restitution as he is incapable of making a contract, while Buckley LJ (at p 12) opined that a minor had the capacity to make a contract for necessaries). Arguments in favour of a restitutionary basis have also been challenged. Barring very young children, a minor is capable of giving true consent and is thus capable of contracting. And payment of a reasonable price does not conclusively point to a restitutionary basis: the law’s interference with the terms of a transaction does not necessarily strip it of its contractual nature (see Edwin Peel, Treitel: The Law of Contract (14th ed, 2015) at para 12–008). Further, although most textbook writers agree that the different approaches to contracts for necessary goods (ie, executory contracts are not binding) and to contracts for necessary services (ie, executory contracts are binding) are hard to reconcile, different solutions have been suggested to rationalise the law (see Edwin Peel, Treitel: The Law of Contract (14th ed, 2015) at para 12–008 and A Phang, Cheshire, Fifoot and Furmston’s Law of Contract (2nd ed, 1998) at p 752). The issue remains unsettled. 351 9.22 For necessary services, the position is governed by common law and it has been held that executory contracts for services bind the minor, at least where contracts for education are concerned. In Roberts v Gray (1913), a minor had contracted to learn the occupation of a professional billiards player from a famous professional by going with him on a world tour and playing billiards with him during the tour. The court held that the contract was for necessary services in that it was a contract for teaching and instruction, and one which bound the minor even though it was still partly executory on the part of the professional when the minor repudiated the contract. Hence, the minor’s repudiation was wrongful and he was held liable for damages for breach of contract. As an aside, it is pertinent to note that contracts for education that equip a minor with necessary skills to earn a livelihood are considered contracts for necessaries. However, given the overlap, they are often also discussed under the category of contracts of employment, apprenticeship or education and contracts analogous thereto (see paras 9.25 to 9.27). 9.23 Where indeed the contract is one for necessaries, in relation to necessary goods, s 3(2) SGA provides that the minor need only pay a reasonable price. This suggests that the minor may not have to pay the price agreed in the contract. There is no statutory equivalent in relation to necessary services and case law would govern, which appears to require payment of a reasonable price (see Chapple v Cooper (1844)). (a) Loans for necessaries 9.24 Generally, a contract to lend money to a minor for the purchase of necessaries is unenforceable against the minor at common law (see Darby v Boucher (1694)). The rationale is probably that a loan can be easily misapplied to other purposes unlike an actual supply of necessaries. In equity, the lender can recover such part of the loan as 352 is actually used for the purchase of necessaries (see Marlow v Pitfield (1719)). (2) Beneficial contract of employment, apprenticeship or education and analogous contracts 9.25 Contracts of employment, apprenticeship or education are binding on a minor as they provide him a means of earning his livelihood. Again, such contracts only bind a minor if the terms are, on balance, beneficial to the minor. Thus in Clements v L & NW Ry (1894), a minor was held bound by his contract of employment in which he agreed to relinquish his statutory rights to personal injury benefits and to join his employer’s own insurance scheme. The insurance scheme conferred the minor some rights which were more advantageous than his statutory rights and some rights which were less so. Nevertheless, taken as a whole, the court found that the insurance scheme was still to his benefit. But not every contract that is beneficial to a minor binds him. For example, a minor’s trading contracts do not bind him no matter how beneficial they may be. In Cowern v Nield (1912), a minor trading in hay and straw failed to deliver a consignment of hay to a buyer despite having already been paid. The buyer’s claim to recover the price paid failed. 9.26 This principle of beneficial contracts of employment, apprenticeship or education has been extended to analogous contracts. Examples of these include a contract to grant a publisher exclusive rights to publish a minor’s memoirs (see Chaplin v Leslie Frewin (Publishers) Ltd (1966)), a contract between a professional boxer (who is a minor) and the British Boxing Board of Control in which he agreed to abide by the rules of the Board as he could not earn his living as a boxer otherwise (see Doyle v White City Stadium Ltd (1935)), and a contract where a group of musicians, the members of which were minors, appointed a company to be their manager and agent (see Denmark Productions Ltd v Boscobel Productions Ltd (1967)). 353 9.27 A decision that provides an interesting contrast to the Denmark Productions case is Proform Sports Management Ltd v Proactive Sports Management Ltd (2007). In Proform Sports Management, an issue arose whether a representation contract for a soccer player, entered into when the player was a minor, was a contract analogous to a contract of “employment, apprenticeship or education” and thus binding on the minor. The case involved a famous English soccer player, Wayne Rooney, who entered into a representation contract when he was aged 15 with Proform Sports Management Ltd (“the company”). Under the contract, the company would act as Rooney’s executive agent and manage Rooney’s career as a professional footballer, provide advice and negotiate on Rooney’s behalf the terms of, inter alia, any contract of transfer from one football club to another. The court held (at [40]) that the representation contract was not a contract analogous to a contract for employment, apprenticeship or education on the ground that the company did not deal with matters essential to Rooney’s training or livelihood, unlike music group managers who “organise matters essential to the very business of the musical artiste”. The company did not provide Rooney training to hone his skills and enable him to earn a living as a professional footballer or to begin to do so. Rooney was already receiving such training under his contract with the Everton Football Club. Voidable Contracts 9.28 At common law, under this exception to the general rule, a contract is binding and enforceable against a minor unless the minor avoids or repudiates the contract during his minority or within a reasonable time after he attains the age of majority. In Singapore, where contractual capacity does not take reference from the age of majority but is conferred from age 18 onwards, this exception will mean that the contract is binding on the minor under 18 unless he avoids it while below 18 or does so within a reasonable time of turning 18. For contracts where 354 contractual capacity still takes reference from the age of majority (ie, contracts listed in s 35(4) CLA: see para 9.8), minors can avoid the contracts while below 21 or within a reasonable time of turning 21, if the contracts fall within this common law exception. The types of contract within this category are: contracts to lease or purchase land; contracts to subscribe for or purchase shares in a company; partnership agreements; and marriage settlements. It is unclear if these are the only contracts that are capable of falling within this category but the usual rationale given for the effect of this category of contracts on a minor is that they concern interest in property of a permanent nature and involve recurring obligations. As such, a minor who retains the interest should, in fairness, be held liable for the obligations. However, the stated rationale has been criticised as vague and does not provide a satisfactory explanation for the inclusion of certain types of contracts within the category or the exclusion of others (see Edwin Peel, Treitel: The Law of Contract (14th ed, 2015) at para 12–025). For example, it is unclear what is meant by “permanent” and it has been held that a hire purchase contract for a car, though involving recurrent obligations on the part of the minor to pay instalments, does not fall within this class of contracts (see Mercantile Union Guarantee Corp Ltd v Ball (1937)). As such, the need for such a class of contracts has been questioned (see Edwin Peel, Treitel: The Law of Contract (14th ed, 2015) at para 12–026). 9.29 As mentioned, in Singapore, unless the minor repudiates whilst he is below the relevant age, he will have to do so within a reasonable time of attaining that age. What will be considered a reasonable time would depend on the facts of the particular case. In this regard, an English case has held that taking nearly five years after attaining 355 the age of majority to repudiate a marriage settlement was not reasonable even though for most of that time the minor concerned did not know of his right to repudiate (see Edwards v Carter (1893)). 9.30 Upon repudiation, the minor ceases to be bound by future obligations under the contract. However, the law is unclear as to whether he remains bound by outstanding obligations that have accrued prior to repudiation. For example, a minor, upon repudiating a lease of a flat, will no longer be bound to pay future rent but what about the rent for the past months that has yet to be paid? There are conflicting dicta and views by textbook writers on this question although the general view seems to be that a minor remains bound by obligations that have arisen prior to his repudiation of the contract (see Sutton and Shannon on Contracts (8th ed) at p 220 and Salmond and Winfield, Principles of the Law of Contracts at p 461 cited by A Phang, Cheshire, Fifoot and Furmston’s Law of Contract (2nd ed, 1998) at p 759, footnote 106. For an alternative view, see A Phang, as above, at p 759, which also cites in support of the opposing view Salmond and Williams, Principles of the Law of Contracts at p 300 in footnote 106). Finally, as mentioned in para 9.12, the minor cannot recover monies paid or goods delivered to the other party prior to the repudiation unless there has been a total failure of consideration (see Steinberg v Scala (Leeds) Ltd (1923)). Ratified Contracts 9.31 At common law, a contract that does not fall under the previous two exceptions to the general rule may still be binding and enforceable against a minor if the minor ratifies the contract upon attaining the age of majority. In the Singapore context, this exception will operate such that a contract ratified when a minor turns 18 will be enforceable and binding on that minor. Remedies Against a (Protected) Minor 356 9.32 Unless a contract with a minor falls within the exceptions discussed above, the counterparty will not be able to enforce the contract against the minor. This is the case even if the counterparty did not know that he was dealing with a (protected) minor. Thus, to protect a supplier who has dealt fairly with the minor, a number of remedies exist at common law and equity, and under the Minors’ Contracts Act (Cap 389, 1994 Rev Ed) (“MCA”). This is an English Act introduced in 1987. It is applicable in Singapore by virtue of the Application of English Law Act 1993. 9.33 A thorough discussion of the remedies under common law and equity is beyond the scope of this chapter. It is sufficient to note that these remedies are very much restricted on account of the courts’ fear of diluting the protection given to the minor. They are thus insignificant in comparison to the remedy under the MCA which generally improves a supplier’s access to restitution of benefits transferred under a contract that is unenforceable against the minor. Hence, even though the MCA specifically preserves the counterparty’s rights against the minor at common law and equity (see s 3(2) MCA), it is unlikely that the counterparty will resort to those remedies. For the purposes of this chapter then, the focus will be on the remedies under the MCA with a brief mention of the remedies under common law and equity mainly for purposes of comparison. (1) Section 3(1) Minors’ Contracts Act 9.34 Section 3(1) MCA provides: Where — (a) a person (the plaintiff) has [after the commencement of the Act] entered into a contract with another (the defendant); and (b) the contract is unenforceable against the defendant (or he repudiates it) because he was a minor when the contract was made, 357 the court may, if it is just and equitable to do so, require the defendant to transfer to the plaintiff any property acquired by the defendant under the contract, or any property representing it. 9.35 The section expressly provides for a remedy for the counterparty to the contract in circumstances where the contract does not bind a minor by virtue of his minority. This would include all situations where the contract is not for necessaries and where the minor has not ratified, and where the contract falls within the class of “voidable contracts” that has been repudiated by the minor. Examples of where the counterparty may be able to obtain a remedy: the tailor in Nash v Inman could probably claim back the eleven fancy waistcoats from the Cambridge undergraduate; and in Steinberg v Scala, if the shares had been allotted without any payment having been made yet when the minor chose to repudiate the contract, then the company would probably be able to claim back the shares allotted. 9.36 Under s 3(1) MCA, the nature of the remedy is restitutionary, that is, the court may order the minor to restore property acquired under the contract or “any property representing it” to the supplier. This is in contrast to the position at common law and equity. At common law, a claim for damages may be made against a minor, except for very young children, in tort. But the tortious remedy will be withheld if to grant it would be tantamount to enforcing the contract against the minor. In R Leslie Ltd v Sheill (1914), a minor lied about his age to obtain a loan. The court held that the minor cannot be sued for a breach of contract as such a contract is unenforceable against a minor. Neither could the minor be sued in the tort of deceit because the effect of granting damages against the minor would result in an indirect enforcement of the contract of loan. At equity, however, a restricted restitutionary remedy is available — the minor may be compelled to restore property but only if the minor had obtained them fraudulently, for example, by 358 misrepresenting his age. Under s 3(1) MCA, the remedy of restitution is available in the absence of fraud. Further, while s 3(1) MCA expressly provides for restoration of “any property representing [the original acquired property]”, it is unclear if the remedy in equity extends to this. 9.37 Thus, under s 3(1) MCA, where the minor still has within his possession the original goods supplied by the counterparty, he may be ordered to return these goods to the counterparty. Moreover, if the minor has exchanged the original goods for other goods in a barter trade, the minor could be ordered to transfer to the counterparty these substitute goods. If the minor has consumed the goods, for example, he has eaten the caviar purchased from the counterparty, or given away the caviar as a gift, then he is no longer in possession of the property acquired under the contract and no order under s 3(1) may be possible. But what if the minor has sold the original goods for cash? The problem here is that the MCA does not provide a definition of the word “property” and it is unclear if “property” encompasses money. Most textbook writers, however, are of the view that money can be considered “property” under the MCA and thus the minor can be ordered to transfer cash representing the original goods to the counterparty (see, eg, Edwin Peel, Treitel: The Law of Contract (14th ed, 2015) at para 12– 041 and Chitty on Contracts Vol 1 (32nd ed, 2015) at para 9–062). Box 9.2 Reflecting on the law “Any property representing [the original acquired property]” under s 3(1) MCA — further complications Consider the situation where the original goods are sold for cash which is used to partially pay for other goods purchased from another party, or where the cash is deposited into the minor’s savings account, mixed with his other savings, and then withdrawn to purchase other goods. In such 359 situations, can the “other goods” be said to represent the original goods and be liable to be surrendered to the supplier of the original goods? It has been suggested that the difficulty in identifying the proceeds of sale of the original acquired property into these subsequently acquired goods should be considered by the court when exercising its discretion under s 3(1). Certainly, an order to restore property that does not clearly represent the original acquired property will increase the risk of an indirect enforcement of the minor’s contract, which in turn, will undermine the protection of minors under 18 (see Edwin Peel, Treitel: The Law of Contract (14th ed, 2015) at para 12–042 for a fuller discussion). 9.38 It should be borne in mind that the remedy under s 3(1) MCA is discretionary and not available as of right. The court will make an order only “if it is just and equitable to do so”. The MCA is silent on the factors to be considered by the court in the exercise of its discretion. However, the difficulty in determining if the minor has in his possession property representing the original goods would probably be an important one. The fairness of the original contract may be another. Hence, whether the supplier tried to take advantage of the minor’s vulnerability is relevant as is the minor’s appearance (whether it is mature or not) in the absence of any representation as to his age. Finally, the need to avoid an indirect enforcement of the minor’s contract may also be considered in the exercise of the court’s discretion. (2) Section 2 Minors’ Contracts Act 9.39 It has been mentioned that loans for the purchase of necessaries are not binding on a (protected) minor. Financial institutions therefore would not grant such loans unless repayment of the loan and interest is guaranteed by a party with contractual capacity. Where such guarantee is furnished, s 2 MCA reiterates that the guarantee is indeed enforceable against the guarantor: Where — 360 (a) a guarantee is given in respect of an obligation of a party to a contract made [after the commencement of the Act]; and (b) the obligation is unenforceable against him (or he repudiates the contract) because he was a minor when the contract was made, the guarantee shall not for that reason alone be unenforceable against the guarantor. MENTAL INCAPACITY 9.40 A person may be mentally incapacitated in two ways: mental retardation or intoxication. More recently, the Singapore High Court was prepared to recognize that a person under the influence of medication can be mentally incapacitated (see Chan Gek Yong v Violet Netto (2018) at [39]). The general rule is that contracts entered into by the mentally incapacitated bind them unless and until they choose to avoid or repudiate the contracts. In other words, the contracts are rendered voidable (see, eg, for the mentally unsound, Che Som bte Yip v Maha Pte Ltd (1989); and for the drunk, Gore v Gibson (1843)). The law affords protection to those under a mental disability if: the mental incapacity prevents the person under such a disability from understanding the general nature and effect of the transaction he is entering into; and the other party knows or should have known about the incapacity at the time of entering into the contract. The burden of proving such knowledge is on the party seeking to avoid the contract. (see Resorts World at Sentosa Pte Ltd v Lee Fook Kheun (2018) at [21]) 9.41 The second requirement of knowledge can be contrasted with the law on protected minors which does not require knowledge by the counterparty of the minor’s lack of legal capacity. This has been the subject of criticism (see A H 361 Hudson, “Mental Incapacity Revisited” (1986) The Conveyancer and Property Lawyer 178). 9.42 Though the mentally incapacitated may avoid the contract if the two requirements mentioned above are satisfied, the counterparty to the contract is always bound. However, if the counterparty does not know or, in the circumstances of the case, it cannot be shown that he ought to have known of the incapacity, he may enforce the contract against the person under the disability. 9.43 In any event, in the case of a contract for the sale of goods, s 3(3) SGA provides that “where necessaries are sold and delivered to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price for them”. Hence, a contract for necessary goods would be an exception to the general rule on contracts with the mentally incapacitated. Even if the person under the mental impairment can prove that he did not understand what he was doing and that this was known to or ought to have been known by the other party, he will still have to pay a reasonable price for necessary goods that have been sold and delivered to him. 9.44 A contract will become absolutely binding on a person of unsound mind if he ratifies the contract when he is cured (see Manches v Trimborn (1946)). In the same way, a contract will absolutely bind a drunk if he ratifies after he becomes sober (see Matthews v Baxter (1873)). CORPORATIONS 9.45 When a company is incorporated, the common law confers upon it a legal personality in the sense that it is considered a separate legal entity from its owners (the shareholders) and has capacity to enter into contracts like any human being (see Chapter 21, para 21.21 onwards). 362 Issues relating to its capacity to enter into contracts arise in the two situations discussed below. 9.46 The first relates to the doctrine of ultra vires. The doctrine was originally introduced to protect shareholders who had invested in a company on the understanding that their money would be applied for certain purposes stated in the objects clause (a clause that states the purpose for which a company is incorporated) contained in a document of incorporation, the constitution of the company. For example, if the objects clause states that the company was set up to carry on the business of selling men’s shoes, any contract entered into by the company to purchase designer watches will be considered ultra vires, that is, beyond the capacity of the company, and therefore, under common law, is null and void. However, while the doctrine protects the shareholders, it operates harshly upon innocent third parties who dealt in good faith with the company. Thus, steps were taken to provide some protection to third parties via s 25 Companies Act (Cap 50, 2006 Rev Ed) (“CA”). 9.47 Section 25 CA prevents a contract that is ultra vires from being rendered null and void automatically. Instead, restraint or the setting aside of the ultra vires contract will only be ordered by the court, upon application by a member or a debenture holder of the company, if the court considers it just and equitable to do so. Otherwise the contract is valid and binding on the company. Significantly, s 23 CA now allows the incorporators of a company a choice as to whether to include an objects clause in the constitution of the company or to omit it altogether. If it is omitted, the doctrine of ultra vires will no longer be relevant. For a detailed discussion of the doctrine of ultra vires see Chapter 21, para 21.37 onwards). 9.48 The second situation where the company’s capacity to contract may be in issue relates to pre-incorporation contracts. Prior to a company’s incorporation, contracts 363 may need to be entered into to set into motion the process of incorporation. For example, lawyers may need to be engaged to draft the company’s constitutional document. However, at this stage, the company has not come into existence and, at common law, is incapable of contracting or to ratify a contract after its incorporation. 9.49 Section 41 CA changes the position. Section 41(1) allows contracts entered into prior to a company’s formation to be ratified by the company after its incorporation and to bind the company thereafter. In the absence of such ratification by the company, s 41(2) provides for persons who acted in the name of or on behalf of the company in entering into pre-incorporation contracts to be personally bound by the contract unless there is express agreement otherwise. PRIVITY OF CONTRACT AND THIRD PARTIES 9.50 As mentioned, under the doctrine of privity of contract, only parties to a contract can sue and are liable to be sued in respect of rights and obligations, respectively, under the contract. Two rules emanate from this doctrine: first, a third party to a contract cannot enforce a benefit promised under that contract; and second, the contracting parties cannot, by a contract between them, impose a burden on a third party. The first rule operates to protect the rights of parties to a contract insofar as it does not allow interference from third parties, while the second protects unsuspecting third parties from being involuntarily burdened by obligations under a contract to which they are not privy. 9.51 The second rule is wholly understandable and uncontroversial. However, the first has worked harshly against third parties whom the contracting parties clearly intend to benefit under the contract. This is illustrated in the case of Beswick v Beswick (1968). Peter Beswick sold his coal business to his nephew, John Beswick, in 364 return for a weekly payment of £6 10s from his nephew for the rest of his life, and if he died leaving his wife a widow, she was to receive £5 a week from the nephew for the rest of her life. John Beswick honoured the agreement until his uncle’s death whereupon he then made only one payment of £5 to his aunt. The widow claimed against the nephew for specific performance of the rest of the payments. She claimed in her own name as well as in her capacity as administratrix of her husband’s estate. The court held that she could not personally claim against the nephew as she was not privy to the contract between her husband and the nephew. However, her claim as administratrix of her husband’s estate succeeded because, here, she was claiming on behalf of her dead husband, and he had been privy to the contract. In this case, the widow’s ability to sue as administratrix of her husband’s estate “saved the day” for had she not been able to do so, she would have been left without a remedy. 9.52 The first rule has also caused commercial inconvenience where it prevents third parties, say employees, from being able to rely on “limitation of liability” clauses contained in contracts between their employers and the claimants (see Scruttons Ltd v Midland Silicones Ltd (1962)). Such limitation clauses may well be a reasonable and legitimate way of allocating business risks and the burden of insurance between the employer and the claimant. 9.53 As a result, there have been many judicial and ad hoc statutory attempts at evading this first rule. The repeated calls for reform were finally answered with the legislation of the Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed)) (“CRTPA”) in 2001. The CRTPA is closely modelled on the English Act of the same name. A significant difference between these Acts is that the Singapore CRTPA expressly dispels the possibility of any argument based on the doctrine of consideration being raised to defeat a third party’s claim (see s 2(5) which ends with the additional words “and such remedy shall 365 not be refused on the ground that, as against the promisor, the third party is a volunteer”). Box 9.3 Reflecting on the law Privity of contract and consideration — a single or two distinct rules? The doctrines of privity of contract and consideration are closely connected. This is illustrated in Tweddle v Atkinson (1861) (see also, Chapter 8, para 8.18). The respective fathers of a bride and groom contracted with one another, each promising to pay a sum of money to the groom upon the couple’s marriage. The contract also conferred upon the groom full power to sue the contracting parties for the sums promised. The bride’s father failed to pay and upon his death, the groom sued his estate for the sum. The groom’s action failed as he did not provide any consideration for the promise. Although the privity rule was not used to explain the decision, it is clear that the groom’s action would also have failed for lack of privity. The relevant rule of consideration here is that “consideration must move from the promisee”. The groom, being a third party to the contract between his and his bride’s father, was neither a promisee nor had he provided consideration for the promises. This is the paradigm situation where third parties are conferred benefits under a contract and raises the question whether the doctrines of privity and consideration are one and the same, or whether they are distinct concepts that present two separate hurdles to the enforcement of a third party benefit. Since the House of Lords decisions in Beswick v Beswick (1968) and Scruttons Ltd v Midland Silicones Ltd (1962), it is clear that consideration and privity are distinct doctrines. A simple example supports this position: A contracts with both B and C to supply C with a limited edition book in return for B’s promise to pay A $100. Should A fail to supply C with the book, C’s action against A may still fail, not for lack of privity, since he is a joint-promisee, but for lack of consideration moving from him. [Note: If the “joint-promisee doctrine” discussed in the Australian case of Coulls v Bagot’s Executor and Trustee Co Ltd (1967) is applied, C would be able to enforce A’s promise as B is deemed to have supplied consideration on behalf of the joint-promisee C. The joint-promisee doctrine presupposes that consideration and privity are distinct doctrines (for a fuller discussion of the doctrine, see A Phang, Cheshire, Fifoot and Furmston’s Law of Contract (2nd ed, 1998) at pp 160–163). It has also been argued that consideration and privity are distinct doctrines as each performs a different function: the former relates to the types of promises that can be enforced and the latter to who is entitled to 366 sue (see, eg, D Beyleveld and R Brownsword, “Privity, Transitivity and Rationality” (1991) 54 Modern Law Review 48 at p 61). Nevertheless, it has been astutely observed that the close connection between the doctrines makes it is impossible to reform one without reforming the other (see E McKendrick, Contract Law (12th ed, 2017) at para 7.3). One or the other may still prove a stumbling block to the enforcement of third party benefits. 9.54 The CRTPA does not override the existing common law or ad hoc statutory techniques for evading the privity rule (s 8(1)) nor does it prevent new techniques from being created. Thus, it is still necessary to consider, albeit briefly, some of the more common judicial and statutory techniques that existed prior to the introduction of the CRTPA. The CRTPA and these existing techniques will be discussed before we look at the techniques for getting around the second rule, that of not imposing burdens on third parties. THIRD PARTY ENFORCEMENT OF BENEFITS UNDER CONTRACT: TECHNIQUES TO GET AROUND THE PRIVITY RULE Statutory Techniques (1) Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) 9.55 Of the techniques to evade the privity rule, the CRTPA is the most important. It provides a “general and wideranging exception to the [privity] rule” (as is described of its UK counterpart in the UK Law Commission Report (1996) at [5.16]). Certain provisions not already mentioned are highlighted below. (a) Scope of application 9.56 The CRTPA automatically applies to contracts entered into from 1 July 2002 (s 1(2)). Between 1 January and 30 June 2002, the CRTPA applies only if the contract expressly provides for its application (s 1(3)). However, 367 certain contracts are excluded from the scope of the CRTPA. These are contracts on bills of exchange, promissory notes or other negotiable instruments (s 7(1)), registration documents of a limited liability partnership under the Limited Liability Partnerships Act 2005 or any such partnership agreement under the Act (s 7(2A)), and any contract binding on a company and its members under s 39 Companies Act (s 7(2)). For certain other contracts, the CRTPA only confers limited rights to third parties. A third party will not acquire a right under the CRTPA to enforce a term in a contract of employment against an employee (s 7(3)), and the third party may only acquire the right to enforce an exemption clause in contracts of carriage of goods by sea, rail or road, or air which are subject to their respective rules of international transport conventions (s 7(4)). 9.57 Apart from these specific exceptions and limitations, contracting parties are at liberty to exclude or impose conditions precedent upon the application of the CRTPA by inserting an express term to this effect in their contract (s 2(4)). (b) Rights of third party to enforce contractual term 9.58 To acquire a right to sue in his name to enforce a term of a contract, a third party must satisfy two requirements: (1) He must have been “expressly identified in the contract by name, as a member of a class, or as answering a particular description but need not be in existence when the contract is entered into” (s 2(3)). The groom in Tweddle v Atkinson (see Box 9.3) and the widow in Beswick v Beswick (see para 9.51) will have satisfied this requirement having been expressly identified. A subsequent purchaser of a property would come within this requirement, although not identified by name, if the contract between the property developer and the original purchaser provides that the developer shall be liable to the 368 original and subsequent purchasers for defects in the development. (2) The third party must fall within either one of the following situations: the contract expressly states that he may enforce the term (s 2(1)(a)). Thus, for example, s 2(1)(a) would have enabled the groom in Tweddle v Atkinson to sue his father-in-law’s estate for payment as the contract expressly conferred on him the right to sue; or a term in the contract purports to confer a benefit on him (s 2(1)(b)). This is subject to any contrary intention of the contracting parties (ie, an intention not to allow third party enforcement of the term) as can be gleaned from a proper construction of the terms of the contract (s 2(2)). 9.59 Sections 2(1)(b) and 2(2) were considered in the Singapore Court of Appeal decision of CLAAS Medical Centre Pte Ltd v Ng Boon Ching (2010). The facts relating to the third party enforcement issue are as follows: Ng Boon Ching (“Ng”) was a doctor who had for many years run his own successful private practice in aesthetic medicine, and distributorship business dealing in machines used in aesthetic medicine (laser and intense pulse light machines) and skin care products. In 2004, six doctors inexperienced in aesthetic medicine persuaded Ng to enter into a joint-venture, to help them establish an aesthetic medical practice. Ng agreed and in 2005, the six doctors incorporated CLAAS Medical Centre Pte Ltd (“CLAAS”) with all six as its shareholders. Ng subsequently also became a shareholder. Ng incorporated a holding company as a sole shareholder and transferred his private practice and distributorship business to the company. CLAAS then purchased 60 per cent of Ng’s shares in the holding company and was given a two-year option to purchase the remaining 40 per cent. CLAAS exercised the option about seven months later whereupon Ng entered into a shareholders’ 369 agreement with the six doctors. The agreement included the following terms: Clause 11: a restraint of trade clause prohibiting any of CLAAS’s shareholders from being engaged in any business in Singapore which is in competition with the business of [CLAAS] and/or engaging in the practice of Aesthetic Medicine while still a shareholder of CLAAS and for three years after ceasing to be one; Clause 11(c): a liquidated damages clause specifying that if Ng breached Clause 11, he is liable to pay damages of $1 million to CLAAS while the other doctors would, upon breach, have to pay CLAAS $700,000 each; Clause 12.1(ii): a termination clause allowing the shareholders’ agreement to be brought to an end if all parties agreed to do so in writing; and Clause 14.5: a prohibition of assignment clause restricting the assignment of rights and benefits under the agreement by any party without the prior written consent of the other parties to the agreement. In the following year, relations soured between Ng and the other doctors (the original six and a new doctorshareholder). Ng sold all his shares in CLAAS to one of the original six doctors, resigned as director of CLAAS and the holding company and left. Almost a month later, Ng set up his own general and aesthetic medical practice at another location in Singapore. As CLAAS was not a party to the shareholders’ agreement, a dispute therefore arose as to whether CLAAS was entitled to rely on s 2(1) (b) CRTPA to enforce the restraint of trade clause (Clause 11) against Ng. 9.60 The court provided important clarifications on the purpose and application of ss 2(1)(b) and 2(2) CRTPA as follows: The intent behind ss 2(1)(b) and 2(2) was to distinguish between intended and incidental beneficiaries to a contract — incidental beneficiaries were not entitled to sue under the contract (at [29]). 370 Section 2(1)(b) only required proof of a purpose to benefit a third party; it was not necessary to show a predominant purpose or intent to benefit (at [28]). The contracting party who invoked s 2(2) bore the burden to prove that a proper construction of the contract negated any intention to allow the third party to enforce the term (at [29]). A proper construction under s 2(2) would involve an objective approach to contractual interpretation (at [37]), taking account of background facts surrounding the making of the contract (at [37] and [41]). A mere failure to expressly state in the contract that the third party had a right to enforce the term is not an obstacle to the third party acquiring such a right under s 2(1)(b). Neither was it proof that the contracting parties did not intend to enable the third party to enforce the term under s 2(2) (at [37]). 9.61 On the facts, the Court noted that Clause 11(c) expressly provided for liquidated damages for breach of Clause 11 to be paid to CLAAS. The court thus concluded (at [28]) that Clause 11 was clearly intended to benefit the third party (CLAAS), and that a presumption arose that CLAAS was intended to be able to enforce Clause 11. The court then held that a proper construction of the following contract terms did not rebut the presumption, for the reasons stated below: Clause 12.1(ii): the termination clause did not expressly provide for the right to terminate the shareholder agreement to be exercisable without CLAAS’s consent (at [33]). Section 3(3) CRTPA required such express provision in order to override a third party’s (and hence CLAAS’s) right to enforce benefits conferred under the agreement (see para 9.65). Clause 14.5: where contract terms indicated an intention to benefit a third party, this did not amount in law to an assignment of benefits and a general 371 restriction of assignment clause would not rebut the presumption (at [35]–[36]). The fact that the third party was a corporate entity, a separate entity in law from the shareholders, also did not rebut the presumption (at [39]), as the shareholders had chosen the corporate vehicle to “advance and protect their interests” and had further provided in their agreement for liquidated damages to be paid not to the shareholders but to the corporate vehicle. 9.62 Subsequent to the CLAAS Medical decision, the High Court in Columbia Asia Healthcare Sdn Bhd v Hong Hin Kit Edward (2014) noted (at [271]–[278]) that the court should consider the distinction between intended and incidental beneficiaries when seeking to establish if the terms of the contract purported to confer a benefit on the third party, under s 2(1)(b). The burden should only shift to the contracting parties to prove that they did not intend to allow the third party to enforce the term under s 2(2), after the third party had shown that he was the intended beneficiary. 9.63 The CRTPA expressly provides that a benefit enforceable by the third party includes his being able to avail himself of the protection of an exemption clause in a contract between the original contracting parties (s 2(6)) as long as he would have been able to do so if he had been a party to the contract (s 4(6)). An example is a contract between A and B in which A excludes or limits his liability in the tort of negligence towards B and further states that the term is also for the benefit of A’s servants, agents and sub-contractors who may enforce the term. In this case, A’s sub-contractor may rely on the clause to exclude or limit his liability when sued by B in the tort of negligence, provided the exemption clause is valid and enforceable at law (on exemption clauses, see Chapter 11). (c) Remedies available to a third party 372 9.64 A third party who is entitled to enforce a term of the contract has available to him remedies for breach of contract as if he is a party to the contract (see, eg, Carriernet Global Ltd v Abkey Pte Ltd (2010)). The contractual remedies include damages, specific performance and injunction, and the usual rules governing the availability of these remedies apply (s 2(5)) (see Chapter 18 for the governing rules). (d) Variation and rescission of contract 9.65 Where the third party acquires a right to enforce a term under s 2, and the third party has either communicated his assent to the term to the promisor (the contracting party against whom the third party would enforce the term), or if he has relied on the term and this is known to or can reasonably be expected to have been foreseen by the promisor, the contract cannot be varied or rescinded so as to remove or alter the third party’s right without his consent (s 3(1)). But this limitation may be pre-empted by the contracting parties’ insertion of an express term reserving their right to vary or rescind their contract without the third party’s consent (s 3(3)(a)). Indeed, the contracting parties may, by an express term, even specify that the third party’s consent is required in circumstances other than those stated above (s 3(3)(b)). (e) Other provisions 9.66 Some other relevant provisions are as follows. A third party’s right of enforcement is subject to defences or setoffs available to the promisor (s 4). The promisor is also protected against double liability if sued by both the third party and the other contracting party (“the promisee”) (s 6) as the promisee’s right to enforce any term of the contract, including the term which confers a benefit on the third party, is preserved (s 5) (see Figure 9.1 for who is a “promisor” and “promisee”). 373 Figure 9.1 Promisor and promisee of the third party benefit 9.67 Under s 8(2), a third party is precluded from challenging an exemption clause relied upon by the promisor (in his defence to a suit against him by the third party) on the basis of s 2(2) Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) (“UCTA”). Thus, if the promisor negligently fails to honour the term conferring a benefit on the third party and this resulted in loss or damage to the third party other than death or personal injury, the third party cannot require that the promisor’s exemption clause be subject to the test of reasonableness under UCTA. Not surprisingly, this provision has been the subject of heavy criticism. Amongst others, it produces the odd result that a third party suing a promisor under the CRTPA is denied the safeguard of s 2(2) UCTA while it is possible that such a safeguard is available if he were to mount an action in the tort of negligence (see J Adams, D Beyleveld and R Brownsword, “Privity of Contract — The Benefits and Burdens of Law Reform” (1997) 60 Modern Law Review 238 at pp 258–263). (2) Other statutes 9.68 Prior to the enactment of the CRTPA, legislation had been introduced on an ad hoc basis to deal with specific situations where it was felt that a third party should be entitled to enforce a benefit conferred upon him. For example, s 9(1) Motor Vehicles (Third-Party Risks and Compensation) Act (Cap 189, 2000 Rev Ed) entitles a third party injured in a motor accident to claim payment of 374 the judgment sum awarded against the insured motorist directly from the insurance company in certain circumstances. Another example is s 2 Bills of Lading Act (Cap 384, 1994 Rev Ed) which provides that the lawful holder of a bill of lading — a shipping document — shall “have transferred to and vested in him all rights of suit under the contract of carriage [of goods by sea] as if he had been a party to that contract”. Some Common Law Techniques (1) Action by promisee on behalf of third party 9.69 If the privity rule prevents a third party from suing the promisor directly to enforce the promised benefit, can the promisee sue on the third party’s behalf? This avenue of recovering a third party’s loss is highly dependent on the willingness of the promisee to do so. Technically, the promisee is entitled to sue the promisor for a breach of any term of the contract. The real issue is the type of remedies recoverable on behalf of the third party. The remedy of specific performance would compel the promisor to do what he has promised to do in the contract and hence will be effective to enforce a third party’s benefit (see, eg, Beswick v Beswick). However, unlike damages, specific performance is not available as of right upon a breach of contract. It is a discretionary remedy and if damages are an adequate remedy, specific performance will not be ordered. Thus, if specific performance is unavailable but the promisee is willing to claim on behalf of the third party, can the promisee claim substantial damages in respect of the third party’s loss? 9.70 The general rule is that a promisee is entitled to sue for breach of contract to recover substantial damages in respect of the promisee’s own loss. Thus, where the promisee himself has suffered no loss upon a breach of a term, for example, to solely benefit a third party, the promisee will only be entitled to nominal damages (possibly only $1). Lord Denning made a radical attempt to introduce an exception to the general rule in Jackson v 375 Horizon Holidays (1975). Mr Jackson (“the promisee”) had contracted for a holiday for himself and his family (“the third parties”) but the holiday turned out to be below the standard promised by Horizon Holidays (“the promisor”) who was clearly in breach of contract. The promisee sued and was awarded £1,100 of which £500 was for “mental distress”. The promisor appealed against the award as excessive but the appeal was dismissed. While the majority judges felt that the award was solely for the promisee’s loss (perhaps because his loss increased on witnessing the disappointment of his family), Lord Denning alone held that the award covered both the promisee and the third parties’ loss. His Lordship felt that in certain contracts, such as where a host contracts with a restaurant for dinner for himself and his friends or where a vicar books a coach outing for the church choir, the contracting party-promisee should be allowed to claim for the loss of the third parties. However, Lord Denning’s approach was disapproved by the House of Lords in Woodar Investment Development Ltd v Wimpey Construction UK Ltd (1980) which reiterated that a promisee cannot recover damages on behalf of a third party. Interestingly, however, the House tentatively suggested that certain types of contracts might warrant special treatment: contracts for family holidays, for meals in a restaurant for a party or for hiring a taxi for a group. This suggestion has yet to be applied as law. 9.71 Another controversial exception to the general rule was introduced by Lord Browne-Wilkinson in Linden Gardens Trust v Lenesta Sludge Disposals (1994). In this case, a building contractor (“promisor”) had contracted with the owner of a site (“promisee”) for the development of the site into offices, shops and flats. The contract was breached because of defects in the building works. However, the defects surfaced only after the development had been sold to a third party. When the original ownerpromisee sued the contractor-promisor for loss suffered by the third party in rectifying the defects, the promisor argued that the promisee was only entitled to nominal 376 damages as they were no longer owners of the development and had not themselves suffered any loss. The House of Lords held that the promisee was entitled to claim in respect of the third party’s loss by applying a principle summarised by Lord Diplock in The Albazero (1977) (at p 437e–f) as follows: [I]n a commercial contract concerning goods where it is in the contemplation of the parties that the proprietary interests in the goods may be transferred from one owner to another after the contract has been entered into and before the breach which causes loss or damage to the goods, an original party to the contract, if such be the intention of them both, is to be treated in law as having entered into the contract for the benefit of all persons who have or may acquire an interest in the goods before they are lost or damaged, and is entitled to recover by way of damages for breach of contract the actual loss sustained by those for whose benefit the contract is entered into. [emphasis added] The majority of the House of Lords felt it appropriate to extend this principle (the “Albazero exception”) to cover cases involving real property (ie, land and building) but not to cases where the third party had a direct right of action against the promisor. On the facts, the House found that the promisor and promisee contracted with knowledge that the development would be occupied and, possibly, sold to third parties. A contract term prohibiting the promisee from assigning the contract to a third party without the promisor’s consent, prevented the third party from suing on the contract (as the promisor refused consent). This led the House to conclude that it must have been the intention of the contracting parties that the promisee should be entitled to claim for the third party’s loss due to the promisor’s defective performance. 9.72 The Albazero exception was subsequently further extended to cover a situation where the promisee did not originally own the property which was the subject of the 377 building contract with the contractor-promisor. The exception enabled the promisee to claim for the development owner-third party’s loss arising from defects in the building works (see Darlington Borough Council v Wiltshire Northern Ltd (1995)). 9.73 Yet later, in Alfred McAlpine Construction Ltd v Panatown Ltd (2000), the majority of the House of Lords endorsed the Linden Gardens’s extension (see para 9.71), and appeared to have endorsed the further extension in Darlington (see para 9.72). The House held that the existence of a direct right of action by the development owner-third party against the contractor-promisor conferred by a “duty of care deed” prevented the Albazero exception from being applied to enable the promisee who contracted for the building works, to sue for the third party’s loss. 9.74 The Albazero exception came to be known as the “narrow ground” of the Linden Gardens decision. The exception applies only if there exists a “legal black hole” that needs to be filled. The quaint metaphor refers to a situation where a party with the legal right to sue had not suffered substantial loss while the one who did has no right to sue for lack of privity of contract—precisely the situation that prevailed in the Linden Gardens case. There is no legal black hole to fill if the party suffering substantial loss has a right to sue. This explains why the House of Lords in Panatown found no room for the application of the Albazero exception (or “narrow ground”) as the third party concerned had a direct right to sue the promisor under the “duty of care deed”. 9.75 Lord Griffiths in Linden Gardens disagreed with the majority decision (based on the “narrow ground”) and preferred to characterise the third party loss as being the promisee’s own loss, that is, the loss of his performance interest in the contract because he did not receive what he bargained for (“the broad ground”). The analogy he used (at pp 96–97) to illustrate his point is illuminating: 378 In everyday life contracts for work and labour are constantly being placed by those who have no proprietary interest in the subject matter of the contract. To take a common example, the matrimonial home is owned by the wife and the couple’s remaining assets are owned by the husband and he is the sole earner. The house requires a new roof and the husband places a contract with a builder to carry out the work. The husband is not acting as agent for his wife, he makes the contract as principal because only he can pay for it. The builder fails to replace the roof properly and the husband has to call in and pay another builder to complete the work. Is it to be said that the husband has suffered no damage because he does not own the property? Such a result would in my view be absurd and the answer is that the husband has suffered loss because he did not receive the bargain for which he had contracted with the first builder and the measure of damages is the cost of securing the performance of that bargain by completing the roof repairs properly by the second builder. The minority judges in Panatown favoured Lord Griffiths’s approach and had held that the promisee could claim for defects to the property as being his own loss. Notably, the “broad ground” also received the majority judges’ qualified support in Panatown. 9.76 Locally, the “narrow ground” (or Albazero exception) is law, having been applied by the Singapore Court of Appeal in Chia Kok Leong v Prosperland Pte Ltd (2005). Briefly, the facts of Chia Kok Leong are as follows: the claimant, the developer of a condominium, initiated legal proceedings for breach of contract against (1) the main contractor for defective works in the construction of the condominium; and (2) the architects for failure to exercise due care in the design and supervision of the building project. In this instance, the claimant was the “promisee” and, the main contractor and architects were the 379 “promisors” in the respective contracts. However, legal action was commenced after the individual units in the condominium had been sold to third parties and ownership of the common areas had been taken over by the management corporation of the condominium (“the MCST”), also a third party. The defects to the common areas (de-bonding of tiles of external wall façade and damaged glass bricks at the lobbies and stairways) only appeared after the claimant had ceased to be owner. At the time of the claim, the claimant had not incurred expenditure to rectify the defects and the MCST had yet to sue the claimant. As mentioned, the Court of Appeal applied the “narrow ground” or Albazero exception to allow the claimant-promisee to claim for substantial damages against the main contractor- and architectspromisors, on behalf of the MCST-third party. This was despite the fact that the MCST-third party had a direct action against the promisors in the tort of negligence (as to which, see Chapter 6, para 6.38). The Court of Appeal held (at [45]) that only an express contractual “provision of a direct entitlement” of claim against the promisor, such as the “duty of care deed” in Panatown will prevent the application of the Albazero exception. The third party’s right of action in tort did not completely remove the legal black hole as a claim in tort was subject to the third party being able to establish elements of the tort (as to the tort of negligence, see, generally, Chapter 6) and subject to certain defences. 9.77 Significantly, the Court of Appeal went on, obiter, to approve of the “broad ground” and its underlying rationale as being “more consistent with principle” (at [52]). The court affirmed that the promisee’s right to claim substantial damages flowed from his not having received what he had bargained and paid for, and which should not depend on: (1) whether the promisee had ownership in the property, the subject matter of the contract (at [53]); or (2) whether the third party had a direct right to claim against the promisor, that is, whether there was any legal black hole that needed to be filled (at [54]). The court 380 noted that problems such as double recovery against the promisor by both the promisee and third party could be guarded against by the court (at [56]). Additionally, the court opined (at [57]) that the promisee should not be required to show that he had carried out repairs or intended to do so before he was allowed to claim substantial damages. The Court would scrutinise the reasonableness of each claim. Recent High Court decisions have applied the broad ground, finally confirming its status as law in Singapore (see Leiman, Ricardo v Noble Resources Ltd (2018) at [85] and Motor Insurers’ Bureau of Singapore v AM General Insurance Bhd (2018) at [133]). 9.78 In Family Food Court v Seah Boon Lock (2008), the Singapore Court of Appeal provided, in obiter, useful clarifications as to the scope of the broad and narrow grounds, some of which are as follows: The loss recoverable under the “broad ground” must be genuine and is subject to an objective test of reasonableness to prevent the promisee from obtaining a windfall (at [53]). Losses recoverable for breach of contract, whether under the “broad” or “narrow” ground, are subject to the usual legal controls on recovery, that is, the need to satisfy the requirements of causation, remoteness, mitigation and certainty (as to which, see Chapter 18, para 18.34 onwards) (at [55]). The “broad” and “narrow” grounds cannot be applied simultaneously as they are conceptually inconsistent (at [56]). Further, the question of when one ground should be applied instead of the other has yet to be decided by the courts. (1) Collateral contracts 9.79 Sometimes, the courts are prepared to circumvent the privity rule through the implication of a collateral contract. This method has been criticised as being rather artificial. 381 An oft-cited example of its use is Shanklin Pier LD v Detel Products LD (1951). The defendants were paint manufacturers who had assured the plaintiffs, the pier owners, that their paint would last for seven to ten years. Based on this assurance, the plaintiffs instructed the contractors whom they had engaged to paint the pier, to purchase and use paint from the defendants. The contractor did as instructed. Unfortunately, the paint only lasted three months. The plaintiffs successfully sued the defendants even though there was no express contract entered into between them. The court held that on the facts, it was able to imply a collateral contract in which the defendants had promised that their paint would last for seven to ten years and in consideration of this promise, the plaintiffs had requested their contractors to purchase and use the defendants’ paint for their pier. (3) Himalaya clause 9.80 Another method to evade the privity rule is illustrated in the cases of Scruttons Ltd v Midland Silicones Ltd (1962) and New Zealand Shipping Co Ltd v AM Sattherwaite & Co Ltd (The Eurymedon) (1975). This technique is applicable only to enable a third party to rely on an exemption clause in a contract to which they are not privy. The technique emerged in the context of the shipping industry in which a carrier of goods by sea sought to extend the benefit of an exemption clause in their contract of carriage with the owner of goods (“cargo owner”), to third parties (usually the stevedores employed by the carrier to unload the cargo owner’s goods from the carrier’s vessel). Such an exemption clause is usually negotiated as a method of allocating business risks and the burden of insurance between the parties involved. In the two cases mentioned above, the stevedores had negligently damaged the goods in the course of unloading and thus were sued by the cargo owners in the tort of negligence. In defence, the stevedores sought to rely on the exemption clause contained in the contract of carriage to which they were not privy. 382 9.81 Perhaps in recognition of the commercial convenience of upholding such a clause, if it was a legitimate one under the law, Lord Reid (at p 474) in the Scruttons case was prepared to allow the third party stevedores to rely on the exemption clause if the following four conditions were satisfied: [T]he bill of lading [the contract of carriage of goods by sea] makes it clear that the stevedore is intended to be protected by the provisions in it which limit liability, the bill of lading makes it clear that the carrier, in addition to contracting for these provisions on his own behalf, is also contracting as agent for the stevedore that these provisions should apply to the stevedore, the carrier has authority from the stevedore to do that, and that any difficulties about consideration moving from the stevedore were overcome. These conditions are not easily satisfied. In fact, the clause in Scruttons itself failed to meet the four conditions as, amongst others, the clause made no reference to the stevedores at all. 9.82 The four conditions were found to be satisfied in the subsequent case of The Eurymedon. The exemption clause involved was lengthy and elaborate and is now known as the “Himalaya Clause”. The clause provides: It is hereby expressly agreed that no servant or agent of the carrier (including every independent contractor from time to time employed by the carrier) shall in any circumstances whatsoever be under any liability whatsoever to the shipper, consignee or owner of the goods or to any holder of this bill of lading for any loss or damage or delay or whatsoever kind arising or resulting directly or indirectly from any act neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this clause, every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defence and immunity of whatsoever 383 nature applicable to the carrier or to which the carrier is entitled hereunder shall also be available and shall extend to protect every such servant or agent of the carrier acting as aforesaid and for the purpose of all the foregoing provisions of this clause the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be his servants or agents from time to time (including independent contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to the contract in or evidenced by this bill of lading. In The Eurymedon, the defendant stevedores were able to satisfy the first three conditions laid down by Lord Reid in Scruttons. The Himalaya Clause above, contained in the contract of carriage of goods by sea evidenced by the bill of lading, did clearly state that the exemption is also to protect any servant or agent of the carrier including any independent contractor from time to time employed by the carrier. The stevedores obviously fell within this category. The clause also made clear that the carrier contracted for the exemption clause as agent on their behalf. As the carrier in this case was a wholly owned subsidiary of the stevedores, they had the authority to act on behalf of the stevedores. The court, however, engaged in some strained and rather artificial reasoning in finding that the fourth condition was satisfied. They held that there was a unilateral collateral contract between the cargo owners and the stevedores analysed as follows: When the cargo owners entered into the contract of carriage of goods with the carrier, they made a unilateral offer to extend the benefit of the exemption clause to anyone who unloaded their goods at the port of destination. The stevedores’ act of unloading their goods thus constituted both the acceptance of the offer as well as the consideration in return for the benefit of the exemption clause. And this contract is collateral to the main contract of carriage of goods between the cargo owners and the carrier. This complicated technique may no longer be needed now that s 2(6) CRTPA (and s 7(4) in particular reference to a 384 contract of carriage of goods by sea, or rail, road or air) enables a third party a more direct method of enforcing an exemption clause in a contract to which he is not privy. (4) Assignment 9.83 If A assigns or transfers his right(s) under his contract with B to a third party, the third party will be able to enforce those rights in his own name against B. In Singapore, a legal assignment can be effected under s 4(8) Civil Law Act (Cap 43, 1999 Rev Ed) through an absolute assignment of the right(s) in writing, signed by the assignor (A), and where written notice of the assignment has been given to the other party to the contract (B). The consent of B to the assignment is unnecessary. The main disadvantage of this technique to get around the privity rule is that the third party assignee takes “subject to equities”; any claim made by the third party upon B is subject to such valid defences as B may raise against A. An assignment that does not satisfy all the requirements under s 4(8) above may still be effective as an equitable assignment if there is clear evidence that the assignor clearly intended the assignee to have the benefit of his right(s) under the contract. (5) Tort of negligence 9.84 A common technique to get around the difficulty of mounting an action in contract is to make a claim in tort. Specifically, third parties have sought to base their claim in the tort of negligence to get around the privity rule. For example, a subsequent purchaser of a condominium unit finds defects appearing in the property and seeks to claim against the developer in respect of his loss. The privity rule would prevent a claim in contract against the developer as the subsequent purchaser is a third party to the contract between the developer and original purchaser. For the requirements to successfully mount an action in the tort of negligence, see Chapter 6. 385 (6) Agency 9.85 An agent is a person authorised by his principal to enter into a contract with another on the principal’s behalf. The agent is the party who negotiates and concludes the contract with the intention that his principal (the ostensible third party) should be entitled to the rights and obligations under the contract. Where the other party is well aware that he is negotiating with an agent, no problem of privity arises for the ostensible third party principal. However, where the agent fails to disclose that he is acting for a principal, the principal may, in certain circumstances, still assert his rights under the contract with the other party. Here, the law of agency appears to permit the privity rule to be circumvented by the third party undisclosed principal (see Chapter 20, paras 20.35 onwards for a fuller discussion). This is not so much a technique employed to get around the privity rule as an incident of the law of agency. (7) Law of trusts 9.86 Where a trust has been constituted for a third party’s benefit, the law of trusts will enable the third party to enforce the benefit against a contracting party. The third party’s right of enforcement is not based on contract law but the specialised area of the law of trusts which is beyond the scope of this chapter. IMPOSING BURDENS ON THIRD PARTIES: TECHNIQUES TO GET AROUND THE PRIVITY RULE Sub-bailment Contracts 9.87 Typically, a bailment arises when an owner of goods (“bailor”) parts with the possession of his goods by delivering them to another person (“bailee”) to hold for a time or to have something done to them before returning possession of the goods to the bailor. An example is where jewellery is taken to jewellers for repair. A sub- 386 bailment arises when the bailee, in turn, bails the same goods to a sub-bailee. The relevant question is whether a third party (the bailor) is burdened by an exception clause contained in the sub-bailment contract between the contracting parties (the bailee and sub-bailee). The answer is that if the third party bailor has expressly or impliedly consented to the terms of the sub-bailment, then the bailor can indeed be bound (see Morris v CW Martin & Sons Ltd (1966)). Land Law 9.88 A third party may be bound by a restrictive covenant contained in a contract for the sale of land between the contracting parties (see Tulk v Moxhay (1848)). This principle is unique to land law which is beyond the scope of this chapter. Unlawful Interference with Contractual Rights 9.89 If a third party knows that A and B have contracted with one another, the third party is under an obligation (burden) not to induce either A or B to breach his contract with the other. This is an obligation imposed by the law of tort (tort of inducing a breach of contract, discussed in Chapter 5) rather than by the contracting parties and as such, is not strictly a technique to evade the privity rule. CONCLUSION 9.90 A business person entering into a contract would naturally be concerned that rights and obligations that had been promised can be enforced. An understanding of the law that limits the capacity of parties or entities to enter into contracts is therefore useful so risks can be assessed and steps taken to protect one’s position. For example, contracts to provide minors with education or employment should be properly vetted to ensure that the terms, as a whole, benefit the minor. 387 9.91 Third parties to a contract would also be concerned about being able to enforce benefits conferred upon them in contracts to which they are not privy. As the case illustrations in this chapter show, this may occur in the commercial or personal sphere. The CRTPA would assist most third parties seeking to enforce such benefits, especially where the contracting parties have made their intentions clear. However, because the CRTPA does not apply to certain types of contracts, and more importantly, permits contracting parties to expressly exclude its application, a third party may still need to resort to other exceptions to the privity rule. The law governing the right of a promisee to claim against the promisor for substantial damages on the “narrow” or “broad” ground is important in this regard. 9.92 Finally, the third party should be aware that there could be instances where he may be legally burdened by an obligation contained in a contract to which he is not privy. 388 Chapter 10 Terms of the Contract 10.1– 10.5 Introduction 10.6– 10.14 The Parol Evidence Rule 10.15 – 10.22 The Interpretation of Contracts 10.23 – 10.25 10.26 10.27 – 10.28 10.29 10.30 10.31 – 10.34 10.35 – 10.40 10.41 – 10.48 Terms and Representations Introduction Request to Verify Importance of the Statement Timing of the Statement Oral Statements and Written Contracts Special Skill and Knowledge Implied Terms Terms Implied in Fact 389 10.49 – 10.51 10.52 – 10.53 10.54 – 10.55 10.56 – 10.62 10.63 – 10.67 10.68 – 10.78 10.79 – 10.80 Terms Implied in Law Terms Implied by Statute Terms Implied by Custom Relative Importance of Terms Conditions, Warranties and Innominate Terms Classifying Terms The Right to Terminate the Contract: the RDC Concrete Qualified by Sports Connection Approach Conclusion INTRODUCTION 10.1 After entering into a contract, the parties may subsequently disagree about what they have agreed to. The law on contractual terms provides rules on how to resolve this disagreement. The rules help to ascertain the precise obligations of the parties to a contract. Once these have been ascertained, the rules provide for the manner in which such obligations should be categorised, in order to determine the remedies available upon a breach. Judges have developed most of these rules but important statutes, such as the Sale of Goods Act (Cap 393, 1999 Rev Ed), also contain rules on the subject. The law on contractual terms attempts to achieve several 390 objectives designed to promote “contractual efficacy”, which generally refers to enabling the contract to be carried out as intended by the contracting parties. In applying the rules, the courts must abide by the principles that first, the courts do not make contracts for the parties; and second, the court’s role is to find out and give effect to the intentions of the parties on an objective basis. 10.2 In order to improve contractual efficacy, the first objective is to promote certainty and predictability of contractual undertakings. Thus, as parties usually make many statements during the negotiations leading up to the contract, the law provides rules that help separate the statements that are intended to become contractual obligations from ones that are not (see para 10.23 onwards). Where parties have not expressly addressed a matter in the contract, there are rules for implying terms to fill such gaps (see para 10.35 onwards). There are also rules for protecting written contracts from being undermined by extrinsic evidence, that is, evidence of purported terms that are not found within the document in which parties have recorded the contract terms (see para 10.6 onwards). 10.3 The second objective is to integrate social and public interest policies in certain types of contracts so that these contracts will be performed in conformity with such policies. In this regard, the next chapter discusses the circumstances under which the law intervenes to limit the enforceability of terms that attempt to allow one party to escape from liability for loss or damage caused to the other party. 10.4 Finally, the law recognises that parties to a contract may not regard all its terms to be of equal importance and therefore provides remedies that reflect this in the event a term is breached. For example, for breach of an important term or one that results in the innocent party being deprived of a substantial benefit, the law permits the innocent party to have the option to terminate the 391 contract, in addition to claiming compensation. However, for breach of a minor term or one that does not deprive the innocent party of a substantial benefit, the innocent party must still perform the contract but may receive compensation for that breach. In this way, the law promotes contractual efficacy by creating a hierarchy of obligations within the contract itself, so that breaches of minor obligations or ones that result in minor consequences will not permit the destruction of the transaction by allowing the innocent party to terminate the contract. 10.5 The discussion that follows addresses four groups of circumstances that typically give rise to disputes over contract terms: (1) A and B, who engaged in pre-contractual negotiations, concluded a contract in writing. A discovers that what she thought had been orally agreed with B is missing from the written contract or that some other term contradicts what she thought was a verbal understanding. In a court trial, is A permitted to submit proof of the oral agreement to contradict, vary or add to the terms in the written contract? Additionally, what meaning should be given to the terms of a written contract, that is, how should the terms be interpreted? Can A or B ask the court to consider matters not contained in the written contract, such as statements made in the pre-contractual negotiations or earlier drafts of the written contract, to decide what the parties had agreed on? (2) During the negotiations that preceded the contract, A made certain claims in respect of the product or service to be sold to B. After the contract is concluded, B finds that the claim with regard to the product or service that she regarded as important proves to be false. Can B allege that such statement is a part of the contract and sue A for breach of contract? 392 (3) The terms of the contract do not carry equal weight. How does a court determine which terms give rise to more extensive remedies upon breach? What factors or circumstances are relevant in this process of determination? (4) Where the contract does not provide for a particular eventuality, how do the courts “fill in the blanks” and what principles do they use to do so? THE PAROL EVIDENCE RULE 10.6 Where the parties have taken the step of putting their contract in writing, raising the reasonable presumption that they intend the document to contain all the terms of the contract, the parol evidence rule prohibits either party from attempting to displace the contents of the written contract by reference to evidence outside of (or extrinsic to) the document. In Singapore, the parole evidence rule is codified in s 93 of the Evidence Act (Cap 97, 1997 Rev Ed) (“EA”). 10.7 Technically, “parol” evidence refers to evidence of any “oral” agreement or statement. In practice, the parol evidence rule has also been applied to exclude evidence not orally made, for example, evidence of terms recorded in another document not specifically referred to in the written contract. A little reflection shows why practical considerations require this rule. Without this rule, the written contract may not be worth the paper it is written on, and uncertainty would result. For example, suppose a company intending to borrow money from a bank attempts to prove its creditworthiness by showing the existence of a profitable contract with another party. Relying on the written contract, the bank approves the loan. The bank would be negatively affected if the cash flow anticipated under the written contract were to be disrupted by the operation of terms not found within it. 393 10.8 Applied rigidly, however, the parol evidence rule can produce great injustice that could outweigh the benefits of certainty. In England, judges have devised exceptions to reduce injustices that may flow from an unwavering application of the rule. A coverage of the English common law exceptions is beyond the scope of this chapter. It suffices for the reader to know that Singapore has codified a number of the English exceptions in s 94 EA, adopting some as they were and others with some modification. 10.9 Turning our attention to the Singapore provisions, s 93 EA states that “when the terms of a contract … have been reduced by … the parties to the form of a document, … no evidence shall be given in proof of the terms of such contract … except the document itself, or secondary evidence”. Secondary evidence refers to, inter alia, certified, electronic or other types of copies of the original document (see s 65 EA) and is not excluded by the rule. Section 94 states that “when the terms of any contract … have been proved according to section 93, no evidence of any oral agreement or statement shall be admitted … for the purpose of contradicting, varying, adding to, or subtracting from its terms”, subject to certain exceptions (for the exceptions, see para 10.14). 10.10 The Singapore Court of Appeal in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd (2008) explained the interplay between ss 93 and 94 EA (at [71]) as follows: Section 94 complements s 93 by ensuring that where the sole evidence of a contract consists of “the document itself” (per s 93), that contract is not varied, contradicted, added to or subtracted from unless the circumstances described in one or more of the six accompanying provisos (ie, provisos (a)–(f) to s 94) are satisfied. Put another way, it is often said that s 93 makes documentary evidence exclusive while s 94 makes it conclusive … 394 [emphasis in the original] 10.11 The court also helpfully explained the approach to the application of ss 93 and 94 (at [132]): … If the court is satisfied that the parties intended to embody their entire agreement in a written contract, no extrinsic evidence is admissible to contradict, vary, add to, or subtract from its terms (see ss 93–94 of the Evidence Act). In determining whether the parties so intended, our courts may look at extrinsic evidence and apply the normal objective test, subject to a rebuttable presumption that a contract which is complete on its face was intended to contain all the terms of the parties’ agreement … In general, the court ought to be more reluctant to allow extrinsic evidence to affect standard form contracts and commercial documents… Thus, before deciding if the parol evidence rule applies at all, the court will first have to examine the facts surrounding the making of the contract to decide if, on an objective basis, the contracting parties intended the written contract to comprise all the terms of the agreement. In light of the greater need for certainty in the commercial context, the presumption that such an intention exists would be much stronger, requiring correspondingly stronger proof for rebuttal. 10.12 Where an “entire agreement clause” is inserted into a written contract, this is an express indication that the parties intend the written document to embody their complete contract. A simple version of such a clause can be found in Lee Chee Wei v Tan Hor Peow Victor (2007) at [21] as follows: This Agreement sets forth the entire agreement and understanding between the Parties in connection with the matters dealt with and described herein. 10.13 The Singapore Court of Appeal in Lee Chee Wei held (at [25]) that entire agreement clauses generally promote 395 certainty as they “define and confine the parties’ rights and obligations within the four corners of the written document thereby precluding any attempt to qualify or supplement the document by reference to pre-contractual representations.” (emphasis added) However, the exact effect of an entire agreement clause depends on the interpretation of the clause’s precise wording and context (at [25] and [35]). The effect of the clause may simply be to confirm the parties’ intention that the written document should contain all the terms of the agreement (a prerequisite to the application of the parol evidence rule). It could also be worded to exclude the application of the exceptions to the parol evidence rule altogether (at [30]– [35]). Should the clause have the latter effect, it might be subject to the regulation imposed on exemption clauses (at [36]–[39]). For the regulation of exemption clauses, see Chapter 11. 10.14 Section 94 EA lists six sets of circumstances in which extrinsic evidence could be introduced in court despite the existence of a written contract. Such evidence could be used to add to or vary the terms of the written contract, to challenge the validity of the contract or ascribe meaning to the written terms: Proviso (a) permits a contracting party to challenge the validity of the written contract by showing, through extrinsic evidence, that the contract was the result of a vitiating factor (eg, incapacity, misrepresentation, mistake, illegality, etc), or was affected by a lack of consideration, etc. Proviso (b) permits proof of a separate oral agreement (or collateral contract) pertaining to any matter on which the written contract is silent, and that is not inconsistent with terms of the written contract. Several points should be noted about this proviso. First, for commercial certainty, the courts are generally reluctant to find that a collateral agreement exists alongside a main, written contract. The facts must clearly show that all the legal elements for a valid 396 (collateral) contract are present (see Dynasty Line Ltd (in liquidation) v Sukamto Sia (2014) at [18]). The party alleging its existence bears the burden of proving that both parties intended to create a legally binding collateral contract (see Lemon Grass Pte Ltd v Peranakan Place Complex Pte Ltd (2002) at [116]– [119]). For example, a flat owner could have assured a potential tenant orally that the flat had been painted with mildew resistant paint of a certain brand but the written tenancy agreement did not contain a term to such effect. To prove that the oral assurance was a term of a separate oral agreement that existed alongside the written tenancy agreement, the tenant would need to show that the flat owner had made the oral assurance intending for it to have promissory effect, and that but for this assurance, the tenant would not have entered into the main, written contract (the tenancy agreement). The tenant must also have provided consideration in return for the flat owner’s oral assurance or promise but this is easily proved. The tenant’s act of entering into the main, written contract (the tenancy agreement) constitutes the required consideration (see Lemon Grass at [119]). Second, the terms of the collateral contract must not be inconsistent with the terms of the written contract. Thus, in Latham Scott v Credit Suisse First Boston (2000), the Singapore Court of Appeal refused (at [21] –[22]) to admit extrinsic evidence of an oral agreement pertaining to a guaranteed bonus, alleged to have been made during prior negotiations, to contradict the written employment contract that provided for a discretionary bonus. Finally, the degree of formality of the written contract needs to be considered in deciding if the oral assurance is inconsistent with its terms, despite the written contract being silent on the matter covered by the oral assurance. The Court of Appeal in Ng Lay Choo Marion v Lok Lai Oi (1995) considered this precise question. The terms of a written contract 397 required the appellant to transfer her interest in four insurance policies to the respondent, in return for the respondent transferring ownership in an apartment to her. Subsequently, the respondent alleged that the appellant had also orally agreed to transfer a car and club membership to the respondent, in return for the apartment. The court held that the alleged oral agreement was inadmissible as evidence under proviso (b) to s 94, as it was inconsistent with the written contract for the following reasons (at [15]): The [written contract] has … a high degree of formality and clearly indicates that the parties intended [it] to contain a full description of their respective rights and obligations. The [written contract] was drafted by … a practicing solicitor, on instructions from [the respondent] and in consultation with [the respondent’s son]. All of them were fully aware at the material time of the alleged subject matters of the oral [agreement] and if these had been agreed at that time they would have been incorporated in the [written contract]. This approach has been endorsed in subsequent court decisions (see, eg, First Asia Capital Investments Ltd v Societe Generale Bank & Trust and another (2017) at [42]). Proviso (c) permits proof of a separate oral agreement that lays down a condition precedent for the attaching of any obligation in a written contract. For example, in respect of a written contract of employment, the parties may have verbally agreed that the contract would come into existence only if the employee obtains her professional qualification by a certain date. Evidence of this oral agreement is admissible to show that the written contract has not yet come into existence if the employee fails to obtain the qualification by the specified date. Proviso (d) permits a party to adduce extrinsic evidence of a subsequent oral agreement to rescind or modify any term(s) of an existing written contract, if 398 there is no law requiring the subsequent modification to be in writing. The factual scenarios in Stilk v Myrick and Williams v Roffey (see Chapter 8, paras 8.32 and 8.35 respectively) are examples of instances where a term of an existing written contract was subsequently modified, evidence of which would be admissible in court in the event of a dispute. Proviso (e) allows a party to offer extrinsic evidence to demonstrate that a particular custom of the trade must be implied into, and therefore become part of, the written contract except where this is inconsistent with its express terms (see para 10.54 onwards on terms implied by custom). Proviso (f) permits the introduction of extrinsic evidence to illuminate the meaning to be ascribed to the written terms in the contractual document (see para 10.15 onwards on how this proviso operates and the contextual approach to interpretation of the written terms). THE INTERPRETATION OF CONTRACTS 10.15 In Zurich Insurance, the Singapore Court of Appeal clarified the law on “whether, when and to what extent extrinsic evidence may be admitted for the purposes of interpreting a written contract …” under proviso (f) to s 94 (see [109]). The Court of Appeal went on to supplement the clarifications in Sembcorp Marine Ltd v PPL Holdings Pte Ltd (2013) and subsequent decisions (most recently in Lim Sze Eng v Lin Choo Mee (2019) at [60]–[62]). These are summarised below: The starting point for interpreting the written words of a contract is always to consider the plain language of the contract/term (see Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd (2015) at [32] and Lucky Realty Co Pte Ltd v HSBC Trustee (Singapore) Ltd (2016) at [2]). 399 In addition, the courts may consider extrinsic evidence of context admitted under proviso (f) to s 94 (see Zurich Insurance at [121]). Such extrinsic evidence can be admitted even if the plain language is neither ambiguous nor absurd. This is because the plain language, when viewed against the factual context in which the contract was made, might then become ambiguous or absurd (a phenomenon the court called a “latent ambiguity”, see paras 10.18–10.20 for a case illustration). The court would then be entitled to decide that the term meant something different from what its plain language would appear to suggest (see Zurich Insurance at [130]). However, the court should only admit and consider extrinsic evidence that meets all of the following criteria (see Zurich Insurance at [125] and [128]– [129]): – evidence that is relevant — in that it “would affect the way the language … would be understood by a reasonable man”; – evidence that is “reasonably available to all the contracting parties” at the time of contracting; and – evidence that relates to a “clear or obvious context” — that is, a context that permits an objective determination of what the contracting parties intended the term to mean (see Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart (2012) at [43]). The above criteria accord with the ultimate goal of interpretation which is to ascertain, objectively, the contextual meaning of expressions or words used at the time the contract was made (see Zurich Insurance at [125]–[126]). This involves considering what those expressions or words would mean to a reasonable person having all relevant background knowledge that are available to the contracting parties at the time of contracting (see Hewlett-Packard Singapore (Sales) Pte Ltd v Chin Shu Hwa Corrina (2016) at [55]). 400 Where there is a “latent ambiguity”, the court may consider the contracting parties’ subjective intent, that is, the parties’ subjective understanding of the term/agreement (see Zurich Insurance at [132(d)–(e)]). However, this is only permitted if the ambiguity cannot be resolved by reference to objective factual circumstances surrounding the making of the contract (see Sembcorp at [55]). There is no absolute ban on admitting extrinsic evidence of “previous negotiations” or “subsequent conduct” under proviso (f) to s 94, but such evidence would often be inadmissible for failing to satisfy all of the required criteria (see Zurich Insurance at [132(d)]). Evidence of pre-contractual negotiations (eg, the earlier drafts of the written contract) would often not relate to a clear and obvious context, as the bargaining process invariably involves a changing of positions and the “addition, removal or variation of any contractual term” (see Xia Zhengyan v Geng Changqing (2015) at [65]–[66]). Admitting evidence of the parties’ conduct after the contract was made, is controversial. Such evidence is usually not helpful for shedding light on what the parties intended at the time the contract was made, and can also be too conveniently raised to support the preferred interpretation of a disputing party (see Y.E.S. at [73]– [74]; see also case illustration at para 10.21). Finally, the extrinsic evidence should only be “used to explain and illuminate the written words, and not to contradict or vary them” (see Zurich Insurance [132(f)]; see also case illustration at paras 10.16–10.17). The court’s task is not to “rewrite” the terms of the contract. Extrinsic evidence of context cannot be used as an excuse to achieve what the court subjectively considers to be fair (see Y.E.S. at [32]). 10.16 To illustrate the application of some of these principles, a few cases are considered. In Zurich Insurance, Mediacorp Pte Ltd (“Mediacorp”) engaged B-Gold Interior 401 Design & Construction Pte Ltd (“B-Gold”) to carry out maintenance, repair, addition and alteration works at its premises as and when required for a stated period. A contract term required B-Gold to obtain “policies of insurance indemnifying Mediacorp, B-Gold itself and all its sub-contractors against damage to persons and property, for Workmen’s Compensation and fire”. B-Gold approached its American International Group (“AIG”) insurance agent, Lee, to obtain the necessary cover. As AIG did not provide such cover, Lee was asked to help approach other insurance companies. Lee contacted a Zurich Insurance (Singapore) Pte Ltd (“ZI”) insurance agent, Long, to inquire. Upon receiving Long’s positive reply, Lee faxed to ZI (through Long) initial instructions together with B-Gold’s contract documents with Mediacorp. Lee later faxed an undated note to Long requesting, inter alia, a Contractor’s All Risks (“CAR”) policy cover. This led to ZI issuing B-Gold a CAR policy, which, as is evident from its terms below, did not literally cover “all risks”: Section II covered the damages B-Gold becomes liable to pay to third parties (eg, Mediacorp) upon “accidental loss or damage to third parties’ property” occurring in connection with the contract works, in the absence of any applicable exclusion. Special Exclusion Clause 4(b) excluded coverage of the contractor’s (B-Gold’s) “liability consequent upon loss of or damage to property belonging to or held in care, custody or control of [inter alia, Mediacorp]…” B-Gold’s sub-contractor negligently caused a fire at Mediacorp’s premises. Mediacorp successfully sued BGold, who then initiated an action against ZI, claiming under the policy for an indemnity of the damages it would have to pay Mediacorp. 10.17 The District Court held that clause 4(b) clearly excluded ZI from liability to indemnify B-Gold. On appeal, the High Court refused to give effect to clause 4(b), despite its literal meaning, in light of the factual context surrounding 402 the issue of the policy. The High Court noted (at [47] and [55]) that the specific coverage B-Gold required had been made known to ZI when the contract documents with Mediacorp were sent to ZI. B-Gold having depended on ZI to provide the necessary cover, the High Court felt (at [56]–[60]) that fairness and justice required that an exclusion clause which purported to exclude the precise cover expected, should be denied legal effect. On further appeal, the Court of Appeal overturned the High Court’s decision on the following grounds: since the parties did not dispute that the policy document contained their complete agreement, the parol evidence rule in s 94 EA applied to exclude extrinsic evidence from contradicting, varying, adding to or subtracting from the terms of the policy (at [134]). the High Court was not permitted to deny effect to a whole exclusion clause as it amounted to varying the terms of the policy (at [134]). even if the High Court had engaged in a contextual interpretation of clause 4(b) and relied on extrinsic evidence of context admitted under proviso (f) to s 94 EA, the evidence was wrongly admitted because it did not relate to a clear and obvious context (at [135]). The court found Lee and Long’s evidence on how the policy came to be issued to be unclear as to: (1) what Lee and Long actually communicated to one another concerning the insurance cover required; and (2) what circumstances led Lee to request for, and ZI to provide a “CAR” policy, especially when Mediacorp’s contract had not called for a “CAR” policy (at [135]). The reader should note that Lee and Long’s evidence were submitted to court by way of sworn statements in writing (called “affidavits”) and they were not present in court during the trial to be cross-examined on them. 10.18 The Singapore Court of Appeal decision in Sandar Aung v Parkway Hospitals Singapore Pte Ltd (trading as Mount Elizabeth Hospital) (2007) provides an illustration of “latent ambiguity”. Sandar Aung’s mother was admitted to 403 hospital to undergo a medical procedure called an angioplasty. On admission, Sandar Aung signed an estimate of hospital charges that indicated a total estimated cost of $15,227.30 for the angioplasty procedure. She also signed the hospital’s standard form contract that contained the hospital’s policies and terms of service, and an undertaking agreeing to be jointly and severally liable with the patient for “all charges, expenses and liabilities incurred by and on behalf of the patient” (“the Undertaking”). As it turned out, unexpected complications developed as Sandar Aung’s mother was recovering from the angioplasty. This inflated the final medical expenses to a sum much higher than that indicated in the estimate. The court had to decide whether, under the Undertaking, Sandar Aung was liable for all medical expenses incurred or merely for expenses that related to the angioplasty. 10.19 The court explained the rationale for a contextual approach to interpretation of contract terms (at [29]): No contract exists in a vacuum and, consequently, its language must be construed in the context in which the contract concerned has been made. We would go so far as to state that even if the plain language of the contract appears otherwise clear, the construction consequently placed on such language should not be inconsistent with the context in which the contract was entered into if this context is clear or even obvious, since the context and circumstances in which the contract was made would reflect the intention of the parties when they entered into the contract and utilised the (contractual) language they did. It might well be the case that if a particular construction placed on the language in a given contract is inconsistent with what is the obvious context in which the contract was made, then that construction might not be as clear as was initially thought and might, on the contrary, be evidence of an ambiguity. 404 10.20 It was argued that a plain reading of the phrase in the Undertaking “all charges, expenses and liabilities incurred by and on behalf of the patient” clearly referred to all charges for medical services rendered. However, the court, after considering extrinsic evidence pertaining to the factual context in which the Undertaking was signed — in this instance the estimate of charges for the angioplasty — concluded that the phrase in the Undertaking could also mean all charges, expenses and liabilities in respect of the angioplasty procedure, thus revealing a latent ambiguity in what had at first apparently been clear words. The court went on to hold (at [18]) that the narrower interpretation of the phrase was warranted given the clear context in which the Undertaking was signed in the first place. 10.21 In Xia Zhengyan, the court refused to admit evidence of a contracting party’s “subsequent conduct” to interpret the term in dispute. The issue concerned what the term required the respondent to transfer to the appellant in return for $1.5 million. The respondent had only transferred half her share in Company X but the appellant argued that the term required the respondent to also transfer half her shares in other companies and an unincorporated business. To refute the appellant’s contention, the respondent sought to rely on evidence of the appellant’s failure to complain about the non-transfer of the other shares, after she had transferred half her share in Company X. The court held that the evidence was equivocal and unhelpful to ascertain the parties’ intention at the time of contracting — the appellant’s inaction could have been due to her ignorance of the legally prudent course of action, since she had not received advice on her legal rights at the time (see [72]– [74]). 10.22 Before moving on to the next sub-topic on terms, it should be mentioned that an “entire agreement clause” will usually not exclude the admission of extrinsic evidence to aid in contractual interpretation under proviso (f) to s 94. 405 As mentioned in para 10.13, an “entire agreement clause” that expressly excluded the operation of proviso (f) could be subject to the regulation that is imposed on exemption clauses (see Lee Chee Wei at ([41]). TERMS AND REPRESENTATIONS Introduction 10.23 As mentioned, the parties often discuss aspects of the transaction before they conclude a contract. A situation could arise where A may think that something said by B during these discussions is part of the deal that they agreed on, while B may consider the statement as not involving a contractual promise of any sort. Where the parties have reduced their contract to writing, the parol evidence rule could be used to exclude extraneous material but most contracts are made wholly or partly verbally. In the latter category of contracts, it becomes necessary to determine what statement is part of the contract and what is not. Contract law makes this determination by drawing a distinction between terms and representations. 10.24 The courts will examine the pre-contractual negotiations and sift what was said into three categories. The first category consists of the mere puff, the normal exaggeration and grandstanding that is a part of contract negotiation, for example, a claim that the product is “the best beer in the world!” The law regards claims such as these as legally insignificant because they are not meant to be taken seriously. Often, though not always, these statements will be on the borderline of opinion and a statement of fact. The second category consists of representations while the third category consists of terms. A representation is made when, for example, A makes a statement of fact to B with the intention of inducing B to enter into a contract, and that factual statement does in fact induce B to enter into the contract. The critical feature of the representation is that it induces the contract and if it 406 turns out to be false, B might be able to sue A for misrepresentation (see Chapter 13 on Misrepresentation). However, B cannot sue for breach of contract, unless A’s representation becomes a term of the contract (see Chapter 13, paras 13.40–13.41). To illustrate, if A tells B that she would sell a necklace to B for $1,000, the price may induce B to buy the necklace but the price is also a part of the contract and hence is a term of the contract. But, if in addition, A tells B that the necklace belonged to a celebrity, this statement may induce B to buy the necklace but it is uncertain whether it becomes a part of the contract (a term) such that B can sue A for breach of contract if she discovers, after making the purchase, that the necklace was never owned nor used by the celebrity in question. 10.25 Whether something said by one party to another during a pre-contractual negotiation is a representation or a term depends on the common intention of the parties and is thus a question of fact. This means that if the parties disagree about the status of the statement and go to court, the judge will examine the specific facts of the particular case to determine, on an objective basis, whether the parties intended the statement in question to be a representation or a term. In determining the common intention of the parties, the judge will apply certain guidelines that the courts have developed over a hundred years. However, not all guidelines may apply to a particular scenario and no one guideline (even if it applies) can be said to be conclusive as to the intention of the parties. Ultimately, a conclusion can only be reached after a consideration of all relevant facts. The guidelines are discussed in the following sections. Request to Verify 10.26 During a negotiation prior to the contract, when A tells B something and then qualifies it to the effect “don’t take my word for it, get an independent verification and satisfy yourself”, the court will likely hold that what A told B was a 407 representation (instead of a term). In Ecay v Godfrey (1947), the seller told the buyer of a boat that the boat did not have any flaws but then went on to invite the buyer to have the boat inspected. The buyer did not have the boat inspected and, after the sale, found flaws in the boat. He sued for breach of contract. The court rejected this claim, holding that the seller’s statement about the lack of flaws was a representation and not a term. In contrast, the court in Schawel v Reade (1913) held that the seller’s statement was a term. Here, the seller told the buyer, who wished to buy the seller’s horse for stud purposes, that the horse was perfectly sound and that the buyer need not look for anything that could be the matter with the horse. The buyer successfully sued the seller for breach of contract upon discovering that the horse was totally unfit for stud purposes. Importance of the Statement 10.27 If it appears to the court that the statement in question is so important to one party that he would not have entered into the contract but for such statement having been made, the court will likely hold that statement is intended to be a term and not a representation. In Bannerman v White (1861), the buyer asked the seller whether the hops that the seller offered had been treated with sulphur. The buyer emphasised that he would not even bother to ask the price if the hops had been treated with sulphur. This exchange clearly showed the buyer’s intent to buy only sulphur-free hops. The seller assured the buyer that no sulphur had been used on the hops. When, after the purchase the buyer found that sulphur had been used, he sued the seller for breach of contract. The court held that the assurance about the hops being free of sulphur was a term of the contract and not a representation. 10.28 A statement asserting a feature of intrinsic significance in relation to the subject matter of the contract is likely to be a term of the contract. In Darwish M K F Al Gobaishi v House of Hung Pte Ltd (1995), the plaintiff purchased 408 some gemstones from the defendants. The defendants had stated that “all the gemstones the plaintiff agreed to purchase were genuine, natural, without flaws and not treated in any way” prior to the purchase. However, some of the gemstones purchased — beryls — turned out to be flawed as their colour faded when exposed to light and heat. The Singapore High Court held (at [80]) that the statement was a term. The court reasoned that since the subject matter of the parties’ contract was gemstones, the subject matter must therefore have the properties of “gemstones” (at [87]). This included permanence or stability of colour, a “very necessary feature in the jewellery trade” (at [88]). Timing of the Statement 10.29 If A makes a statement about the subject matter of the contract to B shortly before they enter into the contract, the courts would likely hold that this statement is a term and not a mere representation. The relevant timeframe would depend on the type of contract and the context. For example, in a contract of employment over which the parties have negotiated for several months, a statement made during the start of the negotiations would probably be a representation and not a term. On the other hand, in a routine buy and sell transaction, there might be so much haggling that it would justify a court finding that a statement made just a week before the contract is a representation and not a term. Thus, in Routledge v McKay (1954), the seller had consulted the registration book of the motorcycle to be sold and told the buyer that the vehicle was a 1942 model. One week later, the parties signed the contract. The buyer found that the motorcycle, far from being a 1942 model, was a 1930 model. The court rejected the buyer’s claim for a breach of contract holding that the statement about the year of the model was not intended as a term. However, this case would likely be decided differently in a country like Singapore, where vehicles are expensive and the parties are choosy and sensitive to the Certificate of Entitlement (“COE”) 409 issues such as the scrap value of the vehicle. In the context of automobile purchases in Singapore, the court might consider any statement about the model year to be so important to the contracting parties that it would qualify as a term, regardless of the length of time between the making of the statement and the time the contract was made. Oral Statements and Written Contracts 10.30 Where the parties, after negotiations, put their agreement in writing, the courts would likely hold that what they say during the pre-contractual negotiation that is not put in writing, is a representation and not a term. Normally, the parol evidence rule would shut out such statements. However, in special circumstances, the court might hold that the parties entered into a contract that was partly written and partly oral. In such an instance, this guideline would not provide useful guidance on the status of the pre-contractual statement. Special Skill and Knowledge 10.31 Whether the maker or recipient of a statement has special knowledge or skill in relation to the subject matter of the statement, is relevant for determining if the statement is a representation or a term. This is because it is reasonable to assume that it is not the intention of a person making the statement, who has little or no expertise in the area, to someone, who has expertise in the area, to expose herself to a breach of contract action if the representation proves to be false. Two contrasting English cases illustrate this approach. 10.32 In Oscar Chess Ltd v Williams (1957), the plaintiff, a hirepurchase firm, agreed with the defendant that he could trade in his car as a part of the hire-purchase transaction. The defendant, who was not in the car business, consulted his registration book and told the plaintiff that the car was a 1948 model whereas in fact the car was a 410 1939 model. The defendant made this false statement in good faith and it was later found that some unknown person had fraudulently altered the particulars in the registration book. Because the plaintiff believed the defendant’s statement that the car was a 1948 model, the defendant received more credit for the trade in than he would have if the plaintiff knew that the car was a 1939 model. The court disallowed the plaintiff’s action against the defendant for breach of contract. It reasoned that the defendant who was not a car dealer was not in a position to provide a contractual promise on the year of the model, whereas the plaintiffs, a hire-purchase firm that dealt in automobiles, had the technical knowledge to protect themselves. 10.33 The roles were reversed in Dick Bentley Productions Ltd v Harold Smith (1965). Here, it was the seller who dealt in cars. The odometer of the car showed that it had done only 30,000 miles after a replacement engine had been fitted. In fact, the car had done 100,000 miles. The buyer successfully sued the seller-dealer for breach of contract. 10.34 These two cases show that where the knowledge of the person who receives the statement is about the same or superior to that of the maker of the statement, the courts would likely hold that the statement is intended as a representation. Even so, the English Court of Appeal in Eian Tauber Pritchard v Peter Cook (1998) held the opposite — a rally motor car seller’s statements about the car’s specifications made to a buyer with greater technical knowledge were held to be intended as terms. The buyer was a motor trader, an experienced rally driver who had previously owned at least three similar rally cars while the seller was a dealer in motorcycle clothing and accessories and collector of classic cars. The seller did not have personal knowledge of the rally car’s technical specifications but had obtained a copy of them from Rally Engineering Development (“RED”), the company he had purchased the car from. The seller indicated in his advertisement for sale that the car specifications were 411 available on request. When the buyer requested to see them, the seller photocopied the specifications onto his company letterhead before showing them to the buyer. The buyer had then checked the car against the specifications for accuracy as far as he could. The conduct of the parties led the court to find that both the seller and the buyer regarded the specifications as important — the seller had mentioned them in his advertisement and the buyer had requested for them and checked the car carefully against them. Further, the seller had made the specification the basis of the sale when he photocopied the specifications on his own letterhead and did not disclaim responsibility for their accuracy by asking the buyer to check with RED instead. Based on these facts, the court concluded that the specifications were intended as terms of the contract regardless of the seller’s relative lack of expertise. This case clearly illustrates that all relevant facts need to be considered before a conclusion can be reached as to the status of any statements made in the course of negotiations. IMPLIED TERMS 10.35 In the countless contracts made every day, the parties explicitly agree only on a few main terms. For example, a consumer-buyer and a supermarket-seller of a product usually engage in a sales transaction without considering critical issues such as the quality of the product and the seller’s title (ownership) to the goods. This is often the way it should be. If the parties to a contract try to anticipate and iron out every possible situation over which a dispute may arise, they will squander precious time and probably not agree on a contract. It is also difficult to envisage and provide for all eventualities, especially in complex transactions. Moreover, the vast majority who make contracts have not studied contract law and should not be expected to know everything that could go wrong in a particular transaction. The law therefore allows people to contract freely, and what they explicitly agree 412 on, the law refers to as “express terms”. The law supplements the express terms of a contract by a category of terms known as implied terms. In this way, the law fills in the gaps in a contract, if and when necessary. 10.36 It should be noted at the outset that an “entire agreement clause” in a written contract would generally not exclude the implication of terms into the contract (see Singapore Court of Appeal decision in Ng Giap Hon v Westcomb Securities Pte Ltd (2009) at [31]). The clause could be worded clearly and unambiguously enough to achieve this effect (at [32]) but might then be subject to regulation by the common law and the Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) (at [32]). 10.37 Implied terms can be divided into sub-categories depending on how the term is implied. First, there is the category of terms implied in fact (see para 10.41 onwards). This is premised on the failure by the parties, for whatever reason, to address their minds to particular matters. Hence, when confronted with a gap in the contract that needs to be filled in order to resolve the dispute before it, the court asks itself what the parties would have unequivocally agreed upon had they addressed their minds to the problem. A term would be implied only if necessary to give efficacy to the contract. 10.38 Second, there is the category of terms implied by law or “default terms” (see para 10.49 onwards). This category concerns specific types of contracts, usually defining relationships between the parties such as landlord and tenant or employer and employee, where the courts imply a term not because of the presumed intention of the parties, but because the implied term gives effect to policies intended to make the relationship work in that particular category of contract. 10.39 Third, there is a category of terms that must be implied in some types of contract pursuant to a law passed by 413 Parliament (see para 10.52 onwards). The Sale of Goods Act furnishes the best example of this category. 10.40 Finally, there is a category of terms implied by custom (see para 10.54 onwards). These pertain to contracts relating to specialist subjects such as the sale of commodities, which take place in the context of trade associations and customary practices that have developed rules on how the contract is to be performed and expands on the obligations of the parties. Terms Implied in Fact 10.41 In the Sembcorp case that we encountered earlier in this chapter, the Singapore Court of Appeal laid down (at [101]) a three-step approach to the implication of terms in fact into a contract. The approach is largely built upon two old English cases described below. 10.42 The first case, The Moorcock (1889), held that courts would imply terms to inject efficacy into the contract. In The Moorcock, the defendants were the owners of a jetty in the Thames River. They contracted with the plaintiff to have the plaintiff’s boat, The Moorcock, docked at the jetty. Both parties knew that when the tide was low, the vessel would lie on the riverbed. During the low tide, the vessel settled on a ridge of hard ground beneath the mud and was damaged. The defendants had not given a contractual promise to the effect that the place was safe and that the ship could rest on it without damage. Despite this omission, the court held that there was an implied term by the defendants to this effect and therefore they were liable for damages caused by the breach. The court observed that the term was implied from the presumed intention of the parties. In business transactions, the purpose of the implication was to give business efficacy to the transaction that both parties must obviously have intended. The alternative, which was unacceptable, was to impose on one party all the risks of the transaction or to free the other side from all chances of failure. 414 10.43 The second case, Shirlaw v Southern Foundries (1926) Ltd (1939), held that a court would imply a term into a contract if it is satisfied that “if, while the [contracting] parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!’” (see Mackinnon LJ at p 227). The term to be implied must be so obvious as not to admit possible disagreement. 10.44 The question whether the tests in the two English cases were to be applied as alternative tests or complementary ones was settled by the Singapore High Court in Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd (2006), which held that the tests complement one another. The “officious bystander” test is merely the practical method by which the goal of “business efficacy” was achieved. The Court of Appeal in Sembcorp approved of this approach, and expanded upon the two tests (at [91]–[92] and [98]) in the three-step approach it laid down for when the court will imply a term. 10.45 The three-step approach is as follows: (1) The first step is to ascertain how the gap in the contract arises. The court will consider implying a term only if it discerns that the gap arose because the parties did not contemplate the gap. (2) At the second step, the court considers whether it is necessary in the business or commercial sense to imply a term in order to give the contract efficacy. (3) Finally, the court considers the specific term to be implied. This must be one which the parties, having regard to the need for business efficacy, would have responded “Oh, of course!” had the proposed term been put to them at time of the contract. If it is not possible to find such a clear response, then, the gap persists and the consequences of that gap ensue. 415 10.46 The first step reflects the court’s concern not to rewrite a contract for the parties. The court will consider implying a term into a contract only if a true gap exists, and it exists only if the parties had not addressed their minds to the issue (at [94]–[96]). Examples of instances where a true gap does not exist are (at [94]): the parties had considered the issue but chose not to include an express term in the contract because they mistakenly thought that the existing express terms already covered the issue; the parties had considered the issue but chose not to include an express term because they were unable to agree on how to deal with the issue. The court reasoned (at [96]) that the proper remedy for the parties’ mistaken belief as to what the existing express terms cover, would be to seek a rectification of the contract. Where parties had deliberately chosen not to include an express term because of lack of agreement on how to deal with the issue, the court observed (at [95]) that to imply a term would be to act contrary to the parties’ actual intention. Terms are implied to give effect to the presumed intentions of the parties, not to go against their actual intentions. Whether the parties had or had not contemplated an issue is ultimately a question the courts would have to ascertain based on an objective examination of the facts surrounding the transaction, including any relevant contractual document or terms (see, eg, Sembcorp at [109]–[118]). 10.47 The second and third steps involve an application of the “business efficacy” and “officious bystander” tests respectively. The Court of Appeal affirmed (at [92] and [98]) that the two tests are to be used complementarily. The “business efficacy” test is used to identify if there is a gap in the contract that requires filling. In the Court’s words, the test helps to identify that “something more needs to be added to the contract” to ensure that the contract is efficacious (see [91]). However, it does not help to identify what specific term should fill that gap. This 416 is where the officious bystander test is helpful, as it ensures that any term that is implied accords with the parties’ presumed intention. This is the case if the parties would regard the term to be so obvious that they would respond “Of course!” irritably to the officious bystander who suggests it. Significantly, the Court in Sembcorp highlighted (at [99]) that business efficacy is relevant when considering if there is a gap in commercial transactions. In non-commercial transactions, efficacy in other senses could be considered. 10.48 Finally, any term implied in fact for a particular contract does not set a precedent for future contracts of the same type (see Forefront Medical (at [41]), reiterated by the Court of Appeal in Ng Giap Hon at [90]): In other words, the court is only concerned about arriving at a just and fair result via implication of the term or terms in question in that case — and that case alone. The court is only concerned about the presumed intention of the particular contracting parties — and those particular parties alone. [emphasis in the original] Terms Implied in Law 10.49 As Lord McLaren said in William Morton & Co v Muir Brothers & Co (1907) at p 1224: The conception of an implied [term] is one with which we are familiar …, [and] it will be found that in almost every instance they are founded either on universal custom or in the nature of the contract itself. If the [term] is such that every reasonable man on the one part would desire for his own protection to stipulate … the [term], and that no reasonable man on the other part would refuse to accede to it, then it is not unnatural that the [term] should be taken for granted in all contracts of the class without the necessity of giving it formal expression. 417 The observation above provides the pragmatic reason why the courts imply terms in certain types of contracts. Often these contracts are those that establish a relationship between the parties such as an employer and an employee. The advantages of having such standardised terms are that certainty is promoted, risk can properly be estimated and important social policies can be given effect to. For instance, a human resources manager in a company can find out what terms the law will imply in the employment relationship and can take up insurance against the risks. Likewise, a lessor will know what duties will be implied in a lease and can adjust the rent to be charged in order to pay for the costs associated with discharging those duties. Borrowing a term from computer technology — “default printer” — the House of Lords has referred to these terms as “default terms” because they will apply unless overridden by express terms inserted by the parties to the transaction (see, eg, Malik v Bank of Credit and Commerce International SA (1998)). 10.50 In Liverpool City Council v Irwin (1977), a landlord of a block of apartments was held to be under an implied obligation to take reasonable care of the common areas and keep them in a reasonable state of repair. In Malik v Bank of Credit and Commerce International SA (1998), the court held that there was an implied term in employment contracts, that the relationship between employer and employee was one of trust and confidence and that neither party would do anything, without good cause, that would damage this relationship. The courts are also willing to imply a term in order to facilitate global commerce and the smooth functioning of arbitral agreements. Thus, it is an implied term of an arbitration agreement that the parties will perform the award issued by the arbitral tribunal (see Associated Electric & Gas Insurance Services Ltd v European Reinsurance Company of Zurich (2003)). 418 10.51 In Chua Choon Cheng v Allgreen Properties Ltd (2009), the Singapore Court of Appeal provided a useful summary of the rationale and approach of the courts to the implication of terms in law (at [69]–[70]): The court is not concerned about giving effect to the presumed intention of the contracting parties when it implies a term in law. Unlike the case of a term implied in fact, the court implies a term in law based on wider considerations of fairness and policy for that defined class of contracts. A term that is implied in law will be implied in all future contracts within a defined class, unless the express terms of the contract provide otherwise. Hence, the court should exercise great restraint in implying a term in law (a caution that was emphasised in Forefront at [41]) When implying a term in law, the court is in effect imposing on the parties what it considers to be most reasonable in the circumstances, although reasonableness of the term is not the only factor considered in deciding whether it should be implied. Terms Implied by Statute 10.52 A statute may imply terms in a particular type of contract. When a statute implies terms in a contract, it is not trying to anticipate and provide for the intentions of the parties. Instead, the implication is on grounds of public policy with Parliament believing that such contracts must contain these implied terms unless explicitly dislodged by the parties. Perhaps, the most well-known instance of terms implied by statute is the UK sales of goods legislation, which applies in Singapore pursuant to the Application of English Law Act (Cap 7A, 1994 Rev Ed), and reprinted locally as Sale of Goods Act (Cap 393, 1999 Rev Ed) (“SGA”). Another instance is the United Nations Convention on Contracts for the International Sale of Goods (“CISG”), which has also been made a part of Singapore law (Sale of Goods (United Nations 419 Convention) Act (Cap 283A, 2013 Rev Ed)). The terms implied by sale of goods legislation attempt to provide coherence and a framework to a type of contract that is entered into thousands of times a day. These implied terms allow the seller to price goods by reference to the risk exposure created by the implied terms, and allow the buyer and seller to routinely engage in sales without wasting time in hammering out the details. The following illustrations of terms implied by the SGA show that the content of what is implied is necessary for the smooth functioning of a sale of goods system in a country. For example, s 12(1) SGA implies a condition that the seller has a right to sell the goods. Section 13(1) implies a condition that goods sold by description will correspond with their description and s 15(2) that goods sold by sample will correspond with their sample. Section 14(2) provides that where a seller sells goods in the course of his business, there is an implied condition that the goods supplied under the contract are of a satisfactory quality. 10.53 By incorporating this “shorthand” in sale of goods transactions, the SGA allows the seller and the buyer to focus on the main elements of the transaction. This in turn, reduces transaction costs and frees up time for the parties to engage in more productive economic transactions. Thus, a grocery store manager may work on managing the store without having to meet customers and assure them on the matters implied by the SGA while they stand in line at the check-out queue. Terms Implied by Custom 10.54 Contracts are rarely divorced from their surroundings and context. A particular trade practice, the features of the market and even the customs of the locality may be relevant to the operation of the contract. Accordingly, where a party engages in contracting within a particular trade, for example, the coffee trade, that party will be bound by the usage in that trade if the usage is wellknown, certain, reasonable and legal (see Nelson v Dahl 420 (1879)). In Hutton v Warren (1836), the dispute centred on a tenant farmer’s claim to a fair share for seeds and allowance. The plaintiff farmer gave the landlord notice of his intention to quit farming the land. However, the lease required the farmer to continue to plant during the notice period. He would no longer be in a contractual relationship when harvest time came around. The issue was whether the farmer was entitled to a fair allowance even though the crop had not been harvested. The court reasoned (at p 475) that this was a type of contract where “the parties did not express in writing the whole of the contract by which they intended to be bound but to contract with reference to known usages”. If it can be shown that those doing business in a particular community had a generally accepted custom and that anyone inquiring would have been told about that custom, then this custom would bind the parties even if both of them were ignorant of its existence (see Chan Cheng Kum v Wah Tat Bank Ltd (1971)). 10.55 To be implied in a contract, a custom must be a usage that is sufficiently uniform and accepted by the relevant community as being applicable, in the absence of express agreements. Pointing to the impact of rapid globalisation and industrialisation in Singapore, it has been argued that the emergence of significant local custom that could be implied in Singapore contracts is remote (see A Phang, International Encyclopaedia of Laws — Contracts (Singapore) (2000) at para 358). For a summary of express and implied terms and their characteristics, see Figure 10.1. 421 Figure 10.1 Express and implied terms RELATIVE IMPORTANCE OF TERMS Conditions, Warranties and Innominate Terms 10.56 When a term, whether express or implied, has been breached, the court has to decide on the remedy to accord the innocent party (ie, the party not in breach). As mentioned, contracting parties may not regard all terms to be of equal importance. The law of contractual terms recognises this by classifying the terms and providing remedies for their breach accordingly. However, there is a remedy that is available regardless of the importance of the term breached. The right to claim damages, that is, compensation for losses suffered, is available to the innocent party for the breach of any term in a contract. The relative importance of terms is significant where the availability of the option to terminate the contract is concerned. Generally, the law only makes this option available for breaches of important terms or where the consequences of breach are serious. 422 10.57 The Singapore courts adopted the UK approach to the classification of terms. Terms are classified as a “condition”, a “warranty” or an “innominate term”. The word “condition” is a legal term of art for an important term. Likewise, “warranty” is used to refer to a minor or unimportant term. 10.58 The word “condition” used in this technical sense is also known as “promissory condition”, and differs from “contingent condition”. As its name implies, a contingent condition is a term in the contract that specifies an event or events that must occur if the contract is to come into force or remain in force. These “conditions precedent” and “conditions subsequent” are terms but are not “conditions” in the specialised sense used above. Rather, they are “conditions” in the layperson sense of the word as in “conditional”. For example, a main contractor may engage a sub-contractor to build a garage in a house, with the sub-contract containing a condition precedent to the effect that the sub-contract will only take effect when the house owner awards the building contract to the main contractor. There might also be a “condition subsequent” to the effect that the sub-contract to build the garage will remain in effect only if the main building contract remains in effect. 10.59 The word “warranty” is frequently used in consumer contracts for the sale of goods or services in a layperson sense. The meaning here is different from the technical term “warranty” when used to refer to a minor or unimportant term. In the consumer context, for example, a seller of a hand phone may give a warranty for a certain period. This usually just means that the seller or dealer of the hand phone will replace any faulty components and provide repairs free of charge during the warranty period. 10.60 Innominate terms are terms that have not been expressly designated or stated by the parties to be important terms (“conditions”) or minor terms (“warranties”), and they cannot be immediately categorised as either type simply 423 by looking at their content because it is possible to envisage both serious as well as extremely trivial breaches of the term. The English case in which the innominate term was first described, Hongkong Fir Shipping Co Ltd v Kawasaki Kishen Kaisha Ltd (1962), provides an example. A vessel was hired by charterers from its owners for 24 months. Clause 1 of the charterparty (ie, the ship hire contract) stated that the vessel was to be “in every way fitted for ordinary cargo service”. However, the vessel broke down several times during the charter and was out of service for 20 weeks. The charterers terminated the charter for breach of the obligation of seaworthiness (ie, a breach of Clause 1) about four months into the charter. The owners then sued the charterers for wrongful termination. Lord Diplock held (at p 71) that an obligation of seaworthiness was a complex contractual term not easily categorisable as a “condition” or “warranty”: It embraces obligations with respect to every part of the hull and machinery, stores and equipment and the crew itself. It can be broken by the presence of trivial defects easily and rapidly remediable as well as by defects which must inevitably result in a total loss of the vessel. The court held that the right to terminate should therefore depend on the nature and consequences of the breach — whether the breach deprived the innocent party of substantially the whole benefit he was intended to obtain. Applying this test, however, the court held that the charterers were not entitled to terminate the contract. By the time the charterers purported to terminate the contract, they had already sailed across the Atlantic from the port of origin at Liverpool, UK, collected cargo and delivered them to Osaka, Japan, despite the delays. The court also found that the charterers had no reasonable grounds to doubt, given the remedial steps the owners had taken, that the vessel would be rendered seaworthy for the remaining 17 months of the charter. 424 10.61 Since the Hongkong Fir decision, the UK approach to determining remedies for breach involves a two-step process (see Bunge Corporation, New York v Tradax Export SA Panama (1981)). First, the court must apply the “Condition–Warranty approach”. This requires determining whether the contracting parties intended the term to be an important one (a condition) or a minor one (a warranty). In the UK, the option to terminate the contract is available for breach of a condition but not a warranty. Second, it is only after determining that the term is neither a condition nor a warranty but, rather, an innominate term, must the court consider whether the breach has deprived the innocent party of substantially the whole of the benefit he was intended to obtain (the “Hongkong Fir approach”). Where there is such deprivation, the remedies for a breach of a condition would follow. Otherwise, the remedies for a breach of a warranty would follow. 10.62 The current Singapore approach to determining remedies for breach has deviated somewhat from the UK approach that is described above. The only difference lies in that Singapore law makes the option to terminate a contract available for breaches of implied warranties as well under certain circumstances (see explanation in para 10.68 onwards, especially 10.71). We turn now to consider in greater detail how Singapore courts classify terms and determine the remedies upon a breach, especially the availability of the option to terminate the contract. Readers are reminded that the remedy of damages is available for every breach, regardless of what term is breached. Classifying Terms 10.63 To classify terms, the Singapore Court of Appeal in Man Financial (S) Pte Ltd v Wong Bark Chuan David (2008) reiterated (at [161]) that the focus of inquiry is on the intention of the parties, as objectively ascertained. The parties are free to agree expressly (ie, using clear words) 425 that a particular term in a contract will be regarded as a condition so that upon its breach, the innocent party has the option to terminate the contract regardless of how minor the consequence of the breach is. For example, the parties may stipulate that “it is essential that the seller delivers the goods no later than the time stated in the contract.” Given such a clear indication of the need for timely delivery, the option to terminate the contract would arise even if there has been a delay of a few minutes. In other words, the contracting parties are free to structure their bargain in such a way that even the smallest infraction of an obligation would give the innocent party the right to terminate the contract. Conversely, the parties could agree explicitly that a breach of an obligation does not give the innocent party the right to terminate the contract regardless of how serious the breach is. If parties have made their intentions clear, thereby giving rise to either express conditions or express warranties, the courts will give effect to their intentions. 10.64 In practice, however, parties rarely make their intentions clear, and sometimes the court may conclude that when the parties label a term as a “condition”, they do not intend the technical meaning (see L Schuler AG v Wickman Machine Tool Sales Ltd (1974)). In the absence of express conditions or warranties, the courts will have to discover the parties’ implied intentions (thereby giving rise to implied conditions or implied warranties) by construing the language of the contract and the term concerned within the context in which the contract was made. 10.65 In Man Financial, the Singapore Court of Appeal summarised the approach to determining the type of term that has been breached. This involves (at [161] and [174]): ascertaining the intention of the contracting parties … by construing the actual contract itself (including the contractual term concerned) in light of the surrounding circumstances as a whole. 426 Emphasising (at [160] and [174]) that there is no magical formula and that much depends on the actual factual circumstances (ie, the context) of the particular case, the Court of Appeal highlighted (at [162]–[173]) four nonexhaustive factors that might be taken into account, if they apply: whether a statute classifies the term as a condition — for example, s 13(1) Sale of Goods Act (Cap 393, 1999 Rev Ed) provides that in a contract of sale of goods by description, there is an implied condition that the goods will correspond with the description. whether the term itself expressly states that it is a condition — this factor is not conclusive as the word “condition” might have been used in the lay rather than the legal sense (see L Schuler mentioned above) whether a prior case precedent is available — sometimes, previous cases examining a standard term in a generic contract would conclude that the term was a condition, and confronted with such a term in the same type of contract, a court may conclude that the term was a condition (see Maredelanto Compania Naviera SA v Bergbau-Handel GmbH, The Mihalis Angelos (1971)) whether the contractual term is given in the context of a mercantile transaction — parties to commercial contracts place a high value on certainty and predictability, and certain terms in mercantile contracts have been regarded as conditions in the absence of evidence to the contrary. An example would be terms relating to time such as a term specifying time for when a ship is ready to load cargo (see The Mihalis Angelos) 10.66 On the facts of Man Financial, none of the four factors mentioned above applied and so the Court construed the term in question and the contract against the factual context. Briefly, Wong Bark Chuan (“Wong”) expressed a wish to step down as CEO of Man Financial (S) Pte Ltd (“MF”), and was asked to resign and put on “garden 427 leave” while serving out his notice. Wong and MF then entered into a Termination Agreement (“TA”), which was executed after much discussion. The TA included two restraint of trade clauses (on such clauses, see Chapter 15 para 15.31 onwards), which MF subsequently alleged that Wong had breached. The issue was whether MF could terminate the TA upon Wong’s breach of the clauses, so that it could discharge itself from its obligation to pay Wong the promised compensation. 10.67 The Court of Appeal held that one of the clauses had been breached and that the breach entitled MF to terminate the TA, as MF and Wong’s implied intention was to regard the clause as a condition. The court inferred such intention objectively from the factual context. Specifically, the court found that the exchange of correspondence between the parties in finalising the TA (at [179]) demonstrated the importance the parties attached to the TA and the clause in question. The exchange of correspondence showed: the trouble Wong took to negotiate for acceptable Clause C terms (which included the term in question), in insisting on a reduction of the period of restraint (at [188]); and MF’s efforts to redraft a clause to add a qualification that the compensation would not be payable upon breach of any term in the TA (at [189]–[190]). The reader is reminded that the parole evidence rule will not shut out the extrinsic evidence of context as the issue here does not pertain to what terms the parties have agreed to but rather how to classify the term in dispute. The Right to Terminate the Contract: the RDC Concrete Qualified by Sports Connection Approach 10.68 We turn now to the current Singapore approach on when, and on what grounds, an innocent party could have an option to terminate a contract upon the breach of a term. The Singapore Court of Appeal in RDC Concrete Pte Ltd 428 v Sato Kogyo (S) Pte Ltd (2007) prescribed a comprehensive approach for this, and subsequently qualified it to a small extent in Sports Connection Pte Ltd v Deuter Sports GmbH (2009). The RDC Concrete approach is now law, having been applied in many subsequent decisions (see, eg, CAA Technologies Pte Ltd v Newcon Builders Pte Ltd (2017) and LED Linear (Asia) Pte Ltd v Krislite Pte Ltd (2017)). What remains obiter is the qualification in Sports Connection of a “limited exception in the case of an express warranty”. Table 10.1 sets out a description of the approach as qualified. Table 10.1 The RDC Concrete approach to situations entitling an innocent party to terminate the contract at common law as qualified by Sports Connection RDC Concrete ‘Situations’ Circumstances where right of termination arises (1) Contract contains express provision of a right to terminate in specified circumstances This refers to a situation where the contract contains a term that clearly lists the events the occurrence of which will permit the innocent party to terminate the contract and an event listed has occurred. Where such a provision exists, the court does not need to ascertain the type of term breached in order to decide if a right of termination arises. (2) Contract does not contain express provision of a right to terminate This refers to a situation where the party in breach renounces the contract (ie, the defaulting party “disowns” the contract) and clearly informs the innocent party that it will not perform any of its contractual obligations. Where this occurs, a right of termination arises without the court having to ascertain the type of term breached. 3(a) Condition– Warranty approach This refers to a situation where the courts have ascertained that the term breached is a condition. Where Situations (1) and (2) described above do not apply, the court has to ascertain the type of term breached in order to decide if the innocent 429 Comment party has a right to terminate the contract. The first step is to apply the Condition– Warranty approach which involves discerning the intention of the contracting parties on an objective basis. If the contracting parties regard the term to be an important one, the court will categorise it as a condition with the consequence that a right of termination arises upon its breach. 3(b) Hongkong Fir approach This refers to a situation where the term breached is not a condition (as ascertained by the courts) but its breach results in consequences which deprive the innocent party of substantially the whole benefit that the innocent party was to obtain from the contract. Where upon applying the Condition– Warranty approach, the court discerns that the contracting parties do not regard the term breached to be an important one, the second step is to apply the Hongkong Fir approach. This involves ascertaining the severity of the consequences of the breach. A right of termination arises only if the breach results in consequences that deprive the innocent party of substantially the whole benefit contracted for and not otherwise. Qualification in Sports Connection This refers to a situation where the term breached “itself states expressly (as well as clearly and 430 Where the term is an express warranty, the court will give effect to Pte Ltd v Deuter Sports GmbH (2009): the limited exception (at [57]) 10.69 unambiguously) that any breach of it, regardless of the seriousness of the consequences that follow from the breach, will never entitle the innocent party to terminate the contract …” it and the innocent party may only be compensated by an award of damages. No right of termination arises. Briefly, the RDC Concrete approach summarises the situations where a right of termination avails the innocent party upon the breach of a term. Sports Connection qualifies it with an instance where the right of termination is not available. Situation 1: where the contract term clearly and unambiguously lists certain events and states that the innocent party would be entitled to terminate the contract upon the occurrence of one or more of them, a right of termination would arise as specified (see RDC Concrete at [91]). Situation 2: where the party in breach renounces or “disowns” the contract, that is, clearly indicates either by words or conduct to the innocent party that he will not perform his contractual obligations at all, the innocent party may terminate the contract (see RDC Concrete at [93]). Situation 3(a): where upon applying the “ConditionWarranty approach”, it is ascertained objectively that the parties intended the term breached to be a condition, then the innocent party may terminate the contract (see RDC Concrete at [97]). If the parties did not intend the term breached to be a condition, then whether a right of termination arises depends on the analysis under Situation 3(b). Situation 3(b): where the term breached is found not to be a condition under the “Condition-Warranty approach”, the “Hongkong Fir approach” is applied to ascertain the nature and consequences of the breach. If the breach deprived the innocent party of substantially the whole benefit which he was intended 431 to obtain from the contract, a right of termination arises (see RDC Concrete at [99]). Limited Exception: where the term breached has clearly and unambiguously stated that a breach of it will never entitle the innocent party to terminate the contract, this is a case of an express warranty and the intentions of the parties will be upheld. The innocent party will not be entitled to terminate the contract regardless of the nature and consquences of the breach (see Sports Connection at [52]). 10.70 The approach described above reflects the principle that the court’s main role is to give effect to what parties intended (as objectively ascertained) at the time of contracting. Hence, the need to apply the “ConditionWarranty approach” first before any resort to the “Hongkong Fir approach” (see [106]). In the same vein, the court must give effect to the parties’ clearly expressed intentions that the breach of a particular term should never allow the innocent party to terminate the contract. 10.71 The difference between the RDC Concrete-Sports Connection approach and the English approach relates to whether an option to terminate the contract is available for the breach of an implied warranty (see Table 10.1, Situations 3(a) and 3(b) and the qualification specified in Sports Connection). While no right of termination exists under English law for the breach of any warranty, express or implied, the Singapore courts have chosen to make the right available for the breach of an implied warranty provided the consequences of the breach deprives the innocent party of substantially the whole benefit he was intended to obtain under the contract. The right of termination is only completely out of reach for a breach of an express warranty since the parties have so clearly communicated their intention that this should be the case. 10.72 To understand the motivation behind the Singapore Court of Appeal’s decision to deviate from the UK approach, the 432 Court’s reasoning in RDC Concrete should be considered. The Court observed (at [100]) that the “Condition-Warranty approach” would ensure certainty and predictability since it seeks to uphold what parties intended at the time of contracting. On the other hand, the “Hongkong Fir approach” would ensure fairness since a right to terminate is not allowed unless the consequences of breach are serious. It would prevent “a party from terminating the contract on excessively technical grounds in a bid to escape from unfavourable bargains” (at [100]). To achieve a judicious balance between fostering certainty and predictability of contract on the one hand, and fairness on the other (see [109]), the Court prescribed that the “Condition-Warranty approach” should always be applied first, before resort to the “Hongkong Fir approach”. It went on (at [107]) to prescribe that the “Hongkong Fir approach” should be applied to warranties as well, also to ensure fairness. 10.73 The Court in RDC Concrete recognised (at [108]) that to apply the “Hongkong Fir approach” to warranties would be to treat them as innominate terms, thus obliterating the concept of the warranty. This very result became the subject of academic criticism, for ignoring the possibility that the contracting parties might not intend the right of termination to be available for the breach of certain terms (see, eg, Goh Yihan, “Towards a Consistent Approach in Breach and Termination of Contract at Common Law: RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd” (2008) 24 JCL 251). The critique led the Court of Appeal to qualify the RDC Concrete approach in its later decision of Sports Connection (at [57]) as follows: We would therefore reaffirm the approach laid down in RDC Concrete …, subject to the extremely limited exception that, where the term itself states expressly (as well as clearly and unambiguously) that any breach of it, regardless of the seriousness of the consequences that follow from that breach, will never entitle the innocent party to terminate the contract, 433 then the court will give effect to this particular type of term (viz, a warranty expressly intended by the parties). [emphasis in the original] 10.74 We conclude this section with a consideration of the decision in Sports Connection. The case applied the RDC Concrete approach and illustrates how the court ascertains the intention of parties in order to classify a term. The court also clarified the precise steps involved in applying the Hongkong Fir approach. 10.75 Under a Distributorship Agreement (“DA”), Sports Connection Pte Ltd (“Sports”) acted as the exclusive local and regional distributor of Deuter Sports GmbH’s (“Deuter”) products from 1992 to 2005. When the DA was renewed in 2002, a clause prohibiting Sports from selling competing products without Deuter’s prior written consent (“the non-competition clause”) was inserted. Sports and Deuter had an understanding that the noncompetition clause would not be activated as long as Sports purchased US$1 million worth of Deuter’s products annually. When Sports failed to do so in 2004, Deuter activated the clause and subsequently terminated the DA for its breach. Sports then sued Deuter for wrongful termination of the DA. 10.76 The Court of Appeal applied the “Condition-Warranty approach” under RDC Concrete’s Situation 3(a), and held that the non-competition clause was not intended to be a condition as: Deuter knew Sports sold competing products both before and after inserting the clause into the DA (at [69]); Deuter did not intend the clause to be a strict prohibition, as evidenced by Deuter’s export manager’s email sent three days after signing the 2002 DA, stating: “As you know we are dependent on you for good sales success in Southeast Asia. So far it 434 has worked with you selling competitive brands and we are not saying that we want you to stop. Potentially it poses a risk and could cause [Deuter] to lose what it has gained. That is why we want the benefit of you asking our approval …” (at [69], emphasis in original); and the non-competition clause would not be triggered if the annual purchase target of US$1 million was met (at [72]). 10.77 The court then applied the “Hongkong Fir approach” in Situation 3(b) through a two-step process, which involved (at [62]): First, ascertaining “what exactly constituted the benefit that it was intended the innocent party should obtain from the contract”; and Second, considering the actual consequences of the breach that had occurred at the time the innocent party purported to terminate the contract. 10.78 The Court of Appeal noted that Deuter’s contracted benefit was to ensure that Sports continued to look after its interests, which included market penetration and brand building for its products. Although the actual consequences of breach were Sport’s drop in purchases from US$1 million to US$788,031.45 and the potential compromise of market penetration and brand position of Deuter products, the court held that Deuter had not been substantially deprived of its contracted benefit. Among other reasons (see [82]–[85]), the court was unconvinced that the drop in sales alone would result in a substantial deprivation of benefit (at [78]), given that Deuter’s objectives of market penetration and brand positioning could be achieved by aggressive promotional activities other than by sales of Deuter’s products (at [81] and [82]). Deuter was thus not entitled to terminate the DA, and in wrongfully doing so, Deuter was itself in breach of the DA. 435 This gave Sports the right to claim damages against Deuter (at [91]). CONCLUSION 10.79 Communications technologies have made telex and facsimile communication obsolete and have replaced these with email, short message services (“SMS”), instant messaging like Whatsapp, and voicemail. In a commercial context, the result is an abundance of material, scattered in various formats and places, that provides evidence of negotiations and agreement. Sifting through this material to ascertain what part is puff, what part are terms and what part are representations can be a challenging task for a lawyer. A “writing” could now be an email, and it may be necessary to determine whether the contract has been reduced to writing so as to trigger the parol evidence rule. In a teleconference negotiation, a visual and audio record of what was said would be available. In determining whether a particular statement was a term or a representation, a judge may have to consider not only the traditional rules found in the cases but visual cues and other pointers generated by advances in communications technology. As technology advances, the law relating to contractual terms would have to respond not only in a pragmatic way but also in a way that is theoretically coherent. 10.80 In addition, recent developments in the law on implied terms make it less likely that the court would imply a term in fact where the contracting parties had engaged in extensive negotiations and exchanged several drafts of the written contract before concluding a final one. In such situations, the court needs to be convinced that a true gap in the contract exists, rather than that the parties had considered particular matters but deliberately chose not to provide a term to cover them. As to the remedy to terminate a contract upon breach of a term, contracting parties should be prudent to word their contract terms 436 clearly to indicate if they desire such a remedy. Such clarity would provide certainty on the availability of the remedy. 437 Chapter 11 Exemption Clauses 11.1– 11.5 Introduction 11.6 11.7– 11.11 11.12 11.13 11.14– 11.15 11.16– 11.19 11.20– 11.22 11.23– 11.24 Incorporation Incorporation by Signature 11.25– 11.26 11.27– 11.29 11.30– 11.35 Construction 11.36– 11.38 11.39 11.40 11.41– Statutory Limitations on the Use of Exemption Clauses: Unfair Contract Terms Act Contracts to Which UCTA Does Not Apply Applicability of UCTA to “Business Liability” Applicability of UCTA to Negligence Liability Incorporation by Notice (1) Type of document (2) Time of notice (3) Adequacy of notice (4) Effect of the clause Incorporation by Previous Course of Dealing Contra Proferentem Rule Guidelines in the Interpretation of Exemption Clauses Attempting to Limit Negligence Liability 438 11.43 11.44– 11.45 11.46– 11.47 11.48– 11.50 11.51– 11.60 Applicability of UCTA to Breach of Contract UCTA and Sale or Supply of Goods UCTA and Consumer Contracts Test of Reasonableness 11.61– 11.66 Exception Clauses and Consumer Protection Legislation in Singapore 11.67– 11.68 Conclusion INTRODUCTION 11.1 Exemption clauses, which are also known as exclusion or exception clauses, form part of the terms of the contract. They are terms that seek to exclude or limit the liability of one of the parties in the event of a breach of contract. Such terms are common in everyday commercial contracts, especially the standard form contracts. They seek to exclude or limit liability arising from the contract or common law liability that might arise independently of the contract, for example, tort liability for loss or damage by negligence (see Chapter 6 on tort of negligence). Exemption clauses can be divided into three types: (1) exemption (or exclusion) clauses that seek to exclude the liability completely; (2) limitation of liability clauses that seek to limit the liability (eg, to a certain money amount); and (3) indemnity clauses that seek to pass liability (or the risk thereof) to a third party. The reference to “exemption clauses” in this chapter includes all three types. It may be noted here that though 439 the first two types of exemption clauses are essentially similar, the courts are likely to interpret the clauses excluding liability more strictly than the clauses limiting the liability. 11.2 A review of the law relating to exemption clauses must take into account two developments: first, the idea of freedom of contract where the parties to the contract have unrestrained rights to enter into contracts of their choosing and second, the subsequent intervention by the courts and the legislature to control its excesses. 11.3 Under the concept of freedom of contract, the parties must be free to negotiate their mutual rights and obligations under the contract without the interference from the courts or the legislature. This would enable the parties to allocate the risks and divide the responsibilities of the transaction between themselves. Theoretically the parties have liberty to make their own bargains when they negotiate. In reality, the contracting parties may differ in bargaining power, and the use of standard form contracts may not help to equalise the bargaining power between them. Standard contract terms are often used (by one party) to help reduce the costs of negotiation by massproducing the contracts. This has given rise to situations where, for example, a supplier of goods and services seeks to exclude his potential liability by the use of his own pre-printed standard contract terms, and he may assert that he will contract on his own terms and no other. This “take it or leave it” situation affords no choice for the customer. Either he must go without the goods or services, or take them subject to the exemption clause. It is apparent that such contracts are not freely negotiated. 11.4 While it may be acceptable for parties with equal bargaining power to impose exemption clauses, the courts and legislatures have been reluctant to allow them when imposed by a stronger party on a weaker party. The courts have disapproved such clauses and have been sympathetic towards the weaker party by interpreting the 440 exemption clauses narrowly and by providing for certain requirements for their validity. The legislature has intervened by introducing the UK Unfair Contract Terms Act 1977, made applicable in Singapore by the Application of English Law Act (Cap 7A, 1994 Rev Ed) and reprinted locally as Cap 396, 1994 Rev Ed, and by provisions in other statutes. 11.5 This chapter will first deal with the courts’ approach to exemption clauses. For an exemption clause to be valid, it must satisfy the requirements laid down by the courts concerning incorporation and construction. The chapter will then consider the statutory limitations on the use of exemption clauses under the Unfair Contract Terms Act (“UCTA”). For an exemption clause to be valid it must satisfy the following requirements: the clause must be properly incorporated into the contract; it must be properly construed to see if it covers the event(s) in question; and it must not be excluded or restricted by statutes such as the UCTA. INCORPORATION 11.6 The courts will require the person relying on an exemption clause to show that the other party agreed to its incorporation into the contract at the time of or prior to the contract; otherwise, it will not be part of the contract. An exemption clause is incorporated into the contract in three ways: (1) by signature; (2) by notice; and (3) by a previous course of dealing. 441 Incorporation by Signature 11.7 Where a contract is made in writing, the general rule is that the person signing the contract is bound by everything contained in the document, whether he has read it or not. Thus a person signing a pre-printed standard form contract cannot later complain that he did not read it before signing. In L’Estrange v F Graucob Ltd (1934), the plaintiff signed a hire-purchase agreement for a cigarette vending machine. The contract contained, “in regrettably small print”, a clause that provided that “any express or implied condition, statement or warranty … is hereby excluded”. Although the plaintiff had not read the document, it was held that the clause bound her, and she had no remedy when the machine proved defective. In Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd (2003) the Singapore High Court held (at [39]) that the plaintiff’s signing of a document that contained a clause referring to terms in another document (which included an exemption clause), resulted in those terms being incorporated into the contract between the parties. It so held even though the plaintiff did not have a copy of those terms and had not read them. 11.8 There are three exceptions to this general rule: where non est factum is relied on; where there is misrepresentation as to the existence, or precise scope or extent of the exemption clause; and where an express warranty that has become part of the contract overrides the exemption clause. These exceptions are discussed below. 11.9 A party may be able to avoid a contract that he has signed if he can bring himself within the doctrine of non est factum (“it was not my deed”). This narrow doctrine is available especially to vulnerable persons (eg, the blind or illiterate) who sign documents under a mistaken belief 442 as to their nature or effect (see Saunders v Anglia Building Society (1971), and Chapter 12 para 12.53 onwards). 11.10 The general rule also does not apply where there is any misrepresentation as to the scope or extent of the exemption clause. In Curtis v Chemical Cleaning and Dyeing Co (1951), the plaintiff took a wedding dress for cleaning, and was asked to sign a document which contained a clause that exempted the cleaners from liability “for any damage howsoever arising”. When she asked why her signature was required, the defendant’s employee told her that the clause simply meant that the cleaners would not accept any responsibility for any sequins and beads. She then signed the document. When she collected the dress, it had a stain which was not there before, but the cleaners, relying on the exemption clause, denied liability. The English Court of Appeal held that even though the plaintiff had signed the document, the cleaners could not rely on the exemption clause since their employee had misrepresented to her the extent of the exemption. 11.11 The Singapore Court of Appeal considered the issue of express warranty in Anti-Corrosion Pte Ltd v Berger Paints Singapore Pte Ltd (2012). Anti-Corrosion (“A”) was a painting sub-contractor for building projects. Berger Paints (“B”), a paint manufacturer, contracted to supply A with paint on four occasions. B initially gave a paint plan according to which it was not necessary to apply a sealer coat to the surface to be painted. When A had concerns, B verbally assured A that a sealer coat would not be necessary and gave a five-year warranty on the paint to be used on any project that was based on their paint plans. Three projects were completed successfully but on the fourth occasion, there was serious discolouration of the internal surfaces of the building project that were painted. A sued for its losses and B counter-claimed for the balance sum due on the paint sold to A. The Court noted (at [24] and [25]) that B’s tax invoices and delivery 443 orders were not intended to contain all the contract terms between the parties, and therefore the parol evidence rule did not prevent B’s verbal assurances and warranty (the express warranty) from forming part of the contract. This raised the question as to whether B was still entitled to rely upon the exemption clauses contained in their tax invoices and delivery orders to limit their liability to A given that they conflicted with the express warranty. The court held that the exemption clauses were not effective in light of the express warranty. The court said (at [46]) that it was well established that an exemption clause contained in a written contract can be overridden by an express warranty given at or before the time the contract was concluded. Incorporation by Notice 11.12 Where the contract is not written or where the terms are in an unsigned document, the exemption clause may still be incorporated into the contract. In the latter case, the person seeking to rely on it must show that the other party knew, or ought to have known, that the document was one which could be expected to contain such terms. In both instances, he must show that he has done everything reasonable to give sufficient notice of the exemption to the other party. The guiding principle was laid down in Parker v South Eastern Railway (1877). The plaintiff left a bag in the station cloakroom and obtained a ticket in return. On the front of the ticket were printed details such as the opening hours of the office, and also the words “See Back”. On the back was a clause limiting the liability of the company to £10 for the loss of any item left with them. When the plaintiff returned to claim the bag, it had been lost. He claimed the worth of the bag which was £24.10s, but the company maintained that their liability was limited to £10. The Court of Appeal held that a party could be deemed to have had reasonable notice if he knew of the clause, or if reasonable steps were taken to bring the clause to his notice. As to what makes a notice reasonably sufficient is a question of fact. 444 Some of the factors to consider are the type of document, the time of notice, the adequacy of notice, and the effect of the clause. These are discussed below. (1) Type of document 11.13 An exemption clause will not be part of the contract if it is contained in an unsigned document where a reasonable person would not be expected to find contractual terms. In Chapelton v Barry Urban District Council (1940), Chapelton hired two deck chairs from the defendant at Brighton beach. There was a notice near the stack of chairs which requested customers to obtain tickets from the attendant and retain them for inspection. Chapelton obtained the ticket and put it into his pocket without reading it. When he sat on one of the chairs, it collapsed under him. He sued the Council for damages for his injuries, but it sought to rely on the exemption clause printed on the ticket. The English Court of Appeal held the Council liable. It held that the clause that was printed on a ticket was not a term of contract because the ticket in this case was not a contractual document. No reasonable person would expect to find contractual terms on such a ticket since it would be regarded simply as a receipt for money paid. However, the reader is advised to consider this decision in light of current practices and expectations about documents containing contractual terms. For instance, it is arguable that a reasonable person would expect to find contractual terms on a movie ticket. (2) Time of notice 11.14 For the exemption clause to be effective, the notice must be given before or at the time of the contract. A notice given after the contract was made is ineffective. Thus, in Olley v Marlborough Court Ltd (1949), a couple rented a hotel room for one week and paid in advance. Upon entering the bedroom they saw a notice containing an exemption clause that exempted the hotel from liability for loss or theft of articles, unless they had been given to the 445 management for safe custody. Later, their property was stolen. They sued the hotel who then sought to rely on the exemption clause. The English Court of Appeal held that the clause was not incorporated into the contract. The contract was already concluded at the reception desk when the hotel agreed to take the couple as guests, and therefore, the notice given on the bedroom door was too late. 11.15 A similar issue arose in Thornton v Shoe Lane Parking Ltd (1971). Thornton parked his car in the defendant’s automated car park. There was a notice at the entrance which stated: “All cars parked at owners’ risk”. Upon entry, a machine issued a ticket which contained printed words that referred to conditions displayed in another part of the car park. Thornton did not see the conditions, which included an exemption clause denying liability for damage to property and personal injury. Thornton suffered an injury due to an accident while collecting his car. He sued and the defendant sought to rely on the exemption clause. The English Court of Appeal held that the defendant had failed to prove reasonable sufficiency of notice. The contract was formed when Thornton paid his money into the machine which later issued the ticket. For the exemption clause to be incorporated, there must have been reasonable sufficiency of notice prior to or at the time of contract. A notice on the ticket would be too late. Similarly, a notice located at a different section of the car park would be too late. The following obiter statement by Lord Denning MR (at p 689) is very instructive: The customer pays his money and gets a ticket. He cannot refuse it. He cannot get his money back. He may protest to the machine, even swear at it; but it will remain unmoved. He is committed beyond recall. He was committed at the very moment when he put his money into the machine. The contract was concluded at that time. It can be translated into offer and acceptance in this way. The offer is made when the proprietor of the machine holds it out as being ready to 446 receive the money. The acceptance takes place when the customer puts his money into the slot. The terms of the offer are contained in the notice placed on or near the machine stating what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to his notice beforehand, but not otherwise. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made. (3) Adequacy of notice 11.16 The person relying on the exemption clause must show that he did take reasonable steps to bring the notice to the attention of the other party. This means, among other things, that the notice must be sufficiently conspicuous and legible. There is no need to show that the injured party had actual notice of it. In Thompson v London, Midland and Scottish Railway Co (1930), the English Court of Appeal held that the test of reasonably sufficient notice had been satisfied. The plaintiff, an illiterate, asked her niece to purchase a railway excursion ticket for her. On the face of the ticket were the words, “For conditions see back”. On the back of the ticket were the words to the effect that the ticket was issued subject to the conditions set out in the defendant company’s time table. Thompson suffered an injury and sued the defendants. The court held that reasonably sufficient notice had been given. In this context the ticket was a common form of contractual document. Since it did refer to the time table, the clause was held to be an integral part of the contract. The court did not consider Thompson’s illiteracy to be relevant. However, the decision does seem wrong because it is questionable whether the steps taken by the defendant to bring the exemption clause to the notice of the plaintiff were adequate (see paras 11.20–11.22 on what would be considered reasonable steps in the case of onerous exception clauses). The decision has also been criticised by many, including Lord Denning in George Mitchell (Chesterhall) v Finney Lock Seeds Ltd (1983). 447 11.17 A different outcome may result where the party relying on the exemption clause knows from the very beginning that the injured party is under some disability. In Geier v Kujawa, Weston & Warne Bros (Transport) Ltd (1970), Geier, who could not understand English, was a passenger in a taxi where there was a notice in English containing an exemption clause. The driver realised that Geier did not understand English though he pointed to the exemption clause. In an action by Geier, the defendant sought to rely on the exemption clause. The court held that there was no reasonable sufficiency of notice, since the driver knew of Geier’s disability but did not take reasonable steps to translate the notice. This suggests that in Singapore, with its multiracial and multi-lingual population, extra steps may be needed to bring the clause to the notice of persons known not to understand the language of the clause. 11.18 Adequacy of notice was also in issue in two Singapore cases, Jet Holding Ltd v Cooper Cameron (Singapore) Pte Ltd (2005) and Wartsila Singapore Pte Ltd v Lau Yew Choong (2017). In Jet Holding Ltd, the plaintiff, the owner of the oil exploration drill ship, Energy Searcher, sued the defendant for breach of contract when the ship’s slip joint manufactured by the defendant broke into two. The defendant tried to rely on standard form exemption clauses that it claimed had been incorporated into the contract by way of a separate provision in a sales quotation. The exemption clauses were not printed on the reverse of the quotation but were merely referred to in the notes to the quotation. The Singapore High Court noted (at [112]) that there was difficulty in establishing what exactly were the terms and conditions of sale that formed part of the sales quotation. Accordingly the court held (at [114]) that inadequate notice was given as the standard form clauses involved should have been brought fairly and reasonably to the plaintiff’s attention “by pointing them out, more so when the terms and conditions were not printed on the reverse of the quotation.” 448 Consequently, the exemption incorporated into the contract. 11.19 clauses were not In Wartsila Singapore, the defendant also argued that a reference in the quotation provided sufficient notice to incorporate its general terms and conditions into the contract. However, the quotation referred to the company’s “General Conditions of Sale & Services”, whereas the actual title of the document was “General Terms and Conditions Service Work”. The Singapore High Court noted (at [118]-[119] and [123]) that the latter provisions were intended to apply to service work of a different nature and extent than the work performed under the quotation. Because of the dissimilarity in wording and the differing contexts, the court held that a reasonable reader would not have understood the reference in the quotation to be a reference to the company’s “General Terms and Conditions Service Work”. As no reasonable notice had been provided, these terms were not incorporated into the contract. (4) Effect of the clause 11.20 This issue is related to the issue of adequacy of notice discussed above. The case law indicates that the more onerous or unusual the clause, the greater the degree of notice required to incorporate it. Such clauses cannot be incorporated simply by handing over or displaying a document containing the clause; the party seeking to rely on it must take special steps to draw attention to it. This principle formed part of the reasoning in Thornton v Shoe Lane Parking Ltd (1971) (see para 11.15). Although it was fairly common for car park conditions to exclude liability for damage to cars, exclusion of liability for personal injury was not a term that motorists would usually expect in such a transaction. Thus, though the steps taken by the proprietor might have been sufficient to exclude or limit liability for property damage, they could not be deemed to have given sufficient notice of the more unusual term concerning personal injury. 449 11.21 This issue was highlighted again in Interfoto Picture Library v Stiletto Visual Programmes Ltd (1989). The defendants were an advertising agency who had hired photographic transparencies from the plaintiffs. Stiletto had not dealt with Interfoto before but, on request, Interfoto delivered 47 photographs, along with a delivery note. This stated that the pictures should be returned within 14 days, and included a list of conditions. One of the conditions was that if the pictures were kept longer than 14 days, they would be charged a holding fee of £5 per picture per day until they were returned. Stiletto, apparently without reading the conditions, decided that the pictures were not suitable for their purpose, and put them aside. When they returned the pictures almost a month later, Interfoto submitted an invoice for holding fees of £3,783.50. The English Court of Appeal held that Stiletto was not contractually bound to pay the charge. The daily charge was much higher than what would usually be charged. The term was merely printed on the plaintiff’s standard terms, whereas due to its particularly onerous nature, it called for a greater degree of notice. The court quoted, with approval, Lord Denning’s statement in Spurling v Bradshaw (1956) (at p 466) to the effect that: Some clauses are so onerous they would need to be printed in red ink on the face of the document with a red hand pointing to it before notice could be held to be sufficient … onerous or oppressive clauses must be drawn clearly to the other party’s notice, otherwise they will not be incorporated. In the instant case, the court allowed Interfoto to recover £3.50 per week for each transparency returned late, as being a reasonable sum due on a quantum meruit. 11.22 The principles in the Interfoto and Thornton decisions have also been applied in Singapore cases. In Holland Leedon Pte Ltd (in liquidation) v C & P Transport Pte Ltd (2013), the plaintiff company stored metal coils and steel sheets in the defendant’s warehouse. The defendant sought to rely on a provision in the warehousing contract 450 which restricted its liability to a sum of S$10,000. The High Court noted (at [221]–[223]) that this provision was of an onerous nature as it imposed a limit of S$10,000 which was a tenth of the logistic industry’s standard limit of S$100,000. The limit was also less than the defendant’s cost of services for one month. Although the defendant had discussed the terms of the quotation with the plaintiff, this was deemed insufficient as the defendant had not specifically brought the contents of the provision to the notice of the plaintiff. Incorporation by Previous Course of Dealing 11.23 Where the parties have previously made a series of contracts, and those contracts contained an exemption clause, that clause may have been incorporated in a subsequent contract even though neither party made a reference to it at the time. In Spurling v Bradshaw (1956), the parties had been doing business together for many years. The defendant delivered eight barrels of orange juice to the plaintiffs, who were warehousemen, for storage. He received a document from them, acknowledging the receipt of the barrels. Words on the front of the document referred to clauses printed on the back. One of them exempted the plaintiffs “from any loss or damage occasioned by the negligence, wrongful act or default” of themselves or their employees. When the defendant went to collect the barrels, they were empty. He consequently refused to pay the storage charges and the plaintiffs sued for recovery. He counter-claimed for negligence and the plaintiffs sought to rely on the exemption clause. The defendant argued that the clause was not applicable because it was only sent to him after the contract had been concluded. However, he admitted that he had received similar documents earlier but he had never bothered to read them. The court held that the clause was incorporated into the contract by previous course of dealing. 451 11.24 In order for a term to be incorporated on the basis of a previous course of dealing between the parties, the course of dealing must be well established. In Hollier v Rambler Motors (AMC) Ltd (1972), the plaintiff had taken his car for repair at the defendants’ garage three or four times in the previous five years. Each time a form containing an exemption clause had been signed. The clause contained the words: “The company is not responsible for damage caused by fire to customers’ cars on the premises.” The plaintiff made an oral contract to have the car repaired. The car was destroyed by fire, owing to the defendant’s negligence. Although no form had been signed on this occasion, the defendants argued that this clause was incorporated into the contract by previous course of dealing. The English Court of Appeal held that the previous course of dealing in this case was not sufficient to justify the inclusion of the exception clause. CONSTRUCTION 11.25 The incorporation of an exemption clause into a contract does not automatically exempt the relying party from liability. Once it is established that the clause is part of the contract, the next step is to construe or interpret the wording of the clause to determine whether it actually covers the breach that has occurred. The interpretation of the clause is important because it determines the scope of protection available to the relying party. 11.26 In trying to limit the scope and applicability of exemption clauses, the courts have used different approaches in the construction of contractual terms. These include the following: the contra proferentem rule; and guidelines in the interpretation of exemption clauses attempting to exclude or limit negligence liability. 452 Contra Proferentem Rule 11.27 The Latin phrase contra proferens means, against the maker. Before the Unfair Contract Terms Act was passed, the courts used the contra proferentem rule very strictly to interpret the exemption clauses in a way that was least favourable to the person who inserted them into the contact. If there is any doubt as to the meaning and scope of the exemption clause, the ambiguity will be resolved against the party who is relying on it. An illustration is the case of Houghton v Trafalgar Insurance Co (1954). An insurance policy excluded claims in cases where the car was carrying “any load in excess of that for which the car was constructed”. The car was a fiveseater, but was carrying six people at the time of the accident. The English Court of Appeal held that the word “load” should be given a narrow interpretation, referring to goods and not people. The word could refer to weight as well as the number of passengers and hence was ambiguous. Consequently, the clause did not exclude the insurer’s liability. 11.28 Since the passing of the UCTA, the courts have been more restrained in applying the contra proferentem rule to regulate the use of exemption clauses. The English courts have recently cautioned that the contra proferentem rule should only apply when the language of the exemption clause is ambiguous, and not when the natural meaning of the clause is clear (see Impact Funding Solutions Ltd v AIG Europe Insurance Ltd (2016) at [6] and [35]). In addition, the court may be slow to apply the rule when the contract concerned is of a commercial nature and negotiated between parties of equal bargaining power (see Transocean Drilling UK Ltd v Providence Resources plc (2016) at [14] and [20]; Persimmon Homes Limited v Ove Arup & Partners Limited (2017) at [52] to [53]). 11.29 Though technically the contra proferentem rule applies to all exemption clauses, the courts have tended to apply it 453 less rigorously to those that merely limit liability rather than exclude it completely. Thus, in Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd and Securicor (Scotland) Ltd (1983), Securicor had contracted to provide security services for certain ships moored in Aberdeen harbour. As a result of their default, two ships sank. A clause in the contract limited Securicor’s liability to £1,000. The shipowners claimed that the clause was ambiguous and should therefore be interpreted in their favour. The House of Lords upheld Securicor’s reliance on the clause, stating that limitation clauses need not be construed as strictly as exclusion clauses. Limitation clauses are more likely to express the genuine intentions of the parties, and to be considered as part of the bargain than exclusion clauses. The Singapore High Court followed Ailsa Craig in Rapiscan Asia Pte Ltd v Global Container Freight Pte Ltd (2002) (at [63]) and PT Soonlee Metalindo Perkasa v Synergy Shipping Pte Ltd (2007) (at [76] and [79]). However, the court will consider the substance of the clause to determine whether it is effectively a clause that limits or excludes liability. The Singapore High Court in Emjay Enterprises Ltd v Skylift Consolidator (Pte) Ltd (2006) pointed out (at [24]) that a limitation clause could reduce the amount claimable to such an extent that it actually becomes a total exclusion of liability clause. Guidelines in the Interpretation of Exemption Clauses Attempting to Limit Negligence Liability 11.30 In cases of negligence, the party relying on the exemption clause must show that clear words in the clause fully cover his negligence liability. Where the clause does not clearly cover negligence, the courts have held that the exemption clause is inapplicable. In Hollier v Rambler Motors (AMC) Ltd (1972), where the plaintiff’s car was damaged by fire caused by the defendants’ negligence, the defendants argued that this fell within the scope of the exemption clause, which stated that company was “not responsible for damage caused by fire to customers’ cars on the premises” and that customers’ cars “were driven 454 by staff at owners’ risk”. The English Court of Appeal disagreed. It held that the clause was not sufficiently clear and unambiguous to cover negligence since it was possible to interpret the clause as attempting to exclude liability for fire damage caused, both by and in the absence of negligence. 11.31 While it is possible for a contracting party to exclude liability for his own negligence by the use of clear words, the courts are also aware that it is inherently unlikely that one party will readily agree to allow the other to exclude liability for his own negligence. In view of such situations, the courts have evolved certain rules of construction. In Canada Steamship Lines Ltd v R (1952), the court set out the following guidelines: (1) If a clause contains language which expressly exempts the party relying on the exemption clause from the consequences of his own negligence, by the use of the word “negligent”, “negligence” or a synonym, then effect must be given to the clause; (2) If the first rule is not satisfied, then the court will proceed to apply the second rule. Under the second rule, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the party relying on the exemption clause. If there is any doubt as to whether the words are wide enough to cover negligence, the doubt must be resolved against the party relying on the clause; and (3) If the second rule is satisfied, the court must apply the third rule and consider whether the exemption clause may yet cover some kind of liability other than negligence. If there is such a liability, the clause will then apply to such liability and will not extend to negligence. 11.32 The third rule is controversial, as it forbids the court to immediately conclude that the clause covers negligence liability even when an interpretation under the second rule 455 suggests that it does (see Wee Ling Loo, “The Application of the Morton Principles in Canada Steamship Lines Ltd v The King in Singapore Reconsidered” (2016) 17 Australian Journal of Asian Law 1–20, at p 6). Thus, both the English and Singapore courts do not apply the third rule literally but prefer to apply the rule taking account of the factual context of the case. 11.33 The English decision in HIH Casualty and General Insurance Ltd v Chase Manhattan Bank (2003) is an illustration of this approach. The case involved an exclusion clause in insurance policies that were procured by brokers on behalf of a financier of films. The policies insured the financier against the risks of non-repayment of loans made by them to film producers. The clause stated that the insured-financier “will not have any duty or obligation to make any representation, warranty or disclosure of any nature” and “shall have no liability of any nature to the insurers for any information provided by any other parties”. The House of Lords decided that the clause was intended to protect the insured-financier against its brokers’ negligence. The brokers and not the insured, had intimate knowledge of the commercial prospects of the film and the risks of non-payment. The insured was therefore protected against the negligent misrepresentations or non-disclosure of the brokers, even though the clause also covered non-negligent liabilities (such as innocent misrepresentation or non-disclosure). HIH’s approach has been followed by the English Court of Appeal in Lictor Ansalt v MIR Steel UK (2012). 11.34 The Singapore Court of Appeal in Marina Centre Holdings Pte Ltd v Pars Carpet Gallery Pte Ltd (1997) also adopted a contextual approach in applying the Canada Steamship guidelines. In this case, Pars Carpet Gallery (“the lessee”) leased certain premises from Marina Centre Holdings (“the landlord-lessor”) under a lease agreement. During the term of the lease, an air-conditioning pipe within the false ceiling of a neighbouring unit burst and leaked water that seeped into the lessee’s unit and damaged the 456 lessee’s goods. The lessee’s insurers paid for the damage and then sued the landlord for the sum paid. The landlord argued that the exemption clauses in the lease agreement protected it from liability, especially cl 36.1(b), which stated that the landlord, its officers, servants, employees and agents should not be liable or in any way be responsible for any injury or damage to persons or property, or for any consequential loss resulting from an entire list of events, “unless caused by the wilful misconduct of [the landlord] or [its] officers, servants, employees or agents”. 11.35 The Court of Appeal held that the landlord could successfully rely on the exemption clause. Applying the Canada Steamship guidelines, the court held (at [13]) that the cl 36.1(b) did not satisfy the first test — it did not contain the word “negligence” or any synonym of it and therefore did not expressly exempt the lessor from liability in negligence. As to the second test, the court held (at [21]) that the qualifying words at the end of cl 36.1(b), namely, “unless caused by wilful misconduct of the landlord or its officers”, clearly implied that negligence liability was covered by the clause. Regarding the third test, the court held (at [47]) that when the clause was construed within the context of the case, it should not cover the non-negligent liabilities suggested by the lessee’s lawyer. This was because in the context of the case, breaches of the lease agreement (eg, involving falling plaster or gas leaks) for which the landlord would be liable would necessarily involve the landlord’s negligence. The parties must therefore have contemplated protection of the landlord against its negligent breaches of the contract. As such, the second and third tests were satisfied and the clause was effective to exclude liability in negligence. STATUTORY LIMITATIONS ON THE USE OF EXEMPTION CLAUSES: UNFAIR CONTRACT TERMS ACT 457 11.36 With the proliferation of exemption clauses, it was only a matter of time before some parties sought to abuse them by inserting unfair terms in contracts. The most effective way to remedy this situation was by legislation. The legislature in the UK intervened by passing the Unfair Contract Terms Act 1977. As mentioned, this Act is now part of the law of Singapore (published locally as Cap 396, 1994 Rev Ed) although some sections have been excluded from the Singapore legislation. Therefore, contracts that are governed by Singapore law that contain exemption clauses may be subject to the UCTA limitations. However, the UCTA does not purport to change the common law relating to exemption clauses. It is therefore necessary to consider whether the clause is incorporated into the contract and whether the wording of the clause covers the breach (or events) that occurred first, before considering the UCTA’s applicability and effect on the clause. 11.37 The UCTA will apply to contracts and to exemption clauses that fall within its scope. In this context, it should be noted that the title of the Act is somewhat misleading in two respects. First, UCTA applies to exemption clauses not only in contract but also in non-contractual situations like tort (see s 2). Second, despite its title, the UCTA does not aim to provide a general standard of fair and unfair contract terms. It does not deal with all the unfair terms in a contract, only unfair exemption clauses. Most of the provisions of the UCTA apply to “business liability” (defined in s 1(3)) or to “consumer” transactions (defined in s 12). 11.38 The primary focus of the UCTA is to protect the parties, especially the consumers. Additionally, the UCTA applies even in non-consumer or non-business situations where exemption clauses are invoked in cases of misrepresentation. An exemption clause that is regulated by the UCTA could either be rendered totally inoperative, or allowed to operate if it passes a test of reasonableness. 458 Contracts to Which UCTA Does Not Apply 11.39 The First Schedule to the UCTA lists contracts to which the regulating sections, ss 2–4, will not apply in relation to exemption clauses. Under para 1 First Schedule, these include contracts of insurance. Sections 2–4 are also inapplicable insofar as certain contracts deal with the following matters, namely, contracts relating to the creation, transfer or termination of rights or interests in land or intellectual property; contracts relating to the formation or dissolution of a company, or to its constitution or the rights and obligations of the corporation or its members; and contracts relating to the creation or transfer of securities or any rights or interests therein. Paragraph 2 First Schedule provides that where marine salvage or towage contracts, ship or hovercraft charterparties, or contracts for the carriage of goods by ship or hovercraft are concerned, ss 2(2)–4 and 7 will not apply to these contracts except in favour of a person “dealing as a consumer”. Further, in relation to contracts involving the carriage of goods by ship or hovercraft, where the means of carriage are concerned, para 3 of the First Schedule excludes the applicability of ss 2(2)–4 as well, again except in favour of a person “dealing as a consumer”. Paragraph 4 First Schedule provides that s 2 will not apply to clauses excluding or restricting negligence liability in contracts of employment, except in favour of the employee. Lastly, s 26 UCTA excludes from its purview certain international supply contracts (see, eg, Trident Turboprop (Dublin) Ltd v First Flight Couriers Ltd). Applicability of UCTA to “Business Liability” 11.40 Sections 2–7 are the primary provisions in the UCTA governing exemption clauses. Under s 1(3), these sections apply in the case of both contract and tort, where the exemption clause in question concerns a “business liability”. This is a liability for “breach of obligations or duties arising from things done or to be done by a person in the course of a business (whether his own or another’s)”. “Business” includes a profession and the 459 activities of any Government department or local or public authority (s 14). Thus, the ss 2–7 regulating sections would apply only where the exemption clause purports to exclude or limit a business liability. Applicability of UCTA to Negligence Liability 11.41 “Negligence” is defined in s 1(1) UCTA as either the breach of “any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance” of that contract, or the breach of “any common law duty to take reasonable care or exercise reasonable skill (but not any stricter duty)”. This definition indicates that the UCTA, despite its name, also applies to cases of negligence that arise outside of the context of contract. Section 2 confirms this view. 11.42 Section 2(1) UCTA states that a person cannot exclude or restrict his liability for death or personal injury resulting from negligence “by reference to a contract term or to a notice given to persons generally or to particular persons”. The inclusion of the word “notice” implies that this provision of UCTA would operate also in cases where there is no contract between the party seeking to exclude or limit liability and the party who was harmed. By necessity, the former can only rely on a disclaimer notice rather than a contract term to exempt liability. Section 14 reinforces this view, as it provides, inter alia, that the word “notice” “includes an announcement, whether or not in writing, and any other communication or pretended communication”. 11.43 Section 2(2) UCTA deals with damage other than death or personal injury, for example, property damage. The sub-section provides that in cases of such loss or damage, a person cannot exclude or restrict his liability for negligence except “insofar as the term or notice satisfies the requirement of reasonableness”. The 460 requirement of reasonableness is dealt with in s 11 UCTA (see para 11.51 onwards). Applicability of UCTA to Breach of Contract 11.44 Section 3 UCTA regulates exemption clauses that excludes or restricts liability for breaches of contract. The section provides that such exemption clauses are regulated only where the contracting party who is subjected to the exemption clause either “deals as consumer” or deals on the relying party’s “written standard terms of business” (see s 3(1) UCTA). The issue as to when a contracting party “deals as consumer” is discussed further at para 11.48 onwards. As to dealing on the relying party’s written standard terms of business, this refers to the situation where the party subjected to the exemption clause had contracted on the other party’s standard contract terms, which included the exemption clause that the latter wishes to rely on. 11.45 Section 3(2) provides that an exemption clause in a consumer contract or a standard form contract can be relied upon by the party who is in breach of contract “insofar as … [it] satisfies the requirement of reasonableness”. The section regulates the use of exemption clauses to restrict or exclude liability for the entire range of breach of contract situations. This includes situations of the party in breach relying on the exemption clause to exclude or restrict liability in respect of the breach, or claim to be entitled “to render a contractual performance substantially different from that which was reasonably expected of him; or … in respect of the whole or any part of his contractual obligation, to render no performance at all”. To illustrate how ss 2 and 3 operate, see Figure 11.1. 461 Figure 11.1 Regulation of exemption clauses (“EC”) under ss 2 and 3 UCTA: An illustrative framework UCTA and Sale or Supply of Goods 11.46 Section 6 UCTA deals with the contracts of sale and hirepurchase. Section 6(1) provides that a seller’s implied undertaking as to title (namely, his right to sell under s 12 Sale of Goods Act (Cap 393, 1999 Rev Ed) (“SGA”) and his right to hire out the goods under s 6(1) Hire-Purchase Act (Cap 125, 1999 Rev Ed) (“HPA”)), cannot be excluded or restricted by reference to any contract term. In the case of consumer contracts (where the buyer is 462 “dealing as a consumer”), s 6(2) UCTA prohibits the exclusion or restriction of liability by the seller relating to his implied undertakings as to conformity of goods with their description or sample, or their quality or fitness for a particular purpose (under ss 13, 14 or 15 SGA and ss 6(2) and (3) HPA). However, such liability can be excluded or restricted in non-consumer contracts subject to the test of reasonableness (s 6(3) UCTA). 11.47 Where a contract is not governed by the SGA or HPA as regards the passing of ownership or possession of goods, s 7 UCTA states that the same principles apply to such contracts (see ss 7(2) and 7(3)). The section further provides that liability for breach of obligations arising under s 2 Supply of Goods Act (Cap 394, 1999 Rev Ed) cannot be excluded or restricted (s 7(3A) UCTA). However, s 7(4) UCTA provides that liability in respect of the right to transfer ownership of goods or give possession or assurance of quiet possession can be excluded or restricted subject to the test of reasonableness. UCTA and Consumer Contracts 11.48 As noted above, the UCTA makes a distinction between two types of contracts: consumer contracts and nonconsumer contracts. A consumer contract is one where one party to the contract “deals as consumer”. Under s 12(1) UCTA a party deals as a consumer where: he “neither makes the contract in the course of business nor holds himself out as doing so”; the other party makes the contract in the course of a business; and in the case of contract for sale of goods or hirepurchase, the goods in question “are of a type ordinarily supplied for private use or consumption”. However, a buyer in a sale by auction or competitive tender is not regarded as dealing as consumer (s 12(2) UCTA). The burden of proof rests upon the party who 463 claims that the other party does not deal as consumer (s 12(3) UCTA). 11.49 Merely because a party is a business does not necessarily prevent it from “dealing as a consumer”. In R & B Customs Brokers Co Ltd v United Dominions Trust Ltd (1988), the plaintiffs were a shipping company owned and controlled by a Mr and Mrs Bell. The company bought a second-hand car from the defendants for business and personal use. They had made two or three similar purchases in the past. The UCTA provision on which they sought to rely would only apply if they were dealing as consumers. Despite the fact that the purchase was made by the company and the car would be used partly for business, the English Court of Appeal held that the Bells were dealing as consumers. Dillon LJ made the following helpful observations as to what would not constitute “dealing as consumer” (at pp 330–331): … there are some transactions which are clearly integral parts of the businesses concerned, and these should be held to have been carried out in the course of those businesses; this would cover, apart from much else, the instance of a one-off adventure in the nature of trade, where the transaction itself would constitute a trade or business. There are other transactions, however, … which are at highest only incidental to the carrying on of the relevant business; here a degree of regularity is required before it can be said that they are an integral part of the business carried on, and so entered into in the course of that business. 11.50 The requirements of s 12 UCTA are cumulative. In Koh Lin Yee v Terrestrial Pte Ltd (2015), the court relied on the R & B Customs Brokers decision and held that the appellants fulfilled s 12(1)(a) UCTA, as obtaining a loan was incidental (and not integral) to carrying on their business. However, the court held that the respondents did not satisfy s 12(1)(b) UCTA because there was no degree of regularity that demonstrated that they had 464 made loans in the course of their business of purchasing barges and boats. The loan was merely a one-off transaction for both parties. As not all the requirements of s 12 UCTA were satisfied, the appellants were therefore not dealing as consumers. Test of Reasonableness 11.51 Under the UCTA, exemption clauses that are not rendered inoperative must pass the test of reasonableness. Section 11(1) UCTA gives a broad definition of reasonableness. It provides that, for contractual terms, the test of reasonableness requires that “the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made”. Section 11(5) UCTA provides that the burden of proof lies on the party seeking to rely on the exemption clause to show that it is reasonable. This means that the relying party cannot merely assert that the term is reasonable but must provide sufficient evidence that it is so. In this regard, the Singapore High Court in Holland Leedon Pte Ltd (in liquidation) v C & P Transport Pte Ltd (2013), held (at [237]–[238]) that it was insufficient for the defendant to assert that the term was reasonable because it was widespread in the warehousing industry, without producing evidence to show reasonableness. 11.52 As regards exemption clauses covered by ss 6 and 7 UCTA, s 11(2) UCTA refers to a set of guidelines given in the Second Schedule. It would thus appear that there might be a difference between the concepts of reasonableness envisaged in ss 11(1) and 11(2) UCTA. However, in practice the courts generally refer to the guidelines given in the Second Schedule in every case. 11.53 The Second Schedule lists the following as relevant considerations: 465 (a) the strength of the bargaining positions of the parties relative to each other, taking into account (among others) any alternative means for meeting the customer’s requirements; (b) whether the customer received an inducement to agree to the exemption clause or could have entered into a similar contract without the need for such a term; (c) whether the customer knew or ought to have known of the existence and extent of the term, having regard to any custom of the trade or any previous course of dealing between the parties; (d) where the term excludes or restricts any relevant liability if a contingent condition is not fulfilled, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable; and (e) whether the goods in question were manufactured, processed or adapted to the special order of the customer. The above factors, if relevant to the case concerned, may be considered in deciding on the reasonableness of the exemption clause. However, relevant factors other than those enumerated above can also be considered. Thus in Smith v Eric Bush (1990) the English court took account of the following factors in determining reasonableness: (1) whether it would have been reasonably practicable to obtain advice from an alternative source having regard to the time and cost involved; (2) whether the liability in question was for a difficult task or obligation that may impose an additional burden on the performing party; and (3) the practical consequences of determining whether or not the clause is in fact reasonable. The question in Smith’s case was whether surveyors who were hired by a purchaser of a house to value the property could reasonably exclude liability for their negligence. The court took into account the difficulty a purchaser faced in paying another expert to value the house. In addition, the 466 valuation task was work at the lower end of a surveyor’ field of professional expertise and did not place an unreasonable burden on the surveyor. As for the practical consequences, the surveyor who was insured would not suffer significant hardship by bearing the risk of potential negligence. The increase in surveyors’ insurance premium would, at most, be distributed amongst house purchasers through an increase in valuation fees. By contrast, a purchaser who had to bear the risk of the surveyor’s negligence would suffer greater hardship when left with a valueless house. Considering all these factors, the court decided that it was not reasonable for the surveyor to exclude liability for negligence. 11.54 The UCTA test of reasonableness came up for consideration in a number of Singapore cases, and the courts have consistently examined factor (a) — the bargaining positions of the parties. In Consmat Singapore (Pte) Ltd v Bank of America National Trust & Savings Association (1992), Consmat sued Bank of America for amounts paid by the bank under forged cheques. The bank relied on an exemption clause in its standard form contract. Although the UCTA was held inapplicable on the facts, the High Court found that, were it to be applicable, the clause in question would have been reasonable. The court noted the following facts in coming to its conclusion: (1) both parties were commercial entities who entered into the contract freely; (2) Consmat had a choice of banks; and (3) the clause contained a grace period for Consmat to challenge any alleged discrepancies, and as a business entity, it had the resources to verify its bank statements within this period. 11.55 In Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding Co Pte Ltd (1999), the High Court stressed that the parties are not deemed to be of equal bargaining power merely because they are commercial entities. Warren Khoo J observed (at [58]) that “the mere fact that a party has apparently willingly entered into a contract containing exclusion or limitation terms does not prevent him 467 subsequently from raising questions of reasonableness in accordance with the Act.” The Kenwell case was followed in the High Court cases of Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd (2003), Kay Lim Construction & Trading Pte Ltd v Soon Douglas (Pte) Ltd (2013) and Holland Leedon Pte Ltd (in liquidation) v C & P transport Pte Ltd (2013). 11.56 In Koh Lin Yee v Terrestrial Pte Ltd (2015), Allgo Marin Pte Ltd took three loans from Terrestrial Pte Ltd. Koh, the owner of Allgo, was the guarantor for these loans. Allgo claimed that the loans should be reduced to take into account a sum owed by Terrestrial to Allgo for the purchase of a tug boat. However, the loan agreements contained an exemption clause which stated that all payments had to be made “without set off”. The Court of Appeal decided that this clause was reasonable because of sound commercial justifications and its common use in loan agreements. The clause would allow the lender to receive full payment and maintain sufficient cash flow. At the same time, the clause would not prevent the borrower from bringing a separate claim against the lender for any breaches of the loan agreement. In addition, the Court of Appeal considered the relative bargaining positions of the parties, and held (at [55]–[57]) that the relevant factors relating to this included (1) whether the party challenging the exemption clause was experienced in commercial matters, (2) whether he had the opportunity to negotiate the deletion or amendment of the clause, and (3) whether he had legal advice. Applying these principles, the court decided (at [72]) that both parties were commercial parties with equal bargaining positions. They had specifically negotiated the terms of the loan agreement for the circumstances, and would know or ought reasonably to have known of the effects of the clause. 11.57 In the appropriate case, public policy may be relevant in deciding the reasonableness of an exemption clause. In Jiang Ou v EFG Bank AG (2011) the issue before the High Court was the reasonableness of the conclusive 468 evidence clauses used by banks. Mdm Jiang Ou opened an account with EFG Bank in June 2008 and deposited nearly S$5 million. Between August 2008 and April 2009 without any instructions, an employee of the bank and Mdm Jiang’s relationship manager executed a series of 160 high-risk foreign exchange and securities transactions purportedly on her behalf. As a result, her account suffered a loss of about S$2.3 million. She claimed that prior to August 2009 she did not receive any of the 160 transaction confirmation slips or bank statements except for 18 documents received from 29 July 2008 to 5 January 2009. The bank denied liability for the loss, arguing that Mdm Jiang could not challenge the correctness of the bank transaction documents because of the conclusive evidence clauses in the bank’s documentation. Conclusive evidence clauses imposed upon the customers the duty to verify their bank statements and to notify the bank if there was any discrepancy. If the customer failed to do so within the stipulated time, he or she would be precluded from challenging the correctness of the bank statement. The court held (at [107]–[122]) that the clauses were probably meant to exclude the bank’s liability for errors caused by lack of due diligence, and were not intended to exclude liability caused by fraudulent or wilful misconduct of its employees. The bank did not expressly exclude such a risk in the clause. Even if it did so, the clause was clearly void as a matter of public policy, as well as unreasonable under the UCTA. Public confidence in the banking system was fundamental to the integrity of the system and was founded upon mutual trust and a reasonable expectation of honest dealings by employees of banks. Shifting the risk and liability for the fraud or wilful misconduct of employees of banks on the consumer by way of conclusive evidence clauses would undermine the integrity of the system. 11.58 It is evident from the Singapore cases that reasonableness is a very factual enquiry which involves a consideration of all relevant factors and not merely those 469 in the Second Schedule of the UCTA. This approach has also been adopted by the English courts. For example, in George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd (1983), a firm contracted to sell winter cabbage seeds but delivered autumn seeds of inferior quality. The House of Lords held that the exemption clause was unreasonable because, among other things, the buyer could not discover the breach until the plants grew whereas the seller was at all times in a position where it should have known whether the wrong seed was supplied. 11.59 In Motours Ltd v Euroball (West Kent) Ltd (2003) the defendant who provided telephone services to the plaintiff, Motours (a travel agency), sought to exclude all liability for all consequential loss howsoever arising. Although it was a commercial bargain between businessmen, the court found the term to be unreasonable. They considered the following factors to be relevant: (1) the exclusion for negligence could not have been within Motour’s contemplation; (2) the exclusion clauses were common in the industry so that Motour had no choice; (3) the term was not negotiated; and (4) Motours was not in a position to negotiate while Euroball could adopt a “take it or leave it” attitude. 11.60 In Regus (UK) Ltd v Epcot Solutions Ltd (2008), Regus hired serviced office accommodation to Epcot. Epcot sought substantial damages for loss of business due to faulty air-conditioning. A standard term in the contract excluded any liability for loss of business, profits, anticipated savings, third party claims or any consequential loss, or loss of or damage to data. The English Court of Appeal found the clause to be reasonable for the following reasons: (1) Epcot could still sue for defective air-conditioning; (2) the exclusion did not cover fraud, or wilful, reckless or malicious damage which would be unreasonable; (3) Regus reasonably limited its liability to the higher of 125 per cent or £50,000; (4) Regus advised its customers to protect themselves by 470 insurance for business losses; and (5) there was no inequality of bargaining power. EXCEPTION CLAUSES AND CONSUMER PROTECTION LEGISLATION IN SINGAPORE 11.61 Singapore has enacted the Consumer Protection (Fair Trading) Act (Cap 52A, 2009 Rev Ed) (“CPFTA”) which came into force on 1 March 2004. The Act defines a “consumer” as an individual who does not act exclusively in the course of a business in the following situations: (1) where he receives or has a right to receive goods or services from a supplier; or (2) has a legal obligation to pay the supplier for goods or services. A “consumer transaction” means the supply of goods or services by a supplier to a consumer as a result of a purchase, lease, gift, contest or other arrangement; or an agreement between a supplier or consumer for that purpose (but excluding the transactions specified in the First Schedule) (s 2(1) CPFTA). 11.62 Section 4 CPFTA refers to “unfair practices”. It is an unfair practice for a supplier to (a) do or say something, or omit to do or say anything, if, as a result, a consumer might reasonably be deceived or misled; (b) make a false claim; (c) knowingly take advantage of a consumer, where the consumer is not in a position to protect his own interests or is not reasonably able to understand the character, nature, language or effect of the transaction; or (d) do certain other acts specified in the Second Schedule (such as misrepresenting the price of a product, the sponsorship, benefits, standard or quality thereof). 471 11.63 A consumer who has entered into a consumer transaction involving an unfair practice is entitled to go to court against the supplier (s 6(1) CPFTA). The Act also gives a consumer the right to cancel certain contracts within a cancellation period (s 11(1) CPFTA). However, a person who, in the ordinary course of his business “prints, publishes, distributes, broadcasts or telecasts an advertisement in good faith” on behalf of a supplier is exempted from liability (s 16 CPFTA). 11.64 The consumer protection given by the Act is in addition to any right or remedy that the consumer may have apart from the Act (s 15(1) CPFTA). Further, it is not possible to contract out of the provisions of the Act (s 13 CPFTA). This would mean that any exemption clause would be invalid if and to the extent that it is inconsistent with the provisions of the Act. 11.65 The Act was amended in March 2012 introducing what was termed in the media as “Lemon Law”, which seeks to give consumers added protection against defective goods that do not conform to the contract of sale of goods (including a contract for the transfer of goods and a hirepurchase agreement) at the time of delivery. The law will apply if three criteria have been met: (1) the transferee deals as a consumer; (2) the goods do not conform to the contract; and (3) the contract was made on or after 1 September 2012. Where a consumer is able to rely on this law he may have the right to require the seller to repair or replace the goods at seller’s discretion. Where it is not feasible to do so, the consumer will be entitled to require the seller to reduce the amount to be paid by an appropriate amount or to rescind the contract. For further details of the lemon law, see Chapter 22, para 22.131 onwards. 11.66 In 2016, the Act was amended (see Consumer Protection (Fair Trading) Amendment Act 2016 (Act 25 of 2016)) to give the Standards, Productivity and Innovation Board new investigatory powers to deal with unfair trade 472 practices and to monitor compliance. Since April 2018, the consumer protection role has been taken over by the Competition and Consumer Commission of Singapore (see Part 10 s 69(b), Enterprise Singapore Board Act 2018 (No 10 of 2018)). The 2016 amendments also gave the courts power to order injunctions against the errant trader’s business and complicit individuals. CONCLUSION 11.67 We noted at the beginning of this chapter that while it is essential to ensure freedom of contract on one hand, it is equally important on the other to control its excesses so that they do not lead to unfairness. The courts played an important part as to the latter by assisting the weaker party through various devices. These included first, the requirement for the stronger party to prove incorporation of the exemption clauses into the contract. An exemption clause could be incorporated into the contract by signature, notice or by a prior course of dealing. Second, the courts would then decide on its validity by employing various rules of construction such as the contra proferentem rule, and the Canada Steamship guidelines in cases of negligence liability. However, over time the courts’ intervention proved to be insufficient and the legislature had to step in. The legislature in the UK intervened by passing the Unfair Contract Terms Act 1977 which is now part of the Singapore law as Cap 396, 1994 Rev Ed. 11.68 Another development to be noted in this context is the growth of consumer protection legislation in tandem with the law on exemption clauses. Singapore enacted the Consumer Protection (Fair Trading) Act (Cap 52A, 2009 Rev Ed) in 2004 which has subsequently been amended several times to strengthen consumer protection. The enactment of this legislation regulating fair trading in Singapore has provided an additional avenue for legal redress for consumers. Although the Act, unlike UCTA, 473 does not specifically provide that certain exemption clauses are invalid, it does permit an aggrieved consumer to sue a supplier and be awarded restitution of the money he has paid or damages for loss he has suffered as a result of the supplier’s unfair trading practices. This legislation thus seeks to achieve fairness between the parties, the same objective that has guided the development of the law relating to exemption clauses. 474 Chapter 12 Mistake 12.1– 12.2 12.3 12.4– 12.5 12.6 12.7 12.8 12.9 12.10 12.11– 12.12 12.13 12.14– 12.21 12.22 12.23– 12.26 12.27– 12.29 12.30 Introduction Categories of Mistake Legal Consequences of Mistake Distinct Consequences at Common Law and in Equity Effects on Third Party Rights (1) Where contract is void under common law (2) Where contract is voidable in equity Common Mistake Introduction Common Mistake at Common Law (1) English position (a) Non-existence of subject matter (res extincta) (b) Subject matter already belongs to the buyer (res sua) (c) A broader doctrine of common mistake (2) Local position Common Mistake in Equity (1) English position (2) Local position Mutual Mistake 475 12.31 12.32– 12.33 12.34 12.35– 12.36 12.37 12.38 12.39– 12.41 12.42– 12.47 12.48– 12.52 12.53– 12.55 Unilateral Mistake Introduction Mistake as to a Term of Contract (1) Unilateral mistake at common law (a) (b) Mistake must relate to a term Knowledge of the non-mistaken party (c) Consequences of an operative mistake (2) Unilateral mistake in equity Mistaken Identity (1) Introduction (2) Face-to-face transactions (3) Non face-to-face transactions Non Est Factum (This is Not My Deed) 12.56 Rectification 12.57 Conclusion: Is There a Doctrine of Mistake to Begin With? INTRODUCTION 12.1 In Chapters 7 and 8, we learnt that a contract is formed when one party’s offer has been unconditionally accepted by another, and this agreement is supported by consideration as well as the intention to create legal relations. What if the parties’ consent was in fact based on mistaken facts or assumptions? In such a situation, the contract may be vitiated, that is, rendered ineffective. A mistake that has this effect is referred to as a “vitiating factor”. It is important to note, however, that it is not every mistake, but only serious mistakes, which have the effect 476 of vitiating a contract. The main objective of this chapter is to identify the types of mistakes which are sufficiently “serious” for this purpose. 12.2 An important preliminary point to note is that this chapter deals with situations where contracting parties are affected by some mistaken belief or assumption at the point of entering into the contract. Mistakes of this nature should therefore be contrasted with and distinguished from: misrepresentation — this involves situations where one party’s mistaken belief is in fact induced by representations made by another party to the contract (see Chapter 13); frustration — this occurs where the parties’ belief or assumption turns out to be wrong as a result of an event that occurs after the contract is formed (see Chapter 17); and unjust enrichment — this may include situations where parties transact with each other on the basis of a mistaken belief or assumption, but such a transaction does not in fact amount to a contract. For example, A may make a payment to B in the mistaken belief that A is indebted to B. In such a case, A’s payment is not contractual in nature, and B’s liability to repay A arises under the law of unjust enrichment, not contract. CATEGORIES OF MISTAKE 12.3 Mistakes which may affect the operation of contracts are broadly categorised as follows: common mistake — where both parties are in agreement but make the same mistake as to the subject matter of the contract; mutual mistake — where both parties are mistaken on different matters; unilateral mistake —where only one party is mistaken as to a term of the contract or the identity of the counterparty and the other party knows of the mistake; 477 non est factum — this is a more specific category of mistake which applies only to documents mistakenly signed. LEGAL CONSEQUENCES OF MISTAKE Distinct Consequences at Common Law and in Equity 12.4 As explained in Chapter 3, paras 3.30–3.31, judge-made rules typically originated either from common law or chancery (equity) courts. In this chapter, it is important to have regard to this historical distinction because the effect which a mistake has on a contract will depend on whether one is applying a common law or an equitable rule. 12.5 At common law, an operative mistake renders the contract void ab initio (ie, void from the beginning). In other words, the contract ceases to have effect in the most complete and absolute sense. The result is that the contract is deemed never to have existed. In contrast, a mistake that is operative in equity only renders a contract voidable. This means that the contract is not void, but may be set aside (rescinded) by the mistaken party. The parties’ contractual rights and obligations therefore remain intact until and unless the mistaken party chooses to set the contract aside. Effects on Third Party Rights 12.6 The distinction between the effects of a mistake at common law and in equity is most critical when third party rights are involved. To illustrate this, consider an example where a seller S sells a car to a buyer B. B subsequently sells the same car to a third party TP (see Figure 12.1). 478 Figure 12.1 Mistake at common law as contrasted with mistake in equity (1) Where contract is void under common law 12.7 If the contract between S and B is void as a result of a mistake operative at common law, no rights or obligations can pass under it. Thus, although B has attempted to transfer the vehicle to TP, such a transfer is ineffective because no right has been transferred to B in the first instance. In such a case, S, the original owner, is entitled to recover the vehicle even though TP may have purchased it in complete ignorance of the circumstances under which the mistake arose in the first place. (2) Where contract is voidable in equity 12.8 Where, however, the contract is only voidable in equity, the consequences are quite different. Such a contract is valid until the seller indicates his or her intention to set it aside. Thus, if B sells the vehicle to TP before S has the opportunity to rescind the first contract with B, then TP would have acquired B’s rights in the vehicle, and it is then too late for S to recover the same from TP. Since the contract between S and B continues in force until S rescinds, there are still rights that could be passed from B to TP under the second contract. Figure 12.1 summarises 479 the distinct results that arise under common law and in equity. COMMON MISTAKE Introduction 12.9 A common mistake arises when, although both contracting parties have reached agreement on the essential terms of the contract, they are in fact mistaken as to the basis upon which they contracted. In other words, the parties’ belief or assumption in respect of a specific contractual subject matter is wrong. While this may appear to be a simple concept, the law has in fact experienced great difficulties in defining the conditions under which a common mistake is said to have occurred. This difficulty is compounded by the fact that there appears to be different sets of criteria for determining when such a mistake arises at common law and in equity. Common Mistake at Common Law (1) English position 12.10 It is convenient to begin with two relatively uncontroversial instances of common mistakes that are operative at common law. (a) Non-existence of subject matter (res extincta) 12.11 A contract is void if the parties are unaware that the contractual subject matter is non-existent or has perished at the time of the contract. In Couturier v Hastie (1856), the parties had contracted to sell a cargo of corn which they believed was being shipped from Salonica to England. Unknown to both parties, however, the cargo had in fact deteriorated and had been sold off by the master of the ship prior to the date of the contract. The court found that the contract was entered into for the sale of existing goods. Since the goods were not in fact available for sale at the time of the contract, the seller could not claim 480 against the buyer for the price of the cargo. Although the term “mistake” was not used in the court’s reasoning, this decision is commonly cited as an instance where a contract is void on the ground of the parties’ shared and mistaken assumption as to the existence of the subject matter. 12.12 A contract may not, however, be invalidated on the ground of mistake if, on its true construction, one of the parties has agreed to bear the risk of the non-existence of the subject matter. This occurred in the Australian decision McRae v Commonwealth Disposals Commission (1951). In this case, the Commission invited tenders for a wrecked tanker that was said to contain oil. The plaintiffs’ tender was accepted and they thereupon embarked on a costly salvage expedition, only to discover that the tanker did not exist at all! In its defence against the plaintiffs’ claim for breach of contract, the Commission argued, relying on Couturier v Hastie, that the contract was void for common mistake. This argument was rejected by the court. It held that on a true construction of the contract, the Commission had assumed the risk relating to the existence of the tanker and was therefore in breach of its contractual promise when the tanker was found not to have existed. The plaintiffs thus succeeded in their claim for damages, which included the wasted expenses incurred in connection with the expedition. (b) Subject matter already belongs to the buyer (res sua) 12.13 The second instance in which a contract would clearly be rendered void for common mistake is where one party agrees to purchase a property or an interest from another which, unknown to both of them, already belonged to the buyer. In such a case, the contract is null and void from its inception. (c) A broader doctrine of common mistake 12.14 What would the position be, if the mistake does not fall within either of the two specific instances just described? 481 For example, if a seller sells a painting to a purchaser which they both honestly believe to be the authentic work of a famous artist, is the contract void for common mistake if the painting is subsequently discovered to be a counterfeit? In such a case, the subject matter of the contract (ie, the painting) does in fact exist, and hence the contract is not void on the narrow ground of res extincta (see para 12.11). Nevertheless, can it not be argued that the counterfeit is so radically different from what the parties had in mind that the contract ought to be void on the ground of mistake? Despite some uncertainty in the past, it is now clear that such an argument may be raised — the doctrine of common mistake is no longer confined to the specific instances involving res extincta and res sua. 12.15 In the leading decision of Bell v Lever Brothers, Ltd (1932), Lord Atkin said (at p 218) that a mistake as to the quality of a thing will only affect the validity of the contract if it “makes the thing without the quality essentially different from the thing it was believed to be”. Similarly, Lord Thankerton observed (at p 235) that the mistake must “relate to something which both [parties] must necessarily have accepted in their minds as an essential and integral element of the subject-matter”. In that case, the claimant company had agreed to compensate the defendant employees for prematurely terminating their service contracts. Subsequently, the company discovered that it could in fact have terminated the defendants’ service contracts without compensation on account of the defendants’ prior breaches of duties. The company argued that had it known of these earlier breaches, it would have dismissed the defendants without compensation. The defendants, on the other hand, had not acted dishonestly because it was found that they had forgotten about their earlier breaches at the time of entering into the compensation agreements. The compensation agreements were thus made under the common mistaken assumption that the service contracts could only be terminated with compensation. Although the court conceded that a radical and essential mistake could 482 render a contract void, it held that this was not such a case. The mistake was not so serious as to render the contracts essentially different from what the parties had contemplated. One explanation of the restrictive approach taken in this case is the court’s concern with protecting contractual certainty — so long as parties have agreed to the essential terms of the contract, the parties should (as far as possible) be held to their bargain and look to the contract for protection against unknown risks. 12.16 The existence of this broader doctrine of common mistake at common law was subsequently affirmed in Associated Japanese Bank (International) Ltd v Crédit du Nord SA (1989). In this case, a fraudster named Bennett purportedly entered into a sale and leaseback arrangement with Associated Japanese Bank (International) Ltd, in respect of four specific machines. This arrangement comprised two contracts: (1) the sale of the machines by Bennett to the claimant, and (2) the claimant’s lease of the same machines back to Bennett at a quarterly rental. The defendants, another financial institution, agreed to guarantee Bennett’s obligations under the lease for a fee. Unknown to both the claimants and the defendants, however, the machines in question never existed. Bennett, whose fraud was exposed only after having been paid a sum in excess of £1 million by the claimants, was arrested and adjudged bankrupt soon after. The claimants thus turned to recover their loss from the defendant guarantor. On these facts, Steyn J (as he then was) was prepared to hold the guarantee void on the ground of common mistake. As the parties had contemplated a guarantee of obligations under a lease of four specific machines, the non-existence of the machines rendered the actual guarantee “essentially different” from that which the parties had in mind. (This holding is, however, strictly obiter because Steyn J had also found that there was either an express or an implied condition precedent in the guarantee that the machines concerned existed and, as the machines did not in fact exist, the claimants’ action failed.) 483 12.17 Steyn J’s judgment in the Associated Japanese Bank case is significant for defining the scope of the doctrine of common mistake. Steyn J highlighted the importance of drawing a clear distinction between the doctrine of mistake and that of breach. Before invoking the doctrine of common mistake, the court will first have to interpret or construe the contract to determine if one of the contracting parties has assumed the risk of the mistake. If so, and the mistake indeed occurs, then the party who has assumed the risk of the mistake is in breach of contract. Accordingly, in such a situation, there is no room for the doctrine of mistake to apply at all. This occurred in McRae v Commonwealth Disposals Commission (discussed in para 12.12), where the Commission was found to have assumed the risk relating to the existence of the tanker, and was therefore liable for breach of contract when it transpired that the tanker did not in fact exist. If, however, the contract is silent on where the risk of the mistake lies, then it is appropriate to consider the application of the doctrine of mistake. 12.18 The learned judge then laid down (at p 268) five important propositions applicable to the doctrine of common mistake: The first imperative must be that the law ought to uphold rather than destroy apparent contracts. Secondly, the common law rules as to a mistake regarding the quality of the subject matter, like the common law rules regarding commercial frustration, are designed to cope with the impact of unexpected and wholly exceptional circumstances on apparent contracts. Thirdly, such a mistake in order to attract legal consequences must substantially be shared by both parties and must relate to facts as they existed at the time the contract was made. Fourthly, and this is the point established by Bell v Lever Brothers, Ltd …, the mistake must render the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist. Fifthly, there is a requirement which was not specifically discussed in 484 Bell v Lever Brothers, Ltd.… In my judgment a party cannot be allowed to rely on a common mistake where the mistake consists of a belief which is entertained by him without any reasonable grounds for such [a] belief … That is not because principles such as estoppel or negligence require it, but simply because policy and good sense dictate that the positive rules regarding common mistake should be so qualified. The above observations make it clear that the doctrine of common mistake has an extremely narrow scope. If the law’s primary task is to uphold rather than destroy contracts, it would follow that the doctrine of common mistake, which has the effect of destroying contracts, has to operate within narrow boundaries. Indeed, this restrictive approach is further amplified by Steyn J’s second proposition, which draws an analogy between the doctrine of frustration and that of mistake. Both doctrines apply only in very exceptional situations involving unforeseeable risks (on the difference between mistake and frustration, see para 12.2). 12.19 In England, the already restrictive approach to common mistake at common law has been further narrowed by the English Court of Appeal in Great Peace Shipping Ltd v Tsavliris Salvage Ltd (2003). In this case, the court held that a common mistake arises only if the parties had (unknowingly) agreed to something which is impossible to perform. The application of this test may be illustrated by the decision in Great Peace Shipping itself. The defendants in this case had contracted to hire the claimants’ vessel (the Great Peace) for the purposes of salvaging another vessel (the Cape Providence), which had suffered serious structural damage at sea. At the time of the contract, both the claimants and the defendants honestly but mistakenly believed that the two vessels were only 35 miles apart. After the conclusion of the contract of hire, however, the parties discovered that the two vessels were in fact 410 miles apart. On discovering the error, the defendants did not immediately terminate the contract of 485 hire, but only did so after it had successfully obtained help from another vessel that was in closer proximity. 12.20 The court declined to invalidate the contract on the ground of common mistake. It was clear from the evidence that the mistake did not render the contract impossible of performance. Despite the greater distance, the Great Peace could still have arrived in time to provide valuable service to the Cape Providence. The fact that the defendants did not cancel the contract of hire until they were certain that they could obtain alternative services was evidence of their belief that the Great Peace could still have served the purpose for which it was hired. The defendants were thus liable to pay to the claimants the cancellation fee stipulated by the contract. 12.21 In reality, very few mistakes (except in the res extincta and res sua cases) would render a contract impossible to perform. It may be that, in the extreme, a strict insistence on the criterion of impossibility could have the practical effect of extinguishing the common law doctrine of mistake altogether. (2) Local position 12.22 The doctrine of common mistake applies in Singapore as well (see Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd (2001) and Wong Lai Keen v Allgreen Properties Ltd (2009)). Furthermore, the Green Peace Shipping case has been cited by the High Court with approval on at least two occasions (see Wong Lai Keen v Allgreen Properties Ltd (2009) and Norwest Holdings Pte Ltd v Newport Mining Ltd (2010)). However, in neither case did the court have to consider whether the alleged mistake was sufficiently serious to vitiate the contract. Thus, it is still unclear if the stricter requirement laid down in the Great Peace Shipping case — that a common mistake may only avoid a contract if it renders the performance of the contract impossible — is part of Singapore law. 486 Common Mistake in Equity (1) English position 12.23 Prior to the Great Peace Shipping case, it was generally accepted that there existed a doctrine of common mistake in equity that was established by the dicta of Denning LJ (as he then was) in the English Court of Appeal decision of Solle v Butcher (1950) (at pp 692–693): The court, it was said, had power to set aside the contract whenever it was of opinion that it was unconscientious for the other party to avail himself of the legal advantage which he had obtained … A contract is also liable to be set aside if the parties were under a common misapprehension either as to facts or as to their respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault. [emphasis added] 12.24 A common mistake in equity is unlike that at common law in three ways: As explained in paras 12.4–12.8, an operative mistake renders a contract completely void at common law, but an equitable mistake only renders it voidable. This distinction becomes critical when it is necessary to determine the effect of a mistake on third party rights. Despite substantial uncertainty as to what degree of misapprehension would amount to a “fundamental” mistake in equity, the cases appear to suggest that it was relatively easier to establish an operative mistake in equity than at common law (see, eg, the well-known English precedents of Grist v Bailey (1967); Magee v Pennine Insurance Co Ltd (1969); Laurence v Lexcourt Holdings Ltd (1978) and the Associated Japanese Bank case itself). 487 Finally, a court has greater flexibility to grant remedies if common mistake is established in equity instead of at common law. In the case of a common mistake in equity, a court has the flexibility of setting aside the contract on such conditions as the court may consider appropriate; for example, a condition requiring one party to give the other party the chance to contract on different terms. As a broader and more flexible approach, the role of the equitable doctrine is to supplement the doctrine of mistake at common law. In practice, what this means is that a party who alleges that a contract has been vitiated by a common mistake has two bites of the cherry. He may first plead that the contract is avoided by the mistake at common law. If this argument succeeds, there is obviously no need to seek the help of equity. However, if the common mistake is established, but is not sufficiently serious to avoid the contract at common law, then the party may attempt a second bite of the cherry by pleading the same mistake in equity. This was essentially the approach of English law until the English Court of Appeal decision in Great Peace Shipping. 12.25 In Great Peace Shipping, the English Court of Appeal drastically altered this state of affairs by holding that the equitable doctrine of common mistake did not exist at all. The court arrived at this conclusion for two reasons. First, it considered that the equitable jurisdiction laid down in Solle v Butcher was not founded on judicial precedents. Second, and more importantly, the equitable doctrine was flawed because it could not satisfactorily define a “fundamental” mistake in a way that is clearly distinct from the operative common law mistake (ie, one that makes the contract “essentially and radically different” from that which the parties had in mind). The court reasoned that if both the common law and the equitable doctrines may be invoked by the same type of mistake, then the more generous and flexible equitable doctrine devised by Solle v Butcher (see para 12.23) would merely be an attempt to get around the strict common law position in Bell v Lever 488 Brothers, Ltd (see para 12.15) inconsistent with the latter decision. 12.26 and is therefore As a result, the present position in English law is that there is no longer any doctrine of common mistake in equity. Not surprisingly, the radical approach taken in Great Peace Shipping is highly controversial (see, eg, the criticism in A Phang, “Controversy in Common Mistake” (2003) The Conveyancer and Property Lawyer 247 and A Chandler, J Devenney and J Poole, “Common Mistake: Theoretical Justification and Remedial Inflexibility” (2004) Journal of Business Law 34), and there are indications that it does not represent the law in Singapore (see para 12.27). (2) Local position 12.27 In Chwee Kin Keong v Digilandmall.com Pte Ltd (2005), the Singapore Court of Appeal disagreed with the approach of the English Court of Appeal in Great Peace Shipping and affirmed the existence in Singapore of an independent doctrine of mistake in equity. While conceding that it might be difficult to distinguish between the scope of the common law and the equitable rules, the court did not think that such difficulties alone justified the abolition of the equitable jurisdiction. The court recognised that a clear and strict common law rule, which allows the avoidance of contracts for the most serious mistakes, has the advantage of promoting certainty of the law. However, the virtue of certainty has to be balanced against the importance of achieving justice. A broader and more flexible doctrine in equity is useful, particularly in cases where the court is asked to determine the rights of third parties affected by an alleged mistake, in ensuring that a fair outcome is obtained. As the scope of the common law doctrine is notoriously narrow, having only a single doctrine at common law may mean that a contract would rarely, if ever, be avoided on the ground of common mistake. In most cases, that would advantage the third party (see Figure 12.1). But that is by no means always a fair result. A supplementary and alternative remedy in equity may therefore be essential in providing the court 489 with some measure of flexibility to grant relief where required by the dictates of justice. 12.28 Although the Court of Appeal was only concerned with unilateral mistakes in the Digilandmall case (see paras 12.35–12.37) and hence its comments may not directly apply to common mistakes, nevertheless its reasons for departing from the English position should be equally pertinent in the context of common mistakes. Surely the concern with achieving a balance between the competing interests of certainty and justice is just as significant whether the mistake is unilateral in nature or is shared by the contracting parties. Indeed, following Digilandmall, the Singapore Court of Appeal in Olivine Capital Pte Ltd v Chia Chin Yan (2014) cited Digilandmall (at [69]) with approval as the leading case establishing the existence of a doctrine of common mistake in equity. 12.29 Given that the equitable doctrine of common mistake does exist in Singapore, how is the scope of this doctrine to be defined? A handful of older cases (see Alsagoff v Robin (1965) and Robin v Goh Boon Choo (1965)) suggest that the doctrine only applies to cases involving a total failure of consideration. Such a requirement would, however, render the doctrine exceptionally narrow, and is arguably inconsistent with the approach taken in a number of modern cases. For instance, in Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd (2001), Judith Prakash J cited with approval the broader approach of Steyn J in the Associated Japanese Bank case, that is, that the equitable doctrine is broader than and supplements the common law doctrine (see para 12.24). Similarly, the Court of Appeal in the Digilandmall case held that mistake in equity has to be broader and more flexible than its common law counterpart. To illustrate, the Court of Appeal suggested (as an example at [75]) that mistake in equity could apply to a wider and more open-ended category of “fundamental” mistakes. Thus, while there is as yet no precise test for determining whether a mistake is sufficiently “fundamental” to invoke the doctrine of mistake 490 in equity, it is at least certain that this concept is broader and less stringent than that required under common law. Box 12.1 Reflecting on the law Should the common law and equitable rules be merged? The difficult and controversial relationship between the rules at common law and in equity is a reflection of the tension between the desire for legal certainty on the one hand, and remedial flexibility on the other. In the foregoing discussion, we have established that at present, the law in Singapore would examine the effects of a common mistake in two stages. It begins with a stricter enquiry at common law, followed by a broader and more flexible test in equity. However, the value and viability of this twostage enquiry will continue to hinge on the very fine (and some would argue, non-existent) distinction between a “radical and essential” mistake at common law and the “fundamental” mistake in equity (see Figure 12.2). In the Great Peace Shipping case, the court resolved this difficulty by opting for a single and strict common law rule. It might be asked: Would not the alternative and contrasting approach of having a single but more flexible rule which only renders contracts voidable for fundamental common mistakes be equally or perhaps even more meritorious? (For a proposal to that effect, see A Phang, “Common Mistake in English Law: The Proposed Merger of Common Law and Equity” (1989) 9 Legal Studies 291–306). Indeed, that is likely to be the practical effect of the existing two-stage enquiry since a plea of common mistake would most certainly be made both at common law and in equity. Finally, it is important to note that there have been numerous calls for legislative reform of the law in this area (see, eg, the observations of Lord Phillips in the Great Peace Shipping at p 726; A Phang, “Common Mistake in English Law: The Proposed Merger of Common Law and Equity” (1989) 9 Legal Studies 291, 303–304; and A Chandler, J Devenney and J Poole, “Common Mistake: Theoretical Justification and Remedial Inflexibility” (2004) Journal of Business Law 34–58). That might be the best way forward given the complex and contentious nature of this subject. 491 Figure 12.2 The effect of a common mistake MUTUAL MISTAKE 12.30 A mutual mistake arises when parties are dealing with each other at cross-purposes. For instance, a seller S offers to sell a brand new car and B accepts the offer thinking that S is offering to sell, instead, a second-hand car. Neither party knows of the other’s mistake at the time of contract. On such facts, it is clear that no contract arises in the first place because there is a complete lack of coincidence between offer and acceptance. As the reason for the failure of the contract lies in the fact that it is not properly formed, this category of mistake ought to be more appropriately understood as an application of “formation of contract” principles (see Wellmix Organics (International) Pte Ltd v Lau Yu Man (2006) at [58]). While conceptually distinguishable, the practical effect of a finding of mutual mistake is substantially similar to a finding that the contract is void ab initio. UNILATERAL MISTAKE 492 Introduction 12.31 The focus of this category of mistake is on a situation where one party is mistaken but the other party is (or ought to be) aware of the first party’s mistake. Situations of unilateral mistake are traditionally sub-classified into two further categories, namely, (1) a mistake as to a term of the contract, and (2) a mistake as to a party’s identity. A mistake as to a contractual term may be pleaded both at common law and in equity. In contrast, the effects of a mistaken identity are determined only by common law principles. Mistake as to a Term of Contract (1) Unilateral mistake at common law 12.32 In general, if A contracts to purchase goods from B in the mistaken belief that the goods are of a certain quality, A’s mistake has no effect on the contract unless B has caused or contributed to A’s mistake. Exceptionally, if A’s mistake relates to a fundamental term of the contract, and the mistake is known to B, then A may resist the enforcement of the contract on the mistaken term. To illustrate, in Hartog v Colin & Shields (1939), the claimant contracted to buy Argentine hare skins from the defendants. The purchase price was mistakenly stated in the contract by the pound instead of by the piece. There was evidence that the industry practice then was to transact on per piece rather than per pound basis. The oral and written negotiations leading to the contract also referred to price per piece. It was held that the claimant could not enforce the contract as he must have realised that the defendants had made a mistake as to the price. 12.33 The Singapore Court of Appeal in Broadley Construction Pte Ltd v Alacran Design Pte Ltd (2018) identified the three requirements for unilateral mistake at common law as follows: (1) one party has made a mistake, (2) the mistake is a sufficiently important or fundamental mistake as to a term, and (3) the non-mistaken party has actual knowledge of the mistaken party’s mistake (at [42]). The 493 second and third requirements are of greater legal significance, and will be the focus of the following subsections. (a) Mistake must relate to a term 12.34 For the unilateral mistake to be operative, it must relate to a term of the contract, that is, a promise made by one of the parties; it is insufficient if the mistake relates merely to a fact or an assumption that does not form part of the contract. The decision in Smith v Hughes (1871) established this requirement. In that case, the defendant purchased oats from the claimant thinking that they were old oats, but the claimant was in fact offering to sell new oats. Upon discovering the mistake, the defendant (buyer) refused to take delivery of the new oats. The court held that the effect of the buyer’s mistake depends on whether the seller knew that the buyer was contracting in the erroneous belief that (1) the oats were old oats, or (2) the seller was contracting to sell old oats. In situation (1), the mistake has no effect on the contract even if the seller knew of the buyer’s error. In this case, the buyer labours under a kind of self-deception and the seller is not obliged to correct the error under the general rubric of caveat emptor (let the buyer beware). The result is different in situation (2), where the seller knows that the buyer has made a mistake as regards the term of the contract (ie, the seller’s promise to sell old oats). Unlike situation (1), the mistake in situation (2) will relieve the purchaser from his obligation under the contract. (b) Knowledge of the non-mistaken party 12.35 In Chwee Kin Keong v Digilandmall.com Pte Ltd (2005), the Court of Appeal clarified that a unilateral mistake as to a contractual term will only be operative at common law if the non-mistaken party has actual knowledge of the other party’s mistake. This requires proof of the non-mistaken party’s subjective state of mind. The best evidence of a person’s intention would be his own admission or some other incontrovertible evidence. In the absence of such 494 evidence, however, his state of mind will have to be “inferred from all the surrounding circumstances, including the experiences and idiosyncrasies of the person and what a reasonable person would have known in a similar situation” (at [41]). In other words, whether or not the contracting party concerned actually (or subjectively) knew of the other contracting party’s mistake is objectively ascertained. If a person wilfully shuts his eyes to the obvious, the court is entitled to find that he has actual knowledge of the matter he is deliberately ignoring. 12.36 This process of inferring subjective knowledge from objective circumstances may be illustrated by the facts of the Digilandmall case. The claimants in this case were six friends who placed orders through the defendant’s websites, for a total number of 1,606 laser printers at $66 each. Prior to the transactions, the claimants had done searches on the Internet and were aware that the ordinary retail price of each printer was just below $4,000. The unusually low price stated on the defendant’s websites was in fact a mistake of the defendant’s employee. When the defendant refused to meet the orders on account of the error, the claimants brought an action to enforce the contracts. The Court of Appeal affirmed the High Court’s finding that the claimants had actual knowledge of the mistake (and hence their claims failed). The relevant evidence included the claimants’ subjective attributes: the fact that they were all educated, streetwise and savvy individuals suggested that they did in fact appreciate that the absurdly low price was a mistake. The extraordinarily large number of printers ordered, as well as the hasty manner in which the claimants “snapped up” the offer, also pointed to the fact that the claimants knew of the error, and were intent on exploiting this rare opportunity. Any reasonable person standing in the claimants’ position would have harboured a very real suspicion as to the correctness of the price and would have seen fit to enquire before taking up the offer. In failing to make enquiries, the claimants were wilfully shutting their eyes to the obvious. On these facts, the courts were clearly justified in their 495 conclusion that the claimants actually knew of the defendant’s mistake. However, on the whole, the Court of Appeal has endorsed a very generous approach to the process of ascertaining actual knowledge, which may overlap substantially with the finding of constructive knowledge. This may render it hard to distinguish between the common law and equitable doctrines of unilateral mistake (see the discussion in Box 12.2). Box 12.2 Reflecting on the law Unilateral mistake at common law and equity — are they one or two on the/awl doctrines? The distinction drawn between actual and constructive knowledge in Digilandmall is a difficult and fine one. Indeed, given the court’s generous approach to the proof of actual knowledge, it is possible that this difficulty of distinguishing between actual and constructive knowledge may in practice reduce the equitable jurisdiction to the point of insignificance. This possibility is bolstered by the fact that the equitable jurisdiction requires the proof of an additional element of impropriety. In practice, that will require that the non-mistaken party be guilty of some unconscionable conduct, and be constructively aware of the other’s mistake. But would not the court also have been able to infer actual knowledge of the mistake on such facts? That said, it may be that the real reason for preserving the equitable jurisdiction is to ensure that the court is endowed with a certain degree of flexibility in dispensing a just remedy particularly in the exceptional case involving third party interests. To that extent, the equitable jurisdiction would remain important, even if rarely invoked. For more detailed discussions of these and related issues, see Wellmix Organics (International) Pte Ltd v Lau Yu Man (2006); T M Yeo, “Unilateral Mistake in Contract: Five Degrees of Fusion of Common Law and Equity” (2004) Singapore Journal of Legal Studies 227–240; and P W Lee, “Unilateral Mistake in Law & Equity — Solle v Butcher Reinstated” (2006) 22 Journal of Contract Law 81–88. (c) Consequences of an operative mistake 12.37 In Digilandmall, the Court of Appeal emphasised the distinct consequences of an operative mistake at common 496 law and in equity — an affected contract is void at common law but is merely voidable in equity. However, this proposition has to be qualified in the context of unilateral mistakes. As between the contracting parties, it is clear that an operative mistake would prevent the nonmistaken party from enforcing the apparent contract (including the mistaken term). However, it does not follow that the contract is always void ab initio at common law. In some situations, the mistaken party may enforce the literal terms of the contract, or seek rectification of the contract to reflect the parties’ true intention (see para 12.56). (2) Unilateral mistake in equity 12.38 In the Digilandmall case, the Court of Appeal confirmed the existence of a doctrine of unilateral mistake in equity that may render the contract voidable in equity. This equitable doctrine differs from the common law rule in the following ways: The rationale underlying the equitable doctrine is that of unconscionability. A contract affected by unilateral mistake may only be set aside if the court is satisfied that it would be unconscionable for the non-mistaken party to enforce the contract. Such unconscionability may arise, for instance, when the non-mistaken party is guilty of some “sharp practice” or has consciously omitted to disabuse the mistaken party of his error. The requisite level of knowledge for the equitable doctrine to be made out is different. In equity, it is unnecessary to prove that the nonmistaken party has actual knowledge of the other party’s mistake. Constructive knowledge on the part of the nonmistaken party will suffice. Constructive knowledge of a fact is imposed on a person in circumstances where a reasonable person standing in his position would have known or, at the very least, would have made enquiries of the mistaken fact. However, this does not mean that a non-mistaken party is guilty of unconscionable conduct merely because he has constructive knowledge of the other party’s mistake. The Court of 497 Appeal emphasised that some additional element of impropriety is required for establishing unconscionable conduct. An operative unilateral mistake is said to render a contract void at common law but voidable in equity. As explained in paras 12.6–12.8, this distinction is critical in determining the rights of subsequent purchasers (but see the qualification discussed in para 12.37). Box 12.3 Reflecting on the law Unilateral mistake in an age of artificial intelligence How would the requirements of unilateral mistake apply to transactions carried out entirely by computers? For example, commercial trades today are frequently carried out by computer algorithms. In such circumstances, what would be the relevant “mistake” and “knowledge” for the purposes of the law? Whose knowledge would be relevant, and at which date should this knowledge be assessed? The Singapore International Commercial Court in B2C2 Ltd v Quoine Pte Ltd (2019) observed that there was no relevant authority dealing with these questions. In this case, Simon Thorley IJ held that the relevant mistake for the purposes of the doctrine of unilateral mistake must be “a mistake by the person on whose behalf the computer placed the order in question as to the terms on which the computer was programmed to form a trading contract in relation to that order” (at [205]). As to the thorny issue of the requisite knowledge, Thorley IJ held that the relevant knowledge was “the state of mind of the programmer of the software of that program at the time the relevant part of the program was written” (at [211]). Is this a satisfactory solution? This decision illustrates well the challenges which technological advancements, especially in the area of artificial intelligence, pose to legal frameworks formulated in an era when such technologies were entirely unheard of. Indeed, artificial intelligence and algorithmic decision-making pose a specific challenge to the oft-used requirement of knowledge in legal doctrine. The law must and will evolve to accommodate these new realities of the commercial world. Mistaken Identity (1) Introduction 498 12.39 This category typically involves cases where one party’s consent to an agreement is procured by the deception of another. If a seller S agrees to sell his car to a buyer B, who has deceived S into believing that he was X, the contract is affected by S’s unilateral mistake as to B’s true identity if B’s identity is material, that is, an important factor which induced the contract. The difficulty in such cases is determining whether the mistake will render the contract void or merely voidable. 12.40 As between S and B, this question is insignificant since S, the mistaken party, would clearly have the right to set aside the contract on account of B’s fraud. However, the distinction becomes critical if B has sold the car to an innocent third party TP before S discovers the fraud. In such cases, the contest is often reduced to that between two innocent parties — S and TP — because B, the fraudster, would usually have absconded or is of little financial means (and hence not worth suing). If the mistake renders the contract between S and B void, S will be able to recover the car from TP because B, not having acquired any property right in the car, has nothing to sell to TP. In the converse situation where the contract between S and B is merely voidable, B would have acquired property rights in the car, which he is able to subsequently transfer to TP (provided S has not rescinded the contract with B). S is therefore unable to recover the property from TP in this instance. In all such cases involving innocent third parties, the court is placed in a difficult position because it is required to prefer one of two innocent parties. It is thus not surprising that the cases dealing with this subject do not all speak with one voice, and the rules that do exist may not be entirely satisfactory. 12.41 To determine the effect of a mistake as to identity, the courts’ general approach is to examine the facts to ascertain whether there is in fact an agreement between the mistaken party and the (deceitful) counterparty. Thus, if S intends to sell his car only to X, then no agreement is reached between S and B when B attempts to purchase 499 the car by pretending to be X. Such intention is established objectively, by reference to what reasonable persons would understand of the contracting parties’ words and conduct. Under this approach, the law further distinguishes between two sub-categories, namely, (1) face-to-face transactions, where the contract between S (the seller) and B (the fraudster) is concluded by the parties in the presence of each other; and (2) transactions “at a distance”, where the parties are not in the physical presence of each other at the time of contract. (2) Face-to-face transactions 12.42 In face-to-face transactions, there is a presumption that the parties intend to deal with the physical person who is present, in which case S is presumed to have intended to contract with B, the fraudster. The contract between S and B would then be valid, though voidable at the option of S (on account of B’s fraud). If S does not discover the fraud in time so as to rescind the contract with B, a third party who purchases the car from B acquires good title to it. Thus, in Phillips v Brooks, Ltd (1919), a rogue represented himself to the claimant jeweller as “Sir George Bullough of St James’s Square”. After the claimant had checked the directory to confirm that there was such a person at the given address, he accepted a cheque from the rogue in exchange for a ring. The rogue then pledged the ring with the defendant pawnbrokers for an advance. Not surprisingly, the cheque was dishonoured and the rogue was nowhere to be found. The claimant then sued the defendants for the return of the ring or the value of the ring plus damages for detention. Horridge J held in favour of the defendants, rejecting the plaintiff’s argument for mistaken identity. In the learned judge’s view, the seller intended to contract with the person present, and there was no error as to the person with whom he contracted, even though the seller would not have made the contract if he had known of the rogue’s true identity. 12.43 Subsequent to Phillips v Brooks, however, the English Court of Appeal took a contrasting approach in Ingram v 500 Little (1961). In this case, the rogue represented himself to the claimants (three elderly ladies) as “Mr PGM Hutchinson who lived at Stanstead House, Stanstead Road, Caterham”. The claimants were the joint owners of a car and were negotiating with the rogue to sell it to him. One of the claimants went to the nearby post office to verify the name and address given by the rogue in the telephone directory. They then sold the car to the rogue and accepted his cheque in exchange. The rogue in turn sold the car to the defendant who purchased it (for cash) in good faith and without notice of the fraud. The cheque was subsequently dishonoured and the claimants brought an action against the defendant to recover either the car or its value. Unlike Phillips v Brooks, however, a majority of the appeal judges (Sellers and Pearce LJJ) held that the mistake was an operative mistake and the claimants succeeded in their claim. The court appeared to be satisfied that the presumption that the claimants intended to deal with the person present (ie, the rogue) has been rebutted. For instance, Pearce LJ found, on an objective view, that the claimants only intended to contract with Mr Hutchinson and not the rogue. The fact that one of the claimants had taken steps to verify the existence of Mr Hutchinson at the stated address was regarded as strong evidence of such intention. The claimants were not mistaken as to an attribute of the counterparty (which would not invalidate a contract) but his very identity (which would). In contrast, Phillips v Brooks was distinguished on the grounds that (1) the claimant in that case intended to deal with the rogue as a customer only and (2) the contract was possibly concluded before the representation by the rogue had been made, and hence the true identity of the buyer was not critical to the contract. 12.44 Despite the court’s attempt to distinguish Ingram v Little from Phillips v Brooks, it is clear that the facts of the two cases are extremely close. Subsequent cases have therefore found it difficult, if not impossible, to reconcile these two conflicting decisions. Some years later, this issue confronted the English Court of Appeal in Lewis v 501 Averay (1972). In this case, the claimant had advertised his intention to sell his car in a newspaper. The rogue responded and introduced himself as “Richard Green” who was then a well-known actor. The rogue then wrote a cheque in payment for the car. When asked for proof of his identity, he showed the plaintiff a special pass of admission to a studio which bore the rogue’s photograph as well as an official stamp. The claimant duly accepted the rogue’s cheque which was of course dishonoured. Applying the presumption that a contracting party intends to deal with the person who is physically present, the court held that the mistake did not render the contract void. In particular, Lord Denning was of the view that the material facts of Phillips v Brooks and Ingram v Little were in fact indistinguishable and more importantly, that the distinction (made in Ingram v Little) between a mistake as to the identity of a person and a mistake as to that same person’s attributes was too fine. The learned judge observed (at p 207): I felt it wrong that an innocent purchaser (who knew nothing of what passed between the seller and the rogue) should have his title depend on such fine refinements. After all, he has acted with complete circumspection and in entire good faith: whereas it was the seller who let the rogue have the goods and thus enabled him to commit the fraud. I do not, therefore, accept the theory that a mistake as to identity renders a contract void. I think the true principle is … [W]hen two parties have come to a contract — or rather, what appears on the face of it, to be a contract — the fact that one party is mistaken as to the identity of the other does not mean that there is no contract, or that the contract is a nullity and void from the beginning. It only means that the contract is voidable, that is, liable to be set aside at the instance of the mistaken person, so long as he does so before the third parties have in good faith acquired rights under it. However, this suggestion for a single rule to govern all contracts (whether or not they are face-to-face transactions) involving mistaken identity — that such 502 contracts should only be voidable and not void — has not been accepted by the House of Lords (now known as the Supreme Court) in Shogun Finance Ltd v Hudson (2004) (see paras 12.49–12.50). 12.45 In Shogun Finance v Hudson, the House of Lords confirmed that the presumption of an apparent contract applies only in face-to-face transactions, and refused to extend it to transactions concluded in writing (see para 12.50). Significantly, the reasoning of the court further suggests that the decision in Ingram v Little was incorrect as there was, in that case, insufficient evidence to rebut the presumption that the claimants were contracting with the rogue. In Ingram v Little, the majority judges had found that the three elderly ladies attached great importance to the identity of the buyer, and concluded, on that basis, that the presumption was rebutted. However, as Devlin LJ (as he then was) pointed out in his powerful dissent in Ingram v Little, the presumption could not be rebutted simply by piling up evidence to show that the claimants would not have contracted with the rogue if they had known of his true identity. Such subjective intention of the victim is likely to be present in most cases involving identity fraud, but it does not alter the fact that, on an objective view, the victims were directing their acceptance to the very person standing in their presence (ie, the rogue). 12.46 Once it is accepted that the victim’s subjective intention is insufficient evidence to rebut the presumption, however, it is hard to imagine what evidence would suffice for such a rebuttal. In Shogun Finance, both Lords Phillips and Walker (in the majority) described the presumption as a “strong” one. Lord Walker conceded (at p 980) that exceptions to the principle would be rare, but suggested that it might arise in cases involving extreme facts including, for instance, a case where the imposter impersonates another through physical disguise. Lord Nicholls (in dissent) admitted (at p 939) that “it is not easy to think of practical circumstances where … the presumption will be displaced.” Lord Millett (also in 503 dissent) went further and suggested that there might be merit in making the presumption a conclusive rule (see p 949). It would thus appear that although the presumption is rebuttable, such rebuttal will only occur in the most exceptional circumstance. 12.47 Before leaving this topic, it is necessary to consider one other difficulty generated by the judgment in Ingram v Little. As mentioned in para 12.43, a distinction was drawn in that case between a mistake as to a person’s identity (which avoids a contract) and a mistake as to his attributes (which does not). For example, S may contract with B in the mistaken belief that B is X, a wealthy individual, but X does not in fact exist. In such a case, it may be said that S is not mistaken as to B’s identity (since X does not exist, X and B are the same person) but only as to his creditworthiness (an attribute). This distinction has, however, been severely criticised. As Lord Millett observed (at p 951) in his dissent in Shogun Finance: [A] person may be identified by reference to any one of his attributes. He may be identified as the person in the room, the person who spoke on the telephone, the person who appended the illegible signature, the writer of the letter under reply, or the person who made the offer; but he may also be identified, and sometimes more relevantly, as the person whose creditworthiness has been checked and found to be satisfactory. Any of these may be the means of identifying a unique person. An automated telling machine is programmed to identify a customer by a combination of a PIN number and a number encrypted on the card which is inserted into the machine. In an increasingly electronic age we are accustomed to identifying ourselves by PIN numbers and passwords; the need to eliminate fraud may in time cause us to identify ourselves by retinal imagery, which at least has the advantage of being a feature of the physical body. But even in the case of a credit card transaction there is an ambiguity. Is the customer to be identified as the person who produces the card? Or as the person whose card is produced? The whole point of 504 a credit card fraud is that the goods should be supplied to the person who produces the card while the cost is debited to the account of the person whose card is produced. The examples given by Lord Millett pointedly demonstrate that the distinction between identity and attributes is highly artificial and rather impractical. There is therefore reason to argue that the effect of an identity mistake should not depend on this artificial distinction. (3) Non face-to-face transactions 12.48 Where the contracting parties are not in physical contact with each other, it is relatively easier to invoke the doctrine of mistaken identity. In the leading House of Lords decision in Cundy v Lindsay (1878), the plaintiffs were manufacturers of goods based in Ireland who had received written orders from a rogue named Alfred Blenkarn. The rogue wrote to the claimants, giving his address as “37, Wood St, Cheapside” and signed his letters in such an ambiguous manner that they appeared to read as “Blenkiron & Co”. As a result, the claimants were under the impression that the orders were from a respectable firm bearing the name of “Blenkiron & Co” operating from “123, Wood St”. The claimants duly despatched the goods ordered to the rogue who, in turn, sold them on to the defendants who were completely unaware of the fraud perpetrated by the rogue. The claimants sought to recover the goods from the defendants (ie, the third party purchasers), arguing that no property in the goods had passed to the rogue (and hence the defendants) since the initial contract with the rogue was void for mistake. The House of Lords accepted the claimants’ argument, holding that since they had intended to deal only with Blenkiron & Co, there was no contract with the rogue Blenkarn. Cundy v Lindsay was applied by the Singapore Court of Appeal in Tribune Investment Trust Inc v Soosan Trading Co Ltd (2000). It should, however, be noted that this was not a case involving third party 505 rights; the court only had to determine whether a contract was formed between two negotiating parties. 12.49 A more recent example of the approach applicable to non face-to-face transactions is that of the House of Lords in Shogun Finance Ltd v Hudson (2004). Here, the rogue went to a car dealer’s showroom and identified himself with a stolen driving licence belonging to one Patel. A copy of the licence as well as the hire-purchase agreement bearing the rogue’s forged signature were faxed to the claimants, the finance company, for credit assessment. Having satisfied itself as regards Patel’s creditworthiness, the claimants advised the dealer accordingly and the dealers in turn handed the car to the rogue. The rogue sold the car to the defendants on the following day. As the transaction involved a written agreement, the court categorised this as a non face-toface transaction and held that, on an objective construction of the hire-purchase agreement, the claimants had intended to transact with Patel — the person named in the agreement — and not the rogue. There being no contract between the claimants and the rogue, the defendants did not acquire any title to the car. 12.50 Despite the defendants’ forceful arguments, the court refused to extend the presumption applicable to face-toface transactions to cases involving written contracts. In the latter case, the intention of the contracting parties will have to be ascertained by looking at the evidence surrounding the contract. Such an approach has the effect of favouring the original owner over the third party purchaser for the following reason. Where the contract is in writing, the parties’ objective intention will be inferred mainly, if not exclusively, from the written agreement. Since a fraudster will in all likelihood use only his false identity when entering into a written agreement, the agreement would invariably be invalid on the ground that it was intended to be made with that assumed identity (rather than the rogue). It follows, then, that the original 506 owner would be entitled to recover the subject matter of the contract from the third party purchaser. 12.51 Finally, it is sometimes said that where a party enters into a contract with a non-existent entity, that party will generally be held to have contracted with the writer of the correspondence (ie, the fraudster) and there would therefore not be an operative mistake. In King’s Norton Metal Co (Ltd) v Edridge, Merrett, and Co (Ltd) (1897), a rogue named Wallis wrote to the claimants and placed orders for some metal wires after falsely representing himself as Hallam & Co, which did not in fact exist. The letterhead used by Wallis depicted a large factory with a list of overseas depots. As is usual, the rogue then sold the goods to the defendant, an unsuspecting third party. The court held that the contract was clearly made with Wallis, the writer of the letter. The court indicated, however, that the result could have been different if Hallam & Co did exist at the time of the contract. Box 12.4 Reflecting on the law Should there be different rules for face-to-face and non face-to-face on the/awl transactions? While the majority Law Lords in Shogun Finance may have affirmed the distinct rules applying to face-to-face and written agreements, this distinction may nevertheless be challenged in future cases given the very forceful dissent of the minority Law Lords. In essence, Lords Nicholls and Millet found the distinction to be arbitrary and illogical. They argued against having different rules apply to what was essentially the same problem in both situations. Whatever the medium of communication, the problem has arisen because the victim has agreed to a transaction in the belief that the person he is dealing with is the person he represents himself to be. So why should an innocent third party’s rights depend on the fortuitous mode through which the fraudster perpetrates his fraud? In their Lordships’ view, the presumption that a party intends to contract with the person he is dealing with should apply to all contracts induced by mistaken identity, regardless of whether the parties contracted in each other’s physical presence. Hence, all such contracts should be voidable, and not void. Admittedly, this will favour the third party purchaser over the original owner in most cases. Such an outcome may, however, be justified 507 on the ground that the original owner is usually in a less meritorious position vis-à-vis the third party since the former could have done more to prevent the fraud. Insofar as the approach advocated by Lords Nicholls and Millett avoids the arbitrary distinction between face-to-face and written transactions, it is to be preferred. However, it may be questioned whether it is correct to assume that the third party is always more deserving than the original owner. It may be that the best way out of this conundrum is to introduce legislative reform that confers upon the courts the discretionary power to apportion the loss between the parties. (See the discussion in A Phang, P W Lee and P Koh, “Mistaken identity in the House of Lords” (2004) Cambridge Law Journal at pp 24–27.) 12.52 However, the rationale for this rule is far from obvious. The underlying reasoning appears to be that if the assumed character is non-existent, then the victim is not in fact deceived as to the identity of the rogue, but merely as to his attributes. However, such reasoning clearly harks back to the unfortunate distinction between identity and attributes, the soundness of which has been questioned (see para 12.47). For an illustration as to the effects of mistaken identity, see Figure 12.3. Figure 12.3 The effects of a mistake as to identity 508 NON EST FACTUM (THIS IS NOT MY DEED) 12.53 In general, a person is bound by a contract he has signed even if he has not read it or does not understand it (L’Estrange v F Graucob Ltd (1934)). However, in very exceptional circumstances, a contracting party may be able to avoid a contract on the ground that the signature on the contract is “not his deed”. As a successful plea of non est factum, which renders a contract void, has a destabilising effect on contracts in general, this doctrine has traditionally been applied very restrictively. 12.54 A party invoking the doctrine of non est factum must prove that the document he signed is radically different from the document he intended. The threshold for meeting this condition is extremely high. In the leading decision of Saunders v Anglia Building Society (1971), an elderly lady was deceived by Lee into signing a document purportedly to transfer her property to her nephew, but which in fact transferred the same to Lee. Lee subsequently mortgaged the property to a building society and defaulted on the mortgage payments. The elderly lady resisted the building society’s claims to the property by pleading non est factum. The House of Lords held that the plea failed. The contract with Lee was not fundamentally different from what the lady intended because her intention was to use the property to raise funds for her nephew, and (despite the error) the objective could still have been achieved had Lee been honest and paid the “purchase price” over to the nephew. 12.55 A second requirement for the plea of non est factum to succeed is that the party seeking to rely upon the doctrine must not have been negligent. This will, for instance, require the party to show that he has taken all reasonable precautions to ensure that the document reflects his understanding. In practice, this will mean that a person of full understanding and capacity would rarely succeed in pleading this doctrine. The Singapore Court of Appeal in Mahidon Nichiar bte Mohd Ali v Dawood Sultan Kamaldin 509 (2015), however, has held (at [122]) that it is reasonable for lay people to rely on their solicitors in the context of a complex transaction, and that doing so would not amount to negligence on their part. Where solicitors are present at the signing of a document, the Court of Appeal held (at [123]) that relevant factors in determining whether a non est factum plea would succeed include “the nature of the transaction, the level of sophistication of the client, the extent of the solicitor’s duty to explain the document, and the actual advice rendered by the solicitor.” RECTIFICATION 12.56 Where a written agreement does not truly reflect the intention of the contracting parties, the court has a discretion (in equity) to rectify the document so that it truly reflects the parties’ intention. It should be noted that the prior agreement need not be legally enforceable, so long as there is a common intention between the contracting parties which is both clear and unambiguous (see Joscelyne v Nissen (1970)). In addition, the parties’ true intention must be one that is continuing right up to the time of the written agreement. Where the mistake is unilateral, the threshold conditions for rectification are higher than those applicable to common mistakes. Specifically, it must be shown that the non-mistaken party has actual knowledge (including wilful shutting of one’s eyes to the obvious) of the mistaken party’s intentions, the nonmistaken party must have failed to alert the mistaken party to the mistake, and the mistake must be one that, if uncorrected, would benefit the non-mistaken party or cause detriment to the mistaken party (see Sheng Siong Supermarket Ltd v Carilla Pte Ltd (2011)). CONCLUSION: IS THERE A DOCTRINE OF MISTAKE TO BEGIN WITH? 12.57 It may be appropriate, as a concluding remark, to consider the argument made from time to time that there does not 510 exist an independent doctrine of mistake, and that, in the final analysis, all the decisions falling under this topic turned upon the construction of the terms of the contract (see, eg, Slade, “The Myth of Mistake in the English Law of Contract” (1954) 70 Law Quarterly Review 385; P S Atiyah, “Couturier v Hastie and the Sale of Non-Existent Goods” (1957) 73 Law Quarterly Review 340). It has also been argued, for example, that alternative substantive doctrines such as offer and acceptance (as opposed to an independent doctrine of mistake) are the actual basis for the court’s decision. It is true, indeed, that mistake cases are replete with references to principles of offer and acceptance. A prominent example is the House of Lords decision in Shogun Finance, where the majority based its conclusion entirely on an “offer and acceptance” analysis without separate regard for the effects of fraud. It is also increasingly common for textbooks to discuss mutual and unilateral mistakes as part and parcel of contract formation. It is, however, clear that sole regard to principles of contract formation does not adequately resolve the many problems in this subject, as the powerful dissenting judgments in Shogun Finance demonstrate. In Singapore, the Court of Appeal’s resolute decision to retain the equitable doctrine of mistake in the Digilandmall case indicates that the doctrine of mistake is not likely to be displaced by or merged with other substantive principles. 511 Chapter 13 Misrepresentation 13.1–13.5 13.6 13.7 13.8 13.9 13.10–13.11 13.12 13.13–13.14 13.15–13.19 13.20–13.21 13.22 13.23–13.24 13.25–13.28 13.29 13.30–13.33 13.34 13.35 13.36 13.37–13.38 13.39 Introduction Operative Misrepresentation Elements of Misrepresentation Statement of Fact (1) Puffs (2) Opinions (3) Intentions (4) Law Representation by Conduct (1) Express representations (2) Implied representations (3) Silence Ambiguity and Falsity Materiality Inducement Addressed to the Other Party Types of Misrepresentations Introduction Fraudulent Misrepresentation Negligent Misrepresentation (1) Negligence at common law (2) Section 2(1) of the Misrepresentation Act (3) Measure of damages (4) Burden of proof Innocent Misrepresentation 512 13.40–13.41 Representation as a Term 13.49 13.50 13.51 13.52–13.53 Rescission General (1) Restitution impossible (2) Affirmation (3) Lapse of time (4) Third party rights Section 2(2) of the Misrepresentation Act (1) General (2) Types of misrepresentation (3) Where right to rescind is lost (4) Measure of damages 13.54–13.60 Exclusion of Liability 13.61–13.62 Conclusion 13.42–13.44 13.45 13.46 13.47 13.48 INTRODUCTION 13.1 The aim of a business is to sell a product or a service and, sometimes, in a bid to secure a sale, much more is said than should have been said. If an untrue statement is part of the contract, the innocent party has his rights for breach of contract. But if the statement is not part of the contract, the innocent party may still have rights under the law of misrepresentation. 13.2 The law of misrepresentation is found in the common law, equity and statute. Originally, at common law, there was liability for misrepresentation only if the misrepresentation was fraudulent or formed part of the contract. Subsequently, after the House of Lords decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) (referred to at para 13.34), there was also, possibly, liability for negligent misrepresentation. Non-contractual statements which were neither fraudulent nor negligent did not give rise to a claim for damages although the 513 representee could seek, in equity, rescission and, possibly, an indemnity. 13.3 The UK Misrepresentation Act 1967 was made applicable in Singapore by the Application of English Law Act (Cap 7A, 1994 Rev Ed) and reprinted locally as Cap 390, 1994 Rev Ed. Under this Act, a representee could claim damages for negligent misrepresentation in the same way as he could claim had the representation been fraudulent (see para 13.35). Compared to the common law claim under the Hedley Byrne case, this species of statutory negligence is easier to mount as a cause of action. 13.4 It should be mentioned that the law of misrepresentation straddles the two broad areas of contract law and tort law. As such, in a situation of misrepresentation, the innocent party may have rights under both contract and tort. The concurrent existence of duties in contract and tort was confirmed by the House of Lords in Henderson v Merrett Syndicates Ltd (1995). 13.5 As a final introductory remark, it may be observed that misrepresentation sometimes overlaps with breach of contract. Indeed, where a representation is or becomes part of the contract, the innocent party may have remedies in both misrepresentation and breach, and s 1 of the Act makes it clear that a person is not to be deprived of the right to rescind for misrepresentation merely because the representation has become part of the contract. In general, there are some broad similarities between the liabilities and remedies for misrepresentation and those for breach. For example, in each area, the innocent party generally has remedies of termination and damages. However, as one goes into the details, there are significant differences between these two areas of law. OPERATIVE MISREPRESENTATION 514 Elements of Misrepresentation 13.6 A misrepresentation is a false statement of fact made by one party to another party which induced the other party to enter into the contract. The statement must be one of a past or an existing fact, not a commendatory puff, an opinion, a statement of intention or a statement of law (see Figure 13.1). Figure 13.1 Classification of pre-contractual statements and elements of an operative misrepresentation Statement of Fact (1) Puffs 13.7 It is usual for salespersons to use glowing terms to describe their product, such as “best value money can buy”, “excellent product” or “very fast car”. In general, such commendatory expressions or puffs are harmless and are regarded as mere sales talk, to which the law attaches no legal liability. However, as the statements get more detailed or precise, they are more likely to be representations, for example, going beyond saying a car is fast to asserting that it has a top speed of 200 kmh. (2) Opinions 515 13.8 In general, a statement of opinion which turns out to be unfounded does not give rise to liability. But there are exceptions. First, a statement of opinion can be a statement of fact in that the representor impliedly stated that he held the opinion. If he did not hold the opinion or could not, as a reasonable man having his knowledge, honestly have held it, there would be a misrepresentation. The misrepresentation here would be one concerning his state of mind, and it has been said that the state of a person’s mind is “as much a fact as the state of his digestion” (see Bowen LJ in Edgington v Fitzmaurice (1885)). Likewise, a statement of another person’s opinion involves an assertion that the latter holds that opinion. Secondly, a statement of opinion may carry with it the implication that the representor had an objectively reasonable basis for his opinion, for example, that he had the handbook which contained the information. (3) Intentions 13.9 A statement of intention is an expression as to the future and does not involve any past or existing fact. However, as with opinions, if the intention was not so held, there would be a false statement of fact. Likewise also, a person who states his intention to do something may be impliedly asserting that he has reasonable grounds for thinking that he has the capacity to do it. (4) Law 13.10 The traditional view is that a statement of law cannot be a misrepresentation. As with opinions and intentions, a statement of law can be a misrepresentation if the representor did not hold that opinion or belief of the law, or if the statement carries an implication of fact which is untrue. Where the statement involves both fact and law, the tendency of the courts is to regard it as a statement of fact. 516 13.11 The House of Lords in Kleinwort Benson v Glasgow City Council (No 2) (1997) allowed a restitutionary claim for money paid under a mistake of law, jettisoning the traditional distinction between payments made under a mistake of fact and those made under a mistake of law. One can expect that in the near future, the distinction may also be abandoned as regards misrepresentation. Representation by Conduct (1) Express representations 13.12 The most obvious form of express representation is the spoken or written word. But expression can also be through a picture, a photograph, a drawing, a chart or any other visual media. (2) Implied representations 13.13 An express statement may also contain an implied representation. For example, it was argued in Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank Ltd (2011) that a statement that a financial product carried an “AAA” rating contained an implied representation that the product was of low risk. The test is whether a reasonable person in the position of the representee would have understood that an implied representation was being made. 13.14 Representation can also be through a person’s conduct. For example, a person who sits down in a restaurant and orders a meal impliedly represents that he has the ability to pay for the meal. Likewise, a nod of the head may signify agreement, just as a shake of the head may show disapproval. So long as it is intended to induce the other party to believe in a certain state of facts, the gesture or conduct can amount to a representation (see Walters v Morgan (1861)). In the situations just discussed, the conduct is intended to convey a certain message. Sometimes, the conduct may be intended to conceal certain facts. A very simple example is where a fruit seller 517 deliberately sticks the label on the part of the fruit that is damaged. In principle, such conduct would also amount to a representation. In the case of the fruit seller, the implied representation is that the fruit is undamaged. (3) Silence 13.15 Silence in itself is rarely sufficient to amount to a representation (see Broadley Construction Pte Ltd v Alacran Design Pte Ltd (2018) at [28]); some active conduct is required. Under general contract law, one party does not have a duty to disclose to the other party material facts which the former knows may influence the latter’s decision whether or not to enter into the contract. This rule is subject to several exceptions. 13.16 The first is where the silence makes what has been said a half-truth or an untruth. For example, to say that a pop group currently comprises five named individuals without going on to say that one of them will be leaving, is a misrepresentation (see Spice Girls v Aprilia World Service (2002)). While a contracting party has no duty to make statements, once he begins, he must make full and frank disclosure. 13.17 Secondly, where a statement (which the representor knows is false) is made by the representee or by a third party to the representee while the representor listens in silence, his reticence may amount to tacit confirmation of the truth of the statement (see Pilmore v Hood (1838)). By keeping silent, he is impliedly representing that the statement is true. 13.18 The law regards a representation as having a continuing effect until the contract is concluded. For this reason, if a statement which though true when made, to the representor’s knowledge, ceases to be true before the contract is concluded, the representor is required to inform the representee of the change in circumstances. The representor has a duty to ensure that his 518 representation remains true up to the time of the contract (see, eg, With v O’Flanagan (1936) and Spice Girls v Aprilia World Service (2002)). 13.19 Finally, in certain contracts, the law imposes a duty of utmost good faith. The prime example of this is the insurance contract, where the law imposes on the proposed insured the duty to disclose to the insurer all material facts that may influence the insurer’s decision whether or not to insure. Such non-disclosure entitles the insurer to avoid the contract of insurance. The rationale for this is that often the special facts and risks are known to the insured but not the insurer. Ambiguity and Falsity 13.20 Sometimes, a statement may be ambiguous and may bear two (or more) meanings, one of which is true and the other(s) false. Whether such a statement by a contracting party amounts to a misrepresentation depends on two things. First, the representee must prove that he understood the statement in the sense which is in fact false. Secondly, the representor must have intended the statement to be understood in the sense that is false; he is not liable if he honestly intended it in the sense that is true. This is so even if the sense in which the representee understood the statement is the one which, on its true construction, it ought to bear (see Akerhielm v De Mare (1959)). 13.21 It would appear from the treatment of commentators (see, eg, J Cartwright, Misrepresentation (2002) at para 4.18) that ambiguous statements can amount to fraudulent misrepresentation but not negligent or innocent misrepresentation. The logicality of such dichotomy is not so evident. The representor’s intention is relevant for determining the type of misrepresentation: fraudulent, negligent or innocent. Whether or not there is falsity (as opposed to culpability) should be an objective matter. For 519 example, whether a hand phone has a particular feature, such as voice-operated dialing, is an objective matter. Materiality 13.22 There is doubt whether the law requires a misrepresentation to be material in the sense that a reasonable man would have been influenced by it to enter into the contract. Is there misrepresentation if the representee was induced by a misstatement which a reasonable man would have ignored? While there are some judicial statements which support a requirement of materiality, the position is not settled. Certainly, a representee who is induced by an immaterial misrepresentation will have difficulty persuading the court that he was so induced. But it is another matter to deny a representee who was truly induced by the misrepresentation. Commentators are divided on this issue. Treitel, The Law of Contract (14th ed, 2015) at para 9–020 confidently asserts that materiality is a requirement. The issue is debateable. For an alternative viewpoint, see eg, Chitty on Contracts, Vol 1 (32nd ed, 2015) at para 7–041. Inducement 13.23 In order for a misrepresentation to be operative, it must induce the representee to enter into the contract. Stated another way, the representee must have relied on the representation. This requirement is an obvious and logical one. There are several scenarios where the representee is not induced by the false statement. The first is where he was not even aware of the representation. Secondly, the representee may have been aware of the representation but knew it was untrue or did not believe it to be true. The third situation is that he simply was not influenced by it, as where he would have entered into the contract even if he had known the true facts. In all these situations, there is no inducement and therefore no operative misrepresentation. The misrepresentation need 520 not be the sole cause that induced the representee to enter into the contract. It is sufficient that, in deciding whether to enter into the contract, he was materially influenced by the misrepresentation, as where the representee was induced by a misrepresentation as well as by his own mistaken belief (see Edgington v Fitzmaurice (1885), followed by the Singapore Court of Appeal in Panatron v Lee Cheow Lee (2001)). 13.24 Sometimes, the representee has the opportunity to verify or ascertain the truth for himself. Generally, the fact that a representee had the opportunity to discover the truth but did not use the opportunity does not disentitle him of relief (see Redgrave v Hurd (1881)). But where it is reasonable to expect the representee to avail himself of the opportunity to discover the truth, the legal position is less clear. In Panatron v Lee Cheow Lee (2001), Yong CJ held that once inducement is proved, it is no defence that the representee failed to take the steps which a prudent man would have taken to verify the truth. Panatron was followed by the Court of Appeal in JTC v Wishing Star (No 2) (2005), where it was held that a representee who chooses “to act carefully but fails, through negligence or otherwise” to discover the fraud, is nonetheless, regarded as having been induced (see Box 13.1). But the Redgrave principle is now open to doubt. In Peekay Intermark Ltd v ANZ Banking Group Ltd (2006), the UK Court of Appeal accepted the notion that where a representee signs a written contract inconsistent with, and subsequent to, earlier oral representations, he may have been induced not by the oral representation but by “his own assumption” that the subject matter of the contract corresponded to the description that he had previously been given. This aspect of Peekay was cited, it would seem with approval, by the Singapore Court of Appeal in Orient Centre Investments Ltd v Societe Generale (2007). Box 13.1 521 Reflecting on the law Misrepresentation and the representee’s own inquiry It is quite often asserted by the representor that the representee was not induced by the representation but rather by his own inquiry. In JTC v Wishing Star (No 2) (2005), JTC was a developer of the Biopolis, a large research complex, and was assisted by JCPL, its consultant. The tender for façade works for the complex was awarded to WSL. Three months later, the contract was terminated for inter alia, misrepresentation as to the satisfaction of the tender evaluation criteria. The trial court found that although there had been misrepresentation, JTC had relied not upon the misrepresentation but on JCPL’s own evaluation. The Court of Appeal allowed the appeal and held that JTC was induced by the misrepresentation even though it partly relied on JCPL’s evaluation and expertise. Woo Bih Li J was of the view that a person who has made a false representation cannot escape its consequences just because the innocent party has made his own inquiry or due diligence but failed, whether due to negligence or otherwise, to discover the fraud. So long as the innocent party does not learn of the misrepresentation, the misrepresentation remains operative. The Court of Appeal’s stance reinforces the position taken in earlier English and Singapore cases. From the policy standpoint, the position makes sense — the representee should not be penalised for choosing to make an inquiry; neither should a contracting party be encouraged to make false statements. It should be noted, however, that the representations in Wishing Star were fraudulent. Where the misrepresentation is a negligent one, the case becomes less compelling. After all, in principle, contributory negligence is a partial defence to a negligence claim. Addressed to the Other Party 13.25 Generally speaking, it is the direct addressee or recipient of a representation who may bring an action for misrepresentation. It should be noted that a direct recipient can be a person who is a member of a class of persons to whom the representation is addressed, such as through a media announcement. There are situations, however, where one who is not a direct recipient may have recourse. 522 13.26 The first is where the representation is made to the representee’s authorised agent. Here, there are two possible scenarios. In the first scenario, the recipient, to the representor’s knowledge, is only an agent for passing on the representation to his principal. In the second, the representor intends that both the agent and principal will be influenced by the representation, as in the case of partners of a firm. In the first, the principal is the representee, while in the latter, both the principal and the agent are representees. 13.27 The second situation is where, even though there is no agency between the direct recipient and the indirect recipient, the representor intended or reasonably expected the representation to be passed on to the indirect recipient. Thus, where A by a misrepresentation induces B to buy an item and B later induces C by a similar misrepresentation to buy it from B, C could rely on the misrepresentation as against A if A knew that B intended to resell and was likely to repeat the misrepresentation (see Gross v Lewis Hillman (1970)). 13.28 It should be noted that an indirect misrepresentation arises either through agency or through the intention or knowledge of the representor. In the past two decades, there has been, in the context of guarantees and mortgages by spouses, substantial development on the issue of the extent of a bank’s liability for misrepresentation (and other misconduct) of the principal debtor. In essence, the position is that the bank is affected by the principal debtor’s misrepresentation to the guarantor if either the principal debtor may be regarded as the bank’s agent or the bank had constructive notice of the misrepresentation. For the detailed rules as to when a bank would be put on inquiry and the reasonable steps it would then have to take, see the House of Lords decision in Royal Bank of Scotland plc v Etridge (No 2) (2002) (see also Chapter 14 at para 14.45 onwards). 523 TYPES OF MISREPRESENTATION Introduction 13.29 As mentioned above, it is now clear that there can be three types of misrepresentation and that they are, on a scale of diminishing culpability, fraudulent misrepresentation, negligent misrepresentation and innocent misrepresentation. Broadly speaking, the remedies of rescission and damages (indemnity, in the case of innocent misrepresentation) are available for all three. As we shall see, however, there are differences in the respective legal positions insofar as the recovery of damages is concerned (see Figure 13.2). Figure 13.2 Types of misrepresentations and remedies FRAUDULENT MISREPRESENTATION 13.30 At common law, fraud is defined quite narrowly, as a charge of fraud “is such a terrible thing as to bring against a man that it cannot be maintained unless it is shown that he had a wicked mind” (see Lord Esher in Le Lievre v Gould (1893) at p 498). In Derry v Peek (1889), the House of Lords held that a fraudulent statement is one 524 made knowingly, without belief of its truth (or without “genuine belief” of its truth, according to Steven Chong JA in Broadley Construction Pte Ltd v Alacran Design Pte Ltd (2018) at [26]), or recklessly — not caring whether it is true or false. A person who deliberately shuts his eyes to the facts or purposely abstains from investigating the facts does not have an honest belief in its truth. Where there has been a fraudulent misrepresentation, the representee may recover damages in an action under the tort of deceit. Damages are awarded to compensate the representee for all the losses which can properly be said to have been caused by his reliance on the fraudulent misrepresentation (as contrasted with the contract measure of expectation loss). (See the House of Lords decision in Smith New Court Securities v Scrimgeor Vickers (Asset Management) (1997)). Further, in such an action, contributory negligence is not a defence (see Standard Chartered Bank v Pakistan National Shipping (No 2) (2002)). 13.31 The motive of the representor is irrelevant. It is not necessary that he had a bad motive (such as to make a sales commission for himself) or intended to cause loss to the representee; it suffices that the false statement was made knowingly with the intention that the representee should act upon it (see Standard Chartered Bank v Pakistan National Shipping (No 2) (2002)). It is also immaterial that the representor thought the statement irrelevant or unimportant. 13.32 Where the responsibility for a statement is shared between a principal and an agent, or between two agents, the position is more complex. If an agent knowingly makes a false statement within the scope of his authority, the principal is liable for fraudulent misrepresentation; likewise, if an agent knowingly makes a false statement to another agent intending that agent to pass the statement on to a third party. 525 13.33 If the agent makes a statement which he honestly believes is true but which the principal knows is untrue, then the position depends on the culpability of the principal. If the principal was aware that the statement will be or had been made and did not intervene, the principal is liable for fraudulent misrepresentation. If he was not aware that the statement will be or had been made, he is not liable (see Armstrong v Strain (1952)). Negligent Misrepresentation (1) Negligence at common law 13.34 A negligent misrepresentation is one which is made carelessly or without reasonable grounds for believing it to be true. Prior to and apart from the Misrepresentation Act, a misrepresentation would not be considered negligent unless the representor owed a duty of care to the representee. A “special relationship” must have existed between the parties before such duty of care can arise (see Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)). The law on negligent misstatements was further developed and qualified by subsequent cases (see, generally, Chapter 6, para 6.28 onwards). So far as negligent misrepresentation is concerned, the importance of these refinements is largely eclipsed by the Misrepresentation Act. (2) Section 2(1) of the Misrepresentation Act 13.35 Section 2(1) of the Misrepresentation Act provides as follows: Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless 526 he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true. The uninitiated reader may find the above paragraph at best awkward and at worst incomprehensible. Adopting what has been termed a “fiction of fraud”, the provision first says indirectly that a non-fraudulent misrepresentation carries the same liability as a fraudulent misrepresentation. It then gives the qualification that the representor will not be liable if he proves that he had reasonable grounds to believe that his statement was true. In effect, what the section does is to provide that a negligent misrepresentation (that is, one where the representor does not have reasonable grounds to believe his statement is true) attracts the same liability as a fraudulent misrepresentation. (3) Measure of damages 13.36 There is much debate as to the correct basis for measuring damages for negligent misrepresentation. One view is that the contract measure — to put the representee into the position he would have been had the representation been true — should apply. Another view is that the tort measure is the appropriate one. In tort, the claimant is to be put in a position he would have been if the tort (the misrepresentation) had not been committed. If the tort measure is the correct one, there is a further complication: should the deceit (fraud) measure or the negligence measure be applied? In cases of fraud, losses may be recoverable even though they were not of a foreseeable kind; this is not the case for negligence. There are no easy answers to this problem. For further discussion of these issues, see A Phang, Cheshire, Fifoot & Furmston’s Law of Contract (2nd ed, 1998) at pp 488– 489 and Treitel The Law of Contract (14th ed, 2015) at paras 9–071 to 9–072. It was said that the words of s 2(1), Misrepresentation Act do not necessarily compel the conclusion that the liability in damages for negligent misrepresentation under section 2(1) is to be the same as 527 that for fraud (see Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank Ltd (2011) at [223]), and in RBC Properties Pte Ltd v Defu Furniture Pte Ltd (2015), the Singapore Court of Appeal suggested that the negligence measure is the appropriate one. (4) Burden of proof 13.37 At common law, a representee who alleges fraudulent misrepresentation bears the burden of proving fraud and the onus is a heavy one. Upon reading s 2(1), it is clear that for negligent misrepresentation, the burden is reversed. Once the representee proves that the statement was false, the burden shifts to the representor to prove that he had reasonable grounds to believe that the statement was true. In effect, the representor has to show that his misrepresentation was not negligently made. In this respect, negligent misrepresentation is a more favourable option for the representee than fraudulent misrepresentation. 13.38 Although the use of the words “reasonable grounds” may give rise to the argument that negligent misrepresentation, like negligent misstatement at common law, requires the representee to establish a duty of care and a special relationship, it is clear from the case judgments that this is not so (see Howard Marine & Dredging v Ogden & Sons (Excavations) (1978) and Ng Buay Hock v Tan Keng Huat (1997)). On the contrary, it is the representor’s responsibility to show that he was not “negligent”. Whether a representee’s claim for damages for negligent misrepresentation in principle should be reduced by the representee’s contributory negligence is more debateable (see Chitty on Contracts, Vol 1 (32nd ed, 2015) at para 7–071). Innocent Misrepresentation 13.39 The least culpable type of misrepresentation is innocent misrepresentation. Here, the false statement is made 528 honestly and with care. The common law provided no remedies for an innocent misrepresentation but, in equity, the representee is entitled to rescission and, possibly, an indemnity. The latter remedy allows the representee to be indemnified against all obligations necessarily created by the contract (see Whittington v Seal-Hayne (1900); RBC Properties Pte Ltd v Defu Furniture Pte Ltd (2015)). REPRESENTATION AS A TERM 13.40 A representation is a statement made before or at the time of the contract, which induced the representee to enter into the contract. It is conceivable, perhaps even likely, that such a statement could be a term of the contract. There are several guidelines for determining whether a pre-contractual statement is a term. For one, the statement is unlikely to be a term if the representor asks the representee to verify its truth (see Ecay v Godfrey (1947)). Another consideration is the relative abilities of the parties: if the representee is in a better position, for instance through special knowledge or experience, to ascertain the truth, the representation is unlikely to be a term (see Oscar Chess Ltd v Williams (1957)). Finally, the importance of the statement is relevant. If the statement is so important that the representee would not have entered into the contract had the statement not been made, the statement is likely to be a term of the contract (see Bannerman v White (1861)). 13.41 A representation may, however, be precluded from being a term of contract by the parol evidence rule (see Chapter 10, paras 10.6 onwards). The rule basically says that where a contract is in writing, extrinsic (including oral) evidence cannot be used to add to, vary or contradict the terms of the written agreement. An exception to this is the collateral contract. The argument here is that there are two agreements: the main (written) agreement and the collateral oral contract. A representation may amount to a 529 collateral contract upon which the representee may bring an action. RESCISSION General 13.42 An operative misrepresentation makes the contract voidable at the option of the representee. The representee is entitled to rescind the contract, that is, to terminate it ab initio, that is, from the beginning, as if the contract never existed. In contrast, where a contract is rescinded for a breach of contract, the contract is terminated as regards the future; while the parties are released from obligations that have not fallen due, they are still liable for obligations which had accrued before the repudiation. 13.43 The right to rescind for a misrepresentation is one which existed prior to the Misrepresentation Act. At common law, a representee had a right to rescind for fraudulent misrepresentation while, in equity, rescission was available for innocent misrepresentation and, presumably, negligent misrepresentation. With s 2(1) of the Act, it is now certain that rescission is available for negligent misrepresentation. However, with regard to negligent and innocent misrepresentation, the right to rescind is subject to the court’s discretion to award damages in lieu of rescission under s 2(2) (see para 13.49). 13.44 As the effect of rescission can be quite severe for the representor or for third parties, the law puts some bars or restrictions on its availability: where restitution is impossible, where there has been affirmation or lapse of time, where third party rights are affected, and where the court exercises its statutory discretion to give damages in lieu of rescission. (1) Restitution impossible 530 13.45 Rescission contemplates the representee terminating the contract and returning what he received under the contract. For example, a buyer who wishes to rescind for misrepresentation and recover his purchase money must return the goods to the seller. If such restoration or restitution is not possible, it makes sense that rescission should not be permitted. However, what is required is not precise restitution but substantial restitution; equity allows a representee to rescind if he returns the subject matter in its altered state and makes an allowance for any diminution in its value or accounts for any benefit he derived from using it. Equity seeks to make such adjustments as are necessary to do practical justice as between the parties. Where substantial restitution is not possible, the representee is not barred from rescinding if the diminution is due either to the very defect in the subject matter which it was represented not to have or to external causes, such as damage caused by a third party. (2) Affirmation 13.46 Upon discovery of the misrepresentation, the representee may elect either to affirm or to rescind the contract. Upon affirmation, the right to rescission is lost. Affirmation can be express or implied by conduct (though very clear evidence is required). An example of the latter is where the representee uses the goods after knowing of the misrepresentation. However, before an election can be made, the representee must have knowledge not only of the untruth but also that the law gives him a right to rescind; and where an election is conditional, upon the failure of the condition, the right to rescind re-emerges (see JTC v Wishing Star (No 2) (2005)). (3) Lapse of time 13.47 If, subsequent to the discovery of the truth, a reasonable period of time has passed and the representee still does not exercise his right to rescind, his inaction may be evidence of affirmation. Apparently, for innocent and, it 531 would appear, negligent misrepresentation, the lapse of reasonable time may be a bar to rescission even if the representee has not discovered the truth (see Leaf v International Galleries (1950)). Such a position is somewhat disconcerting since there can be no affirmation without knowledge of the untruth. So far as fraudulent misrepresentation is concerned, lapse of time without discovery of the truth would not prevent a representee from rescinding. (4) Third party rights 13.48 Misrepresentation makes a contract voidable, not void. If before a representee avoids (rescinds) a contract, an innocent third party (that is, one who acts in good faith and gave consideration) has acquired an interest in the subject-matter, the right to rescission is lost. Section 2(2) of the Misrepresentation Act (1) General 13.49 Section 2(2) provides as follows: Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed … that the contract ought to be or has been rescinded, the court … may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party. Essentially, the provision restricts the representee’s right to rescission for negligent and innocent misrepresentation. It gives the court the discretion to declare that the contract subsists and to award damages in place of rescission. In deciding whether rescission 532 should be disallowed and the amount of damages to award in lieu, the court will consider the nature of the misrepresentation, the loss that upholding the contract would cause as well as the loss that rescission would cause. (2) Types of misrepresentation 13.50 The sub-section does not apply to fraudulent misrepresentation; the representee’s right at common law to rescission and to damages is unaffected. As for negligent misrepresentation, the representee’s right to rescission and damages is affected in that the right to rescission is now subject to the court’s power to give damages instead. Technically speaking, the representee to a negligent misrepresentation may get two sets of damages: he may claim damages as of right (under s 2(1)) and may also be awarded damages in lieu of rescission (s 2(2)). As for innocent misrepresentation, the representee’s rights in equity to rescission and indemnity are now qualified by the court’s power to award damages in lieu of rescission. (3) Where right to rescind is lost 13.51 There is substantial controversy as to whether s 2(2) allows a court to award damages in lieu where the representee has lost the right to rescind. For example, he may have affirmed the contract or third party rights may have intervened. A purely linguistic interpretation suggests that the entitlement to rescind must still be available in order for damages to be given in lieu (see Government of Zanzibar v British Aerospace (Lancaster House) (2000)). (4) Measure of damages 13.52 There is uncertainty as to how damages under s 2(2) are to be assessed. Two possibilities are the tortious measure and the contractual measure, respectively. The tortious 533 measure seems inappropriate for innocent misrepresentation since no tort has been committed. For negligent misrepresentation, the further complication is whether the tortious measure, assuming it is to apply, is the fraud measure or the negligence measure (see para 13.36). 13.53 Section 2(3) goes on to provide that damages may be awarded under subs (2) whether or not the representor is liable to damages under subs (1), and that any damages awarded under subs (2) will be taken into account in assessing the damages under subs (1). EXCLUSION OF LIABILITY 13.54 Contracting parties sometimes seek to exclude the consequences of misrepresentation by inserting a clause to that effect in the contract. At common law, apart from where the representor is fraudulent, such a clause is valid and is subject to the normal rules of incorporation and construction applicable to exemption clauses. This freedom to include exclusion clauses is now circumscribed by statute. 13.55 Section 3 of the Misrepresentation Act, as amended by s 8 Unfair Contract Terms Act (“UCTA”), reads: If a contract contains a term which would exclude or restrict (a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or (b) any remedy available to another party to the contract by reason of such a misrepresentation, that term shall be of no effect except insofar as it satisfies the requirement of reasonableness as stated in s 11(1) of the Unfair Contract Terms Act, and it is for those claiming that the term satisfies that requirement to show that it does. 534 In essence, the provision invalidates exclusion clauses that exclude or restrict any liability or remedy for misrepresentation unless they are reasonable. The UCTA test of reasonableness needs to be satisfied by virtue of s 3 of the Misrepresentation Act. It should be noted that the burden of proving that an exclusion clause is reasonable lies with the party seeking to rely on it. 13.56 For exclusion clauses in general, a distinction can be drawn between clauses which exclude liability and those which seek to prevent liability from arising by negativing one or more of the elements of liability, with the former attracting the operation of the UCTA test of reasonableness but not the latter. As regards misrepresentation, examples of the former would include one which expressly seeks to exclude liability, such as “All liabilities for and all remedies in respect of any misrepresentations made are excluded” and one which states that the contract is not cancellable or voidable by either party. It should be noted that clauses which seek to limit rather than altogether exclude liability, for example, by limiting liability to a certain sum of money, are viewed less stringently by the courts (see Ailsa Craig Fishing v Malvern Fishing (1983)). On exemption clauses generally, see Chapter 11. 13.57 Overbrooke Estate v Glencombe Properties (1974) provides a good example of a clause which seeks to prevent misrepresentation liability from arising. In that case, the defendants were successful bidders for a property. A few days before the auction, they made enquiries with the auctioneers and received inaccurate answers. The terms of the sale included a clause which stated that “neither the auctioneers nor any person in the employment of the auctioneers has any authority to make or give any representation or warranty”. The court held that the provision was not an exclusion clause but a limitation on the apparent authority of the auctioneers. 535 13.58 Other clauses which seek to negative the elements of misrepresentation include clauses stating that no representation has been made or that neither party has relied on any representation. Such clauses are known as non-reliance clauses. The general approach of the law is that if the clause is genuine, that is, that there really had been no representation, or no reliance, or no authority (as the case may be), then the clause is effective to prevent misrepresentation liability from arising (see, eg, Government of Zanzibar v British Aerospace (Lancaster House) (2000)). The clause should not avail, for example, where the party seeking to rely on the clause is well aware that representations have in fact been made (see Cremdean Properties Ltd v Nash (1977)). Even so, where both parties to the contract are sophisticated, commercial entities of similar bargaining power, courts have been willing to find that clauses falling within the latter category are reasonable (see, eg, Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc (2010)). 13.59 Generally, in deciding whether a clause excluding liability for misrepresentation is reasonable, a relevant factor is the relative knowledge or access to knowledge of the parties (see South Western General Property v Marton (1982)). If, for example, the facts on which the representation is based are only within the knowledge of the representor, the clause is likely to be unreasonable. The guidelines set out in Second Schedule of the UCTA, such as the relative bargaining power, are also generally applicable (on the UCTA test of reasonableness, see Chapter 11, para 11.51 onwards). 13.60 In recent times, such exclusionary clauses have been advanced from another angle — that they operate to estop (or prevent) a representee from alleging misrepresentation. Two forms of estoppel have been pleaded: estoppel by representation and contractual estoppel. The requirements for estoppel by representation were laid down by Diplock J (as he then was) in Lowe v Lombank (1960) as follows: 536 (a) there must be a clear and unambiguous statement (here, the statement that there has been no representation, or no reliance etc); (b) the maker of the statement intended the recipient to rely on the statement; and (c) the recipient believed the statement and was induced by it. Estoppel by representation may be explained with an example as follows: where a buyer signs an agreement with a non-reliance clause, the buyer is said to be representing to the seller that he is not relying on any representation made to him by the seller in entering into the purchase contract. The seller therefore can argue that since he relied on the buyer’s representation to him (via the non-reliance clause) that the buyer did not rely on any of the seller’s representations in entering into the purchase contract, the buyer is estopped or prevented from later asserting otherwise. In contrast to estoppel by representation, contractual estoppel, which is a recent doctrine, merely requires that there was a clear and unambiguous statement (ie, only requirement (a) of estoppel by representation). Although contractual estoppel has gained acceptance in the English Court of Appeal (see Peekay Intermark Ltd v ANZ Banking Group Ltd (2006) and Springwell Navigation Corp v JP Morgan Chase Bank (2010); Peekay was recently discussed by the Singapore Court of Appeal in Broadley Construction Pte Ltd v Alacran Design Pte Ltd (2018)), the doctrinal basis of this new species of estoppel is seriously doubted. For a discussion of the legal developments in this important and complex area, see Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc (2010) and Low Kee Yang, “Misrepresentation and Contractual Estoppel: the Raiffeisen Clarifications” (2011) Singapore Academy of Law Journal 230. 537 CONCLUSION 13.61 The law of misrepresentation performs the important function of providing rights and remedies against false statements in the contractual context, especially if these statements do not find their way into the written agreement. The elements of an operative misrepresentation are clear enough, apart from the nagging doubt regarding materiality. Although misrepresentation provides a drastic remedy in the form of rescission, its availability is moderated by sensible restrictions. This is especially the case for negligent and innocent misrepresentation, where the court has discretion to award damages in lieu of rescission. The protection which the law of misrepresentation provides is further safeguarded by the legislative requirement that any attempt to exclude or restrict liability for misrepresentation must be reasonable to be valid. 13.62 Fundamental to understanding the law of misrepresentation is an appreciation of the Misrepresentation Act provisions — what they mean to say and how they modify the previous position. The manner by which negligent misrepresentation is established as a recognised concept is unfortunate. Indeed, the indirect approach of using the “fiction of fraud” results in confusion and several legal issues still remain debateable and speculative. However, taking a holistic view of the subject, one may conclude that the law of misrepresentation does provide a reasonably satisfactory regime for ensuring accountability for the making of precontractual statements. 538 Chapter 14 Economic Duress, Undue Influence and Unconscionability 14.1–14.2 Introduction 14.3–14.4 14.5–14.7 14.8 14.9–14.12 14.13–14.23 14.24 Economic Duress Introduction The Basis for Intervention General Principles (1) Sufficient pressure (2) Illegitimacy Effect 14.25–14.28 14.29 14.30–14.32 14.33 14.34–14.36 14.37–14.40 14.41–14.44 14.45–14.47 14.48–14.50 14.51–14.52 Undue Influence Introduction Categories of Undue Influence (1) Actual undue influence: Class 1 (2) Presumed undue influence: Class 2 (a) The nature of the parties’ relationship (b) Nature of transaction (c) Rebutting the presumption Creditors and Doctrine of “Infection” (1) When the creditor is put on inquiry (2) Reasonable steps 14.53–14.54 14.55–14.58 14.59–14.61 Unconscionability Introduction Narrow Doctrine A General Doctrine of Unconscionability? 539 14.62–14.63 Conclusion INTRODUCTION 14.1 The idea of freedom of contract is fundamental to the law of contract. In the case of Printing and Numerical Registering Co v Sampson (1875), Jessel MR stated this concept (at p 465) in the following terms: If there is one thing which more than another public policy requires it is that men of full and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice. Thus, the law requires parties who enter into contracts to honour their respective obligations under the contract. A party who breaches any of his obligations may find himself liable to paying damages to the “victim” of his breach (on damages and other remedies, see Chapter 18). This theory of contract engenders predictability and thus certainty. In a business or commercial context, certainty as to enforceability of bargains made is particularly important. Business involves risk-taking and parties should not be allowed to throw out contracts whenever they are faced with adversity that might render the transaction unprofitable or their obligations more difficult to perform. 14.2 There is, therefore, as a general rule, very little room for considerations of unreasonableness or the lack of fairness in contract law, and this is especially so in commercial transactions. G P Selvam J emphasised (at [26]) the point in Thomson Plaza (Pte) Ltd v Liquidators of Yaohan Department Store Singapore Pte Ltd (2001) as follows: The law with regard to a commercial contract between hard-nosed businessmen is that, save in extreme cases, the court must not rewrite what the parties have 540 agreed simply by relying on the court’s notions of unreasonable or unconscionable conduct. To do so would undermine certainty and security in the law of contract. However, this is not to suggest that fairness has no role in the law of contract. As the Court of Appeal observed (at [81]) in the case of Chwee Kin Keong v Digilandmall.com Pte Ltd (2005), “[w]hile certainty is desirable, it is not an object which should prevail in all circumstances, even against the dictates of justice”. The doctrine of mistake, for example, discussed in Chapter 12, addresses the problem of unfairness that would result if a party, who is mistaken about a very important aspect of the contract, is nevertheless held bound by it. The doctrines considered in the present chapter attempt to address the unfairness in transactions between parties of unequal bargaining positions, which involve some element of pressure (duress) or exploitation (undue influence). Although some amount of pressure or exploitation is acceptable, especially between commercial parties, there can be situations where the law deems such pressure or exploitation to have “crossed the line”, and hence no longer legitimate. The main difficulty is in identifying the boundaries of legitimate behaviour and to this end, the particular facts of the case are of crucial importance. It should, however, be pointed out that the ideals of contractual freedom and the certainty of contract remain important. As such, the scope for the application of these doctrines must be strictly limited. ECONOMIC DURESS Introduction 14.3 Exerting some amount of pressure to persuade or induce a party to enter into a contract is sometimes necessary and probably acceptable. However, as with many things, pressure is a relative concept and exists on a scale. Hence, if the pressure exerted is such as to go beyond what the law considers acceptable or legitimate, the 541 pressured party is given the option to set aside, or avoid, the contract. Generally, pressure that is exerted by way of a threat to physically harm the other party or his property is considered illegitimate. Thus, if A threatens to murder B and makes threatening phone calls, resulting in B executing an agreement in A’s favour, the agreement will be set aside for duress (see Barton v Armstrong (1976)). Similarly, an agreement entered into by B as a consequence of an imminent threat of having his home razed to the ground would not be upheld (see Occidental Worldwide Investment Corp v Skibs A/S Avainti, Skibs A/S Glarona, Skibs A/S Navalis (The Siboen and the Sibotre) (1976)). Such threats are considered so inherently unfair that the causation requirement for a claim for relief — that the pressure must have caused the pressured party to enter into the contract — is fairly easily satisfied. 14.4 Commercial or economic pressure, sometimes exerted by a party who is in a stronger bargaining position and at other times exerted by a party with less to lose commercially, is generally seen as part and parcel of commercial negotiations and accordingly less serious than duress against the person or to property. It is only in recent times that the courts have acknowledged economic duress, usually in the form of a threat to breach an existing contract, as a separate and distinct vitiating factor that could render a contract voidable (see E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd (Orion Oil Ltd, interveners) (2011) at [46]). Often, this type of pressure is exerted to induce a modification of an existing contract, and this was exactly what occurred in the case of North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic Baron) (1979). A had contracted with B, a shipbuilding company, to build a tanker for a fixed price payable in US dollars in a number of instalments. However, a devaluation of the US dollar would have translated to B receiving less money. As such, B demanded that A pay more in the remaining instalments to make up for the depreciated dollar, and 542 threatened not to complete the contract if this increase was not paid. A agreed to the demand as negotiations for a lucrative contract for the charter of the new tanker were ongoing. The court held that the threat amounted to economic duress, and the resultant contract to pay more than was originally agreed was thus voidable at A’s option. Nonetheless, the fact remains that economic duress only arises in very exceptional situations (see Wartsila Singapore Pte Ltd v Lau Yew Choong (2017) at [145]; Eastern Resource Management Services Ltd v Chiu Teng Construction Co Pte Ltd (2016) at [24]). Box 14.1 Reflecting on the law Duress and consideration Contract renegotiations often provide the factual context within which economic duress may be alleged. Equally, as we saw in Chapter 8, the doctrine of consideration plays an important role in striking down contract modifications. There is therefore some overlap in the roles played by the two doctrines in controlling the enforceability of contracts that are extracted under duress. However, as we saw in our discussion on consideration, nominal consideration can be good consideration given the rule that onsideration need only be sufficient and not adequate. This provides ample opportunity for extortion to be disguised as bargains by conveniently introducing nominal consideration into the contract. As Santow J observed (at p 742) in Musumeci v Winadell Pty Ltd (1994), “consideration expressed in formalistic terms of one dollar can indeed actually cloak duress rather than expose it”. Indeed, since the English Court of Appeal decision in Williams v Roffey Bros & Nicholls (Contractors) Ltd (1991) which adopted a more liberal approach towards consideration, it seems that the doctrine of consideration may be taking a backseat to the doctrine of economic duress in regulating extortion. However, as the doctrine of economic duress is not without its conceptual difficulties, it remains to be seen how well it will perform this function. The Basis for Intervention 14.5 When would the pressure exerted be such as to demand relief? Understanding the reason for the law’s intervention 543 will assist in defining the sort of inquiry that needs to be made. There are, however, differing judicial statements made about the true basis of the doctrine of economic duress. 14.6 In the case of Occidental Worldwide Investment Corp v Skibs A/S Avainti, Skibs A/S Glarona, Skibs A/S Navalis (The Siboen and the Sibotre) (1976), the court explained that there was economic duress only if the pressure exerted was so great as to deprive the party pressured of any ability to exercise free will (the “overborne will” theory). However, this theory has been criticised insofar as it suggests that the alleged victim of economic duress did not know what he or she was doing (see, eg, P S Atiyah, “Economic Duress and the Overborne Will” (1982) 98 Law Quarterly Review 197). Indeed, the victim must have been fully aware that he or she was consenting to the new contract. The situation here is unlike a non est factum situation where there is a true lack of consent (see Chapter 12). 14.7 Thus, the objection to contracts induced by duress is not a lack of consent as such, but that any apparent consent had been obtained by the exertion of illegitimate pressure by the other party (the “illegitimate pressure” theory) (see Universe Tankships Inc of Monrovia v International Transport Workers Federation (1983) at p 384). Indeed, in Pao On v Lau Yiu Long (1980), a decision often cited as endorsing the overborne will theory, Lord Scarman had in fact said (at p 635) that duress is “a coercion of the will such that there is no true consent”. The italicised words suggest that both theories are in fact reflective of a common premise and that is that the pressure was such as to so affect the voluntariness of the victim’s consent that the law cannot hold him to the resultant contract (see A Phang, “Economic Duress — Uncertainty Confirmed” (1992) 5 Journal of Contract Law 147 at p 151; see also Wu Yang Construction Group Ltd v Zhejiang Jinyi Group Co Ltd (2006) at [78] where Phang J 544 (as he then was) opined that “there is … no real conflict between these two theories”). General Principles 14.8 How then, as a practical matter, do we ascertain whether a threat to breach an existing contract constitutes economic duress? In Universe Tankships Inc of Monrovia v International Transport Workers Federation, The Universe Sentinel (1983), Lord Scarman observed (at p 400) that there are “two elements in the wrong of duress: (1) pressure amounting to compulsion of the will of the victim; and (2) the illegitimacy of the pressure exerted”. There cannot be duress unless the victim was coerced and coerced by pressure that the law regards as illegitimate. For a diagrammatic representation of these elements, see Figure 14.1. Figure 14.1 The elements of economic duress (1) Sufficient pressure 14.9 In Pao On v Lau Yiu Long (1980), Lord Scarman provided some guidelines to aid in determining whether the pressure applied suffices to vitiate consent: 545 whether the person alleged to have been coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. These guidelines have also been relied upon by Singapore courts (see Tam Tak Chuen v Khairul bin Abdul Rahman (2009) at [62]; E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd (2011) at [44]). Other cases have usefully added another factor: in order for there to be a finding of economic duress, the alleged victim must prove that he or she had acted reasonably in taking the other party’s threats seriously (see, eg, the (English) decisions of The Alev (1989) at pp 142 and 146, as well as Atlas Express Ltd v Kafco (Importers and Distributors) Ltd (1989) at p 644). 14.10 The focus of the inquiry here is the gravity of the pressure applied, and it appears that the availability of an adequate practical alternative is of particular relevance: did the threat put the victim in a situation that left him without practical choice? The context (whether it was commercial or not) in which the threat was made will also be relevant in the determination of what is a practical choice. 14.11 It should be pointed out that these factors are not conclusive, and may in fact lead to uncertainty. For instance, the fact that the victim failed to protest may not necessarily indicate that he had acted freely and voluntarily; he might not have protested because he considered it futile to do so. Similarly, the fact that the victim did not pursue any of the alternatives available to him would not necessarily mean that he had chosen 546 voluntarily; it might have been that he did not consider those alternatives as viable or practical. 14.12 Clearly, it is imperative to carefully consider and weigh the relevant factors. The decision of Pao On (1980) is illustrative. There, a threat to breach a contract was held to amount to mere commercial pressure not amounting to duress because the threatened party’s will had not been coerced. This conclusion was reached on evidence that the threatened party had not protested, had considered the matter thoroughly and, with the benefit of legal advice, had weighed all the risks involved before finally agreeing to the renegotiation. The threat was therefore not the cause of the pressured party’s entry into the transaction. (2) Illegitimacy 14.13 In R v Attorney-General for England and Wales (2003), the Privy Council considered that the legitimacy of a threat had to be considered from two aspects: (1) the nature of the pressure, and (2) the nature of the demand which the pressure is applied to support. 14.14 Where the threat is of any form of unlawful action, such as a threat to commit a crime or a tort, it will generally amount to illegitimate pressure. However, breaches of contracts tend to be treated differently. Although a breach of contract is a civil wrong and therefore unlawful, a threat to breach a contract does not always amount to illegitimate pressure. The court will instead consider the threat against all the circumstances of the case before deciding if the pressure exerted was illegitimate. 14.15 The High Court decision of Sharon Global Solutions Pte Ltd v LG International (Singapore) Pte Ltd (2001) provides a useful illustration. The plaintiff, a small Singapore company with no significant record or assets, had entered into an agreement with the defendant, a wholly owned subsidiary of LG International Corp, a substantial conglomerate. By the agreement, the plaintiff 547 would sell certain steel products to the defendant, who would then enter into a back-to-back agreement to sell those same steel products to POSCO, an important customer of the LG group. It was the plaintiff’s responsibility to secure a vessel for shipment of the steel products to Korea, but the plaintiff was unable to secure a vessel at the rate of freight earlier envisaged. When the plaintiff finally located a vessel but at a significantly higher rate, it told the defendant that unless the latter shared the cost of the increased freight with it, it would refuse to confirm the charter (hire) of the vessel. The plaintiff also indicated that it was prepared to suffer the consequences of breach. The defendant felt that, as it had to meet its contractual deadline for delivery to POSCO, there was no reasonable alternative open to it but to agree. 14.16 The court held that there was no economic duress, finding (at [45]) that “the plaintiff’s declaration that it would not perform unless the defendant shared the additional freight should be regarded as a legitimate notice of its inability to perform rather than an illegitimate threat”. His Honour arrived at this conclusion by taking into account two factors: (1) the spirit and cooperative nature of the venture; and (2) that it was the plaintiff’s inexperience that resulted in the underestimation of the freight costs. Kan J opined (at [37]) that “against this background, it cannot be said that the plaintiff was seeking to exploit the situation to increase its profits when it informed the defendant that it would not charter the vessel unless the defendant agreed to share the additional costs.” 14.17 Kan J was persuaded to find that there was no illegitimate pressure, despite the threat to breach an existing contractual obligation (therefore an unlawful threat), because the plaintiff was not exploiting the situation, that is, the plaintiff had not acted in bad faith. The court found that the plaintiff was as eager as the defendant to ensure that the transaction with POSCO succeeded. Additionally (at [35]–[36]), that the plaintiff was prepared to proceed with transaction even though: (1) its liability for breach of 548 contract was lower than the cost of its share of increased freight; and (2) it had to borrow money to meet its share of the increased freight. 14.18 The court noted (at [43]) that the party alleging economic duress bore the burden to show that the duress exerted was such as to place it in a position where it was compelled to accede to the other party’s demands. To assess if the defendant had in fact been pushed against the wall, so to speak, the court considered the matter from the defendant’s perspective. The court accepted that the transaction with POSCO was important to the defendant. However, there was no evidence as to the repercussions of non-performance on the defendant or on its relationship with POSCO. In fact, the evidence showed that the defendant had been prepared to contribute towards the additional costs even before the plaintiff’s threat. Thus, even though the threat was of an unlawful action, the entirety of the evidence indicated that there was no duress exerted on the defendant. 14.19 It is apparent from Sharon Global that the good faith of the plaintiff was a significant factor in the court’s conclusion. In a similar manner, the presence of bad faith could be relevant in deciding if lawful threats might amount to illegitimate pressure (see Huyton SA v Peter Cremer GmbH & Co (1999) at p 637). 14.20 Turning now to lawful threats, can a threat to do something lawful amount to actionable duress? A threat to enforce one’s legal rights is an example of a lawful threat. In Lee Kuan Yew v Chee Soon Juan (2003), Rubin J observed (at [42]) that a threat to enforce one’s legal rights would not amount to duress, especially where the threat is made bona fide, and not in a frivolous or vexatious way. However, where the nature of the demand is unreasonable, the threat, albeit lawful in nature, may still be considered illegitimate. Blackmail is often used to illustrate the point. As Lord Atkin explained (at p 806) in Thorne v Motor Trade Association (1937): 549 The ordinary blackmailer normally threatens to do what he has a perfect right to do — namely, communicate some compromising conduct to a person whose knowledge is likely to affect the person threatened … What he has to justify is not the threat, but the demand of money. 14.21 Nevertheless, where the lawful threat is made in a commercial context, it remains difficult to establish duress. The English Court of Appeal decision of CTN Cash and Carry Ltd v Gallaher Ltd (1994) provides an illustration. The plaintiff company, which carried on a cash and carry business from different warehouses had purchased a consignment of cigarettes from the defendant distributors. This consignment was mistakenly delivered to the wrong warehouse. The defendant then arranged for the transfer of the goods to the correct warehouse, but before the transfer could take place, the consignment of cigarettes was stolen from the plaintiff’s warehouse. The defendant invoiced the plaintiff for the price of the stolen cigarettes, believing in good faith that the risk in the goods had already passed to the plaintiff. The plaintiff rejected the invoice initially, but ultimately paid up when the defendant made it clear that it would stop granting credit to the plaintiff unless they paid for the stolen goods. The plaintiff claimed a return of the money paid on the ground that that payment had been made under duress. The plaintiff’s claim failed. 14.22 The court noted that the defendant was entitled to refuse to deal with the plaintiff on credit terms. Accordingly, the defendant’s threat to withdraw credit was a lawful act. Although the removal of credit would cause the plaintiff financial damage, the relationship between the parties was not one that the law is especially protective of, such as that between a supplier and a consumer. In addition, the dispute arose in the context of arm’s length commercial dealings between two trading companies, and the party making the demand acted in good faith. Steyn LJ (as he then was) observed (at p 719) thus: 550 Outside the field of protected relationships, and in a purely commercial context, it might be a relatively rare case in which “lawful act duress” can be established. And it might be particularly difficult to establish duress if the defendant bona fide considered that his demand was valid. In this complex and changing branch of the law I deliberately refrain from saying “never”. 14.23 There is one final matter that needs to be established for the illegitimate pressure to be actionable, and that is the causal link between the pressure applied and the pressured party’s entry into the contract or agreement to the modification of contract. The exact degree of causation required, however, appears to depend on the nature of the threat. As indicated earlier (see para 14.3), where the threat is of injury to the person of the victim, it appears that as long as the illegitimate pressure was a reason (but not necessarily the overwhelming reason) for the victim entering into the contract, that would suffice in a plea of duress (see the Australian Privy Council decision of Barton v Armstrong (1976)). However, a stronger causation requirement appears necessary in the case of economic duress, arguably because of its less serious nature. Thus, Mance J in the English High Court decision of Huyton SA v Peter Cremer GmbH & Co (1999) opined (at p 636) as follows: The minimum basic test of subjective causation in economic duress ought, it appears to me, to be a “but for” test. The illegitimate pressure must have been such as actually caused the making of the agreement, in the sense that it would not otherwise have been made either at all or, at least, in the terms in which it was made. In that sense the pressure must have been decisive or clinching. Effect 14.24 A finding of economic duress renders the contract voidable, not void (see, eg, Pao On v Lau Yiu Long (1980) at pp 635–636); for the distinction between these 551 two concepts, see Chapter 7, para 7.3. However, even where the contract concerned was voidable for economic duress, the victim might be prevented from rescinding the contract if he or she is found to have affirmed the contract. The reader may recall that, in North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (The Atlantic Baron) (1979), the English High Court had concluded that the shipbuilding company’s threat to breach its contract to build a tanker amounted to economic duress (see para 14.4). This meant that the victim had the option to avoid the agreement to pay the company more than what was originally agreed for the tanker. However, the evidence showed that, by the time the tanker was due for delivery, market conditions had changed such that there was no risk that the shipbuilding company would not deliver even if the victim had protested the agreement to pay more. The victim nevertheless made the increased payments without protest, and further, took no action on the matter for some eight months after delivery of the tanker. In the circumstances, the court drew the inference, on an objective view of the facts, that the action and inaction of the victim amounted to an affirmation of the variation of the terms of the original contract. UNDUE INFLUENCE Introduction 14.25 By the doctrine of undue influence, a party may be relieved from a transaction if that transaction was entered into upon the undue influence of the other party. The doctrine is equitable in origin, and covers broadly cases of victimisation, usually involving one party’s domination of the other or “other insidious techniques of persuasion” (see Lord Clyde in Royal Bank of Scotland plc v Etridge (No 2) (2002) at [93]). 14.26 As with the case of economic duress, there is no single universally accepted view as to the true basis of the 552 doctrine. Some cases focus on the wrongful or unconscionable conduct on the part of the defendant. In R v Attorney-General for England and Wales (2003), Lord Hoffmann stated (at [21]), as follows: [U]ndue influence is based upon the principle that a transaction to which consent has been obtained by unacceptable means should not be allowed to stand. Undue influence has concentrated in particular upon the unfair exploitation by one party of a relationship which gives him ascendancy or influence over the other. [emphasis added] The alternative view focuses instead on the claimant’s inability to give real or meaningful consent because of an excessive dependence on the defendant (see Ward LJ’s dicta (at [36]) in Daniel v Drew (2005)). This view of undue influence does not require wrongdoing or unconscionable conduct on the part of the defendant. 14.27 The Singapore courts have tended to justify the doctrine on the basis of the defendant’s unconscionable behaviour or the unacceptable means by which a party’s assent to the transaction is procured. Hence, L P Thean JA in Lim Geok Hian v Lim Guan Chin (1993) explained (at [36]) that “[u]ndue influence is the unconscientious use of one’s power or authority over another to acquire a benefit or to achieve a purpose.” Of the same view is Judith Prakash J, who, in Rajabali Jumabhoy v Ameerali R Jumabhoy (1997), stated (at [189]) as follows: It is not enough to set aside a contract that one party tried to influence the other to enter it. There must be something wrong in the way that the influence was exercised, ie, some unfair or improper conduct, some coercion or some form of misleading. 14.28 Arguably, just like duress, the common denominator is really the impaired consent of the claimant, whether this impairment was the result of the defendant’s unconscionable conduct or the claimant’s own dependency on the defendant as a result of a relationship 553 of trust and confidence between them. If such a view is accepted, there would then be no need to insist upon a finding of wrongful conduct before a transaction can be set aside for undue influence. Categories of Undue Influence 14.29 Undue influence has traditionally been classified into two main categories: Class 1 (or actual) undue influence and Class 2 (or presumed) undue influence. Class 2 is further subdivided into Class 2(A) (involving relationships where trust and confidence is presumed) and Class 2(B) (where trust and confidence is to be proved). Although categorising cases of undue influence in this manner has been criticised as “confusing” by the House of Lords, the practice has continued in Singapore (see, eg, OverseaChinese Banking Corp Ltd v Tan Teck Khong (committee of the estate of Pang Jong Wan, mentally disordered) (2005) at [33]–[34]; BOM v BOK (2019) at [101]). (1) Actual undue influence: Class 1 14.30 This class of undue influence does not depend, unlike Class 2 undue influence, upon the existence of some special relationship between the parties. The party alleging undue influence bears the burden of proving affirmatively that the defendant had exercised undue influence over him and this influence brought about the transaction in question. This may be done by showing that the defendant had exercised such domination over the claimant so as to “twist” the latter’s mind, so much so that his independence of decision was substantially undermined. 14.31 Although there is no need for a special relationship to exist between the parties, there may in fact be such a relationship. In Allcard v Skinner (1887), Lindley LJ described (at p 181) actual undue influence as “cases where there has been some unfair and improper conduct, some coercion from outside, some over-reaching, some 554 form of cheating, and generally, though not always, some personal advantage obtained by a donee (ie, the defendant) placed in some close and confidential relation to the donor (ie, the claimant)”. As the reader will notice, there is some overlap between actual undue influence and the doctrine of economic duress considered earlier in this chapter. 14.32 Once actual undue influence is established, the claimant is entitled to relief. Relief does not depend, unlike cases of presumed undue influence, on the claimant establishing that the transaction was disadvantageous to him. In CIBC Mortgages Ltd v Pitt (1994), Lord BrowneWilkinson observed (at p 209) as follows: Actual undue influence is a species of fraud. Like any other victim of fraud, a person who has been induced by undue influence to carry out a transaction which he did not freely and knowingly enter into is entitled to have that transaction set aside as of right. … A man guilty of fraud is no more entitled to argue that the transaction was beneficial to the person defrauded than is a man who has procured a transaction by misrepresentation. The effect of the wrongdoer’s conduct is to prevent the wronged party from bringing a free will and properly informed mind to bear on the proposed transaction which accordingly must be set aside in equity as a matter of justice. Nevertheless, it should be noted that it would be rare indeed to find undue influence where the transaction is a fair one. As Lord Nicholls pointed out (at [12]) in Royal Bank of Scotland plc v Etridge (No 2) (2002): [I]n the nature of things, questions of undue influence will not usually arise, and the exercise of undue influence is unlikely to occur, where the transaction is innocuous. The issue is likely to arise only when, in some respect, the transaction was disadvantageous either from the outset or as matters turned out. 555 (2) Presumed undue influence: Class 2 14.33 An evidential presumption of undue influence arises in some relational situations. Where the claimant proves: (1) that a relationship of trust and confidence existed between the parties; and (2) that the resulting transaction is “not readily explicable by the relationship of the parties”, the court will, in the absence of a satisfactory explanation, draw the factual inference that the transaction must have been procured by the undue influence of the defendant. Thus, as explained in Royal Bank of Scotland plc v Etridge (No 2) (2002) at [14], “proof of these two facts is prima facie evidence that the defendant abused the influence he acquired in the parties’ relationship.” The defendant then bears the burden of producing evidence to rebut or counter the inference that would otherwise be drawn, and this is usually done by proving that the claimant had exercised a truly independent will. (a) The nature of the parties’ relationship 14.34 Presumed undue influence is further sub-categorised into two types — Class 2(A) and Class 2(B) — on the basis of the nature of the relationship between the parties. 14.35 Class 2A covers those relationships where a presumption of influence arises automatically by force of law, because of the law’s “sternly protective attitude towards certain types of relationship” (see Royal Bank of Scotland plc v Etridge (No 2) (2002) at [18]). These include relationships between parent and child, guardian and ward, doctor and patient, lawyer and client, trustee and beneficiary, and religious adviser and disciple. In these cases, the claimant need only prove the existence of the relationship, and not that he has reposed trust and confidence in the defendant. 14.36 Class 2B, on the other hand, deals with relationships that do not fall within the abovementioned classes, and to which no presumption of influence applies. The following 556 relationships are examples: employer–employee; agent– principal; husband–wife; and siblings. Instead, it must be proven that there is a relationship, on the facts, whereby trust and confidence has been reposed by the claimant in the defendant, and by that relationship, influence is present. (b) Nature of transaction 14.37 The claimant must next show that the transaction was one that is not readily explicable on the basis of the relationship. This requirement is necessary so as not to “presume that every gift by a child to a parent, every transaction between a client and his solicitor or between a patient and his doctor, was brought about by undue influence unless the contrary is affirmatively proved” (see Royal Bank of Scotland plc v Etridge (No 2) (2002) at [24]). As Nourse LJ explained in Goldsworthy v Brickell (1987) (at p 401): [T]he presumption [of influence] is not perfected and remains inoperative until the party who has ceded the trust and confidence makes a gift so large, or enters into a transaction so improvident, as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which men act. Although influence might have been presumed beforehand, it is only then that it is presumed to have been undue. 14.38 The requirement that the transaction cannot be readily explained or accounted for on the basis of the relationship is not necessarily met by showing that that transaction was of “manifest disadvantage” to the plaintiff. This is because a transaction that is clearly disadvantageous to the plaintiff may nevertheless be explicable in the context of the relationship in question. In Royal Bank of Scotland plc v Etridge (No 2) (2002), Lord Nicholls explained the point by reference to the not-uncommon scenario of a wife guaranteeing payment of the debts of her husband (at [28]): 557 In a narrow sense, such a transaction plainly (“manifestly”) is disadvantageous to the wife. She undertakes a serious financial obligation, and in return she personally receives nothing. But that would be to take an unrealistically blinkered view of such a transaction … there are inherent reasons why such a transaction may well be for her benefit. Ordinarily, the fortunes of husband and wife are bound up together. If the husband’s business is the source of the family’s income, the wife has a lively interest in doing what she can to support the business. 14.39 Conversely, some transactions may not be overtly disadvantageous, such as where a child purchased the family home from his parents at market price, and yet, against the backdrop of the particular relationship, influence could have been abused. The inquiry is a factual one, and the question that needs to be answered is whether the transaction is one that cannot be “reasonably accounted for on the ground of friendship, relationship, charity, or other motives on which ordinary men act” (see Allcard v Skinner (1887) at p 185). The court must therefore be mindful of the factual context within which the transaction in question occurs. In this regard, the courts are particularly careful when considering family arrangements. In Peh Nam Kee v Peh Lam Kong (1996), the High Court emphasised that family arrangements are “very special creatures which have to be treated rather differently from commercial transactions” (at [107]). This sentiment was reiterated in Gan Cheng Chan v Gan Meng Hui (2005) (at [43]), where the Singapore High Court held that no presumption of undue influence could be raised in a transaction involving a parent and a child. The case involved a 22-year-old daughter who had agreed, inter alia, to extend an interest-free loan to her father. The court held that the family arrangement was “beyond criticism” (at [44]). 14.40 A converse situation occurred in Oversea-Chinese Banking Corp Ltd v Tan Teck Khong (2005). The 558 transaction in question was a mortgage that had been executed by an elderly illiterate lady over her property, the main asset she had. The mortgage secured loans that were granted to her son and was clearly beneficial to that son and disadvantageous to her. Even though the evidence showed that he was her favourite child and that she lived with him, the court found the transaction to be “manifestly one-sided and not readily explicable by the mother-son relationship” (at [40]). Clearly, some process of balancing is necessary, involving a weighing of the seriousness of the risk to the claimant of enforcing the transaction, in practical terms; and the benefits gained by the claimant in accepting the risk, considered in the context of the relationship between the parties (see Bank of Credit and Commerce International SA v Aboody (1989) at p 780). (c) Rebutting the presumption 14.41 The presumption of undue influence may be rebutted by showing that the claimant acted freely and independently in entering into the transaction. One way of rebutting the presumption is to show that the claimant had received independent (in particular, legal) advice. In Inche Noriah v Shaik Allie bin Omar (1929), the Privy Council (on appeal from the Court of Appeal of the Straits Settlements) was of the view that independent legal advice, whilst an extremely helpful factor, was not the only way in which the presumption of undue influence could be rebutted. However, where independent legal advice was indeed given, the Board considered that rebuttal of the presumption was not necessarily dependent on proof that the advice was in fact taken by the claimant. The Board also observed that the legal adviser must have given his or her advice “with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor” (see pp 135–136). Ultimately, however, whether the receipt of independent legal advice is 559 sufficient to “emancipate” the claimant from the influence of the defendant is a question of fact. 14.42 Can legal advice tendered by a lawyer who is also acting for the defendant be considered independent? The House of Lords in Royal Bank of Scotland plc v Etridge (No 2) (2002) observed that it is a common practice for solicitors to act for both the husband and the wife. Although there are advantages to requiring that the wife be advised by a solicitor who acts solely for her, or who does not act for the husband, the House considered that these advantages do not justify the additional expense involved for the husband. In concluding that the solicitor advising the wife does not need to act for the wife alone, Lord Nicholls observed (at [74]) as follows: When accepting instructions to advise the wife the solicitor assumes responsibilities directly to her, both at law and professionally. These duties … are owed to the wife alone. In advising the wife the solicitor is acting for the wife alone. He is concerned only with her interests … [I] n every case the solicitor must consider carefully whether there is any conflict of duty or interest and, more widely, whether it would be in the best interests of the wife for him to accept instructions from her. If he decides to accept instructions, his assumption of legal and professional responsibilities to her ought, in the ordinary course of things, to provide sufficient assurance that he will give the requisite advice fully, carefully and conscientiously … If at any stage the solicitor becomes concerned that there is a real risk that other interests or duties may inhibit his advice to the wife he must cease to act for her. 14.43 It is important to remember that the classification of undue influence cases is not meant to detract from the requirement of having to prove that there is undue influence. Establishing that there is a special relationship and that the transaction cannot be readily explained on account of the relationship merely raises a rebuttable 560 presumption in the claimant’s favour. The House of Lords, in Royal Bank of Scotland plc v Etridge (No 2) (2002) emphasised (at [16]) that the fundamental concern, in any case involving an allegation of undue influence, is with the drawing of “appropriate inferences of fact upon a balanced consideration of the whole of the evidence” before the court. The local courts have, however, not lost sight of the importance of the factual inquiry. Indeed, even in endorsing and utilising the classification, the courts have remained acutely aware of the need to take into account the individual circumstances of the particular case (see, eg, The Bank of East Asia Ltd v Mody Sonal M (2004) and Oversea-Chinese Banking Corp Ltd v Chng Sock Lee (2001)). For a summary of the points considered above, see Figure 14.2. Figure 14.2 Establishing undue influence 561 14.44 The effect of undue influence is to render the contract concerned voidable, giving the victim of influence the option of avoiding the contract. The courts will attempt to restore the parties concerned as close to their original positions as possible, the key guideline here being the achievement of “practical justice” between them. In this regard, the English Court of Appeal observed in Cheese v Thomas (1994) at p 137, as follows: Achieving a practically just outcome … requires the court to look at all the circumstances, while keeping the basic objective [of restoring the parties to their original positions] firmly in mind. In carrying out this exercise the court is, of necessity, exercising a measure of discretion in the sense that it is determining what are the requirements of practical justice in the particular case … As with the jurisdiction to grant relief, so with the precise form of the relief granted, equity as a court of conscience will look at all the circumstances and do what fairness requires. Creditors and Doctrine of “Infection” 14.45 It is not unusual for a person to stand as surety or provide security (usually by charging his/her share of the matrimonial home) for the debts of his/her spouse. Surety arrangements are tripartite transactions, involving the principal debtor (ie, the borrower), the creditor (ie, the lender) and the guarantor (ie, the surety). The guarantor enters into the contract of surety at the request of the debtor, assuming obligations for no apparent benefit (except where the relationship between the debtor and guarantor is commercial in nature). Difficult issues in connection with the enforceability of the security arise if the contract had been procured by the spouse’s exertion of undue influence. It should be remembered that the creditor, which is a party to the contract, is not itself guilty of undue influence (or even misrepresentation, as to which see, generally, Chapter 13). The difficulty thus is due to the need to achieve a balance between, on the one hand, protecting vulnerable sureties and on the other, 562 not making it unduly burdensome for creditors to enforce their securities. In some situations, a creditor may find its rights against a surety “infected” by the wrongdoing of its debtor, such that it would be treated as if it had itself committed the wrongdoing. 14.46 The creditor is “infected” in one of two main ways. First, it might have entrusted the guilty party as its agent with the task of obtaining the execution of the document it is presently suing under. If so, there is “infection” by way of agency. Secondly, the creditor might have had notice, actual or constructive, of the wrongdoing by the guilty party and, hence, its rights would be “infected” accordingly. 14.47 However, in the House of Lords decision of Barclays Bank Plc v O’Brien (1994), Lord Browne-Wilkinson was of the view that situations of agency are likely to be rare (see p 195) and that the doctrine of constructive notice would constitute the main doctrine in this regard (see pp 194– 195). Two conditions must be present in order for the doctrine to apply: first, the creditor was put on inquiry; and second, it failed to take reasonable steps to minimise the risk that the wrong of undue influence may be committed. (1) When the creditor is put on inquiry 14.48 In husband-and-wife cases, Lord Browne-Wilkinson stipulated the threshold requirement as follows (see p 196): A creditor is put on inquiry when a wife offers to stand surety for her husband’s debts by the combination of two factors: (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction. 563 The House of Lords in Royal Bank of Scotland plc v Etridge (No 2) (2002) clarified that, in this passage, Lord Browne-Wilkinson was not laying down factual conditions that had to be proved before a creditor is put on inquiry. This would unrealistically require creditors to probe into the state of the parties’ emotional relationship, leaving creditors in an undesirable state of uncertainty. The passage, instead, contains Lord Browne-Wilkinson’s “broad explanation of the reason why a creditor is put on inquiry when a wife offers to stand surety for her husband’s debts” (at [46]), and those factors, taken together, constitute the underlying rationale. 14.49 The House, however, adopted a somewhat sweeping approach in husband and wife cases, holding (at [44]– [49]) that the threshold is simply that the creditor is put on inquiry whenever a wife (or husband) offers to stand surety for the debts of her husband (or his wife); or for the debts of a company owned jointly by them, even if the wife (or husband) is involved in the company’s management. It suffices that the creditor knows of the husband–wife relationship. The creditor, however, will not be put on inquiry if the loan is advanced for their joint purposes. In The Bank of East Asia v Mody Sonal M (2004), the High Court distinguished Royal Bank of Scotland plc v Etridge (No 2) (2002) and declined to apply the blanket test. The case concerned personal guarantees which had been given by the wife and daughter in favour of the bank to secure the indebtedness of a company in which they, and not the husband, were shareholders. The court found that their guarantees had been given as directors of the debtor-company. In the circumstances, the court considered that the bank was not put on inquiry. 14.50 Beyond spousal relationships, creditors are also put on inquiry in every case where the relationship between the surety and the debtor is non-commercial (see Royal Bank of Scotland plc v Etridge (No 2) (2002) at [87]). Such relationships may include those between parent and 564 child; relatives; in-laws; employee and employer; and unmarried couples. Mere knowledge of the noncommercial nature of the relationship suffices to place the creditor on inquiry. (2) Reasonable steps 14.51 When the creditor is put on inquiry, it has to take reasonable steps to ensure that it is not fixed with constructive notice of the wife’s rights. In Royal Bank of Scotland plc v Etridge (No 2) (2002), Lord Nicholls said (at [53]–[54]): [I]t is plainly neither desirable nor practicable that banks should be required to attempt to discover for themselves whether a wife’s consent is being procured by the exercise of undue influence of her husband … Nor, further, is it desirable or practicable that banks should be expected to insist on confirmation from a solicitor that the solicitor has satisfied himself that the wife’s consent has not been procured by undue influence … The furthest a bank can be expected to go is to take reasonable steps to satisfy itself that the wife has had brought home to her, in a meaningful way, the practical implications of the proposed transaction. Whilst Singapore courts have endorsed this approach (see Susilawati v American Express Bank Ltd (2008) at [26]–[27]), it remains to be seen what precise steps the courts will regard as satisfying the requirement for reasonable steps. In practical terms, these steps could involve, in ordinary cases, requiring that the guarantor obtain her own legal advice, informing her that the purpose of the solicitor’s involvement is so that the creditor may obtain and rely on written confirmation from the legal advisers that the guarantor had been properly advised, and that these steps are for the creditor’s own protection (see Royal Bank of Scotland plc v Etridge (No 2) (2002) at [79]). 565 14.52 There may be exceptional situations in which more is required of the creditor, such as where the creditor knows of facts that indicate that the guarantor had been inappropriately advised or that lead the creditor to suspect an aggravated risk of undue influence being exercised or other wrongdoing. In these sorts of abnormal cases, the creditor proceeds at its own risk and may need to satisfy itself that there was no undue influence (see Royal Bank of Scotland plc v Etridge (No 2) (2002) at [164]). UNCONSCIONABILITY Introduction 14.53 Like undue influence, the doctrine of unconscionability is equitable in origin. The doctrine allows the court to set aside unconscionable bargains. In Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd (1985), Dillon LJ said (at p 183) that “the courts would only interfere in exceptional cases where as a matter of common fairness it was not right that the strong should be allowed to push the weak to the wall. The concepts of unconscionable conduct and of the exercise by the stronger of coercive power are thus brought in.” 14.54 Unconscionability, however, may be found in the terms of the bargain and in the behaviour of the stronger party. The cases are clear that merely showing that the bargain is a hard or unreasonable one is insufficient for relief. The basis of the doctrine is not the weaker party’s impaired consent, but the unconscionable conduct of the stronger party. As explained in Multiservice Bookbinding Ltd v Marden (1979) (at p 110): [I]t is not enough to show that, in the eyes of the court, [the bargain] was unreasonable. In my judgment a bargain cannot be unfair and unconscionable unless one of the parties to it has imposed the objectionable terms in a morally reprehensible manner, that is to say, in a way which affects his conscience. The classic 566 example of an unconscionable bargain is where advantage has been taken of a young, inexperienced or ignorant person to introduce a term which no sensible well-advised person or party would have accepted. But I do not think the categories of unconscionable bargains are limited: the court can and should intervene where a bargain has been procured by unfair means. Narrow Doctrine 14.55 Although potentially capable of applying broadly to all cases involving unequal bargaining positions, the doctrine is, under English law, narrow in scope applying to protect a somewhat restricted class of persons with personal or circumstantial weaknesses. Thus, the English High Court observed (at p 257) in Cresswell v Potter (1978) that there were three requirements. First, whether the plaintiff was “poor and ignorant”; secondly, whether the transaction was at a considerable undervalue, and thirdly, whether the plaintiff had independent advice. More generalised requirements for the application of the doctrine were stipulated in Alec Lobb (Garages) Ltd v Total Oil (Great Britain) Ltd (1983) (at pp 94–95) as follows: First, one party has been at a serious disadvantage to the other, whether through poverty, or ignorance, or lack of advice, or otherwise, so that circumstances existed of which unfair advantage could be taken … secondly, this weakness of the one party has been exploited by the other in some morally culpable manner … and thirdly, the resulting transaction has been not merely hard or improvident, but overreaching and oppressive. 14.56 In contrast, there are clear signs of a broader development of the doctrine in Australia. In the Australian High Court decision of Commercial Bank of Australia Ltd v Amadio (1983), it was observed (at p 422) that the court’s jurisdiction to relieve against unconscionable 567 dealing extended to circumstances in which (1) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them, and (2) that disability was sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he accept the weaker party’s assent to the transaction in the circumstances in which he accepted it. If such circumstances are shown to have existed, the onus lies on the stronger party to show that the transaction was fair, just and reasonable. 14.57 In Singapore, however, the courts have generally taken a more conservative approach, preferring the narrower English position (see, eg, Lim Geok Hian v Lim Guan Chin (1993); Pek Nam Kee v Peh Lam Kong (1996); and Rajabali Jumabhoy v Ameerali R Jumabhoy (1997)). This approach has been affirmed by the Court of Appeal in BOM v BOK (2019). The broader approach demonstrated in Amadio was rejected as it “[afforded] the court too much scope to decide on a subjective basis” (at [133]). The narrow doctrine of unconscionability under Singapore law applies where a plaintiff shows that he was suffering from an infirmity that the other party exploited to procure the transaction. The court opined that for this purpose, the concept of “infirmity” extends beyond poverty and ignorance to other forms of physical, mental and/or emotional infirmities, provided the infirmity is of such “gravity as to have acutely affected the plaintiff’s ability to ‘conserve his own interests’” (at [141]). Further, the plaintiff need not show that the transaction in question was at a considerable undervalue, or that he did not have access to independent legal advice, in order to successfully invoke the narrow doctrine. Nevertheless, these are “very important factors” that the court will “invariably consider” (at [142]). 14.58 The adoption of the narrow approach is due mainly to a fear of the exercise of excessive judicial discretion because the general criteria underlying the doctrine, 568 being the ideals of fairness and justice, are rather broad. The doctrine is, nevertheless, rather attractive to those who tend to put much weight on the attainment of a fair outcome. Once again, we encounter the perennial tension between the need for (general) certainty of contract on the one hand and (specific) fair outcomes on the other. Whilst it is true that, in most situations, both can be achieved simultaneously, this is not always the case. Sometimes, in order to achieve a fair result in a particular case, the court might have to ignore or even effectively contradict previously enunciated rules and principles. This undermines what may be fair rules which operate well in most cases, hence, the oft-cited saying that “hard cases make bad law”. The court’s duty, therefore, is to constantly balance this tension. It seems clear, however, that the doctrine of unconscionability does tend to lean towards the side of fairness as opposed to general certainty of contract, leading to a fear of opening the floodgates of judicial discretion. A General Doctrine of Unconscionability? 14.59 In Gay Choon Ing v Loh Sze Ti Terence Peter (2009), the Singapore Court of Appeal acknowledged (at [112]) the “possible linkages” between the doctrines of economic duress, undue influence, and unconscionability. This suggests the possibility of recognising a general doctrine of unconscionability within which these doctrines may be subsumed. Indeed, the interpretation and application of the common law of contract by our courts reflect concerns for the fairness of the bargain reached by the parties and the protection of their legitimate expectations. In addition to the doctrines discussed in this chapter, concepts of fairness also underpin the rules and doctrines applicable to, inter alia, the classification of terms, the interpretation of exclusion clauses, and the grant of appropriate remedies and relief. The question whether there should therefore be a general doctrine of unconscionability in Singapore contract law has been raised. 569 14.60 Proponents point out that the creation of a general doctrine of unconscionability is of most benefit in hard cases, allowing the needs of justice to be addressed in a principled manner without the need to resort to “contortions or subterfuges”. There are, however, real difficulties with the concept itself. The potential for uncertainty and the opening of the floodgates of judicial discretion have already been alluded to. In addition, an externally imposed doctrine premised on good faith might not sit well with those contracting scenarios in which parties operate in an opportunistic, competitive and hence adversarial mode. Difficult questions arise as to the standards of fair play by which the contracting parties’ actions should be judged. 14.61 More recently, the Court of Appeal considered the arguments for and against a general doctrine of unconscionability in BOM v BOK (2019). Whilst recognising that subsuming the doctrines of duress and undue influence under such an umbrella doctrine was “theoretically elegant” (at [176]), the court considered such a move to be difficult in practice because there is no “practically workable legal criteria” for identifying unconscionable behaviour that is sufficient to vitiate a contract. The court doubted (at [180]) that a coherent and principled development of an umbrella doctrine is possible in the absence of principled and practical legal criteria. CONCLUSION 14.62 Inequality in the bargaining positions of contracting parties may give rise to unfairness in the contracts ultimately concluded. This is especially so where the party with the stronger economic power exerts pressure or influence so as to either compel the very entry into the contract, or to impose certain terms which are more onerous for the weaker party. In this chapter, we looked at the law’s response to transactions entered into under such 570 circumstances. Specifically, we considered the doctrines of duress, undue influence and unconscionability. These doctrines allow contracts affected by illegitimate pressure or influence to be set aside. 14.63 Whilst the doctrines demonstrate the law’s concern for unfairness in contracts, the main planks of contract law remain the traditional ideals of contractual freedom and the certainty of contract. As such, the doctrines considered in this chapter necessarily operate within narrow confines. 571 Chapter 15 Illegality and Public Policy 15.1– 15.3 Introduction 15.4– 15.10 Statutory Illegality 15.11 15.12– 15.13 15.14– 15.15 15.16– 15.17 15.18 15.19– 15.23 15.24– 15.26 15.27– 15.30 15.31– 15.34 15.35– Illegality at Common Law Introduction Types of Common Law Illegality Intermediate Category Consequences or Effects of Illegality Introduction Recovery of Benefits Conferred Under Illegal Contract (Restitution) (1) Recovery where parties are not in pari delicto (2) Timely repudiation or repentance (3) Recovery on independent cause of action Contracts in Restraint of Trade Introduction Validity of “Restraint of Trade” Clause 572 15.40 15.41– 15.54 15.55– 15.56 15.57– 15.59 15.60 15.61– 15.63 15.64– 15.67 15.68– 15.69 Employment Contracts Sale of a Business Other Categories Severance Introduction Severance of Entire Clauses Severance within Covenants: “Blue Pencil Test” Conclusion INTRODUCTION 15.1 The general rule that no action will arise from a wrong done is derived from the Latin phrase “ex turpi causa non oritur actio”. This means that the courts will not assist a person whose action is based on a contract which is tainted by illegality or is contrary to public policy. Accordingly, such contracts may be totally or partially unenforceable. If both parties are before the courts with a contract that is illegal or contrary to public policy then the court through its own observation of the presence of either of these features will decline enforcement of the contract. The spirit of this area of law is in the refusal of the courts to allow a party to benefit from his wrongdoing and to have that rule so manifestly stated that it discourages illegal contracts and contracts that are contrary to public policy. It is important to note at the outset that a party who tries to rely on illegality will be the party who does not want to observe his contractual obligations. 573 15.2 In Holman v Johnson (1775), Lord Mansfield provided (at p 343) this extremely useful perspective: The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may say so. In the interest of the greater public good, the courts are prepared to override the contractual rights of the parties. In almost all situations concerning illegality of contracts or contracts that are otherwise contrary to public policy, the general rule is that the loss will lie where it falls. In other words, the courts will not aid any of the parties if to do so would be to enforce a contract that has already been adjudged to be against the greater public good. There are exceptions to this general rule which will be dealt with later. 15.3 There