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
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Senior Marketing Manager:
Charles Ho
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2
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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.
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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-
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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
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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?
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(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 …
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[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 are two broad categories that this area is divided
into:
statutory illegality; and
illegality at common law.
Statutory illegality is as controversial as the concept of
public policy. This is because there is no clear theoretical
framework for it. In addition, there are difficulties when the
courts are required to try and discover the legislative
intention of the provisions before them. Refer to Figure
15.1 for a diagrammatic summary of the doctrine of
illegality (statutory and common law) and public policy in
the context of unlawful contracts.
574
Figure 15.1 A summary of the doctrine of illegality (statutory and
common law) and public policy in the context of unlawful contracts
STATUTORY ILLEGALITY
15.4
Statutory illegality can only arise when there has been a
contravention of the statute in question. The key focus is
whether the object of the statute is only to prohibit the
conduct that is the subject of the statutory penalty or is
the object also to prohibit the making of such contracts.
Sometimes the legislative intention is clear on the face of
the provision. For example, in the Professional Engineers
Act (Cap 253, 1992 Rev Ed), s 11(1) provides that:
Subject to the provisions of this Act, no person shall
employ as a professional engineer any person who is
not a registered professional engineer.
The section thus generally prohibits the engaging of
persons as professional engineers who have not been
duly registered.
575
15.5
Where a statute expressly prohibits certain contracts and
contracts of such nature are entered into, then the result
will clearly be an illegal contract which is unenforceable
and the innocence of either or both parties would be
irrelevant. An illustration of this can be found in the
English Court of Appeal decision of Phoenix General
Insurance Co of Greece SA v Administratia Asigurarilor
de Stat (1988). By statute, proper authorisation was
required before a person could carry on certain types of
insurance business. There were criminal sanctions for
non-compliance. It was held that the statute prohibited the
conduct of certain insurance contracts without
authorisation. It is important to note that the prohibition
affected both the business of effecting contracts of
insurance and the business of carrying out contracts of
insurance. Thus both the contracts and their performance
were prohibited by statute.
15.6
Another interesting case illustrating an express prohibition
by statute is Re Mahmoud and Ispahani (1921). A
government order made under the Defence of the Realm
Regulations prohibited the sale or purchase of linseed oil
without a licence. The seller had the requisite licence and
was assured by the buyer that he, the buyer, had the
licence as well. The buyer subsequently refused to accept
delivery and pleaded that his lack of licence rendered the
contract illegal. It was held that the language of the
statute was plain irrespective of guilt or innocence,
knowledge or otherwise; a contract for the purchase of
linseed oil without the necessary licence was prohibited.
Unfair though it may appear from the innocent party’s
perspective, the general rule requires the courts not to
enforce a statutorily illegal contract. The innocent party
could have found a way of getting what he wanted without
relying on illegality but if he insists on relying on the illegal
contract to found his action, he will meet a dead end.
15.7
As a result of the severe consequences of a finding of
statutory illegality, courts will be slow to hold that any
contract or class of contracts is prohibited by a statutory
576
provision unless there is a “clear implication” or
“necessary inference” that this was what the provision
intended (see Ting Siew May v Boon Lay Choo (2014)
(“Ting Siew May”) (at [110])). Where the legislative
intention is not clear from the plain wording of the relevant
provision, a further exercise in statutory interpretation is
therefore necessary to discern if the provision impliedly
prohibits the contract. This will entail a consideration of
the objective(s) for introducing the provision in the first
place, that is, the mischief which the provision is to
prevent.
15.8
An example of an implied prohibition by a statute can be
found in the case of Cope v Rowlands (1836). Statute
made it an offence for persons to act as a broker in the
City of London without a licence, with a penalty of £25 for
such offences. The plaintiff sued the defendant for his
services as a broker although he did not have the
necessary licence. Parke B held (at p 159):
[T]he legislature had in view, as one object, the benefit
and security of the public in those important
transactions which are negotiated by brokers. The
clause, therefore, which imposes a penalty, must be
taken … to imply a prohibition of all unadmitted
persons to act as brokers, and consequently to
prohibit, by necessary inference, all contracts which
such persons make for compensation to themselves
for so acting.
However, as also observed by Kerr LJ (at p 273) in the
Phoenix General Insurance case:
[W]here a statute merely prohibits one party from
entering into a contract without authority and/or
imposes a penalty on him if he does … it does not
follow that the contract itself is impliedly prohibited so
as to render it illegal and void. Whether or not the
statute has this effect depends upon considerations of
public policy in the light of the mischief which the
statute is designed to prevent, its language, scope and
577
purpose, the consequences for the innocent party, and
any other relevant considerations.
15.9
Another example of an implied statutory prohibition was
found in Anderson Ltd v Daniel (1924). In that case, the
Fertilisers and Feeding Stuffs Act 1906 stated that a
seller of soil fertiliser had to provide every purchaser with
an invoice containing the fertiliser’s content of certain
chemical substances, and that a monetary penalty would
be imposed if the seller failed to provide the said invoice.
The court held that the penalty imposed was wholly for
the protection of the public; because the seller here had
not provided the necessary invoice, the contract of sale
was illegal and the seller could not sue for the price.
Generally speaking, therefore, where a statute is enacted
to protect the public, it is likely that contracts concerned
with the thing the statute prohibits will be held impliedly
prohibited.
15.10
On the other hand, where the statutory penalty imposed
relates only to the collection of revenue, generally no
adverse consequences will follow insofar as the validity of
the underlying contract is concerned. In Smith v
Mawhood (1845), a tobacco dealer had not painted his
name on the licensed sale premises. This breached the
relevant legislation and a penalty was payable. It was
held by the court that the object of this legislative
provision was merely for the collection of revenue, and
not to prohibit contracts of sale. As such, the dealer could
recover the price for goods sold.
ILLEGALITY AT COMMON LAW
Introduction
15.11
The previous segment dealt with statutory illegality, where
the illegality stems from a statute enacted by Parliament
and on a true construction of the statute it prohibits the
making of such contracts or, exceptionally, where parties
578
or a party enter into a contract with the intention of
contravening a statute. In contrast, in this segment, the
source of the illegality lies in general principles
propounded in case law which have evolved through
decisions of judges and is generally referred to as the
common law. In such cases, the principles of the illegality
have been identified in case law as being capable of
tainting the contract, and it is important to realise that it
may apply in the context of a prohibition even in a statute.
Types of Common Law Illegality
15.12
The following are some of the various established heads
of public policy developed by the common law:
Contracts prejudicial to administration of justice.
Examples under this category can be found in
contracts to either stifle prosecution or perhaps to give
false evidence in a court of law.
Contracts to deceive public authorities. In Alexander v
Rayson (1936), the plaintiff leased a flat to the
defendant. There were two separate agreements. The
first agreement was a lease for the sum of £450 per
annum, including services to be rendered by the
plaintiff. The second agreement was for the same
services as the first agreement but for the sum of £750
per annum. The defendant refused to pay an
instalment due under the agreements and argued that
the object of the agreements was to deceive the local
authority into reducing the value of the flat on which
rates payable to the authority were calculated, by only
disclosing the lease document to the authority. It was
held that the agreements were for an illegal purpose
and the plaintiff could not enforce either of them.
Contracts to oust jurisdiction of the courts. This is
where a contract or agreement deprives a party of the
right to seek the redress of the courts. An example
would be a separation agreement in which a wife
undertakes not to apply for maintenance. In Hyman v
Hyman (1929), it was held that the courts’ power to
579
award maintenance could not be ousted by such an
agreement.
Contracts to commit (or involving) a crime, tort or fraud.
A contract to commit a crime is clearly illegal. A crime
is also committed at the time the agreement takes
place as it amounts to a criminal conspiracy such as,
for example, to commit a murder. A contract to commit
a civil wrong or tort can also be illegal. In the case of
fraud, it can have both criminal and civil
consequences. So, in Taylor v Bhail (1996), the
headmaster of a school agreed with a builder that the
builder would submit an inflated estimate for repair
works necessitated by storm damage so as to defraud
the insurance company. The builder completed the
work and sued for payment of the balance. The
English Court of Appeal held that the contract was
tainted by fraud. The builder could not recover any
further payment, nor could the headmaster recover
what he had paid out.
Contracts prejudicial to public safety. An apparent
example would be trading with the enemy.
Contracts promoting sexual immorality. In Pearce v
Brooks (1866), the plaintiffs hired out an ornamental
brougham to the defendant woman for the purposes of
prostitution. The plaintiffs’ cause of action for the
recovery of sums due for the hire failed as they were
fully aware of the defendant’s intention to use the
brougham for an illegal purpose.
Contracts which are liable to corrupt public life. An
agreement to buy public office or to get a person of
influence in the civil service to use his position to
obtain benefits would come within this category.
15.13
In many of the cases falling within the various heads
mentioned above, there was no statute that had been
contravened. Instead these agreements were for an
illegal purpose and they were unenforceable for that
reason. The reader should note that although the
categories of illegality at common law are not closed, the
580
courts will not readily add new categories (see Ochroid
Trading Ltd v Chua Siok Lui (trading as VIE Import &
Export) (2018) (“Ochroid”) (at [30])).
Intermediate Category
15.14
Quite apart from the established heads mentioned above
(in which the contract will be unenforceable and there will
be no recovery pursuant to the contract), there is a
particular category of contracts which has traditionally
given rise to much difficulty. This category comprises
contracts tainted by illegality, but which are not expressly
or impliedly prohibited by statute and are also not
contrary to one of the established heads of common law
public policy. Because the degree of the illegality involved
could vary greatly from case to case in this category, the
courts will apply a test of proportionality in deciding
whether the contract is enforceable. Factors to be
considered in this test include (1) whether allowing the
claim would undermine the purpose of the prohibiting
rule; (2) the nature and gravity of the illegality; (3) the
remoteness or centrality of the illegality to the contract;
(4) the object, intent, and conduct of the parties; and (5)
the consequences of denying the claim (see Ting Siew
May (at [70]); Ochroid (at [176])).
15.15
Ting Siew May provides an illustration of a contract which
is not prohibited by statute or contrary to an established
head of common law public policy, but nevertheless
involves the commission of a legal wrong. A seller had
granted two purchasers an option to purchase a property
on 13 October 2012. The option was backdated to 4
October 2012 at the purchasers’ request. This was so
that the purchasers could obtain a bank loan for the
purchase on the more favourable terms (mainly, a higher
loan-to-value (LTV) ratio of residential property loans)
allowed prior to 5 October 2012, which was the date the
Monetary Authority of Singapore (MAS) implemented a
property cooling measure lowering the LTV ratio. The
seller subsequently withdrew the option. The Singapore
581
Court of Appeal held that the option was neither expressly
nor impliedly prohibited by statute. Nevertheless, the
option fell within the principles of common law illegality
and would not be enforced. Among other reasons, the
court found that (1) the purchasers’ intent from the outset
was to use the (false) date stated in the option for a
purpose which they knew was prohibited; (2) the illegal
act which the purchasers set out to commit was not trivial;
(3) allowing the purchasers to enforce the option would
undermine the purpose of the MAS cooling measure; and
(4) the consequences of denying enforcement of the
option would not be so great as to render it a
disproportionate response to the illegality.
CONSEQUENCES OR EFFECTS OF ILLEGALITY
Introduction
15.16
As mentioned earlier, the general rule is that no action will
arise from a wrong done. It offends the dignity of the court
to have anything to do with a contract tainted by illegality
or one that is contrary to public policy. In fact, the general
rule could, arguably, aim to deter parties from entering
into illegal contracts. Accordingly, such contracts are
unenforceable and the loss lies where it falls. The
significance of the general rule is also that a party trying
to claim any rights, including the right to damages for
breach of contract, will be unsuccessful. The
consequences and remedies that normally follow the nonperformance by one of the parties to the contract will not
apply.
15.17
Having said that, there are circumstances under which
money paid or property transferred under an illegal
contract can be recovered. Benefits in some form or other
may have passed under the illegal contract and really
here we are dealing with a form of restitution. Recovery
under this latter category is clearly restrictive as there is
no question of recovering the full contractual losses, for
example, the profits that would otherwise be gained.
582
Recovery of Benefits Conferred Under Illegal Contract
(Restitution)
15.18
The general rule is that money paid or property
transferred under an illegal contract is not recoverable.
The Latin maxim “in pari delicto potior est conditio
defendentis” applies. Thus, where both parties are at fault
the law favours the defendant and the result is that gains
and losses remain where they have accrued or fallen. It
signifies the law’s refusal to grant any assistance
whatsoever. There are several exceptions to the general
rule.
(1) Recovery where parties are not in pari delicto
15.19
This exception applies where one of the parties is
deemed, in law, not to be equally at fault. There are a few
examples where it could apply. First, the parties are
certainly not in pari delicto when one party is fraudulent.
In Hughes v Liverpool Victoria Legal Friendly Society
(1916), the plaintiff was advised by an insurance agent to
keep up premium payments on certain existing life
insurance
policies.
That
was
a
fraudulent
misrepresentation by the agent. The plaintiff had no
insurable interests in the lives of the persons named in
the policies, which therefore made the policies illegal. It
was held that the plaintiff could recover the premiums she
had paid, as she had kept up the policies as a result of
the fraudulent misrepresentation.
15.20
Second, the parties cannot be said to be equally at fault if
there has been duress or oppression by one party on the
other. In Kiriri Cotton Co Ltd v Ranchhoddas Keshavji
Dewani (1960), the plaintiff paid his landlord, who was
committing an offence by accepting it, a premium for a
flat. The statute that rendered such contracts illegal,
namely the Rent Restriction Ordinance, did not provide
that such premiums were recoverable. It was held that the
plaintiff was not to blame for evading the legislation but
his landlord was. If the landlord was using his property
583
rights to exploit those in need of a roof over their heads,
in that sense there could be oppression.
15.21
As Lord Mansfield said (at p 792) in Browning v Morris
(1778):
[W]here contracts or transactions are prohibited by
positive statutes, for the sake of protecting one set of
men from another set of men; the one, from their
situation and condition, being liable to be oppressed or
imposed upon by the other; there the parties are not in
pari delicto; and in furtherance of these statutes, the
person injured, after the transaction is finished and
completed, may bring his action and defeat the
contract.
15.22
Lord Mansfield provides the third example of where a
statute is a class protecting statute, that is, the statute
protects one group of people against another. This
exception is also illustrated on the facts of the Kiriri case
where the statute protected tenants from landlords who
sought to obtain inflated rental.
15.23
Another instance where the parties are not equally at fault
is where one party enters into the illegal transaction as a
result of a mistake as to the facts constituting the
illegality. In Aqua Art Pte Ltd v Goodman Development
(S) Pte Ltd (2011), the plaintiff, a foreign company, had
exercised an option to purchase five shophouses from the
defendant. The plaintiff was mistaken as to the zoning of
the properties; it thought they were zoned for commercial
use, but they were actually restricted residential
properties. Any purchase by the plaintiff (a foreigner)
would therefore have been void under the Residential
Property Act (Cap 274, 2009 Rev Ed), and the option was
indeed declared void. The Singapore Court of Appeal
held that the plaintiff, being mistaken as to the facts of the
illegality, was entitled to claim for restitution of the option
deposit paid.
584
(2) Timely repudiation or repentance
15.24
This exception applies when one party repudiates in time.
Before an illegal contract is performed it is open to either
party to repent while the contract is still executory. In a
sense, the law provides the parties with an “opportunity of
repentance” and encourages the parties to pull out of the
illegal contract. In the case of Taylor v Bowers (1876), the
plaintiff fraudulently assigned some machinery to X to
prevent it falling into the hands of his creditors. He then
had several meetings with his creditors but failed to reach
a settlement with them. The plaintiff later claimed the
machinery from the defendant who had obtained it from X
knowing of the fraudulent scheme. It was held that the
plaintiff could recover the machinery as the illegal
purpose had not been carried out.
15.25
In contrast is the case of Kearley v Thomson (1890). The
plaintiff agreed with the defendants, a firm of solicitors, to
pay them if they did not appear at his friend’s public
examination, and did not oppose his friend’s discharge of
bankruptcy. He paid them the money. The defendants
were willing to enter into such a contractual arrangement
as the bankrupt’s estate, from which their costs were to
be paid, lacked the requisite funds. The defendants did
not appear at the public examination. However, before the
friend was discharged, the plaintiff sought to recover the
money paid. It was held that the plaintiff could not recover
the money because the contract had been partly
performed.
15.26
As demonstrated by the case of Bigos v Bousted (1951),
it has been suggested that there must be voluntary and
genuine repentance for this exception to apply (see also
Ochroid (at [171]–[175])). This was a case of statutory
illegality. In contravention of a statute, the defendant
agreed to supply the plaintiff with Italian currency. As
security for the loan, the plaintiff deposited a share
certificate with the defendant. The defendant failed to
supply the Italian currency and the plaintiff sued for
585
recovery of the certificate. It was held that the plaintiff was
not entitled to succeed. The plaintiff’s repentance was not
genuine or voluntary. The plaintiff’s change of heart was a
result of the scheme having failed.
(3) Recovery on independent cause of action
15.27
Under this category, recovery is allowed because the
plaintiff relies upon a basis that is separate and
independent of the illegality. The plaintiff may be able to
recover the benefits conferred under the illegal contract
(but not to enforce and profit from the illegal contract) by
making a claim in unjust enrichment, tort or the law of
trusts. However, there is no automatic right of recovery
under any such claim. The court will also consider
whether the defence of illegality and public policy is
applicable to such a claim. This last exercise requires the
court to determine whether allowing the claim would
undermine or stultify the fundamental policy that rendered
the contract void and unenforceable in the first place. If
the answer is yes, the court is likely to dismiss the claim
made in unjust enrichment, tort or the law of trusts (see
Ochroid (at [159] and [168])).
15.28
For a plaintiff to make out a claim in unjust enrichment, all
of the following requirements must be satisfied: (1) Has
the defendant been benefitted or enriched? (2) Was the
enrichment at the expense of the plaintiff? (3) Was the
enrichment unjust? (4) Are there any defences? Ochroid
provides an example of an unsuccessful claim. The
plaintiffs had provided monies to the defendant under
illegal
moneylending
contracts,
which
were
unenforceable. However, the plaintiffs also claimed in
unjust enrichment for the return of the monies. The court
found that only the first three requirements were satisfied.
The fourth requirement was not satisfied because the
defence of illegality and public policy was applicable to
the claim in unjust enrichment. The court found that
recovery of the monies would undermine and stultify the
fundamental social and public policy against unlicensed
586
moneylending underpinning the relevant legislation.
Unlicensed moneylenders should not receive any
compensation whatsoever for illegal loans, which were a
serious social menace in Singapore. The court therefore
dismissed the plaintiffs’ claim in unjust enrichment.
15.29
When a person wants to assert his rights to goods,
especially his rights of ownership, against a person who
has the goods, that person will usually rely on the tort of
conversion. For example, if A owns a car and it is stolen
and sold by the thief to B, A will rely on the tort of
conversion in an action against B. There are many ways
in which the tort of conversion can be committed. For
example, it can be committed by doing any of the
following:
wrongfully taking possession of goods;
wrongfully disposing of them; or
wrongfully refusing to give them up when demanded.
15.30
In a claim under the law of trusts, a beneficiary may be
able to assert his interest in the property that is held on
trust by a trustee. A common example of a trust
relationship is where a person (the settlor) transfers
property to another person (the trustee) to be expressly
held on trust for the benefit of a third person (the
beneficiary). Generally, the beneficiary is said to have an
interest in the property and will be able to assert his
interest by making a claim under the law of trusts.
CONTRACTS IN RESTRAINT OF TRADE
Introduction
15.31
Covenants in contracts in restraint of trade are very
common and take many forms. Such covenants restrict
the freedom of contracting parties in one way or another.
Literally, restraint of trade covenants curtail the freedom
of trade. However, in employment contracts, it not only
attempts to prevent an employee from leaving the
587
employment, it usually seeks to prevent the employee
from working for the employer’s competitor. Employers
use these covenants to protect the investment they have
made in terms of training an employee. In addition, they
also use them to protect other interests which include
trade secrets and their clientele. In some cases, where
the employee has brought in skills which are integral to
the employer’s business, the employer may try to use
these covenants to hold back the employee.
15.32
When faced with a covenant in restraint of trade, the
courts usually bear in mind two competing public policy
considerations. First, it is in the interest of society to
encourage competition and such clauses are not in the
interest of society generally as they prevent competition.
However, generally speaking it is also equally important
and in the interest of society that covenants voluntarily
entered into should be upheld. Initially, the courts
supported the first consideration and held that all
covenants in restraint of trade were absolutely void.
15.33
This approach was rather restrictive and ignored
commercial practicalities, such as the fact that the salary
paid may have taken into account the restrictive
covenants that the employee had willingly accepted.
Although it may be argued that employees very often do
not have sufficient bargaining power to negotiate
favourable terms in view of the restrictive clause, they are
nonetheless not compelled to enter into such
agreements. Of course, even though an employee has
agreed to the restrictive covenants, he is not precluded
from arguing later that the covenants are restrictive (see
the cases of TSC Europe (UK) Ltd v Massey (1999) and
National Aerated Water Co Pte Ltd v Monarch Co Inc
(2000)). However, in the situation where the employee
proposes a period of restraint in return for a not
inconsiderable payment, it has been held that the
employee cannot argue later that the duration was
unreasonable especially where his entitlement to receive
the payment is in return for the clause in restraint of trade
588
(see Man Financial (S) Pte Ltd (formerly known as E D &
F Man International (S) Pte Ltd) v Wong Bark Chuan
David (2008) (“Man Financial”)).
15.34
In addition to the points made earlier, it is also in society’s
interest to encourage the sale and purchase of
businesses and the transfer of knowledge from employers
to employees. These considerations required recognition
by the courts that certain interests can be protected
through the voluntary agreement of the parties.
Box 15.1
Reflecting
on the law
Nature of “restraint of trade” clauses
“Restraint of trade” clauses are obligations undertaken voluntarily and
are not themselves illegal in the sense that an offence has been
committed by having such undertakings. Such clauses necessarily
involve some element of “restraint” on the part of the employee. The
employer will seek to enforce the covenants in “restraint” by requiring the
ex-employee to observe the restraining obligations he had undertaken
by, for example, not working for competitors. The employee will try and
argue that it should not be enforced on the ground of illegality in relation
to some aspect of the clause which is against the interest of the public.
Hence, the illegality hinges on public policy considerations, the freedom
to trade being at the crux of it.
Validity of “Restraint of Trade” Clause
15.35
The validity of a “restraint of trade” clause hinges on two
requirements. First, there must be a legitimate interest
that the party relying on the clause is seeking to protect.
Second, the clause has to be reasonable, having regard
to the interests of the parties and the public generally.
Accordingly, Lord Macnaghten in the significant House of
Lords decision in Nordenfelt v Maxim Nordenfelt Guns
and Ammunition Co (1894), set the balance between the
competing interests in perspective when he said (at p
565):
589
The public have an interest in every person’s carrying
on his trade freely: so has the individual. All
interference with individual liberty of action in trading,
and all restraints of trade of themselves, if there is
nothing more, are contrary to public policy, and
therefore void. This is the general rule. But there are
exceptions: restraints of trade … may be justified by
the special circumstances of the particular case. It is a
sufficient justification, and indeed it is the only
justification, if the restriction is reasonable —
reasonable, that is, in reference to the interests of the
parties concerned and reasonable in reference to the
interests of the public, so framed and so guarded as to
afford adequate protection to the party in whose favour
it is imposed, while at the same time it is in no way
injurious to the public.
15.36
In view of the Nordenfelt decision, the general rule is that
all covenants in restraint of trade are prima facie void and
unenforceable, and may only be valid if it is reasonable
both in the interests of the parties and in the interests of
the public. The measure of reasonableness is viewed
from the standpoint of both the public and the parties.
15.37
The legal test of whether a restrictive covenant is in
unreasonable restraint of trade in Singapore is broadly
similar and well settled by the Singapore Court of Appeal
decision of Man Financial. It can be summarised as
follows:
1. The court conducts a preliminary inquiry as to
whether or not there was a legitimate proprietary
interest to be protected by the restrictive covenant,
over and above the mere protection of the employer
from competition by way of a bare and blatant
restriction of the freedom to trade ((at [79]); see also
the Court of Appeal decisions of CLAAS Medical
Centre Pte Ltd v Ng Boon Ching (2010) (“CLAAS”) (at
[44]) and Smile Inc Dental Surgeons Pte Ltd v Lui
Andrew Stewart (2012) (“SMILE”) (at [19])).
590
2. If the answer to the preliminary inquiry is affirmative,
then the court applies the twin tests of
reasonableness (at [70]) enunciated in Nordenfelt:
i.
is the restrictive covenant reasonable in reference
to the interests of the parties; and
ii. is the restrictive covenant reasonable in reference
to the interests of the public.
15.38
In SMILE, Phang JA (at [19]) made it clear that the
application of twin tests of reasonableness assumes that
there is a legitimate proprietary interest meriting
protection in principle in the first place, and as such, the
court will enforce the covenant only if it goes no further
than necessary to protect legitimate proprietary interests.
15.39
In line with the general rule, that such covenants are
prima facie unenforceable, the burden of proof is on the
party seeking to rely upon the covenant in restraint of
trade to show that the covenant was reasonable at the
time at which the contract was made. Although there are
several factors that influence a court’s decision on the
reasonableness of such covenants, it is important to bear
in mind that none of them are entirely conclusive. For
example, the courts do take into consideration the
expanse that the restraint covers in terms of geographical
area and the duration of time.
15.40
In terms of geographical range, Singapore is unique and
this was recognised by G P Selvam JC in Heller Factoring
(Singapore) Ltd v Ng Tong Yang (1993) when he said (at
[22]):
[A]s to the geographical limit, the area must be no
more than adequate for the protection of the plaintiffs.
This in effect means the area where the plaintiffs’
customers are situated. In the case of Singapore, a
small country, a prohibition applicable for the whole
country would be necessary in the context of the
factoring industry. Customers would be spread all over
the island and it would be well nigh impossible to
591
specify pockets to which the clause should be
restricted. Further, a competitor of the plaintiffs could
be situate anywhere in Singapore. For these reasons
the space limit is also eminently reasonable.
Employment Contracts
15.41
There have been several local decisions of importance on
restrictive covenants relating to employment contracts. In
SMILE, a seminal Court of Appeal decision, Phang JA
stated that the courts adopt a stricter approach when
considering restrictive covenants in the context of a
contract of employment as compared to a sale of a
business. This is because of the differing nature of the
legitimate proprietary interest to be protected and also
because of the greater inequality of bargaining power in
an employment context (see Man Financial (at [48]) and
SMILE (at [20])). In addition, the public policy reason in
construing restrictive covenants more strictly in the
employment context is that “every man shall be at liberty
to work for himself, and shall not be at liberty to deprive
himself or the state of his labour, skill, or talent, by any
contract that he enters into.” (see Herbert Morris Ltd v
Saxelby (1916) (at p 701) and SMILE (at [21])).
15.42
When an employee leaves an employer, the employer
would have obtained whatever it has paid for in terms of
the employee’s services (see Man Financial (at [48]) and
SMILE (at [20])). Therefore, in order to justify a covenant
in restraint of trade, the employer must have some
proprietary interest that requires protection. Trade secrets
and business connections are clearly owned by the
employer and are considered legitimate interests that an
employer can protect with a suitably drafted covenant.
The maintenance of a stable workforce can be a
legitimate interest that an employer may seek to protect
with a restrictive clause (see Man Financial (at [121])). In
the context of business connections or clientele, the
employee must have personal knowledge of and
influence over the customers of the employer (see
592
Faccenda Chicken Ltd v Fowler (1987)). However, where
an employee has acquired additional skill and knowledge
of a trade or profession in the course of his employment,
it belongs to the employee and the use of it will be
extremely difficult to inhibit by an employer (see Mason v
Provident Clothing and Supply Co Ltd (1913)).
15.43
In the leading House of Lords decision of Mason v
Provident Clothing and Supply Co Ltd (1913), the
covenant provided that the employee, a canvasser, would
not work in any similar business for three years within 25
miles of London. It was held that the employee’s duties
were confined to Islington and that the clause was wider
than reasonably necessary to protect the employer’s
legitimate interest. It was stated that the success of the
employee was predominantly due to the employee’s
natural gifts and that the training provided by the
employer was of lesser significance. See also the similar
case of Herbert Morris Ltd v Saxelby (1916) where the
restrictive covenant was also wider than necessary for the
protection of the employer’s interest.
15.44
In the House of Lords decision of Fitch v Dewes (1921), a
solicitor’s managing clerk covenanted that he would not
be engaged in solicitors’ work within seven miles of the
town hall in the place where he worked. The House
upheld the covenant as being reasonable, even though it
was for an unlimited duration. Clearly, the severely
restricted scope of the clause in terms of locality was a
significant factor that influenced their decision.
15.45
In Buckman Laboratories (Asia) Pte Ltd v Lee Wei Hoong
(1999), the Buckman Group dealt in speciality chemicals
used by many industrial sectors including industries
dealing in pulp and paper, leather and water treatment.
Lee was employed for four years as a technical services
specialist mainly for specialty chemicals for the pulp and
paper industry in Singapore. His employment contract
contained a “restraint of trade” clause. When Lee left
Buckman in 1998, he joined ECC International, one of
593
three global competitors of Buckman in respect of
speciality chemicals for the pulp and paper industry.
Buckman sought an injunction to enforce the “restraint of
trade” covenant. The Singapore High Court refused to
grant the injunction as the clause was too wide. The
legitimate interest was not specified and the width of the
clause led to the inference that it was intended primarily
to stifle competition. The geographical scope of the
clause was also too wide as it sought to protect not only
Buckman’s actual but also potential business in regions
where they were merely trying to establish a permanent
presence. Buckman should have limited the business
scope of the clause to the pulp and paper industry.
Instead the clause covered all products and services of
Buckman and associated companies.
To determine the interest intended to be protected by a
restraint of trade covenant, the court must first of all
construe the contractual wording to determine whether it
indicates what that interest is. Where the wording of a
restriction does not specifically state the interest of the
employer which it is intended to protect, the court is
entitled to look both at the wording and the surrounding
circumstances for the purpose of ascertaining that
interest by reference to what appear to have been the
intentions of the parties. But if the employer states
specifically what interest the covenant is intended to
protect, the employer cannot thereafter seek to justify it
by reference to a separate interest which has not been
specified.
15.46
In Stratech Systems Ltd v Nyam Chiu Shin (alias Yan
Qiuxin) and others (2005), the Singapore Court of Appeal
stated that the court would never uphold a restrictive
covenant which served only to protect an employer from
competition from a former employee. There had to be
some subject matter which an employer could legitimately
protect by a restrictive covenant.
594
15.47
In Man Financial, the Singapore High Court was faced
with a post-employment termination agreement which
contained restrictive clauses. The plaintiff was the
managing director and chief executive officer of the
defendant company. He was asked to resign and placed
on garden leave for three months from 13 June 2005. The
plaintiff and defendant entered into a termination
agreement. The termination agreement provided for the
plaintiff to receive benefits if he did not breach the terms
of the agreement, which included restrictive covenants.
The defendant refused to pay the benefits on the ground
that the plaintiff had breached certain restrictive
covenants. Clause C.1 prohibited him from soliciting the
employment of the defendant’s employees and Clause
C.3 prohibited him from participating in or rendering
advice to a competitor (which the court found that he had
breached). However, the High Court held that the
defendant had not discharged its burden of establishing
the interests that were meant to be protected by the
restrictive covenants and the reasonableness of the
same. As such, the plaintiff was held to be entitled to
receive the benefit in terms of compensation under the
agreement. The defendant appealed. In a significant
judgment by Phang JA, the Court of Appeal allowed the
appeal and found, among other things, as follows:
Given the nature of the defendant’s business, there was
a legitimate proprietary interest in the defendant
maintaining a stable, trained workforce and that was a
fortiori the case in the light of the plaintiff’s access to
and use of confidential knowledge gained in the
course of his employment (at [136]).
595
Clause C.1 was reasonable as between the parties.
The terms in the termination agreement (of which
Clause C.1 was an integral part) were arrived at in
earnest and in good faith. Significantly, it was the
plaintiff who had proposed the period of seven months
for the covenants to last as a gesture of goodwill. It
was therefore not open to the plaintiff to later argue
that the seven-month duration was unreasonable
especially since he received a not inconsiderable
compensation which he was clearly not entitled to
otherwise from a legal point of view (at [137] to [139]
and [142]).
Clause C.1 was reasonable both in the interests of the
parties as well as in the interests of the public and as
such valid. A breach of Clause C.1 entitled the
defendant to terminate the contract. Therefore, the
plaintiff could not enforce his claim for the
compensation under the termination agreement (at
[151] and [192]).
The Court of Appeal also observed that Clause C.3
could not be invoked to disentitle the plaintiff from
claiming the compensation. There was insufficient
evidence adduced by the defendant to demonstrate an
underlying legitimate proprietary interest which Clause
C.3 was intended to protect. Clause C.3 was also far
too wide, particularly with regard to the area covered
(at [15]).
15.48
In the context of medical practitioners (including dentists),
solicitors and accountants, there is ample authority to
show that a legitimate proprietary interest exists in the
form of “special and intimate knowledge of the patients of
the business” (see Routh v Jones (1947) (at p 181E-H)
and SMILE (at [22] and [24]); Robin M Bridge v Deacons
(1984) (at pp 719H–720A); and Campbell v Park (1954)
(at [10]), respectively).
15.49
In the interesting local decision of SMILE, Dr Lui was
employed as an associate dental surgeon for Smile Inc
596
Dental Surgeons Pte Ltd (“Smile Clinic”) located at the
Forum Shopping Mall. Dr Lui and another dentist
colleague, Dr Gareth Pearson, accounted for 80 per cent
of the patients at the said clinic. On 7 January 2009, Dr
Lui incorporated Dental Essence Pte Ltd (“Dental
Essence”) while still employed by Smile Clinic. On 27
February 2009, Dr Lui entered into a one-year tenancy for
premises only five minutes away from Smile Clinic and
resigned on that same day. On 19 March 2009, Dr
Pearson joined Dental Essence as a shareholder and
dentist. Smile Clinic agreed that Dr Lui’s last day of work
would be 18 April 2009. Smile Clinic experienced a
significant drop in its monthly income after Dr Lui left and
received numerous requests from its patients for their
dental records. Smile Clinic later discovered that many of
its patients had become patients of Dental Essence
(Smile Clinic closed down its branch in September 2010).
It commenced action against Dr Lui on 8 October 2009
basing its case on, among other things, Dr Lui’s breach of
the following express terms (Clauses 23, 24 and 25) of
their Employment Contract:
23. Upon leaving The Practice, Dr. Lui will not seek to
damage or injure The Practice’s reputation or to
canvass, solicit or procure any of The Practice’s
patients for himself or any other persons.
24. In the event that Dr. Lui leaves (whether
resignation or dismissal) The Practice, Dr. Lui shall not
practice within a 3 kilometre radius distance from the
Smile Inc. Dental Surgeons practices at Suntec City
Mall and from Forum The Shopping Mall, and a 3
kilometre radius from any other new Smile Inc. Dental
Surgeons practices that have been set up before and
during his cessation of work at The Practice.
25. In the event that Dr. Lui leaves (whether
resignation or dismissal) The Practice, existing and
new corporate and non-corporate contracts, as well as
existing and new patients, shall remain with The
Practice. Patient data and records, office data and
records and computer software programmes and data
597
shall remain the property of The Practice, and such
records, in full or in part, shall not be copied manually,
electronically or otherwise be removed from the
Practice.
15.50
The trial judge found that Dr Lui had breached the
restrictive covenants in Clauses 24 and 25 but as there
was no evidence of solicitation, there was no breach of
Clause 23. However, the learned judge also found that
the restrictive covenants were in unreasonable restraint of
trade and therefore void and unenforceable, mainly
because they were unlimited in duration. The Court of
Appeal affirmed this reasoning when Phang JA stated (at
[29]):
A restraint of trade that operates for an indefinite
period of time is (absent the most exceptional
cir