xi
CONTENTS
Preface
Preface to the First Edition
Acknowledgments
Contents
Detailed Table of Contents
law Report Abbreviations
Table of Cases
Table of Statutes
vii
viii
ix
xi
xii
XX
xxi
xxxvii
Part I
law & legal System
1.
2.
Introduction to Law
Singapore Legal System
Part II
Principles of Contract
3.
4.
5.
6.
7.
8.
Offer & Acceptance
51
Consideration & Intention to Create Legal Relations 77
Terms
104
Vitiating Factors
131
Discharge
167
Remedies for Breach of Contract
193
Part Ill
Business Organisations
9.
10.
11.
13.
Unincorporated Business Entities
Companies 1: Formation
Companies II: Management
Companies Ill: Finance
Insolvency
Part IV
Aspects of Commercial law
14.
15.
16.
17.
18.
Principles of Property
Sale of Goods
Agency
Negotiable Instruments
Torts in Business
Law & International Business
12.
19.
1
20
224
244
264
292
320
338
367
400
425
457
487
Appendices
A.
B.
C.
Sample Contract
Sample Statute: Unfair Contract Terms Act
Sample Law Report
513
516
529
Select Bibliography
540
Index
545
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DETAILED TABLE OF CONTENTS
Chapters 1 - 19
Part 1: Law and Legal System
II
1- 101
1-201
1-301
1-401
1-501
El
2- 101
2-201
2-301
2-401
2-501
2-601
2-701
Introduction to Law
1
Law in Society
1- 104 Elements of a Legal System
1- 107 Jurisdiction
1- 11 1 Legal Traditions
The Civil Law Tradition
The Common Law Tradition
1-302 Development of Common Law
1-306 Equity
1-312
Law Reports
1-317
Precedent
1-324 Classification of Laws
1-333 Terminology of "Common Law"
Business and the Law
1-402 Nature of Business
1-406 Business Law, Change and Uncertainty
1-409 Business Law and Ethics
1-413 Function of Business Law
Summary
1
2
3
4
5
5
6
7
8
9
11
14
15
15
16
17
18
19
Singapore Leg al System
Introduction
2- 102 Founding of Singapore
2- 107 Federation and Independence
Constitution
2-208 The President
2-210 The Legislature
2-234 The Executive
2-240 The Judiciary
2-255 The Attorney-General
Sources of Singapore Law
2-302 Influence of Eng lish Law
2-304 General Reception
2-306 Specific Reception
2-307 Continuing Reception
The Singapore Legal Profession
2-404 Law Firms
2-406 Professional Organisations
Outline of Litigation Process
2-503 Litigating a Civil Claim
Alternative Dispute Resolution Methods
2-603 Mediation and Conciliation
2-605 Arbitrat ion
2-607 Other Tribunals
2-608 Trends
Summary
20
20
20
22
22
25
26
32
34
39
40
40
41
41
42
43
44
44
45
46
47
48
48
49
49
50
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Part II: Principles of Contract
D
3-101
3-201
3-301
3-401
3-501
3-601
a
4-101
4-201
4-301
4-401
4-501
m
5-101
5-201
5-301
5-401
5-501
Contract: Offer and Acceptance
Introduction
Nature of Contract
3-203 Four Key Elements
3-205 Types of Contract
3-207 Written and Oral Contracts
Offer
3-303 Unilateral Contracts
3-306 Invitations to Treat
3-308 Auctions and Tenders
3-310 Provision of Information
Acceptance
3-403 Knowledge of Offer
3-406 Communication of Acceptance
3-408 Waiver of Communication
3-410 Silence
3-412 The Postal Acceptance Ru le
3-415 Electronic Communications
Termination of Offer and Acceptance
3-502 Withdrawal
Rejection and Counter-offer
3-511
3-514 Lapse of Time
3-516 Failure of Condition
3-517 Death
3-519 Termination of Acceptance
Summary
Contract: Consideration and Intention to
Create Legal Relations
Introduction
Consideration
4-205 Types of Consideration
4-213 Consideration Must Move From Promisee
4-216 Must be Sufficient but Need Not be Adequate
4-23 1 Rule in Pinnel's Case
4-234 Consideration and Promissory Estoppel
Intention to Create Legal Relations
4-303 Social and Domestic Agreements
4-306 Commercial Agreements
4-31 1 Administrative Relat ionships
Privit y of Contract
Summary
Terms
Introduction
Terms and Representations
5-207 Guidelines to Distinguish Terms from
Representations
5-2 13 Express and Implied Terms
Classification of Terms
5-302 Condition, Warranty and Innominate Term
5-303 Singapore Approach
Exemption Clauses
5-405 Incorporation
5-4 12 Construction
5-4 18 Unusual Factors
5-420 Unfair Contract Terms Act
Summary
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51
52
53
54
54
56
57
58
59
59
60
60
62
63
63
65
65
67
68
71
71
72
73
73
74
77
77
77
78
81
82
88
90
92
93
94
96
97
101
104
104
104
106
108
11 1
112
113
114
115
118
121
122
127
xiv
Ell
6-101
6-201
6-301
6-401
6-501
6-601
6-701
D
7- 101
7-201
7-301
7-401
7-501
7-601
D
8-101
8-201
8-301
8-401
8-501
8-601
8-701
Vitiating Factors
Introduction
Incapacity
6-202
Minors
6-205
Valid Contracts
6-216
Voidable Contracts
6-219
Ratifiable Contracts
6-221
Mentally Unsound and Intoxicated Persons
Illegality
6-302
Gaming and Wagering
6-303
Contracts Contrary to Public Policy
6-304 Contracts Contrary to Statute
6-307
Contracts in Restraint of Trade
6-313
Effect of Illegality
Misrepresentation
6-403
Elements of Misrepresentation
6-410
Categories of Misrepresentation
6-415
Remedies for Misrepresentation
Mistake
Other Vitiating Factors
6-602
Duress
6 -605
Undue Influence
6-607
Unconscionable Bargain
Summary
13 1
131
132
132
134
137
138
139
139
140
141
141
142
145
148
149
152
156
157
160
160
162
162
163
Discharge
Introduction
Performance
7-202
Precise Performance
7-203
Exceptions to Precise Performance Rule
Breach
7-302
Repud iation
7-306
Election
7-308 Affirming After Anticipatory Breach
Agreement
7-402
Existing Agreement
7-403
Subsequent Agreement
Frustration
7-502
When Frustration Operates
7-511
Factors Limiting Frustration
7-516
Effect of Frustration
Summary
178
178
179
179
181
181
185
188
190
Remedies
Introduction
Common Law Remedy - Damages
8-204 Causation
8-205
Remoteness
8-208
Applying Hadley v Baxendale
8 -213
Mitigation
8 -217
Assessment
8-225
Liquidated Damages and Penalties
8-230 Taxation
Interest
8-231
Equitable Remedies
8-304 Specific Performance
8-306
Injunction
Anton Piller Order
Quantum Meruit
Refund of Money Paid
Limitation of Actions
193
194
195
196
197
200
202
209
211
211
212
212
214
216
217
218
218
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167
167
168
168
171
173
177
193
XV
8-801
8-702
Limitation Legislation
8-705
Laches
Summary
PART
Iii
9-101
9-201
9-301
9 -401
9-501
9 -601
m
10-101
10-201
10-301
10-401
10-501
10-601
m
11 -101
11 -201
11-301
11 -401
Ill:
219
219
220
BuSINESS ORGANISATIONS
Unincorporated Business Entities
Introduction
9-102 Incorporated Ent ities
9-106 Unincorporated Entities
Sole Proprietorship
9-202
Un li mited Liability
9-203
Business Registration
9-210 Dissolution
Partnership
9-303
Definition
9-308 Formation
9-312 Relationship among Partners
9-320 Relationship with Third Parties
9-329 D issolution
9-334 Limited Liability Partnership
9-337 Limited Partnership
Joint Ventures
Ending the Unincorporated Business Entity
Summary
224
224
224
226
226
226
227
228
228
229
231
232
234
237
239
240
241
242
242
Companies 1: Formation
Introduction
Companies
10-202 Legislation
10-203 Corporate Status
10-207 Lifting the Corporate Veil
Incorporation Process
10-302 Constitution
10-305 Company Name
10-308 Capacity and Ultra Vires
10-310 Promoters
Types of Companies
10-403 Foreign Companies
10-405 Singapore Companies
10-414 Private and Public Companies
10-423 Corporate Groups
Members and Shares
10-503 Types of Shares
10-511 Relationship among Members
10-513 Meetings
Summary
244
Companies II: Management
Introduction
Company Officers
11-202 Definition
11-203 Officers as Agents
11-213 Indoor Management Rule
Company Secretary
11-303 Qual ifications
11-304 Appointment and Removal
11-305 Responsibility
Directors
264
264
265
265
265
267
269
269
269
269
270
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245
245
245
246
247
248
248
249
250
251
251
252
254
256
257
257
259
260
263
xvi
11-501
11-601
11-701
11 -801
11 -901
m
12-101
12-201
12-301
12-401
12-501
12-601
12-701
m
13-1 01
13-201
13-301
13-401
11-402 Qualifications
11-405 Appointment and Remova l
11-407 Types of Directors
Directors' Duties
11-502 Classification of Duties
11-504 Duty to Act Bona Fide in Company's Interests
1 1-508 Duty to Act with Care and Skill
11-510 Duty to Avoid Conflicts of Interests
11-516 Duty to Use Powers for Proper Purposes
11-517 Effect of Breach of Duty
11-519 Duty to disclose Ownership and Control
Insider Trading
11-603 Statutory Provisions
Minority Protection
11-702 Right to Restrain Ultra-vires Acts
11-703 Right to Information
11-705 Right to Fair Treatment-No Oppression
11 -711 Right to Protect Company's Interests
Corporate Governance
Summary
270
271
272
272
273
275
276
277
279
280
280
281
281
283
283
284
284
285
287
29 1
Companies Ill : Finance
Introduction
Corporate Finance
12-202 Equity
12-203 Debt
12-205 Regulatory Framework
Secured Debt Finance
12-302 Debenture
12-312 Charge
12-327 Guarantees
Offers to the Public
12-404 Capital Market
12-406 The Singapore Exchange (SGX)
12-409 Regulatory Framework
12-412 Share Issues
12-420 Prospectus Requirements
12-440 Application for Listing
Securities Trading
12-503 Settlement
12-510 Take-overs
Accounts and Auditors
12-602 Documents to Members
12-604 Auditors
12-610 Audit Committee
Summary
292
292
292
292
293
293
294
295
296
299
300
301
302
303
304
305
309
310
312
313
315
315
316
318
318
Insolvency
Introduction
Insolvent Individuals
13-205 Two Regimes
13-208 Voluntary Arrangements
13-216 Bankruptcy
Insolvent Companies
13-305 Scheme of Arrangement
13-307 Receivership
13-311 Judicial Management
Winding-up
13-402 Voluntary W ind ing-up
13-406 Wind ing-up by the Court
13-408 Effect of Winding-up Order
13-409 Liquidator
320
320
321
321
322
324
329
330
331
331
332
332
333
334
334
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13-501
PART IV:
1!1
14- 101
14-201
14-301
14-401
14-501
m
15-101
15-201
15-301
15-401
15-501
15-601
15-701
15-801
335
336
336
13-414 Ranking of Claims
13-415 Dissolution
Summary
CoMMERCIAL
LAw
Principles of Property
Introduction
Property and Related Concepts
14-202 Meaning of Property
14-204 Classification of Property
14-209 Lega l and Equitable Interests
14-215 Possession and Title
14-217 Security Interests
Real Property in Singapore
14-302 Meaning of Land
14-305 Ownership of Singapore Land
14-311 Co-ownership
14-314 Strata Titles
14-319 Transfers of Real Property
14-324 Compulsory Acquisition
Intellectual Property in Singapore
14-403 Intellectual Property Protection
14-406 Patents
14-414 Trade Marks
14-429 Geographical Indications
14-431 Copyright
14-444 Registered Designs
14-453 Confidential Information
Summary
338
338
338
338
339
340
341
342
344
344
345
346
347
348
349
349
350
351
353
357
357
362
364
366
Sale of Goods
Introduction
Application of SGA
15-202 Other Related Leg islation
15-204 Contract of Sale
15-208 Goods
15-212 Money Consideration (Price)
Duties of Sellers
15-303 Implied Duties
15-306 Duty to Deliver Goods
15-309 Duty to Pass Good Title
15-310 Duty to Deliver Goods of the Right Quantity
15-311 Duty to Deliver Goods of the Right Quality
15-325 Manufacturer's Liability
15-329 Exclusion of Liabi lity
Duties of Buyer
15-402 Acceptance of Delivery
15-408 Payment by Buyer
Transfer of Ti t le and Risk
15-503 Specific Goods
15-508 Unascertained Goods and Future Goods
15-516 Reservation of Title
Transfer of Property by Non-owner
15-602 General Rule
15-606 Exceptions to the General Rule
Fair Trading Legislation
15-702 Application
15-704 Remedies
Summary
367
367
368
368
368
370
371
37 1
371
372
372
373
373
378
379
380
380
382
383
383
385
387
387
388
389
396
396
396
398
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m
16-101
16-201
16-301
16-401
16-501
16-601
16-701
16-801
16-901
m
17- 101
17-201
17-301
17-401
17-501
m
18- 101
18-201
18-301
Agency
Introduction
Nature of Agency
16-202 Liability of Agent
16-203 Agency Distinguished from Distributorships
16-205 Agent, Employees and Contractors
16-209 Types of Agency
Creation of Agency
16-302 Actual Authority
16-305 Ostensible Authority
16-310 Ratification
16-319 Operation of Law
Relationships Created by Agency
Principal-Agent Relationship
16-502 Duties of Agent
16-510 Rights of Agent
Principal-Third Party Relationship
16-602 General Rule
16-605 Undisclosed Principal
Agent-Third Party Relationship
16-703 Agent Agrees to be Liable
16-704 Trade Usage
16-705 Negotiable Instruments
16-706 Non-existent Principal
16-708 Breach of Warranty of Authority
16-710 Undisclosed Principal
Termination of Agency
16-802 Acts of Parties
16-803 Operation of Law
Summary
400
400
400
401
401
402
403
404
404
405
409
412
412
413
413
416
417
417
418
420
420
420
421
421
421
422
422
422
422
423
Negotiable Instruments
Introduction
Bi lls of Exchange
17-207 Creation
17-220 Acceptance
17-231 Negotiation
17-243 Discharge
17-250 Dishonour
17-257 Liability of Parties
17-263 Rights of Holders or Transferees
17-272 Alteration and Forgery
Cheques
17-302 Key Characteristics
17-306 Banker-Customer Relationship
17-310 Standard Transaction and the CTS
17-312 Crossed Cheques
17-323 Protection of Banks
Promissory Notes
17-404 Creation
17-406 Liability of Parties
17-407 Payment
Summary
425
Torts in Business
Introduction
Tort
18-202 Tort and Othe r Areas of Law
18-204 Tortfeasors and Types of Torts
Negligence
18-304 Duty of Care
18-319 Breach of Duty
457
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426
428
431
434
436
437
439
440
442
445
445
446
448
449
451
454
454
455
455
455
457
457
458
458
459
459
465
xix
18-401
18-501
18-601
m
19-101
19-201
19-301
19-401
19-501
19-601
19-701
19-801
19-901
18-327 Resulting Damage
18-332 Defences
18-336 Psychiatric Harm
Negligent Misstatement and Professional Advisers
18-402 Negligent Misstatement and Neg ligent
Misrepresentation
18-403 Duties in Contract and Tort
18-406 Duty of Care
18-411 Breach of Duty
18-414 Resulting Loss
18-416 Defences
Other Torts in Business
18-502 Passing-off
18-504 Defamation
18-507 Inducing Breach of Contract
Summary
468
471
472
473
Law and Internation a l Business
Introduction
International Law
19-203 Public International Law
19-207 Private International Law
19-209 International Organisations
International Contracts
19-303 Sales Contracts
19-304 Investment Contracts
19-305 Financing Contracts
19-306 Services Contracts
Common Legal 1ss1.1es
19-402 Jurisdiction
19-411 Governing law
19-418 Enforcement
Letter of Credit
19-504 Definition
19-509 Irrevocable LC
19-510 Confirmed LC
19-512 Standby LC
19-515 Two Basic Principles
Vienna Convent ion (CJSG)
19-602 App lication
19-604 Provisions
lncoterms
19-703 Ex Works (EXW)
19-704 Free Alongside Ship (f.a.s.)
19-705 Free on Board (f.o.b.)
19-706 Cost, Insurance and Freight (c. i.f.)
19-707 Container Trade Terms
Intellectual Property Protection Overseas
19-803 Copyright
19-804 Patents
Summary
487
···•·•·•···
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474
475
478
479
479
481
482
483
484
485
487
487
488
489
489
492
492
493
493
493
493
494
498
499
502
503
505
505
505
506
507
507
508
508
509
509
509
509
510
510
510
511
511
XX
LAW REPORT ABBREVIATIONS
Below are the law report abbreviations used in the Table of Cases, together with their
full titles and jurisdictions covered.
AC
A&E
AllER
App Cas
B &Ad
B &Aid
Beav
Bing
BCC
BPR
B&S
Camp
CB
CB NS
Ch
ChD
ChApp
cu
CLR
CPO
Co Rep
D
DLR
Drew
Dr & Sm
E&B
ER
Ex
H Bl
H&C
HyBI
JR
KB
K&J
Legge
U Ex
lloyd's Rep
LR CP
LR Ex
LR QB
LR Hl
LT
MU
MSCLC
M&W
NY
NZLR
PO
PWms
QB
QBD
SCR
SLR
SLR(R)
SSLR
TLR
TR
WLR
WR
Appeal Cases
Adolphus & Ellis
All England Reports
Appeal Cases
Barnewall & Adolphus
Barnewall & Alderson
Beavan
Bingham
Butterworths Company Cases
Butterworths Property Reports
Best & Smith
Campbell
Common Bench
Common Bench, New Series
Chancery
Chancery Division
Chancery Appeals
Current Law Journal
Commonwealth Law Reports
Common Pleas Division
Coke
Dunlop (Session Cases, 2nd series)
Dominion Law Reports
Drewry Reports
Drewry & Smale
Ellis & Blackburn
English Reports
Exchequer
Blackstone
Hursltone & Coltman
Hyde's Reports Bengal
New Zealand Jurist Reports
King's Bench
Kay & Johnson
Legge's Supreme Court Reports NSW
Law Journal Reports Exchequer
Lloyd's List law Reports
Law Reports Common Pleas
Law Reports Exchequer
Law Reports Queen's Bench
Law Reports House of Lords
law Times Reports
Malayan Law Journal
M'sian & S'pore Co Law Cases
Meeson & Welsby
New York
New Zealand law Reports
Probate Divorce Admiralty Division
Peere Williams
Queen's Bench
Queen's Bench Division
Supreme Court Reports
Singapore law Reports
Singapore law Reports (Reissue)
Straits Settlements Law Reports
Times Law Reports
Term Reports (Durnford & East)
Weekly Law Reports
Weekly Reporter
U075837L/N1510069
England
England
England
England
England
England
England
England
England
Australia
England
England
England
England
England
England
England
M'sia & S'pore
Australia
England
England
Scotland
Canada
England
England
England
England
England
England
England
India
New Zealand
England
England
Australia
England
England
England
England
England
England
England
M'sia & S'pore
M'sia & S'pore
England
USA
New Zealand
England
England
England
England
M'sia & S'pore
Singapore
Singapore
Straits Settlements
England
England
England
England
xxi
TABLE OF CASES
References are to paragraph numbers: eg, 3-301 refers to Chapter 3, paragraph 301. A
reference in bold type means that the facts of the case concerned are elaborated upon
in greater detail in the paragraph referred to. Singapore cases which are not (or not
yet) published in the Singapore Law Reports (SLR) typically have a neutral citation such
as SGHC (Singapore High Court decision) or SGCA (Singapore Court of Appeal decision)
and are available through the Lawnet online subscription service (www.lawnet.com.sg).
In 2010, the Singapore Academy of Law (SAL) re-issued the SLR (abbreviated SLR(R)) for
case reports from 1965-2009 with re-written headnotes and re-edited judgment texts
which conform to the SAL house-style. Consequently, the volume and page citations of
1965-2009 cases may differ in the SLR and SLR(R). However, both the SLR and SLR(R) are
authoritative references.
5-405
Abani Trading Pte Ltd v BNP Paribas and another appeal [2014] 3 SLR 909
3-509
Abbott v Lance (1860) Legge 1283
4-219, 4-235
Abdul Jalil bin Ahmad bin Talib and Others v A Formation
16-307, 16-308
Construction Pte Ltd [2006] 4 SLR(R) 778
Abdul Jalil bin Ahmad bin Talib and Others v A Formation
Construction Pte Ltd (2007] 3 SLR 592
4-219, 4-235, 16-307, 16-308
Abdul Rashid bin Abdul Manaf v Hii Yii Ann {2014]4 SLR 1042
19-409
Adams v Lindsell (1818) 1 B & Aid 681
3-412
ACB v Thomson Medical Pte Ltd and others {2017]1 SLR 918
8-201, 8-224b
ACTAtek, Inc and another v Tembusu Growth Fund Ltd (2016] 5 SLR 335
6-411b
Adani Wilmar Ltd v Cooperatieve Centrale Raiffeisen·
Boerenleenbank BA (2002]4 SLR 217
6-503, 15-309
Aero-Gate Pte Ltd v Engen Marine Engineering Pte Ltd
[2013] 4 SLR 409
7-306b, 8-219
Afovos Shipping Co SA v Pagnan (1983]1 Al l ER 449
7-304
Ahvena Ravena Mana Aroogmoogum Chitty v Lim Ah Han,
Ah Gee and Chop Lee Watt (1894) 2 SSLR 80
6-303
Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd & Securicor (Scotland)
(1983] 1 WLR 964
5·403
Airtrust (Hong Kong) Ltd v PH Hydraulics & Engineering Pte Ltd
(2015] SGHC 307
15-319
Ajayi v R T Briscoe (Nigeria) Ltd [1964]1 WLR 1326
4-237
AJU v AJT [2011] SGCA 41
19-424
Alacran Design Pte Ltd v Broadley Construction Pte Ltd (2017]SGHC 162
6-411b
Aldridge v Johnson (1857) 7 E & B 885
15-212
4-219
Alliance Bank Ltd v Broom (1864) 2 Dr & Sm 289
Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd [2014]3 SLR 857
7-503
Allplus Holdings Pte Ltd & others v Phoon Wui Nyen (Pan Weiyuan)
[2016] SGHC 144
8-227
Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd and Another
19-424
[2006]3 SLR 174
Alumin ium lndustrie Vaassen BV v Romalpa Aluminium (1976]2 AllER 552
15-516
Alvin Nicholas Nathan v Raffles Assets (Singapore) Pte Ltd
[2016] 2 SLR 1056
8-218, 8·220
Alwie Handoyo v Tjong Very Sum ito and another (2013]4 SLR 308
6·408
Amin Rasheed Shipping Corporation v Kuwait Insurance Co (1984]
AC 50
19-412, 19·415
Amrae Benchuan Trading Pte Ltd v Tan Te Teck Gregory [2006]4 SLR 969
13·409
Ang Ming Chuang v Singapore Airlines Ltd (Civil Aeronautics
19-410
Administration, Third Party) (2005]1 SLR 409
8-219, 8·220
Ang lia Television Ltd v Reed [1972] 1 QB 60
An imal Concerns Research & Education Society v Tan Boon Kwee
[2011]2 SLR 146
18-315
Anti-Corrosion Pte Ltd v Berger Paints Singapore Pte Ltd (2012] SLR 427 5-419, 5-433
Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55
8-401
Anwar Siraj v Teo Hee Lai Building Construction Pte Ltd (2003]1 SLR 394
6-608
U075837L/N1510069
xxii
Apthorp v Neville & Co (1907) 23 TLR 575
6-303
Archbold's (Freightage) Ltd v Spanglett Ltd [1961] 1 QB 374
6-313,6-315, 6-316
Arcos Ltd v E A Ronaasen & Son [1933] AC 470
7-204
Arokiasamy Joseph Clement Louis v Singapore Airlines Ltd [2004] 2 SLR 233
7-306
AS Nordlandsbanken v Nederkoorn [2001]1 SLR 466
8-218
Ash bury Railway Carriage and Iron Co v Riche (1875) LR 7 HL 653
16-317
Asia Business Forum Pte Ltd v Long Ai Sin & Another [2003] 4 SLR 658
6-310
Asia Hotel Investments Ltd v Starwood Asia Pacific Management Pte Ltd
& Another [2005] 1 SLR 661
8-222, 8-222b
Asia Hotel Investments Ltd v Starwood Asia Pacific Management
Pte Ltd & Another [2007] SGHC 50
8-222
Asia Pacific Publishing Pte Ltd v Pioneers & Leaders (Publishers)
Pte Ltd [2011] SGCA 37
14-442
Asia Polyurethane Mfg Pte Ltd v Woon Sow Liong [1990] SLR 407
6-312
Asiawerks Global Investment Group Pte Ltd v Ismail bin
Syed Ahmad & Another [2004) 1 SLR 234
6-307
Asiatic Enterprises (Pte) Ltd, The v United Overseas Bank Ltd [2000)
12-203
1 SLR 300
Asnah bte Ab Rahman v Li Jianlin [2016) 2 SLR 944
18-334
Assoland Construction Pte Ltd v Malayan Credit Properties Pte Ltd [1993)
3 SLR 470
4-239
Asteroid Maritime Co Ltd v The owners of the ship or vessel "Saudi AI Jubail"
[1987) SGHC 71
10-207d
Astro Venturoso Campania Naviera v Hellenic Shipyards SA,
The Mariannina [1983) 1 Lloyd's Rep 12
19-416
Atlas Express v Kafco [1989]1 AllER 641
6-603
ATS Specialized Inc (trading as ATA Wind Energy Services) v LAP Projects
(Asia) Pte Ltd [2012] SGHC 173
4-201
Auston International Group Ltd v Public Prosecutor [2008) 1 SLR 882
12-440
Avery v Bowden (1855) E & B 714
7-308
8-224
Bailey v Bullock (1950) 66 TLR (Pt 2) 791
Baker v Jones [1954) 1 WLR 1005
6-303
Balfour v Balfour [1919) 2 KB 571
4-303
Bank of China Ltd (Singapore Branch) v Huang Ziqiang [2014) SGHC 245
4-236
Bannerman v White (1861) 10 CB NS 844
5-209
Banque Bruxelles Lambert & Ors v Puvaria Packaging Industries (Pte) Ltd
11-210
(in liquidation) [1994) 2 SLR 35
Banque Nationale de Paris v Tan Nancy & Another [2002] 1 SLR 29
16-309
Banque Paribas v Citibank NA [1989]1 MLJ 329
3-504
Barang Barang Pte Ltd v Boey Ng San & Others [2002) 3 SLR 158
6-307
Barnett v Chelsea & Kensington Hospital [1969) 1 QB 428
18-328
5-213
Bayerische Hypo- und Vereinsbank AG v C K Tang Ltd [2004) SGHC 254
BCBC Singapore Pte Ltd v PT Bayan Resources TBK [2016) 4 SLR 1
3-209
Beale v Taylor [1967) 3 All ER 253
15-313
Bee Cheng Hiang Hup Chong Foodstuff Pte Ltd v Fragrance
Foodstuff Pte Ltd [2003) 1 SLR 305
14-443
Behn v Burness (1863) 3 B & S 751
5-203, 7-302
Bellezza Club Japan Co Ltd v Matsumura Akih iko [2010) 3 SLR 342
19-421
Bernard Desker Gary and Others v Thwaites Racing Pte Ltd
5-214
and Another [2003) SGHC 175
Bertram, Armstrong & Co v Godfray (1830) 12 ER 364
16-503
Beswick v Beswick [1968) AC 58
8-305
5-302
Bettini v Gye [1876] 1 QBD 183
Beverley Acceptance v Oakley [1982) RTR 417
15-609
B-Gold Interior Design & Construction Pte Ltd v Zurich Insurance
(Singapore) Pte Ltd [2007) 4 SLR 82
5-414
14-417
Bigfoot Internet Ventures Pte Ltd v Apple Inc [2017) SGIPOS 4
17-325
Bintai Kindenko Pte Ltd v Sanwa Bank & Anor [1994] 3 SLR 459
Bisset v Wilkinson [1927) AC 177
6-405
1-315, 16-706
Black v Smallwood (1966) 117 CLR 52
U075837L/N1510069
xxiii
Blyth v Birmingham Waterworks [1856]11 Exch 781
BNP Paribas v Bandung Shipping Pte Ltd [2003 ]3 SLR 61
Boardman v Phipps [1967]2 AC 46
Bob Teo Seng Kee v Arianecorp Limited [2008] SGHC 81
Bok Chee Seng Construction Pte Ltd v Development Bank
of Singapore [2002]2 SLR 61
Bolton v Mahadeva [1972] 1 WLR 1009
Bolton v Stone [1951) AC 850
Bolton Partners v Lambert (1888) 41 ChD 295
Boone v Eyre (1779) 1 Hy Bl 273n
BNJ v SMRT Trains Ltd [2014] 2 SLR 7
Brace v Calder [1895]2 QB 253
Bradbury v Morgan (1862) 1 H & C 249
Brader Daniel John and others v Commerzbank AG [2014]2 SLR 81
Bradford v Robinson Rentals Ltd [1967]1 WLR 337
British Westinghouse Electric & Manufacturing Co Ltd v Underground
Electric Rai lways Co of London [1912] AC 673
Buckman Laboratories (Asia) Pte Ltd v Lee Wei Hoong [1999]3 SLR 333
Bryan v Maloney (1995) 28 ALR 163
Bulsing Ltd v Joon Seng & Co [1972] 2 MU 43
Bunga Melati, The 5 [2016] SGCA 20
Byrne v Van Tienhoven (1880) 5 CPD 344
18-319
15-516
16-506
4-230
17-306
7-207
18-322
16·312
7-206
18·325
8-214
3-517
3-409, 3-510
18-330
8-213, 8-214
6-310
18-403
8-229
16-305
3-502
CAA Technologies Pte Ltd v Newcon Builders Pte Ltd [2017)2 SLR 940
7-303, 7-303c
Cain Sales & Consultancy Pte Ltd v Beyonics Technology
16-511
Limited [2003) SGHC 163
4-219
Callisher v Bischoffsheim (1870) LR 5 QB 449
Caltong (Australia) Pty Ltd & Another v Tong Tien See
11-517
ConstfUction Pte Ltd (in liquidation) [2002) 3 SLR 241
11-515
Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371
9-403
Canadian Pacific (Bermuda) Ltd v Nederkoorn Pte Ltd [1998) 3 SLR 309
18·311
Caparo Industries pic v Dickman & Others [1990) 2 WLR 358
15-621
Car & Universal Finance Ltd v Caldwell [1965] 2 QB 242
3-304, 3-306, 3·409
Carlill v Carbolic Smoke Ball Co [1892] 2 QB 4B4
15·511
Carlos Federspiel v Charles Twigg [1957)1 Lloyd's Rep 240
4·406
Carriernet Global Ltd v Abkey Pte Ltd [2010]3 SLR 454
Cassa di Risparmio di Parma e Piacenza SpA v Rals International Pte Ltd
17-204
[2016)1 SLR 79
15-606
Caterpillar Far East Ltd v CEL Tractors Pte Ltd [1995) 2 SLR 1
16-310b, 16-603
Cavenagh Investment Pte Ltd v Kaushik Rajiv [2013] SGHC 45
Cavendish Square Holding BV v Makdessi and ParkingEye v Beavis
8·226b
[2016] AC 1172
15-314
Cavendish-Woodhouse Ltd v Manley [1984] Crim LR 239
18-502
COL Hotels International Ltd v Pontiac Marina Pte Ltd [1998)2 SLR 550
9-106
Central Christian Church v Chen Cheng & Anor [1995]1 SLR 115
Central London Property Trust v High Trees House Ltd
4-234, 4-235, 4-238
[1947) KB 130
Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter
6-310
[2013] 2 SLR 193
14-420
Ceramiche Caesar Spa v Caesarstone Sdot-Yam Ltd [2017] SGCA 30
Chai Cher Watt (trading as Chuang Aik Engineering Works) v
SOL Technologies Pte Ltd [2012]1 SLR 152
15-315
Chapelton v Barry UDC [1940]1 KB 532
5-407
Chaplin v Hicks [1911) 2 KB 786
8-222b
Chaplin v Leslie Frewin (Publishers) Ltd [1966] Ch 71
6-215
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
4-217
Che Scm bte Yip v Maha Pte Ltd [1989]3 MU 468
6-221
Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd [2013] SGHC 32
5·213
Cheng Song Chuan v Chin Ivan [2008] SGHC 39
17-241
Cheong Kok Leong v Cheong Woon Weng [2017) SGCA 47
3-208,3-210
Cheong Soh Chin v Eng Chiet Shoong [2015] SGHC 173
16-509
Cherry, The[2003]1 SLR471
8-204,15-516
Chew Ai Hua Sandra v Woo Kah Wai and another (Chesney Real Estate Pte Ltd,
third party) [2013] SGHC 120
8-304c, 8·705
U075837L/N1510069
xxiv
Chia Kim Huay v Saw Shu Mawa Min Min (2012] SGHC 172
3·414, 3-518
Chia Kok Leong & Another v Prosperland Pte Ltd (2005] 2 SLR 484
8·704
Chiam Heng Chow v Mitre Hotel (1993] 3 SLR 547
9-327
Children's Media Ltd and Others v Singapore Tourism Board
(2009] 1 SLR 524
10-207
China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd (1997] 1 SLR 707
7-513
Ch'ng Choon Eng v Phaik Keow Lucien Gladys (2000] 1 SLR 257
16·803
Choo Tiong Hin v Choo Hock Swee (1959] MU 67
4·304
Chua Keng Mong v Hong Realty Pte Ltd (1994] 3 SLR 819
8-214
Chua Kwee Chen &Others v Koh Choon Chin (2006] 3 SLR 469
9·313
Ching Mun Fong (executrix of the estate of Tan Geok Tee, deceased)
v Liu Cho Chit (2001] 3 SLR 10
8-703
Chua Puay Kiang v Singapore Telecommunications Ltd (2000] 3 SLR 640
14·435
Chuan Hup Marine Ltd v Sembawang Engineering Pte Ltd (1995] 2 SLR 629
8-212
Chwee Kin Keong & Others v Digilandmall.com Pte Ltd
(2004) 2 SLR 594
3-307, 3·403, 3·417, 3·419, 4·230
Chwee Kin Keong v Digilandmall.com Pte Ltd (2005]
1 SLR 502
6-503, 6-506
Citibank NA v Lim Soo Peng & Another [2004] SGHC 266
6-604
City Equitable Fire Insurance Ltd, Re (1925] Ch 407
11-508
City Hardware Pte Ltd v Goh Boon Chye (2005) 1 SLR 754
17·311
CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another
(2015] 3 SLR 1041
6-608
CLAAS Medical Centre Pte Ltd v Ng Boon Ching (2010] SGCA 3
4-405, 6-311
Clea Shipping Corporation v Bulk Oil International, The Alaskan
Trader [1984] 1 All ER 129
7-309, 8·216
Coastland Properties Pte Ltd v Lin Geok Choo [2001] 1 SLR 72
8-304b
Collins v Associated Greyhound Racecourses Ltd (1930) 1 Ch 1
16-609
Collins v Godefroy (1831) 1 B & Ad 950
4-225
Columbia Asia Healthcare Sdn Bhd v Hong Hin Kit Edward [2014) 3 SLR 87
4-405
Combe v Combe [1951] 2 KB 215
4-238
Compact Metal Industries Ltd v PPG Industries (Singapore) Ltd
[2006) SGHC 242
15-319
Compaq Computer Asia Pte Ltd v Computer Interface (S) Pte Ltd
[2004) 3 SLR 316
4-310
Consmat Singapore (Pte) Ltd v Bank of America National Trust &
Savings Association [1992) 2 SLR 828
5-431
Cooke v Falconer's Representatives (1850) 13 D 157
18·412
Corinna Chin Shu Hwa v Hewlett-Packard Singapore (Sales) Pte Ltd
(2015) SCHC 204
5-413
Couturier v Hastie (1852) 8 Ex 40
6·504, 16·320
Craven-Ellis v Canons Ltd (1936] 2 KB 403
8-503
Creative Technology Ltd and another v Huawei International Pte Ltd
[2017] SGHC 201
6·413b
Credit Agricole lndosuez v Banque Nationale de Paris
[2001) 2 SLR 1
17·208, 17-267, 19·517
CS Bored Pile System Pte Ltd v Evan Lim & Co Pte Ltd (2006] SGHC 11
3-406
Cui indo Livestock (1994) Pte Ltd v Ananda UK (China Ltd
[2014) SGHC 178
15·324
Cullinane v British "Rema" Manufacturing Co Ltd [1954] 1 QB 292
8·220
Curtis v Chemical Cleaning & Dyeing Co [1951 ) 1 KB 805
5-418
Cutter v Powell (1795) 6 TR 320
7-202, 7-205
Daewoo Singapore Pte Ltd v CEL Tractors Pte Ltd (2001) 4 SLR 35
Daniels v Anderson (1995) 16 ACSR 607
Dart Sum Timber (Pte) Ltd v Bank of Canton Ltd [1982] 2 MU 101
Darwish MKF AI Gobaishi v House of Hung Pte Ltd [1998] 3 SLR 435
Davies v Benyon-Harris (1931) 47 TLR 424
Davis Contractors Ltd v Fareham UDC [1956) AC 696
De Bussche v Alt (1878) 8 ChD 286
De Cruz Andrea Heidi v Guangzhou Yuzhitang Health
Products Co Ltd and Others [2003) 4 SLR 682
De Francesco v Barnum (1890) 45 ChD 430
U075837L/N1510069
13-306
11-508
11·204
15·329
6·217
7·501, 7·503
16-507
4-304, 15-316
6·214
XXV
De Montfort University v Stanford Training Systems Pte ltd
[200G)1 SlR 218
13-407
Derry v Peek (1889) 14 App Cas 337
G-411
Diaz v Diaz [1997] 3 SlR(R) 759
14-313
Dick Bentley Productions ltd v Harold Smith (Motors) Ltd [19G5)1 WlR G23
5-210
Dickinson v Dodds (187G) 2 ChD 4G3
3-503, 3-505, 3-517
Dickson Trading (S) Pte ltd v Transmarco ltd [1989] 2 MLJ 408
3-510
Dimmock v Hallett (18GG) lR 2 ChApp 21
5-202, G-407
Donoghue v Stevenson [1932) AC 5G2
1-411, 4-213, 18-30G
Dunlop Pneumatic Tyres Co ltd v New Garage & Motor Co ltd
[1915] AC 79
8-22G, 8-22Gb, 8-227
Dunlop v Selfridge [1915) AC 847
4-203, 4-204
Dynasty line limited (in liquidation) v Sukamato Sia [2014] 3 SlR 277 (CA)
11-507
Dysart Timbers ltd v Roderick William Nielsen [2009] 3 NZlR 1GO
3-51Gb
E C Investment Holding Pte ltd v Ridout Residence Pte ltd [2011)
2 SlR 232
G-G03, 6-GOS, 8-304c
EA Apartments Pte ltd v Tan Bek and others [2017] 3 SlR 559
G-407
Eastern Distributors ltd v Goldring [1957] 2 QB GOO
15-617
Eastern Resource Management Services ltd v Chiu Teng Construction
Co Pte ltd [201G) SGHC 114
4-302, 6-603
Eastwood v Kenyon (1840) 11 A & E 438
4-222
Ecay v Godfrey (1947) 80 Lll R 28G
5-211
Edgington v Fitzmaurice (1885) 29 ChD 459
6-404, 6-408
Edwards v Odin [197G] 1 WlR 943
15-515
Ei-Nets ltd & Another v Yeo Nai Meng [2004] 1 SlR 153
8-214
Eleven Gesellschaft Zur Entwicklung Und Vermarktung Von
Netzworktechonologien MBH v Boxsentry Pte ltd [2014] SGHC 210
19-421
Elis Tjoa v United Overseas Bank [2003) 1 SlR 747
5-431
Eltraco International Pte ltd v CGH Development Pte ltd (2000) 4 SLR 290
6-608
Emjay Enterprises Pte ltd v Skylift Consolidator (Pte) ltd [200G) SGHC 28
5-412
Empresswood Enterprise Pte ltd v Kao Shin Ping [2005) SGDC 120
7-210
Energy Shipping Co Ltd v UDl Shipping (Singapore) Pte Ltd (1995) 3 SLR 25
5-217
Eng Chiet Shoong and others v Cheong Soh Chin and others and
another appeal (201G) 4 SLR 728
5-217
Engelin Teh Practice LlC v Wee Soon Kim Anthony (2004) 1 SlR G05
3-208
Entores Ltd v Miles Far East Corporation [1955) 2 QB 327
3-40G, 3-418
Esso Petroleum Co ltd v Harper's Garage (Stourport) ltd (19G8) AC 2G9
6-312
Estate of lee Rui Feng Dominique Sarron, deceased v Najib Hanuk bin
4-225, 4-311
Muhammad Jalal (201G)4 SlR 438
Euro-Asia Realty Pte ltd v Mayfair Investment Pte Ltd (District Court
(2001) SGDC 352
4-233
Everbright Commercial Enterprises Pte ltd & Another v AXA Insurance
Singapore Pte ltd (2000)4 SLR 22G
6-303
Excel Golf Pte ltd v Allied Domecq Spirits and Wine
(Singapore) ltd (No 2) (2004) SGHC 162
9-303
Export Services Singapore Pte ltd v ldemitsu Chemicals Southeast
Asia Pte ltd [1998)1 SlR 93
15-315
Evans (J) & Son (Portsmouth) Ltd v Andrea Merzario ltd (1976) 1 WLR 1078
5-419
Faccenda Chicken v Fowler [198G)1 AllER G17
Falcke v Gray (1859) 4 Drew 651
Family Food Court (a firm) v Seah Boon Lock [2008) 4 SlR 272
Farley v Skinner [2001)4 AllER 801
Felthouse v Bind ley (1862) 11 CBNS 869
Fibrosa Spolka Akcyjna v Fairbairn lawson Combe Barbour Ltd
[1943) AC 32
Financings ltd v Stimson (19G2)1 WLR 1184
Fineplas Holdings Pte ltd Re; Sitra Wood Products Pte ltd v
Fineplas Holdings Pte ltd [2001 ] 2 SLR 189
First Currency Choice Pte Ltd v Main-line Corporate Holdings Ltd
(2008) 1 SLR 335
U075837L/N1510069
14-45G
8-304
16-605
8-224
3-410
7-516, 7-518, 8-G02
3-516
8-30G
14-407
xxvi
First Energy (UK) Ltd v Hungarian International Bank Ltd
16-308
[19931 2 Lloyd's Rep 194
3·403
Fitch v Snedaker 38 NY 248 (1868)
4-232, 4-233
Foakes v Beer (1884) 9 App Cas 605
Fong Maun Yee & Another v Yoong Weng Ho Robert [19971
16·709, 18·412, 18-413
2 SLR 297
Foo Jong Long Dennis v Ang Yee Lim Lawrence and another
4-306
[20161 2 SLR 287
Forefront Medical Technology (Pte) ltd v Modern·Pak Pte ltd
[2006] SGHC 3
3-207, 5-217
Foss v Harbottle (1843) 2 Hare 461
11-711,11-712, 11·713
Freeman & Lokyer v Buckhurst Park Properties (Mangal) ltd
11-207, 16-305
[1964] 2 QB 480
Frost v Aylesbury Dairy Co Ltd [1905] 1 KB 608
15-320
Furs ltd v Tomkies (1935) 54 CLR 583
11·512
Future Enterprises Pte ltd v McDonald's Corp [2006] 4 SlR 629
14·420
G Grains and Industrial Products Trading Pte ltd v Bank of India
[2016] SGCA 32
19·517
Gay Choon lng v Loh Sze Ti Terence Peter and Another Appeal [2009] 2 SlR 332 4·230
Gebrueder Buehler AG v Chi Mak Kwong Peter [19881 1 SLR(R) 185
14-304
Geier v Kujawa, Weston & Warne Bros (Transport) Ltd [19701
5-410
1 Lloyd's Rep 364
Gema Metal Ceilings (Far East) Pte ltd v lwatani Techno
Construction (M) Sdn Bhd [20001 SGHC 37
15-320
Genelabs Diagnostics Pte ltd v lnstitut Pasteur [20001 SGCA 60
14-407, 14-413
George Mitchell (Chesterhall) ltd v Finney Lock Seeds ltd [1983] 2 AC 803
5-430
Georgi Velichkov Barbudev v Eurocom Cable Management Bulgaria Eood &
4-306
Ors [2012] EWCA Civ 548
3-411b
G-Fuel Pte Ltd v Gulf Petrochem Pte Ltd [20161 SGHC 62
3-403
Gibbons v Proctor (1891) 64lT 594
10-207c
Gilford Motor Co v Horne (1933) CH 935
Glassbrook Bros Ltd v Glamorgan City Council [19251 AC 270
4·226
14-434
Global Yellow Pages v Promedia Directories Pte ltd [20171 SGCA 28
Go Dante Yap v Bank Austria Creditanstalt AG
18·403, 18-405, 18-407
[2011 I 4 SLR 559
6-603
Goh Bee Lan v Yap Soon Guan and another [20181 SGHC 11
Goh Lay Khim and others v Isabel Redrup Agency Pte Ltd and
7-306, 16-511
another appeal [20171 1 SlR 546
14·309
Goh Teh Lee v Lim Li Pheng Maria and others [20101 3 SlR 367
8-502
Gold Coin Ltd v Tay Kim Wee [1987] 2 MU 271
Golden Bay Realty Pte ltd v Orchard Twelve lnvestements Pte Ltd
8-228
[19911 3 MLJ 65
6-317
Goldsoll v Goldman [19151 1 Ch 292
Good Earth Agricultural Co ltd v Novus International Pte ltd [20081 SGCA 13 19-409
17-212
Goodman v J Eban Ltd [1954] 1 QB 550
17-271
Goodman v Harvey (1836) 4 A & E 870
Grace Electrical Engineering Pte Ltd v Te Deum Engineering Pte Ltd
18-325
[20171 SGCA 65
15-321
Griffiths v Peter Conway ltd [19391 1 All ER 685
8-502
Grossner Jens v Raffles Holdings Ltd [20041 1 SLR 202
9-315
Guy Neale v Nine Squares Pty Ltd [20131 SGHC 249
9-313, 9-319
Guy Neale v Nine Squares Pty Ltd [20151 1 SLR 1097
Hadley v Baxendale (1854) 9 Ex 341
8-206,8-207,8-208,8-210, 8-211,8-221
Hai Tong Co (Pte) Ltd v Ventree Singapore Pte Ltd and another [20131
14-420, 14·423
2 SlR 941
15-314
Harlingdon Enterprises v Christopher Hull Fine Art ltd [1991 I 1 QB 564
8-223
Haron bin Mundir v Singapore Amateur Athletic Association [19921 1 SLR 18
8-228
Harris Hakim v Allgreen Properties ltd [20011 4 SlR 137
4-228
Hartley v Ponsonby (1857) 7 E & B 872
U075837L/N1510069
xxvii
Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd & Ors [1985)
3-304, 3-309
2 AllER 966
8-202
Harvester Baptist Church Ltd v Chua Moh Huat Dennis [ 1992) 1 SLR 395
3-310
Harvey v Facey [1893] AC 552
Harwindar Singh s/o Geja Singh v Michael Wong Lok Yung and
another [2015]4 SLR 69
3-202
Hatton National Bank Ltd v Ocean Gourmet Pte Ltd [2001]1 SLR 392
17-222
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
6-413, 6-413b, 18-401
18-402, 18-406, 18-407, 18-409
16-309
Hely-Hutchinson v Brayhead Ltd [1968]1 QB 549
Henry Kendall & Sons v William Lillico & Sons [1969] 2 AC 31
5-411, 15-317
Herbert Morris Ltd v Saxelby [1916]1 AC 688
6-310
Herne Bay Steamboat v Hutton [1903]2 KB 683
7-505
2-232
Heydon's Case (1584) 3 Co Rep 7a
7-30Gb
HG Metal Manufacturing Ltd v Nam Tat Hardware Co [2006] SGHC 37
16-506
Hippisley v Knee Brothers [1905)1 KB 1
Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd
[2001]4 SLR 407
6-506
Ho Wing On Christopher & Others v ECRC Land Pte Ltd
13-409
(in liquidation) [2006]4 SLR 817
7-304
Hochster v De La Tour (1853) 2 E & B 678
7-207
Hoenig v Isaacs [1952]2 AllER 176
Holland Leedon Pte Ltd (in liquidation) v C & P Transport Pte Ltd [2013)
5-409
SGHC 281
Hollier v Rambler Motors (AM C) Ltd [1972] 2 QB 71
5-413
Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd [2011]2 SLR 106
7-513c
Holland v Hodgson (1872) LR 7 CP 328
14-304
Hon Chin Kong v Yip Fook Mun and another [2017] SGHC 286
8-225, 8-22Gb
Honey Secret Pte Ltd v Atlas Finefood Pte Ltd [2016] SGHC 164
15-317
Hong Fok Rea lty Pte Ltd v Bima Investment Pte Ltd [1993]
7-307, 8-221
1 SLR
19-418
Hong Pian Tee v Les Placements Germain Gauthier Inc [2002] 2 SLR 81
17-274
Hong Kong and Shanghai Banking Corporation v Lo Lee Shi [1928] AC 181
Hongkong & Shanghai Banking Corp v San's Rent A Car Pte Ltd tla
16-605
San's Tours & Car Rentals [1994]3 SLR 593
Hongkong and Shanghai Banking Corp Ltd v Jurong Engineering Ltd &
16-308
Others [2000] 2 SLR 54
Hongkong Fir Shipping Co Ltd v Kawasa ki Kisen Ka isha Ltd [1962)
5-302, 7-303
2 QB 26
Housing & Development Board v Microform Precision
7-512
Industries Pte Ltd [2003] SGHC 214
11-215
Howard v Patent Ivory Manufacturing Co (1888) 38 ChD 156
7-306
Howard v Pickford Tool Co [1951]1 KB 417
11-516
Howard Smith v Ampol Petroleum Ltd [1974) AC 821
Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations)
6-41 3
Ltd [1978] QB 574
HSBC Institutional Trust Services (Singapore) Ltd (trustee of Starhill Global
Rea l Estate Investment Trust) v Toshin Development Singapore Pte Ltd
4-307
[2012]4 SLR 738
15-516
Hua Seng Sawmill Co Bhd v QBE Insurance (Malaysia) Bhd [2003] 4 SLR 449
16-608
Humble v Hunter (1848) 12 QB 310
5-214
Hutton v Warren (1836) 150 ER 517
3-512
Hyde v Wrench (1840) 3 Beav 334
0
Illingworth v Houldsworth [1904) AC 355
Independent State of Papua New Guinea v PNG Sustainable Development
Program Ltd [2016) 2 SLR 366
Ingham v Primrose (1859) 7 CB NS 82
International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene
Pastoral Co (1958) 100 CLR 644
Internat ional Trust and Finance Ltd v Chui Pui Cheng [1987)1 MLJ 578
U075837L/N1510069
12-314
3-202
17-248
16-204
17-404
xxviii
lnt raco Ltd v Multi-Pak Singapore Pte Ltd [1995) 1 SLR 313
lnvenpro (M) Sdn Bhd v JCS Automation Pte Ltd [2014] 2 SLR 1045
lrawan Darsono & Another v Ong Soon Kiat [2002] 4 SLR 84
iTronic Holdings Pte Ltd v Tan Swee Leon and another suit [2016) 3 SLR 663
11-504
14-456
8-204
8-227
0
Jackson & Another v Royal Bank of Scotland [2005) UKHL 3
8-212, 8-222
Jarvis v Swan Tours Ltd [1973]1 All ER 71
8-223, 8-224
Jermyn Street Baths Ltd, Re [1971]3 AllER 184
11-705
Jet Holding Ltd and Others v Cooper Cameron (Singapore)
Pte Ltd and Another [2005] 4 SLR 417
5-204, 5-409
JESinternational Holdings Ltd v Yang Shushan [2016) 3 SLR 193
8-222
Jewson Ltd v Leanne Teresa Boyhan [2004] 1 Lloyd's Rep 50
15-322
Jeyaretnam Joshua Benjamin v lndra Krishnan [2007) 3 SLR 433
13-237
JIO Minerals FZC and others v Mineral Enterprises ltd [2010] SGCA 41
19-409
John McCann & Co v Pow [1975) 1 AllER 129
16-508
Johnson v Agnew [1979]1 All ER 883
8-202
Jones Ltd v Waring and Gill ow Ltd, Re [1926] AC 670
17-267
Joo Yong Co (Pte) Ltd v Gajentheran Marimuthu [2015] SGCA 38
18-334
Joseph Mathew v Singh Chiranjeev [2010]1 SLR 338
3-210
JSI Shipping (S) Pte Ltd v Teofoongwonglcloong (a firm}
[2007 ] 4 SLR 460
18-328b, 18-412
Jurong Shipyard Pte Ltd v BNP Paribas [2008) 4 SLR 33
16-307
Jurong Town Corp v Wishing Star Ltd (No 2) [2005) 3 SLR 283
6-416
0
Karlshamns Oljefabriker v Eastport Navigation [1982) 1 All ER 208
15-512
12-326
Kay Hian & Co (Pte) v Phua Ooi Yong Jon and others [1988] SLR 963
Kay Lim Construction & Trading Pte Ltd v Soon Douglas (Pte} Ltd
5-413
and another [20 13) 1 SLR 1
6-407
Keates v Lord Cadogan (1851} 10 CB 591
Keighley, Maxsted & Co v Durant [1901) AC 240
16-315
Kelner v Baxter (1866) LR 2 CP 174
16-706
Kenso leasing Pte Ltd v Pang Kek & Another [2005) SGDC 199
15-614
Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding Co Pte Ltd
[1999]1 SLR 214
5-432, 5-433
Keppel v Wheeler [1927) 1 KB 577
16-504
Khng Thian Huat v Riduan bin Yusof [2005]1 SLR 130
4-310
Khoo Tian Hock & Another v Oversea-Chinese Banking
17-308
Corporation Limited [2000] 4 SLR 673
Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad [1989)
1 WLR 379
4-310
4-215
KLW Holdings Ltd v Straitsworld Advisory Ltd and another [2017] SGHC 35
Koh Ewe Chee v Koh Hua Leong &Another [2003 ] SGHC 24
9-317
Koh Keow Neo & Others v Chee Johnny & Others [2004) 3 SLR 385
6-403
Koh Lin Yee v Terrestrial Pte Ltd and another appeal [2015]2 SLR 497
5-431
Kong Thai Sawmill (Miri} Sdn Bhd, Re [1978] 2 MU 227
11-706
Koon Seng Construction Pte Ltd v Chenab Contractor Pte Ltd
and Another [2008) 1 SLR 375
6-315
Korea Jonmyong Trading Co v Sea-shore Transportation Pte Ltd
& Another [2003]1 SLR 702
8-206
Koufos v C Czarnikow Ltd ("The Heron II"} [1969] 1 AC 350
8-209, 8-211
Krell v Henry [1903) 2 KB 740
7-505
Ku Yu Sang v Tay Joo Sing [1993] 3 SLR 938
16-708
Kuek Siew Chew v Kuek Siang Wei and another [2015] 1 SLR 396
4-222
Kuek Siew Chew v Kuek Siang Wei and another [2015) 5 SLR 357
4-217b
Kumagai-Zenecon Construction Pte Ltd v Low Hua Kin
[2000) 2 SLR 510.
11-512, 11-517
1L30G v EQ Insurance Company Ltd [2017) SGHC 242
Lai Yew Seng Pte Ltd v Pilecon Engineering Bhd [2002) 3 SLR 425
Lam Chi Kin David v Deutsche Bank AG [2011 I 1 SLR 800
Lam Hong Leong Aluminium Pte Ltd v Lian Teck Huat
Construction Pte Ltd and Another [2003) SGHC 53
U075837L/N1510069
3-413
4-239
4-235
4-217,4-21 9
xxix
Lanphier v Phipos (1838) 173 ER 581
18-411
Latimer v AEC Ltd [1953) AC 643
18-324
lau Lay Hong v Hexapillar Pte Ltd [1993) 3 SLR 198
7-509
lee Chee Wei v Tan Hor Peow Victor [2007) 3 SLR 537
7-503, 8-305b
lee Feng Steel Pte ltd v First Commercial Bank [1997) 1 SLR 280
16-603
lee Seng Heng v Guardian Assurance Co Ltd [1932) MU 17
3-413
lee Siew Chun v Sourgrapes Packaging Products Pte Ltd [1993) 2 SLR 297
6-507
Leivest International Pte Ltd v Top Ten Entertainment Pte Ltd [2006) 1 SLR 888 7-408
lek Bong Hua v Lek Boon Chye [1999]1 SLR 523
9-303
Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd [2014]3 SLR 27
6-310
5-413
Leong Hin Chuee v Citra Group Pte Ltd and others [2015) 2 SLR 603
l'Estrange v Graucob [1934) 2 KB 394
5-405
levy v Abercorris Slate and Slab Co (1887) 37 ChD 260
12-303
lew Chee Fai Kevin v Monetary Authority of Singapore [2012) SGCA 12
11-605
LH Aluminium Industries Pte Ltd
v Newcon Builders Pte Ltd [2015) 1 SLR 648
3-202, 3-411
Li Hwee Building Construction Pte Ltd v Advanced Construction
& Engineering Pte Ltd [2002) SGHC 287
7-404
6-302
liao Eng Kiat v Burswood Nominees Ltd [2004) 4 SLR 690
8-704
Lian Kok Hong vOw Wah Foong and Another [2008) 4 SLR 165
Lifestyle 1.99 Pte ltd v SS 1.99 Pte Ltd (trading as ONE.99 SHOP) [2000)
2 SLR 766
18·503
Lim Ah Sia v Tiong Auang Yeong [2014) SGHC 154
11-710
Lim Beng Cheng v Lim Ngee Sing [2016]1 SLR 524
4-219, 8-304c
lim Geok Hian v Lim Guan Chin [1994) 1 SLR 203
6-411, 6-606, 6-607
Lim Kim Som v Sheriffa Taibah bte Abdul Rahman [1994) 1 SLR 393
7-512
lim Kok Koon v Tan Cheng Yew & Another [2004) 3 SLR 111
9-324
lim Siew Bee v lim Boh Chuan and another [2014) SGHC 41
8-301
Lim Swee Khiang and Another v Borden Co (Pte) Ltd and
Others [2006) 4 $LR 745
11-710
Lim Weng Kee v Public Prosecutor [2002) 4 SLR 327
11 -501c, 11-508
Liu Tsu Kun and another v Tan Eu Jin and others [2017) SGHC 241
6-411b
Liu Wing Ngai tla Kam Wah Ultrasonic Engineering Co v Lui Kok Wai
tla Almac Machinery [1997) 1 SLR 559
16-204
Liverpool City Council v Irwin [1977) AC 239
5-217
London Joint Stock Bank Ltd v Macmillan and Arthur [1918) AC 777
17-308
low Kin Kok (alias Low Kong Song) v lee Chiow Seng and another
[2014) SGHC 208
3·202, 5-206
Lloyd v Grace Smith & Co [1912] AC 716
16-603
Lloyds Bank Ltd v Bundy [1974] 3 AllER 757
6·602, 6-607
Lloyds Bank Limited v Cooke [1907] 1 KB 794
17-267
13-219
lu Yuan Sheng v Hitachi Credit Singapore Pte Ltd [2004] SGHC 118
luxor (Eastbourne) Ltd v Cooper [1941] AC 108
16-511
Mcloughlin v O'Brian [1983) AC 410
18-340
McDonald's Corp v Future Enterprises Pte ltd [2005]1 SLR 177
14-420
Mahidon Nichiar bte Mohd Ali and others v Dawood Sultan Kamal din
[2014) 4 SLR 1309
6·507
Mahidon Nichiar bte Mohd Ali and others v Dawood Sultan Kamaldin
[2015] 5 SLR 62
6·507
Malayan Banking Bhd v Lauw Wisanggeni [2003) 4 SLR 287
4-215, 4-219
Malayan Banking Berhad v Sivakolunthu Thirunavukarasu and Others
[2008] 1 SLR 149
6·605
Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR 663
5·304, 6·310,
6-311, 6-317, 7-303c, 14-456
Man Mohan Singh slo Jothirambal Singh and another v Zurich
Insurance (Singapore) Pte ltd (now known as QBE Insurance
(Singapore) Pte Ltd) and Another and Another Appea l
[2008] 3 SLR 735
18-313
Management Corporation Strata Title No 473 v De Beers
Jewellery Pte Ltd [2001) 4 SLR 90
4-311, 8-705
Management Corporation Strata Title Plan No 2297 v
Seasons Park Ltd [2005) 2 SLR 613
4-402, 4-404
U075837L/N1510069
XXX
Malcolmson Nicholas Hugh Bertram v Naresh Kumar Mehta
[2001) 4 SlR 454
18-201
Mahmoud and lspahani, Re [1921] 2 KB 716
6-304, 6-314
Management Recru iters International (Asia) Pte ltd (fka Humana
International (Asia) Pte l td), Re [2002]4 SlR 561
13-407
Manurewa Trasnport ltd, Re [1971] NZlR 909
12-318
Mareva Compania Naviera SA v International Bulkcarriers SA
("The Mareva") [1975]2 lloyd's Rep 509
8·312
Mario-Ville Boarding House Pte ltd and others v Pulau Properties Pte ltd
[1995] 3 SlR(R) 396
16-608
Maritime National Fish v Ocean Trawlers [1935] AC 524
7-515
Marken limited (Singapore Branch) v Scott Ohanesian [2017] SGHC 227
3·209
Marlow v Pitfield (1719) 1 P Wms 558
6-213
Mason v Provident Clothing & Supply Co ltd [ 1913] AC 724
6-311
Master v Miller (1791) 2 H Bl138
17-249
Master Stelios, The; Monvia Motorship Corporation v Keppel Shipyard
(Pte) Ltd [1983] 1 MU 361
3-513
Max Sources Pte Ltd v Agrocon (S) Pte ltd [201S] SGHCR 11
4·204
Max-Sun Trading Ltd v Tang Mun Kit [2016] 5 SLR 815
4-306, 5·217
MCI Group Holding SA v Secondment Pty ltd [2014] SGIPOS 15
14-417
Mead v Young (1790) 4 TR 28
17·218
Melachrino v Nichol l & Knight [ 1920]1 KB 693
8-214
Merck & Co Inc v Pharmaforte Singapore Pte Ltd [2000] 3 SlR 717
14-407
Merritt v Merritt [1970] 1 Wl R 1211
4-305
7-305
Mersey Steel and Iron Co v Naylor Benson & Co (1884) 9 App Cas 434
7-506
Metropolitan Water Board v Dick, Kerr & Co [ 1918] AC 119
Miah Rasel v 5 Ways Engineering Services Pte l td {2017] SGHC 235
18-315
Miles v New Zealand Alford Estate Co (1886) 32 ChD 266
4-219
Millennium Commodity Trading ltd v BS Tech Pte ltd (2017] SGHC 58 17·207, 17-304
Midlink Development Pte ltd v The Stansfield Group Pte Ltd [2004]
4 SLR 258
3-411, 3-411b
Mizuho Corporate Bank limited v Woori Bank (2004] SGHC 219
7-302
MK Distripark Pte Ltd v Pedder Warehousing & Logistics (S) Pte Ltd
8-222b
[2013] SGHC 84
Mohamed Bassatne v Rifaat El Gohary [2004] SGHC 63
4-310
Monarch SS Co v Karlshamns Oljefabriker (AlB) [1949) AC 196
8-204
Mookka Pillai Rajagopal v Kushvinder Singh Chopra [ 1996) 3 SLR 437
6-605
Moorcock, The (1889) 14 PD 64
5-215, 5-216
Moore & Co and Landauer & Co, In Re [1921) 2 KB 519
7-202, 15-315
MP-Bilt Pte Ltd v Oey Widarto [1999) 3 SLR 592
8-215, 7-309
Muhlbauer AG v Manufacturing Integration Technology ltd (2010) SGCA 6
14-407
Nagasima Electronic Engineering Pte ltd v APH Trading Pte Ltd
[2005) 2 SlR 641
14-445
Nash v Inman [1908) 2 KB 1
6-208, 6-212
Natferrous Pte ltd v Tradelink Hardware Pte Ltd [2005) SGHC 131
15-324
National Aerated Water Co Pte Ltd v Monarch Co, Inc [2000) 2 SLR 24
6-317, 14-428
National Employers Mutual General Insurance Association v Jones [1988)
2 A ll ER 425
15-616
National Foods ltd v Pars Ram Brothers (Pte) ltd [2007) 2 SlR 104
15-319, 15-322
Neo Corp Pte Ltd v Neocorp Innovations Pte Ltd [2006) 2 SLR 717
13-314
Neptune Agate, The [1994) 3 SLR 786
5-403
New Dennis Arthur and another v Greesh Ghai Monty and another
[2012] SGHC 122
8-304c
New Zea land Shipping Co ltd v AM Satterthwaite & Co Ltd,
The Eurymedon [1975) AC 154
4·220, 5-416
Next of kin of Ramu Vanniyar Ravichandran v Fongsoon
Enterprises (Pte) Ltd [2008) 3 SLR 105
16-309
Ng Buay Hock & Another v Tan Keng Huat & Another [1997) 2 SLR 788
16-604
Ng Chu Chong v Ng Swee Choon [2002) 2 SLR 368
9-313
Ng Hock Kon v Sembawang Capital Pte l td (2010] 1 SlR 307
16·321
Ng Koo Kay Benedict and another v Zim Integrated Shipping Services Ltd
(2010) 2 SlR 860
18-505
Ngee Ann Development Pte Ltd v Takashimaya Singapore Ltd [2017)
U075837L/N1510069
xxxi
2 SLR 627
Ngiam Kong Seng & Anor v lim Chiew Hock [2008] 3 SLR 674
N K Rajarh v Tan Eng Chuan [2013] SGHC 76
16-505,
Novelty Pte Ltd v Amanresorts Ltd and Another [2009]3 SLR 216
NTUC Foodfare Co-operative Ltd v SIA Engineering Co Ltd [2017) SGHC 250
3-209
18-339
16-506
18-503
18-317
Oakwell Engineering Ltd v Energy Power Systems Ltd [2003) SGHC 241
7-507
Obegi Melissa v Vestwin Trading Pte Ltd [2008) 2 SLR 540
14-455
Ocean Tramp Tankers Corporation v V/0 Sovfracht, The Eugenia [1964)
7-512
2 QB 226
Ochroid Trading Ltd and another v Chua Siok Lui (trading as VIE Import &
Export) and another [2018) SGCA 5
6-304
Olivine Capital Pte Ltd and another v Chia Chin Yan [2014) 2 SLR 1371
6-503
Olley v Marlborough Court Ltd [1949)1 KB 532
5-408
Ong & Ong Pte Ltd v Fairview Developments Pte Ltd [201 5) 2 SLR 470
3-516b
Ong Chow Hong v PP [2002) 4 SLR 327
11-501c
Ong Han ling v American International Assurance Co Ltd [2017) SGHC 327
16-604
11-707
O'Neill v Philips [1999) 1 WLR 1092
9-332
Ong Kay Eng v Ng Chiow Tong [2001]2 SLR 213
Ong Hong Kiat v RIQ Pte Ltd [2013] SGHC 131
3-401, 3-513
8-601
Ooi Ching Ching Shirley v Just Gems Ltd [2003]1 SLR 14
Oppenheimer v Attenborough [190B]1 KB 221
15-611
Orchard Capital I Ltd v Ravindra Kumar Jhunjhunwala [2012] SGCA 16
14-409
Orient Centre Investments Ltd and Another v Societe Generale
[2007] 3 SLR 566
6-419
Oriental Investments (SH) Pte Ltd v Catalla Investments Pte Ltd
[2013]1 SLR 1182
4-235
Oscar Chess Ltd vWilliams [1957) 1 WLR 370
5-210
Out of the Box Pte Ltd v Wan in Industries Pte Ltd [2013) 2 SLR 363
8-210
Over & Over Ltd v Bonvests Holdings Ltd and
another [2010]2 SLR 776
11-710,11-802
Oversea-Chinese Banking Corp Ltd v lnfocommcentre Pte Ltd [2005) 4 SLR 30
6-408
Oversea-Chinese Banking Corp Ltd v The Timekeeper
Singapore Pte Ltd [1997) 2 SLR 526
5-432
Overseas Union Insurance Ltd v Turegum Insurance Co
3-503, 19·413
[2001 I 3 SLR 330
Pacific Motor Auctions v Motor Credits Ltd [1965]2 AllER 105
15-613
Pacific Recreation Pte Ltd v SY Technology Inc and Another Appeal
[2008]2 SLR 491
19-413
7-305
Pacific Rim Palm Oil Ltd v PT Asiatic Persada [2003) 4 SLR 731
Panatron Pte Ltd v Lee Cheow Lee (2001) 3 SLR 405
6-408, 6-409 • 6-411
Pang Koi Fa v lim Djoe Phing [1993) 3 SLR 317
18·338
Panorama Developments (Guildford) Ltd v Fidel is Furnishing Fabrics
Ltd [1971] 2 QB 711
11-306, 16-308
3-514
Panwell Pte Ltd & Another v Indian Bank (No 2) [2002) 4 SLR 963
Pao On v Lau Yiu Long [1980) AC 614
4-210, 4-211, 4-221
Paris v Stepney Borough Council [1951) AC 367
18-323
Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978) QB 791
8-212
Partridge v Crittenden [1968) 1 WLR 1204
3-306
Pearson v Rose & Young (1951) KB 275
15-610
Peh Yeng Yok v Tembusu Systems Pte Ltd (formerly known as
Tembusu Terminals Pte Ltd) and others (2016) 2 SLR 781
8-402
Pelican Engineering Pte Ltd v Lim Wee Chuan [2001) 1 SLR 105
6-606
Pender Development Pte Ltd v Chesney Real Estate Group LLP [2009)
4-306
3 SLR 1063
People's Park Chinatown Development Pte Ltd (In Liquidation)
14-304
v Schindler Lifts (Singapore) Pte Ltd [1992) 3 SLR(R) 236
Perishables Transport Co Ltd v N Spyropoulos (London) Ltd [1964)
2 Lloyd's Rep 379
16-704
Pertamina Energy Trading Ltd v Credit Suisse (2006) SGHC 4
17-308
Peters v Fleming (1840) 6 M & W 42
6·209
PH Hydraulics & Engineering Pte Ltd v Airtrust (Hong Kong) Ltd and
U075837L/N1510069
xxxii
another appeal [2017]2 SLR 129
8·202b
Pharmaceutical Society of Great Britain v Boots Cash Chemists
(Southern) Ltd [1952]2 QB 795
3-307
Phosagro Asia Pte Ltd v Piattchanine, louri [2016]5 SLR 1052
7-303c
Photo Production ltd v Securicor Transport ltd (1980] AC 827
5-415, 5-425
Pinnel's Case (1602) 5 Co Rep 117a
4-231, 4-232, 4-233, 4-234
PlanAssure PAC (formerly known as Patrick lee PAC) v
Gaelic Inns Pte Ltd [2007] 4 SLR 513
18-413
Planche vColburn (1831) 8 Bing 14
7-209
Polemis, Re (1921] KB 560
18-329
Polo/Lauren Co LP v United States Polo Association [2002]1 SLR 326
14-420
Poussard v Spiers & Pond (1876) 1 QBD 410
7-508
PPG Industries (Singapore) Pte Ltd v Compact Metal Industries Ltd
[2013] SGCA 23
8-207
President Marine (Pte) Ltd v Kojima Singapore (Pte) Ltd [1994] SGHC 68
7-204
Press Automation Technology Pte Ltd v Trans-link Exhibition
Forwarding Pte Ltd [2003]1 SLR 712
5-405, 5-433
Price v Easton (1833) 4 B & Ad 433
4-402
Prima Bulkship Pte Ltd (in creditors' voluntary liquidation) and another
v Lim Say Wan [2016] SGHC 283
11-509b
Prudential Assurance Co ltd v Newman Industries (No 2) [1982] Ch 204
10-411
PT First Media TBK (formerly known as PT Broadband Multimedia TBK)
v Astro Nusantara International BV (2014] 1 SLR 372
19-424
PT Master Mandiri v Yamazaki Construction (S) Pte Ltd [2001 ]1 SLR 540
8-214
PT Soonlee Metal indo Perkasa v Synergy Shipping Pte Ltd [2007]4 SLR 51
5-403
Public Prosecutor v lew Syn Pau and Another (2006]4 SLR 210
10-425
Public Prosecutor v Ng Chee Keong & Another [1999]4 SLR 56
11-604
QBE Insurance (International) Ltd v Winterthur Insurance
(Far East) Pte Ltd [2005]1 SLR 711
Quenerduaine v Cole (1883) 32 WR 185
4-237
3-413
R v Andrews [1973] QB 422
6-303
R v Clarke (1927) 40 ClR 227
3-403
R v Willans (1858) 3 Kyshe 16
2-304
R1 International Pte ltd v lonstroff AG [20 15) 1 SLR 521
3-411b
Rabiah Bee Bte Mohamed Ibrahim v Salem Ibrahim (2007)2 SLR 655
9·306, 9-403
Raffaella, The; Soplex Wholesale Supplies ltd and PS Refson & Co Ltd v
Egyptian International Foreign Trading Co (1985)2 Lloyd's Rep 36
16-308
Raffles Hotel Ltd v Rayner [1965)1 MU 60
11-506
Raffles Town Club Pte Ltd v Tan Chin Seng & Others [2005)4 SlR 351
8-222b, 8-603
Rai Bahadur Singh v Bank of India (1993]1 SLR 634
6-203
Raiffeisen Zentralbank Osterreich AG v Archer Daniels
Midland Co [2007)1 SlR 196
6-411
"Rainbow Spring", The [2003]3 SLR 362
16-605
Rainforest Trading Ltd v State Bank of India Singapore [2012)2 SlR 713 4-210, 4·211
Ramsgate Victoria Hotel Co v Montefiore (1866) lR 1 Ex 109
3-515
Rapiscan Asia Pte ltd v Global Container Freight Pte Ltd [2002] 2 SlR 325
5-403
Rappo, Tania v Accent Delight International Ltd [2017] SGCA 27
19-413
Rasmachayana Sulistyo, Re [2005]1 SLR 483
13-219
Ratnam Alfred Christie v Public Prosecutor (2000]1 SLR 467
2-232
RBC Properties Pte Ltd v Defu Furniture Pte Ltd
[2015)1 SLR 997
3-204, 6-413b, 6-414
RBG Resources pic (in liquidation) v Ban que Cantonale
Vaudoise & Others [2004) 3 SLR 421
15-513
R D Harbottle (Mercantile) ltd v National Westminster Bank ltd [1978) QB 146 19-501
RDC Concrete Pte ltd v Sato Kogyo (S) Pte Ltd & Another Appeal
5-303 to 5-305,
[2007)4 SLR 413
7-301, 7-302 to 7-306, 7-513b, 7-513c, 8·201, 8-207
Reckitt & Colman Products v Borden Inc (1990)1 AllER 873
18-502
Redgrave v Hurd (1881) 20 ChD 1
6-409, 6-414
U075837L/N1510069
xxxiii
11-513
Regal (Hastings) Ltd v Gulliver [1942)1 All ER 378
Regazzoni v KC Sethia (1944) Ltd [1958) AC 301
6-303
Regina v Willans [1834)3 Ky 16
2-304
Reindeer Developments Inc v Mindpower Innovations
3-210
Pte Ltd [2007) SGHC 170
3-518
Reynolds v Atherton (1921) 125 lT 690
5-432
Ri Jong Son v Development Bank of Singapore Ltd [1998} 3 SlR 64
6-212
Roberts v Gray [1913)1 KB 520
Robertson Quay Investment Pte Ltd v Steen Consultants Pte ltd
8-211
and Another [2008) 2 SlR 623
18-209b
Robinson v Graves [1935]1 B 579
14-41 7
Romanson Co ltd v Festina Lotus SA [2015) SGIPOS 3
Romar Positioning Equipment Pte Ltd v Merriwa Nominees
5-215
Pty ltd [2004)4 SLR 574
4-208
Roscorla v Thomas (1842) 3 QB 234
Rose & Frank Co v J R Cromption & Bros Ltd [1925] AC 445
4-307
Routledge v Grant (1828) 4 Bing 653
3-505
5-208
Routledge v McKay [1954)1 WlR 615
8-602
Rover International ltd v Cannon Film Sales Ltd (No 3) [1989]1 WlR 912
11-214
Royal British Bank v Turquand [1856)6 E & B 327
RSP Architects Planners & Engineers (Raglan Squire & Partners FE)
18-321
v MCST Plan No 1075 [1999)2 SLR 449
Rudhra Minerals Pte ltd v MRI Trading Pte ltd [2013]4 SLR 1023
3-402, 4-239
8-224
Ruxley Electronics and Construction ltd v Forsyth [1996] AC 344
4-230
S. Pacific Resources ltd v Tomolugen Holdings ltd [2016)3 SLR 1049
SAl Industrial leasing ltd v Lin Hwee Guan [1998)3 SlR 482.
11-204
Salomon v A Salomon & Co [1897) AC 22
10-205
6-411
Samwoh Resources Pte Ltd v Lee Ah Poh [2003] SGHC 69
14-423
Sarika Connoisseur Cafe Pte ltd v Ferrero SpA [2012) SGCA 56
18-325
Scott v London & St Katherine Docks (1865) LR 8 QB 161
Scruttons ltd v Midland Silicones ltd [1962) AC 446
5-416
Seagate Technology Pte ltd v Goh Han Kim [1995]1 SLR 17
13-416
4-230
Selectmove ltd, Re [1995]1 WLR 474
3-209, 5-217
Sembcorp Marine Ltd v PPl Holdings Pte Ltd [2013) 4 SLR 193
15-327
Shanklin Pier v Detel Products ltd [1951 ] 2 KB 854
Sharon Global Solutions Pte ltd v lG International (Singapore)
Pte Ltd [2001) 3 SlR 368
6-603
6-306
Shaw v Groom [1970)2 QB 504
Shenyin Wangou-APS Management Pte Ltd & Another v
7-507
Commerzbank {South-East Asia) Ltd [2001) 4 SlR 275
Shenzhen Kenouxin Electronic Co ltd v Heliyanto and others [2016] SGHC 139 16-701
Shirlaw v Southern Foundries (1926) Ltd v Anor {1939) 2 AllER 113
5-216
Show Theatres Pte ltd (in liquidation) v Shaw Theatres Pte ltd
13-413
& Another [2002)4 SlR 145
12-317
Siebe Gorman & Co ltd v Barclays Bank ltd (1979) 2 lloyd's rep 142
9-327
Sim Yak Song v Lim Chang & Another [2003]3 SlR 351
Sim Yong Kim v Evenstar Investments Pte ltd [2006] 3 SlR 827
11-708
Sin Heak Hin Pte ltd & Anor v Yuasa Battery Singapore
18-504
Co Pte ltd [1995)3 SlR 590
Singapore Salvage Engineers Pte ltd v North Sea Drilling Singapore Pte Ltd
16-304
[2016) SGHC 5
Singapore Telecommunications Ltd v Starhub Cable Vision ltd
5-413, 8-207
[2006) 2 SLR 195
14-442
Singsung Pte Ltd v lG 26 Electronics Pte ltd [2016] SGCA 33 1
Sinnathamby Rajespathy & Another v lim Chong Seng & Another
[2002] 4 SLR 375
6-304
Siow Soon Kim & Others v l im Eng Beng alias Lim Jia le [2004] SGCA 4
6-314
16-605
Siu Yin Kwan & Anor v Eastern Insurance Co Ltd [1994]2 WlR 370
Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v
Asia Pacific Breweries (Singapore) Pte Ltd and Another and
Another suit [2009) 4 SlR 788
11-207b
U075837L/N1510069
xxxiv
Skandinaviska Enskilda Banken AB (Pub!), Singapore Branch v Asia
16-308
Pacific Breweries (Singapore) Pte Ltd [201 1]3 SLR 540
Smart Modular Technologies Sdn Bhd v Federal Express
(Singapore) Pte Ltd [2004]3 SLR 473
3·209
18-41Sb
Smith v Eric S Bush [1 989] 2 WLR 790
18-331
Smith v Leech Brain & Co [1962] 2 QB 405
Soh Gim Chuan (private trustee of the estate of Goh Poh Choo
13· 230
in bankruptcy) v Koh Hai Keong & Another [2002) 4 SLR 212
Sonny Yap Boon Keng v Pacific Prince International Pte Ltd [2009]1 SLR 385
8·224b
Southern Ocean Shipbuilding Co Pte Ltd v Deutsche Bank AG
3-411
[1993] 3 SLR 686
Spandeck Engineering (S) Pte Ltd v Defence Science &
18-307, 18-310 to 18-318
Technology Agency [2007] 4 SLR 100
11·215
Specialty Laboratories Asia Pte Ltd, Re [2001 ]2 SLR 563
12-317
Spectrum Plus Ltd, Re: (2005) 3 WLR 58
15-3 17, 15-705
Speedo Motoring Pte Ltd v Ong Gek Sing [2014]5GHC 71
19-409
Spiliada Maritime Corporation v Cansulex Ltd [1987]1 AC 460
Sports Connection Pte Ltd v Deuter Sports GmbH [2009]
7-303b
3 SLR 883
16-309
SPP Ltd v Chew Beng Gim & Anor [1993) 3 SLR 393
4-221
SSAB Oxelosund AB v Xendral Trading Pte Ltd [1992]1 SLR 600
StJohn Shipping Corporation v Joseph Rank Ltd [1957] 1 QB 267
6·305
7-301, 7-304
"STX Mumbai", The [2015] 5 SLR 1
Star City Pty Ltd (formerly known as Sydney Harbour Casino Pty Ltd)
6-302
v Tan Hong Woon [2002] 2 SLR 22
Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide,
14-420
Inc [2014] 1 SLR 91 1
6-218
Steinberg v Scala (Leeds) Ltd [1923] 2 Ch 452
Stephan Machinery Singapore Pte Ltd v Oversea-Chinese
Banking Corp Ltd [2000] 2 SLR 191
17-276
Stilk v Myrick (1809) 2 Camp 317
4-227, 4-229, 4-230
Straits Engineering Contracting Pte Ltd v Merteks Pte Ltd [1996] 1 SLR 227
8-222b
Strandore Invest NS v Soh Kim Wat (2010] SGHC 151
19-424
Stratech Systems Ltd v Nyam Chiu Shin & Others [2005]
6-310, 14-456, 14-457
2 SLR 579
3-401
Stuttgart Auto Pte Ltd v Ng Shwu Yong [2005}1 SLR 92
7-210
Sumpter v Hedges [1898]1 QB 673
Sun Technosystems Pte Ltd v Federal Express Services (M)
5-415
Sdn Bhd [2007] 1 SLR 411
Sun Qi (formerly trad ing as Power King International) and another v
15-404
Syscon Pte Ltd [2013) SGHC 38
18-312
Sunny Metal & Engineering Pte Ltd v Ng Kh im Ming Eric
18-312, 18-327 to 18-329
[2007]1 SLR 853
17-267
Sutanto Henny v Suriani Tani [2004] SGHC 7
18-314
Sutherland Shire Council v Heyman (1985) 60 ALR 1
16-703
Swan, The [1968]1 Lloyd's Rep 5
Swiss Butchery Pte Ltd v Huber Ernst and Others and Another Suit [2010)
11-504
SGHC 129
Swiss Singapore Overseas Enterprise Pte Ltd v Navalmar
4-217
UK Ltd (No 2) [2003) 1 SLR 688
16·310 ,16-311
Syed Salim Alhadad & Others v Shaika Amnah [1999} 2 SLR 414
0
T2 Networks Pte Ltd v Nasioncom Sdn Bhd (2008) 2 SLR 1
4-211, 4-219
Tai Kim San v Lim Cher Kia (2001] 1 SLR 607
6-406, 6-408, 11-518
Tan Chin Seng & Others v Raffles Town Club Pte Ltd (2002) SGHC 278
5-206
Tan Chin Seng and Others v Raffles Town Club Pte Ltd (No 2)
6-404, 6-41 7, 8-224b
(2003] 3 SLR 307
4-305
Tan Hin Leong v Lee Teck lm (2001 ] 2 SLR 27
18·328b
Tan Hun Toe v Harte Denis Mathew [2001) 4 SLR 317
Tan Siah Poh v Orient Consumer Credit Pte Ltd (Fullhouten Credit Pte Ltd
& Another, Third Parties) (2000) 2 SLR 215
15-609, 15-611
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Tan Teck Khong & Another v Tan Pian Meng [2002]4 SLR 616
6-606
Tan Yong Hui v Aasperon Venture Pte Ltd and another [2015] SGHC 169
7-502
Tang Siew Choy and Others v Certact Pte Ltd [1993]3 SLR 44
14-456
Tapematic SpA v Wirana Pte Ltd [2002] SGHC 5
16-303
Tate & Anor v Sihan Sadikan [1992]1 SLR 594
7-303
Tay Eng Chuan v Ace Insurance Ltd [2008] SGCA 26
5-413
Tay Ah Poon & Another v Chionh Hai Guan & Another [1997]2 SLR 363
8-305b
Tay Joo Sing v Ku Yu Sang [1994]3 SLR 719
1-314, 3-506, 8-705
Taylor v Caldwell (1863) 3 B & S826
7-504
Tee Soon Kay vAG [2007] 3 SLR 133
3-104
Tembusu Growth Fund Ltd v ACTAtek, Inc and others [2017) SGHC 251
7-301
Teng Ah Kow & Anor v HoSek Chiu & Ors [1993) 3 SLR 769
18-326
Teo Sing Keng v Sim Ban Kiat [1994) 1 SLR 634
8-230
Teo Song Kwang (alias Richard) v Gnau Lye Chan and Another [2006] SGHC 2 14-206
Teo Song Kwang Richard v Seng Hup Electric Co (S) Pte Ltd [2001 ]3 SLR 190
13-218
Teo Teo Lee v Ong Swee Lan & Others [2002) 4 SLR 344
7-303
Terrestrial Pte Ltd v Al lgo Marine Pte Ltd and another [2014) 1 SLR 985
5-432
Tesa Tape Asia Pacific Pte Ltd v Wing Seng Logistics Pte Ltd
[2006) 3 SLR(R) 116
18-325
Thahir Kartika Ratna v Pertamina [1994) 3 SLR(R) 312
16-506
Thai Kenaf Co Ltd v Keck Seng (S) Pte Ltd [1993] 2 SLR 92
4-403
The One Suites Pte Ltd v Pacific Motor Credit (Pte) Ltd [2015]3 SLR 695
5-213, 5-217
The Singapore Professional Golfers' Association v Chen Eng Waye
9-336
(2013) 2 SLR 495
5-217
The We llness Group Pte Ltd v OSIM International Ltd [2016]3 SLR 729
4-223
Thomas v Thomas (1842) 2 QB 851
Thomson Plaza (Pte) Ltd v Liquidators of Yaohan Department Store
3-402
Singapore Pte Ltd [2001] 3 SLR 437
5-409, 5-410
Thompson v London Midland Scottish Railway Co [1930]1 KB 41
5-409
Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163
6-303
Ting Siew May v Boon Lay Choo and another [2014] 3 SLR 609
Ting Sing Ning (alias Malcolm Ding) v Ting Chek Swee
11-717
(alias Ting Chik Sui) and Others [2008]1 SLR 197
3-405
Tinn v Hoffmann & Co (1873) 29 LT 271
6-603
Tjong Very Sum ito and others v Chan Sing En and others [2012] SGHC 125
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955]
4-236
1 WLR 761
3-402
Toptip Holding Pte Ltd v Mercuria Energy Trading Pte Ltd [2017] SGCA 64
Total English Learning Global Pte Ltd and another v Kids Counsel Pte Ltd
18-507
[2014] SGHC 258
14-407
Towa Corp v ASM Technology Singapore Pte Ltd [2017] 3 SLR 771
Trans-World (Aluminium) Ltd v Cornelder China (Singapore)
6-411, 6-413b
[2003] 3 SLR 501
Trigen Industries Ltd v Sinko Technologies Pte Ltd & Another
16-610
[2003]1 SLR 183
4-213
Tweddle v Atkinson (1861) 1 B & S393
10-310
Twycross v Grant (1877) 2 CPD 469
Ultra mares Corp v Touche 174 NE 441 (1931)
Underwood Ltd v Burgh Castle Brick & Cement Syndicate [1922]1 KB 343
United States Trading Co Pte Ltd v Ting Boon Aun
and Another [2008] 2 SLR 981
18-410
15-505
9-324
Valentini v Canali (1889) 24 QBD 166
6-206
15-312
Varley v Whipp [ 1900) 1 QB 513
6-411
Vellasamy Lakshimi v Muthusamy Suppiah David [2003] SGHC 75
Viet Hai Petroleum Corp v Ng Jun Quan [2016] SGHC 81
16-305
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949)
2 KB 528
8-210, 8-211
Viknesh Dairy Farm Pte Ltd v Balakrishnan s/o P S Maniam [2015] SGHC 27
16-305
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xxxvi
Virtual Map (Singapore) Pte ltd v Singapore Land Authority [2008]
3 SLR 86
14-452, 14-434, 14-435
Vishva Apurva, The [1992] 2 SLR 175
19-410
Vita Health Laboratories Pte Ltd & Others v Pang Seng Meng
11-501b
[2004] 4 SLR 162
W&P Piling Pte Ltd (in liquidation} v Chew Yin What and Others
11-501b, 11-512
[2007] 4 SLR 218
Wagon Mound (No 1), The [1961] AC 388
18-329
Warehousing & Forwarding Co of East Africa Ltd v Jafferali
& Sons Ltd [1964] AC 1
16-313
Warner Brothers Pictures Inc v Nelson [1937] 1 KB 209
8-311
WBG Network (S} Pte Ltd v Sunny Daisy Ltd [2007] 1 SLR 1133
15-404
Wee Ah Lian v Teo Siak Weng [1992] 1 SLR 688
3-514
Wee Poh Hueh Florence v Performance Motors Ltd (2004] 2 SLR 58
8-224b
9-314
Wee Soon Kim Anthony v Lim Chor Pee & Another (2005] 4 SLR 367
Wee Soon Kim Anthony v Lim Chor Pee [2006] 2 SLR 370
9-304, 9-314, 9-326
Wellmix Organics (International) Pte Ltd v La u Yu Man [2006] 2 SLR 117
6-505
Wells v Cooper [1958] 2 QB 265
18-321
Wenkheim v Arndt (1873} 1 JR 73
3-520
White v Bluett (1853) 23 LJ Ex 36
4-224
White & Carter (Councils) Ltd v McGregor [1962] AC 413
8-215, 8-216
Williams v Carwardine (1833) 5 C & P 566
3-404
Williams v Roffey Bros and Nicholls (Contractors} Ltd [ 1991J 1 QB 1
4-229, 4-230
With v O'Fianagan [1936] Ch 575
6-407
W J Tatem ltd v Gamboa [1939] KB 132
7-512
Wong Poh Oi v Guok Gertrude & Anor [1966] 2 MLJ 134
7-305
Woo Kah Wai v Chew Ai Hua Sandra (2014] 4 SLR 166
3-506, 4-230
Wu Shun Foods Co Ltd v Ken Ken Food Manufacturing Pte Ltd [2002] SGDC 75 6-303
Xi a Zhengyan v Geng Changqing [2015] 3 SLR 732
8·226b
Xu Jin Long v Nian Chuan Construction Pte Ltd [2001)4 SLR 624
X Pte Ltd and Another v CDE (1992)2 SLR 996
5-423
14-456
0
Yap Boon Keng Sonny v Pacific Prince International Pte Ltd
(2009) 1 SLR 385
18·404, 18-408
Yap Chin Hock v Cheng Wang Loong (1964) MLJ 276
15-511
Yeh Ee Swan, Re [2003) 4 SLR 789
6-201
Yeo Geok Seng v Public Prosecutor (2000)1 SLR 195
11-510
18-321
Yeo Peng Hock Henry v Pai Lily [2001) 3 SLR(R} 555
18-415a
Yeo Yoke Mui v Ng Liang Poh [1999)3 SLR 529
Yeo Yoke Mui v Kong Hoo (Pte) Ltd [2001) SGHC 28
8-305b
Yeow Chern Lean v Neo Kok Eng (2009) 3 SLR 1131
17-271
Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd (formerly
known as Soup Restaurant (Causeway Point} Pte Ltd)
3-202
[2015) 5 SLR 1187
16-507
Yuen Chow Hin and Another vERA Realty Network Pte Ltd (2009] SGHC 28
16-708
Yonge v Toynbee [1910] 1 KB 215
G
Zheng Yu Shan v Lian Beng Construction (1988} Pte Ltd [2009) 2 SLR 587
Zhu Yong Zhen v AlA Singapore Pte Ltd and another [2013) 2 SLR 478
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior
Design & Construction Pte Ltd (2008) 3 SLR 1029
···•·•·•···
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18-505
3-209
xxxvii
TABLE OF STATUTES
References are to paragraph numbers: eg, 3-301 refers to Chapter 3, paragraph 301.
• CONSTITUTIONAL DOCUMENTS
5 51(1): 13-212
s 52(2): 13-213
5 53(1): 13·214
5 55(1): 13·214
5 56: 13-215
5 56B: 13-216b
5 56(; 13-216b
s 56L: 13-21Gb
s 56M: 13-216b
s 56N: 13-21Gb
5 57: 13-216
s 58: 13-216
s 60(1): 13-216
s61: 13-216
s 62: 13-217
s 63: 13-227
s 65(1): 13-219
s 65(2): 13-219
s 65(2)(c) & (d): 13-219
s 65(7): 13-219
s 66: 13-216, 13-220
s 67: 13-220
s 67(3): 13-216b
Constitution of the Republic of Singapore: 2-201
Art 38: 2-206
Art 3: 2-202
Art 39(1)(b): 2-214,
Art 4: 2-202
2-215
Art 5: 2-203
Art 39(1)(c): 2-215
Art 9-16: 2-202
Art 39(2): 2-215
Art 17(2): 2-209
Art 39A: 2-213
Art 18: 2-209
Art 44: 2-212
Art 19: 2-209
Art 45: 2-212
Art 19B: 2-209b
Art 52: 2-218
Art 20(1): 2-209
Art 58(1): 2-210
Art 21 (1): 2-238
Art 59(1): 2-219
Art 21-221: 2-208
Art 65(4): 2-216
Art 23(1): 2-234
Art 66-98: 2-218
Art 23-24: 2-206
Art 24(1): 2-237
Art 69: 2-207
Art 76(1 ): 2-207
Art 24(2): 2-238
Art 76-78: 2-223
Art 25(1): 2-235
Art 31(1): 2-239
Art 78(6): 2-224
Art 34(2): 2-239
Art 78(7): 2-224
Art 35(1): 2-255
Art 93: 2-206, 2-240
Art 35(7): 2-255
Art 95(2): 2-242
Art 36(1) 2-237
Art 95(4): 2-242
Art 378: 2-207, 2-226
Art 95(5)-(11): 2-242
Art 371A: 2-207
Art 98(1): 2·243
Betting Act (Cap 21): 6-302
Republic of Singapore Independence Act 1965:
2-226
• LEGISLATION
Accountants Act (Cap 2A): 9-310
Administration of Muslim Law Act (Cap 3): 2-253
s 17A(2) & (3): 2-253
s 35(2): 2-253
s 55(1): 2-253
s 34A(1): 2-253
s 34A(2): 2-253
s 56A: 2-253
Application of English Law Act (Cap 7A): 2-303,
2-307, 2-308, 6-202, 15-102
s 3: 2-307, 2-308
First Schedule: 2-307,
s 4: 2-307
15-606
s 4(1)(a): 15-606
Arbitration Act (Cap 10): 2-606
Arbitration (I nternational investment Disputes) Act
(Cap 11): 19-427
Architects Act (Cap 12)
s 20-26: 10-408
Bankruptcy Act (Cap 20): 13-103
s 34: 13-222
5 45(3) & (4): 13-209
s 36: 13-223
s 46: 13-210
s 38: 13-222
5 49(1): 13-210
s 39: 13-223
s 49(5): 13-210
s 45(1) & (2): 13-208
5 49(6): 13-210
5 75: 13-221
s 76(1)(a) & (b): 13-221
s 76(1 )(c): 13-221
5 76(4): 13-227
s 81: 13-224
s 82: 13-224
s 86: 13-225
s 90: 13-226
s 95A: 13-238
s 98: 13-229
s 99: 13-230
s 100(1 )(a): 13-229
s 1OO(l)(c): 13-230
s 108: 13-232
s 11 0(1 )(c): 13-233
s 116: 13-232
5 123: 13-238
5 123A: 13-238
s 124: 13-236
5 125: 13-237
s 135-136: 13-231
s 137-138: 13-231
s 141: 13-231
Bills of Exchange Act (Cap 23): 17-102,17-103
s 2: 17-207, 17-263,
s 23(1): 17-257
s 24: 17-276, 17-277
17-269, 17-302
s 3(1): 17-201
5 26(1): 16-705, 17-213
s 3(2): 17-216
5 27(1)(b): 17-242, 17-266
s 4(1): 17-203
5 27{2): 17-242, 17-268,
17-272
s 4(2): 17-203
s 29{1): 17-264, 17-272
s 5(1): 17-219
s 29{2): 17-267
s 5(2): 17-211, 17-404
s 29{3): 17-272
s 6(1): 17-210
s 30: 17-270
5 7(1): 17-218
s 30{1): 17-241
5 7(4): 17-218
5 30{2): 17-263
5 8(1): 17-238, 17-320
s 31(1): 17-233
5 8(2): 17-217
s 31(2): 17-235
s 9(1): 17-216
s 31{3): 17-236
s 9(2): 17-216
s 32{d): 17-218
s 10(1): 17-214
s 34(1): 17-237
s 10(2): 17-214
5 34{2): 17-237
s 11(1): 17-215
s 38: 17-270
s 11 (1)(a): 17-215
s 38(1): 17-264
s 11 (1)(b): 17-215b
s 38(1)(b): 17-264
s 11 (2): 17-208
s 39{1): 17-228
s 13(2): 17-304
s 39(2): 17-228
s 14(c): 17-215
5 39(3): 17-228
s 16: 17-261
s 17(1): 17-222
5 40: 17-224
s 17(2)(a): 17-220
s 42: 17-251
5 43(1): 17-251
s 18: 17-224
5 43(2): 17-251
s 19(1): 17-229
s 19(3): 17-229
5 44(2): 17-230
s 19(4): 17-229
5 45(1): 17-244
s 21(1): 17-207, 17-238
5 45(3): 17-244
5 21(2): 17-222
s 47: 17-252
5 48: 17-253, 17-254
523:17-212
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SINGAPORE BUSINESS LAW
s 49(c): 17-253
s 49(m): 17-254
s 51(2): 17-255
s 51(12): 17-255
s 52(3): 17-253
s 53: 17-221, 17-258
s 54(a): 17-222
s 54(b): 17-223
s 55(1): 17-260
s 55(2): 17-260, 17-277
s 56: 17-260
s 58: 17-262
s 58(1): 17-271
s 59(2): 17-245
s 59(3): 17-245
s 59(4): 17-245
s 60: 17-326, 17-327
s61: 17-246
s 62(1): 17-247
s 62(2): 17-247
s 63(1): 17-248
s 63(4): 17-248
s 64: 17-274, 17-325
s 64(1): 17-249, 17-273
s 64(3): 17-249
s 65(1): 17-225
s 65(4): 17-226
s 66: 17-259
s 66(1): 17-226, 17-256
s 66(2): 17-226
s 73(1): 17-301
s 73(2): 17-301
s 73-91: 17-301
s 74: 17-305
s 75(a): 17-305, 17-328
s 76: 17-3 17
s 76(1): 17-313
s 76(2): 17-313
s 77(2): 17-321
s 77(3): 17-321
s 77(4): 17-321
s 77(5): 17-322
s 77(6): 17-322
s 79(2): 17-314
s 80: 17-325, 17-327
s 81: 17-317
s82: 17-319
s83: 17-327
s 86: 17-329
s 86(3): 17-330
s 89(1): s 17-311
s 89(2): s 17-311
s 89(3): s 17-311
s 89(5): s 17-311
s 91: 17-301
s 92(1): 17-401
5 92(2): 17-405
5 93: 17-405
5 92-98: 17-401
5 95(1): 17-407
s 96(1}: 17-407
s 96(2): 17-407
s 96(3): 17-407
s 97: 17-406
s 98(1): 17-403
s 98(2}: 17-403
s 98(3}: 17-403
s 98(4}: 17-403
s 99: 17-266
s 100(1): 17-213
s 100(2): 17-213
s 104(1): 17-255
Part Ill: 17-301
Part IV: 17-401
Bills of Sale Act (Cap 24): 14-222
Business Names Registration Act 2014 (No. 29 of
2014): 9-203, 9-602, 9-603
s 4(1)(b}: 9-310
s 22{1): 9-210
s 4(1)(c): 9-204
s 4(1)(m): 9-204, 9·310
s 5(1): 9·204, 9-310
s 5(2): 9-205
s 10: 9-208
s 17(1 ): 9-206
Building Maintenance and Strata Management Act
(Cap 30C):
s 136: 14-318
s 24: 14-316
Fourth schedule,
s 32: 14-318
paragraph 14: 14-317
s 33: 14-318
5 39: 14-317
Casino Control Act (Cap 33A): 6·302
Children and Young Persons Act (Cap 38): 2-252b
s 32: 2-250
Civil Law Act (Cap 43): 6-703
s 5 (repealed by AELA}:
s 15: 18-334
2-307, 2-308, 2-309
s 21: 18-338
s 5: 6-302
s 35: 6-203b
s 6: 3-210
s 36: 6-203b
s 6(d}: 14-320
Community Disputes Resolution Act 2015 (No. 7 of
2015): 2-607
Companies Act (Cap 50): 2-22G, 10-103, 10-201, 10202, 10-402, 11-102, 11-605, 12-205, 12-301, 12-40G,
12-409, 12-510, 12-702, 13-103, 13-301
s 4(1): 10-403, 10·41G,
s 7GK: 10-510
10-510, 11-202, 11-408,
s 78A(SA): 10-508
s 81(1}: 10-522
12-302
s 93(1}: 12-311
s 5: 10-423
s 95: 12-308
s SA: 10-424
s 131(2): 12-320
s 58: 10-424
s 131(3): 12-319
s 6: 10-424
s 131(3)(a): 12-324
s 9: 13-409
s 131-141:12-312
s 10(1 ): 12-605
s 132: 12-319
s 10(10}: 12-606
s 134(1): 12-321
s 17(2): 10-405
s 136(1}: 12-323
s 17(3): 9-309, 10-301
s 13G(2}: 12-323
s 17(4): 9-309
s 18(1): 10-414
s 138(1} & (2}: 12-322
s 138(3}: 12-322
s 19(3): 10-304
s 138(3A}: 12-322
s 19(4): 10·304
s 145(1): 11-401b
s 19(5): 10-203, 10-304
s 145(2): 11-402
s 20(2): 10-304
s 145(4A): 11-405, 11-40G
s 20A: 10·301
s 145(4B): 11-406
s 21(1): 10-425
s 145(5}: 11-40G
s 22(1): 10-303
s 147(1): 11-404
s 22(1)(e): 10-409
5 148: 13-235
s 22(3): 10-406
5148-1 49:11-403
s 23(1): 10-308, 11-210
5 1498:11-405
s 23(1A): 10·308
s 152(1 ): 11-40Gb
s25: 10-309,1G-317
s 25(1): 10-309
s 152(9): 11-40Gb
s 25(2): 11-702
s 154: 11-403
s 25A: 11-208
s 15G(1): 11-510
s 258: 11-214b, 11-215
5 15G(G): 11-510
s 15G(8): 11-510
s 27(1): 10-305
s 27(7): 10-30G
s 157(1): 11-501, 11-502,
s 27(8): 10-30G
11 -504
s 27(10): 10-305
s 157(3}(a): 11-517
s 157(3)(b): 11 -517
s 29: 10-30G
s 157(4}: 11-501
s 35(1): 10-303
s 157A: 11-401
s 36: 10-302
s 157C: 11-509
s 37: 10-302
s 157((1 }: 11-509
s 39(1}: 10-511
s 157C(2}: 11-509
s41: 10-312, 10-313,
s 158: 11-50G
10-314
s 159(a): 11-505
s41(1): 10-312
s 1G2: 10-41G, 11-511,
s 41 (2): 10-313
12-330
s 41 (5): 11-205, 1G-210
s 1G2(3): 11-511
sG2A(1): 10-412
s 1G3: 10-41G, 11-511,
s 70(3): 10-508
s 7GB(S): 10-510
12-330
s 7GI: 10-510
s 1G5: 11-510
s 7GJ: 10-510
s 171{1}: 11-301
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TABLE OF STATUTES
s 171(1A): 11-303
s 171(1AA): 11-303
s 171(1E): 11-302
s 171 (3): 11-304
s 171(5): 11-302
s 172: 11-518
s 1728: 11-518
s 173: 11-202b
s 173(3A): 11-301
s 174: 10-514
s 175(1): 10-514
s 175A: 12-602
s 176(1): 10-515
s 177(2): 10-51Gb, 10-519
s 178(1): 10-522
s 178(1)(b)(i): 10-522
s 178(2): 10-522
s 179(1)(a): 10-518
s 179(1)(c)(i): 10-521
s 179(1)(c)(ii): 10-521
s 180(1): 10-517
s 180(2): 10-505
s 181: 10-517
s 181(1): 10-519, 10-522
s 181(1A): 10-517b
s 181(1(): 10-517b
s 184(1): 10-519
s 184(1)(a): 10-519
s 184(1)(b): 10-519
s 184A: 10-513
s 184(S)(a)(ii): 10-520b
s 184A(1): 10-520
s 184A(3): 10-520
s 184A(4): 10-520
s 184D(1): 10-520
s 184D(2): 10-520
s 184DA: 10-520b
s 189(1) & (2): 11-703
s 189(2A): 11-704
s 190: 11-202c
s 190(1): 10-501
s 196A: 11-202c
s 199(1): 12-601
s 199(2): 12-601
s 199(3): 11 -704, 12-601
s 201: 12-603
s 201(3): 12-603
s 201 (3A): 10-425,
12-603
s 201(5): 12-603
s 201 (15): 12-603
s 2018(1): 12-610
s 2018(2): 12-610
s 2018(3): 12-612
s2018(5)(a): 12-611
s 2018(5)(b): 12-611
s 2018(8): 12-612
s 201(: 12-602
s 203(1): 11-704,
12-603
s 203(3): 12-603
s 205(1): 12-606
s 205(2): 12-606
s 205(4): 12-606
s 205 AA: 12-607
s 205 A8: 12-607
s 205 AF: 12·607
s 2058: 12-603
s 2058(1): 10-419
s 2058(2): 10-419
s 2058(6): 10-419
s 205(: 10-418, 12-603
s 207: 18·414
s 207(1) & (2): 12-603
s 207(3): 12-609
s 207(5): 11-704,
12-608
s 207(9): 12·609
s 207(9A): 12·609
s 207(9C): 12-609
s 207(10): 12-608
s 210(3): 13·306b
s 210·212: 13-306
s 2118: 13-306
s 21 18(9): 13-306
s 21 1H: 13-306b
s 215: 12-517
s 216:1 1-708
11-712,11-717,11-718
s 216(2)(c): 11-718
s 216A: 11-714, 11-716
s 216A(1): 11-719
s 217-227: 13-308
s 227A-227X: 13-312
s 2278: 13·312
s 2278(8): 13·313
s 2278(9): 13-312
s 227(: 13-312
s 227D(4): 13-312
s 227G: 13-313
s 227HA: 13-314
s 227M: 13-313
s 227N: 13·313
s 227N(4): 13-313
s 227P: 13-313
s 247: 13·401
s 253(1): 13-406
s 254: 13-407
s 254(1)(f): 11-708
s 254(1)(i): 11 -708
s 254(2A): 13-407
s 255(1 ): 13-408
s 255(2): 13-408
s 256(2): 13-406
s 258: 13-408
s 263(d): 13-409
s 268(3): 13-409
s 272(1 )(a): 13-41 1
s 272(2): 13-410
s 275: 13-416
s 276: 13-41 6
s 277: 13-410
s 280(1): 13-408
s 290: 13-403
s 293: 13-403
s 294(1): 13-404, 13-409
s 295(1): 13-405
s 296: 13-405
s 308: 13-415
s 327(2): 13-414
s 328: 13-412, 13·414
s 328(1): 13-414
s 329: 13-412
s 330: 13-412
s 331: 13-413
s 332: 13-413
s 339(3): 10-207
s 340(1): 10-207
s 340(2): 10-207
s 351: 9-331
s 365: 10-403
s 368: 10-403
s 387: 10-516b
s 386 AB: 11-519, 11·520
s 386 AL(8): 11 -520
s 387C: 10·516b
s 392(1): 10-518
s 392(2): 10-518
s 409A: 11-702
s 411: 2-228
Part IV Division 8: 12-312
Part VIII: 13-307
Part VIllA: 13·311
Part XA: 10-404b
Thirteenth Schedule:
10·418
Sixteenth Schedule:
11-520
Competition Act (Cap SOB): 6-308
Consumer Protection (Trade Descriptions and
Safety Requirements) Act (Cap 53): 15·325
Contracts (Rights of Third Parties) Act (Cap 538):
4-404, 4-409, 5-417
s 1(2): 4-404
s 3(3): 4·407
s 2(1): 4·406
s 4(6): 4·406
s 2(1 )(a): 4-405
s 7(1): 4·408
s 2(1)(b): 4-405
s 7(2): 4·408
s 7(2A): 4·408
s 2:4-406
s 2(2): 4-405
s 7(3): 4-408
s 2(3): 4-405
s 7(4): 4-408
s 7(4)(a): 5·417
s 2(5): 4-406
s 2(6): 4-406
s 8(1): 4-407
s 3:4-407
Consumer Protection (Fair Trading) Act (Cap 52A) :
15-325, 15-701
s2: 15-703 ,15-701,
s 12A: 15-7026
15-702
s 128: 15-706
s 128(1)(b): 15-706
s3: 15-703
s4: 15-704
s 128: 15-706
s6: 15·704
s 12D: 15-706
s 6(6): 15·703
s 13: 15-707
s 7(4): 15·704
s 15: 15-707
s 8: 15-707
s 17: 15-705
s 9: 15-707
s 18: 15-705
s11:15·704
First Schedule: 15-703
s 12: 15-707
Second Schedule: 15·703
Contributory Negligence and Personal Injuries Act
(Cap 54)
s 3(1): 18-334
Conveyancing and Law of Property Act (Cap 61):
14-323
s 44: 16·210
s 66A: 14-313
Co-operative Societies Act (Cap 62): 9-106
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SINGAPORE BUSINESS LAW
Copyright Act (Cap 63): 14-432, 14-433
s 7: 14-433
s 7(2): 14-443
s 7(2A): 14-443
s 7A: 14-433
s 15(3): 14-438, 14-451
s 26(1)(a): 14·438
s 26(1}(b): 14-438
s 26(1)(c): 14-438
s 27(1): 14-434
s 27(2): 14-434
s 27(3): 14-434
s 27(4): 14-434
s 28(2): 14-440
s 28(3): 14-440
s 30(2): 14-437
s 30(4): 14-437
s 30(5): 14-437
s 31: 14-442
s 32-33: 14-442
s 35(3): 14-443
s 35-37: 14-443
s 39: 14-443
s 44-50: 14-443
s 50A-53: 14-443
s 71(1): 14-452
s 71(2): 14-452
s 82: 14-439
s 82-86: 14-433
s 83: 14-439
s 84-85: 14-439
s 86: 14-439
s 87-88: 14-436
s 89: 14-436
s 90: 14-436
s 91: 14-436
s 92: 14-440
s 93: 14-440
s 94: 14-440
s 95: 14-440
s 96: 14-440
s 103: 14-442
s 109: 14-443
s 114: 14-443
s 136: 14-442
s 142: 14-442
s 184: 14-434
Coroners Act 2010: 2-251
Hire-Purchase Act (Cap 125): 15-202, 15-702b
Housing and Development Act (Cap 129): 14-306
Insurance Act (Cap 142)
s 58(1): 6-203
International Arbitration (Cap 143A): 2-227
International Arbitration Act (No 23 of 1994}:
2-226, 2-606
Interpretation Act (Cap 1): 2-229
s 9A: 2-231
s 2: 17-212
s 2(1): 2-308, 9-305,
s 19(c): 2-229
17-209
s 23 : 2-229
s 2(5): 3-414
Judicial Committee (Repeal) Act (No 2 of 1994):
2-241
Economic Development Board Act (Cap 85): 9-104
Electronic Transactions Act (Cap 88): 3-415, 3-419
s 4(1): 17-212
s 13(1): 3-416, 3-420
s 8: 17-212
s 13(2): 3-416' 3-420
s11:3-415
s13(3):3-416
s 13:3-307,3-417,
s 13(4}: 3-416
3-419
s 14:3-307,3-419
Employment Act (Cap 91): 7-402
s 12: 6-214
s 94: 3-208, 3-209
Exchanges (Demutualisation and Merger) Act 1999:
12-406
Family Justice Act (No. 27 of 2014): 2-252
s 3: 2-252
s 26: 2-253
Health Products Act (Cap 122D): 15-203
Judicial Committee Act (Cap 148) [repealed): 2-241
Defamation Act (Cap 75): 18-504
Factors Act (Cap 386): 15-606
s 1: 15-608
s 8: 15·612
s 2(1): 15-608, 15-611
s 9: 15-615
Geographical Indications Act (Cap 1178}: 14-429
Intestate Succession Act (Cap 146): 14-312
Criminal Procedure Code 2010
s 7: 2-248
s 8: 2-247
Evidence Act (Cap 97)
s 93: 3-208, 3-208b
s 94(f): 3-209
Frustrated Contracts Act (Cap 115): 7-607, 7-517
s 2:7-519
s 2(4): 7-518
s 2(2): 7-518
s 3(5): 7-519
s 2(3): 7-518
Jurong Town Corporation Act (Cap 150}: 14-306
land Acquisition Act (Cap 152): 14-324
s 5: 14-324
s 10: 14-325
s 19-37: 14-325
land Titles (Strata) Act (Cap 158): 9-104, 18-335
s 10A: 14-316
s 3: 14-314, 14-315
s 4: 14-321
s 13: 14-315
First Schedule: 14-317
s 10: 14-321
land Titles Act (Cap 157)
s 4(1): 14-302
s 45: 14-322
s 53: 14-313
s 53: 14-313
s1 15: 14-323
s 149: 16-210
Layout-Designs of lntergrated Circuits Act 1999:
14-446
Legal Profession Act (Cap 161): 2-404, 2-406, 9-310
s 30: 2-401
s 170: 2-407
s 75: 2-406
s 152-167: 2-404
s 758: 2-406, 2-409
Foreshores Act (Cap 113): 14-306
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TABLE OF STATUTES
Limited Partnerships Act (Cap 1638): 9-337
s 3(2): 9-337
s 7: 9-335
s 3(3): 9-337
s 8: 9-338
s 3(4): 9-337
s 10: 9-337
s 16: 9-338
s 3(5): 9-338
s 4(1): 9-338
s 27(1): 9-338
s 6(1): 9-337
s 27(5): 9-338
s 28: 9-337
s 6(2): 9-337
Limited Liability Partnerships Act (Cap 163A): 9-334
s 4(1): 9-334
s 14: 9-335
s 4(2): 9-334
s 18: 9-335
s 4(3): 9-334
s 20: 9-334
s 21: 9-334
s 5(1): 9-334
s 6: 9-335
s 24: 9-336b
s 7: 9-335
s 25(1): 9-336b
s 8(1): 9-336
s 25(5): 9-336b
s 8(2): 9-336
s 25(6): 9-336b
s 8(3): 9-336
s 30: 9-336
s 8(4): 9-336
Limitation Act (Cap 163)
s 6: 8-702, 15-707
s 29(1)(c): 8-703
s 24A: 8-704
s 32: 8-705
s 29: 8-703
Maintenance of Parents Act (Cap 1678): 2-219
s 34: 9-309, 9-331
s 35: 9-331
s 36(1): 9-327
s 36(2): 9-327
s 36(3): 9-327
s 39: 9·332
s 44: 9-332
s 45: 9-306
s 46: 9-301
Patents Act (Cap 221): 14-406
s 13(1): 14-407
s 36A(4): 14-409
s 14(1): 14-407
s 36(1): 14-409
s 14(2): 14-407
s 41(2): 14-412
s 15: 14-407
s 41(3): 14-412
s 49-50: 14-411
s 16(1): 14-407
s 19(2): 14-411
s 55: 14-412
s 25(3): 14-408
s 66(1): 14-413
s 66(2): 14-413
s 25(5): 14-408
s27-28: 14-409
s 104-105:14-408
s 36A(1)(a): 14-409
Part XII: 14-413
Pawnbrokers Act (Cap 222): 14-225
Payment Systems (Oversight) Act: 1-409
Presidential Elections Act (Cap 240A): 2-209
Mediation Act 2017 (No. 1 of 2017): 2-603
Professional Engineers Act (Cap 253)
Part VIs 20-26: 10-408
Mental Capacity Act (Cap. 177A): 2-252b
Minors' Contracts Act (Cap 389): 6-203
s 2:6-213
s 3(1): 6-219
s 3: 6-220
Protection from Harassment Act (Cap 256A): 18-201
Misrepresentation Act (Cap 390)
s 1: 6-403, 6-415
s 3: 5-422, 5-427, 6-419
s 2:6-413, 6-710, 18-402
s 3(a) & (b): 5-427
s 2(1): 6-412, 6-413b,
6-414, 6-417
Monetary Authority of Singapore Act (Cap 186):
12-409
Nanyang Technological University (Corporatisation)
Act (Cap 192A): 9-104
National University of Singapore (Corporatisation)
Act (Cap 204A): 9-104
Partnership Act (Cap 391): 9-301, 9-308, 9-404
s 1(1): 9-303, 9-304
s 17(2): 9-327
s 1(2): 9-302
s 17(3): 9-327
s 19: 9-312
s 2(3): 9-304
s 4: 9-310
s 20(1): 9-313
s 5: 9-320, 9-321
s 21: 9-313
s 6: 9-322
s 23(1): 9-314
s 8: 9-321
s 23(2): 9-314
s 9:9-323
s 24: 9-317
s 24(1): 9-317
s 10:9-324
s 11:9-324
s24(2): 9-317
s 12: 9-324
s 24(5): 9-315
s 14: 9-326
s 24(6): 9-316
s 17(1): 9-328
s 24(7): 9-328
s 28:9-319
s 29: 9-319
s 30: 9-319
s 32-35: 9-338
s 32(1)(a): 9-330
s 32(1)(b): 9-330
s 32(1)(c): 9-330
s 33(1): 9-331
s 33(2): 9-331
Reciprocal Enforcement of Commonwealth
Judgments Act (Cap 264): 19-420
Reciprocal Enforcement of Foreign Judgments Act
(Cap 265): 19-421, 19-420
Registration of Deeds Act (Cap 269): 14-323
Registered Designs Act (Cap 269): 14-444
s 2(1): 14-444,
s 18: 14-448
14-445
s 21(1): 14-448
s 5(1): 14-446
s 21(2): 14-448
s 5(2): 14-446
s 30(1): 14-449
s 7(1): 14-446
s 30(2): 14-449
s 7(2): 14-446
s 31: 14-449
59: 14-452
5 32(1): 14-449
5 11: 14-447
s 36: 14-450
5 12: 14-447
s 38: 14-450
5 16(1): 14-448
s 44: 14-450
5 16(2): 14-448
5 17(2): 14-448
Residential Property Act (Cap 274): 14-318
s 4(1): 14-318
s 25: 14-318
Sale of Food Act (Cap 283): 15-203
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SINGAPORE BUSINESS LAW
~~--------------------------------------------~~
Sale of Goods Act (Cap 393): 5-218, 5-424,6-202, 15102, 15-201, 15-202, 15-203, 15-208, 15-212, 15-301,
15-304, 15-329, 15-330, 15-510, 15-606
s 18 r 5(1): 15-508
s 1(1 ): 15-202
s 2(1 ): 15-204
s 18 r 5(3): 15-512
s 2(3): 15-206
s 18 r 5(4): 15-512
s 19(1): 15-516
s 3: 6-207, 6-208. 6-705
s 19(2): 15-516
s 3(1): 6-206
s 20: 15-502
5 3(2): 6-210, 6-211,
s 20A: 15-513
6-221
s 20A(1): 15-514
s 3(3): 6-206
s 20A(2): 15-514
s 4(1 ): 15-207
s 20(1): 15-502
s 5(1): 15-211
s 20(2): 15-502
s7:7-519
s 21: 15-602
s 8(1): 15-213
s 21(1): 15-617
s 8(2): 8-502, 15-213
s 8(3): 15-213
s 23: 15-619
s 9(1): 15-214
s 24: 15-612
s 9(2): 15-214
s 25: 15-615, 15-616
s 27: 15-306, 15-310,
s 10: 15-408
15-401
s 11(2): 5-304
s 28: 15-408
s 12: 15-426, 15-330
s 12(1): 15-309
s 29(2): 15-307
s 12(2): 15-309
s 30(1): 15-310
s 12-15:5-424
s 30(2): 15-310
s 30(2A): 15-310
s 13: 15-330
s 32(1 ): 15-403
s13(1): 15-312
s 34: 15-404
s 13(2): 15-324
s 35(1 )(a): 15-404
s 13-15: 5-426, 15-407
s 35(1 )(b): 15-404
s 14(2): 15-316, 15-322,
s 35(2): 15-404
15-330
s 35(3): 15-404
s14(2A): 15-316
s 35(4): 15-404
s 14(28): 15-317, 15-325
s 35(6): 15-405
s 14(2C): 15-318
s 36: 15-406
s 14(3): 15-319, 15-322,
s 37(1 ): 15-406
15-330
s 37(2): 15-406
s 15: 15-323, 15-330
s 38(1): 15-409
s 15(1): 15-324
s39: 15-410
s 15A(1): 15-407
s 48(1): 15-411
s 16: 15-508
s 51: 15-308
s 17(1): 15-503
s 52: 15-308
s 18: 15-804
s 57(2): 3-308
s 18 r 1: 15-504
s 61(1): 15-205, 15-210,
s 18 r 2: 15-505
15-211, 15-302, 15-306,
s 18 r 3: 15-506
s 18 r 4: 15-507
15-513
s 61 (4): 15-504
s 18 r 5: 15-515
Securities and Futures Act (Cap 289): 11-603,
11-604, 12-205, 12-409, 12-510, 12-702
s 2:12-401
s 189(1): 11-703
s 25:12-410
s 189(2): 11-703
s 189(2A): 11-704
s 8151: 12-506
s 197: 11-603
s 81SJ: 12-507
s 198: 11-603
s 81SJ(4): 12-509
s81SS: 12-509
s 199(3): 11-704
s 133(3): 12-411
s 200: 11-603
s 133: 12-411
s 203(1): 11-704
s 138: 12-411
s 204(1): 11-604
s 139(2): 12-411
s 216-271: 12-310
s 139(3): 12-411
s218: 11-603, 11-605
s 139(5): 12-510
s 219: 11-603
s 139(8): 12-411
s 221(1): 11-604
s 139(9): 12-411
s 232: 11-604
s 234: 11-604
s 240(1): 12-420, 12-435
s 240(4): 12-433
s 246(2): 12-434
s 240(7): 12-426
s 240(8): 12-428
s 240(13): 12-429
s 240(16): 12-429
s 243(1): 12-427
s 246(2): 12-434
s 250(3)(b): 12-428
s 253: 12-431
s 254: 12-432
s 254(3)(f): 12-432
s 255: 12-432
s 255(1 ): 12-431
s 261 -271: 12-310
s 262: 12-436
s 266(2): 12-437
s 266(3): 12-438
s 267: 12-438
s 271(1): 12-439
s 272A: 12-423
s 2728: 12-423
s 273(1)(a): 12-423
s 273(1)(cc): 12-423
s 275(1): 12-424
s 283 - 308: 12-402
s321: 12-411
Part IIIAA: 12-503
Singapore Academy of law Act (Cap 294A) : 2-411
Singapore Polytechnic Act (Cap 303) : 9-104
Singapore Totalisator Board Act (Cap 30SA): 6-302
Small Claims Tribuna ls Act (Cap 308): 2-249
Societies Act (Cap 311)
s 35(b): 9-106
State Courts Act (Cap 321): 2-240
s 2: 2-247, 2-248
s 30: 2-247
s 3:2-240
s 31(a): 8-303
s 19: 2-247
s SO: 2-247
s 23: 2-247
s 52: 8-303
State Immunity Act (Cap 313): 19-426
State lands Act (Cap 314): 14-305, 14-308
Supply of Goods Act (Cap 394): 15-202, 15-330
Supreme Court of Jud icature Act (Cap 322): 8-303
s 3: 2-241
s 28A: 2-252
s 9(1): 2-242
s 29(1): 2-242
s 15-17:2-245
s29A: 2-245
s 30: 2-242
s 16: 19-403
s 18A: 2-243
s 80: 2-501
s 18A-18M: 2-243
First Schedule, para 14:
s 18D: 19-405b
8-303
s 19-21 : 2-245
Trade Marks Act (Cap 332): 14-414, 14-416
s2(1): 14-414
s 7:14-419
s 7(6): 14-429
s 8: 14-420
s10:14-418
s 12: 14-419
5 13: 14-421
s 15: 14-421
s 18: 14-421
s 19: 14-421
s 22(1)(a): 14-417
s 26: 14-423
s 27: 14-423
s 28: 14-425
U075837L/N1510069
s32: 14-426
s35: 14-426
s 36: 14-428
s 39: 14-428
s42:14-428
s 43: 14-428
s 46: 14-427
s 47: 14-427
s 49: 14-427
s 55: 14-420
s 56-57: 14-419
s 60: 14-422
s 61: 14-422
s 82: 14-424
xliii
TABLE OF STATUTES
Unfair Contract Terms Act (Cap 396): 5-404, 5-420,
5-421, 5-422, 5-423, 5-431, 5-432, 7-514, 15-303,
15-330
s 6-7: 5-429
s 1(1): 5-421
s 7: 15-330
s 1(3): 5-421, 5-422
s 11 (1 ): 5-428, 5-429,
s 2: 5-423
s 2(1 ): 5-423
6-419
s 11 (2): 5-429
s 2(2): 5-423
s 2-7: 5-427
s 11 (5): 5-421
s 3: 5-424, 5-425
s 12: 5-422, 5-426
s 6: 5-424, 5-426, 15-330
s 13-15: 5-423, 5-426
First Schedule: 5-422
s6(1): 15-330
s 6(2): 15-330
Second Schedule: 5-429,
s 6(3): 5-430, 15-330
5-430
s 6(4): 15-330
Urban Redevelopment Authority Act (Cap 340):
14-306
lim itation Act 1939 (UK): 8-702
Minors' Contracts Act 1987 (UK): 6-203
Misrepresentation Act 1967 (UK)
s2:6-413
Partnership Act 1890 (UK): 9-301
Registered Design Act 1949 (UK): 14-444
Sale of Goods Act 1893 (UK): 15-102
Sale of Goods Act 1979 (UK): 6-202, 15-102
Second Charter of Justice 1826 (UK Letters Patent):
8-303, 2-304, 2-305, 2-307
Statute of Frauds 1677 (UK): 3-210
• SUBSIDIARY LEGISLATION
Supply of Goods and Services Act 1982 (UK):
15-202
Bankruptcy Ru les: 13-218
Companies Regulations: 10-306
Rules of Court: 2-501, 19-403
01 r 1:2-501
0 r 2(1): 2-501
0 5 r 1: 2-503
0 10 r 1: 2-505
0 11:2-505
0 11 r 1: 19-404
0 15 r 2: 2-505
0 18 r 1: 2-505
018r2:2-505
0 22A: 3-414
0 24 r9: 2-505
0 24 r 10: 2-505
0 26: 2-505
0 35: 2-505
0 42 r 1: 2-505
0 45: 2-505
0 77 r 1: 9-323
0 110: 19-405b
0110r8:19-409
0 110 r 12: 14-405c
Supreme Court of Judicature Act 1873 (UK): 1-310,
8-302, 8-303, 8-231
United Kingdom Designs (Protection) Act
(repealed): 14-444
Unfair Contract Terms Act 1977 (UK): 5-431, 5-432
···•·•·•···
Securities and Futures (Offers of Investments)
(Shares and Debentures) Regulations 2005:
12-427
s 7: 12-435
• FOREIGN LEGISLATION
Bills of Exchange Act 1882 (UK): 17-102
Compan ies Act 1965 (Malaysia)
s 181:11 -706
Factors Act 1889 (UK)
s 1: 15-608, s 2(1): 15-609, s 8: 15-612, s 9: 15-615
Family Law Reform Act 1969 (UK): 6-203
Infants Relief Act 1874 (UK): 6-202
law Reform (Frustrated Contracts) Act 1943 (UK):
7-517
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INTRODUCTION TO LAW
LAW IN SOCIETY
1-101
A simple definition of law is that it isthe set of rights and obligations by
which a community regulates its affairs. As soon as people live in groups
or communities, there is a need for law. The law may be manifested
in the form of custom, ethics, religion or legislation. Regardless of the
form, the point remains: law is essential for every community. The law
states a person's rights and obligations, thus regu lating his behaviour.
Law protects a person from the arbitrary actions of others and provides
remedies when a person's rights are infringed. This is part of the "rule
of law" concept: the notion that everyone, including the government,
is under the law.1 In communities where the rule of law is not upheld,
the strong often wins at the expense of the weak. In such places,
"might is right". In communities where the rule of law is upheld, the
rights of each person, whether weak or strong, are protected.
1-102
From a broader perspective, there are three key social systems through
which a community organises its affairs: the politica l system, the
economic system and the legal system. The political system allocates
power. It typical ly includes institutions such as parliament, government
departments and statutory agencies, as well as organ isations such as
political parties. The economic system allocates resources. It includes
institutions like financia l markets, goods and labour markets, as well
as economic players such as business corporations and consumers. The
legal system al locates rights and obligations. For example, a court of
law hears a dispute between two parties and has the task of hand ing
down a judgment as to the rights and obligations of each party in that
matter.
For a more detailed discussion of the "rule of law" concept, see French R AC (The Honourable),
"Singapore Academy of Law Annual Lecture 2013- The Rule of Law as a Many Coloured Dream
Coat" 26 Singapore Academy of Law Journal (2014) 1; and Shanmugam K, "The Rule of Law in
Singapore" Singapore Journal of Legal Studies (2012) 357.
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1-103
Although each of these three social systems are distinct and can be
studied as separate disciplines, they tend to overlap in practice. This
is understandable because the main subject of each system - power
(politics), resources (economics), rights and obligations (law)- interplay
with each other. Thus, a powerful towkay (rich person) tends to
have many resources available and can exercise lots of rights and
correspondingly may owe few obligations. Similarly, the institutional
framework of the political, economic and legal systems sometimes
overlap. For example, the Singapore Parliament is a key institution
in the Singapore political system. Yet it is also a key institution in the
Singapore legal system because Parliament enacts written law called
leg islation (~2-211). Given the interplay of these three disciplines
politics, economics and law should ideally be studied together. Through
such a multi-disciplinary study, we can obtain a more comprehensive
and fascinating snapshot of how society functions. However, given the
nature and scope of this book, we devote the rest of this chapter to
introducing some basic concepts of law necessary to understand the
Singapore legal system.
Elements of a Legal System
1-104 A legal system can be viewed as comprising three important elements:
lega l institutions, substantive law and legal culture. 2 The first element,
lega l institutions, refers to institutions- such as law courts- through
which rights and obligations are allocated. The second element,
substantive law, refers to the rules themselves. For example, the
legislation governing lawyers in Singapore, called the Legal Profession
Act (~2-404), includes provisions on the rights and obligations of
lawyers toward their clients and the public. The third element, legal
culture, refers to the attitudes and values held by the community in
respect of law.
2.
1-105
Whereas legal institutions usually have a brick-and-mortar physical
presence and substantive law is usually written in black-and-white,
legal culture is more elusive and more difficult to study and analyse.
Yet, in some instances, legal culture can override legal institutions and
substantive law. For example, a submissive worker may have the right
to claim compensation against his employer for injuries suffered at
work and the courts may be authorised to enforce that right. However,
due to cultural or personal reasons the injured worker may not wish
to initiate or enforce the claim. In this book, we focus largely on legal
institutions and substantive law while acknowledging that legal culture
can be a significant factor in Singapore, especially given our multicultural society.
1-106
Today, one of the ways of gauging the progress of a community is to
examine its legal system. Are the laws just? Are they adequate to meet
the requirements of the modern world? Are the laws administered by
legal institutions fairly? Can the laws be understood by the majority of
Friedman L M, Law and Society: An Introduction (Englewood Cliffs: Prentice-Hall, 1977) 6-9.
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Introduction to Law
law in Ancient Times
Section 229 of the Code of Hammurabi (circa 2000 BC):
"If a builder has built a house for a man, and has not made his work
sound, and the house he built has fallen, and caused the death of its
owner, that builder shall be put to death."
Source: Johns C H W (ed), Babylonian &Assyrian La\o\o'S, Contracts and Letters
(New York: Charles Scribner's Sons, 1904) 67.
•••••••
Lease of a bakery during the Roman Empire (27 BC- 410 AD):
" ...The rent is established at 2 ob per day, which they shall pay to
Eirenaeus daily without any deduction or expense. The repairs of t he
bakery and of water-pipes and reed-thatching besides the rent paid
for the location and the taxes shall be borne by the lessees Artemidorus and Hermione, who enter upon the lease immediately and take
the profits as their own. They shall not abandon the
lease within the term nor shall they ever build another shop within a
radius of f ive plethra of the bakery, and at the end of the term
they shall hand over the shop clear of grain and all filth with the
equipment and ovens as they are after ordinary use, and likewise free
of any charge for rent or taxes ... "
Source: Frank T (ed), An Economic Survey of Ancient Rome (Baltimore: John
Hopkins Press 1940) vol 2, 370; quot ed by Weeramantry C G, An Invitation to
the Law (Sydney: Butterworths, 1982) 268.
the community? Is there a culture of respect for the law and a desire to
uphold the rule of law? If Singapore is to remain a law-abiding nation
and maintain its position as an efficient and prosperous regional and
international business hub, the answer to these questions must be a
clear affirmative.
Jurisdiction
1-107
With all laws, it is necessary to know the limits of their application.
Historically, communities and their laws have geographical boundaries.
From the smallest tribe in India to the largest state in Australia, law
has developed with territorial limitations. The greater the influence
and power of the community, the greater the range of application
of its laws. Generally, when a person steps beyond the geographica l
boundary, the laws of t hat commun ity may not apply to him anymore.
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Law According to Justinian
Book 1, Concerning Justice and Law, The Institutes of Justinian
(AD 529):
"Justice is the constant and perpetual desire to give to each one that
to which he is entitled ... Jurisprudence is the knowledge of matters
divine and human, and the comprehension of what is just and what is
unjust...The following are the precepts of the Law: t o live honestly, not
to injure another, and to give to each one what belongs to him ... "
Source: S P Scott (trans), The Civil Law (Cincin nati: Centra l Trust Co, 1932}
vol1 1, 230.
1-108
The basic un it within which a legal system operates is called its
jurisdiction. In geographical terms, jurisdiction is that territory over
which a community lives subject to a uniform law administered by the
relevant authorities. Singapore, therefore, is one legal jurisdiction. The
laws wh ich apply in Tampines equally apply in Jurong and on Sentosa
Island. However, they do not apply in Johor simply because Johor is
not part of Singapore; Johor is outside the Singapore jurisdiction.
1-109
Usually, legal jurisdiction corresponds with geographica l jurisdiction.
Hence what is law in one state, province or country may not apply
beyond its physical borders. However, in some instances, the laws of
a jurisdiction may extend beyond its physical borders. Th is is called
"extra-territoria Iity" and is especially important if a person undertakes
cross-border business transactions; we will discuss this point further in
Chapter 19. The issue is further complicated w ith the rise of electronic
commerce, when transactions occur in cyberspace.
1-1 10
Apart from its geographical meaning, jurisdiction can also be used to
describe the reach of the law in a more abstract sense. For example, the
Magistrates' Court in Singapore has jurisdiction to hear a commercial
case where up to $60,000 is in dispute whereas the District Court has
jurisdiction t o hear a case where up to $250,000 is in dispute (112-247
and 112-248). If a dispute involves claims of more than $250,000 then
the parties must bring their case to the High Court (112-245). Used in
this sense, jurisdiction describes the limit of authority of the court.
Legal Traditions
1-111
Since communities are different from each other, it is not surprising
that their laws also differ. Of the existing legal systems in the world,
many fall within the two great legal traditions known as the civil law
tradition and the common law tradition. The common law tradition
originated in England. The civi l law tradition originated with the
Romans. From these two traditions are descended many of the legal
systems used today by England and the countries of continenta l Europe
and many of their former colonies in Asia, Africa and the Americas.
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Introduction to law
THE CIVIL LAW TRADITION
1-201
The origins of the civil law tradition can be traced back to Roman
law.3 When the Roman Empire fell, its legal trad ition continued in
many parts of Europe which previously formed part of the Empire.
A lthough each European country had its ind iv idual civi l law
system w ith its unique characteristics, they shared one civi l law
tradition.
1-202
The dominant characteristic of the civil law tradition is its reliance on
codified law. This means that law is chiefly in the form of legislation,
compi led into written codes wh ich are promulgated by the rul ing
authority. The codes contain general principles of law and are
intended to cover the spectrum of human activity. Typically, there
w ill be a civi l code governing the rights and obligations of persons,
a crim inal code prohibiting certain actions as criminal offences, and a
commercia l code governing business transactions.
1-203
One of the most famous codes in the civil law trad ition is the multivolume Corpus Juris Civilis of Emperor Justinian, completed in AD 529.
Later, in the nineteenth century, another great cod ification of law
was completed, this time by Napoleon in France. The Code Napoleon
of 1804 was based on Roman law and French customary law. It was
later used by other countries includ ing Italy and Holland.
1-204
The spread of the civi l law tradition was given further impetus by the
colonial activity of the European states. As a result of this activity, most
of South America and parts of Asia, such as Indonesia and Sri Lanka, now
have civil legal system. Other countries such as Japan, when decid ing to
reform its legal system, eventually chose to follow the German civil law
system. In fact, the civil law tradition is older than the common law
t radition and, some wou ld argue, is the more influentia l of the two.
THE COMMON LAW TRADITION
1-301
3.
4.
Countries whose lega l systems are based on the Engl ish common
law tradition include Asian and African countries such as Singapore,
Hong Kong, Malaysia, Philippines, India and South Africa. 4 Western
countries with common law systems include the Un ited States of
America, Canada, Australia, New Zealand and, of course, the Un ited
Kingdom.
See generally: Merryman J H et al, The Civil Law Tradition: Europe, Latin America, and East Asia
(Charlottesville: M ichie Co, 1994).
On the social, economic, political and cultural aspects of select Asian legal systems, see: Black
E A & Bell G F (eds), Law and Legal Institutions of Asia: Traditions, Adaptations and Innovations
(Cambridge: Cambridge University Press, 2011).
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'M
Select Jurisdictions with English Common Law Heritage
Australia, Brunei Darussalam, Canada, Hong Kong, India,
Malaysia, New Zealand, Papua New Guinea, Philippines,
s;ngapo<e,
.
4
...
. I
..
un;ted States of Amerka
..
South Africa
Development of Common Law
5.
1-302
The common law is a product of medieval England. 5 It is
possible to see traces of the common law prior to the Norman
conquest of 1066. However, the common law did not become
discernib le as a lega l system probably unti l some time in the
thirteenth century. Since then, the common law has developed
into what is acknowledged to be one of the most enduring legacies
of England to the world.
1-303
The term "common law" was first used in Eng land in the twelfth
century. By this time, there were regular meetings, called "assizes",
for the administration of justice. As a result of the Assizes of
Clarendon (1166) and Northampton (1176), King Henry II sent his
judges on regular circuits to bring the King's justice to every person.
These circuit judges held court in the villages and smaller towns
throughout the country. To promote consistency and fairness, they
applied the same legal principles wherever they went. In this way,
the law as admin istered by these judges became common to the
whole of England. Their courts later came to be known as common
law courts.
1-304
Initially, the decisions of these royal judges were nothing more than
"a wi lderness of single instances" rather than a uniform body of law.
To develop a uniform body of law, some method of recording and
publicising these decisions was required. This would enable judges
to refer to past cases and use the principles embod ied in them to
decide new cases. In turn, th is wou ld lead to greater consistency in
judgments.
For a full history of t he English common law, see Pollock F & Maitland F W, The History of
English Law Before the Time of Edward I, 2nd ed, 2 vols (Cambridge: Cambridge University Press,
1968).
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1·305
The emergence of law reports disseminated the judgments of courts
and helped the common law to develop a degree of consistency and
uniformity. However, it was not until textbook writers started
publish ing their treatises that the common law became more
coherent and systematic. The earliest English legal treatises were
published in the thirteenth century. Others, including works on the
philosophy of law (jurisprudence), were published in subsequent
centuries. Perhaps the most famous among them are Blackstone's
four-volume Commentaries published in 1765.
Equity
1-306
As the common law developed, there was a tendency for the
common law judges to apply the emerging common law rules rather
strictly. Over time, instances arose where the strict technicalities of
common law rules prevented the giving of remedies in what
were clearly deserving cases. People began to complain to the
English monarch who, in turn, referred such cases to the Lord
Chancellor.
1-307
As a high judicial officer in the royal service, the Lord Chancellor
presided over such cases until, eventually, a system of courts called
the Courts of Chancery was established. The Courts of Chancery ran
parallel to the common law courts. They exhibited greater flexibility
than the common law courts. England's Lord Chancellors, who in those
days were often churchmen, were guided more by the principles of
conscience and fairness than technical legal rules. They applied Latin
maxims such as aequum et bonum (the fair and the just), bona fides (good
fa ith), aequitas (equity), and natura/is ratio (natural reason) in preference
to strict legal rules. 6
1-308
The principles and decisions of the Courts of Chancery later became a
distinct set of principles called "equity". Equity was seen to
complement, soften and, in some situations, override the sometimes
harsh application of legal rules. In this respect, equity was not a new
concept. Almost 2,000 years earlier, Aristotle (384 - 322 BC) had
discussed the distinction between principles of law and equity. In his
Nicomachean Ethics, he wrote:
... it is clear that the law-abiding man and the fair man will both be
just. "The just" therefore means that which is lawful and that which
is equal or fair, and "the unjust" means that which is illegal and that
which is unequal or unfair...The source of the difficulty is that equity,
though just, is not legal justice, but a rectification of legal justice.
The reason for this is that law is always a general statement, yet there
are cases which it is not possible to cover in a general statement...
6.
Since Latin, through the influence of the Roman Empire, became the language of learning
for much of early Western civilisation, it is not surprising that law uses many Latin terms,
even until this day. For a useful dictionary on legal terms, including Latin phrases, see:
Woodley M, Osborn's Concise Law Dictionary, 12th ed (London: Sweet and Maxwell, 2013).
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This is the essential nature of the equitable: it is a rectification of law
where law is defective because of its generality.7
1-309
In itially, the application of equitable principles was somewhat
arbitrary, dependent to some extent upon the conscience of the judge
in the Court of Chancery. Hence the rather mischievous saying that
the exercise of discretion in a Court of Chancery "varied with the
length of the Chancellor's foot". Gradually, however, equity became
more systematic.
1-3 10
Eventually, to avoid the problems associated with maintain ing two
sepa rate court systems, the English Parliament fused the
administration of common law and equ ity. This was achieved by
the enactment of the Supreme Court of Judicature Act in 1873.
Thereafter, all courts became courts of common law and equity, free
to apply both sets of principles as they deem fit. Where there is a
conflict between equitable and legal principles, equity prevai ls.
1-311
Today, the distinction between common law and equity is important
la rgely for historical purposes. The distinction is useful when
identifying the source and ambit of specific lega l and equ itable rules.
The distinction no longer has much practical effect as far as the
admin istration of justice is concerned. This is because all courts in
England (and Singapore) are now empowered to app ly both
common law and equitable principles.
Law Reports
7.
1-312
It was mentioned earlier that law reports played a critical role in
publicising the judgments of the courts. In 1289, the first Year Books
were collated, containing many jud icial decisions. These were the
forerunners of our modern law reports. After the advent of the Year
Books, private law reporters issued their own reports, such as Coke's
Reports and Vaughan's Reports. Some were good and some were
unreliable. In the nineteenth century, semi-official and official reports
dom inated the reporting scene and the ir qua l ity improved
markedly.
1-313
Singapore's official law report series was first launched in 1992 and
is known as the Singapore Law Reports (SLR). Prior to that, most of the
important Singapore court judgments were reported in the Malayan
Law Journal (MLJ) and its predecessors. Today, the Singapore Law
Reports (Reissue) cover cases from 1965-2009 while the Singapore Law
Reports cover cases from 2010 onwards. Lawnet (lawnet.com.sg) is the
premier online subscription service for Singapore court judgments and
legislation.
1-314
Cases in law reports are cited in a particular manner. The standard
form of citation is to write the name of the parties involved, the
year the judgment was delivered, the law report series in which it is
Rackham H (trans), Aristotle: The Nicomachean Ethics, rev ed (Cambridge: Harvard
University Press, 1934) 253, 315- 6.
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9
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reported and the page number of the volume. Usua lly, the name of
the law report series is abbreviated. Also, many series identify their
volu mes by the year, in which case the year of reporting in the citation
is placed in square brackets; in t hese series, the year of the case is an
essential part of the citation. The volumes in the Singapore Law Reports
are identified by the year. Hence, a typica l citation appears as: Tay
Joo Sing v Ku Yu Sang [1994]3 SLR 719, meaning that this case is to be
found commencing on page 719 of the third volume of the Singapore
Law Reports published for 1994.8
1-315
Other series number their volumes consecutively, in which case the
year of reporting in the citation is placed in round brackets. Take the
example of the Australian case: Black v Smallwood (1966) 117 CLR 52.
It is to be found on page 52 of volume 117 of the Commonwealth Law
Reports. The year of the case is given for information purposes only;
it is not essential for locating the volume since the series is
numbered consecutively.
1-316
When read ing a law report (see Appendix C), it is important to note
the parties involved. In civi l cases, the first party cited is the plaintiff
-the person making the compla int. The plaintiff is the person who
initiates the legal proceedings. The other party is the defendant. In
crim ina l cases, the first party is the public prosecutor (abbreviated to
"PP"), acting for the state, and the other party is the defendant. For
both civil and crim inal appeals, the f irst party is the appellant and the
other party is the respondent. Hence, at f irst instance, a defendant's
name appears second. If he subsequently appea ls, his name will appear
f irst as the appel lant.
Precedent
8.
1-317
The development of Engl ish common law is dependent upon the
principle of precedent. In Latin, the principle of precedent is summed
up in the term stare decisis which litera lly means "to stand by
decisions". In the common law tradition, precedent is the principle
whereby past cases decided by superior courts are binding and
authoritative for future cases decided by lower courts in the same
hierarchy.
1-318
Precedent is critical in English common law because the common law
evolved from what is essentially judge-made law. A court faced with
a d ispute followed the reasoning of a higher court which dealt with
a similar dispute. In this way, the cumulative reasoning of the j udges,
particularly those in the higher courts, gradua lly emerged to become
principles of law. It is in that sense that the common law is said to
comprise ma inly judge-made law.
For ease of reference this book does not give f ull citations of cases in its text. Only the year
of the case is given. The full citation of each case is found in the Table of Cases.
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Deductive and Inductive Reasoning
1-319
This should be contrasted with the civil law system described earlier.
The civil law system from the outset has codified laws which stipulate
general legal principles. Cases are then decided on the basis of these
stated principles. In other words, whereas the common law approach
starts off with particular cases and proceeds to derive general rules,
the civil law approach starts off with general rules which are then
applied to particular cases. The common law employs inductive
reasoning - the reasoning process in which the general is induced
from the particular. The civil law approach employs deductive
reasoning -the reasoning process in which the particular is deduced
from the general.
Ratio and Dictum
1-320
In applying the inductive reasoning process, the common law system
distinguishes between two aspects of a judgment. These are called
ratio decidendi (rationale for the decision) and obiter dictum (a saying
by the way)- often colloquially abbreviated to ratio and dictum, respectively.
A ratio is a principle or rule of law which forms the basis of the
judgment. It is used in contradistinction to a dictum which is a
statement or observation made in passing which does not form
the basis of the judgment. A dictum is thus a statement of law
which is not necessary for the purpose of deciding the case at
hand. According to the rules of precedent, a ratio has binding
authority; dictum only has persuasive authority.
1-321
The distinction between ratio and dictum, which appears rather
straightforward in theory, can be very elusive in practice. The
difficulty lies in the fact that a written judgment does not
automatically lend itself to a clear separation of what is ratio and
what is dictum. Where there is more than one judge in a court and
each chooses to render an individual judgment, the matter becomes
more complex. It raises the possibility of multiple - and sometimes
conflicting - paths of argument and, in these circumstances, it may
be next to impossible to determine the ratio of the case.
1-322
Apart from understanding the concepts of ratio and dictum, it is also
useful to know how the principle of precedent is applied in practice.
Some of the important points regarding the application of precedent
are described below:
(a)
The ratio of a case binds all lower courts in the same hierarchy.
This means that a Singapore court will not be bound by the
decisions of an Australian court, no matter how high its
standing, because they are from different hierarchies.
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1-323
(b)
Usua lly a court is not bound by its own prior dec isions. 9
According ly, since 1966, the House of Lords in Eng land has
considered itse lf not to be bound by its prior dec isions.
Singapore's highest judicial tribunal, the Court of Appeal has
adopted a similar stance since 1994.
(c)
Decisions of lower courts, the dictum of higher courts and the
decisions of courts from other common law jurisdictions may
be cited to support arguments during a trial. However, these
are not of binding authority. They are of persuasive authority only.
(d)
The fact that a precedent case is old does not automatically
make it a stronger or weaker authority. An old case may
not be overru led but its authority may be narrowed by
continual refinements and qual ifications. On the other
hand, another old case may continue to gather increasing
respect over the years. Yet other old cases simply become
irrelevant because the circumstances in which they were
decided are no longer present.
As an introductory text, this book sidesteps some of the complicated
issues involved in applying the rules of precedent and exam ining
written j udgments for their ratio and dictum. 10 The approach adopted
in this book is to summarise the f acts of significant cases and state
the ma in principles of law which they represent.
Classification of Laws
1-324
9.
10.
A lega l system usually has distinct areas of law to deal with different
aspects of community affairs. Just as a cake can be cut vert ically,
horizontally or diagonally, there are different ways in which law can
be classified. The ways of classifying law in a common law system are
not mutually exclusive. The main classifications are:
Civil law and crim ina l law
(a)
(b)
Case law and statutes
(c)
Publ ic law and private law
(d)
Substantive law and procedura l law.
In the past, some superior courts considered themselves bound by their prior decisions so as to
maintain consistency in j udgments. This principle is called "horizontal stare decisis" . While
horizontal stare decisis is less common today, in practice, a superior court will usually follow
its previous decisions unless there are strong reasons for doing the contrary: see generally:
Soe M, Principles of Singapore Law (Including Business Law), 4th ed (Singapore: Institute of
Banking and Finance, 2001) 41-2; and Chan H H M, The Legal System of Singapore, 2nd ed (Singapore:
Butterworths, 1995) 117.
For a useful Singapore text covering this topic, see Beckman R C et al, Case Analysis and Statutory
Interpretation.· Cases and Materials, 2nd ed (Singapore: Faculty of Law, National University of
Singapore, 2001).
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Civil Law and Criminal Law
1-325
In a common law system, there is a traditional distinction between
criminal law and civil law. Crimina l law covers those laws prohibiting
certain acts because they are harmful to the community. The
offender is p rosecuted by the state and punished by the
imposition of a fine or imprisonment. All other laws come with in the
civil law. The term "civi l law" is used here in a different way from
when it is used in reference to the European lega l tradition. Like the
usage of "common law", the meaning of "civil law" also depends on
the context in which it is found.
1-326
Most business laws are found within the civil law. Yet, it is also
important to know a little about the criminal law. This is because
some types of unfair or un lawful business conduct are criminal
offences. If a person commits any of these unlawfu l acts, the penalty
is a criminal conviction which may include a jail term- a serious thing
indeed. In contrast, the liability for breach ing civil law
usua lly involves the payment of financ ial compensation to the
injured party. Thus, when a wrong is committed, the criminal law
punishes whereas the civil law compensates.
1-327
Within the civil law, two key branches of law are prominent:
contract and tort. The law of contract governs agreements. The law
of tort governs the rights and obl igations of persons. Although
criminal law, contract and tort are distinct branches of law, they also
overlap. A sing le act or transaction may give rise to legal consequences
in crimi na l law, contract and tort. For example, a sales employee
who steals from his employer's shop commits the crimina l offence of
theft, breaches his contract of employment with his employer and is
also liable for detinue and conversion in tort.
Civil and Criminal l aw
Diagram 18
Business law
example:
•Property law
•Company law
• Law of contract
•Banking law
•Competition law
•Insurance law
•Aspects of law of tort
U075837L/N1510069
13
Introduction to l aw
CHAPTER 1
Overlap of Contract, Tort and Criminal Law
Diagram 1C
Case Law and Statutes
1-328
A second way in which the laws in a common law system can be
classified is by grouping them under the headings: case law or
statutes. This classification groups laws on the basis of the source of
the law. Laws wh ich are judge-made rules come under case law. Laws
which are enacted by the legislature come under statutes.
1-329
In the earlier period of its development, the common law system
was dominated by case law. However, in more recent times, statutes
have overtaken case law as the more important source of law,
particularly in the business sector. This is partly due to increasing
government regulation of and intervention in the economy. It is also
due to the fact that legislation offers a faster and more pro-active
approach to cope with the fast-changing needs of business arising
from economic growth.
Public Law and Private Law
1-330
A third way of classifying the laws in a common law system is to group
them under the headings: public law and private law. Public law
covers laws which have a public nature in that the government is
involved. This would include areas of law such as constitutional law,
administrative law (dealing with government administration),
taxation and criminal law. On the other hand, private law covers
those laws which deal with private persons. It includes areas of law
such as contract, tort and family law. Business laws, understandably,
come from both public law and private law categories.
Substantive Law and Procedural Law
1-331
The fourth way of classifying laws in a common law system
groups them according to their legal effect. Does the law affect
the substantive rights and obligations of parties or does it affect
some procedural issue? If the law does the former, such as most rules
in the laws of contract and tort, it is considered to be substantive
law. If it does the latter, then it is considered to be procedural law.
U075837L/N1510069
14
SINGAPORE BUSINESS LAW
1-332
Within the law of contract itself there may be substantive and
procedural provisions. For example, some contracts are required to
be in writing to fulfill certain legal formalities. This is a procedural
rule. Most of the rules in contract law, however, are substant ive in
nature. In this book, our interest in business law lies main ly in
substantive rules rather t han procedural rules.
Terminology of "Common Law"
1-333
Our brief survey of the development of English common law reveals
that the term "common law" can be used in three senses. At the
basic level, common law can be used to distinguish the law as
developed by the common law courts as distinct from equity which
was developed by the Courts of Chancery. Here, common law is used
in contrast to equity.
1-334
On a w ider scope, common law is also often used to refer t o case law
as distinct from statutes. Hence, to say that the law of contract is
rooted in the common law means that contract law largely
developed out of case law rather than statutes. However, using
"common law" in this way does not mean that contract law is
bereft of equitable principles. After all, contract law involves both
principles of common law (as used in the first sense) and principles
of equity.
1-335
At t he broadest level, "common law" is used to describe the legal
trad ition which emerged in England and is now manifested in the
legal systems of the United Kingdom and many of her former
colonies. Here, "common law" is used to distinguish the common
law tradition from other legal traditions such as the civil law
tradition.
Usage of "Common Law"
Development of English law
Diagram 10
1
: Common law
v Equity
~ofEnglsh 1aw
Common law
v Statute
Type of legal system
Common law
v Civil law (&others)
U075837L/N1510069
CHAPTER 1
15
Introduction to Law
BUSINESS AND THE LAW
1-401
We shall now consider how the law affects business. In
particular, several general questions can be asked. Which laws
regulate or impinge upon business activity? How does the law
cope with the ever-changing needs of business? What happens
when law and ethics take differing paths - which course should a
business follow? More generally, what is the function of business
law?
Nature of Business
1-402
In essence, business is the art of providing goods or services with a
view to making a profit. A business may be dealing with goods such
as cars, power stations and jet engines. Or it may be dealing with
services such as dry clean ing, education, and the provision of lega l,
accountancy, real estate, financia l or engineering services. The
essence, however, is the same. The business has certa in products or
services and it provides these at a price, with the hope that the cost
to it will be less than the price it receives, thus yielding a profit.
1-403
Although the essence of business is simple, undertaking business
activity in the commercia l world is more complex. A business has to
deal with suppliers and customers. It has to manage employees
and compete w ith competitors. Throughout, it must also abide by
government regulations - everything from paying taxes to
environmental laws. It also owes certain duties to members of the
public generally even though they may not be its customers.
1-404
These business issues are further complicated as the world - through
advances in technology, commun ications, transport and marketing turns into a global ma rket. Businesses have to take into account
the different economic, political, social and legal frameworks of
various countries. Transactions in one country may affect people
and property in other countries. Many firms are now mu lti-national,
Nature of Business
Diagram 1E
~'""'"'
*'"'""
Taxation Regulation
Competition Duties
,------'--.,
U075837L/N1510069
~
4 CU>10moo I
16
SINGAPORE BUSINESS LAW
multi-product conglomerates. Electronic commerce through the
internet is now common. Even the concept of money is becoming
more complex as cross- border funds transfers, new international currency units and the provision of financial services using
innovative technology become more prevalent.
1-405
The law therefore can affect a business in many aspects, from the
moment it commences unti l the t ime it is dissolved. The aim of this
book is to provide an introduction to fundamental business laws which
regulate commercial activity in Singapore 11 • Due to limits on coverage,
this book focuses on several key topics such as contracts, company
law, sale of goods, and agency law. Other topics such as insurance
law, banking law, taxation law, and employment law are beyond the
scope of this book.
Business Law, Change and Uncertainty
1-406
Given that the modern business environment is constantly changing,
is the law able to keep pace with such changes? The answer is
somewhat equivocal. On the one hand, within each legal system
there is a mechanism to change outdated laws and introduce new ones.
On the other hand, in reality, there are areas where the
law has lagged behind developments in business practice.
This creates uncertainty since, where the law is non-existent or vague,
no one can be certain as to his rights and obligations.
11.
1-407
In fact, as long as law is developing, there is bound to be some
degree of uncertainty in its application. Uncertainty arises in two
ways. First, it arises because of imperfections in the legal process. A
law may be unclear because those who drafted the law omitted an
important consideration or worded the law poorly, allowing two or
more inconsistent interpretations. Secondly, uncerta inty arises through
change. In fact, one mark of a good legal system is its capacity for
handling change. In a common law system like Singapore, changes
can be made through both case law and statutes.
1-408
As long as the business environment continues to change and as long
as human social systems are imperfect, law wil l continue to harbour
some uncertainty. Generally, business does not like uncertainty
because uncertainty increases costs. To minimise uncertainty, firms
often engage lawyers to provide them with clear advice as to what
and how business transactions may be undertaken.
For other books on Singapore business law, see: Woon W, Basic Business Law in Singapore, 2nd
ed (Singapore: Prentice Hall, 2000); Shenoy G T l & loo W l (eds), Principles of Singapore Business
Law, 2nd ed (Singapore: Cengage learning, 2013); and Chandran R, Introduction to Business Law
in Singapore, 5th ed (Singapore: McGraw-Hill, 2015). See also www.singaporelaw.sg for helpful
articles on Singapore law, including business law.
U075837L/N1510069
CHAPTER 1
17
Introduction to Law
Business Law and Ethics
1-409
The regulation of business activity through the law raises not only
questions of change and uncertainty but also questions concern ing
business ethics. Ideally, whatever is ethical is lawfu l and whatever is
lawful is ethical. In that perfect world, morality and law will be perfectly
consistent with each other. But real ity is far from ideal. There are laws
which, arguably, are not ethical. Equally, there are ethical principles
which are not enshrined in laws. To make matters worse, sometimes
business practice does not comply with the law. As a result, people in
business are often faced with a dilemma: follow the law, business
practice or ethical principles?
1-410
Addressing this dilemma is not easy. In many situations, following
one's ethical principles may lead to financial disadvantage whereas
following the law or business practice may be financially rewarding.
Yet, consumers and the public are increasingly expecting businesses
to be ethical and to go beyond the law. Questions of ethics and social
responsibility therefore come into play, adding to the complexity of
decision-making that a business has to make.
1-41 1
Within the common law system, ethics and morality play a large role.
This is because, historically, the common law was heavily influenced
by the Judaeo-Christian tradition which dom inated Eng land.
Christian concepts of good faith, duty of care and honesty can be
found in many areas of the common law. As late as 1932, when Lord
Atkin was delivering his judgment in the landmark case of Donoghue v
Stevenson (1932), his Lordship quoted a biblical text from the Gospel
of Luke in the process of defining the ambit of the law of negligence
in tort (1118-306).
law & Morality
"Without religion there can be no morality and without morality there
can be no law."
Sour<e: Lord Alfred Denning, The Changing Law (London: Stevens, 1953) 99.
•••••••
Paragraph 3, Book II, The Analects of Confucius (551-479 BC):
"The Master said, Govern the people by regulations, keep order
among them by chastisements, and they will f lee from you and lose
all self-respect. Govern them by moral force, keep order among them
by ritual and they will keep their self-respect and come to you of their
own accord."
Sour<e: Waley A (trans), The Analects of Confucius (London: George Allen &
Unwin, 1938) 88.
U075837L/N1510069
18
SINGAPORE BUSINESS LAW
1-412
In more recent t imes, howeve r, the common law has become
increasingly secu lar in its approach . The influence of rel igion is being
eclipsed by modern views of what are acceptable and unacceptable
standards of conduct. Nevertheless, given the inter-relationship of
law, mora lity and rel igion, the business person who opts to abide
by mora l, ethica l or religious princip les should be applauded Y
More often than not, abiding by such p ri ncip les will more
than adequately fulfill the applicable lega l obligations.
Function of Business Law
1-413
1-414
What then is the function of business law? Essentially, it has three
functions:
(a)
Facilitator: business law exists to facil itate business. For
example, the law of contract provides the framework within
which agreements can be made and enforced.
(b)
Regulator: with the increase in government intervention in
business activity, business law is used as a means by w hich
governments can encourage certa in types of activity while
prohibiting or discouraging others.
(c)
Adjudicator: disputes are inevitable and there must be a
means to resolve them. Traditionally, th is has been done in
the law courts through the process of litigation. Increasingly,
alternative methods of dispute resolution, such as arbitration
and med iation, are also available.
Viewed in this way, law can be seen as a means of promoting rather
than restricting business activity. Where the law does restrain
certain types of commercial activity, it is usually for the purpose of
maintain ing the overal l good of the community.
Three Functions of Business Law
Diagram 1F
12.
Function of Business Law
For a standard, albeit North American, text on law, ethics and business see: Halbert T &
lngulli E, Law & Ethics in the Business Environment, 9th ed (Mason, Ohio: Sout h-Western College
Pub, 20 17).
U075837L/N1510069
CHAPTER 1
19
Introduction to Law
SUMMARY
1-501
This chapter introduces the concept of law in society. At the macro level,
a legal system operates together with a political system and an economic
system in order to enable a community to organise itself. At the micro
level, a legal system consists of legal institutions, substantive law and
legal culture. Moreover, each community has a legal system with its
own laws which apply within its jurisdiction. Many of the existing legal
systems of today fall within the two great legal traditions known as
the common law tradition and the civil law tradition.
1-502
The civil law tradition prevails in most of modern Europe and
many of the former Asian and African colonies of European
powers. This tradition emphasises the role of codified law and
statutes. In contrast, the common law tradition, which originated
in England, relies heavily on case law. Case law utilises both
common law principles as well as equitable principles. Moulded
by the doctrine of precedent, these principles eventually become
lega l rules.
1-503
The laws in a common law legal system can be classified in a
number of ways which are not mutually exclusive. The main
distinction is between civil law and criminal law. Another way is
to classify laws as being case law or statute, public or private law, and
substantive or procedural law. Each classification highlights a different
aspect of the law.
1-504
Within a legal system, there are various laws which affect business.
Cumulatively, these laws can be referred to as business law. One
of the aims of business law is to provide an ethical legal framework
within which business can operate with greater certainty and
lower risks. Overall, the function of business law is to facilitate
and regulate business activity and provide a satisfactory procedure
for the adjudication of business disputes.
···•·•·•···
U075837L/N1510069
SINGAPORE LEGAL SYSTEM
INTRODUCTION
2-101
Singapore's present lega l system contains various elements
wh ich reflect different stages of Singapore's development from a
British co lony to a modern mu lti -racial independent state. This
chapter provides an outline of the Singapore legal system. 1 After
sketching the background to Singapore's rise as an independent
sovereign state in 1965, the key elements t hat comprise the nation's
constitut ional structure are introduced and the process through wh ich
law is made and enforced is described. We will also briefly discuss
the structure of the legal profession in Singapore and outline the
litigation process.
Founding of Singapore
2-102
1.
2.
Briefly, the story of modern Singapore began when Sir Stamford
Raffles established Singapore as a British colony in 1819.2 In 1826,
Singapore was grouped with Prince of Wales Island (now Penang)
and Malacca to form the Straits Settlements, the name referring to
the Straits of Malacca to which al l three colonies shared close
proximity. A colonia l constitution was introduced at a later stage.
This state of affairs continued until the Japanese occupation during
World War II.
See also: Chan H H M, TheLegaiSystemofSingapore, 2nd ed (Singapore: Butterworths, 1995); TanK Y L (ed},
The Singapore Legal System, 2nd ed (Singapore: Singapore University Press, 1999}; Teo K S, Developments
in Singapore Law between 2001 and 2005 (Singapore: Singapore Academy of Law, 2006); and Yeo T M et
al (gen eds), Developments in Singapore Law between 2006 and 2010: Trends and Perspectives (Singapore:
Academy Publishing, 2011). The Singapore Academy of law has a website (www.singaporelaw.sg) which
showcases Singapore law and contains useful summaries of various aspects of Singapore business law.
For a history of Singapore, see Turnbull C M, A History of Singapore 1819-2005 (Singapore: NUS
Press, 2009).
U075837L/N1510069
CHAPTER 2
3.
4.
5.
Singapore Legal System
21
2-103
In 1946, after the war ended, the Straits Settlements was disbanded
and Singapore was re-occupied by the British. However, Singapore
became a separate Crown Colony with her own colonial Constitution.3
Like many other colonies in Asia, however, the end of the war
marked the beginning of a movement towards self-government
and independence.
2-104
As a result of further constitutiona l changes, the f irst elections were
held in 1948. Six representatives were democratically elected to the
Legislative Council, a colonial forerunner to the future Parliament.
For the first t ime, the Legislative Council was occupied by a majority
of persons (13 to 9) who were either popularly elected or were
nominated unofficial members. 4
2-105
In 1955, under yet another Constitution, 5 the Legislative Council
was changed into a 32-member Legislative Assembly, of whom 25 members were elected representatives. This Rendel Constitution marked
the turning point for self-government. Following elections held in
that year, David Marsha ll, a lawyer from the Labour Front, became
Singapore's f irst Chief Min ister.
2-106
The movement towards self-government continued. Constitutional
conferences were held between Singapore representatives and
the British Colonial Office. Fu ll interna l self-government came in
1959 w ith a new Constitution. Britain sti ll controlled foreign affairs
and defence but a fully-elected Leg islative Assemb ly was
established. The office of Governor was abol ished and replaced
w ith a new constitutional head of state called the "Yang diPertuan Negara" . In turn, t he Yang di-Pertuan Negara appointed
the person who commanded a majority in t he Leg islative Assembly
as Pr ime M in ister. Th e People's Action Party won the general
elections in 1959. Lee Kuan Yew, another lawyer, became Singapore's
first Prime Minister.
A leading text on Singapore constitutional law is Tan K Y L, Constitutional Law in Singapore
(Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2014). See also: Tan K Y L,
An Introduction to Singapore's Constitution, 3rd ed (Singapore: Talisman, 2014).
Many British colonies had "official" and "unofficial" members sitting in their legislative
counc ils. The officia l members referred to the bureaucrats in power, such as the
Chief Secretary and the Attorney-General, who were appointed to the council. The
unofficial members were usually local luminaries appointed by the Governor. They provided a
means by which the views of the local population could be represented in the council.
Usually called the "Rende! Constitution" after Sir George Rende I who chaired a Constitutional
Commission in 1953 which recommended major constitutional changes.
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22
SINGAPORE BUSINESS LAW
Federation and Independence
2-101
In 1963, following merger discussions, Singapore (together with
Sabah and Sarawak) joined the Federation of Malaya to
form the Federation of Malaysia. This took place after a national
referendum showed that Singaporeans wanted the merger. 6 The
present Constitution of the Republic of Singapore traces its origins
to this date. The merger was brief. Due to unresolved internal strains
within the Federation, Singapore separated from the Federation
on 9 August 1965. On that day, the Republic of Singapore emerged
as an independent sovereign state.
2-108
Sovereign states can exist in different forms. A republic is a state
where government is undertaken by the people through elected
representatives. A republic is often contrasted with a monarchy
where supreme power is vested in one (usually hereditary) ruler.
A federal state is where several distinct political entities are grouped
to form one sovereign state and decision-making power is shared
between central and constituent levels. Malaysia, Australia and the
USA are federations. In contrast, Singapore is a unitary state.
CONSTITUTION
6.
7.
8.
2-201
The Singapore Constitution is the fundamental legal document upon
wh ich the entire nation is based. 7 The Constitution first came into
force in September 1963 when Singapore became part of the
Federation of Malaysia. In 1965, when Singapore declared itself to
be a fully independent sovereign state, the Constitution was
amended. The amendments included changes in the nomenclature
of state institutions and officers. For example, references to Yang
di-Pertuan Negara were changed to the President and references to
Legislative Assembly were changed to Parliament.
2-202
Article 3 of the Constitution proclaims that Singapore is a sovereign
republic.8 The Constitution is the supreme law of the nation and any
later law which is inconsistent with the Constitution is void: Art 4.
The Constitution also contains a list of fundamental rights. These
include the rights to personal liberty, liberty from slavery, equa lity
before the law, freedom of speech and association, freedom of
religion and non-discrimination in education: Arts 9-16.
It was thought that Singapore needed to merge with the Federation of Malaya to ensure
Singapore'seconomicsurvival: Chan H C. Singapore: ThePoliticsofSUtvival, 1965-1967(Singapore: Oxford
University Press, 1971).
For useful references on the Singapore Constitution, see footnote 3.
The latest version of the Constitution with up to date amendments is accessible from th e
Attorney-General's Chambers' website (sso.agc.gov.sg) which provides free access to Singapore
legislation. Provisions in the Constitution are called "Articles" whereas provisions in enacted
legislation are called "Sections".
U075837L/N1510069
CHAPTER 2
23
Singapore Legal System
PRIME MINISTER,
SINGAPORE
PROCLAMATION OF SINGAPORE
WHEREAS it is the inalienable right of a people to be free
and independent;
AND WHEREAS Malaysia was established on the 16th day
of September, 1963, by a federation of the existing states of the
Federation of Malaya and the States of Sabah, Sarawak and
Singapore into one independent and sovereign nation;
AND WHEREAS by an Agreement made on the seventh
day of August in the year one thousand nine hundred and sixty-five
between the Government of Malaysia of the one-part and the
Government of Singapore of the other part it was agreed that
Singapore shou ld cease to be a state of Malaysia and should
thereupon become an independent and sovereign state and
nation separate from and independent of Malaysia;
AND WHEREAS it was also agreed by the parties to the said
Agreement that, upon the separation of Singapore from Malaysia,
the Government of Malaysia shall relinquish its sovereignty and
jurisdiction in respect of Singapore so that the said sovereignty and
jurisdiction shall on such relinquishment vest in the Government of
Singapore;
AND WHEREAS by a Proclamation dated the ninth day of
August in the year one thousand nine hundred and sixty-five The
Prime Minister of Malaysia Tunku Abdul Rahman Putra AI-Haj lbni
Almarhum Sultan Abdul Hamid Halim Shah did proclaim and declare
that Singapore shall on the ninth day of August in t he year one
thousand nine hundred and sixty-five cease to be a state of Malaysia
and shall become an independent and sovereign state and nation
separate from and independent of Malaysia and recognised as such
by the Government of Malaysia.
Now I LEE KUAN YEW Prime M inister of Singapore, DO
HEREBY PROCLAIM AND DECLARE on behalf of the people and
the Government of Singapore that as from today the ninth day of
August in the year one thousand nine hundred and sixty-five
Singapore shall be forever a sovereign democratic and independent
nation, founded upon the principles of liberty and justice and
ever seeking the welfare and happiness of her people in a more
just and equal society.
(signed Lee Kuan Yew]
Dated the 9th day of August, 1965.
Extracted from the Independence of Singapore Agreement 1965.
U075837L/N1510069
24
SINGAPORE BUSINESS LAW
2-203
Since the Constitution is the fundamental legal basis of the nation, it is
not surprising that it contains provisions for amendment so that it can
adapt to the needs of a progressive and developing nation. However,
Art 5 provides that, generally, any constitutional amendment requires a
two-thirds majority vote of the Members of Parliament (MPs) (excluding
nominated Members) (see ~2-215). Other especially important parts
of the Constitution require a two-thirds majority vote from the people
in a national referendum.
2-204
Pursuant to the Constitution, there are three main institutions
which, collectively, can be said to "govern" Singapore. In this
respect, Singapore's structure of government broadly follows the
separation of powers doctrine.9 Under this doctrine, government
power is divided among three arms or branches so as to avoid any
one arm having excessive power which, in turn, may lead to abuse.
2-205
More specifically, the Constitution lays down a system of government
based on the Westminster model, albeit with significant differences.
The essence of the Westminster system of parliamentary democracy
has been described to mean: 10
... a constitutional system in which the head of state is not the
effective head of government; in which the effective head of
government is a Prime Minister presiding over a Cabinet
composed of Ministers over whose appointment and removal
he has at least a substantial measure of control; in which the
effective executive branch of government is parliamentary in
as much as Ministers must be members of the legislature; and in
which Ministers are collectively and individually responsible to
a freely elected and representative legislature.
9.
10.
2-206
In Singapore, the three govern ing arms are the executive, the
legislature and the jud iciary. The executive comprises the President
together with the Prime Min ister and his Cabinet: Arts 23-24. The
legislature comprises the President with the Parliament: Art 38.
The j udiciary comprises the Supreme Court and such subordinate
courts as provided by law: Art 93.
2-207
In addition, there are other constitutional bodies such as the Council
of Presidential Advisers (CPA) and the Presidential Council for
Minority Rights (PCMR). The CPA advises the President on specific
matters involving the exercise of Presidential discretion, such as the
appointment of key public officers: Arts 37B & 371A.The PCMR advises
on any legislation referred to it by Parliament or the government which
involves racial or religious issues: Arts 69 & 76(1).
The separation of powers doctrine is usually attributed to the 18th century French nobleman,
Montesquieu, and his book, The Spirit of the Laws, trans Thomas Nugent (New York: Hafner
Publishing Co, 1949), first published in 1748.
De SmithS A, "Westminster's Export Models: The Legal Framework of Responsible Government"
1 Journal of Commonwealth and Political Studies (1961 -63) 2, 16.
U075837L/N1510069
CHAPTER 2
25
Singapore Legal System
Singapore Constitut ional Structure
Executive
Legislature
Judiciary
Presidential Council
for Minority Rights
The President
2-208
The President of Singapore is the head of state. 11 Under the Westminster
parliamentary model of government, the head of state usually has a
ceremonial role whi le the head of government, the Prime Minister, with
the Cabinet, hold executive power. However, following constitutional
amendments in 1991, the President gained additional powers. These
include discretionary powers in respect of the safeguarding of national
financial reserves and the appointment of senior public officers: Arts
21-221.
2-209
Moreover, since 1991, the office of President is an elected office: Art
17(2).12 The term of office is six years: Art 20(1 ). The qualifications
for becoming a President are substantial: Art 19. For exa mple, a
person who has served for at least three years in high public office
such as a Minister, Chief Justice or Permanent Secretary may be a
presidential candidate. In addition, a person who has served for at
least three years as the chief executive officer of a company that has
at least $500 million in shareholders' equity and makes profit after tax
during the entire three-year period of service, may also be elig ible for
presidency. In add ition, the candidate must satisfy the Presidential
Elections Committee (Art 18) that he is a person of integrity, good
character and reputation. Fol lowing the 1993 presidential elections,
Ong Teng Cheong became Singapore's f irst elected President.
2017, a presidential election
will be reserved for a "community" if no person belonging to that
2-209b Following constitutiona l amendments in
11.
12.
See generally the website of t he President (www.istana.gov.sg).
On the elected presidency, see the essays in TanK Y L & Lam P E, Managing Political Change
in Singapore: The Elected Presidency (New York: Routledge, 1997). Presidential elections are
governed by the Presidential Elections Act.
U075837L/N1510069
26
SINGAPORE BUSINESS LAW
community has held the office of President for any of the five most
recent terms of office of the President Art 19B. The term "community"
refers to the Chinese community, the Ma lay community, or the Indian
or other minority communities. The intention is that each community is
to be represented in the highest office every 30 years. Th is amendment
is designed to enhance the credibi lity of the office of President as
representing Singaporeans.
The Legislature
2-210
The legislature is the main law-making body in Singapore. The lawmaking process requires all draft legislation, called "Bills", to be passed by
Parliament and thereafter assented to by the President: Art 58(1).
Parliament
13.
14.
15.
2-211
Parliament refers to the body of elected and non-elected representatives
of the people whose main task is to enact leg islation, control state
finances and perform a critical and inquisitorial role to check on the
actions of the governing party and the Ministers. 13 The Singapore
Parliament broad ly follows the British Westminster model. However,
unlike the British system which has two houses (bicameral), the
House of Commons and the House of Lords, the Singapore Parliament
has only one house (unicameral). Generally, the structure and
procedures adopted in the Singapore Parliament follow those of the
House of Commons.
2-212
Most Members of Parliament (MPs) are elected by the populace at
genera l elections. 14 A Singapore citizen of at least 21 years who has
resided in Singapore for a minimum of ten years and who is able to
read and write in English, Malay, Mandarin or Tamil may become an
MP: Art 44. There are, however, a number of disqualifying factors:
Art 45.
2-213
An MP may be elected as a sole representative of an electoral
constituency. Alternatively, an MP may be elected under the
group representation constituency (GRC) provisions: Art 39A. 15 A
constituency designated by the President to be a GRC requires a group
of three to six persons to stand for election in that constituency. At
least one group member must be from the Malay community or from
the Indian community or other minority communities. The GRC scheme
is intended to ensure that there is some minority representation in
Parliament.
See: Parliament's website (www.parliament.gov.sg}.
Certain MPs are not elected: see 1]2-214 and 1]2-215. Parliamentary elections are governed
by the Parliamentary Elections Act.
On GRCs, see TanK Y l, "The Constitutional Implications of Singapore's 1991 General Elections"
13 Singapore Law Review (1992) 26, 41 -56.
U075837L/N1510069
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2-214
Although most MPs are elected representatives, there are two groups
of non-elected MPs. The first group of non-elected members is the NonConstituency Members of Parliament (NCMPs). NCMPs are members
of a political party which is not otherwise represented in Parliament:
Art 39(1)(b). The rationale for introducing NCMPs in 1984 was
to ensure that there would always be some representation of
opposition parties in Parliament.
2-215
The second group is the Nominated Members of Parliament (NMPs):
Art 39(1)(c). According to the Fourth Schedule to the Constitution,
they are distinguished persons, nominated by a Special Select
Committee of Parliament and appointed by the President, who
provide independent and non-partisan views to Parliament.
Introduced in 1990, NMPs are expected to inject alternative views
which may not otherwise be heard. There is a maximum of 12 NCMPs
and nine NMPs in Parliament Art 39(1)(b) and (c). Unlike NCMPs, NMPs
are not entitled to vote in respect of certain matters before Parliament,
such as Money Bills, amendments to the Constitution, and votes of no
confidence in the government Art 39(2).
2-216
Parliament sits at least once a year. It is presided over by an MP who
is elected by Parliament to the position of Speaker of Parliament.
Each Parliament can function for up to five years from the date of its
first sitting: Art 65(4). After that general elections must be held.
However, it may be dissolved earlier, in which case general elections
must be held with in three months from the date of dissolution.
Notice of a parliamentary sitting is usually publicised in the media
beforehand. Members of the public are allowed to sit in the public
gallery to observe proceedings.
2-217
Pursuant to the Parliament (Privileges, Immunities and Powers)
Act, MPs enjoy certain parliamentary privileges and immunities.
Among other things, MPs can call witnesses and experts in their
parliamentary work. Similarly, the immunities guard them against
the threat of legal action in certain circumstances. For example, an
MP cannot be sued for defamation in respect of matters brought
up in parliamentary proceedings. An MP also has the right of
immunity from arrest. The statute, however, grants Parliament the
power to reprimand or punish an MP for dishonourable conduct,
abuse of privileges or contempt.
Making Legislation
2-218
All Singapore legislation must be passed by Parliament and assented
to by the President. The actual process of making legislation and
the proceed ings of Parliament generally are set out in its Standing
Orders: Art 52. The Standing Orders are the rules which govern
parliamentary procedure.
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28
SINGAPORE BUSINESS LAW
Making Legislation
Introduction and
First Reading of the Bill
Principles debated.
Amended by Parliament sitting as a
committee of the whole Parliament; or
referred to a Select Committee.
l'arlllamteml----•
Presidential Council
for Minority Rights
(Bills affecting racial
or religious matters)
16.
2·219
The leg islative process beg ins with the introduction of the draft
leg islation, the Bil l: Art 59(1}. In practice, there are two types of
Bills: a Bill introduced by the government and a Bill introduced by an
individual MP. The latter is known as a member's Bill and is rare in
Singapore. 16 The Attorney-General's Chambers drafts all Bills except
member's Bi lls.
2-220
The introduction of the Bill is made at what is called its First
Read ing. The Bill is introduced but not read out in full. At this stage,
no discussion takes place on the Bil l. It is printed in the Government
Gazette in ful l and distributed to al l MPs.
2-221
At the Second Reading, the general principles reflected in the Bill
are debated. After this debate, the Bill may be amended by the
Parliament sitting as "a Committee of the Whole Parliament".
Alternat ively, Parliament may refer it to a Select Comm ittee
consisting of MPs. The Select Committee may invite feedback and
comments from the public and will thereafter report back to Parliament.
Usual ly, Select Committees are formed whenever a Bill deals with a
topic of significant public concern. Major amendments to a Bil l are
effected at this stage after the Second Reading.
The f irst private member's Bill since Singapore's independence was the Maintenance of
Parents Bill introduced by NMP Walter Woon in 1995. It was enacted as the Maintenance
of Parents Act and came into force on 1 June 1996.
U075837L/N1510069
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17.
Legal System
29
2-222
The Third Reading of a Bill may follow the Second Reading almost
immediately. This is the case with Bills which require little or no
amendment and which are not referred to a Select Committee. On
the other hand, the Third Reading may be scheduled at a future
sitting to enable a Select Committee to perform its tasks.
2-223
At t he Third Read ing, no major amendments are permitted. After
the Bill is debated further, Parliament votes on it. Once passed, the
Bill is presented to the President for his assent. However, Bills
which affect racial or religious matters are first referred to the
PCMR which must report back within 30 days: Arts 76-78.
2-224
If the PCMR's report is favourable, the Bill is presented to the President
for his assent. If the report is unfavourable, the Bill is referred back
t o Parliament with the Council's suggested amendments. Parliament
can pass the Bi ll with these amendments or, alternatively, reject the
amendments in which case t he Bill requires a two-thirds majorit y to
be passed by Parliament (excluding nominated Members): Art 78(6).
Money Bills, Bills affecting the defence or security of Singapore, and
Bills certified by the Prime Minister to be so urgent that it is not in the
public interest to delay its enactment, do not require consideration by
the PCMR: Art 78(7).
2-225
Once assented to by the President, the Bill becomes an Act of Parliament
and a law of Singapore. The Act will come into application either on
t he dat e specified in t he Act or, if no date is specified, on t he date it
is published in the Government Gazette.
2-226
All current Singapore legislation are collected in a hard copy multivolume set called Statutes of the Republic ofSingapore (usually shortened
to "Singapore Statutes"). Each Act of Parliament is treated as a chapter
of this set and comes in the form of a loose-leaf booklet. The full
citation of any Singapore statute is its short title together with its
chapter number (abbreviated as "Cap."). Thus, the citation: Companies
Act (Cap. 50). 17
2-227
Statutes are revised regu larly and t hen reprinted . To obt ain the
current version of an Act of Parliament, it is easiest to use the free
public online service, Singapore Statutes Online (www.sso.agc.gov.
sg}, provided by the Attorney-General's Chambers. There is also the
online subscription service provided by Lawnet (www.lawnet.com.sg).
For ease of reference, only the name of the Act is given in the text of this book; the chapter
number for each piece legislation can be found in the Table of Statutes. It should also be
noted that chapter numbers are given to principal Acts, not amending Acts. (Constitutional
documents such as the Constitution of the Republic of Singapore and the Republic of Singapore
Independence Act 1965 are not given chapter numbers.) When new legislation is f irst passed, it is
referred to by its short title together with the year and number it was passed, eg. International
Arbitration Act (No 23 of 1994). When reprint ed, the new Act is given a chapter number in
the Singapore Statutes. The citation then changes from International Arbitration Act (No 23 of
1994) to International Arbitration Act (Cap. 143A).
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30
SINGAPORE BUSINESS LAW
Subsidiary Legislation
2-228
Many Acts of Parliament conta in only the general provisions relating
to the subject matter of the law. Such an Act may empower the
Min ister responsible for the Act to make more detai led rules to
implement the provisions of the Act. For example, the Companies
Act is a hefty volume containing more than 400 sections which
regulates compan ies. Pursuant to s 411 Companies Act, the relevant
Minister (in this case the Min ister of Finance) is empowered to make
rules for various forms to be used under the Act. These detailed rules
are called "subsidiary legislation" or "delegated legislation", as opposed
to the primary legislation which is the empowering Act. 18 The relevant
law on any point includes both primary and subsidiary legislation.
2-229
The Interpretation Act provides general rules regarding subsidiary
leg islation. For example, subsidiary legislation must not be
inconsistent with the empowering Act: s 19(c) Interpretation Act.
A piece of subsidiary legislation takes effect from the date it is
published in the Government Gazette (in practice, they are published
in a supplement called the Government Gazette Subsidiary Legislation
Supplement): s 23 Interpretation Act. Subsidiary legislation is also
avai lable through Singapore Statutes Online (sso.agc.gov.sg) and
Lawnet (lawnet.com.sg).
Interpreting Legislation
18.
2-230
Although it is the intention of Parliament to enact legislation which
is clear and precise, in practice this goal is not always achieved.
The statute books contain examples of provisions which are less than
well-drafted. Such provisions give rise to ambiguity and uncertainty.
2-231
To help determine the intention of Parliament when faced with an
ambiguous provision, there are two sources of assistance. The first
source is extrinsic. This means that the court can go beyond the
words in the legislation to discover the intention of Parliament.
Pursuant to s 9A Interpretation Act, it is permissible for extrinsic
materials (such as the written record of Parliamentary debates
published as the Singapore Parliament Reports) to be consu lted when
seeking to discover Parliament's intention in enacting a provision.
2-232
Secondly, recourse may be made to the provision itself. For purposes
of interpretation, the marginal notes appearing in a statute (see
Appendix B) are considered part of the statute and may be referred
to for assistance to resolve ambiguities: Ratnam Alfred Christie v Public
Prosecutor (2000). The key to understanding a statutory provision,
however, remains with the actua l wording of the provision. Over the
years, a number of approaches have emerged to assist in interpreting
the wording of statutes. These are described below.
On subsidiary legislation, see generally Cremean D, MP Jain's Administrative Law of Malaysia and
Singapore, 4th ed (Singapore: LexisNexis, 2011).
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CHAPTER 2
31
Aids to Statutory Interpretation
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Parliamentary debates
(Singapore Parliament Reports)
Literal Approach
According to this approach, Parliament means what it says and says
what it means. The literal meaning of the provision is given effect.
Note, however, the meaning can only be extracted after due
consideration has been given to the context of the provision.
Golden Rule Approach
The golden rule for interpreting a statutory provision is that it must
be construed in accordance with the plain meaning of the words
unless doing so will lead to an absurd result. This rule appears
to be a variation of the literal approach and simply seeks to qualify
the literal approach in cases where to apply the literal rule strictly
will lead to absurdity or injustice.
Purposive Approach
According to this approach, where a provision is ambiguous,
consideration must be given to the purpose of Parliament in
enacting the provision. Often, this can be determined by examining
the mischief sought to be addressed by the statute. The problem is
that the very ambiguity of the provision sometimes prevents a clear
determination of the intention of Parliament. However, with the
availability of extrinsic evidence, such as the record of Parliamentary
debates, it is now possible to use the purposive approach with greater
efficacy.''
2·233
19.
In addition to the three general approaches mentioned above, the
law has also developed a number of maxims or canons for statutory
interpretation. These rules are guidelines to interpretation. They are
not rules of law which are to be applied rigid ly. In some instances,
different rules may be applied to a problematic provision, yielding
This approach is also known as the "mischief rule" or the rule in Heydon~ Case ( 1584). It is probably
fair to say that the mischief rule is now subsumed under the general purposive approach.
U075837L/N1510069
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SINGAPORE BUSINESS LAW
different results. Ultimately, it is up to the court to decide which
construction is to be preferred as reflecting the intention of Parliament.
Ejusdem generis
This maxim literally means "of the same kind". Where a provision
contains broad general words following a list of specific words, the
broad words should be read narrowly to apply only to matters of
the same group or genus as the specific words which preceded
them. Thus, in the provision "apples, oranges, bananas, papayas and
any other food", the broad words "any other food" should be read
narrowly to mean "any other fruit" since the preceding words fall
into a common grouping of fru its.
Noscitur a sociis
Literally, this means that a t hing is known by its companions. So, in
a provision which reads "trains, buses, vehicles, taxis" the noscitur a
sociis rule may be used to support the view that "vehicles" should
be restricted to vehicles for public transport and should not include
private cars. This rule is similar to the ejusdem generis rule in that it
narrows the meaning of a broad word in view of the words found
within its context. Unlike the ejusdem generis rule, however, there is
no requirement for general words to follow specific words nor for a
specific genus to be identifiable.
Expressio unius est exclusio alterius
Literally, this means that the express mention of one thing is the
exclusion of another. For example, if Noah is told to build an ark using
gopher wood, he should not build it using oak or teak.
Unity of an Act
An Act of Parliament should be read as a whole and, unless
expressed to the contrary, the same word is to have the same
meaning throughout the Act. No provision should contradict
another provision in the same Act.
The Executive
2-234
The executive function refers to the power to execute decisions of
the government. Whereas the legislature makes laws, the executive
implements them. Under the Constitution, and subject to its provisions,
the executive function is vested in the President, the Cabinet or any
Minister authorised by the Cabinet Art 23(1).
Prime Minister, Ministers and Cabinet
2-235
The Prime Minister (PM) is an MP who commands the confidence of
the majority of Parl iament: Art 25(1). The PM is appointed by the
President. The M inisters - who must also be MPs- are also appointed
by the President with the advice of the PM: Art 25(1 ). Accord ingly,
in the Westminster parliamentary model of government, there is
some overlap between the executive and legislative functions in
that the executive is drawn from members of the legislature.
U075837L/N1510069
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Ministerial and Sub-ministerial Ranks
Prime Minister
Senior Minister
Minister Mentor
Ministers
Senior Ministers of State
Ministers of State
Senior Parliamentary Secretaries
Parliamentary Secretaries
Permanent Secretaries
20.
----....1 Public service
2-236
Ministers are typ ica ll y responsible for various government
mi nistries, ranging from defence to community deve lopment.
Certain ministries also have Ministers of State and Senior Ministers
of State. Although not specifically mentioned in the Constitution,
Senior Ministers, Minister Mentors and Ministers of State are
also considered part of the executive branch of government.
The ministerial rank thus comprises different levels of Ministers, each
with its own responsibilities.
2-237
The Cabinet consists of the PM and Ministers. 20 However, not all
persons with ministerial rank are in the Cabinet. The PM decides
which Ministers are included in the Cabinet. Such Ministers are
appointed to the Cabinet by the President acting on the advice of the
PM: Art 24(1 ). The Cabinet is served by a Secretary to the Cabinet
who performs the secretarial role for the Cabinet. The Secretary
to the Cabinet is a public officer appointed by the President upon
the advice of the PM: Art 36(1).
2-238
Pursuant to Art 21(1) of the Constitution, the President exercises
his functions in accordance with the advice of the Cabinet or a
Minister acting under the authority of the Cabinet. This means that
the executive function is shared between the President and the
Cabinet, with the Cabinet having the genera l direction and control
of the government: Art 24(2). In practice, however, given that the
President acts in accordance with the advice of the Cabinet or a
Minister authorised by the Cabinet, it is the Cabinet led by the PM
which effectively governs Singapore. The Cabinet, in turn, is collectively
responsible to Parliament: Art 24(2).
Art 24(1) Constitution. The current list of Cabinet members can be obtained from the Cabinet
website (www.pmo.gov.sg/the-cabinet).
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Secretaries
2-239
Below the min isteria l rank are a number of other office holders who
perform specific functions in each of their .ministries. Parliamentary
Secretaries are MPs who are appo inted by the President, upon
the advice of the PM, to ass ist Ministers in their dut ies: Art
31 (1 ). Permanent Secretaries are also appointed by the President
upon the advice of the PM: Art 34(2). They are responsible
for the day-to-day running of the ir respective ministries. One
d istinction to note is that al l Par liamentary Secretaries and
persons in the Ministerial rank are, by definition, MPs. In contrast,
Permanent Secretaries are members of the public service.
The Jud iciary
2-240
The judiciary is responsible for the independent administration of
justice. This is done through a system of courts in which disputes
may be heard and decided accord ing to the law. Constitutionally,
j udicial power in Singapore is vested in the Supreme Court and such
subordinate courts as provided by law: Art 93. The Supreme Court
comprises the Court of Appeal and the High Court. The subordinate
courts refer to a number of lower level courts including District Courts,
Magistrates' Courts, Coroners' Courts, Smal l Claims Tribunals, and
Employment Claims Tribunals: s 3 State Courts Act (SCA). Previously
grouped under the name "Subordinate Courts", since 2014 these
courts have been grouped under the name "State Courts" (112-246).
Separately, in 2014, the Family Justice Courts (FJC) were establ ished
to bring together all family-related proceedings under a specia lised
body of courts (112-252 & 112-252b).
Supreme Court
2-241
21.
22.
As stated earlier, the Supreme Court comprises the High Court and
the Court of Appeal: s 3 Supreme Court of Jud icature Act (SCJA).
Both the High Court and the Court of Appeal have jurisdiction over
civil and crimina l matters: s 3 SCJA. Since April 1994, the Court of
Appeal has been Singapore's highest judicia l tribunal. 21 Pursuant to a
Practice Statement issued in Ju ly 1994, the Court of Appea l does not
hold itself strictly bound by any previous decisions of its own or of
the Privy Council. 22 This means that the Court of Appea l is no longer
bound by horizonta l stare decisis (111-322).
Appea ls from the Court of Appea l to the Judicial Committee of the Privy Council in London
were abolished in 1994 by the repeal of the Judicial Committee Act: s 2 Judicial Committee
(Repeal) Act . Previously, appeals to the Privy Council were already severely limited. On the
Supreme Court, see its website (www.supremecourt.gov.sg).
See: Practice Statement (Judicial Precedent) [1994] 2 SLR 689. However, the Practice Statement
stated that the Court will exercise its power to depart from prior decisions sparingly. In doing
so, the Court of Appeal is adopting a practice similar to that adopted by England's House of
Lords in 1966.
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2-242
The Judges of the High Court together with the Chief Justice
comprise the High Court: s 9(1) SCJA. The Judges of Appeal together
w ith the Chief Justice comprise the Court of Appeal: s 29(1) SCJA.
Supreme Court j udges enj oy tenure until the age of 65 years: Art
98(1). Aft er that age, they may be re-appointed for a limited period:
Art 95(2). The President may also appoint for a li mited period a
qualified individual to be a Judicial Commissioner, Senior Judge or
International Judge of the Supreme Court: Art 95(4). Such persons
essentially exercise the same powers and functions as a Judge of
the High Court: Art 95(5)-(11).
2-243
The appointment of International Judges of the Supreme Court flows
from the launch of the Singapore International Commercial Court
(SICC) in 2015 (sicc.gov.sg). Structurally, the SICC operates as a d ivision
of the High Court: s 18A SCJA. The SICC offers parties involved in a
transnational commercial dispute a court-based resolution process
before a bench consisting of prominent international jurists. Through
the SICC, Singapore is taking another step to entrench itself as a premier
dispute resolution centre in Asia. The legislative provisions governing
the SICC are found in s 18A-18M SCJA.
2-243b In response to the increasing complexity of commercial cases reaching
the judiciary, various specialised lists have been set up in the High
Court. These specialised lists apply to cases in the High Court other
than those in the SICC, which has its own specialist j udges who
manages the international commercial disputes. The special ised
lists in the High Court include, among others, admiralty, arbitration,
intellectual property, as well as finance, securities, banking and
complex commercial cases.
Supreme Court Judiciary
•
Judges of Appeal
.
'......
.!lidges
- ~· 0~ the
. ffigh Cciutt
.
.
Senior Judge1
International Judge1
Jud1C1al Comm11110nerl
2-244
Individuals appointed to the Supreme Court bench are all addressed
as "Your Honour" while in open court or in their chambers. On
other occasions, they are referred to as "Chief Justice" or"Judge", as
appropriate. In written communications, they are referred to as "Chief
Justice", "Justice" or "Jud icia l Commissioner", respectively, w ithout
any distinction as to gender.
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SINGAPORE BUSINESS LAW
2-245
Within the Supreme Court, the High Court and the Court of Appeal
have different jurisdictions. The Court of Appeal exercises an appellate
jurisdiction, hearing appeals from the High Court: s 29A SCJA. The
High Court has jurisdiction to hear both civil and criminal cases at first
instance: s 15-17 SCJA. Generally, a civil claim must be initiated in
the High Court if the claim involves more than $250,000. It also tries
criminal offences wh ich are punishable by death or jail for a period
exceeding 10 years. The High Court also has an appellate jurisdiction
to hear civil and criminal appeals from the State Courts, including the
District Court and Magistrates' Court: s 19-21 SCJA.23
State Courts
23.
24.
2-246
The State Courts (previously called Subordinate Courts), although
lower in the judicial hierarchy, are in some respects more important
to the ordinary person on the street. In 2016 they handled around
312,000 proceedings while the Supreme Court handled around 14,500
cases. 24 The State Courts thus deal with most of the legal proceedings
in Singapore. The bulk (83%) of cases in the State Courts is hand led
by the crim inal justice division. The remainder is handled by the
civil justice division (14%) and the community justice and tribunals
division (3%). Increasingly, court-ordered mediation means that a
large number of civil cases in the State Courts are settled without
proceeding to trial.
2-247
Within the State Courts, the District Court has the widest jurisdiction.
A District Court hearing proceeds before a District Court judge. A
District Court has both civil and criminal jurisdiction: s 19 & 50 SCA.
Its civil jurisdiction entitles it to hear cases involving up to $250,000
in dispute. This jurisdictional limit may be increased if both parties
consent in writing: s 23 SCA. For road traffic accident cases and
personal injury claims arising from industria l accidents, the jurisdiction
is increased from $250,000 to $500,000. For probate matters- which
involves the handling of a deceased's estate- the limit is $3 million:
s 2 SCA. In criminal matters, the District Court tries cases where the
maximum punishment does not exceed 10 years' jail or is a fine only:
s 8 Criminal Procedure Code (CPC).
2-248
The Magistrates' Court also has civil and criminal jurisdictions. Its
criminal jurisdiction is to try cases where the maximum punishment
does not exceed five years' jail or is a fine only: s 7 CPC.Its civil jurisdiction is
similar to that of the District Court but its monetary limit is
$60,000: s 2 SCA. Proceedings in a Mag istrates' Court are heard
before legally qualified magistrates.
The rules on such appeals are complex. See generally: Pinsler J (gen ed), Singapore Court Practice
2077 (Singapore: LexisNexis, 2017).
State Courts, Annual Report 2016: Charting The Future Together (Singapore: State Courts, 2017) 37; and
Supreme Court, Annual Report 2076: Shaping The Future of Justice (Singapore: Supreme Court, 2017) 46.
See also the State Courts' website (www.statecourts.gov.sg).
U075837L/N1510069
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37
Singapore Legal Syst em
Supreme Court, State Courts and Family Justice Courts
Supreme
]
Court
State
Court
]
25.
26.
2-249
Established in 1985, the Small Claims Tribunals form part of the State
Courts but are governed by separate legislation, the Small Claims
Tribunals Act. The Tribunals only deal with claims for up to $10,000 in
relation to contracts for the sale of goods or the provision of services,
certain property damage claims (excluding those arising out of the
use of a motor vehicle), and claims relating to residential leases of
a period not exceeding two years. 25 Parties are not represented by
lawyers. Typically, a claim is heard with in a few weeks after filing;
for tourists visiting Singapore, their claims may be heard within 24
hours. Proceedings can be undertaken by telephone, videophone and
other electron ic means. Although the jurisdiction of the Tribunals
overlaps that of the Magistrates' Court, the Tribuna ls in many cases
offer a faster and cheaper means of resolving disputes. For that
reason, it is often the preferred venue for small consumer claims.
The Tribunals processed around 10,300 claims in 2016. 26
2-250
The Employment Claims Tribuna ls (ECT) were launched in April2017
to facilitate the expeditious resolution of employment disputes.
The ECT has simplified procedures and is judge-led. In addition,
no lawyers will be involved. As such, the processes in the ECT are
designed to be simple, expeditious and affordable to ensure that
parties can have access to justice for their employment disputes. The
ECT has jurisdiction to hear claims up to $20,000 or up to $30,000 if
the dispute has undergone mediation with trade union involvement.
If t he disput ing parties consent in writing, a Tribunal can hear claims of up to $20,000. For
procedures in the Small Claims Tribunals, see step by st ep gu ide in t he State Courts website
(statecourts.gov.sg). See also: Tay C S K & TangS C, Your rights as a Consumer: a Guide to Safe of
Goods, Hire-purchase, Smafl Claims Tribunals {Singapore: Times Books Int ernational, 2003).
State Courts, Annual Report 2016: Charting The Future Together {Singapore: State Courts, 2017)
37.
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SINGAPORE BUSINESS LAW
2-251
The Coroners' Court exercises the jurisdiction and powers conferred
upon a coroner by the Coroners Act. Its role is to
determine the cause and circumstances of death in cases where a
person dies suddenly, in an unnatural manner, by violence or from
unknown causes. The Coroners' Court is headed by the State
Coroner.
Family Justice Courts
2-252
To better cater to the needs of youth and families in distress, the
Family Justice Courts (FJC) were established in 2014 as part of the
restructuring of the court system to bring together all fami ly-related
work under a specialised body of courts. The FJC is the collective name
for several courts comprising the High Court (Fami ly Division) and the
subordinate courts, cal led the Family Court and the Youth Court: s 3
Fa mily Justice Act (FJA). Collectively, the FJC hears all fami ly-related
proceed ings in Singapore.
2-252b The Family Court hears the ful l suite of family-related cases includ ing
al l divorce and related matters, family violence cases, adoption and
guardiansh ip cases, applications for deputyship under the Menta l
Capacity Act, and probate and succession matters. In 2016, the
Family Court handled about 6,300 divorce casesY The Youth Court
(previously known as the Juvenile Court) has jurisdiction over cases
involving juveniles. Its jurisdiction is more specifica lly stated in the
Children and Young Persons Act. A juvenile is a "chi ld" if he is below
14 years old or a "young person" if he is 14 years or above but below
16 years of age. Genera lly, the Youth Court attempts to deal with
juveni les using a restorative justice model with a view towards reform
and rehabilitation instead of penal sanctions. Where necessary,
the Youth Court may direct the parties to undergo mediation or
counselling, as we ll as to participate in avai lable fam ily support
programmes. In 2016, the Youth Court handled about 1,000 juvenile
cases. 28 Both the Fami ly Court and the Youth Court are presided by a
District Judge or a Magistrate. The High Court (Fami ly Division) wil l
primarily hear appeals against decisions of the Family Court and the
Youth Cou rt.
27.
28.
Family Justice Courts, Annual Report 2016: Access to Family Justice: Anchoring Deeper; Extending
Wider (Singapore: Family Justice Courts, 2017), 2. See also the Family Justice Courts' website
(www.familyj usticecourts.gov.sg).
Ibid.
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Singapore Legal System
CHAPTER 2
39
Syariah Court
2-253
In addition to the courts which form the main judiciary, there is a
separate court system to hear cases on specific matters involving
Muslims. Under the Administration of Muslim Law Act (AMLA), the
Syariah Court is designated to handle matters such as marriage, divorce,
ma intenance, child custody, and property disposition or division upon
divorce among Muslims: s 35(2) AMLA. Every proceeding of the Syariah
Court is presided over by a president who is appointed by the
President of Singapore: s 34A(1) & (2) AMLA. Pursuant to s 55(1)
AMLA, appeals from the Syariah Court are heard before an Appeal
Board. Decisions of the Syariah Court and the Appeal Board are final
and cannot be reviewed by any court: s 56A AM LA. 29
2-254
The Syariah Court forms a significant part of the Singapore judicia l
system since about 13% 30 of the population are Muslims. However,
since the Syariah Court does not hear business disputes, we will not
consider it in detail in this book. The administration of the
Syariah Court falls within the purview of the Ministry of Culture,
Community & Youth. The Syariah Court website (syariahcourt.gov.sg)
contains additional information in Malay and English.
The Attorn ey-General
29.
30.
31.
2-255
Another significant constitutional office in the Singapore legal
system is the Attorney-General. Pursuant to the Constitution,
the Attorney-General is appointed by the President upon the
advice of the Prime Minister: Art 35(1). He acts as the main
legal adviser to the government and is entrusted to perform all
legal duties assigned to him by the President and the Cabinet:
Art 35(7}.31 He must, therefore, be a lawyer. Furthermore, the
Constitution stipulates that he must be a person who can fulfi ll all
the qualifications of a Supreme Court judge: Art 35(1).
2-256
The Attorney-General's Chambers (as the office is cal led) has five
law-related divisions. The Civil Division provides lega l advice to the
government on civi l matters and represents the government in civil
proceedings. Its Crimina l Justice Division advises the government on
crim inal matters and conducts criminal prosecutions. The Financial
& Techno logy Crime Division deals w ith, among other matters,
prosecutions and appeals concerning financial and corruption
crimes. The Internationa l Affairs Division advises the government on
However, since, in cases involving maintenance, custody of children and division of matrimonial
property resulting from a divorce, the Family Justice Courts and the High Court have concurrent
jurisdiction w ith the Syariah Court: 26 FJA and s 17A(2) & (3) of AMLA.
Singapore Department of Statistics, Population Trend Report 2017, S.
See the website of the Attorney-General's Chambers (www.agc.gov.sg).
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40
SINGAPORE BUSINESS LAW
internationa l law issues such as multilateral and bi lateral treaties.
Finally, the Legislation Division has the responsibility for legislative
drafting and law revision to ensure that Singapore's laws are of a high
standard.
2· 257
The Attorney-General is not part of the judiciary. Moreover, un like
the Attorney-Genera l in England, the Singapore Attorney-General
is not a politica l appointee in that he need not be a member of
the ruling political party.32 He is therefore not part of the Cabinet.
Accord ing to a former Singapore Attorney-General:
"The Minister of Law is responsible to Parliament for the
Attorney-General's Chambers. The Ministry of Law... [is] ... the
nexus between Parliament and the Attorney-General's Chambers
and in this manner the Attorney-General's office is kept apolitical." 33
SOURCES OF SINGAPORE lAW
2· 301
The preceding discussion has outlined the constitutional structure of
Singapore, with particu lar emphasis on the legal system. We now turn to
consider the way in which the law is applied within this legal framework.
Influence of English Law
32.
33.
34.
2-302
Since Singapore was formerly a Br itish colony, the roots of
Singapore law lie within English law. Even today, English law still
plays a significant role in Singapore. In recent years, however, this
influence has decreased, especial ly as the Singapore legislature,
judiciary and legal profession mature. In futu re, Singapore will
probably become less influenced by lega l developments in England.
Though rooted in English law, Singapore is likely to develop legal
rules and processes which wi ll be suitable for a nation with a unique
blend of East and West. In this way, an autochthonous (ie. locally
developed) legal system is emerging.
2-303
Historically, the influence of English law on Singapore law can be
described broad ly under two headings: the genera l reception of
Engl ish law in 1826 and the specific reception of English law thereafter. What follows is a brief outl ine of the ma in points under each
head. 34
On the English Attorney-General, see Edwards J Ll J, The Law Officers of the Crown (London:
Sweet & Maxwell, 1964).
Tan B T, "The Attorney-General" 2 Malayan Law Journal (1988) lviii, lxiii.
For more detailed treatments, see Rutter M F. The Applicable Law in Singapore and Malaysia - A
Guide to Reception, Precedent and the Sources of Law in the Republic of Singapore and the Federation
of Malaysia (Singapore: Malayan Law Journal. 1989); Woon W, The Singapore Legal System
(Singapore: Longman, 1989); Phang A B L, The Development of Singapore Law: Historical and SocioLegal Perspectives (Singapore: Butterworths, 1990) and Chan H H M, above note 1.
U075837L/N1510069
CHAPTER 2
41
Singapore Legal System
Reception of English Law
English law introduced
into Singapore
,;;.·' .. ~ .
~
.
~~:,-'
~.l?.i~gram . 2G ::
.:,:.,.'~~
__;___ • ' -
;___.:I
Cut-off Reception
Section 5 Civil
Law Act (repealed)
Continuing Reception
Application of English
Law Act
General Reception
2-304
The general (or historical) reception of English law is viewed as having
occurred through the English Second Charter of Justice of 1826. The
Charter is in the form of a royal Letters Patent dated 27 November 1826
which established the Court of Judicature of Prince of Wales Island
(now Penang), Singapore and Malacca. Although there was no express
provision which imported English law into the Straits Settlements,
subsequent cases such as Reg v Willans (1834) have interpreted the
Second Charter as introducing t he existing law of England into the
Straits Settlements.
2·305
In this way, through the Second Charter of Justice, English law was
introduced into the Straits Settlements, including Singapore. The
accepted view is that English law of general policy and application,
both case law and statute law as they stood on 27 November 1826,
was imported en bloc into Singapore, subject only to suitabi lity and
modification to cater to local circumstances.
Specific Reception
2-306
35.
In addition to the general reception of 1826, English law was introduced
into Singapore through specific reception provisions. A specific
reception provision may introduce into Singapore a particular English
law as it stood at a certain date (also called "cut-off reception" 35 ).
Alternatively, it may provide for a continuing reception of Eng lish law.
Whether it provides for a cut-off reception or continuing reception
depends on the wording of the specific reception provision. By far,
the legal issues raised in respect of a continu ing reception are more
significant.
This is the term used by Chan H H M, above note 1.
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SINGAPORE BUSINESS LAW
Application of English Law Act
Section 3
(1)
The common law of England (including the principles
and rules of equity), so far as it was part of the law of
Singapore immediately before 12th November 1993, shall
continue to be part of the law of Singapore.
(2)
The common law shall continue to be in force in Singapore,
as provided in subsection (1), so far as it is applicable to the
circumstances of Singapore and its inhabitants and subject
to such modifications as those circumstances may require.
Section 4
(1)
Subject to the provisions of this section and of any other
written law, the followi ng English enactments shall, with
the necessary modifications, apply or continue to apply in
Singapore:
(a)
(b)
the English enactments specified in the second and
third columns of the First Schedule to the extent
specified in the fourth column thereof; and
any other English enactment which applies to or is in
force in Singapore by virtue of any written law....
Section 6
(1)
Subject to subsection (2), section 5 of the Civil law Act
(Cap. 43) is repealed.
(2)
In respect of any proceedings instituted or any cause of
action accruing before 12th November 1993, section 5 of
the Civil law Act shall continue to apply as if it had not
been repealed by this Act.
Continuing Reception
2-307
Earlier, it was noted that English law was imported into Singapore by
the 1826 Second Charter of Justice. After Singapore's independence
in 1965, s 5 of the Civil Law Act (now repealed) was enacted to
provide for the continuing reception of English case law and English
statutes in Singapore; however, the provision referred to only certain
commercial categories of law and general mercantile law. This
resulted in uncertainty as to whether the Second Charter of Justice
provided for the continuing reception of English statutes and case law
after 27 November 1826. Controversies regarding s 5 of the Civil Law
U075837L/N1510069
CHAPTER 2
Singapore Legal System
43
Act continued until November 1993, when the Application of English
Law (AELA)36 came into force to repea l the problematic s 5 Civil Law
Act and specified the extent to which English law is appl icable in
Singapore. Section 3 AELA states that English common law that was
part of Singapore law before 12 November 1993 shall continue to
apply "so far as it is applicable to the circumstances of Singapore and
its inhabitants." Furthermore, s 4 AELA (read with the First Schedule)
specifies the English statutes which form part of the Singapore law,
the extent which they apply, and any necessary modifications.
2-308
Thus today an Eng lish statute applies in Singapore only if
specifically provided for in the AELA or another written law. The
picture is less clear in respect of English case law. The question is
whether s 3 AELA provides for a cut-off reception (as at 12 November
1993) or a continuing reception of English case lawY The wording
of s 3 AELA appears ambiguous on this point. Meanwhile, the
Singapore authorities appear determined to foster the development
of an autochthonous common law. This is evidenced by the 1997
amendment of the definition of "common law" in s 2(1)
Interpretation Act- wh ich now reads: 38
"common law" means the common law in so far as it is in
operation in Singapore and any custom or usage having the force
of law in Singapore.
THE SINGAPORE LEGAL PROFESSION
2-401
36.
37 .
38.
39.
40.
Every person who wishes to practise Singapore law must first be
reg istered on the Roll of the Supreme Court as an advocate and
solicitor. This is often known as "being cal led to the Bar".39 Under
the prevailing rules, such a person must first obtain an acceptable
law degree from a recognised university, fulfi ll a period of practical
training (called "pupillage") with a qualified lawyer, and complete a
practical law course. As at 31 August 2017, there were 5,191 practising
lawyers in Singapore. 40
On the AELA generally, see: Yeo V, "Application of English Law Act 1993: A Step in the Weaning Process"
4 Asia Business Law Review (1994) 69; and Phang A B L, "Cementing the Foundations: The Singapore
Application of English Law Act 1993" 28 University of British Columbia Law Review (1994) 205.
Some have submitted that, under s 3 AELA, there is no continuing reception of English case law into
Singapore: see, for example, Chan H H M, above note 1, 120-121. See also Phang A B L, Cheshire Fifoot and
Furmston's Law of Contract- Second Singapore and Malaysian Edition (Singapore: Butterworths, 1998) 20-22.
This definition was introduced by s 6 Statutes (Miscellaneous) (Amendment) Act, Act No 17 of 1997.
The former definition stated that "common law means the common law of England".
The "Bar" is thought to refer originally to the wooden partition across a court which separates lawyers
and the public. Once called to the Bar, a person is entitled to be heard before t he court. The Bar also
refers to the professional body of advocates. Experienced senior members of the Singapore Bar may be
granted the prestigious title "Senior Counsel", abbreviated "SC": s 30 Legal Profession Act.
Law Society of Singapore, Annual Report 2017- No Mountain High Enough, 33 (Singapore: Law Society of
Singapore, 2018). More information on the Singapore legal profession can be obtained from the Law
Society of Singapore website (www.lawsociety.org.sg).
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SINGAPORE BUSINESS LAW
2-402
Once called to the Bar, a Singapore lawyer is both an advocate and
solicitor. An advocate is a lawyer who represents and presents arguments
for his client at a trial before a court. A solicitor is a lawyer who advises
on legal matters generally, drafts legal documents, and assists in litigation
before the court. Advocates spend a substantial proportion of their time
in court whereas solicitors spend most of their time in their offices.
2-403
The Singapore legal profession is a ~<fused profession" in that a lawyer
called to the Singapore Bar is both an advocate and a solicitor. In practice,
however, many Singapore lawyers choose to devote most of their time
either to the work of an advocate or a solicitor and not both.
Law Firms
2-404
As at 31 August 2017, there were 881 Singapore law firms ranging in size
41
from one-man operations to large firms with more than 100 lawyers. Of
these, 82% (or 720 firms) were small firms with between 1-5 lawyers;
about 16% (or 140 firms) were medium-sized firms with between 6-30
42
lawyers; and only 2% (or 21 firms) had more than 30 lawyers each.
2-405
In addition to local firms, there are over 100 foreign law firms which
have established offices in Singapore. 43 As foreign lawyers, they are
generally not permitted to practise Singapore law. They deal mainly
with matters involving the laws of the ir respective jurisdictions
and cross-border transactions. However, with the liberalisation of
the legal services sector since 2009, nine Qualifying Foreign Law
Practices (uQFLPsu) and eight Joint Law Ventures (u JLVsu) have been
allowed to practise Singapore law in specific categories of matters
by employing Singapore-qualified lawyers. 44
Professional Organisations
2-406
41.
42.
43.
44.
45.
All practising lawyers in Singapore are members of the Law Society of
Singapore. This professional body of lawyers was established in 1967
pursuant to the LPA. 4 s The Council of the Law Society has the power
to investigate the conduct of any lawyer and decide upon disciplinary
action where necessary. Dissatisfied clients may also seek redress for
inadequate professional services and may be entitled to compensation
for any loss they suffer: s 75 & 75B LPA.
Law Society of Singapore, Annual Report 2017, above note 40, 33.
Ibid. Since 2000, a law firm can be incorporated as a limited liability company called a "law corporation":
s 152 - 167 Legal Profession Act (LPA). Generally, the Companies Act (see Chapter 10) will also apply to
law corporations.
List of foreign law firms in Singapore as at 31 January 2018, accessed from Ministry of Law website, Legal
Services Regulatory Authority E-Services, Search Lawyer or Law Firm (https://www.mlaw.gov.sg/eservices/
lsra/search-lawyer-or-law-firml) on 31 January 2018.
These figures are as at 31 January 2018: ibid.
Like many professional organisations, it has a dual role in furthering the interests of its members and
protecting the interests of the public. See its website (www.lawsociety.org.sg) for details of its activities.
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Singapore legal System
CHAPTER 2
2·407
All Singapore lawyers are also members of the Singapore Academy
of Law. The Academy was established in 1988 pursuant to the
Singapore Academy of Law Act. 46 Since its formation, the Academy
has been active in holding talks, seminars and workshops for the
legal community. It also has an active publishing arm. In addition,
the Academy has the responsibility of appointing commissioners for
oaths and notaries public in Singapore.47
OUTLINE OF LITIGATION PROCESS
2-501
There is one set of Ru les of Court (RC) which applies to both the
Supreme Court and the State Courts: 0 1 r 1 and 0 1 r 2(1) RC. 48 The
provisions in the RC are divided into Orders and, within each Order,
into rules. The RC is made pursuant to s 80 SCJA. The RC governs the
litigation process.
ICommencement I
I
-1-
Pleadings
I
1
Litigation Process
I DisTery I
=
2-502
46.
47.
48.
49.
Pursuant to the RC, the litigation process may be viewed as having
six stages beginning with the commencement of the litigation and
ending with the enforcement of judgment. The time required for the
entire process varies from case to case. With regular improvements in
the administration of case loads in the Singapore judiciary, the time
taken for a case to conclude has been significantly reduced. 49
Wee CJ, "Message From the President", Singapore Academy of LawNewsletter(March 1989) 1. The Academy
(www.sal.org.sg) was established for two main reasons: to promote and maintain high standards of
conduct, learning and professional competence in the Singapore legal profession and, secondly, to
promote fellowship and interaction among the different branches of the legal fraternity. Accordingly, the
Academy includes among its members not only Singapore lawyers but also foreign lawyers in Singapore,
legal academics, as well as members of the Singapore judiciary.
Commissioners for oaths and notaries public are appointed from among lawyers in Singapore. Persons
who wish to make affidavits or statutory declarations can make them before a commissioner for oaths.
A commissioner for oaths must have at least 10 years of experience in legal practice and be at least 35
years old. A notary public attests the execution of deeds and other documents and can certify true copies
of documents, especially for use overseas. A notary public must have at least 15 years of experience in
legal practice and be at least 40 years old. Each appointment is for one year.
A standard reference on court procedures is: Pinsler, above note 23.
For case load and waiting period of cases in the Supreme Court and the State Courts, see their respective
annual reports, above note 24.
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SINGAPORE BUSINESS LAW
Litigating a Civil Claim
2-503
When a person (plaintiff) wishes to sue another person (defendant)
in a civi l matter, the plaintiff typically engages a lawyer who will issue
through the court an "originating process". There are two types of
originating process: a writ of summons and an originating summons:
0 5 r 1 RC. A writ of summons is used for proceedings in which
substantial disputes of fact are likely to arise. An originating summons
is used for non-factual disputes and originating applications made to
the court under any written law. For example, in a typical action for
breach of contract, the originating process will be a writ of summons.
2-504
The law provides that certain types of legal proceedings must be issued
w ithin a fixed period from the date the cause of action accrued. For
example, actions for breach of contract must be commenced within six
years from the date the breach occurred (~8-702). Actions in tort must
also be commenced within six years from the date the tort occurred.
2-505
Once the originating process has been issued by the court, the plaintiff's
lawyers must arrange for it to be served upon the defendant. Usually,
the document must be served personally - the defendant must be
handed the document in person: 0 10 r 1 RC -to ensure that the
defendant has knowledge of the action. If the defendant is overseas,
the court's approva l must be obtained to serve the writ on a defendant
who is overseas: 0 11 RC. Thereafter the following general steps
describe a typical litigation process.
Pleadings
The "pleadings" consist of several documents. The Statement of Claim
set s out the plaintiff's claim: 0 18 r 1 RC. The defendant then delivers a
Defence which explains the grounds upon which the plaintiff's claim will
be resisted: 0 18 r 2 RC. The defendant may also make a Counterclaim:
0 15 r 2 RC. The plaintiff can then serve a Reply to the Defence and a
Defence to any Counterclaim: 0 18 r 3 RC.
Discovery and Interrogatories
Discovery refers to the process of each party listing all documents
relevant to the claim and making the documents ava ilable for
inspection by the other party: 0 24 r 9 RC. Privileged documents- such
as most correspondence between a party and its lawyers- are typically
not obliged to be disclosed through discovery. Interrogatories refer
to questions which a party can serve on another party which must be
answered in an affidavit (a document made on oath): 0 26 RC. Together,
discovery and interrogatories help to clarify the ambit of the dispute
and describe the nature of evidence relied upon by each party.
Trial
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47
The trial refers to the court hearing before one or more judges. Often,
before the trial, parties may be ordered to attend a pre-trial conference
(0 34A RC) to explore the possibility of reaching a settlement. However,
if the case is not settled and does go to trial, oral arguments based on
the evidence w ill be subm itted to the court: 0 35 RC. Witnesses will
be examined and cross-exam ined. The trial may take 30 minutes for
a simple case t o several weeks for a complicated case.
Judgment and Enforcement
At the conclusion of t he trial, the court may give its judgment
immediately or, in more complex cases, adjourn the proceedings
before handing down its judgment at a later date: 0 42 r 1 RC. Written
judgments with detailed reasons are usually given for more complicated
cases. 50 If there is a right to appeal, t hen the unsuccessfu l party
may appeal the judgment at this pointY Meanwhile, the successful
party may seek to enforce the judgment (0 45 RC) - for example, by
demanding payment of money ordered by the court. If the money is not
paid, then the successful party may use certain procedures, including
seizing and selling the assets of the unsuccessfu l party, to recover the
money due.
ALTERNATIVE DISPUTE RESOLUTION METHODS
50.
51.
2-601
Although litigation is the most common and widely accepted method
of resolving commercial d isputes, there are alternative d ispute
reso lution methods ava il able. Obviously, the fastest way for a
dispute to be resolved is for one party to concede his position.
Another way is for the parties to undertake negotiations with a view
to each party conceding some ground. If negotiation fails, the
parties may seek assistance from third parties.
2-602
Consequently, a whole spectrum of alternative d ispute resolution
methods has emerged. Despite their differences, all these methods
have a common goa l: to provide a dispute resolution method wh ich
is fair, fast and at a reasonable cost. Given that there are several
different methods of dispute resolution, it is important to know
their main features so that a suitable method can be selected for
A sample judgment of the Singapore Court of Appeal, as published in the Singapore Law Reports, is
reproduced in Appendix C.
In practice, appeals are not common. Overall, perhaps only about 10% of judgments are
appealed.
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SINGAPORE BUSINESS LAW
a particular case.
Methods of Dispute Resolution
Amicable
Adversarial
Conciliate
[Disputants only]
[Third party involvement]
Mediation and Conciliation
2-603
In mediation, the disputants appoint a third party to help them work
through the dispute with the goal of reaching a mutually acceptable
compromise. 52 Mediation is usually non-binding upon the parties. Since
it is a private process, it mainta ins confidentiality. The ma in mediation
institution for Singapore disputes is the Singapore Mediation Centre,
established in 1997 (www.mediation.com.sg). In 2014, the Singapore
International Mediation Centre (www.simc.com.sg) was established
to provide mediation services for parties involved in cross-border
commercial disputes. In 2017, the Mediation Act was enacted as part of
the efforts to make Singapore a hub for international dispute resolution
by improving the legislative framework for mediation. 53
2-604
Concil iation involves the appointment of a third party to steer the
parties to a resolution. Like mediation, the procedure is informal.
The conciliator may be an expert in the field wh ich is the subject of
the dispute and may be asked to provide an opinion on the dispute.
Usually the opinion is not binding upon the parties. Conciliation is
also a private process.
Arbitration
2-605
52.
53.
With arbitration, the parties agree to appoint one or more mutually
acceptable arbitrators to adjudicate their dispute. Arbitration is also
a private process. Supporters of arbitration say arbitration is faster,
cheaper and allows the selection of a suitably qualified expert to
decide the issue in question. They also cite the binding nature of
For a discussion of mediation generally and in the context of Singapore, see Menon S, "Building
Sustainable Mediation Programmes: A Singapore Perspective" (2015) 1 Asian Journal on Mediation 1;
Menon S, "Mediation and the Rule of Law" (2017) 1 Asian Journal on Mediation 1; and Phang A B
L, "Mediation and The Courts- The Singapore Experience" (2017) 1 Asian Journal on Mediation 14.
The Mediation Act only applies to mediations either conducted wholly or in part in Singapore,
or conducted elsewhere provided that the mediation agreement provides that the Mediation
Act or Singapore law applies to the mediation. The Act does not apply to mediations conducted
under the auspices of any written law.
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49
the arbitral decision (the arbitral award) and confidentiality.
2-606
Singapore has a two-track legal framework for arbitrations: one
regime for domestic arbitrations and another for international
arbitrations. International arbitrations are governed by the
International Arbitration Act. Domestic arbitrations are governed by
the Arbitration Act. 54 Established in 1991, the Singapore International
Arbitration Centre (www.siac.org.sg) is a leading arbitral institution
in the region.
Other Tribunals
2-607
In addition to the above methods of dispute resolution, there may
be specialised tribunals to deal with particular classes of disputes.
Singapore has a number of such semi-judicial tribunals such as the
Copyright Tribunal (dealing with copyright issues between copyright
owners and licensees) and the Income Tax Board of Review (dealing
with income tax disputes between taxpayers and the Inland Revenue
Authority of Singapore). Pursuant to the Community Disputes
Resolution Act, the Community Disputes Resolution Tribunals (CDRTs)
were set up in October 2015 to hear cases involving neighbourly
disputes through informal, low-cost and judge-led proceedings.
Trends
2-608
54.
55.
The Singapore government, together with the judiciary, have been
promoting alternative dispute resolution methods as a means of
resolving commercial disputes. These efforts are especial ly noticeable
in relation to dispute resolution of cross-border commercial disputes.
Launched in 2010, Maxwell Chambers is the flagship venue for
arbitration in Singapore. 55 Billed as "the world's first integrated
dispute resolution complex", it offers extensive hearing rooms and
support services. Also within the complex are the offices of the
Singapore International Arbitration Centre, Singapore Institute
of Arbitrators, and Singapore Chamber of Maritime Arbitration.
Maxwell Chambers also houses the regional offices of the Paris-based
International Court of Arbitration of the Internationa l Chamber of
Commerce, the US-based International Centre for Dispute Resolution
of the American Arbitration Association, and the Geneva-based
Arbitration and Mediation Centre of the World Intel lectual Property
Organisation. The trend is clear: Singapore is seeking to cement and
further expand its position as a premier dispute resolution hub in the
Asian region.
The domestic framework applies to any arbitration which is held in Singapore and which is not
conducted pursuant to the provisions of Part II of the International Arbitration Act.
See www.maxwel l-chambers.com for more information.
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SUMMARY
2-701
This chapter introduced the Singapore lega l system. As a
prel iminary step, a brief history of Singapore was given, tracing
its development from a Brit ish colony into an independent
sovereign state. Thereafter, we examined the Constitution - the
fundamental legal document of the nation. In particu lar, we
discussed constitutiona l offices and institutions such as the
President, the legislature, the executive, the judiciary and the
Attorney-General. In our discussion of the leg islature, we saw
how statutes are created and some of the key ru les of statutory
interpretation. In our discussion of the executive, we looked at the
functions of the Prime Minister, Cabinet and the Ministers. In our
discussion ofthe judiciary, we saw the structure of the Supreme Court,
State Courts and Family Justice Courts.
2-702
After examining the institutional framework, we looked at the
sources of Singapore law. Essentially, there are two sources of
Singapore law: English law and local law. Eng lish law was
received into Singapore through the general reception of 1826
and also through specific reception provisions in other instances.
The type of English law received included both leg islation and
case law. Over the years, however, Singapore has relied increasing ly
upon both local legislation and local case law.
2-703
To complete the introduction of the Singapore legal system, we
briefly examined the Singapore legal profession and the process of
litigation. To facilitate a greater understanding ofthe role of lawyers
in litigation, we looked at a typical litigation process commencing
from the issuing of the originating process, the holding of the trial,
and the giving of judgment and enforcement of the judgment. The
increasing profi le of alternative dispute resolution methods such as
arbitration and mediation is also noted. With this basic understanding
of law and the Singapore lega l system, we are now ready to
commence our examination of specific areas of business law. We
begin with the law of contract which will be the subject of the next
six chapters.
···•·•·•···
U075837L/N1510069
CONTRACT:
OFFER AND ACCEPTANCE
INTRODUCTION
3·101
When the word "contract" is mentioned, most people visualise a
formal legal document. When they are asked how often they enter
into a contract, many would say only occasionally, as when they
purchase a car, a house, or enter into a loan agreement with the
bank. In other words, "contract" is associated with a narrow range
of activity involving lawyers, documents and agreements concerning
things of substantial value.
3-102
At law, however, a contract is more than just documents. Every time
a person boards a bus and is transported to his destination, there
has been a contract entered into, performed and discharged.
Every time a person buys a bowl of noodles, there is a contract.
In fact, most of us would enter into several- some into dozens ofcontracts each day.
3·103
Contracts are particularly important in the business world. The reason
is that business is primarily about buying and selling. There are all kinds
of associated activities involved - everything from manufacturing and
marketing to management. Yet, the essence of business is still the same:
buy low and sell high and earn a profit. The rest is incidental to this
goal.
3·104 A contract is that which binds parties in their business transactions and,
in so doing, ensures profits. If a trader buys gold at $1,690 per ounce
and agrees to sell it one month later at $1,730 per ounce, he wants
to ensure that, at the appropriate times, his supplier will be bound
to deliver the gold and his buyer will be bound to accept the gold.
Without that certainty, his profit is in jeopardy. The law of contract
is the glue which binds such agreements. As the Singapore Court of
Appeal observed in Tee Soon Kay vAG (2007):
"The very concept of an ordered society depends on parties
observing the law in general and t he promises validly made under
law to each other in particular. This is not only obvious and
axiomatic; it is utterly essential to a proper functioning of society
itself."
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SINGAPORE BUSINESS LAW
3-105
Since contract law is crucial to business transactions, six chapters
wi ll be devoted to expla ining the key principles of the law of
contract in Singapore. The chapters wi ll examine how a contract is
formed (Chapters 3 and 4), what it comprises (Chapt er 5), factors
which may undermine a contract (Chapter 6), how a contract is
fulfilled and discharged (Chapter 7) and, finally, the remedies
available when a contractual promise is breached (Chapte r 8).
Many of the principles are based on case law, particularly Engl ish
case law. Statutes also play an increasing role. Modern contract law
in Singapore comprises both case law and statutes.
Principles of Contract l aw
Formation
How a
contract Is
made
Terms
The substance
of the
contract
Vrtiating
Factors
Factors which
undermine a
contract
Discharge
How a
contract is
fulfilled or
ended
Remedies
The cures for
a breach of
contract
NATURE OF CONTRACT
1.
3-201
A well-known English book on contract law defines a contract as "an
agreement giving rise to obligations which are enforced or recogn ised
by law" .1 The heart of a contract, therefore, is an agreement. It is
important to note, however, that not every agreement is a contract. For
example, an agreement between a young couple to have a candlelight
dinner usually does not give rise to legal remedies if one of them fails
to make t he appointment. Therefore, all contracts are agreements
alt hough not all agreements are contracts.
3-202
The Latin phrase consensus ad idem (consensus as to the same th ing)
describes this concept of agreement. The essence of the phrase is
that the parties to a contract must have a "meeting of minds". What
the parties agree on must therefore be clear and unambiguous as
contracts often fail on the grounds of uncertainty, or because there is
no consensus ad idem between the parties: Harwindar Singh s/o Geja Singh
v Michael Wong Lok Yung and another (2015) and LH Aluminium Industries
Pte Ltd v Newcon Builders Pte Ltd (2014). Given the abstract nature of
agreement sometimes it is not easy to establish that a meeting of minds
has taken place. In certain situations, the law infers that a meeting of
minds has been reached on a particular point when, in fact, t he parties
might not have fully agreed on all the relevant terms. In Low Kin Kok
Peel E, Treitel on the Law of Contract, 14th ed (London: Sweet & Maxwe ll. 2015) 1.
U075837L/N1510069
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Contract : Offer and Acceptance
CHAPTER 3
v Lee Chiow Seng (2014), the Singapore High Court affirmed that the
test of inferring consensus ad idem is an objective one. Specifically, the
law is concerned with the parties' objective intention at the time they
entered into the contract: Y.E.S. F&B Group Pte Ltd v Soup Restaurant
Singapore Pte Ltd (formerly known as Soup Restaurant (Causeway Point) Pte
Ltd) (2015). Further, in Independent State of Papua New Guinea v PNG
Sustainable Development Program Ltd (2016), the High Court reaffirmed
the objectivity approach under which the court's function is to try,
"as far as practical experience allows, to ensure that the reasonable
expectations of honest men are not disappointed".
-
... .
·~
" Diagram. 38
<
'.
.
- ..
Agreements and Cont ract s
Four Key Elements
3-203
To help ascertain whether the necessary meeting of m inds is
present, the law breaks down the concept into four basic elements:
offer, acceptance, consideration and intention to create legal relat ions.
However, this classification is not a scientific analysis but an attempt by
the law to identify, in abstract, t hose elements wh ich form a contract.
Formation of Contract
Elements Which Form a Contract
I·
3-204
Offer
I I
Acceptance
I I
Consideration
I
I
Intention to
create legal
relations
Consequently, in some situations, there may be room for dispute as
to whether a statement is an offer or not. Similarly, in some cases it
is debatable whether the necessary intention to create legal relations
exists. To help overcome these uncertainties, we rely upon principles
found in case law. These principles become the guidelines w ith wh ich
we can determ ine whether a contract exists. However, while these
gu idelines to be appl ied are objective and general, the outcome of a
case is heavily dependent on the specific facts concerned: RBC Properties
Pte Ltd v Defu Furniture Pte Ltd (2015).
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SINGAPORE BUSINESS LAW
Types of Contract
3-205
There are two main types of contracts which are used in modern business:
simple contracts and special contracts (also known as contracts by deed
or contracts under seal). Simple contracts are, by far, the largest type
of contracts used in modern business. Our discussion of contract law
focuses primarily on simple contracts and, unless indicated otherwise, a
reference to a contract in this book is a reference to a simple contract.
3-206
Special contracts are always in writing. The written document is called
a "deed". For historical reasons, contracts under seal do not require
consideration to be enforceable. Hence, if a transaction is one where no
consideration is involved, the parties should execute a deed to ensure
that the obligations will be enforceable. Deeds are generally used in a
more formal context such as the grant of a gift or sale of real property.
Written and Oral Contracts
3-207
Simple contracts may be made orally or in writing. Most contracts
entered into each day are probably oral contracts (also called "parol
contracts"). However, if there is a dispute, it may be difficult to
ascertain the precise terms of the oral contract. For this reason,
most people w ill insist on a written contract whenever there is any
possibility of a future dispute. This is especially important if the
amount or value of property involved is substantial. In other words, a
written contract is useful because it provides evidence of the parties'
contractua l obligations. This view has been strongly endorsed by
the Singapore High Court in Forefront Medical Technology (Pte) Ltd v
Modern-Pak Pte Ltd (2006) where Phang J observed:
" ... wherever possible, contracting parties ought to reduce their
(entire) agreement into writing. I recognise that this is not always
possible... Nor may parties find it always desirable...But potential
contracting parties must understand that if they choose not to
reduce their agreement into writing, they must suffer the legal
consequences of not doing so ... Parties must abide by the terms of
the contract willingly entered into and objectively ascertained ... the
best obj ective evidence is a written agreement that does not fall afoul
of any vitiating factors."
Types of Contracts
Types of Contract
·~·
~!•
...
,..\.;7-:f~#';.:-.....-.
· Diag·r~ m . 3D: ..
• ·~> ....-~ ~---
·,
U075837L/N1510069
CHAPTER 3
2.
Contract : Offer and Acceptance
55
3-208
The primacy of a written agreement over oral statements is reflected
in an important rule of evidence ca lled the "parol evidence ru le".
According to this rule, oral (parol) evidence will not be admitted in a
court action to add to, vary, amend or contradict a written contract.
In Singapore, this rule is codified by ss 93-94 Evidence Act. The
Singapore High Court in one case rejected a client's contention that
a written agreement on costs with a law firm had been varied orally
with the managing partner of the firm. This was because the client
was relying on parol evidence to contradict the written contract: Engelin
Teh Practice LLC v Wee Soon Kim Anthony (2004). It should however be
noted that the parol evidence rule applies only if the contract was, in
the first place, intended by the parties to represent the entire agreement
between them: Cheong Kok Leong v Cheong Woon Weng (2017). The
parties' intention is to be objectively determined.
3-208b
Section 93 Evidence Act states that where the parties have reduced their
contract into writing, "no evidence shall be given in proof of the terms
of such contract ... except the document itself, or secondary evidence
of its contents .. . ". Secondary evidence refers to certified, electronic
or other types of copies of the original document and is not extrinsic
evidence excluded by the parol evidence rule. Hence, if the parties
have intended that the written document should embody the entire
agreement between them, s93 Evidence Act makes clear that parties may
not introduce extrinsic evidence to prove the terms of their agreement.
3·209
Section 94 Evidence Act provides exceptions to the parol evidence rule.
In certain situations, the rule wil l be waived and oral evidence may be
admitted to alter the terms of a written contract. In recent years, the
Singapore courts have taken a more open view on the use of extrinsic
evidence as exceptions to the parol evidence rule. In Sembcorp Marine
Ltd v PPL Holdings Pte Ltd (2013), the Singapore Court of Appeal held that
"extrinsic evidence of surrounding circumstances is generally admissible
under s 94(f)" to aid in the interpretation of the written words. This
case follows Zurich Insurance (Singapore) Pte Ltd v 8-Go/d Interior Design
& Construction Pte Ltd (2008) which suggested that ambiguity need not
be a prerequisite for admitting extrinsic evidence to aid contractual
interpretation.2 1n BCBC Singapore Pte Ltd v PT Bayan Resources TBK (2016),
the Singapore International Commercia l Court affirmed the above
principles in Sembcorp Marine and Zurich Insurance. The court explained
that even though the starting point is the contractual language, extrinsic
Readers who wish to pursue the topic further should consider a standard text on evidence such as
Tapper C, Cross & Tapper on Evidence, 12th ed (Oxford: Oxford University Press, 2010} or a local work,
Chin T Y, Evidence (Singapore: Butterworths, 1988). Note that the parol evidence rule does not apply
where the question relates to the identity of contracting parties: Smart Modular Technologies Sdn Bhd v
Federal Express (Singapore) Pte Lrd (2004). Goh Y H, "The New Contractual Interpretation in Singapore:
from Zurich Insurance to Sembcorp Marine" [2013] Singapore Journal of Legal Studies 301· 330 discussed the
development of the law on contractual interpretation in Singapore. See also Ngee Ann Development Pte
Ltd v Takashimaya Singapore Ltd (2017), where the Singapore Court of Appeal has reinforced the contextual
approach to the interpretation of w ritten contracts. Under the contextual approach, the court will
consider both the text and context of the written agreement in ascertaining the parties' intention with
respect to the contract.
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SINGAPORE BUSINESS LAW
evidence may be admitted to interpret words provided that the evidence
is "relevant, reasonably available to all contracting parties and relates to
a clear or obvious context". A recent case which applied these principles
but found the evidence inadmissible is Marken Limited (Singapore Branch)
v Scott Ohanesian (20 17).
3-210
Another reason for the use of written contracts is that certain
transactions are required by law to be in writing or be evidenced in
writing. For example, in Singapore an assignment of copyright must
be in writing (1114-441 ). Moreover, contracts for certain transactions,
such as transfers of real property, must be evidenced in writing to be
enforceable. This requirement is imposed by s 6 Civil Law Act which is
based on the infamous Statute of Frauds, first introduced in England
in 1677. 3 The contract itself need not be in writing, and written
evidence of the contract in a memorandum can suffice: Cheong Kok
Leong v Cheong Woon Weng (2017). The written evidence need not be
comprehensive but should contain all the material terms of the contract.
In a contract involving land, details of the "requisite three Ps" (the
property, price and parties) written on the back of a cheque was held
to be sufficient written evidence: Reindeer Developments Inc v Mindpower
Innovations Pte Ltd (2007). It is also sufficient if these details can be found
in an email correspondence: Joseph Mathew v Singh Chiranjeev (2010) .
3-211
Within the category of written contracts, there is an increasing
tendency to use pre-printed standard form contracts in modern business
transactions. For example, a person who wishes to open a bank account
invariably signs a standard form contract prepared by the bank. Such
contracts are also commonly used in insurance, hire-purchase, sale of
goods and sale of real property transactions.
3-212
Standard form contracts usually preclude much, if not all,
negotiation on the part of the customer. Typically, the customer
has the choice of either signing the contract as already printed or
not at all. If such a contract is drafted by only one party, it tends to
favour the party which drafted it. To redress some of this imbalance, the
leg islature has enacted some legislation- such as the Unfair Contract
Terms Act (115-420)- in favour of the weaker party.
OFFER
3-301
3.
The first element necessary to form a contract is the offer. An offer
is an expression made by one party ("offeror") to another party ("offeree") communicating the offeror's willingness to perform a promise.
The intention is that, if the offer is accepted by the offeree, there wi ll
be a binding agreement between them.
Ironically, the Statute of Frauds, which was intended to prevent fraud, has been used by
fraudsters to commit fraud. Although there have been calls for its repea l, it rema ins in
the English statute books and is part of the law in Singapore. See generally: Phang A B L
(ed}, Cheshire, Fifoot and Furmston's Law of Contract - 2nd Singapore and Malaysian Edition
(Singapore: Butterworths Asia, 1998) ch 8.
U075837L/N1510069
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Contract : Offer and Acceptance
3-302
57
Offers can be made in writing, ora lly, or by conduct. A simple oral
offer is where a person says: "I would like to sell this book to you for
$40. Would you like to buy it?" In this case, the offeror is the seller.
Conversely, the offeror can be the buyer if he says, "I wou ld like to buy
your book for $40. Would you sell it to me?" Notice that, in both cases,
there is no requirement that the word "offer" itself be used. Moreover,
for an offer to be effective, it must be communicated to the offeree. If
an offeror sends the offer letter on Monday and it reaches the offeree
on Wednesday, the offer is deemed to be made on Wednesday.
Uni lateral Contracts
3-303
An offer can be addressed to a particular person, a group of people or
to everyone. In the last situation, the offer is said to be made to the
whole world. Obviously, if an offer is to a particular person, it is not
open for another person to accept it. So, if a company offers Mei Ling
a job, it is not possible for Mei Hua to accept it. However, if an offer
is made to a group, anyone in the group can accept it.
3-304
Simi larly, an offer which is made to the whole world is open for anyone to accept. Thus, if an owner advertises a reward to anyone who
returns his lost cat and Tom finds the missing cat and returns it to
the owner, then there is a valid contract; Tom can legally claim the
reward. The contract is called a "unilateral contract" because it is "a
contract brought into existence by the act of one party in response to
a conditional promise by another": Harvela Investments Ltd v Royal Trust
Co of Canada (CI) Ltd & Ors (1985).
Carlill v Carbolic Smoke Ball Co (1892)
The defendant advertised their product, the Carbolic Smoke Ball,
as a preventive medication against influenza. The advertisement
stated that the defendant will pay £100 to any person who
contracted influenza after having used the product according to
its dosage. The advertisement also stated that £1,000 had been
deposited in a bank "to show their sincerity". Carlill, on the basis
of the advertisement, bought the smoke balls and took them as
prescribed. She still caught influenza and sued for the £100. The
court held that the advertisement in this case constituted an offer
to the whole world. Bowen LJ said:
"Although the offer is made to the world, the contract is made
with that limited portion of the public who come forward and
perform the condition on the faith of the advertisement."
3-305
4.
In the usual contract-called a "bilateral contract" 4 -the parties would
know the identities of each other. This is because there is an exchange
of promises. In a unilateral contract, t he offeror may not know the
Sometimes called a "synallagmatic" contract since "bilateral" may give the impression that
a contract can only be made between two parties.
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SINGAPORE BUSINESS LAW
offeree's identity immediately, as there is no exchange of promises.
Instead, there is only one promise- the one by the offeror. The offeree
makes no promise but simply performs the condition attached to the
offeror's promise. Hence, typically the owner of the lost cat would not
know from the outset the identity of the person he was contracting
with. Tom's identity may be revealed only when he has fulfil led the
advertised offer.
Invitations to Treat
3-306
Although the newspaper advertisement in Carli// v Carbolic Smoke
Ball (113-304) was held to constitute an offer, that does not mean
that all advertisements are offers. In fact, most of the time the
opposite is true. Generally, an advertisement is not considered an
offer. It is usually viewed as an invitation to treat. Catalogues and
price lists are also usually regarded as invitations to treat. At law,
an invitation to treat is an invitation to commence negotiations.
It is an invitation to make an offer. Accordingly, acceptance of
an invitation to treat does not lead to a contract.
Partridge v Crittenden (1968)
Partridge paid for an advertisement in the "Classified
Advertisements" section in a magazine called Cage &Aviary Birds.
The advertisement stated: "Bramblefinch cocks and hens, 25 shillings
each". The authorities successfully prosecuted him for selling live
wild birds contrary to the prevailing legislation. On appeal, it was
held that there was no "offer for sale" and that, therefore, the
re levant legislation was not contravened. The advertisement was
held to be only an invitation to treat. According to Lord Parker:
"I think that when one is dealing with advertisements and
circulars, unless they indeed come from manufacturers, there is
business sense in their being construed as invitations to treat
and not offers for sale."
3-307
In the same way, a display of goods and prices in a shop is usually
considered to be an invitation to treat and not an offer. The offer is
made when a customer selects the item he wants and brings it to the
cashier to pay for it. This general principle has been affirmed by the
Singapore High Court in Chwee Kin Keong & Others v Digilandmall.com
?te Ltd (2004).
Pharmaceutical Society of Great Britain v Boots Cash Chemists
(Southern) Ltd (1952)
Boots operated self-service chemist shops. A customer would
choose the articles he wished to buy, place them in a basket and
bring them to the payment counter where a registered pharmacist
could remove any drugs from the customer's bag. The issue before
the court was whether Boots had contravened a statute which
prohibited the sale of any poisons "unless the sale is effected
under the supervision of a registered pharmacist". This depended
on when the sale took place. The court held that the display of
U075837L/N1510069
CHAPTER 3
Contract : Offer and Acceptance
59
goods with prices constituted an invitation to treat and the sale
took place at the counter in the presence of the pharmacist. Lord
Goddard stated:
" ...the mere fact that a customer picks up a bottle of medicine
from the shelves in this case does not amount to an acceptance
of an offer to sell. It is an offer by the customer to buy, and
there is no sale effected until the buyer's offer to buy is
accepted by the acceptance of the price."
Auctions and Tenders
3-308
The same principle applies to auctions and tenders. In an auction,
the auctioneer will usually display to the audience the item to be
auctioned - anything from jewellery and works of art, to land and
buildings. The auctioneer wil l then invite bids. This is viewed as
an invitation to treat. Bids made by the audience are considered
offers. The sa le is completed only when the auctioneer indicates his
acceptance, usually by the fall of his hammer. This principle, as
applied to auctions for the sale of goods, is now enshrined in s 57(2)
Sale of Goods Act.
3-309
A tender, like a bid at an auction, is also considered as an offer. Tenders
are usually sought when a party wishes to obtain competitive quotes for
the supply of goods or services. The advertisement which invites tenders
is treated as an invitation to treat. Each person who submits a tender
is an offeror. Although the party advertising for tenders (the invitor)
usually accepts the highest or the lowest tender as the case may be,
there is no legal requirement that this be the case. 5 In fact, many tender
advertisements expressly provide that the invitor is not bound to accept the
lowest tender. However, once a tender is accepted, a contract is formed.
Provision of Information
3-310
In some instances, a communication may not be an offer but a
mere response to a request for information. Whether this is so in
a particular situation always depends on the facts in that case.
Harvey v Facey (1893)
The following telegraphic communication took place regarding a
piece of property called Bumper Hall Pen:
H: "Will you sell us Bumper Hall Pen? Telegraph lowest price."
F: "Lowest price for Bumper Hall Pen, £900."
H: "We agree to buy Bumper Hall Pen for £900 asked by you.
Please send us your title-deeds."
There was no further communication. On appeal from the Supreme
Court of Jamaica, the Privy Council held that there was no contract
because the second telegraph from the seller merely amounted to a
5.
An exception exists where the invitor expressly binds himself to accept the h ighest or lowest
tenderer: Harvela Investments Ltd v Royal 7fust Co of Canada (CI) Ltd (1986). Cf 8/ackpool and
Flyde Aero Club Ltd v 8/ackpoo/ Borough Council (1990).
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SINGAPORE BUSINESS LAW
provision of information and was not an offer. The amount specified
was viewed as the lowest price acceptable to the seller if they
subsequently decide to sell. Here, the seller had made no offer.
Accordingly, if the second telegraph was not an offer, then the third
telegraph could not be an acceptance.
ACCEPTANCE
3·401
If an offer exists, the next question is whether there is acceptance. Like
an offer, an acceptance may be made in writing, orally or by conduct. 6
An acceptance must be final and unconditional. If the offeree states
that he accepts the offer subject to a change in one of the offer
terms, this is no acceptance. In other words, conditional acceptance is
treated as no acceptance: Stuttgart Auto Pte Ltd v Ng Shwu Yong (2005).
The acceptance does not have to re-state all the terms of the offer as
long as it is clear that both parties intended to be bound by the same
offer terms. Thus, the final SMS in an SMS exchange was held to be
an acceptance because it was clear from the exchange that the parties
agreed to the same terms: Ong Hong Kiat v RIQ Pte Ltd (2013).
3·402
In Singapore, a prospective purchaser may say that he accepts the
seller's offer, "subject to contract" or "subject to a written contract
to be drafted by our solicitors". This means that he agrees to buy but
wishes to have the benefit of further advice or written documentation
from his lawyers. Similarly, a "subject to details" or "subject to review"
clause can be inserted to requ ire that either or both parties' review of
the final terms is a precondition to a contract being formed. Usually,
such expressions do not amount to an acceptance. The contract will
come into existence only when the condition is fulfilled. Until such
time, no contract exists: Thomson Plaza (Pte) Ltd v Liquidators of Yaohan
Department Store Singapore Pte Ltd (in liquidation) (2001 ). The mere use of
words in the clauses is not conclusive of the parties' intention. Whether
there is a binding contract between the parties shou ld be determ ined
by considering all the circumstances in question, including the parties'
words and conduct: Toptip Holding Pte Ltd v Mercuria Energy Trading Pte
Ltd (2018) and Rudhra Minerals Pte Ltd v MRI Trading Pte Ltd (2013).
Knowledge of Offer
3·403
6.
7.
One problematic issue is whether a person who performs obligations
which amount to an acceptance creates a contract if he is unaware of the
offer in the first place. For example, if Tom returns the lost cat without
knowing about the reward offered by the owner, is the owner bound to
give the reward to Tom? In Gibbons vProctor (1891}, the court appeared
to take the view that a contract could be formed in those circumstances
even if the offeree is ignorant of the offer. This decision, however, has
been criticised? The opposite approach was adopted in the US case Fitch
v Snedaker (1868) and the Australian case Rv Clarke (1927).
Thus, a seller banking a buyer's cheque can constitute acceptance of the buyer's offer to
purchase a house: Lim Hwee Meng v Citadel investment Pte Ltd (1998).
Pollock F, Principles of Contract, 13th ed (London: Stevens & Sons, 1950) 16.
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Contract : Offer and Acceptance
61
~--------------~------~--------------------------------~
Formation of Cyberspace Contracts
Chwee Kin Keong & Others v Digilandmal/.com Pte
Ltd (2004)
The defendant sold IT-related products using its website. Through
an employee error, its website had laser printers for sa le at t he
unusually low price of $66 each. The correct price was $3,854 each.
The six plaintiffs, having spott ed a bargain, quickly placed orders on
the website for 1,606 printers at $66 each. Upon receiving the orders,
the defendant's automated response system sent emails to the
plaintiffs confirming each purchase. When the defendant realised
its error, it promptly removed the advertisement from its website,
informed all who had placed orders that the price was a mistake, and
that it would therefore have to decline all orders. The plaint iffs sued,
insisting that the confirmed orders were binding on the defendant.
In t he Singapore High Court, V K Rajah JC considered w hether
existing contract principles applied to cyberspace contracts. His
Honour said they general ly do. But, he also cautioned:
" .. .Internet merchants have to be cautious 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 range of purchasers than resources permit."
Thus, un like traditional forms of advertising and shop d isplays,
web advertisements may not be simply construed as invitations to
treat. Web advertisements which use "loose language" may create
unilateral contracts that can bind the advertiser. These principles are
now reflected in s 14 Electronic Transactions Act (ETA): see 113-415.
The court also considered when an internet contract is formed.
Should the postal rule apply such that the contract is formed when
the email acceptance is sent? Here, the court seemed to lean in
favour of the receipt rule as the default rule for cyberspace contracts.
His Honour mentioned that this rule is affirmed by Art 24 of the
Vienna Sa les Convention (1119-601}, which applies in Singapore, and
felt that the rule was "more convenient and relevant in the context
of both inst antaneous or near instantaneous commun ications."
Further, s1 5 [now s13) ETA appeared to favour the receipt rul e (see
113-415 -113-419 for a discussion of these issues). As for automated
email responses, His Honour had no doubt that they could constitute
unequivocal acceptances. The intention to accept an offer is not
undermined merely because it is communicated via automatically
generated responses.
The defendant eventually won its case on appeal on the basis of
unilateral mistake (116-506). However, the High Court's views on
cyberspace contract formation were not disputed before the Court
of Appeal; hence, these views remai n good authority.
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SINGAPORE BUSINESS LAW
3-404
What is clear, however, is that once the offeree is aware of the offer,
it does not matter that he was prompted to act for reasons other than
the desire to accept the offer. In Wifliams vCarwardine (1833), the court
held that the plaintiff was entitled to a reward because, when giving
the information sought by the police, she had done so with knowledge
of the reward even though her motive for giving the information was
her own remorse.
3-405
A second issue regarding a person's knowledge of an offer arises in
the context of cross-offers. Is there a contract if two persons make
identical offers to each other, each offer crossing the other during the
communication? A simple example is where, unknown to each other,
Mei offers to sell her watch to Ling for $100 and Ling offers to buy
from Mei the same watch for $100 and their letters crossed in the mail.
In Tinn v Hoffmann & Co (1873), the court, on a five-two majority, held
that a cross-offer did not make a contract. The reasoning appears to
be based on the argument that a cross-offer imp Iies a lack of consensus
or meeting of minds between the parties at the time of making the
offers.
Communication of Acceptance
3-406
For an acceptance to be effective, it must be communicated to the
offeror. Generally, this means that the acceptance, if in writing, must
be physically received by the offeror or, if made orally, be actually heard
by the offeror: CS Bored Pile System Pte Ltd v Evan Lim & Co Pte Ltd (2006).
As Denning LJ remarked in a well-known obiter dictum in Entores Ltd v
Miles Far East Corporation (~3-418):
"Suppose, for instance, that I shout an offer to a man across a river
or a courtyard but do not hear his reply because it is drowned by
an aircraft flying overhead. There is no contract at that moment.
If he wishes to make a contract, he must wait till the aircraft is
gone and then shout back his acceptance so that I can hear what
he says. Not until I have his answer am I bound."
Communication of Acceptance
General rule:
Acceptance must be
communicated
Exceptions
I
Offeror waives
communication of
acceptance
Parties agree
that offeree's silence is
acceptance
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Acceptance
properly made under
the postal rule
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63
The general rule, therefore, is that acceptance must be actually
received by the offeror. To avoid any dispute on this point, many
offerors specify the mode of communication of acceptance
required. For example, the offeror may state that written acceptance must be received at the offeror's office no later than 4.00 pm
on Thursday. This means that the acceptance must be made in
writing and that it must physically reach the offeror's office by
the stated t ime; any other form of acceptance would be invalid.
However, there are at least three situations where acceptance need
not be communicated to or received by the offeror.
Waiver of Communication
3-408
The first situation is where the facts show that the offeror has
waived the need for communication of acceptance. This may arise
in a case where the offer is made to the whole world. In such a
situation, the contract may be accepted by anyone, creating a
unilateral contract. In a typical unilateral contract, the offeror
makes a promise to pay money when the offeree does something.
Here, the doing of the act by the offeree may itself be construed as
acceptance, without requiring formal communication to the offeror.
3-409
In the example given earlier, if Tom finds the lost cat and returns it
to the owner who advertised the reward, the owner is bound to
pay Tom the $100. There is no requirement for Tom to communicate
his acceptance of the offer. His very act of finding and returning
the cat constitutes acceptance. An obvious example of a unilateral
contract is Carli// v Carbolic Smoke Ball (~3-304). In Brader Daniel John v
Commerzbank AG (2014), the Singapore High Court held that a "town
hall meeting" announcement made by the defendant to pay bonuses
from a minimum bonus pool, in return for continued employment
and performance by the employees, constituted a classic unilateral
contract. The result was that the requirement for communication of
acceptance by the employees was waived. It was sufficient that the
employees continue their employment.
Silence
3-410
A second situation where acceptance may not require any
communication is where the parties have agreed that the offeree's
silence is to be construed as his acceptance. For this to be effective,
however, both parties must agree to it. If the offeror, without the
consent of the offeree, imposes a condition that the offeree's silence
would be taken as acceptance, then such a condition would not be
enforceable.
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Felthouse v Bindley (1862)
On 2 February, Felthouse wrote to his nephew, Bind ley, making an
offer to buy Bindley's horse at a fixed price. The letter stated: "If I
hear no more about him, I consider the horse mine at that price."
Bind ley did not rep ly to Felthouse. The horse was subsequently
sold by Bindley to another person. Felthouse sued Bind ley. It was
held that there was no contract between Felthouse and Bindley.
Felthouse had no right to impose a condition that a sale contract
would come into existence if Bindley remained silent.
3-411
Although silence is not automatically equivalent to acceptance, in
certain circumstances, it can properly be construed as acceptance.
For example, both the offeror and the offeree may agree that the
offeree would have a positive obligation to communicate only if
he wishes to reject the offer. In such a case, albeit rare in practice,
silence can properly be construed as acceptance: Southern Ocean
Shipbuilding Co Pte Ltd v Deutsche Bank AG (1993).
Mid/ink Development Pte Ltd v The Stansfield Group Pte Ltd (2004)
The defendant leased premises from the plaintiff landlord until
June 2002. This was evidenced by written agreements. The parties
subsequently negotiated to renew the lease with a reduced rent.
The defendant, however, did not sign a written agreement but
continued to pay the lower rent. The defendant later tried to
terminate the lease on the ground that there was no binding
tenancy agreement. The Singapore High Court held that there was
an effective oral contract between the parties. This was despite the
defendant's purported "silence" (inactivity following the offer) and
the absence of a written tenancy agreement. Here, the defendant's
conduct of paying the reduced rent showed that a contract exists.
Rajah JC said:
"Silence and implicit acceptance are not invariably antagonistic
concepts...To say that silence can never be unequivocal evidence
of consent may be going too far... lt is always a question of fact
whether silent inactivity after an offer is made is tantamount to
acceptance."
R11nternational Pte Ltd v Lonstroff AG (2015), the Court of Appeal
applied the principles in Mid/ink Development and reiterated that the
effect of silence is context-dependent. Whether silence amounted to
acceptance depended on whether the parties' conduct, objectively
ascertained, supports the existence of a contract. A failure to object
might at times amount to an assent to the incorporation of the
other party's terms. On the facts, the Court of Appeal held that the
respondent's payment of the invoice for the contract without protest
constituted unequivocal acceptance of its terms. Similarly, in G-Fuel Pte
Ltd v Gulf Petrochem Pte Ltd (2016), the Singapore High Court held that
a contract was formed because the defendant did not communicate
an objection.
3-411b In
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The Postal Acceptance Rule
3-412
The third exception which may allow acceptance to be effective even if
it is not communicated to the offeror is when acceptance is sent through
the post. In such a situation, the acceptance is deemed to have been
effective as soon as the letter is posted, regardless as to when, if at
all, it reaches the offeror.
Adams v Lindse/1 (1818)
On 2 September 1817, the defendant wool-dealers wrote to the
plaintiff woollen manufacturers offering to sell some wool.
The offer letter reached the plaintiff on 5 September.
The defendant's offer letter requested a reply "in course of post".
That same evening, the plaintiff posted a letter of acceptance
which reached the defendant on 9 September. Meanwhile, on
8 September, the defendant, having heard nothing from the
plaintiff, sold the wool to someone else. The court held that the
acceptance was communicated and the contract formed as soon as
the plaintiff posted the acceptance letter on 5 September.
3-413
The rationale for the postal rule is rooted in 19th century England.8
Yet the rule continues to apply today in England as well as Singapore:
Lee Seng Heng v Guardian Assurance Co Ltd (1932). However, care must
be taken when applying the posta l rule. It shou ld be applied only in
circumstances where it is clear that the parties agree that acceptance
should be sent by post: 1L30G v EQ Insurance Company Ltd (2017). Thus,
an offer made by telegram gives rise to a presumption that the offeror
wishes a speedy reply such that an acceptance sent by post would not
attract the posta l rule: Quenerduaine v Cole (1883). In such a situation,
the genera l rule applies and acceptance occurs only when the posted
letter is actually received.
3-414
Where the postal rule does apply in a particular situation, it benefits
the offeree. It is not surprising that, to avoid the application of the
postal rule, offerors often stipulate that acceptance is not valid until
physically received by the offeror. In this way, the offeror overrides
the postal rule so that the general rule applies. Also, if legislation
authorises or requires a document to be sent by post, the postal rule
does not apply: s 2(5) Interpretation Act. For example, the postal rule
does not apply to an acceptance of an offer to settle litigation where
the acceptance was sent by post pursuant to 0 22A Rules of Court:
Chia Kim Huay v Saw Shu Mawa Min Min (2012).
Electronic Communications
3-415
8.
What about offers and acceptances sent by electronic communication?
In 1998, Parliament enacted the Electronic Transactions Act (ETA) to
See generally: Gardner S, "Trashing with Trollope: A Deconstruction of the Postal Rule in
Contract" 12 Oxford Journal of Legal Studies (1992) 170.
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further facilitate electronic commerce. 9 While helpful to some extent,
the ETA does not resolve all questions relating to offers and acceptances.
One helpful provision states that an offer or acceptance can be sent
electronically in the form of an "electronic communication": s 11 ETA.
Another helpfu l provision, created through a 2010 amendment to the
ETA, states that an online advertisement of goods or services via the
internet will be considered as an invitation to treat unless the offeror
makes it clear that he intends to be bound by it: s 14 ETA. This means
online advertisements essentially have the same legal status as traditional
advertisements- they are general ly considered as invitations to treat
(1]3-306).
3-416
As to the t iming of offers and acceptances, the general rule pursuant
to the ETA is that the despatch of an electronic communication occurs
when the message leaves an information system under the control of
the originator: s 13(1) ETA. Receipt occurs when the electronic communication becomes capable of being retrieved by the addressee at an
electronic address designated by him; or, if the electronic communication
is received at an electronic address that has not been designated by the
addressee, receipt occurs when the message becomes capable of being
retrieved by the addressee at that address and he becomes aware that
the electronic commun ication has been sent to that address: s 13(2) &
(3) ETA. In these circumstances, it seems generally advisable to designate
an electronic address whenever possible and ensure that that address is
checked regularly for incoming messages. An electronic communication
is presumed to be capable of being retrieved by the addressee when it
reaches the electronic address of the addressee: s 13(4) ETA.
3-417
Whiles 13 ETA clarifies when an electronic communication is despatched
or received, it does not categorically state when acceptance is
communicated. Does acceptance occur when the communication is
received by the electronic system or when it is actually retrieved by
the addressee? So, the question as to when acceptance is effective
for electronic contracts remains. In other words, the ETA does not
definitively endorse the postal rule or the general (receipt) ru le. As the
Singapore High Court has noted in Chwee Kin Keong v Digilandmall.com
pte Ltd (11 3-403), s 13 ETA does not purport to change or even clarify
the lega l principles governing contract formation:
" It can be noted, however, that while [s 13) of the ETA appears to be
inclined in favour of the receipt rule, commentaries indicate that it is
not intended to affect substantive law. It deals w ith the process rather
than the substance of how to divine the rule."
9.
On the ETA, see: Tan K H, "Breaking New Ground: The Electron ic Transactions Act 1998"
23 Asia Business Law Review (January 1999) 64; and Chandran R, "Singapore's Electron ic
Transactions Act 1998" Journal of Business Law [1999) 80.
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~
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3-418
How then is the time of acceptance to be determined for electronic
contracts? On this point, the older case of Entores Ltd v Miles Far East
Corporation (1955) may be helpful. Entores involved the now largely obsolete telex communication system. Telex functioned using a network of
teleprinters (similar to a telephone network) through which text-based
messages were sent electronically. Telex machines could be manned by
operators or unmanned. Entores held that in the case of acceptances
sent by telex, the genera l rule applied: acceptance was complete when
it was received, not when it was sent.
Entores Ltd v Miles Far East Corporation (1955)
A Dutch company in Amsterdam sent a telex to London accepting a
counter-offer sent by the English company in London. The court had
to decide where the contract was made. The court held that, in this
case, the contract was made when the communication was actually
received - in london where the telex was received.
3-419
In one sense, therefore, the finding in Entores can be viewed as having
pre-empted the principle in s 13 ETA; namely, the general rule (ie_
acceptance is completed when it is received, not sent) applies to
electronic communications. The Singapore High Court in Chwee Kin Keong
v Digilandmall.com Pte Ltd (113-403) also appeared to lean in favour of the
general rule (referred to there as the receipt rule) for email acceptances.
If so, then the postal rule will have little or no scope of application to
acceptances sent by electronic means. 10
TERMINATION OF OFFER AND ACCEPTANCE
3-501
Not all offers result in acceptances. An offer can expire or an acceptance
be withdrawn such that no contract results. We will first consider how
an offer can terminate and then consider how an acceptance terminates.
There are essentially five ways through which an offer can terminate,
thus preventing a contract from coming into existence.
Termination of Offers
~
~~ Diagram 3F
c..~:'--
10.
For a more historical perspective on how the law has sought to cope with technological advances in
electronic communications, see: Gardiner J, "The Postal Rule in Contract Law and the Electronic Marvels" (July
1994) 2(2) Current Commercial Law47; and Phang A B L, "Contract Formation and Mistake in Cyberspace- The
Singapore Experience" (2005) 17 Singapore Academy ofLaw Journal 361 .
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Withdrawal
3-502
The first way to end an offer is by withdrawing it, at any time prior to
acceptance. When an offer is withdrawn, the offer is said to be revoked.
A revocation of an offer must be communicated to the offeree; in other
words, the revocation is effective only when the offeree receives notice
of the revocation.
Byrne v Van Tienhoven (1880)
On 1 October, the defendant mailed a written offer to the
plaintiff to sell 1,000 boxes of tin plates. On 8 October, they mailed
another letter revoking their earlier offer. This letter reached the
plaintiff on 20 October. Meanwhile, on 11 October, the plaintiff
telegraphed their acceptance which was confirmed in a letter
posted on 15 October. lindley J held that the revocation was not
effective until 20 October when the letter of revocation was
received by the plaintiff. Since the offer was accepted prior to
the revocation, there was a valid contract.
3-503
However, it appears that it is not necessary for the communication
of the revocation to be made by the offeror himself. A reliable third
party could commun icate a val id revocation. The important point, it
seems, is that the offeree obtains knowledge of the revocation.
Dickinson v Dodds (1876)
On 10 June, Dodds made a written offer to Dickinson to sell his
house for £800, "to be left over until Friday 12 June, 9 am." This
means that the offer is intended to remain open until 9 am on
12 June. However, on 11 June, Dodds sold his house to someone
else. That same evening, a fourth person told Dickinson about
the sale. Dickinson purported to accept Dodd's offer by forwarding
a written acceptance before 9 am on 12 June. The English Court
of Appeal held that Dodds had validly withdrawn his offer and
that withdrawal was effectively communicated to Dickinson even
though this was done through a third party.
Overseas Union Insurance Ltd v Turegum Insurance Co (2001)
The plaintiff Singapore company had entered into reinsurance
contracts with the defendant British insurers. In 1995, the plaintiff
negotiated with the defendant to settle certain claims relating to
the reinsurance contracts. In March 1999, the defendant offered
to accept a sum of US$220,000 from the plaintiff to reduce its
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 a letter of demand made on 5 October
such that it was no longer capable of acceptance. The plaintiff
insisted that the parties had entered into a binding agreement on
21 October. The Singapore High Court agreed with the defendant's
claim. According to Prakash J:
"The maker of an offer is free to withdraw it at any time before
it is accepted. Notice of the withdrawal must be given and must
actually reach the offeree to be effective. It is not necessary,
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however, that the notice of withdrawal be explicit. It is enough
if the offeree is given information which would show that the
offeror has changed his mind and no longer wants to proceed
with t he offer. This information need not even come directly
from the offeror .... 1consider that an objective person would
have rea lised from the letter that [the defendant) was no longer
minded to settle the claim on the terms previously put forward."
3-504
Revocation of an offer can also occur if the offer is replaced or substituted
by a fresh offer. The fresh offer must, however, stipulate that it
supersedes the earlier offer.
Banque Paribas v Citibank NA (1989)
On 14 October 1985, a marine salvage company, Selco, wrote to
Citibank offering to sell salvage claims in respect of nine vessels. On
7 November, Selco made a second offer to Citibank to sell salvage
claims in respect of four of the vessels listed in the first offer. The
letter stated that "This letter will supersede our previous letter...
dated 14 October 1985". On 7 November, Citibank accepted the second offer. Meanwhile, on 23 October, Selco completed the sale of
the salvage claims in respect of the other five vessels to Pari bas. On
20 November, Citibank purported to accept Selco's offer in respect
of the same five vessels on the ground that the first offer remained
open. In the Singapore High Court, Thean J held that the first offer
"had been replaced or substituted by the 7 November letter and the
effect of that is that any offer in the 14 October letter which had
not been accepted had been withdrawn". Accordingly, Citibank's
purported acceptance on 20 November failed.
3-505
What if the offeror had expressly stipulated that he would keep
his offer open for a fixed period- is he bound to do so? For instance,
it may be argued that in Dickinson v Dodds (113-503) it seems unfair that
Dodds was entitled to withdraw his offer when in fact he had
originally told Dickinson the offer would remain open until 9 a.m.
on 12 June. Is there a legal obligation on the part of Dodds to
keep his offer open for the specified period? Although there have
been suggestions to the contrary, the present answer, perhaps
somewhat surprisingly, is no.
Routledge v Grant (1828)
On 18 March, Grant made an offer to Routledge to buy his house.
The offer specified that "a definite answer [from Routledge is) to
be given within six weeks from date [of offer)". Best CJ held that
it is permissible for Grant to withdraw his offer during the six
week period despite the implied assurance that the offer would
remain open during this period.
3-506
The rationale is that an offeree cannot enforce an offeror's promise to
keep his offer open unless there is a separate contract supported by
consideration to do so. Such contracts are called "options". An option
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is essentia lly a promise, supported by consideration, to keep an offer
open for a specific period. In Singapore, options are typically used in
transactions involving real property if the offeree wishes to have a period
of time w ithin which to decide whether or not to enter into the purchase
agreement: Tay Joo Sing v Ku Yu Sang (1994). In Woo Kah Wai v Chew Ai
Hua Sandra (2014), the Singapore Court of Appeal further clarified that
a contract to grant an option to purchase (a "pre-option contract") is
legally enforceable so long as all the other requirements of contractual
formation are satisfied. Options are also used in respect of company
shares.
3-507
One complicating factor arises in the case of revocation of an offer in
a unilateral contract. Take the case of the pet owner who makes an
offer of a reward for the return of his lost cat. The problem is that,
once the offer is made, the offeror is not in a position to know whether
anyone has accepted or has started to accept the offer by searching for
the cat. In such a situation, is the offeror entitled to revoke his offer?
3-508
If the usual rule is applied, then the offer can be revoked at any time
prior to acceptance. In the case of a unilateral contract, th is occurs
when the offeree's obligations have been fully performed. If so, then,
as the pet owner sees Tom walking with the lost cat in his arms to
the owner's home, the owner can still revoke the offer. Such a view,
obviously, can be quite unjust. Yet, it is the log ical conclusion based
on the general rule of revocation of offers.
3-509
An alternative view is that, if an offeree within a reasonable time from
the making of the offer begins to perform his obligations, the offeror
cannot revoke the offer. This was the view adopted by an early decision
of the Supreme Court of New South Wales, Australia. The court held
that in cases of unilateral contracts, the offeror cannot withdraw his
offer once the offeree has started to act: Abbott v Lance (1860). Th is
view is simi lar to that held by the legal scholar, Sir Frederick Pollock.
Pollock wrote that the offeror cannot revoke his offer once the offeree
has made" an unequivocal beginning of the performance requested" .11
3-510
In Singapore, the second view appears to find favour. In Dickson Trading
(S) Pte Ltd v Transmarco Ltd (1989), in what seems to be an obiter dictum,
Chan Sek Keong JC accepted the proposition that: " ...the offeror in
a uni latera l contract has an obligation not to revoke the offer after
the offeree has embarked on the performance of the conditions." In
Brader Daniel John v Commerzbank AG (2014), the Singapore High Court
endorsed Dickson Trading, holding that once the employees commence
performance i.e. continue in their employment and forbear from resigning, the defendant bank would come under an obligation not to
revoke the offer.
11.
Pollock F, above note 7, 19.
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Rejection and Counter-offer
3-511
An offer can also be terminated when an offeree rejects the
offer. Rejection may be made in writing, orally or by conduct.
For a rejection to be effective, it must be communicated to the
offeror. Once communicated, a rejection extingu ishes the offer
and the offer cannot be revived.
3-512
Where an offeree accepts an offer but on condition of a new
term, the acceptance may amount to a counter-offer. A counteroffer is construed as rejecting the initial offer. This rule is corollary
to the rule that an acceptance must be unconditional for it to be
valid. Thus, anything less than an uncond itiona l acceptance may
be viewed as a counter-offer which rejects the original offer.
Hyde v Wrench (1840)
On 6 June, Wrench offered to sell a certain property to Hyde at a
price of £1,000. Hyde replied on 8 June, offering to purchase the
property at £950. Wrench refused on 27 June. Then, on 29 June,
Hyde wrote that he was now agreeable to buy the property for
£1,000. The court held that there was no contract because Hyde's
reply of 8 June was a counter-offer which extinguished the offer
of 6 June. Accordingly, Hyde's communication of 29 June could
not be an acceptance since, by this time, there was no longer any
offer available.
3-513
Sometimes it is difficult to ascertain whether an offeree's response is
a counter-offer. In certain circumstances, the response may simply be
an inquiry or a request for additional information and shou ld not be
construed as an offer. Ultimately, the task of construing the nature of
any communication calls f or a thorough examination of the facts: Ong
Hong Kiat v RIO Pte Ltd (2013) and must be done carefully in the light
of the circumstances of each case: The 'Master Stelios', Monvia Motorship
Corporation v Keppel Shipyard (Pte) Ltd (1983).
Lapse of Time
3-514
The third way in which an offer can terminate is by lapse of time.
The clearest example is where an offeror states that his offer is
open for a specified period. A purported acceptance after that
period wou ld not be effective since the offer had lapsed. In certain
circumstances, the court may imply that the offeror has specified
the period of offer even if he has not done so expressly: Wee Ah Lian
v Teo Siak Weng (1992). However, if it is clear from the offeror's
conduct and other evidence that the terms of the supposedly
lapsed offer continue to govern their relationsh ip after the
specified period, then the offer is still valid and capable of acceptance
after the dead line: Panwe/1 Pte Ltd & Anor v Indian Bank (No 2) (2002).
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3-515
Even if there is no express or implied period when the offer is open,
the law usually presumes that an offer will lapse after a reasonable
t ime has passed. What is a reasonable period depends on the circumstances of each case. In commercial transactions, the period tends
to be shorter since prices continually f luctuate in the business world.
Ramsgate Victoria Hotel Co v Montefiore (1866)
On 8 June 1864, Montefiore wrote to the plaintiff company
offering to take up shares in the company and paid a deposit
into the company's bank account. There was no reply. On 23
November, the company replied stating that it had allotted shares
to him and asking for the balance of payment. Montefiore refused
to take up the shares and the company sued. It was held that
Montefiore could refuse to take up the shares because his offer
had lapsed after a reasonable time. The delay between June and
November meant that the company's acceptance came after the
offer had lapsed.
Failure of Condition
3-516
An offer may be made subject to a condition such that if the condition
is not met, the offer is automatically terminated. For example, in a
contract for the purchase of goods, usually the offer remains open
conditional upon the goods throughout the offer period remaining
in the same state as when the offer was first made. If the goods are
severely damaged, the offer may be deemed to have lapsed because
the condition is no longer met. Such a condition may be expressly
stated in the offer or it may be impl ied.
Financings Ltd v Stimson (1962)
On 16 March, Stimson signed a hire-purchase contract with
the plaintiff in relation to a car he saw at a car dealership. The
contract was provided by the car dealership and included a clause
which stated that the agreement was not binding until signed by
the plaintiff. On 18 March, Stimson paid the car dealer the first
hire-purchase instalment and took the car. On 20 March, he
returned the car because he was not satisfied with it. He told
the car dealer he was willing to forfeit his first instalment. On
24 March, the car was stolen from the car dealership. It was later
recovered, but badly damaged. On 25 March, the plaintiff signed
the hire-purchase contract. Stimson argued that he was not
bound to the contract and the plaintiff sued. By a majority
judgment, the English Court of Appeal held that Stimson was not
bound to the contract because there was an implied condition
that, at the time of acceptance by the plaintiff, the car would be
in substantially the same state as when the offer was made by
Stimson. This condition was broken because, at the time of
acceptance by the plaintiff, the car was badly damaged. Therefore,
the offer was no longer available for acceptance.
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3-516b Can a fundamental change in circumstances occurring after an offer is
made and before it is purportedly accepted cause the offer to lapse?
There does not appear to be any English or Singapore authority on
this point. However, the New Zealand Supreme Court has held that
an offer can lapse if there has been a fundamental change in the basis
of the offer: Dysart Timbers Ltd v Roderick William Nielsen (2009). In a
recent case, the Singapore Court of Appeal appeared to lean in favour
of this rule when it stated that "there seem[ed) to be room for the
application of the doctrine of fundamental change in circumstances per
Dysart Timbers": Ong & Ong Pte Ltd v Fairview Developments Pte Ltd (2015).
Death
3-517
In some cases, an offer is terminated by death of either the offeror or
the offeree. For example, if an artist offers a client to paint his portrait,
then the offer would be terminated automatically if the artist dies. In
Dickinson v Dodds (~3-503), Mellish U expressed a broad view stating
that, "if a man who makes an offer dies, the offer cannot be accepted
after he is dead". This was an obiter dictum and should be contrasted
with the decision in Bradbury v Morgan (1862). In that case, the court
held that the death of an offeror did not terminate the offer unless
the offeree had notice of the offeror's death.
3-518
A similar outcome eventuates if the offeree dies before accepting the
offer. If the offer was directed to the offeree then, upon his death, the
offer ceases and is no longer capable of acceptance: Reynolds v Atherton
(1921). In Chia Kim Huay v Saw Shu Mawa Min Min (2012), the Singapore
High Court expressed the view that an offer would not survive an offeree's death if it was an offer personal to the offeree.
Termination of Acceptance
3-519
Once an acceptance has been commun icated to an offeror, it cannot
be withdrawn since, upon communication, there is a contract.
Conversely, unti l such time as acceptance is communicated to the
offeror, it can be withdrawn or revoked.
3-520
What about the case of an acceptance sent by post to which the
postal rule applies? Is it possible - by a faster means of communication
such as facsimile, email or telephone- to revoke the acceptance after
posting but before the letter reaches the offeror? There does not
appear to be any English or Singapore authority on this point.
However, a New Zealand court has he ld that, once posted, an
acceptance cannot be revoked: Wenkheim v Arndt (1873).
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SUMMARY
3-601
This chapter described the essence of a contract and outlined its key
features. The distinction between special contracts (deeds) and
simple contracts is explained. So is the distinction between written
and oral contracts. The rest of the chapter then focused the
discussion on the first two key elements requ ired to form a contract:
offer and acceptance.
3-602
By making an offer, the offeror is expressing his willingness to enter
into a contract. The offer can be made to a specific person, a group
of persons or, in the case of unilateral contract, to the whole world.
If the offeree unconditionally accepts the offer, the parties are in
agreement and, assuming the other necessary elements exist, then a
contract is formed.
3-603
An offer, however, must be distinguished from an invitation to treat
and a reply to a request for information. The classic example of an
invitation to treat is a display of goods in a shop. Contrary to popular
opinion, the display is only an invitation to treat, not an offer- despite
any point-of-sale signage to the contrary. However, an advertisement
on a commercial website may be an invitation to treat or an offer,
depending on its wording. In the case of an auction or tender, the
person making the bid or the tender is typically the offeror, not the
offeree.
3-604
Once an offer is made, only the offeree can accept the offer. This
implies that the offeree must know of the offer. Thus, two identical
cross-offers do not make a contract. However, once he is aware of
the offer, it is irrelevant that his acceptance was motivated by
factors other than a desire to accept the offer.
3-605
To be effective, the acceptance must be unconditional. Hence, an
acceptance which is "subject to contract" or "subject to review" is a
qualified acceptance; the contract is not created until the condition is
fu lfil led. Furthermore, the acceptance must be communicated. The
general rule is that acceptance is communicated when it is received by
the offeror. The fol lowing are exceptions to this genera l rule:
(a)
if there is a waiver of communication;
(b)
silence may amount to acceptance if the parties so agree; and
(c)
the postal rule deems acceptance to be communicated when
it is posted, not when it is received.
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Contract : Offer and Acceptance
3-606
In the case of electronic contracts, the ETA applies. An online
advertisement of goods or services via the internet will be considered
as an invitation to treat unless the offeror makes it clear that he
intends to be bound by it. Moreover, an offer or acceptance can be sent
electronically in the form of an electronic communication. Despatch
of an electronic communication occurs when the message leaves
an information system under the control of the originator. Receipt
occurs when the electronic communication becomes capable of being
retrieved by the addressee at an electronic address designated by him.
If the electronic address has not been designated by the addressee,
receipt occurs when the message becomes capable of being retrieved by
the addressee at that address and he becomes aware that the electronic
communication has been sent to that address. In these circumstances,
the posta l rule appears to have little or no scope of application to
acceptances sent by electronic means.
3-607
Not all offers are accepted. An offer can be terminated prior to it
being accepted. There are a number of ways in which an offer can
be terminated:
(a)
the offer can be withdrawn or revoked;
the offer can be rejected;
(b)
(c)
the offeree can make a counter-offer;
(d)
the offer can lapse after a reasonable period of time has
passed;
(e)
a conditional offer can terminate upon occurrence of that
condition; or
(f)
the offer may be terminated by the death of the offeror or
the offeree.
Similarly, an acceptance may also be withdrawn as long as it has not
yet been communicated to the offeror. In the case of an acceptance
sent by post, the better view is that, once posted, it cannot be
withdrawn.
···•·•·•···
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U075837L/N1510069
Summary
Offer terminated
Made to a specific
person or a group of
rsons
Offer accepted
Offer must be communicated
Diagram 3G
------~1
Genera I rule:
Acceptance must be
communicated
Acceptance must
be final and
unconditional
MM.fB!~ijlij41ijnt•
Simple Contracts
Exceptions
Acceptance
properly made under
the postal rule
Parties agree
that offeree's silence is
acceptance
Offeror waives
communication of
acceptance
Chapter4
Intention to
create legal relations
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CONTRACT:
CONSIDERATION AND INTENTION
TO CREATE LEGAL RELATIONS
INTRODUCTION
4-101
In the previous chapter, we looked at the first two elements
necessary to form a contract- offer and acceptance. In this chapter
we continue our examination of how contracts are formed by
discussing the remain ing two elements namely, consideration and
intention to create legal relations.
CONSIDERATION
4-201
While the doctrine of consideration has a long pedigree in contract law,
there have been recent calls for its abolition (~4-230). Nonetheless, the
doctrine of consideration - in spite of its weaknesses- remains a key
doctrine of contract law in Singapore today: ATS Specialized Inc (trading
as ATA Wind Energy Services) v LAP Projects (Asia) Pte Ltd (2012).
4-202
Traditional ly, consideration is essential for all contracts, except those
which are under seal (ie, a deed). In lay terms, consideration can be
viewed as the price or compensation for the promise given by one
party to the other. Thus, if Aris agrees to sell his book to Rehan for
$30, then the consideration for sel ling the book is $30. Consideration
is rooted in the concept of reciprocity or bargain; it is the something
which is given in exchange for another thing.
4-203
A more formal definition of consideration was given by Sir Frederick
Pollock and later adopted by the House of Lords in Dunlop v Selfridge
(1915): "An act or forbearance of one party, or the promise thereof, is
the price for which the promise of the other is bought, and the promise
thus given for value is enforceable."
4-204
In respect of each act, forbearance or promise, the person who
makes or pe rforms it is the promisor and the person to whom
it is made or performed is the promisee. In a typical contract, there
wil l be at least two promises. On the one hand, Aris prom ises to
sel l his book to Rehan. On the other hand, Rehan promises to pay
Aris $30. The consideration for Aris' promise is Rehan's promise, and
vice versa. In other words, in each contract, there are at least
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SINGAPORE BUSINESS LAW
two promisors and two promisees. In the case of Aris and Rehan,
each is a promisor and a promisee, depending on which promise
is being considered. Thus, if Aris breaks his promise to sell the
book to Rehan, Rehan can sue him for breach of that promise,
but only if Rehan has given consideration in exchange for that
promise. In this situation, Aris is the promisor (who broke his
promise) and Rehan is the promisee (who is required to furnish
consideration in order to sue Aris for breach of contract). Th is
then illustrates the meaning of the above quote from Dunlop
v Selfridge (1915): that in order for a promise to be enforceable
in court, consideration must first be given in exchange for such
promise. The idea of exchange requi res that the consideration given
by the promisee must be requested by the promisor: Max Sources Pte
Ltd v Agrocon (S) Pte Ltd (2015).
Consideration and Promises
Promise 1 :Promisor
Promise 1 :Promisee
Promise 1 : Book
oE------~
Promise 2 : $30
Promise 2: Promisee
Promise 2 : Promisor
Types of Consideration
4-205
There are three types of consideration which must be distinguished.
They are executory, executed, and past consideration.
Executory Consideration
4-206
Executory consideration refers to consideration which is yet to be
performed. In the case of Aris and Rehan, the consideration is
executory if the contract consists of promised obligations which
are intended to be performed in future. For example, Aris may
agree to deliver the book next Monday, when Rehan is scheduled
to hand over the money. Here, both promises are executory in
nature.
Executed Consideration
4-207
Executed consideration, on the other hand, refers to consideration
which has been performed. Suppose that Aris offered and handed
over the book to Rehan and Rehan agrees to buy it and promises
to pay the $30 the following week. In this case, Aris has performed
his promise whereas Rehan's is still to be performed in future. Here,
Aris' consideration is executed because the consideration was given
together with the offer. Rehan's consideration is still executory. In
other words, whereas executory consideration involves a promise to
perform an act in future, executed consideration involves an act
or forbearance which has been fulfilled.
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79
----------------~
Past Consideration
4-208
Past consideration refers to an act performed prior to, and to that
extent independent of, the promises being exchanged. In other words,
the action which was performed was not done in contemplation of
or in response to a promise given. The general rule is that past
consideration is not sufficient to make a promise enforceable; hence
the saying: "past consideration is no consideration".
Roscorla v Thomas (1842)
Thomas made a declaration which stated: " in consideration
that the plaintiff at the request of the defendant, had bought of a
certain horse, at and for a certain price, the defendant promised
the plaintiff that the said horse was sound and free from vice".
The court held that the defendant's promise was made after the
transaction had already been concluded and was past consideration.
4·209
Sometimes it is difficult to distinguish executed consideration from
past consideration because in both situations the act has been
performed. The key, however, is that with executed consideration the
act was performed in exchange for another promise given whereas
with past consideration the act was performed without the reciprocal
promise in mind. Hence, if Aris gratuitously gave his book to Rehan
and then, subsequently, Rehan promises to give Aris $30, this will
constitute past consideration. Aris' act was not done in exchange
for the promise of the $30. If, however, Aris gave the book to Rehan
at the time of making the mutua l promises, then this will constitute
executed consideration because Aris' act was done in exchange for
the promise of $30.
Past Consideration Becomes Executed Consideration
Pao On's three requirements
Act done at promisor's request
Contract must otherwise be enforceable
4-210
Clearly, when distinguishing between past consideration and
executed consideration, the state of mind of the parties, especially
the person performing the act, is critica l. What appears to be
past consideration could in fact be executed consideration - and
thus good consideration - if it can be shown that, at the time of
performing the act, the parties intended that the promisee's action
would be compensated by the promisor. In a sense, this can be
viewed as an exception to the genera l rule that past consideration
is no consideration. In Pao On v Lau Yiu Long (1980), Lord Sca rman
summarised the position as follows:
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"An act done before the giving of a promise to make a payment
or to confer some other benefit can sometimes be consideration
for the promise. The act must have been done at the promisor's
request: the parties must have understood that the act was to be
remunerated either by a payment or the conferment of some
other benefit, and payment, or the conferment of a benefit, must
have been legally enforceable had it been promised in advance."
.JiiiL Do not Bank on Past Consideration
~ Rainforest Trading Ltd v State Bank of India Singapore
(2012)
On 22 February 2007, the respondent bank, SBIS, entered into a Facility
Agreement with Baytech Inc. This was to finance Baytech's parent company's
acquisition of eSys Technologies, a wholly-owned subsidiary of the appellant
company, Rainforest. Under the Facility Agreement, it was agreed that the
US$80 million loan facility would be secured by a pledge over 51% of the
shares of eSys Technologies (the "Pledged Shares"). On 23 February 2007,
Baytech Inc fully drew down on the facility.
On 5 April 2007, Rainforest delivered share certificates representing the Pledged
Shares to SBIS, together with a signed blank share transfer form. Subsequently,
Baytech failed to make payment on US$13 million due and owing to SBIS.
Consequently, SBIS declared an event of default had occurred under the Facility
Agreement and took steps to enforce its security over the Pledged Shares.
Rainforest argued that the consideration furnished by SBIS, namely the
loan to Baytech under the Facility Agreement on 22 February 2007 (or,
alternatively, the disbursement of the loan on 23 February 2007) preceded the
equitable mortgage over the Pledged Shares which was created on 5 April
2007. Rainforest argued that this constituted past consideration. If so, then
the Facility Agreement fai led for lack of consideration.
The Singapore Court of Appeal reaffirmed the rule that past consideration
is not good consideration. On the facts, however, the court found that the
conditions laid down in Pao On were satisfied. Rainforest's arguments that
consideration was past were rejected. Andrew Phang JA observed:
"The courts are understandably (and justifiably) reluctant to invalidate
otherwise perfectly legitimate and valid commercial transactions on as
technical a basis as consideration. A strictly chronological approach in
determining whether consideration is past or not is deeply unrealistic and
unnecessarily restrictive; it also undermines the freedom of contracting
parties as well as the sanctity of commercial transactions... lf the earlier
act which is said to constitute the consideration for the later promise
is part of substantially one and the same transaction and there was a
common understanding between the parties that the former was to be
compensated for by the latter, the consideration is valid and hence the
later promise is enforceable, notwithstanding the fact that, in strictly
chronological terms, the consideration was provided before the promise
was made."
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4·211
In Singapore, the courts have followed the general rule that past
consideration is no consideration: T2 Networks Pte Ltd v Nasioncom Sdn
Bhd (2008). Further, the exception to this rule, as expressed in Pao On
v Lau Yiu Long, has also been followed in Singapore: Rainforest Trading
Ltd v State Bank of India Singapore (~4-21 0).
4-212
There are two main rules on consideration which should be borne
in mind. First, consideration must move from the promisee but need
not go to the promisor. Secondly, consideration must be sufficient
but need not be adequate. These rules are explained below.
Two Main Rules
rRules on Consideration I
Must move from
promisee but
need not move
to promisor
Need not be
adequate but
must be sufficient
Consideration Must Move From Promisee
4-213
The general rule is that for a promisee to enforce the promise, he
must show that consideration has moved from him. Take the case
of Aris and Rehan again. Suppose Aris contracted instead with
Rehan's father who paid the $30 to Aris. Rehan's father instructed
Aris to hand over the book to Rehan. This rule states that, if Aris
fails to hand over the book, then Rehan's father can enforce the
contract because consideration has moved from him. However,
Rehan is not able to enforce the contract because no consideration
has moved from her.
Tweddle v Atkinson (1861)
A young couple married and their respective fathers subsequently
entered into a contract. The contract provided that each fath er
was to pay a specified sum to the young husband, Tweddle, and
that he is entitled to sue for the money. The fathers later died.
Tweddle sued the executors of one of the fathe rs for the money
due to him. The court held that Tweddle could not enforce the
contract between the two fathers. First, he was not a party to the
contract. Secondly, no consideration f lowed f rom him. From
Tweddle's perspective, the law viewed the fathers' promises as
gratuitous promises.
4·214
The rule that consideration must move from the promisee has often
been associated with the rule of privity of contract, which is discussed
later in th ischapter (~4-401) . There is some debate as to whether these
two rules are merely two sides of the same coin or whether they are
two distinct rules. Until th is issue is clarified, it is best for our purposes
to consider the two rules as distinct and understand how each operates.
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4-215
While consideration must move from the promisee, it does not have
to move to the promisor. In other words, although the promisee
must provide consideration, the consideration need not benefit the
promisor: Malayan Banking Bhd v Lauw Wisanggeni (M-219) and KLW
Holdings Ltd v Straitsworld Advisory Ltd and another (2017). In the case of
Aris and Rehan, it is clear that the consideration provided by Aris- the
book- did not move to the promisor (Rehan's father) but to Rehan. In
other words, a third party who is a stranger to the contract may benefit
from the contract although he may not enforce it.
Consideration From Promisee
Promise 1:Promisee
Promise 1:
Book to be given to Rehan
·~-~
Promise 2 : $30
Promise 2: Promisee
Promise 2: Promisor
Must be Sufficient but Need Not be Adequate
4·216
Among lay people, the terms "adequate" and "sufficient" are
usually treated as synonyms and used interchangeably. However,
the law, when dealing with the question of consideration, contrasts
these two words. The legal rule which has been hallowed by more
than 300 years of usage states that the consideration given for a
promise must be sufficient but need not be adequate.
Adequacy of Consideration
4-217
The law creates a distinction between "adequate" and "sufficient" to
convey two basic principles. First, the law will not interfere with the
parties' bargain. Therefore, if Aris agrees to sell his book to Rehan for
a token one cent, the law will still recognise and enforce the contract.
Second, unlike certain civil law systems, the common law will not
inquire as to the fairness of the consideration, as long as the parties
agree to it willingly: Lam Hong Leong Aluminium Pte Ltd v Lian Teck Huat
Construction Pte Ltd and Another (2003). Hence, even a "peppercorn" or
nominal consideration can be good consideration. In Swiss Singapore
Overseas Enterprise Pte Ltd v Navalmar UK Ltd (No 2) (2003), Choo Han
Teck JC in the Singapore High Court observed: " ... once the subject
of exchange is recognised in law as suitable consideration, quantity
is irrelevant. [Hence] legal tender... is good consideration even if one
offers two cents for a piece of cake."
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CHAPTER 4
::::.
8 .::::.
3
Chappell & Co Ltd v Nestle Co Ltd (1960)
Nestle offered to the public records of a dance tune called
"Rockin' Shoes" in return for a money price (1 shilling, 6 pennies)
accompanied by three wrappers of Nestle's chocolate bars. Nestle's
aim was to advertise their chocolate bars. It made profit f ro m the
money price and simply threw away the wrappers. Pursuant to
s 8 Copyright Act 1956 (UK), any person can use a copyright tune if
he pays a royalty of 6.25% of the "ordinary retail selling price" of
the record to the owner of the copyright. Chappell & Co owned
the copyright to "Rockin' Shoes". Nestle offered to pay a royalty
based on the money price, but Chappell & Co insisted that the
consideration for the record included the price of the three
chocolate bars. The House of Lords, in a majority decision, held
that the consideration included the wrappers even though they
were of no value to Nestle.
4-217b
In some cases, however, a grossly inadequate consideration may
lead the court to conc lude that a party to the arrangement either
did not understand what he was doing or was the victim of some
imposition: Kuek Siew Chew v Kuek Siang Wei and another (2015). In
such situations, the agreement may be set aside on the ground of
duress or undue influence (see 116-602 to 116-606).
Sufficiency of Consideration
4-218
Secondly, all consideration must be of some value in the eyes of
th e law. This makes the consideration "sufficient". Sufficient
consideration is also described as good consideration or valuable
consideration. Goods, services, money and other forms of property
are clearly sufficient consideration. In addition, the case law revea ls
that there are other types of sufficient consideration such as a
forbearance to sue. Correspondingly, several things have been held
not to be good consideration.
Sufficient and Insufficient Consideration
p
•
•
•
•
-
•
~
Diagram 4E
Forbearance to sue
Performance of
existing contractual
duty to a third party
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Vague or insubstantial consideratictnl
Performance of existing public duty
Performance of existing contractual
duty owed to promisor
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SINGAPORE BUSINESS LAW
4-219
Generally, a promise to forbear from suing or enforcing a legal
claim can constitute sufficient or valuable consideration:
Alliance Bank Ltd v Broom (1864) and Lam Hong Leong Aluminium
Pte Ltd v Lian Teck Huat Construction Pte Ltd and Another
(2003). The same applies to a compromise of a legal
action, for example, through an out-of-court settlement:
Callisher v Bischoffsheim (1870) and T2 Networks Pte Ltd
v Nasioncom Sdn Bhd (2008). The requirement is that the legal claim
must be reasonable and not frivolous, that the claimant
has an honest belief in the chance of success of the claim,
and that the claimant has not concealed from the other
party any fact which, to the cla imant's know ledge, might
affect its va l idity: Miles v New Zealand Alford Estate Co
(1886) and Abdul Jalil bin Ahmad bin Talib and Others v A
Formation Construction Pte Ltd (2006). The claimant need not in
fact have a valid claim. Therefore, the forbearance to sue on
a doubtfu l or even an invalid claim can constitute sufficient
consideratio n, as long as the above requ irement is met: Lim Beng
Cheng v Lim Ngee Sing (2016). What is cruc ial is that the claim
was in good faith believed by the cla ima nt to have a fair chance
of success.
Malayan Banking Bhd v Lauw Wisanggeni (2003)
The defendant Lauw signed an undertaking with the plaintiff bank to
help a business contact who owed money to the bank. Lauw undertook
that. if certain shares fall below a specified value, he would make good
the difference. The shares fell below that value. But Lauw argued that the
undertaking was not enforceable because the bank did not furnish any
consideration for it The Singapore High Court referred to Alliance Bank Ltd
v Broom and held that:
"It is well established that a forbearance to sue, even for a short time,
may, in appropriate circumstances, be consideration for a promise...
There is no doubt that [the bank] furnished consideration for (the
undertaking] by giving more time to (the business contact] to repay his
outstanding debts."
Lauw also argued that the business contact benefitted from his undertaking
to the bank and Lauw himself did not receive any benefit. But the court
rejected this argument. stating: "it is trite law that while consideration must
be furnished by a party seeking to enforce a contract not under seal, the
consideration offered need not move to the promisor."
4-220
In some situations, the performance of an existing contractual duty
to a third party may constitute valuable consideration. The case of
The Eurymedon (115-416) is an example. There, the defendant
stevedores were already contractually bound to unload goods
from the ship, The Eurymedon. The plaintiff shipping company made
a separate offer to pay the defendant if they would unload the
plaintiff's goods from The Eurymedon. Even though the defendant
was already contractually bound to a third party to do so, the
majority of the Privy Council took the view that the defendant's
act of unloading the ship formed good consideration for the
contract with the plaintiff.
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4-221
85
In a subsequent case, Pao On v Lau Yiu Long (1980), the House of
Lords clarified the point further by stating that this rule applies to
both executory and executed consideration. According to Lord Scarman:
"Their Lordships do not doubt that a promise to perform, or t he
performance of, a pre-existing contractual obligation to a third
party can be a valid consideration."
The principle enunciated by this decision has been accepted in
Singapore by the High Court in SSAB Oxelosund AB v Xendral
Trading Pte Ltd (1992).
Moral Obligation
4-222
We now turn to those situations where the case law has held that
the consideration provided was insufficient. The first situation is
where the consideration amounts to nothing more than moral
obligation. Previously, it was thought that if there was a pre-existing
moral obligation owed by a promisor to a promisee and the
promisor promised to fulfill the obligation, then the pre-existing
moral obligation constituted good consideration for the promise
and no further consideration was required from the promisee. This
view was later rejected.
Eastwood v Kenyon (1840)
Eastwood was the guardian of Sarah Sutcliffe whose father had
died when she was an infant. As guardian, Eastwood incurred
expenses on her behalf. When Sarah reached majority, she
promised to repay him for the expenses. After Sarah married,
her husband, Kenyon, also promised to repay Eastwood for the
expenses. Kenyon failed to pay and Eastwood sued. It was clear
that Eastwood did not provide fresh consideration for Kenyon's
promise. However, it was argued that Kenyon was under a moral
obligation to pay Eastwood for Sarah's expenses. The court
rejected this view and held that an existing moral obligation is
insufficient consideration for a fresh promise.
In Singapore, the High Court has affirmed that moral obligation, love
or affection does not constitute sufficient consideration to support a
contract: Kuek Siew Chew v Kuek Siang Wei and another (2015).
4-223
Using a similar approach, a promise which is supported merely by
the wishes or motives of the promisee- no matter how exemplarycannot be enforced because it lacks good consideration.
Thomas v Thomas (1842)
The plaintiff, Mrs Thomas, had a husband who died. Before his
death, he had expressed his wish that Mrs Thomas should continue
to use his house after his death. After his death, the defendant,
who was the executor of Mr Thomas' estate, allowed Mrs Thomas
to use the house in return for a nominal rent of £1 and "in
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SINGAPORE BUSINESS LAW
consideration of" Mr Thomas' expressed desire before he died.
The court held that the nominal rent was sufficient consideration
but the husband's wishes were irrelevant; motive is not the same
thing as consideration.
Vague or Insubstantial Promise
4-224
A second situation giving rise to insufficient consideration is
where the consideration is too vague or insubstantial in nature
to be enforceable.
White v Bluett (1853)
Bluett had issued a promissory note to his father. Upon his
father's death, his father's executor, White, sued him on the note.
Bluett argued that his father had agreed to discharge his liability
under t he note in consideration of Bluett's promise to cease
complaining (as he was wont to do) that he was overlooked in
favour of his brothers. The court held that Bluett's promise was
nothing more than a promise "not to bore his father". As such, it
was too vague and was insufficient consideration for the alleged
discharge by his father.
Existing Public Duty
4-225
A third situation giving rise to insufficient consideration is where
the promisee is already under a public duty to perform an act and
the same act is the purported consideration. Generally, in such a
situation, there is no consideration. In the words of Lord Tenterden
in Collins v Godefroy (1831):
"If it be a duty imposed by law upon a party regularly subpcenced,
to attend from time to time to give his evidence, then a promise
to give him any remuneration for loss of time incurred in such
attendance is a promise without consideration."
In Singapore, the High Court held that the enlistment by a full-time
national serviceman was insufficient consideration because the
serviceman was performing a duty that he was already under an
existing statutory obligation to do: Estate of Lee Rui Feng Dominique
Sarron, deceased v Najib Hanuk bin Muhammad Jalal and others (20 16).
4-226
The courts, however, may find sufficient consideration if it can be
shown that the promisee did something more than that required
by an existing public duty.
Glassbrook Bros Ltd v Glamorgan City Council (1925)
The manager of a coal mine sought additional policemen to
protect the mine during a strike. The police authorities thought
a mobile force was adequate whereas the colliery manager
wanted a stationary force. Eventually, the police agreed to
provide a stationary force on the condition that they are paid
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£2,200. The company failed to pay and argued that their promise
failed because there was no consideration. The House of Lords, in
a majority judgment, held that there was sufficient consideration
because the police went beyond their public duty by providing a
stationary force which was in excess of what they thought was
adequate in the circumstances.
Existing Duty to Promisor
4-227
A fourth situation where there may be insufficient consideration
is where the promisee is under an existing duty to the promisor to
perform the act which is to be the purported consideration.
Stilk v Myrick (1809)
Stilk was a seaman on a ship sailing from London to the Baltic
and return. During the voyage, two sailors deserted. The captain
promised the crew that the wages of the deserting sailors would
be divided among them if they worked to bring the ship home,
even though shorthanded. Stilk sought to claim the extra wages.
It was held that there was no consideration for the captain's
promise because the remaining crew did what they were
contractually required to do. Two sailors deserting was within the
usual emergencies found in such a voyage.
4-228
However, if the promise involved the prom isee doing something
more than what he was already required under the contract, then
this may be sufficient consideration. In Hartley v Ponsonby (1857),
the court found sufficient consideration. There, the number of
sailors who deserted was so large that the ship became unseaworthy
and Hartley was required to do much more than what wou ld have
been expected from him originally.
4-229
More recently, the rule in Stilk v Myrick has been qualified in its
application. In certain circumstances, discharging an existing duty
owed to the promisor may constitute good consideration for a fresh
promise.
Williams v Roffey Bros and Nicholls (Contractors) Ltd (1991)
The defendants were builders who, under a main contract, were
engaged to refurbish 27 flats. They sub-contracted Williams to
carry out the carpentry work for the refurbishment for a fee of
£20,000. Williams completed part of the work, received part
payment of £16,000 but then got into financial difficulties. The
defendants were anxious about the delay caused by Williams'
financial situation- primarily because the defendants would be
liable under the main contract for late completion- and also
realised that the £20,000 sub-contract fee was too low in the first
place. So, they orally promised to pay Williams an additional £575
for each completed flat. Subsequently, the defendants failed to
pay the amount due under the oral promise for eight completed
flats. Williams sued but the defendants argued that there was no
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fresh consideration for their oral promise. The English Court of
Appeal held that, as long as the extra payment was not given
under duress or fraud, the oral promise was enforceable because
the defendant obtained "practical benefits" from Williams' work.
The benefit was that they would not be liable under the main
contract for late completion.
4-230
The decision in Williams v Roffey is difficult to reconcile with Stilk v
Myrick. However, the English Court of Appea l in Williams v Roffey did
not overrule Stilk v Myrick. The outcome is that the strict requirement
of consideration in Stilk v Myrick is effectively diluted by Williams
v Roffey. This dilution of the doctrine of consideration has been
acknowledged in Singapore. In Chwee Kin Keong v Oigilandmall.com
Pte Ltd (113-403), V K Rajah JC in the Singapore High Court noted
that "(t)he modern approach in contract law requires very little
to find the existence of consideration ...The marrow of contractua l
relationsh ips should be the parties' intention to create a legal
relationship". In Gay Choon lng v Loh Sze Ti Terence Peter and Another
Appeal (2009), the Singapore Court of Appeal elaborated further. The
court acknowledged there are "problems of theoretica l coherence"
with the doctrine of consideration - such as exceptions created by
promissory estoppel (114-234), but stated that maintaining a diluted
doctrine of consideration is the most practical solution until thorough
reform of the doctrine can be undertaken. 1 The approach for courts
in Singapore is therefore to still require consideration to uphold
contracts but to be more ready to find the existence of consideration:
Woo Kah Wai v Chew Ai Hua Sandra (2014) and 5. Pacific Resources Ltd v
Tomolugen Holdings Ltd (2016).
Rule in Pinnel's Case
4-231
The general rule that partial fulfi llment of a contractua l obligation
does not discharge the promisee's ob ligations also app lies to a
debt. To take the simplest example, if Rehan owes Aris $30 for
the book she bought, the fact that she paid $10 to Aris on the
due date does not discharge her obligations under the contract.
She still owes Aris $20. Th is is so even if Aris, at the time of payment,
assured Rehan that the $1 0 is in fu II satisfaction of the entire debt.
Pinnel's Case (1602)
Pinnel sued Cole for a debt of £8, 10 shillings of which was due to
be paid on 11 November 1600. Cole argued that, at Pinnel's
request, he had paid £5, 2 shillings, 6 pennies to Pinnel on
1 October which Pinnel accepted in full satisfaction of t he debt.
The court held that:
1.
For an overview of the development of the role of consideration in Singapore, see: Phang
A B L, "Consideration at the Crossroads" (1991) 107 Law Quarterly Review 21; and Carter J
W, Phang A B Land Poole J, "Reactions to Williams v Roffey" (1995) 8 Journal of Contract
Law 248. For a discussion on dispensing with the doctrine of consideration to bring the law
in line with commercial expectations, see Lee P W, "Consideration" in The Law of Contract
in Singapore (Phang A B L gen ed) (Singapore: Academy Publishing, 2012) 4.059-4.060; and
Halsbury's Laws of Singapore vol 7 (LexisNexis, 2014 Reissue) 80.081.
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" ... payment of a lesser sum on the day in satisfaction of a
greater [sum) cannot be any satisfaction for the whole... But
the gift of a horse, hawk or robe, etc in satisfaction is good ...
[because it] might be more beneficial to the plaintiff than the
money... [Similarly,) (t]he payment and acceptance of [a part)
before the day in satisfaction of the whole would be a good
satisfaction... [because the part) ... before the day would be more
beneficial to him than the whole at the day, and the value of the
satisfaction is immaterial."
4-232
On a technical point of pleading, Pinnel succeeded in his claim.
However, the court made it clear that, but for this technical point,
Pinnel would have failed in his claim because Cole had, at Pinnel's
request, paid the part payment earlier than the date the debt was
due and this was accepted by Pinnel in full discharge of the debt.
In other words, part payment of a debt does not discharge the
entire debt unless the part payment was made at the request of the
creditor and the payment was made earlier, at a different place, or
in conjunction with some other valuable consideration. Pinnel's Case
was later re-affirmed by the House of Lords in Foakes v Beer (1884).
Foakes v Beer (1884)
Mrs Beer was awarded a judgment of £2,090 against Dr Foakes.
They agreed that the sum would be paid by Foakes in a £500 first
payment and subsequent instalments of £150 every 6 months until
the balance was paid off. Beer agreed that she would take no
further action on the judgment. After the entire judgment was
paid, it turned out that there was statutory accumulated interest
amounting to £360. Beer claimed the £360 interest. The House
of Lords reaffirmed the rule in Pinnel's Case and held that Beer's
promise not to take further action was not supported by
consideration. Accordingly, she could claim the £360.
4-233
2.
The decisions in Foakes v Beer and Pinnel's Case have been criticised.
One argument is that the rule appears inconsistent with the
princip le that the la w does not look at the adequacy of
consideration. Further, the rule seems to allow a creditor to go back
on his word simply by omitting consideration for the settlements
he accepts. For this and other reasons, there have been
suggestions that this rule be re-evaluated. 2 However, although
the rule has been criticised and refined by exceptions, it has not
been abrogated. In Euro-Asia Realty Pte Ltd v Mayfair Investment Pte Ltd
(2001 ), the District Court in Singapore endorsed the rule in Foakes v
Beer and held in favour of the creditor.
For a useful summary and comparison of the Singapore, Malaysian and English situations,
see the discussion in Phang A B l, Cheshire, Fifoot and Furmston's Law of Contract- 2nd Singapore
and Malaysian Edition (Singapore: Butterworths Asia, 1998) 183-189.
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Consideration and Promissory Estoppel
4-234
One way in which the general requirement of consideration and
the ru le in Pinnel's Case can be softened in their application is
through the somewhat controversial doctrine cal led "promissory
estoppel". Where promissory estoppel is establ ished, a promisee
may have a valid defence against a promisor's claim even though
no consideration has been given by the promisee. This doctrine was
explained in an obiter dictum by Denning J in the well-known case
of High Trees.
Central London Property Trust v High Trees House Ltd (1947)
In 1937 the defendant obtained from the plaintiff a 99-year lease of
a new block of flats. The rent was £2,500 per year and the agreement
was under seal. The defendant then sub-leased the flats to others. In
1940, because of the war, the defendant could not find sub-tenants.
The defendant and plaintiff agreed to reduce the rent to £1,250 per
year. This arrangement was in writing but not under seal. By 1945,
the flats were fully leased by sub-tenants. Throughout this period, the
defendant paid the reduced rent. Later, the receivers for the plaintiff
sued the defendant claiming that the full rent was payable for the
last two quarters of 1945 and the f uture. The court held the receivers
succeeded in their claim on the basis that the 1940 arrangement was
intended to be a temporary one due to the exigencies of the war.
Denning J, however, expressed an obiter dictum stating that, if the
receivers wished to claim the full rent for the period 1940-45, then
they would fail because they would be estopped by the plaintiff's
1940 promise not to enforce its full legal rights, even though t hat
promise lacked consideration.
4-235
The obiter dictum by Denning J was initially crit icised by some
commentators as being inconsistent with past authority. Nevertheless,
it was approved in subsequent cases. In Singapore, promissory estoppel
was successfully applied in Orienta/Investments (SH) Pte Ltd v Catal/a
Investments Pte Ltd (2012). From High Trees and later cases, we can
summarise the key elements required to establish promissory estoppel:
(a)
the parties must have an existing legal relationship;
(b)
the promise must be clear, unequivocal and certain, and intended
to affect the existing legal relationship;
(c)
the promisee relied upon the promise and altered his position;
and
(d)
overall, it must be inequitable for the promisor to be allowed
to go back on his promise.
Element (c) was explained in Abdul Jalil bin Ahmad bin Talib and Others
v A Formation Construction Pte Ltd (2006), when Prakash J stated:
"[D)etriment of [any) kind ... is not an essentia l requirement [of
promissory estoppel) and all that is necessary is that the promisee
should have acted in reliance on the promise in such a way as to make
it inequitable to allow the promisor to act inconsistently with it." Going
further, the Singapore Court of Appea l in Lam Chi Kin David v Deutsche
Bank AG (2010) held that even if no detriment was found, a benefit
conferred upon the promisor could give rise to promissory estoppel.
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Four Elements of Promissory Estoppel
,...-
Parties have existing legal
relationship
Clear & unequivocal
f- promise which affects the
Diagram 4F
I
Requirements for
promissory estoppel
~
legal relationship
f-
'---
Promisee relied upon
promise and altered his
position
Inequitable for the promisor
to go back on his promise
Suspensive or Extinctive
4-236
Once the elements of promissory estoppe l are established, it
is tantamount to upholding a promise even though no consideration
flowed from the promisee. The usual effect is that the original legal
relationship is suspended for the duration of the promise. When
the promisor gives reasonable notice of his intention to revert to the
original legal relationship, the original relationship is restored. In other
words, the effect of promissory estoppel is to suspend the promisor's
rights temporarily: Bank of China Limited (Singapore Branch) v Huang
Ziqiang and another (2014).
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1955)
In 1938, Tool Metal granted a licence to Tungsten Electric to use
its patent rights to produce certain materials. Tungsten Electric
was to pay royalties in return. In 1939, because of the war,
Tool Metal agreed to suspend the collection of royalties pending
negotiations for a new agreement. The negotiations took place
in 1944 but ceased. In 1945, Tool Metal revoked their voluntary
suspension of royalties. In 1950, Tool Metal sued claiming
compensation from January 1947. The House of lords affirmed
the principle of promissory estoppel. But the lordships found that
Tool Metal was entitled to revoke their voluntary suspension by
giving adequate notice to Tungsten Electric. This was done in 1945
and by January 1947 the parties were deemed to have returned to
their original agreement.
4-237
In certain cases, however, it is possible that promissory estoppel
may totally extinguish the rights of the promisor under the
original agreement. Thus, the promise could become "final and
irrevocable if the promisee cannot resume his position": Ajayi v R T
Briscoe (Nigeria) Ltd (1964). Hence, in QBE Insurance (International) Ltd v
Winterthur Insurance (Far East) Pte Ltd (2005), the Singapore High
Court declared, "There being no way of putting the parties back in
their status quo ante [ie. prior original position), [the promisor) is
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now permanently estopped." Whether the effect of promissory
estoppel is suspensory or extinctive must be decided on the facts of
each case.
Shield Not Sword
4-238
Another point to note is that promissory estoppel can only be used
"as a shield and not as a sword". This means that it can only be
raised as a defence against a claim made by a plaintiff. Promissory
estoppel could not be used to commence a suit.
Combe v Combe (1951)
After obtaining a divorce, a husband promised his wife £100 per
year as an allowance. Relying on this promise, the wife chose not
to obtain a formal court order for maintenance. The husband
failed to pay and the wife sued on the basis of the promise. The
English Court of Appeal rejected the wife's claim on the principle
that promissory estoppel can only be "used as a shield and not as a
sword". Denning LJ stated:
"The principle stated in the High Trees case ... does not create
new causes of action where none existed before. It only
prevents a party from insisting upon his strict legal rights,
when it would be unjust to allow him to enforce them, having
regard to the dealings which have taken place between the
parties."
4-239
The view that promissory estoppel can only be used as a shield and
not as a sword is accepted in Singapore: Assoland Construction Pte Ltd
v Malayan Credit Properties Pte Ltd (1993) and Lai Yew Seng Pte Ltd v
Pilecon Engineering Bhd (2002). In Rudhra Minerals Pte Ltd v MRI
Trading Pte Ltd (2013), the Singapore High Court affirmed this
fundamental princ iple and rejected the plaintiff's argument
that promissory estoppel may be pleaded as a cause of action. The
learned judge also expressed his concern that if promissory estoppel
were used as a sword, it would effectively confer new rights in the
absence of a pre-existing relationship, thus becoming a way for
parties to subvert the established rules of contract formation.
INTENTION TO CREATE lEGAl RElATIONS
4-301
The fourth necessary element in the formation of a contract is the
intention to create legal relations. If this intention is absent, then
the promise may not create any binding obligation at all. For
example, a gentleman could not enforce a promise by his lady
friend to have dinner with him if she decided to cancel it. The law
views agreements made in such circumstances as lack ing the
intention to create legal re lations. This is so even though the
agreement may be supported by consideration.
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4-302
93
In determining whether part ies have the intention to create
legal relations, the law applies an objective test: Eastern Resource
Management Services Ltd v Chiu Teng Construction Co Pte Ltd (2016).
The court considers whether a reasonable person viewing all the
ci rcumstances of the case wou ld consider that the party at issue
intended his promise to have lega l consequences. Cases where the
intention to create lega l relations is an issue are usually grouped
under two categories: social and domestic agreements and commercial
agreements.
Intention to Create Legal Relations
I
Intention to Create
Legal Relations
I
Social & Domestic
Agreements
Commercial
Agreements
Presumption of
no intention
Presumption of
intention
Social and Domestic Agreement s
4-303
Social and domestic agreements cover situations where the
agreement is made between friends or between family members.
There is a general presu mption that such agree ments lack the
necessary intention to form a contract.
Balfour v Balfour (1919)
The defendant Mr Balfour was stationed in Ceylon. His wife, the
plaintiff, claimed that he promised to give her £30 per month
when they discovered that she would not be able to accompany
him in Ceylon. This was to be used as an allowance while they
lived apart. She sued on this promise when he failed to pay.
The English Court of Appeal held that the claim failed because the
parties did not intend the promise to be legally enforceable.
Atkin U stated:
"It is necessary to remember that there are agreements
between parties which do not resu lt in contracts within the
meaning of that term in our law. The ordinary example is
where two parties agree to take a walk together or where
there is an offer and an acceptance of hospitality...To my mind
those agreements, or many of them, do not result in contracts
at all ...even though there may be what as between other
parties would constitute consideration...They are not contracts
because the parties did not intend that they should be
attended by legal consequences."
4-304
In Singapore, the principles enunciated by Atkin LJ have been cited
with approval and applied: Choo Tiong Hin v Choo Hock Swee (1959).
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De Cruz Andrea Heidi v Guangzhou Yuzhitang Health Products Co Ltd and
Others (2003)
Andrea De Cruz, a well-known actress with MediaCorp Studios, sued,
amongst others, Rayson Tan, a fellow MediaCorp actor, for breach
of contract. She claimed Tan sold her some Slim 10 pills that caused
her to suffer liver failure. It was alleged that Tan had supplied the
pills to her since he was acquainted with the importer, and after
De Cruz had urged him to procure the pills for her at a discount.
The Singapore High Court held that there was no contract between
the parties in the absence of an intention to create legal relations.
De Cruz and Tan were clearly on very good terms with each other.
Although this by no means precluded contracts from being made
in social surroundings, the "incident had all the trappings of a
friend doing a favour for another by getting something for her".
Tay J further observed that making a secret profit or commission
f rom the transaction would not elevate the favour to a commercial
transaction.
4-305
In other situations, however, social or domestic agreements may possess
the necessary intention: see, for example, Tan Hin Leong v Lee Teck lm
(2001), where the agreement was between a man and his father's
mistress. Ultimately, whether this intention can be established depends
on the circumstances of the case.
Merritt v Merritt (1970)
A married couple discussed their marriage separation in a car.
The wife refused to leave the car until the husband had recorded
the following agreement in writing and signed it: "in consideration
of the fact that you [the wife] will pay all charges in connection
with the [matrimonial home] ... until such time as the mortgage
repayment has been completed I will agree to transfer the
property into your sole ownership". The husband fai led to
transfer ownership after the wife paid off the mortgage. The
English Court of Appeal found the necessary intention and held
that the wife succeeded in her claim for breach of contract.
Commercial Agreements
4-306
In the case of commercial agreements, there is a general presumption
that th~re is the necessary intention to create legal relations. This
presumption flows partly from the desire of the law to give efficacy to
agreements made in a commercial context. In Georgi Velichkov Barbudev
v Eurocom Cable Management Bulgaria Eood & Ors (2012), the Engl ish
Court of Appeal held that documents negotiated and drafted in a
commercial context evidence an intention to create binding obligations.
Nevertheless, although the intention to create legal relations is
presumed in commercial contexts, the surrounding circumstances of
the case may militate aga inst it. In particular, a party's acquiescence
to the agreement may reflect a bowing to commercial pressure, not
an intention to create legal relations: Max-Sun Trading Ltd and another
v Tang Mun Kit and another (2016).
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--------------------------------------~------------------~~
Pender Development Pte Ltd v Chesney Real Estate Group LLP (2009)
The Singapore High Court rejected a claim by one of the parties that
a loan agreement was invalid because the parties to the agreement
had not in fact intended to effect a loan. This claim was inconsistent
with t he fact that the agreement was a product of a commercial
t ransaction conducted at arm's length, that the document was
carefully prepared by t he party making the claim, and t hat t he same
party took steps to comply wit h the terms of t he agreement.
Foo long Long Dennis v Ang Yee Lim Lawrence and another (20 16)
The Singapore High Court concluded that since the parties were
dealing in a commercial capacity, a presumption arose that they
intended to create legal relations. The presumption was not
rebutted as the contract stated that the parties "agreed" to do
certain things, performed parts of the contract, and also set out
their liabilities to each other in the event of a breach of contract.
Honour Clauses
4-307
There are, however, instances where what appears to be a binding
commercial agreement may be found to be unenforceable because of
the absence of the necessary intention. This may occur if the parties
have inserted an "honour clause" which expressly states that their
agreement is not to be legally binding.
Rose & Frank Co v J RCrompton & Bros Ltd (1925)
The plaintiff, based in New York, was t he defendant 's agent in North
America selling the defendant's tissues for carbonising papers. Their
agreement included a clause described as an "Honourable Pledge
Clause":
"This arrangement is not entered into nor is this memorandum
written as a formal or legal agreement, and shall not be subject
to legal jurisdiction in the law courts either of the United States
or England, but it is only a definite expression and record of the
purpose and intention of the parties con cerned, to which they
each honourably pledge themselves."
The parties later had a dispute and t he agreement came before the
court. The English Court of Appeal held that t he agreement was not
legally binding because t he cl ause clearly and expressly stat ed their
intention that it would not give rise to legal re lations.
However, honour clauses are different from the clause discussed in
HSBC Institutional Trust Services (Singapore) Ltd (trustee of Starhi/1 Global Real
Estate Investment Trust) v Toshin Development Singapore Pte Ltd (2012). In
that case, a clause with the words "in good faith endeavour to agree"
in the context of an existing contractual framework was found by the
Singapore Court of Appeal to be binding and enforceable.
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Letters of Comfort
4-308
A more difficult situation may arise in the case of several forms of documents whose contents, although giving the impression of evidencing
a binding agreement, may fall short of a contract. They include letters
of comfort, letters of intent and memoranda of understanding.
4-309
Letters of comfort are letters written by one party usually intended
to vouch for the financial soundness or probity of another related
party who wishes to enter into a contract with a third party. If
the third party is uneasy about entering into the contract, the letter
of comfort would act as an additional assurance from the letter's
issuer. A memorandum of understanding is usually a document
which records the understanding of the parties on a proposed
commercial project. A letter of intent is simply that: it records the
intention of the parties, usually in connection with a proposed
commercial project.
4-310
The difficulty is that sometimes what appears to be binding may
not actually be enforced by the law, or vice versa. Thus, in Compaq
Computer Asia Pte Ltd v Computer Interface {S) Pte Ltd (2004), the
Singapore Court of Appeal held that a "letter of award" issued
by Compaq did not create a binding contract as it was "subject to
final terms and conditions being agreed" by the parties. Ultimately,
whether a particular assurance or promise is enforceable will depend
on the wording of the document and the circumstances in which
it was created. For example, in Mohamed Bassatne v Rifaat El Gohary
(2004) and Khng Thian Huat v Riduan bin Yusof (2005}, involving a
memorandum of understanding and a letter of intent respectively,
the Singapore High Court held that the parties' conduct had
determined that the respective agreements were indeed binding.
Kleinwort Benson Ltd v Malaysian Mining Corporation Berhad (1989)
The defendant parent company, MMC, issued a letter of comfort
to Kleinwort Benson in connection with a loan facility of up to £10
million provided to MMC Metals Ltd, a wholly-owned subsidiary of
MMC. The letter of comfort contained the statement that it was
MMC's policy to ensure that MMC Metals Ltd was "at all times in a
position to meet its liabilities". Upon examining the wording of the
letter, the English Court of Appeal held that the letter of comfort
did not amount to a contractual promise by MMC to guarantee the
loan payment owed by MMC Metals Ltd. On this basis, the court saw
no need to apply the usual presumption of intention to create legal
relations.
Administrative Relationships
4·31 1
If the legal relationship between the parties is administrative (as
opposed to commercial) in nature, courts are generally less likely to find
that an intention to create legal relations has arisen. In the following
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case, the Singapore High Court held that an application made by a
subsidiary proprietor of property to the management corporation
for the approval of building plans did not give rise to an intention to
create legal relations.
Management Corporation Strata Title No 473 v De Beers Jewellery Pte Ltd
(2001)
De Beers had paid money amounting to $370,000 to the
management corporation (MC) of People's Park Complex in return
for the MC's approval of plans to convert and subdivide De Beers'
units in the complex. De Beers later claimed that the payments had
been unlawfully demanded by the MC. The MC denied that they
had wrongfully extracted the money from De Beers. They argued
that the payments had been properly made pursuant to contracts
between the MC and De Beers in connection with the proposed
redeve lopment plans. The Singapore High Court held that no
contract resulted in this case. This decision was later affirmed by the
Court of Appeal. According to Prakash J in the High Court:
"The MC's powers of approval or disapproval of De Beers'
plans came directly f rom the legislation. This put the MC in
the position of an administrative licensing body. De Beers had
no alternative but to obtain the approval of the MC if they
wanted to implement their plans. Accordingly, when De Beers
approached the MC they were doing so in the position of an
applicant. De Beers was not approaching the MC in order to
enter a commercial transaction .. .No intention to create legal
relations could exist on either side since De Beers was in the
position of an applicant for a licence and the MC was in the
position of the issuing authority. The situation was analogous
to that which exists when someone applies to a governmental or
statutory body for an approval, for example, a licence to operate
a restaurant or a rad io or even a permit to construct a building."
Similarly, the Singapore High Court held that where a person is
enlisted for national service with the Singapore Armed Forces (SAF),
neither the full-time national serviceman nor the SAF possesses an
intention to enter into a contractual relationship: Estate of Lee Rui
Feng Dominique Sarron, deceased v Najib Hanuk bin Muhammad Jalal and
others (2016). Ramesh JC reasoned that enlistment in national service
is an act done to discharge a duty imposed by legislation. Since the
national serviceman had no alternative but to enlist with the SAF,
no intention to create legal relations could exist on either side.
PRIVITY OF CONTRACT
4-401
Before concluding this chapter, we touch on the old doctrine of
privity of contract. Privity of contract, strictly speaking, is not an
element in the formation of a contract. Nevertheless, we deal with
this concept here because knowledge of it is presumed in subsequent
chapters.
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4-402
Under the doctrine of privity, no one, other than a person who is a
party to the contract, may enforce or be bound by the terms of the
contract. There has been some debate as to whether the doctrine
of privity is merely a different way of expressing the rule that
consideration must move from the promisee. For our purposes, it is
not necessary to delve into this debate. The important point is that
the doctrine of privity is well entrenched in Singapore.
Price v Easton (1833)
A debtor owed Price £13. The debtor agreed to perform work for
Easton on the condition that Easton would pay off the debt which
the debtor owed to Price. The work was performed but Easton
failed to pay off the debt. Price sued Easton for the debt. The
court held that Price could not succeed because he was not a party
to the contract between the debtor and Easton. Indeed, there
was no contract between Price and Easton. (Of course, Price could
have sued the debtor for failing to pay the debt; alternatively,
the debtor could have sued Easton for failing to fulfill their
agreement.)
Management Corporation Strata Title Plan No 2297 v Seasons Park Ltd
(2005)
The Management Corporation (MC) of Seasons Park Condominium
sued the developer when defects began to appear in the common
property of the condominium. The trial judge held that the MC was
not entitled to sue on behalf of all the subsidiary proprietors of the
condominium because some of these subsidiary proprietors were not
original purchasers from the developer but rather sub-purchasers,
which meant that they had no privity of contract with the developer.
Being third parties, they could not sue the developer in contract. The
Singapore Court of Appeal agreed with the trial judge and dismissed
the appeal.
4-403
To overcome the limitations placed by privity, the law has
developed certain exceptions through which third parties may
acquire contractual rights or liabilities. In these exceptional
situations, third parties may be able to sue on a contract to which
they were not originally a party. According to Rajah JC in the
Singapore High Court case, Thai Kenaf Co Ltd v Keck Seng (S) Pte
Ltd (1993}, there are several recognised exceptions to the doctrine
of privity -three of these are mentioned below:
(a)
Agency: An agency relationship arises when a person
("principal") authorises another person ("agent") to act on
his behalf by entering into a contract with a third party (see
Chapter 16). According to the general rules of agency, the
principal, although not a party to the contract, has a direct
contractual relationship with the third party. Conversely, the
agent, who is a party to the contract, is not liable for and not
entitled to enforce the contract.
(b)
Assignment of choses in action: The rights or liabilities
relating to a chose in action under a contract between
two parties may be transferred to a third party under an
assignment with the full consent of all three parties.
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Contract : Consideration and Intention to Create Legal Relations
CHAPTER 4
(c)
4-404
99
Letter of credit: A buyer who orders goods from overseas may
be asked to open a letter of credit with his bank in favour of
the seller (see 1]19-501). If the letter of credit is confirmed by
the buyer's bank, then the seller can sue the bank for nonpayment even though the underlying sale contract is between
the buyer and seller and the underlying contract for the letter
of credit is between the buyer and the bank.
In 2001, the Singapore legislature enacted the Contracts (Rights of Third
Parties) Act (CRTA) which reformed the doctrine of privity. 3 The CRTA
does not abolish the privity rule and all existing exceptions to the rule
remain. The CRTA has the effect of providing additional exceptions to
the privity rule for the modern commercial context.
4-405 Pursuant to the CRTA, a third party is able to enforce any term of a
contract to which he is not a party where:
(a)
the contract states expressly that he may: s 2(1)(a) CRTA; or
(b)
the contract purports to confer a benefit on him unless, on a true
construction ofthe contract, the contracting parties did not intend
the third party to be able to sue: s 2(1)(b) and s2(2) CRTA and ClAAS
Medical Centre Pte Ltd v Ng Boon Ching (116-311). In Columbia Asia
Healthcare Sdn Bhd v Hong Hin Kit Edward (2014), the Singapore
High Court held that the parties did not intend the plaintiff to
be able to enforce the warranties under the Share Sale
Agreement; and
(c)
the third party is expressly identified in the contract by
name, as a member of a class, or as answering a particular
description, although he need not have existed at the date
of the contract: s 2(3) CRTA.
4·406
3.
A third party can "enforce a term ofthe contract" pursuant to s 2(1)
CRTA if it seeks performance of the contract or if it claims damages
for breach of the contract: Carriernet Global Ltd v Abkey Pte Ltd (20 10).
Moreover, a third party who sues pursuant to the CRTA will have a
right to all remedies for breach of contract available to him in court
as if he is a party to the contract. Such remedies include damages,
injunction and specific performance. This is so even though the third
party gave no consideration (ie, he is a volunteer): s 2(5) CRTA. The
CRTA also entitles the third party to take advantage of any exemption
or limitation clauses in the contract: s 2(6) CRTA. This is subject to
the qualification that the third party must have been able to rely on
such an exemption clause if he had been a party to the contract: s
4(6) CRTA.
For a more detailed discussion of the CRTA and its effects, see: Low V, "Interpreting the Contracts {Rights
of Third Parties) Act 2001: A Significant Step Towards Reform?" 37 Asia Business Law Review (July 2002)
52. Note that the Singapore Court of Appeal in Management Corporation Strata Title Plan No 2297 v
Seasons Park Ltd (114·402) referred to the CRTA and observed how the strict privity rule had been modified
by the Act. However, it was not applicable to the case as the Act only applies to contracts entered into
after it has come into force, ie. 1 January 2002: s 1{2) CRTA.
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SINGAPORE BUSINESS LAW
Contracts (Rights of Third Parties) Act
Section 2: Right of third party to enforce contractua l term
(1)
Subject to the provisions of this Act, a person who is not a
party to a contract (referred to in this Act as a third party)
may, in his own right, enforce a term of the contract i f (a) the contract expressly provides that he may; or
(b) subject to subsection (2), the term purports to
confer a benefit on him.
(2)
Subsection (1)(b) shall not apply if, on a proper construction
of the contract, it appears that the parties did not intend
the term to be enforceable by the third party.
(3)
The third party shall be 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.
(4)
This section shall not confer a right on a third party to
enforce a term of a contract otherwise than subject to and
in accordance with any other relevant terms of the contract.
(5)
For the purpose of exercising his right to enforce a term of
the contract, there shall be available to the third party any
remedy that would have been available to him in an action
for breach of contract if he had been a party to the contract
(and the rules relating to damages, injunctions, specific
performance and other remedy shall apply accordingly) and
such remedy shall not be refused on the ground that, as
against the promisor, the third party is a volunteer.
4·407
(6)
Where a term of a contract excludes or limits liability in
relation to any matter, references in this Act to the third
party enforcing the term shall be construed as references to
his availing himself of the exclusion or limitation.
(7)
In this Act, in relation to a term of a contract which is
enforceable by a third party "promisee" means the party to the contract by whom the
term is enforceable against the promisor;
"promisor" means the party to the contract against whom the
term is enforceable by the third party.
Once the third party's rights have arisen under the CRTA to enforce
a term of the contract, the contracting parties cannot rescind
or vary those rights w ithout his consent: s 3 CRTA. This takes
place where the third party has communicated his assent or has
relied on the term to the knowledge or reasonable expectation
of the promisor (the contracting party against whom the term
is enforceable by the third party). However, the contracting
parties can insert an express term into the contract providing
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Contract : Consideration and Intention to Create Legal Relations
101
that the third party's consent is not required, or only required in
circumstances other than those provided in the CRTA: s 3(3) CRTA.
All existing rights and remedies (at common law or in equity) of
the third party are preserved against the promisor: s 8(1) CRTA.
4-408
The CRTA provides an exhaustive list of the types of contracts
which are excluded from its application. Apart from this list, which is
given below, the CRTA applies to all other contracts:
(a)
contracts on bi ll s of exchange, promissory notes or other
negotiable instruments: s 7(1) CRTA;
(b)
constitution of a company that binds the company and its
members: s 7(2) CRTA;
(c)
reg istration documents or partnership agreement of a limited
liability partnersh ip: s 7(2A) CRTA;
(d)
contracts of employment where a third party wishes to enforce
a term against an employee: s 7(3) CRTA; and
(e)
contracts for the carriage of goods by sea, or for the
international carriage of goods by rail, road or air: s 7(4) CRTA
(except that a third party may enforce an exemption clause in
such contracts).
4·409
It is important that business people be aware of the implications of
the CRTA. On the positive side, the CRTA enables contracting parties to
choose whether or not to confer enforcement rights on a known third
party where this is not already provided for by another statute. On
the negative side, contracting parties may be sued by a total stranger
who is not a party to the contract since the CRTA does not require
t he third party to be individually named or even in existence at the
time. In any event, the impact of the CRTA may be excluded totally
by inserting a simple standard term into the contract. An example
of such a clause is: "A person who is not a party to this agreement
shall have no right under the Contracts (Rights of Third Parties) Act
to enforce any of its terms."
SUMMARY
4-501
In this chapter, we continued our discussion on how a contract is
formed. We examined the nature of consideration and the intention
to create legal relations. As far as consideration is concerned, there are
three types of consideration which must be distinguished: executory,
executed and past consideration. The critical difference between executed consideration and past consideration is that past consideration
is performed independent of any reciprocal promise in mind.
4-502
The key rules on consideration can be summarised as follows:
(a)
consideration must move from the promisee but need not
move to the promisor; and
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SINGAPORE BUSINESS LAW
(b)
consideration must be sufficient but need not be adequate.
Examples of cons ideration which have been held to be
insufficient include: moral obligation; good motives; vague
or insubstantial prom ises; discharge of an existing public duty;
discharge of an existing contractual duty owed to the promisor;
and partial payment of an existing debt.
4-503
In certain situations, however, the doctrine of promissory estoppel
may enable a promise which is not supported by consideration to be
nonetheless upheld and binding upon the promisor. Thus prom issory
estoppel may be viewed as a partial encroachment into the strict rule
that every promise must be supported by consideration. However, the
scope of promissory estoppel is li mited. Usually, even if prom issory
estoppel is established, its effect is only suspensive rat her than extinctive.
Furthermore, it cannot be used as a sword but on ly as a shield.
4-504
As far as intention to create legal relations is concerned, contracts are
usually categorised as either social and domestic agreements or commercial agreements. For the latter, the intention to create legal relations
is presumed to exist, unless rebutted. For the former, the intention to
create legal relations is presumed to be absent, unless rebutted.
4-505
Special problems arise when a commercial agreement uses words
which appear to dilute the intention to create legal relations.
Ultimately, whether a memorandum of understanding, heads of
agreement, letter of intent or letter of comfort reflects the
necessary intention to create legal relations depends on a careful
construction of the words used in the document. Similarly, certain
types of agreements (such as an application to a licensing body or
governmental authority) are deemed not to be commercial agreements
and so cannot give rise to an intention to create legal relations. Finally,
an act that is done as the discharge of a duty imposed by leg islation
does not give rise to an intention to create legal relations.
4-506
Finally, we touched briefly on the privity of contract doctrine wh ich
determines the parties who are entitled to enforce a contract. Under
this doctrine, generally a third party is not bound and, correspondingly,
cannot enforce a contract. Over the years, however, exceptions have
arisen to this general ru le. In addition, the CRTA has reformed,
although not abolished, the privity ru le in Singapore. It confers upon
third parties the right to enforce a contract in certain circumstances. It
shou ld be noted that all existing exceptions to the privity rule remain
in place. These may prove useful in cases where the CRTA does not
apply.
···•·•·•···
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U075837L/N1510069
---
1-
f-
Promisee relied upon
promise and altered his
position
Inequitable for the promisor
to go back on his promise
1-
f-
Clear & unequivocal
promise which affects the
legal relationship
Parties have existing legal
relationship
Summary
Performance of
existing contractual
duty to a third party
Forbearance to sue
Goods, services,
money, property
[
Must move from
promisee but
need not move
to promisor
I' Promissory
I
estoppel
Performance of existing
contractual duty owed
to promisor
Commercial
Agreements
Presumption of
intention
Contract must otherwise be enforceable
Social & Domestic
Agreements
Presumption of
no intention
Intention to create legal relat1ons
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CONTRACT: TERMS
INTRODUCTION
5-101
The heart of a contract is its terms. Terms are the promises
and undertakings given by each party to the other. They form the
substance of a contract and specify the way in which contractual
obligations are to be performed. In this chapter, we examine the
legal effect of terms. The chapter begins by outlining the distinction
between terms, which form part of a contract, and representations,
which do not. We then examine the different types of terms and their
legal significance. In the third section of this chapter, we will discuss
an important set of terms known as exemption clauses.
TERMS AND REPRESENTATIONS
5-201
Contracts do not exist in a vacuum. A contract to buy real property
usually comes after extensive negotiations between the parties. An
employment contract is usually preceded by an interview when the
employer learns about the prospective employee, who in turn learns
about the conditions of employment. Even a simple purchase of a
toothbrush from the shop may be preceded by a newspaper or pointof-sale advertisement.
5-202
In other words, most (if not all) contracts involve pre-contractual
statements. These are the oral or written statements made by the
parties in the course of negotiations right up to the time the
contract is formed. Depending on their nature, these precontractual statements may have different legal effects. Broadly
speaking, pre-contractual statements can be classified under three
categories: puffs, representations and terms. Puffs are statements
which have no legal effect whatsoever. They tend to be statements
which are vague because of imprecision or exaggeration. For
example, a description of land as being "fertile and improvable" was
held to be a mere puff: Oimmock v Hallet (1866). Similarly, an
advertisement stating that this is the "best restaurant in town"
will probably also constitute a puff.
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Contract : Terms
CHAPTER 5
5-203
A representation is a statement made before or at the time a
contract is formed concerning some matter relating to the contract.
Although it may be in writing, it is not an integral part of the contract.
Consequently, the contract is not breached if the representation is
untrue: Behn v Burness (1863). In this situation, the injured party may
have a remedy under the law of misrepresentation (~6-401), but he
cannot initiate an action for breach of contract.
5-204 Terms are statements which form part of a contract. Terms and
representations are similar in that both originate as oral or written
statements made before a contract is formed . At this point,
their similarity ends. Terms form part of the contract whereas
representations do not. As the Singapore High Court in Jet Holding
Ltd and Others v Cooper Cameron (Singapore) Pte Ltd and Another
(~5-
409) observed: "Representations cannot in law be elevated to terms
of contract whether expressed or implied." It follows, therefore, that
terms and representations create different rights and obligations for
the contracting parties.
Puffs, Representations and Terms
Pre-contractual Statements
Puffs
No legal effect
Reoresentations
Not part of contract
False
Misrepresentation
5·205
To ascertain the rights of contracting parties requires a careful
analysis of these pre-contractual statements. Each statement
must be identified correctly so that the associated legal effects
can be determined. In practice, puffs are relatively easy to identify
because of their vague nature. The most common difficulty arises
in distinguishing between representations and terms. Both usually
involve specific assertions.
5-206
The main criterion for distinguishing terms and representations is
the intention of the parties: Tan Chin Seng & Others v Raffles Town Club
Pte Ltd (2002) and Low Kin Kok (alias Low Kong Song) and another v Lee
Chiow Seng and another(2014). The basic test is whether, on an objective
basis, the contracting parties intended that there be contractual liability
in respect of the statement. Over the years, the courts have developed
several guidelines which help to discern this intention.
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Guidelines to Distinguish Terms from Representat ions
s-207
There are five guidelines which we will describe below. It should be
stressed that these gu idelines simply assist in discovering the
intention of the parties. They are not mechanical formulae which
are to be applied rig idly. Indeed, in particular cases, the gu idelines
may yield conflicting ind ications as to whether a statement is a
term or a representation. In these circumstances, it is important to
take a holistic approach and ascertain the intention of the parties
after a consideration of all relevant facts of the case.
When Statement Made
5-208
The first guideline looks at the point in time at which the statement
was made. If the statement was made closer to the time the contract
was fina lly concluded, then it is more likely to be a term rather than a
representation. The rat ionale is that a long interva l between the t ime
the statement is made and the point the contract is formed suggests
that the statement is relat ively unimportant.
Routledge v McKay (1954)
Routledge entered into negotiations to purchase McKay's motorcycle.
On 23 October, McKay, who relied on the motorcycle registration
book, told Routledge that the motorcycle was a 1942 model. They
entered into a written contract on 30 October. Later, Routledge
discovered t hat the motorcycle was, in fact, a 1930 model. He sued
claiming a breach of contract. The English Court of Appeal held that
the statement about the year of the model was not a term of the
contract. Hence, it rejected Routledge's claim for a breach of warranty.
In its finding, the Court had considered the significant time lapse
between the making of the statement and the making of the contract.
Maker's Emphasis
5-209
The greater the emphasis, the more likely the statement is a term.
Th is is because a greater emphasis suggests that the statement is
important to one party or both parties.
Bannerman v White (1861)
In negotiations for the sale of hops to be used for brewing beer,
White asked if any sulphur was used in growing the hops.
Bannerman replied, "No". White told Bannerman that he would
not even bother to ask the price if sulphur had been used, simply
because brewers refuse to use hops contaminated with sulphur.
Thereafter White contracted to buy hops from Bannerman. White
later found traces of sulphur in the hops delivered to him and
repudiated the contract. Bannerman sued for the price. The court
upheld a finding that Bannerman's reply was not intentionally
false; however, the query regarding sulphur was significant and
Bannerman's reply was a condition upon which White agreed to
buy the hops. The reply was therefore a term of the contract.
Bannerman was found to have breached this condition which
entitled White to repudiate the contract.
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107
Contract: Terms
Maker's Special Knowledge
s-210 Where the maker of the statement has greater knowledge concerning
the statement as compared to the other party, it is more likely that
the statement is a term. The rationale is that the other party will be
dependent upon the maker of the statement for its accuracy.
Oscar Chess Ltd v Williams (1957)
Williams sold his Morris car to the plaintiff, a motor car dealer. He
told the plaintiff that the car was a 1948 model on the basis that
the registration book showed that it was first registered in 1948. In
fact, the registration book had been tampered with and the car was
actually a 1939 model. The plaintiff sued for breach of contract. The
English Court of Appeal (Morris LJ dissenting) held that Williams'
statement was not a term of the contract because, as a private individual, Williams was not in a position to guarantee t he accuracy of
the year of registration given.
Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965)
The defendant motor car dealer told the plaintiff that a Bentley had
done only 20,000 miles when in fact it had done 100,000 miles. The
plaintiff later bought the car. It discovered the true mileage and
sued. The English Court of Appeal held that there was a breach of
contract because the defendant's statement was a term of the contract. Oscar Chess v Williams was distinguished on the basis that there
the seller, an individual, honestly believed his statement and had no
way of knowing otherwise. Here, the seller, a motor car dealer, was
in a better position to know the true facts regarding the Bentley.
Invitation to Verify Statement
s-211
If the maker of the statement invited the other party to verify the
truth of the statement made, then the statement is more likely to
be a representation. By inviting the other party to conduct an
independent assessment, the maker of the statement shows that
he does not intend contractual l iabi lity to result from his statement.
Conversely, if the maker of the statement dissuades the other party
from verifying the truth of the statement made, then the statement
is more likely to be a term.
Ecay v Godfrey (1947)
The seller of a boat told the buyer the boat, priced at £750, was
sound. However, he expressly gave the buyer the opportunity to
survey the boat. Lord Goddard CJ held that the suggestion by the
seller that the buyer independently survey the boat was material
in deciding whether there was any intention that the statement
be a term of the contract. Here, the statement was held to be a
representation.
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Written Statement
5-212
If the statement was originally made orally and later reduced into
writing, then it is more likely to have become a term of the contract.
The rationale is that, where there is a written contract, all the terms
of the contract are presumed to be contained within the written
document. Conversely, all non-written statements are presumed not
to form part of the contract.
Guidelines to Distinguish Terms from Representations
Guidelines
I
I
Special Knowledge
If maker has special
knowledge, more likely
a term
Emphasis
Greater emphasis
sugge.sts a term
Ti ming
Closer to contract,
more likely a term
Verification
Invitation to verify
suggests a representation
Written Form
If reduced into writing
more likely a term
Express and Implied Terms
S-213
A term can be express or implied. An express term is one which has
been expressly agreed between the parties. An express term can be
made orally or in writing. An implied term is one which has not been
expressly agreed by the parties but is nevertheless implied into the
contract: Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd (2013).
Implied terms can be implied into a contract by a court to give efficacy
to the contract or it may be implied by a statute. It follows that parties
are usually aware of express terms but may be unaware of implied
terms. Also, a term cannot be implied if doing so would be plainly
against the express terms of the contract: The One Suites Pte Ltd v Pacific
Motor Credit (Pte) Ltd (2015). It has further been held that, where terms
are clear and unambiguous, they must be given their natural meaning
because "there is no room for re-writing or implying terms" into the
contract in those circumstances: Bayerische Hypo- und Vereinsbank AG v
C K Tang Ltd (2004).
Types of Implied Terms
lmj:Jiied Terms
Implied by the court
Custom &usage
Business efficacy
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CHAPTER 5
109
Contract : Terms
Custom and Usage
5-214
Terms can be implied into a contract because such contracts are
subject to unwritten terms hal lowed by long usage or custom. In
the case of Singapore, however, the relatively short but rapid pace
of development may dissuade the courts from a liberal exercise of
their discretion to imply terms on the grounds of customary usage.'
Hutton v Warren (1836)
Hutton was a tenant on Warren's farm. Warren gave Hutton a
notice to quit, to take effect six months later. As requested by
Warren, Hutton continued to cultivate the land during this period.
Hutton left at the appointed time which was before the harvest.
He requested a fair compensation for seed and labour which he
had foregone because he left before the harvest. It was held that
Hutton was entitled to such allowance because it was an accepted
custom that a tenant was bound to a farm for the entire tenancy
but, upon quitting, may claim an allowance for seeds and labour.
Bernard Desker Gary & Others v Thwaites Racing Pte Ltd & Another (2003)
The plaintiffs were owners of three racehorses while the defendants
were horse trainers. The dispute arose as a result of the plaintiffs'
allegations that the defendants had been negligent in, amongst
other things, racing the horses without first providing proper
treatment for their injuries. The defendants argued that industry
custom and practice implied that the contract would be governed
by the recommended terms and conditions issued by the Association
of Racehorse Trainers (Singapore) or ARTS. The ARTS terms favoured
the defendants. The Singapore High Court found that, based on the
evidence, this was not the universal practice of all trainers. Further,
the ARTS terms were not in existence when the training agreements
between the plaintiffs and the defendants were made. As the
practice from which these terms were drawn was not accepted by all
trainers and owners, they could not be implied into the contract by
custom and practice.
Business Efficacy and Officious Bystander Tests
5-215
Another reason why a court sometimes implies a term into a
contract is to ensure business efficacy. Th is means that the court
will supply a term which it considers as having been intended by
the parties, so as to ensure that their contract w ill proceed on
normal business lines. This requires the court to determine the
presumed intention of the parties, which may be gathered from the
"express words of the contract and the facts and circumstances
surround ing it": Romar Positioning Equipment Pte Ltd v Merriwa Nominees
Pty Ltd (2004).
The Moorcock (1889)
The plaintiff, a shipowner, agreed to pay the defendant for allowing
the plaintiff's ship, The Moorcock, to unload at the defendant's
1.
This is the view of Phang A B L, The Development of Singapore Law: Historical and Socio-Legal
Perspectives (Singapore: Butterworths, 1990) 68-78.
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jetty. The jetty extended to River Thames in london and the parties
understood that, at low tide, the ship would rest on the mud at the
bottom of the river. The ship was damaged when, at low tide, she
settled on a ridge of hard ground beneath the mud. The plaintiff
sued for damages. The English Court of Appeal held that, even
though the defendant did not give any warranty that the ground
below the jetty was safe, there was an implied undertaking to this
effect. Hence, the plaintiff succeeded. Bowen U stated:
"In business transactions such as this, what the law desires to
effect by the implication [of the term) is to give such business
efficacy to the transaction as must have been intended at all
events by both parties who are business men; not to impose
on one side all the perils of the transaction, or to emancipate
one side from all the chances of failure, but to make each
party promise in law as much, at all events, as it must have
been in the contemplation of both parties that he should be
responsible for in respect of those perils or chances."
s-216
The business efficacy test in The Moorcock is often mentioned
together with the "officious bystander test". The officious bystander
test was stated by MacKinnon U in Shirlaw v Southern Foundries (1926)
Ltd v Anor (1939}:
"If I may quote from an essay which I wrote some years ago, I then
said: 'Prima facie, that which in any contract is left to be implied
and need not be expressed is something so obvious that it goes
without saying.' Thus, if. while the 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.' At least it is true, I think, that, if a
term were never implied by a judge unless it could pass that test.
he would not be held to be wrong."
5·217
Both the business efficacy test and the officious bystander test
have been used in Singapore with, it seems, not much difference
in outcomes: Energy Shipping Co Ltd v UDL Shipping (Singapore) Pte
Ltd (1995). In Sembcorp Marine Ltd v PPL Holdings Pte Ltd (2013),
the Singapore Court of Appeal affirmed the "complementarity"
characterisation of the two tests. The suggestion is that the" officious
bystander" test is the practical mode by which the "business efficacy"
test is implemented. The threshold for implying a term is high: a term
will only be implied if it is necessary for the contract: Sembcorp Marine
Ltd v PPL Holdings Pte Ltd (2013} and Eng Chiet Shoong and others v Cheong
Soh Chin and others and another appeal (2016}. In this regard, an earlier
suggestion by Lord Denning in Liverpool City Council v Irwin (1977}
advocating that the primary test should be one of reasonableness
has not been accepted generally. Rather, the accepted test is that the
missing term must be commercially necessary before a court should
exercise its discretion and imply it into the contract. Menon CJ in
Sembcorp Marine then summarised the steps to imply a term:
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Contract : Terms
CHAPTER 5
"[T]he implication of terms is to be considered using a three-step
process:
(a)
The first step is to ascertain how the gap in the contract
arises. Implication will be considered only if the court
discerns that the gap arose because the parties did not
contemplate the gap.
(b)
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.
(c)
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 [the]
time ofthe contract. If it is not possible to f ind such a clear
response, then, the gap persists and the consequences of
that gap ensue."
The three-step process in Sembcorp Marine was applied successfully in
subsequent cases: The One Suites Pte Ltd v Pacific Motor Credit (Pte) Ltd
(2015) and The Wellness Group Pte Ltd v OSIM International Ltd (2016). In
Max-Sun Trading Ltd v Tang Mun Kit (2016), however, the Singapore High
Court rejected the implication of a term obliging parties "to act lawfully
and diligently" in the implementation of a joint venture agreement.
Such an implied term was not commercially necessary because the
parties were obliged to act in the relevant manner by the joint venture
agreement even without such a term. In other words, even if there
was a "gap" under the first step of the process, steps two and three
were not fulfilled.
Statute
5-218
Terms can also be impl ied by statute. The most obvious examples
are the statutory provisions in the Sale of Goods Act which seek to
protect the interests of buyers of goods. These are considered more
fully in 1115-303. Terms implied by statute operate by force of law.
It is irrelevant that the parties are unaware of the statute.
ClASSIFICATION OF TERMS
5-301
Once a statement is found to be a term of the contract, the next
step is to determine its classification. This is because not all terms
are equally important. The more importa nt terms tend to generate
more serious consequences if they are breached . For example, in a
contract for the lease of office premises, the tenant's failure to pay
the required monthly rent is obviously more serious than h is
unauthorised hammering of a nail into the wal l - although both
usually constitute a breach of the tenancy agreement.
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Condition, Warranty and In nominate Term
5-302
Traditionally, terms have been classified under three categories:
conditions, warranties and innominate terms:
(a)
Conditions are those terms which are important, essential or
fundamenta l to the contract. A breach of condition g ives the
injured party the option to affirm the contract, keeping it on
foot, or, alternatively, discharging the contract. In each case, he
may also claim damages.
(b)
Warranties are the less important terms and constitute secondary
obligations. 2 A breach of warranty does not give the injured
party the right to d ischarge the contract. The contract remains
on foot and the injured party only has a cla im in damages.
Bettini v Gye (1876)
Bettini was an opera singer who contracted with Gye,
director of the Royal Italian Opera in London, to sing in
England for three months from 30 March 1875. The contract
included a term that Bettini would be present in London for
rehearsals at least six days prior to the commencement of
the contract, ie, 24 March 1875. Bettini was ill and arrived
in London on 28 March. Gye refused to continue with the
contract and Bettini sued for breach. The court held that the
rehearsal clause was not vital to the contract. It was not a
condition but a warranty. Bettini's breach of the warranty
did not entitle Gye to repudiate the contract. The contract
remained on foot but Gye could claim damages for breach of
warranty.
(c)
Innominate terms are those which are too complicated to
be pigeon-holed easily under the older condition-warranty
dichotomy. It covers terms whose breach can result in trivial
consequences or serious consequences. If t he former occurs,
a remedy in da mages should suffice. If the latter occurs,
the inj ured party should be entitled to treat the cont ract as
d ischarged. Thus, unl ike the condition-warranty approach, the
innominate term classification - as shown in the Hongkong Fir
case -focuses not on the nature of the term breached, but on
the actual consequences of the breach.
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962)
Kawasaki chartered the plaintiff's ship for 24 months from
February 1957. Unfortunately, the ship's engine-room crew
was insufficient in number and also incompetent. The
plaintiff later admitted that it had breached a term of the
charter which required the ship to be "in every way fitted for
2.
The usage of the word "warranty" in this chapter is to be contrasted with the following: (1) warranty as
a guarantee- a manufacturer often provides a warranty for the goods it produces, and the warranty is
in effect a guarantee that the manufacturer will indemnify the purchaser for any defects in the goods;
and (2) wa rranty in insurance law- in insurance contracts, a wa rranty is treated as an essential term and
hence a condition, which is the opposite of our use of warranty in this chapter.
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Contract :Terms
ordinary cargo service". The ship was not made seaworthy
until September 1957. In June 1958, Kawasaki repudiated
the charter and refused to pay. The plaintiff sued for breach
of contract and wrongful repudiation. The English Court
of Appeal classified the clause as an innominate term. The
plaintiff breached this innominate term. Diplock U asked
this question regarding the consequences of the breach: " ...
does the occurrence of the event deprive the party, who has
further undertakings to perform, of substantially the whole
benefit which it was the intention of the parties as expressed
in the contract that he should obtain as the consideration
for performing those undertakings?" The court took the
view that the breach was not sufficiently serious to entitle
Kawasaki to repudiate the contract. Hence, Kawasaki could
only claim damages.
Singapore Approach
3.
5-303
In Singapore, the traditional categories of conditions, warranties and
innominate terms were re-assessed by the Singapore Court of Appeal
in the 2007 case, ROC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd & Another
Appeal (117-301). Before ROC Concrete, the classification of a term as a
condition or warranty essentially determined the importance of that
term. It also determined the legal consequences of a breach of the
term: if a term was a condition or an innominate term whose breach
caused serious consequences, then breach of such a term could lead
to a repudiation of the contract.
5-304
ROC Concrete and later cases have reduced the significance of the
traditional categories of conditions, warranties and innominate terms.
Instead, Singapore courts now place more focus on the intention of
the parties when decid ing on the importance of a term. The intention
of the pa rties is key in determining whether a term is a condition
or warranty. The fact that a term is described as a "condition" or
"warranty" in a written contract may be relevant but is not conclusive.
In a later case, Man Financial (S) Pte Ltd v Wong Bark Chuan David
(2008), the Singapore Court of Appeal stated that to determine
whether a term is a condition, "the focus is on ascertaining the
intention of the contracting parties themselves by construing the
actual contract itself (including the contractual term concerned) in
the light of the surrounding circumstances as a whole" .3 Moreover,
when considering the legal impact of a breach, it is more important to
consider the intention of t he parties in respect of such breach rather
There is a similar approach in s 11{2) Sale of Goods Act w hich reads: "Whether a stipulation
in a contract of sale is a condition, the breach of which may give rise to a right to treat the
contract as repud iated, or a warranty, the breach of w hich may give rise to a claim for damages
but not to a right to rej ect the goods and treat the contract as repudiated, depends in each
case on the construction of the contract; and a stipulation may be a condition, though called
a warranty in the contract."
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than considering the actual consequences of such breach. It is only
after the intention of the parties has been considered that the courts
wil l also evaluate the consequences of the breach.
5-305
The ROC Concrete approach towards classification of terms has also
affected how the courts view the breach of such terms. The lega l
consequences of a breach are potentially different than if the courts
are to use the traditional classification of conditions, warranties and
innominate terms. These points are further elaborated upon in Chapter
7 which deals with discharge of contract (see: 117-301 to 117-309).
EXEMPTION CLAUSES
5-401
We now come to a specific type of term which is very common in
commercia l contracts, particularly contract s in a pre-printed
standard format. This is the exempt ion clause, sometimes also
known as the exclusion clause or exception clause. An exemption
clause is a term in a contract which seeks to exclude t he liabi lity
of the party relying on the clause. For example, a contract for the
sale of a new car may include a clause which stipu lates t hat the
manufacturer is not liable for any loss o r injury suffered by the
purchaser or any th ird party arising from the use of the car, whether
negl igently or otherwise.
s-402
There is also another clause which has a similar - though less absoluteaim. This is the limitation of liability clause. Whereas an exemption
clause seeks to exclude liabi lity totally, a limitation of liabi lity clause
seeks to lim it the liability of a party relying on itto a sum specified in
the contract.
5-403
The rules wh ich apply to exemption clauses and limitation of liability
clauses are essentially the same, with one proviso. In the case of
lim itation of liab ility clauses, t he ru les will not be app li ed so
rigorously: Rapiscan Asia Pte Ltd v Global Container Freight Pte Ltd (2002)
and PT Soonlee Meta/indo Perkasa vSynergy Shipping Pte Ltd (2007). In "The
Neptune Agate" (1994), Warren Khoo J in the Singapore High Court
made a distinction between the two types of clauses and approved
the following comments of Lord Wilberforce in Ailsa Craig Fishing Co
Ltd v Malvern Fishing Co Ltd & Securicor (Scotland) (1983): 4
"Clauses of limitation are not regarded by the courts with the
same hostility as clauses of exclusion: this is because they must
be related to other contractual terms, in particular to the risks to
which the defending party may be exposed, the remuneration
which he received, and possibly also the opportunity of the other
party to insure."
4.
Thus, in this book we will refer to exemption clauses generally on the understanding that
the rules actually apply to both exemption clauses and limitation of liability clauses, albeit
less rigorously upon the latter.
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5-404
A party who wishes to rely on an exemption clause must establish
the four points below:
(a)
The clause must be incorporated into the contract;
The clause, properly construed, must cover the loss or injury
(b)
which occurred;
(c)
There must not be any extraordinary facts in the case which
prevent the operation of the clause; and
The clause must not contravene the Unfair Contract Terms Act
(d)
(UCTA).
Exemption Clauses
Exemption Clauses
Incorporation
lse.c
incorporated?
Construction
Does e.c cover the
loss/damage in
question?
Unusual Factors
Any special
facts limiting
thee.c?
UCTA
Ooese.c
contravene UCTA?
Incorporation
5-405
An exemption clause becomes incorporated into a contract in two
ways: by signature or notice. In many cases, an exemption clause
appears as one of the terms of a standard form written contract
signed by the parties. If so, then, subject only to factors such as fraud
or misrepresentation, the exemption clause is incorporated by the
signature of the parties: Abani Trading Pte Ltd v BNP Paribas (2014). In
Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte
Ltd (2003), the Singapore Court of Appeal held that an exclusion clause
is validly incorporated into a signed contract notwithstand ing the fact
that the party resisting its effect did not have the chance to read it.
L'Estrange v Graucob (1934)
L'Estrange purchased a machine from Graucob. The sale agreement
included a number of terms, including an exemption clause in
"legible, but regrettably small print". Scrutton U said:
"When a document containing contractual terms is signed, then,
in the absence of fraud ...or... misrepresentation, the party signing
it is bound, and it is wholly immaterial whether he has read the
document or not."
5-406
If there is no written contract or the contract is not signed, the
exemption clause may still be incorporated into the contract.
However, the person relying on the exemption clause must show
that he gave reasonably sufficient notice of the exemption clause
to the injured party. Whether the notice given in a part icu lar
situation is reasonably sufficient is a question of fact. Several
factors may be relevant, as mentioned below.
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Where Notice Affixed
5-407
If the exemption clause is printed on an unsigned document, is the
document of a type upon which a reasonable person wou ld have
expected to f ind contractual terms?
Chapelton v Barry Urban District Council (1940)
Chapelton hired two deck-chairs from the defendant Council which
rented out such chairs at a beach. There was a notice near the
chairs which instructed hirers to obtain and retain a ticket from the
chair attendant. Chapelton obtained his ticket and retained it
w ithout reading it. He sat on one of the chairs which collapsed
under him. He sued the Council seeking damages for his injuries.
The Council sought to rely on the exemption clause printed on the
ticket. The English Court of Appeal held that the clause was not a
term of the contract because the ticket was not a contractual
document. The Court opined that no reasonable person would
expect to f ind contractual terms on the ticket since it would be
regarded simply as a receipt for money paid.
When Notice Given
5-408
To be effective, the notice must be given before or at the time the
contract was made. If it was given after the contract had been formed,
then it is too late for the notice to be incorporated into the contract.
Olley v Marlborough Court Ltd (1949)
A couple rented a hotel room for one week, paying in advance.
When they entered the bedroom, they saw a notice on the wall
stating that the proprietors will not be liable for lost or stolen
articles unless such articles are handed to the manageress for safe
custody. Later, the bedroom key was wrongfully taken from the
hotel reception by a third party who opened the couple's room and
stole some property. The hotel sought to rely on the exemption
clause. The English Court of Appeal held that the contract was
already formed before the couple entered their room and that,
therefore, the notice given on the bedroom wall was too late.
Adequacy of Notice
5-409
Th is means that reasonable steps must have been taken to bring the
notice to the attention of the injured party. Among other things, the
notice must be sufficiently conspicuous and leg ible. In Holland Leedon
?te Ltd (in liquidation) v C & P Transport Pte Ltd (2013), the Singapore
High Court held that the defendant's failure to point the plaintiff to
the relevant exclusion and limitation clauses contained in an unsigned
quotation meant that the clauses had not been fairly brought to the
attention of the plaintiff.
Thornton v Shoe Lane Parking Ltd (1971)
Thornton intended to park in the defendant's automated carpark.
There was a notice outside the carpark stating: "All cars parked
at owners' risk". Upon entry, a machine issued a ticket which
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Contract : Terms
contained printed words. The words referred to conditions displayed
in another part of the carpark. Thornton did not see the
conditions, one of which was an exemption clause denying liability
for property damage and personal injury. When collecting his car,
Thornton suffered injury because of an accident. The defendant
sought to rely on the exemption clause. In the English Court of
Appeal, Lord Denning said that 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 reasonab le notice given prior to or at this time. A notice
on the ticket would be too late. Similarly, a notice located at a
different section of the carpark was not acceptable. Accordingly, the
defendant failed to prove reasonable sufficiency of notice.
Thompson v London Midland Scottish Railway Co (1930)
Thompson, who was illiterate, asked her niece to purchase a
railway ticket on her behalf. The ticket contained the words "For
conditions see back." The back of the ticket in turn referred to the
def endant's timetables and excursion bills. These contained an
exemption clause against personal injury. Thompson suffered
injury and sued the defendant. The English Court of Appeal held
that reasonab ly sufficient notice was given since the ticket made
reference, albeit rather circuitously, to the exemption clause.
Jet Holding Ltd & Others v Cooper Cameron (Singapore) Pte Ltd & Another
(2005)
The plaintiff owned the oil exploration drill ship, Energy Searcher. It
sued for breach of contract when the ship's slip joint manufactured
by the defendant broke into two due to tensile overload, causing
other consequential losses. The slip joint broke because the material
used was significantly thinner than t hat specified in the design
drawings. The defendant t ried to re ly on standard form exemption
clauses t hat it claimed had been incorporated into t he contract by
way of a separate provision in a sales quotation. The Singapore High
Court held that no adequate notice was given as t he standard f orm
clauses involved should have been brought fairly and reasonab ly
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." Mere reference to the exemption clauses in the notes
to the quotation was not sufficient notice. As such, the exemption
clauses were not incorporated into the contract.
S-410
It is interesting to not e that, in Thompson v London Midland Scottish
Railway Co, the plaint iff's illiteracy did not help her case. This suggests
that, as long as the party relying on the exemption clause has done
what is reasonable to bring the notice to t he attention of the injured
party, he w ill be entitled to rely on the clause despite t he fact that
the injured party may be under some disabil ity preventing him from
understanding the notice. A different outcome, however, may emerge
if the party relying on the exemption clause knows, from t he very
beginning, that the injured party is under some disability.
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Geier v Kujawa, Weston & Warne Bros (Transport) Ltd (1970)
Geier, who could not understand English, was a passenger in a
taxi . Inside the taxi was a notice in English containing an
exemption clause. The defendant driver realised that Geier did
not understand English but nevertheless 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
notice. The driver knew of Geier's disability and did
not take the reasonable step of translating the notice. 5
Previous Course of Dealings
S-411
If there has been a previous course of dealings between the parties
which included an exemption clause, and the parties indicated that
the present contract would be bound by the terms of the earlier
contracts, then the exempt ion clause may be incorporated through
the previous course of deal ings.
Henry Kendall & Sons v William Lillico & Sons & Ors (1969)
A game farmer bought from an agricultural association, SAPPA,
stock feed for his pheasants and partridges. SAPPA, in turn,
obtained supplies of the feed from other sources. The feed was
contaminated and killed or affected the farmer's animals. As
between SAPPA and a supplier, Grimsdale and Sons Ltd, there
were three to four purchases of stock feed per month for the
past three years. Typically, following SAPPA's order, Grimsdale
would send a contract note on the back of which were several
terms, including one which stated: "Seller not accountable for
weight, measure or quality after delivery from ship, mail or
granary. The buyer under this contract takes the responsibility for
any latent defects." In the House of lords, lord Morris found that
over the course of time, SAPPA knew that when Grimsdale sold the
feed, it did so on the terms it had "continuously made known to
SAPPA". Accordingly, the exemption clause formed part of their
contracts. (However, in this instance, the exemption clause was
held to be ineffective in shielding Grimsdale from liability.)
Const ruction
5-412
5.
Once an exemption clause is incorporated into a contract by signature or
reasonable sufficiency of notice, the next step is to construe the clause.
To construe a clause means to interpret it. This is important because
the effectiveness of the clause depends on its construction. If a clause
can be likened to a shield, then the process of construing the clause is
like determining the size of the shield. Obviously, the wider the clause,
the more protection it will provide to the party relying on it. In Emjay
Geier's Case may have interesting implications if it is strictly applied to Singapore's
multi-racial, multi-lingual society. Would reasonable sufficiency of notice in Singapore
mean that all exemption clauses should be written in the four official languages?
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Enterprises Pte Ltd v Skylift Consolidator (Pte) Ltd (2006), Phang J observed:
" ... the court's task is to construe the exception clause concerned in
the context of the contract as a whole in order to ascertain whether
the contracting parties intended that the exception clause cover the
events that have actually happened". Two ru les of construction must
be borne in mind when construing an exemption clause.
Contra Proferentem Rule
5-413
The contra proferentem (aga inst the proferens - or maker - of the
exemption clause) rule states that, where there is any amb iguity
in interpret ing a clause, the construction to be adopted is the
one which is least favourable to the person who put forward the
clause : Hollier v Rambler Motors (AMC) Ltd (1972). In Singapore, the
contra proferentem rule serves to protect weaker parties from an
inequal ity of bargaining power and applies where the "justice of
the case demands it": Leong Hin Chuee v Citra Group Pte Ltd and others
(2015) and Corinna Chin Shu Hwa v Hewlett-Packard Singapore (Sales) Pte
Ltd (2015) . Under the rule, exemption clauses are to be construed
strictly- if a party seeks to exclude or limit his liability, he must do
so in clear words: Singapore Telecommunications Ltd v Starhub Cable
Vision Ltd (2006) and Kay Lim Construction & Trading Pte Ltd v Soon
Douglas (Pte) Ltd (2013).
Main Purpose Rule
5-414
The main purpose ru le (also called the "repugnance rule") states
that there is a general presumption that the parties do not intend
an exemption clause to defeat or be repugnant to the main
purpose of a contract. According to this ru le, if a buyer agrees to
buy bananas and t he sel ler delivers papayas, no exemption clause
can protect the sell er since to do so wil l destroy the whole basis of
the contract. This mea ns that an exemption clause wil l general ly
be ineffective where there is a fundamental breach.
8-Go/d Interior Design & Construction Pte Ltd v Zurich Insurance
(Singapore) Pte Ltd (2007)
The appellant construction company was hired by MediaCorp to
renovate their premises. The appellant took out a contractor's
all-risk policy with the respondent insurer as required under the
renovation contract. The appellant claimed under this policy when
it was found liable for a fire that damaged MediaCorp's property.
In the policy, there was an exemption clause that excluded liability
for any loss or damage to property owned by Media Corp, amongst
others. The Singapore High Court found that it had been made
known to the respondent that the policy was taken out specifically
for the appellant's renovation contract with MediaCorp. It would
therefore be "contrary to all sense of justice and fair play" if the
exemption clause were allowed to deny the appellant the "very
essence of the cover" which it had sought under the policy. This
would lead to an absurdity and the courts must intervene to hold
such a clause ineffective.
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5-415
Previously, there was a divergence of judicial op1n1on as to
whether the main purpose rul e is a rule of law or merely a rule
of interpretation. The older cases generally took it to be a rule of
law. This means that whenever there is a fundamental breach, the
exemption clause is automatically defeated. The modern approach
is to view the main purpose rule simply as a rule of interpretation
or construction : Photo Production Ltd v Securicor Transport Ltd (1980)
and Sun Technosystems Pte Ltd v Federal Express Services (M) Sdn Bhd
(2007). Hence, if the exemption clause uses clear and unambiguous
words, it can be effective even in the case of fundamental breach.
Photo Production Ltd v Securicor Transport Ltd (1980)
The plaintiff owned a factory and engaged Securicor to provide
security services. Securicor's staff made periodic visits during the
nights. On one visit a Securicor employee started a fire which
accidentally got out of control and burnt the entire factory,
causing loss of £615,000. When the plaintiff sued, Securicor relied
on its exemption clause which stated that " ... under no
circumstances... [is Securicor] ...to be responsible for any injurious
act or default by any employee... unless such act or default could
have been foreseen and avoided by the exercise of due diligence ...
[by Securicor]". The Court of Appeal held that the exemption
clause was invalid because the breach by Securicor was a
fundamental breach. The House of lords stated that the question of
whether an exemption clause was applicable where there was a
fundamental breach was a matter of construction of the contract.
Exemption Clause and Third Parties
5-41 6
Can an exemption clause be effective to protect third parties? The
privity of contract rule (114-401) genera lly allows only the contractual
parties to derive rights under the contract. However, in the context of
the shipping industry, courts have allowed a third party to rely on an
exemption clause in a contract to which he is not privy. Under such an
approach, a shipping line could extend the benefit of an exemption
clause contained in a bil l of lading entered into with the consignee,
to the stevedores who are third parties engaged by the shipping line
to unload the consignee's goods. In Scruttons Ltd v Midland Silicones
Ltd (1962), although the Court was prepared to recognise such third
party rights if certa in requirements were met, there the stevedores
were not able to shelter behind an exemption clause found in the
bill of lading because the clause had not made any reference to the
stevedores. Conversely, in The Eurymedon, the Court found that the
necessary requirements were met for the benefit of the exemption
clause to be extended to the stevedores.
New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, The Eurymedon {1975)
The plaintiff was the New Zealand consignee of goods on board
The Eurymedon. The bill of lading issued by the carrier included a
wide exemption clause which sought to protect the carrier and its
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agents and servants in cases where they commit neglect or default.
The defendant was a firm of stevedores engaged by the carrier to
unload the goods in New Zealand. They were negligent in their
work and damaged the goods. The plaintiff sued the stevedores
and they sought to rely on the exemption clause in the bill of
lading. The Privy Council held that the stevedores could shelter
behind the exemption clause, even though they were not parties
to the contract. This was because the clause clearly extended
protection to them, they provided consideration to the plaintiff,
and the circumstances showed that the carrier, in issuing the bill of
lading, was not only contracting for itself but for and with the
authority of the stevedores.
5-417
In Singapore, the Contracts (Rights of Third Parties) Act (CRTA) came
into force in 2002. Under s 2(6) CRTA, a third party is now able to take
advantage of an exemption clause in a contract to which he is not a
party, subject to the requirements contained in the CRTA (114-405).
Specifically, for contracts of carriage of goods by sea, third parties
can now rely on s 7(4)(a) CRTA to enforce an exemption clause in the
contract to which they are not privy.
Unusual Factors
5-418
After incorporation and construction, the third consideration to be taken
into account when dealing with an exemption clause is whether there
are any unusual factors which may limit the effectiveness of the clause.
For example, a misrepresentation as to the true scope of an exemption
clause in a laundering contract by stating that the clause on ly exempts
liabil ity for damage to beads and sequins on a dress could render the
entire clause invalid: Curtis v Chemical Cleaning & Dyeing Co (1951).
5-419
Sometimes, an oral undertaking made before or when a written
contract has been signed may overshadow the written terms, thus
neutralising the exemption clause in the written document: AntiCorrosion Pte Ltd v Berger Paints Singapore Pte Ltd (115-433). One way
of rationalising this outcome is that the oral undertaking creates
a second, subsid iary contract known as a collateral contract. A
co l latera l contract is a contract imp l ied by the court and run s
paral lel with the ma in contract. In effect, the collateral contract
concept can be used to add to or to vary the terms of t he main
contract as an exception to the parol evidence rule. In this way, a
collatera l contract can also defeat an exemption clause in the main
contract.
Evans (J) & Son (Portsmouth) Ltd v Andrea Merzario Ltd (1976)
The plaintiff imported Italian equipment regularly and engaged
th e defendant as its forwardi ng agent on standard written
contracts used by forwarders. Up to 1967, t he equipment was
always stored below deck during t he sea voyage to avoid
corrosion. In 1967, the defendant decided to start using
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containers and orally assured the plaintiff that their goods would
be stored below deck. Based on this assurance, the plaintiff
continued to engage the defendant. However, contrary to the
assurance, the written contract actually specified that the plaintiff's
equipment may be carried on deck. One shipment was lost when
the equipment which was placed on deck slid into the sea. The
plaintiff sued and the defendant relied on the exemption clause
and printed conditions in the written contract. In the English
Court of Appeal, Lord Denning held that the oral assurance
created a collateral contract which neutralised the exemption
clause and printed conditions in the written contract. (Roskill and
Geoffrey lane UJ took a different approach, finding that there
was one contract which was partly oral.)
Unfa ir Contract Terms Act
5-420
The final -and often determining factor- when evaluating an
exemption clause is whether it complies with the UCTA. The relevant
UCTA provisions are substantial and, for ease of reference, have been
included in Appendix B. Broadly, the UCTA requ ires the party relying
on the exemption clause so as to exclude certa in liabilities to show that
the clause satisfies the requirement of reasonableness. If the exemption
clause is found to be unreasonable under the UCTA, the party relying
upon it cannot use it to exclude or limit his liabil ities, despite the fact
that the clause may have been incorporated and well-constructed.
Preliminary Comments
5-421
There are two preliminary comments which may be helpful when
analysing the UCTA. First, the UCTA applies not only to exemption
clauses in contract cases but also to exemption clauses in tort
cases (for tort, see 1118-414). This is clear from s 1(3) UCTA which
specifically mentions both contract and tort. Also, the definition
of "negligence" ins 1(1) UCTA includes both negligence in contract
as well as negligence in tort. In all cases involving an exemption
clause, the burden of proving reasonableness falls upon the party
seeking to rely on the exemption clause: s 11 (5) UCTA.
5-422
Secondly, the majority of UCTA provisions which deal with
exemption clauses apply only in cases of "business liability"
(defined in s 1(3) UCTA) or in "consumer" transactions (defined in
s 12 UCTA). In other words, the primary focus of the UCTA is towards
protecting parties, especially consumers, who undertake business
transactions. It has some, albeit limited, application outside these
cases. For example, where an exemption clause is invoked in cases
of misrepresentation, the UCTA will apply even in non-consumer
and non-business liability situations: s 3 Misrepresentation Act.
However, certain categories of contracts - including insurance
contracts, contracts relating to land, intellectual property and
securities - which are listed in the First Schedule of the UCTA,
are excluded from the scope of the UCTA.
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Contract : Terms
Persona/Injuries and Other Losses Caused by Negligence
5-423
It is useful to begin with the UGA by making a general distinction
between liability for death or personal injury and liability for other
loss or damage in cases of negligence. Liability for death or
personal injury resulting from negligence cannot be excluded or
restricted at al l: s 2(1) UCTA. In Xu Jin Long v Nian Chuan Construction
Pte Ltd (2001), the Singapore High Court observed: "It is clear that
any contractual term that prevents a party from being sued in
negligence for death or personal injury, is a restriction of liability
under s 2 of the Act, and such a term is not enforceable." Liability
for other loss or damage, such as financial loss or property damage,
can be excluded if the clause is reasonable: s 2(2) UGA.
Consumer Transactions
5-424
Where the transaction is a consumer transaction, the exemption clause
must be reasonable in order for the party relying on it to exclude or
limit his liabi lity: s 3 UCTA. Consumers are also protected by s 6 UGA
in relation to sale of goods contracts (1115-301). The consumer rights
enshrined in ss 12- 15 Sale of Goods Act (SGA) are entrenched by s 6
UGA such that a seller cannot exclude his liability under the SGA by
using an exemption clause. This is an absolute prohibition.
Non-Consumer Transactions
5-425
If a non-consumer transaction uses a standard written contract
and it contains an exemption clause, the exemption clause must
be reasonable in order for the party relying on it to exclude
or limit his liability: s 3 UCTA. An example of this is Photo
Production v Securicor (115-415) where neither party is a consumer
and the transaction was done through Securicor's standard written
contract. This means that, if Photo Production v Securicor were to
be tried today, Securicor's exemption clause would have to be
reasonable before the party relying on it could use it to exclude or
limit his liability.
S-426
In addition, the prohibition ins 6 UCTA which seeks to entrench the
buyers' rights as specified in the relevant legislation for the sale of
goods or hire-purchase is relaxed when the transaction is a nonconsumer transaction. For example, in the case of a sale of goods
contract between a wholesaler and retailer, the seller can exclude
his liability under ss 13- 15 SGA as long as the exemption clause is
reasonable. However, for s 12 SGA. the absolute prohibition remains.
Misrepresentation
5-427
Pursuant to s 3 Misrepresentation Act, if liability arises from a
misrepresentation, the misrepresentor can only seek protection
behind an exemption clause if the clause is reasonable. It appears
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that this provision applies even in non-business liability transactions.
This is unlike the key provisions of the UCTA (specifically, ss 2 -7 UCTA)
which are general ly limited to cases of business liabil ity, whether
consumer or non-consumer transactions (~5-422) .
Misrepresentation Act
Section 3:
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 misrepresentation,
that term shall be of no effect except in so far as it satisfies the
requ irement 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.
Meaning of Reasonableness
5-428
It is clear that the operative provisions of the UCTA rely heavily
on the concept of reasonab leness. Section 11(1) UCTA explains
the meaning of reasonableness generally. It provides a broad
definit ion. In eva luat ing whether an exemption c lause is
reasonable, the court must consider all the circumstances which:
(a) were known to; (b) ought reasonably to have been known to; or
(c) were in the contemplation of the parties when the contract
was made: s 11(1) UCTA.
5-429
If an exemption clause fal ls w ith in ss 6-7 UCTA, then s 11 (2) UCTA
requ ires the cou rt to consider, in pa rt icu lar, the gu idelines for
determining reasonableness as specif ied in the Second Schedu le.
Thus, s 11(2) UCTA appl ies toss 6-7 whi les 11(1) UCTA applies in al l
other cases. Theoretically, this means that there may be differences
between the concepts of reasonableness envisaged in s 11(1) and
s 11 (2) UCTA. In practice, however, the courts would refer to the
gu idelines in the Second Schedule even when determin ing the question
of reasonableness pursuant to s 11(1) UCTA.
5-430
According to the Second Schedu le of the UCTA, the factors which are
to be considered include the following:
(a) The bargaining position of the parties: presumably, if the party
re ly ing on the exemption clause has a strong bargaining
position vis-a-vis the injured party then, all ot her things
being equal, the clause is more likely to be unreasonable.
(b) Whether the customer received an inducement to accept
the exemption clause: if the customer received such inducement
then, al l other things being equal, the clause is more likely to
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Contract : Terms
(c)
(d)
(e)
be reasonable. This is presumably because the inducement
is regarded as a "sweetener" in exchange for accepting the
exemption clause.
Whether the customer knew of the exemption clause: if the
customer knew of the clause then, all other things being equal,
the clause is more likely to be reasonable.
Whether compliance with the exemption clause is practicable: if
the clause excludes or limits liability for non-compliance of a
condition, then compliance with such a condition must be
practicable; if not, then the clause is more like ly to be
unreasonable. For example, in George Mitchell (Chesterha/1) Ltd
v Finney Lock Seeds Ltd (1983), a firm contracted to sel l Dutch
w inter cabbage seeds but delivered autumn seeds of inferior
quality. The House of Lords held that the exemption clause in the
contract was unreasonable pursuant to the equivalent of s 6(3)
UCTA 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.
Whether the goods were ordered specially: it is unclear
whether the fact that the goods were specially ordered
makes the exemption clause more or less likely to be
reasonable. One possib le argument is that, if the goods
are manufactured to the customer's specifications but
causes damage to the customer, then the clause should be
considered reasonable because any defect in the goods is
due to the customer's own specifications.
The factors above serve only as guidelines. Whether an exemption
clause is reasonable is a factua l enquiry and courts are not limited to
these factors when determining the question of reasonableness.
s-431
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 written banker-customer
contract. The court held that the UCTN was not applicable on
the facts but stated that the clause would be enforceable if the
UCTA is assumed to apply. Among the reasons mentioned for this
finding were the following: both parties were commercial parties;
Consmat had a choice of banks to use; the parties entered into
the contract freely and there was no suggestion t hat the standard
terms were not negotiable; and the clause contained a 7-day
grace period for Consmat to chal lenge any alleged d iscrepancies
in its bank statements and as a commercial entity, it had the resources
to verify its bank statements within this period. Similarly, in Efis Tjoa
6.
The applicable legislation in Singapore at that time was actually the United Kingdom Unfair
Contract Terms Act 1977.
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v United Overseas Bank (2003), the court also expressed the view that
it was not unreasonable for a bank's exemption clause to require its
customers to check their statements regularly and to notify the bank
promptly of any unauthorised transaction reflected there. However,
if the bank had inadvertently and unilaterally made a wrong debit
without any instruction whatsoever, it may then be unreasonable and
against public policy to allow it to rely on the clause. In Koh Lin Yee v
Terrestrial pte Ltd (2015), the Singapore Court of Appeal expressed the
view that a contractual clause that excludes the right to a set-off is
subject to the requirement of reasonableness in the UCTA.
5-432
In Ken well & Co pte Ltd v Southern Ocean Shipbuilding Co pte Ltd (1999), the
Singapore High Court discussed the UCTN in the context of a limitation of
liability clause in a contract for ship repair works. The court held that the
defendant failed to adduce evidence of reasonableness and hence the
clause cou ld not be relied upon. Warren Khoo J stated that whether
a particular exemption clause is reasonable or not depends on the
facts of a particular case. A clause which is reasonable in one context
may be unreasonable in another. In particular, an exemption clause
commonly used in the industry may still be unreasonable under the
UCTA. Moreover, the more unreasonable an exemption clause, the
greater is the burden upon the party relying upon it to establish
reasonableness. In passing, it was noted that the fact that the parties
entered into the contract willingly does not prevent one party from
later questioning the reasonableness of an exemption clause.
5-433
In Press Automation Technology pte Ltd v Trans-Link Exhibition Forwarding
Pte Ltd (2003), Prakash J in the Singapore High Court expressed the
view that:
"Kenwell's case is clear authority for the principle that even if a party
knowingly enters a contract with a restrictive condition he will still be
able to seek the protection of UCTA. That principle emanates from
the language of UCTA itself as the statute was passed to allow parties
to contracts to be relieved of the burden of unfair contractual terms
provided the contracts concerned fall within the legislation."
7.
The j udge held that the applicable legislation was actually the United Kingdom Unfair
Contract Terms Act 1977 because the contract in question pre-dated the Application
of English Law Act and thus pre-dated the Singapore UCTA. Nevertheless, since the
particular UK UCTA provisions considered in this case are identica l to the Singapore
UCTA provisions, a discussion of t he case is usefu l. For other Singapore High Court
cases which have touched on the UCTA, see: Oversea-Chinese Banking Corp Ltd v The
Timekeeper Singapore Pte Ltd (1997), Ri long Son v Development Bank of Singapore Ltd (1998) and
Terrestrial Pte Ltd v Allgo Marine Pte Ltd (2013).
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~
111.11111
On Express Terms and Exemption Clauses
Anti-Corrosion Pte Ltd v Berger Paints Singapore Pte Ltd
(2011)
Anti-Corrosion (AC) was a painting subcontractor which provided painting
works on building projects. Berger Paints (BP), a paint manufacturer, was
contracted to supply paint to AC for four projects. Contrary to what was
said on the product data sheet for the paint supplied, BP initially presented
a paint plan for the projects which did not require a sealer coat to be
applied to the surface prior to application of the paint itself. In response to
concerns expressed by AC, BP gave assurances that a sealer coat would not
be necessary, and also gave a five-year guarantee on the paint used on any
project which was based on their paint plans.
Three projects had been completed with litt le complaint but on the fourth
project, which was the subject of t his case, there was serious discolouration
of the paint on the internal surfaces that were painted. AC sued BP for
the expenses incurred in repainting the affected surfaces. The High Court
dismissed AC's claim and ruled that there was no breach of contract on
BP's part, ie. AC had not proved that the defects in the paint caused the
discolouration.
On the facts, Rajah JA found that BP had given oral assurances to AC that
a sealer coat was not necessary and that a guarantee would be provided.
Given that the tax invoices and delivery orders did not form the whole of the
contract, evidence of these oral assurances was not precluded by the parol
evidence rule. The oral assurances were thus incorporated into the contract.
Finding that these statements were instrumental in AC's decision to enter
into the contract, and taking into account BP's greater knowledge of their
own products, the court concluded that the statements were binding terms
and not mere representations.
On appeal, the Singapore Court of Appeal disagreed with the lower court's
finding that the defects in the paint supplied by BP did not cause the
discolouration, and hence held that there was indeed a breach of contract.
Following that, the court held that, having been incorporated into the
contract, the guarantee was an express term for all the projects. Relying
on English authorities, the court held that the exemption clauses in the tax
invoices and delivery orders were not effective in t he light of the express
guarantee. It is well established that an exemption clause contained in a
written contract can be overridden by an express inconsistent undertaking
given at or before the t ime of contracting. As such, BP could not rely on the
exemption clauses to limit their contractual liability.
SUMMARY
5-501
In this chapter, we dealt with the substance of a contract: its terms.
Not all statements made in the course of negotiating a contract are
terms. Some are terms, others are representations and yet others are
mere puffs. A puff has no legal effect. A representation, if false, may
give rise to an action in misrepresentation. A term forms part of a
contract.
5-502
Sometimes it is difficult to differentiate terms from representations.
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SINGAPORE BUSINESS LAW
The following gu idel ines may be relevant when making th is
distinction:
(a) If the statement was made closer to the time of the contract,
it is more likely to be a term;
(b) If the maker of the statement was emphatic, it is more likely to
be a term;
(c) If the maker of the statement possesses special knowledge, it is
more likely to be a term;
(d) If the maker of the statement invites the other party to verify
the truth of the statement, it is more likely to be a representation;
and
(e) If the statement was reduced into writing, it is more likely to be
a term.
5·503
A term can be express or impl ied. Terms which are expressly agreed
upon by the parties usually raise fewer problems, apart f rom issues of
interpretation. Implied terms are usua lly more prob lemat ic. Terms
imp lied by statute may sign if icantly alter the rights and obligations
of t he pa rties, even if the parties were orig inally unaware of the
existence of these impl ied terms. As to whether a term is implied
by custom and usage or to give business efficacy, the answer is often
unclear since the evidence necessa ry to support such an implication
may be debateable. For this reason, the best approach is to ensure
that all terms in a contract are express terms.
5-504
Both express and impl ied terms can be fu rther categorised according
to their legal effect. The three t raditional categories of terms are:
conditions, warranties and innominate terms. A cond ition is an
essential term, whereas a warranty is a less important term. If it is
difficult to determ ine whether a particular term is a condition or a
warranty, it may be viewed as an innominate term. Singapore courts
have reduced their reliance on these three categories. They tend
to adopt a two-stage ana lysis focusing f irstly on the intention of
the parties and, secondly, on the consequences of breach. The lega l
im pact of a breach thus depends on the parties' intention as to what
is to occu r in that situation, as well as an evaluation of the actual
consequences of the breach.
5·505
The fina l type of term which is dealt with in th is chapter is the
exemption clause . Such clauses are used by a party to limit or
exclude liabil ity for what is otherwise a breach of contract. For an
exemption clause to be effective in shielding a party from liability,
it must fu lf ill the following four factors:
(a) Incorporation: the exemption clause must be incorporated
into the contract either by signature or reasonable sufficiency
of notice;
(b) Construction: the exemption clause, properly construed, must
cover the breach in question;
(c) Unusual factors: there must be no extraordinary factors
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Contract : Terms
(d)
which can undermine the exemption clause; and
UCTA: the exemption clause must not contravene the UCTA- in
particular, the t est of reasonableness appl ied by the UCTA.
···•·•·•···
U075837L/N1510069
U075837L/N1510069
Incorporation
lse.c
incorporated?
lossfdamage in
question?
Does e.c cover the
Construction
Unusual Factors
Any special
facts limiting
thee.c?
Exemption Clauses
Pre-contractual Statements
Summary
--
UCTA
Doese.c
contravene UCTA?
L-
Special Knowledge
If maker has spe<:lal
knowledge, more likely
a term
Classification of Terms under Singapore Approach
Atwo-stage analysis to determine whether a particular
term is a condition or a warranty:
consider first the intention of the parties,
and then the conseouences of the breach.
Innominate Term
Unclassifiabletreated like a condition or warranty,
depending on seriousness of
breach & consequences
Written Form
If reduced into writing
more likely a term
Emphasis
Greater emphasis
suggests a term
Verification
Invitation to verify
suggests a representation
Timing
Closer to contract.
more likely a term
w
0
CONTRACT:
VITIATING FACTORS
INTRODUCTION
6-101
So far in the law of contract, we have discussed how a contract is
formed and the nature of its terms. If an analogy is made with
horticulture, the formation of contract could be likened to the
germination of a seed. The terms of the contract could be likened
to the type of seed - whether it is a papaya or mango plant. In
due course, the plant is expected to grow into maturity; this is
the aspect of contract law known as discharge (Chapter 7).
6-102
Between infancy and maturity, however, living things may be
subject to adverse elements which stunt their development. In
this respect, a contract is no different. At law, there are a number
of f actors which may prevent a contract from being enforceable.
They are often called vitiating factors because they vitiate a
contract by depriving it of its efficacy. In other words, they render
a contract to some degree unenforceable.
6-103
There are a number of vitiating factors which can affect the
enforceability of a contract. In this chapter, we look at four main
factors: incapacity, illegality, misrepresentation, and mistake. We will
consider their elements and the consequences they generate. Not all
vitiating factors generate the same consequences. Some of them may
render a contract void, which means the contract becomes a nullity
and has no lega l effect. Other vitiating factors may make a contract
voidable, which means the contract is valid until such time as it is
rightfully terminated by an injured party.
Four Vitiating Factors
•.,...-:.:.
•
..
,";.,
Diagram 6A
..
'
Vitiating Factors
Misrepresentation
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INCAPACITY
6-201
Incapacity refers to the lack of capacity which may characterise
a contracting party. As a general rule, to form a va lid contract, the
parties must have capacity to do so. The law, however, views certa in
pe rsons as not having the capacity to enter into contracts.
If such persons enter into contracts, their contracts may be
unenforceable by reason of incapacity. The rationale for the
concept of incapacity is rooted in public policy. For example, a
young ch ild is generally cons idered as lacking the capacity to
enter into a contract. The reasoning is that children do not have
sufficient understanding or experience to make bind ing agreements. Sim il arly, peop le of unsound mind or people who are
intoxicated are also considered to lack capacity to enter into a
contract: Re Yeh Ee Swan (2003).
Minors
6-202 Among persons who lack capacity, the largest category iscalled "minors"
(in the past, they were called- rather unflatteringly - infants). Minors
are persons who have not reached the age of majority. At law, the age
of majority defines the stage at which a person reaches adulthood and is
considered legally responsible for his actions. From a policy perspective,
the law is concerned t o protect minors from entering into contracts
because they may not fully appreciate the consequences of their actions.
On the ot her hand, the law must also ensure that the other party does
not suffer unnecessary hardship if he has contracted fairly with t he
minor. As a result, the law has developed several rules which attempt
to balance the interests of the minor as well as the other party. These
rules are found in the common law as complemented by provisions in
the Minors' Contracts Act (MCA) and the Sale of Goods Act (SGA), both
of which are based on their United Kingdom counterparts. 1
6-203
The common law age of majority is 21 years. In the United Kingdom,
however, the Fam ily Law Reform Act 1969 has lowered the age of
majority to 18. As is clear from the Appl ication of Eng lish Law Act, this
statute does not apply in Singapore. Accordingly, in Singapore (with
some important exceptions - see 1]6-203b) the common law age of
majority is still 21 yea rs.
Rai Bahadur Singh &Anor v Bank of India (1993)
In 1986, the plaintiffs, who were 18 and 19 years old respectively, signed
a letter of set-off which entitled the defendant bank to set-off any debts
owed by a company against the plaintiffs' fixed deposit with the bank.
1.
In addition, particular statutes may specify a lower age for purposes of competency. For
example, s 58(1) Insurance Act states that a person over 10 years shall not, by reason only of
being under the age of majority, lack capacity to enter into a contract of insurance; however,
a person under the age of 16 shall not have capacity to enter into an insurance contract except
with the written consent of his parent or guardian.
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CHAPTER 6
In 1991, the defendant bank exercised its rights of set-off. The plaintiffs
claimed that they were minors and hence lacked capacity when the
letter of set-off was signed. In the Singapore High Court, Karthigesu J
held that on the facts, the English Infants Relief Act 1874 (later repealed
by the Minors' Contracts Act 1987 (UK)) applied, and the common law
age of majority in Singapore was 21 years. This therefore rendered
the letter of set-off void. This decision was subsequently upheld by the
Singapore Court of Appeal.
6-203b While the common law age of majority in Singapore remains 21 years,
in 2009 the law was changed to allow individua ls above 18 years of
age to have contractual capacity in certain commercial activities. The
rationale for this change is to remove lega l barriers wh ich may prevent
young people from starting and conducting business activities- with
the overal l goal of fostering a more entrepreneurial society. The
changes were effected by inserting two new sections (s 35 and s 36)
into the Civil law Act. The impact is that contracts entered into by
minors who have attained the age of 18 years have the same effect as
if they were contracts entered into by persons of full age. Moreover,
such minors can now bring certain legal proceedings and actions
in their own names as if they were of full age. Consequential and
related amendments to other legislation (including the Employment
Act, Companies Act and limited liabi lity Partnersh ips Act) were made
so as to allow such minors to carry out related business activities.
6-204
The rules on minors' contracts are best demonstrated in cases
involving a contract where one party is a minor and the other
party has fu ll capacity. Such a contract wi ll fall under one of three
possible categories: valid contracts, voidable contracts and a residual
category which we may call ratifiable contracts. 2
Minors' Contracts- Three Classes
Minors' Contracts
I
Valid Contracts
Binds both minor &
other party
2.
I
Voidable Contracts
Binds other party &
binds minor unless
minor repudiates
I
Ratifiable Contracts
Binds other party &
binds minor only if
minor ratifies
This classification is a modified version of t he one used by PeelE, Treitel on the Law of Contract,
14th ed (London: Sweet & Maxwell, 2015), chapter 12. Professor Treitel used "other contracts"
instead of "ratifiable contracts".
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Valid Contracts
6-205
Va lid contracts bind both the minor and the other party. As such,
they are fully enforceable. Two groups of contracts make up the
category of valid contracts: beneficial contracts for necessaries and
beneficial contracts of employment. In both cases, the contract on
the whole must benefit the minor. If it contains onerous terms
prejudicial to the minor, the contract may not be binding.
6·206
It is important to note that, in the cases referred to below, the minors
have not yet performed their obligations. In other words, these cases
deal with a minor's contract which is still executory on the part of
the minor. A different outcome arises if the minor has performed his
obl igations by payment of money or delivery of goods or services. In
such a case, regardless whether the contract is for necessaries or nonnecessaries, it seems that the minor is unable to recover any money
paid or goods delivered by him unless there has been tota l failure of
consideration by the other party. 3
Valentini v Canali (1889)
Valentini, a minor, contracted to lease a furnished house from
Canali for £102. He paid £68 on account and occupied the house
for some months. He later claimed the contract was not binding
and sued to recover the £68 paid by him. The court held that he
could not recover the money because he had already had the
benefit of the house. Lord Coleridge CJ stated:
"When an infant has paid f or something and has consumed or
used it, it is contrary to natural justice that he should recover
back the money which he has paid."
Beneficial Contracts for Necessaries
6·207
Necessaries re f ers to those goods and services which the law
deems reasonably required by a minor in his particu lar station in
life. Section 3 SGA contains a definition of necessaries.
Sale of Goods Act
Section 3:
(1)
Capacity to buy and sell is regulated by the general law
concerning capacity to contract and to transfe r and acquire
property.
(2)
Where necessaries are sold and delivered to a minor or to a
person who by reason of mental incapacity or drunkenness is
incompetent to contract, he must pay a reasonable price for
them.
(3)
In sub-section (2), "necessaries" means goods suitable to
the condition in life of the minor or other person concerned
and to his actual requirements at the t ime of the sale and
delivery.
3.
See generally: Dobson P. Charlesworth's Business Law, 16th ed (London: Sweet & Maxwell, 1997)
71.
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6-208
135
Without the s 3 SGA definition, one might expect items of necessity,
such as food and clothing, to be necessaries. However, the wording
of s 3 SGA makes it clear that not all necessities are in fact necessaries;
in this respect the statutory definition reflects the case law.
Nash v Inman (1908)
Nash, a Saville Row tailor, initiated proceedings to recover £122 for
clothes (including 11 fancy waistcoats) delivered to a Cambridge
undergraduate, Inman, who was a minor. The contract was held
unenforceable because Nash failed to prove that the clothes were
necessaries - chiefly because the evidence showed that Inman
already had an ample supply of clothes. Cozens-Hardy MR in the
English Court of Appeal stressed that the statutory definition of
necessaries ins 2 Sale of Goods Act 1893 had two elements:
"Having shown that the goods were suitable to the condition
in life of the infant, [the plaintiff] must then go on to show
that they were suitable to his actual requirements at the time
of sale and delivery."
6-209
On the other hand, necessaries need not be confined to necessities.
Necessaries may include luxurious items of utility if they are
considered appropriate for the minor in his position.
Peters v Fleming (1840)
Fleming, an undergraduate who was a minor, purchased some
gold rings and a gold watch-chain from Peters. He was the
eldest son of a gentleman of fortune who was also a Member
of Parliament. On appeal the court held that these items could
constitute necessaries and whether they were in fact so was a
proper question for the jury to decide.
6-210
Where the contract deals with necessaries, the common law would
require the minor to pay the contracted price. Today, s 3(2) SGA
provides that a minor must pay "a reasonable price" for such goods.
No definition is given as to what is a reasonable price. Th is raises the
possibility that the reasonable price may not be the contracted price
for the goods.
Executory Contracts for Necessaries
6-211
The preceding discussion has been premised on the assumption
that, in contracts for necessaries, the goods or services have been
supplied by the other party and the question is whether the minor
is bound to pay for them. Thus, s 3(2) SGA deals only w ith executed
contracts in that the goods must have been "sold and delivered"
to the minor. A complication arises if the contract for necessaries
is still executory on the part of the other party. Is the minor bound
in these circumstances?
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6-212
In Nash v Inman (1!6-208), Fletcher Moulton U expressed the view that,
in sale of goods contracts involving goods which are necessaries, the
minor is not bound unless the goods have been delivered by the
other party. However, in Roberts v Gray (1913), Hamilton LJ preferred
to make no distinction between contracts which are executory and
those which are executed by the other party. One way of reconciling
these two views is to say that, in relation to necessaries which are
goods- as was the case in Nash v Inman- the other party must have
performed his obligations before the contract is binding upon the
minor. In relation to necessaries which are services- as was the case
in Roberts v Gray - the contract is binding upon the minor regardless
whether the other party has performed his obligations or not.
Loans for Necessaries
6-213
A person who lends money to a minor is generally unable to
enforce the contract and recover the money from the minor. An
exception exists if the money was used by the minor to purchase
necessaries: Marlow v Pitfield (1719). In practice, no financial
institution would lend money to a minor simply on the assurance
that the loan will be used to obtain necessaries. This is because
such loans can easily be misapplied to other uses. Accordingly,
financial institutions in Singapore typically lend money to minors
only if the minor can supply a guarantor who will guarantee the
loan. Pursuant to s 2 MCA, such a guarantee is enforceable even if
the underlying loan agreement is unenforceable.
Minors' Contracts Act
Section 2:
Where(a)
a guarantee is given in respect of an obligation of a party to
a contract made after [the commencement of this 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 t hat reason alone be unenforceable
against the guarantor.
Beneficial Contracts for Employment
6-214
4.
The main rule is that a contract of service involving a minor will be
binding upon the minor if the contract is, on the whole, beneficial to
him.4 The rationale is that such a contract enables the minor to
This rule is now enshrined in s 12 Employment Act which states that: "Notwithstanding
anything in any other written law, a person below the age of 18 years shall, subject to the
provisions of this Act, be competent to enter into a contract of service ... (provided that] no
contract of service...shall be enforceable against [that) person ...unless it is for his benefit."
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earn a livelihood. An example of a minor's employment contract
which was not beneficial to the minor is given below.
De Francesco v Barnum (1890)
A 14-year-old girl entered into a deed of apprenticeship with
De Francesco to learn stage dancing for seven years. The deed
provided that during this period she could not marry and would not
accept professional engagements without De Francesco's consent.
However, De Francesco was under no obligation to provide her with
engagements and her pay was totally unsatisfactory. Fry U held that
the terms of the deed were unreasonable and not beneficial to the
girl and, therefore, unenforceable.
6-215
The rule regarding a minor's beneficial contract of service has been
extended from employment contracts to other contracts through
which a minor could make a living. Such contracts will be binding
even if there are certain aspects which are not advantageous to
the minor. The important point is that, overa ll, the contract must
benefit him .
Chaplin v Leslie Frewin (Publishers) Ltd (1966)
The son of Charlie Chaplin, while still a minor, agreed to have his
authorised biography written by ghost writers in consideration of
an advance of royalties from the defendant publishers. The book
turned out to show him as a "depraved creature". The English
Court of Appeal (Lord Denning dissenting) nevertheless held that
he was bound by the contract as it enabled him to get a start as an
author and earn money for his living expenses. Danckwerts and
Winn UJ took the view that the contract was, on the whole,
beneficial to Chaplin, stating that "the mud may cling but the
profits will be secured"!
Voidable Contracts
6-216
The second class of minors' contracts is voidable contracts. Such
contracts are found in a relatively small number of cases. In these
cases, the contract is valid and bind ing upon the other party.
However, the minor is entitled to repudiate the contract - without
any liability on his part - any time during his infancy or within a
reasonable period after he attains majority.
6-217
These cases typically arise when a minor acquires an interest in a
subject matter where the minor faces recurring future obligations.
Examples include minors' contracts for a lease, partnership and
purchase of shares in a company. The rationale is that, because of
these continuous future obligations, the minor should be entitled
to end the agreement should he wish to do so. Unti l he repudiates
it, however, the contract remains enforceable.
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Davies v Benyon-Harris (1931)
A minor entered into a lease for a flat. Three years later, after he
had attained majority, the landlord sued the minor for unpaid rent.
The court held that the lease was not void but voidable and was
enforceable against the minor unless he repudiated it within a
reasonable time after attaining majority.
6-218
What amounts to reasonable time within which to repudiate
a voidable contract is a question of fact which depends on the
circumstances of each case. Once repudiated, the minor is no longer
bound to perform any future obligations. There are conflicting
views as to whether he is free from the liabilities which had accrued at
the time of repudiation. In any event, consistent with the general rule
stated earlier, he would not be entitled to recover any money paid or
property transferred by him to the other party prior to the repudiation
unless there has been a total failure of consideration: Steinberg v Scala
(Leeds) Ltd (1923).
Ratifiable Contracts
6-219
The third class of minors' contracts is a residual class. If a minor's
contract does not fall within the class of valid or voidable contracts
then, by a process of elimination, it falls within this third class.
This third class may be called "ratifiable contracts" because such
a contract would neither be valid nor enforceable against the
minor unless he ratifies it after he attains majority. The contract
nevertheless binds the other party.
Minors' Contracts Act
Section 3(1 ):
Where(a)
a person (the plaintiff) has after [the commencement of this
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,
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.
6-220
In two classes- voidable and ratifiable contracts- the legislature has
enacted a catch-all provision to compel a minor to return property
improperly obtained by him by virtue of an unenforceable contract.
This provision, found in s 3 MCA, applies to minors' contracts that
are voidable or ratifiable since the requirement is that the minor has
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139
improperly obtained property as a result of the contract being
unenforceable or repudiated. The effect of s 3(1) MCA is to
provide a partial remedy to a person who enters into a contract
with a minor. If the minor refuses to pay for any property
acquired by him on the basis that the contract was either invalid or
voidable, then the other party can at least recover the property from
the minor.
Mentally Unsound and Intoxicated Persons
6-221
In the same way that the law seeks to protect minors from
being bound to contracts which may not benefit them, the law
also protects mentally unsound (previously called "insane persons"
or "lunatics") as well as intoxicated persons. Essentially, a contract
with such a person is valid but may be unenforceable against him
if it can be shown that, at the time the contract was made:
(a)
he was incapable of understanding the nature of the contract;
and
(b)
the other party knew or ought to have known of his incapacity:
Che Som bte Yip & Ors v Maha Pte Ltd & Ors (1989).
It should be noted that s 3(2) SGA also applies to mentally unsound and
intoxicated persons. Where they have obtained goods which are
necessaries, they must pay a reasonable price for the goods.
ILLEGALITY
6-301
5.
6.
7.
8.
A second factor which can vitiate a contract is illegality. Sometimes
a distinction is made between void and illegal contracts. 5 Others
take the approach that illega lity can be classified depending on
the source of law infringed - whether statute or common law. 6
Although there is some justification for these distinctions, a rigid
classification is probably difficult to maintain. 7 Given th is lack
of unanimity, without attempting to be exhaustive or definitive,
we will simply describe several types of illegal contracts arising
from both statute and common law. 8 Particular attention is
focused on contracts which are illegal because they restrain trade.
We also briefly describe the effects of such illegality.
This was the approach adopted by Phang A B L (ed), Cheshire, Fifoot and Furmston·s Law of Contract
-Second Singapore and Malaysian Edition (Singapore: Butterworths Asia, 1998) chapters 11-13.
This is the approach adopted by another leading text, Beatson J et al (eds). Anson's Law of
Contract, 30th ed (Oxford: Oxford University Press, 2016) chapter 11.
On the conceptual difficulties surrounding illegality, see: Phang A B l, "Vitiating Factors in Contract
Law- The Interaction of Theory and Practice"10 Singapore Academy of Law Journal (1998) 1,
63-89; Furmston M and Sufrin B, "Illegality and Public Policy", Furmston M (gen ed), Butterworths
Common Law Series - The Law of Contract, 4th ed (london: LexisNexis UK, 201 0) chapter 5.
This echoes the view found in Beatson, above note 6, 409-410.
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Viewing Four Illegal Contracts
Illegal Contracts
Gaming &
wagering
contracts
Contracts
contrary to
public policy
Contracts
contrary
to statute
Contracts
in restraint
of trade
Gaming and Wagering
6-302
In Singapore, all gaming and wagering contracts are general ly void
by statute: s 5 Civil Law Act. 9 As such, they are of no legal effect and
cannot be enforced. Essentially, a wagering contract is a bet upon an
uncertain event. In a wager, there are only two parties to a contract
and one must lose and the other must win. A gaming contract arises
where two or more parties contract to play a game where the stakes
are money or something of value. As a general rule, money paid
or won under a wagering or gaming contract cannot be recovered.
Moreover, the unauthorised use of premises for betting or gaming
is prohibited under the Betting Act. Of course, exceptions are made
to legalise gaming and wagering contracts. In Singapore, these
exceptions include casinos at the integrated resorts (pursuant to the
Casino Control Act) and horse-racing (pursuant to the Singapore
Totalisator Board Act).
Civil Law Act
Section 5:
(1)
All contracts or agreements, whether by parol or in writing,
by way of gaming or wagering shall be null and void.
(2)
9.
No action shall be brought or maintained in the court for
recovering any sum of money or valuable thing alleged to
be won upon any wager or which has been deposited in the
hands of any person to abide the event on which any wager
has been made.
The impact of s 5 Civil Law Act upon loans for extraterritorial gambling (eg. a Singapore loan
for legal gambling in Las Vegas in the United States) raises complex legal issues; see generally:
Yeo T M, "Are Loans for International Gambling Against Public Policy?" [1997] Singapore Journal
of International & Comparative Law 593; and Star City Pty Ltd (formerly known as Sydney Harbour
Casino Pty Ltd) v Tan Hong Woon (2002). See also the Singapore Court of Appeal decision in Liao
Eng Kiat v Burswood Nominees Ltd (2004).
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141
Contracts Contrary to Public Policy
6·303
There are a number of cases where contracts have been held to
be illegal because they contravene some aspect of public policy.
Most are rooted in the common law, although some have also
been codified by statute as cri mina l offences. Examples of such
illega l contracts include:
(a)
a contract to comm it a crime, a tort or a fraud on a third party,
such as a contract to pu bl ish a libel: Apthorp v Neville & Co
(1907). In Ting Siew May v Boon Lay Chao (2014), the Singapore
Court of Appeal held that a back-dated option agreement had
been entered into with the object of committing an il legal act
and was accordingly void under common law.
(b)
a contract which promotes sexual immorality, such as a
contract to lend money to finance a brothel: Ahvena Ravena
Mana Aroogmoogum Chitty v Lim Ah Han, Ah Gee and Chop
Lee Watt (1894);
(c)
a contract wh ich benefits a foreign enemy or undermines
the relationship with a friendly country, such as a contract for
a transaction to be done in a friendly foreign country which is
illega l under its local law: Regazzoni v KC Sethia (1944) Ltd (1958),
which was cited in Everbright Commercial Enterprises Pte Ltd &
Another v AXA Insurance Singapore Pte Ltd (2000) and Wu Shun
Foods Co Ltd v Ken Ken Food Manufacturing Pte Ltd (2002);
(d)
(e)
a contract inimical to the admin istration of justice, such as a
contract to give fa lse evidence at a trial: R v Andrews (1973);
and
a contract to oust the jurisdiction of the courts, such as a
provision specifying that the right to interpret the rules of
an association vests only in its council: Baker v Jones (1954).
Contracts Contrary to Statute
6·304
Some contracts are illegal because statutory provisions prohibit them.
The reason is usually because the legislature wishes to proscribe t he
performance of certain activities which wou ld be entailed in such
contracts. The precise terms of the statutory provisions must be
interpreted carefu lly. Some statutes expressly or impliedly prohibit
ce rtain types of contract and prevent their inception altogether,
whi le others seek only to pena lise certa in types of unlawful
conduct without prohibiting the underlying lawful contract. Yet
others pena lise illegal performance without affecting the parties'
contractua l righ ts at all. Where the legislature's intention to prohibit
a type of contract is clear from the statute, then the contract will
be void and unenforcea bl e by al l the parties, whether or not they
are aware of the statutory i I legality (see 116-313 below on the effect
of il lega lity): Sinnathamby Rajespathy & Another v Lim Chong Seng &
Another (2002) and Ochroid Trading Ltd and another v Chua Siok Lui
(trading as VIE Import & Export) and another (2018).
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Re Mahmoud and lspahani (1921)
Wartime regulations during the First World War prohibited the
buying or selling of linseed oil unless the parties have obtained
licenses from the government Food Controller. In this case, the
seller possessed a licence to sell linseed oil to other licensed
dealers. The buyer wanted to buy linseed oil from the seller and
told the seller he had the necessary licence when in fact he did not.
Later, the buyer refused to accept delivery of the linseed oil, claiming that he did not have the licence to buy it. The seller's claim for
damages failed because the English Court of Appeal held that the
contract was unenforceable. Bankes LJ took the view that here the
legislature has made a "clear and unequivocal declaration ... that
this particular kind of contract shall not be entered into" and that,
consequently, the contract was void.
6-305
Other provisions, however, only penal ise certain conduct without
rendering the entire contract void. For example, the over-loading
of a ship, which was illegal, in itself might not cause a contract
for transport ing goods on that ship to be void because the act
wh ich contravenes the statute was cons idered to be at the
periphery of the contract: StJohn Shipping Corporation v Joseph
Rank Ltd (1957). In this situation, the shipowner was still entitled
to claim for the freight specified under the contract. In other
words, the unlawful performance on an otherwise lawful contract
does not necessarily render the entire contract void.
6-306
Whethe r a contract is entirely void or continues to be part ly
enforceable despite being tainted by illega lity in some aspect of
its performance often depends on the construction of the
statutory provision wh ich prohibits the ill egal contract. If the
statutory provision sim ply imposes a fine for non-compliance, the
likelihood is that non-compliance would not cause the entire
contract to fai l: Shaw v Groom (1970). In other words, the issue is
whether the relevant statute intended only to proh ibit the offending
conduct, resulting inevitably in crimina l sanctions, or whether it
intended to proh ibit the contract as well, result ing in add itional civil
consequences. So, if a taxi-driver is fined for speeding under the Road
Traffic Act, his passenger cannot solely rely on th is il legal act to refuse
payment of the fare. In such cases, the parties' contractual rights and
obl igations remain unaffected by the illegality.
Contracts in Restraint of Trade
6-307
Restraint of trade contracts are agreements under which a party
agrees to refra in from undertak ing certain types of trade or
employment. Usually, such agreements are used to prevent a party from
entering into a f ield in which the other party operates: Barang Barang
Pte Ltd v Boey Ng San & Others (2002). A restraint of trade agreement is,
in essence, a contract which seeks to prevent or minimise compet ition.
The restraint can be found as a clause in a larger contract or it may form
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Contract : Vitiating Factors
the entire basis of the contract. The genera I rule is that such clauses or
contracts in restraint of trade are void: Asiawerks Global investment Group
Pte Ltd v Ismail bin Syed Ahmad (2004). This is consistent with the overall
approach of a market economy based on fa ir competition. In certain
situations, however, a restraint of trade clause may be enforceable if
it can be shown that the restraint is reasonable given the interests of
the parties and the public generally.
6-308
In Singapore, restraints of trade may also be proh ibited under the
Competition Act. Enacted in 2004, this legislation general ly prohibits
three main types of anti-competitive behaviour:
(a) anti-competitive agreements which appreciably prevent, restrict
or distort competition in Singapore;
(b) abuse of a dominant position in the market; and
(c) mergers and acquisitions of business entities which substantially
lessen competition in Singapore.
6-309
In practice, restraints of trade frequently appear in two classes of
contracts: employment contracts and contracts for the sa le of business.
At common law, a restraint of trade clause, to be va lid, must fulfi ll
three criteria: it must protect a legitimate interest of the covenantee
(the person benefitting from the restraint); it must be reasonable in
scope; and it must not be contrary to the public interest.
Contracts in Restraint of Trade
Valid Restraint of Trade
Must protect proprietary
or lettimate interest
o covenantee
Must be reasonable
in duration, scope
and subject matter
I
Must not
be contrary to
public interest
Legitimate Interest
6-310 The restra int must protect some proprietary or leg itimate interest
of the covenantee. In the case of the sa le of a business, the main
proprietary interest is goodwill. In the case of employment contracts,
an employer (the covenantee) may restrain a former employee
from exploiting trade secrets or trade contacts obtained from his
emp loyment: Asia Business Forum Pte Ltd v Long Ai Sin & Another
(2003). Trade secrets and trade contacts may constitute legitimate
interests which can be protected by a restraint of trade clause:
Centre for Creative Leadership (CCL) Pte Ltd v Byrne Roger Peter (2013)
and Lek Gwee Noi v Humming Flowers & Gifts Pte Ltd (20 14). In
this regard, the Singapore Court of Appea l has stated that the
ma intenance of a stable, trained workforce could constitute a
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legitimate proprietary interest that merits protection by a nonsolicitation clause which may otherwise be seen as an unreasonable
restraint of trade: Man Financial (S) Pte Ltd v Wong Bark Chuan David
(2008). However, if the restraint is intended merely to minimise
competition or to prevent an employee from using the personal skills
or knowledge acquired during his previous employment, then it is likely
to be void: Herbert Morris Ltd v Saxe/by (1916) and Buckman Laboratories
(Asia) Pte Ltd v Lee Wei Hoong (1999).
Stratech Systems Ltd v Nyam Chiu Shin & Others {2005)
Stratech sued Nyam and Wong for, amongst other things, breaching
the restraint of trade clause in their employment contracts, which
restrained them from joining a company in the habit of dealing with
Stratech w ithin nine months after leaving Stratech. The Singapore
Court of Appeal approved the earlier case of Buckman Laboratories.
The court observed that, although the restriction period of nine
months was not unreasonably long, the duration of the prohibition
was only one factor to be considered. In fact, it was not the most
important factor. The established legal proposition was that a
court will not uphold a covenant benefitting an employer merely
to protect itself from competition by a former employee. Here,
as Stratech was unable to demonstrate any legitimate interest
that required protection by a restraint of trade clause, the court
ruled that the main function of the clause was indeed to inhibit
competition in business. The clause was therefore invalid.
Reasonable Scope
6-311
The restraint must be reasonable in terms of its period, geographical
scope, and subject matter. If the restraint is for a period which is too
long, it may be held to be void. Similarly, a restraint of trade clause
where an Islington canvasser whose employment agreement restrained
him from entering into a similar business 25 miles from London was
held to be void because the area of restraint was 1,000 times larger
than the area in which he was employed: Mason v Provident Clothing &
Supply Co Ltd (1913). Also void for being far too wide with respect to
the area covered was a clause which restrained the covenantor from
giving advice to a competitor "anywhere in the world". Thus, even
where a legitimate proprietary interest is shown, the court will ensure
that the covenant in restraint of trade "goes no further than what is
necessary to protect the interest concerned": Man Financial (S) Pte Ltd v
Wong Bark Chuan David (2008).
CLAAS Medical Centre Pte Ltd v Ng Boon Ching (201 O)
Ng ran a clinic practising aesthetic medicine w it h a distributorship
business of aesthetic laser machines and skin care products. CLAAS
Medical Centre was an entity incorporated by six doctors who
had persuaded Ng to enter into a joint venture with them. Ng
later became a shareholder in CLAAS. A subsequent agreement,
under which shares held by Ng were to be sold to the six doctors,
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145
contained a restraint of trade clause which precluded the signatories
from (a) engaging with any business which would compete with
CLAAS' business and/or (b) practising aesthetic medicine, for as long
as they remained shareholders and for a period of three years from
the date they ceased to hold shares in CLAAS. Less than two months
after the sale, Ng set up a general and aesthetic medicine practice,
in breach of the restraint of trade clause. The Court of Appeal
commented that it was reasonable for the clause's geographic scope
to be the whole of Singapore. In evaluating the three-year period,
the court took into account several facts: that Ng was a much more
well-established practitioner of aesthetic medicine than the other six
doctors; that a significant number of patients would choose Ng over
any other doctor if his services were available; and the fact that the
three-year period was proposed by Ng himself. The court concluded
that the three-year period was not unreasonable. It did however,
criticise the clause as being unreasonably large in scope insofar as ·
it restricted the practice of "aesthetic medicine"- this was wider
than was necessary to protect the legitimate interests of CLAAS. The
offending parts of the clause- "and all procedures and treatment as
understood by aesthetic medicine" -were held to be severable, and
the clause was not thereby invalidated.
Public Interest
6-312
The restraint must not be contrary to public interest: Asia Polyurethane
Mfg Pte Ltd v Woon Sow Liong (1990). For example, if the restraint
has sign ificant impact on trading arrangements such that it reduces
competition generally, the court may declare the clause to be void.
Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd (1968)
The defendant owned two petrol stations. In respect of the first petrol
station, it entered into a solus agreement with Esso which, among other
things, bound it to purchase petrol only from Esso for the next four
years and five months. There was a similar sol us agreement for the
second petrol station. The defendant also obtained a loan of £7,000
from Esso and granted Esso a 21-year mortgage over the premises of the
second petrol station. The mortgage was effectively tied to the solus
agreement such that the sol us agreement was to be valid for those 21
years. The defendant later started to sell petrol from another source
and, when sued by Esso, claimed that t he solus agreements were an unreasonable restraint of trade. The House of Lords held that the 21-year
sol us agreement was unreasonable whereas the four-year five-month
solus agreement was reasonable. Among the reasons given was that
the test of reasonableness requires a consideration of the public interest
which must be protected in such exclusive dealing agreements.
Effect of Illegality
6·313
At common law, the general effect of illegality is that the contract is
void. The law treats the contract as if it had not existed in the first place
and no party can sue on the contract. Furthermore, where property has
passed under an illegal contract, generally the property is not recoverable
unless the recovery proceedings can be made without relying on the
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illegality. The effect of illegality has been summarised in the judgment
of Devlin U in Archbold's (Freightage) Ltd v S Spanglett Ltd (~6-315):
"The effect of illegality upon a contract may be threefold. If at the time
of making the contract there is an intent to perform it in an unlawful way,
the contract, although it remains alive, is unenforceable at the suit of the
party having that intent; if t he intent is held in common, it is not enforceable at all. Another effect of illegality is to prevent a plaintiff from recovering under a contract if in order to prove his rights under it he has to
rely on his own illegal act; he may not do that even though he can show
that at the t ime of making the contract he had no intent to break the law
and that at the time of performance he did not know that what he was
doing was illegal. The third effect of illegality is to avoid the contract ab
initio and that arises if the making of the contract is expressly or impliedly
prohibited by statute or is otherwise contrary to public policy."
Recovering Property
6-314
In cases of statutory illegal ity, the effect of the illegality usually
depends on the wording of the statute. If the statute prohibits a
contract wh ich was made in contravention of its provisions, as in
the case of Re Mahmoud and lspahani {~6-304), then the contract
is void. No party can enforce the contract. A similar resu lt ensues
where contracts are he ld to be illegal because they contravene
some aspect of pub lic policy. In some cases, however, the court
may allow an innocent party to recover property which would
otherwise pass to the defaulting party under the illegal contract.
Siow Soon Kim & Others v Lim Eng Beng alias Lim Jia Le (2004)
The respondent, Lim, sued the appellants for a claim of his share of
partnership assets following his withdrawal from t heir partnership.
The appellants argued that the funds in question had been diverted
into certain bank accounts for the illegal purpose of evading tax. As
such, they were irrecoverable. Affirming the Singapore High Court's
ru ling, the Court of Appeal held that Lim's claim to the partnership
assets was his rightful entit lement upon exiting a perfectly legitimate business. He was neither suing on an agreement that was
tainted with illegality nor suing for the return of money paid under
an illegal contract.
Recovering Damages
6-315
On the other hand, if the statute merely proscribes certain types of
conduct, the rights of the defau lt ing party and the innocent party
may be different. The defaulting party may be prevented from
enforcing the contract by the maxim ex turpi causa non oritur actio
(an action does not arise from a base cause). However, the innocent
party may recover damages from the defaulting party. Where both
parties are in pari delicto, then neither can establish a cause of action
against the other without relying on its own wrongdoing. The effect
is that neither party obta ins a remedy: Koon Seng Construction Pte
Ltd v Chenab Contractor Pte Ltd and Another (2008).
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CHAPTER 6
Archbold's (Freightage) Ltd v 5 Spanglett Ltd (1961)
Spang lett agreed to transport whisky for Archbold's from Leeds
to London. In contravention of the prevailing transport rules,
Spang lett's vehicle did not have the necessary licence to carry
goods of third parties for reward. The whisky was stolen in transit
because of Spanglett's negligence. Archbold's sued for damages
but Spang lett claimed that the contract was illegal and that it was
therefore not liable. The English Court of Appeal held that the
contract was illegal in its performance but, since Archbold's was
not aware of the illegality, it was entitled to claim damages.
Effects of Illegality
Effect of Illegality
Severance
Severed part void;
remaining parts valid
Contract illegal
generally
Void
6·316
It should be noted that this lack of awareness of the illegality is not
the same as ignorance of the law. In Archbold's case, the plaintiff was
aware that the licence was required; however, it did not know that
Spanglett's vehicle did not have the licence. Its ignorance was an
ignorance of a fact, not of the law. Ignorance of the law would not
allow recovery of any kind. 10
Severance
6-317
10.
In certa in cases, the illegality may be confined to a part of the
contract. For example, if a restraint of trade clause in an employment
agreement is held unreasonable, the clause may be void but the rest
of the employment contract may still be valid. Sometimes within the
clause itself particular words can be severed so as to save the rest of
the clause: National Aerated Water Co Pte Ltd v Monarch Co, Inc (2000).
Genera lly, severance is possible in cases of illegality if:
(a)
the promises are severable in nature;
it is possible to sever the void part by deleting the offending
(b)
words or clause without adding, substituting, re-arranging or
re-drafting the contract (this is known as the "blue pencil"
test, the idea being that severance must be possible by
running a blue pencil through the offending words); and
(c)
severance does not change the basic nature of the contract:
Man Financial (S) Pte Ltd v Wong Bark Chuan David (2008) .
The Lati n maxim for this principle is: ignorantia facti excusat; ignorantia juris non excusat
(ignorance of the fact excuses; ignorance of the law does not excuse).
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Goldso/1 v Goldman (191 5)
Goldman sold his business of selling imitation jewellery to Goldsoll.
The agreement provided that for the next two years, Goldman would not, either solely or jointly, deal in real or imitation
jewellery anywhere in the United Kingdom or in France, USA,
Russia or Spain, or within 25 miles of Potsdamerstrasse (Berlin)
or St Stefans Kirche (Vienna). The English Court of Appeal held that
the restraint covering the United Kingdom was reasonable. However,
the clause was unreasonable in that it specified other locations and
also because it mentioned real jewellery. Using the blue pencil test, the
court severed the other locations and the reference to real jewellery
and allowed the remaining clause to stand.
MISREPRESENTATION
6-401
Another factor which can vitiate a contract is misrepresentation.
The law of misrepresentation is complex because it crosses several
legal fields. 11 Misrepresentation generally is a tort and fraudulent
misrepresentation is historica lly rooted in the tort of deceit. Nevertheless, misrepresentation is usually discussed within a contract syllabus
because it often arises in the context of a contract.
6-402
In the business world, misrepresentation is a common ground
for one party to raise against another party. A simple example is
where a business acquires computer software from a programmer
who claims the software is his own original work. If it later turns
out that the software in fact is a copy of someone else's work,
then the business may wish to terminate the contract and seek
a refund of purchase price. In doing so, the business is alleging
misrep resentation by the programmer. In this section, we will
examine the basic elements of misrepresentation. We will then discuss
the three types of misrepresentation together with the remedies
available to the innocent party.
Misrepresentation
Pre-contractual Statements
Representations
Diagram 6F
False statement of fact
Induced the representee
into the contract
11.
For its complexities, see Phang A B L, "Vitiating Factors in Contract Law- The Interaction of Theory and
Practice" (1998) 10 Singapore Academy of Law Journa/ 1, 15-33.
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Elements of Misrepresentation
6-403
A misrepresentation is a false statement of fact made by one party
("representor") to another ("representee") which induces and is relied
upon by the representee to alter his position- typically by entering into
a contract with the representor- thus causing the representee loss. As
discussed in 1]5-204, among pre-contractual statements, representations
generally are to be distinguished from terms. Representations are
statements, verbal or in writing, which are made prior to a contract
being formedY However, not all false representations amount to
misrepresentation. For t he statement to be a misrepresentation, it must
be a false statement which is relied upon by the representee and induced
the contract: Koh Keow Neo & Others v Chee Johnny & Others (2004).
False Statement of Fact
6-404
In a claim for misrepresentation, the operative statement must be one
of past or existing fact. It cannot be a mere statement of opinion or
a statement of some likely future event. In certain circumstances, a
statement of intention as to future action could be a fa lse statement
of fact if, at the time of making the statement of intention, the
representor did not in fact hold that intention: Tan Chin Seng & Others
v Raffles Town Club Pte Ltd (No 2) (2003).
Edgington v Fitzmaurice (1885)
A company issued a prospectus stating that the money raised
would be used to improve buildings and extend the business.
In fact, the real intention was to pay off some liabilities. The
court held that there was a misrepresentation because the stated
intention was not actually held. Bowen LJ said:
"The state of a man's mind is as much a fact as the state of
his digestion. It is true that it is very difficult to prove what
the state of a man's mind at a particular time is, but if it
can be ascertained it is as much a fact as anything else. A
misrepresentation as to the state of a man's mind is, therefore,
a misstatement of fact."
Tan Chin Seng & Others v Raffles Town Club Pte Ltd (No 2) (2003)
In its membership drive, Raffles Town Club (RTC) had sent out
promotional materials to selected members of the public inviting
them to become "founder members". The promotional materials
stated that the number of such founder members would be limited
and described RTC's facilities and ambience as "without peer in terms
of size, faci lities and sheer opulence". The exclusivity of the club
was also emphasised. The plaintiffs sued RTC for misrepresentation
and breach of contract. They argued that RTC's representations
turned out to be false since the facilities did not live up to what was
promised at the time of entering into the contract and, instead of
12.
Note, however, that in certain situations, a representation can also become a term of the
contract. For example, a representation made during pre-contractual negotiations can later
be included as a condition of the contract. The person who made the representation would
also be in breach of the contract if the statement turns out to be false. If so, the representee
may rescind t he contract for misrepresentation and claim for damages for breach of contract:
s 1 Misrepresentation Act.
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being an exclusive club for the elite, the total number of founder
members exceeded 18,000. The Singapore Court of Appeal held that
the statements in the promotional materials were not statements
of past or existing fact but statements of intention or opinion. The
court affirmed the well-known legal principle that representations
of intention could only be actionable if the defendants had made
them w ithout any intention of complying with them. However, the
court did not have to examine this issue since no allegation of such
a representation was made. Thus, the plaintiffs' misrepresentation
claim failed. However, the court held that it must be implied as a
term of the contract that RTC would provide a "premier club, with
first class facilities". The court then found that RTC had breached
its obligation of delivering a premier club. The plaintiffs were
therefore entitled to damages for breach of this implied term.
6-405 A statement of opin io n usually cannot form the basis of a
misrepresentation unless the representor had access to the relevant
facts and had no reasonable ground for holding such an opinion.
Similarly, an erroneous statement of law is normally not capable of
found ing a claim in misrepresentation. This is because a statement
of law is essentially an opinion as to what the law is. Unless the
representor does not actually hold this opinion or makes a separate
assurance that he has reasonable grounds for holding this opinion,
then even an erroneous statement of law is not actionable.
Bisset v Wilkinson (1927)
The appellant who owned a New Zealand property which was
never previously used to raise sheep told prospective purchasers
that, in his opinion, the property could sustain 2,000 sheep. In
fact, the property could not sustain that many sheep. On appeal
from the New Zealand Court of Appeal, the Privy Council held that
the statement was a representation of the appellant's opinion
of the capacity of the farm, not a representation of what that
capacity in fact was. Accordingly, the statement was an opinion
actually held and did not amount to a misrepresentation.
6-406
In Singapore, Amarjeet Singh JC in the High Court case Tai Kim
San v Lim Cher Kia (116-408) made a careful distinction between a
misrepresentation of fact and an expression of opinion. Where an
opinion is expressed, it must be expressed upon reasonable grounds
and made honestly. Where the opin ion is stated as if it is a positive
fact, it can constitute a misrepresentation. Moreover, where "the facts
are not equally well known to both sides, then a statement of opinion
by the one who knows the facts best involves very often a statement
of a material fact, for he impliedly states that he knows facts which
justify his opinion."
6-407
What about silence? The general rule is that silence in itself does
not amount to a misrepresentation. In Keates v Lord Cadogan (1851),
the defendant's house was in a poor condition but the fact that he
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1 51
kept silent about it to Keates, who wanted to rent it, did not amount
to a misrepresentation because he had no duty to disclose the state
of his house. In EA Apartments Pte Ltd v Tan Bek and others (2017), the
Singapore High Court held that "the law did not oblige parties dealing
at arm's length to disclose to each other all that was detrimental
to their bargaining position ." Silence may, however, amount to
misrepresentation in three situations:
(a)
The silence could amount to a partial non-disclosure if what is
stated becomes a half-truth or an untruth by what is left unsaid.
For example, where a seller of land told a purchaser that the
land was fully let but did not say that the tenants had given
notice to quit, the unsaid facts turned the stated facts into
half-truths and this constituted misrepresentation: Dimmock v
Hallett (1866).
(b)
A change of circumstances arose which rendered a previously
truthful statement misleading: With v O'Ffanagan (1936); and
(c)
Where the law imposes a duty upon one party to disclose all
material facts to the other party, as in fiduciary contracts such
as contracts of insurance.
Inducement
6-408
For the false statement to be a misrepresentation, the statement must
induce the representee to enter into the contract. As long as it is one
of the inducing causes, it is immaterial that it is not the sole inducing
cause: Edgington v Fitzmaurice (116-404). This legal principle has been
reaffirmed by the Singapore Court of Appeal in Panatron Pte Ltd v Lee
Cheow Lee & Another (116-411) and Afwie Handoyo v Tjong Very Sum ito
and another (2013). However, if the false statement was made to the
representee but he was not induced by the statement to enter into the
contract, then there is no misrepresentation: Oversea-Chinese Banking
Corp Ltd v fnfocommcentre Pte Ltd (2005).
Tai Kim San v Lim Cher Kia (2001)
The defendant was the Managing Director of a group of companies
in which the plaintiffs held shares. The plaintiffs agreed to sell their
shares to the defendant. However, they later sued the defendant
on the ground that he had misrepresented to them that the group
of companies was not doing well. The plaintiffs claimed that the
fa lse statements were made to induce them to sell their shares. The
Singapore High Court held that the plaintiffs had not been induced
by the defendant's representations. Being experienced businessmen
who had access to all the information concerning the companies,
they would not have relied on any such statements. According to the
court, "a misrepresentation is considered to be harmless if, amongst
other t hings, a plaintiff did not allow it to affect his judgment."
6-409
In certain situations, the representee has an opportunity to investigate
the truth of the statement made by the representor. The existence of
such an opportunity does not automatically remove the possibility
of reliance or inducement. If a representee did not make use of the
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opportunity to check the statement, he might still have been induced
to enter into the contract. This position has been affirmed by the
Singapore Court of Appeal in Panatron Pte Ltd v Lee Cheow Lee & Another
(116-411) where LP Thean JA held: "All that is required is reliance in
the sense that the victims were induced by the representations. Once
this is proved, it is no defence that they acted incautiously and failed
to take those steps to verify the truth of the representations which a
prudent man would have taken."
Redgrave v Hurd ( 1881 )
Redgrave, a solicitor, sold his house together with his law practice
to another solicitor, Hurd. Redgrave had misrepresented the value
of his practice. Although Hurd had the opportunity to check
Redgrave's statements, he did not do so. The English Court of
Appeal held that there was misrepresentation. The mere fact that
the representee had an opportunity to investigate and ascertain
whether a representation was true or false was not sufficient to
deprive him of his right to rely on the misrepresentation. However,
because there was no fraud or negligence on the part of Redgrave,
the misrepresentation was an innocent one and the contract was
rescinded.
Categories of Misrepresentation
6-410
Essentially, there are three categories of misrepresentation:
fraudulent, negligent, and innocent misrepresentation. The
remedies available to a representee will depend on the category of
misrepresentation the particular situation falls under.
Fraudulent Misrepresentation
6-411
Fraudulent misrepresentation arises when the false statement is made
by the representor knowing that it is false. This is also known as the
tort of deceit. In simple terms, the representor lies to the representee:
Lim Geok Hian v Lim Guan Chin (1994) and Raiffeisen Zentralbank Osterreich
AG v Archer Daniels Midland Co (2007). Unless a representee can show
that there is dishonesty on the part of the representor, there is no
fraud even if the statement is far-fetched, negligent, or ill-conceived.
The Singapore High Court has held that "whenever fraud or deceit
is alleged, a high degree of proof is required on he who asserts":
Vellasamy Lakshimi v Muthusamy Suppiah David (2003). Further, the
standard of proof for an allegation of fraud is higher than the ordinary
standard in civil cases. In this regard, it has been observed that "the
court does not adopt so high a degree as a criminal court but still
it does require a degree of probability which is commensurate with
the gravity of the imputation": Trans-World (Aluminium) Ltd v Cornelder
China (Singapore) Pte Ltd (2003) and Samwoh Resources Pte Ltd v Lee Ah
Poh (2003).
Derry v Peek (1889)
A company issued a prospectus which stated that it had the right
to run trams by steam or mechanical power. In fact, under a special
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Act of Parliament, it was only authorised to run trams using animal
power. The company was aware that to use steam or mechanical
power it had to obtain the consent of the Board of Trade; however,
it thought that obtaining such consent would be a mere formality.
The Board ultimately refused to grant its consent. The company was
wound up. The House of Lords held t hat for fraudulent
misrepresentation to arise, the false representation must be made
knowingly, or without belief in its truth, or recklessly, careless as to
whether it is true or false. None of these elements were present
here; hence there was no fraudulent misrepresentation.
Panatron Pte Ltd v Lee Cheow Lee & Another (2001)
The two respondents were former employees of Panatron. They
claimed against Panatron and its president, Phua, for damages
for fraudulent misrepresentations made to them to induce them
to invest in Panatron shares. Amongst other statements, one
representation was that Panatron and its subsidiaries were more
profitable than they actually were. In fact, they were making
losses. The t rial judge concluded that Phua did make the alleged
representations to the respondents, and that Phua knew that these
representations were false. These false statements in turn induced
the respondents to subscribe for the shares in Panatron. The Court
of Appeal held t hat the trial judge's findings satisfied the essential
requirements of the law on fraudulent misrepresentation as laid
down in Derry v Peek.
6-411b
In AGAtek, Inc and another v Tembusu Growth Fund Ltd (2016), the
Singapore Court of Appea l's stance reinforces the position taken
in earlier cases requiring a high th reshold of proof to be met in
establishing allegations of dishonesty. Recent cases where f raudu lent
misrepresentation was established include Alacran Design Pte Ltd v
Broadley Construction Pte Ltd (20 17) and Liu Tsu Kun and another v Tan Eu
Jin and others (2017).
Types of Misrepresentation
Types of Misrepresentation .
Innocent
Error without fault
Negligent Misrepresentation
6-412
Negligent misrepresentat ion ar ises when the false statement
is made by the representor without due care. In its modern
app lication, the concept is enshrined ins 2(1) Misrepresentation
Act. This rather convo lut ed section basical ly provides that a
representor who makes a fa lse statement without fraudulent intent
would stil l be liable unless he can prove that he has reasonable
grounds to believe and did believe the statement to be true.
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Misrepresentation Act
Section 2(1):
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 has 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
fraudu lently, unless 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.
6-413
However, "negligent misrepresentation" is also used to describe
a tort in the famous 1964 case of Hedley Byrne & Co Ltd v Helfer &
Partners Ltd (1118-406). Yet, the two causes of action are different.
Negligent misrepresentation pursuant to s 2 Misrepresentation
Act is statute-based and arises in the context of a contract- for
an examp le, see the Howard Marine case below. The neg li gent
m isrepresentation in Hedley Byrne is a common law tort and does
not require the existence of a contract.
Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd
(1978)
Ogden chartered two barges from Howard Marine to carry excavated
soil. Howard Marine's manager confirmed the payload of each
barge was 1,600 tonnes, based on information in the Lloyds Register.
However, the Lloyds Register- surprisingly- was wrong. The German
shipping documents (previously seen by the manager) showed the
payload was 1,055 tonnes. Due to this error, Ogden stopped payments
and Howard Marine sued. Ogden counter-claimed for damages under
s 2 Misrepresentation Act (UK). The court held that Howard Marine
was liable for negligent misrepresentation. Although the manager
made the statement honestly, he had no reasonable grounds for it.
A reasonable manager would have checked the shipping documents
and not relied on the Lloyds Register.
Trans-World (Aluminium) Ltd v Cornelder China (Singapore) Pte Ltd
(2003), the Singapore High Court confirmed that a claim founded
on s 2(1) Misrepresentation Act is an action in contract. Further, in
RBC Properties Pte Ltd v Defu Furniture Pte Ltd (20 15), the Singapore
Court of Appeal observed that whi les 2(1) Misrepresentation Act
6-413b In
co-exists with the tort of negligent misstatement at common law,
s 2(1) is more advantageous to the representee who is also in a
contractua l relationship with the representor. This is because in
the tort of negligent misstatement the burden of proving breach
of duty lies on the claimant. In contrast, the statutory action in s
2(1) p laces the burden of proving the absence of negligence on the
defendant. To avoid confusion, in this book we will use "negligent
misrepresentation" to refer to the contract cases of statutory
misrepresentation. We will use "negl igent misstatement" to refer
to the tort cases of the Hedley Byrne type (see 1]18-40 1).
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=:::1
A Creative Miscalculation
Creative Technology Ltd and another v Huawei
International Pte Ltd (2017)
In 2009, Creative Technology explored the possibility of building a wireless
broadband network using WiMAX technology after acquiring broadband
infrastructure firm QMax Communications. WiMAX is a fourth-generation
(4G) technology for high-speed mobile communications. In response to
Creative's tender, Huawei International submitted a proposal to design,
build and operate a WiMAX network to cover Singapore. After several
rounds of negotiations, Creative told Huawei that it had a budget of
US$20 million for the project. Huawei said it could meet the budget
by providing nationwide coverage with 225 base stations. After the
contract was signed in June 2010, Huawei identified suitable locations
for base stations and Creative acquired leases from building owners for
equipment to be installed. In October 2011, Huawei's new radio planner
said another 619 sites were needed for the project. Huawei then offered,
at a discount, to upgrade the existing sites to a more advanced Long-Term
Evolution (LTE) network, and also included a buy-one-get-one-free offer
for subsequent base stations. Creative rejected the proposals and, in
December 2011, withdrew from the project. By then, 175 base stations had
been built.
In 2012, Creative and its subsidiary, Qmax, (collectively, "Creative"), sued
Huawei for misrepresentation and breach of contract. Creative sought
recovery of the money spent on the project, contending that Huawei
had miscalculated and negligently misrepresented the number of base
stations required as well as the cost of the network. Huawei argued that
the f igure of 225 base stations was a mere expression of opinion and that
its representative had warned Creative that while Huawei could meet
Creative's budget, it would translate into a lower-quality network.
The Singapore High Court found that Huawei's representation that "225
stations would be sufficient" was a statement of fact and not a mere
expression of opinion. The court reasoned that Huawei had held itself
out as an expert on WiMAX technology. Furthermore, Huawei knew and
intended that Creative would rely on its estimate of 225 base stations.
The court held that Huawei was liable for misrepresentation and was
"grossly negligent" because, on an objective basis, Huawei had no
reasonab le ground to believe that 225 sites would be sufficient.
Accordingly, Huawei was liable to Creative for damages under s 2(1) of
the Misrepresentation Act. The court ordered Huawei to repay Creative
the US$9.3 million paid by Creative to Huawei under the contract, as well
as 5$15.7 million and US$22,000, respectively, being Creative's wasted
expenditure for the now abandoned WiMAX Network.
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Innocent Misrepresentation
6-414
Innocent misrepresentation is the residual class of misrepresentation.
It arises where the representor made the false statement without
fraud and without fault. In other words, he made the false statement
believing and having reasonable grounds to believe in its truth. An
example of in nocent misrepresentation can be found in Redgrave
v Hurd (116-409). More recently, in RBC Properties Pte Ltd v Oefu
Furniture Pte Ltd (2015), the Singapore Court of Appeal held that
a successful defence under s 2(1) Misrepresentation Act claiming
innocent misrepresentation requires the representor to show that
he subjectively believed in the truth of the representation and that,
objectively, he had reasonable grounds for that belief.
Remedies for Misrepresentation
6-415
The remed ies available for misrepresentation wi ll depend on
the category of misrepresentation proven. In all three types of
misrepresentation, rescission is ava il ab le. Rescission is avai lab le
even if the fa lse statement has become a term of the contract: s 1
Misrepresentation Act. A contract is rescinded when a representee
elects to terminate the contract because of a misrepresentation. He
does so by expressing his intention not to be bound by the contract.
In these circumstances, the contract is said to be voidable - meaning
that it is valid until such time as it is rightfully terminated by the
representee.The representee has the right to terminate or affirm
the contract. If the contract is terminated, then it is considered
void ab initio (void from the beginning) as if it never existed. For
a contract to be held void ab initio, the parties must be restored
to their original position prior to entering the contract. In other
words, restitutio in integrum is necessary. Once the representee gives
notice of rescission to the other party, the rescission is final and the
contract cannot be revived.
6-416
There are limits to the right to rescind in cases of misrepresentation.
Rescission is not avai lable where:
(a)
the contract is affirmed expressly or impliedly by the
representee after he discovered the misrepresentation.
Nevertheless, the Singapore Court of Appeal in Jurong Town
Corp v Wishing Star Ltd (No 2) (2005) clarified that the right
of rescission is not lost easily: the representee must have
communicated his choice to the other party in clear and
unequivocal terms;
(b)
a reasonable amount of time had lapsed since the discovery of
the misrepresentation;
(c)
the parties cannot be restored to their original position before
the contract (restitutio in integrum impossible); or
(d)
the court exercises its discretion pursuant to s 2(2) Misrepresentation Act to award damages in lieu of rescission.
6-417
Another remedy for misrepresentation is damages. Damages are the
monetary compensation ordered by a court requiring the defaulting party
to pay money to the injured party. The common law allowed damages
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for fraudulent misrepresentation. Section 2(1) Misrepresentation Act
allows the court to award damages for negligent misrepresentation.
Also, s 2(2) Misrepresentation Act grants to the court a discretion to
order damages in lieu of rescission for both negligent and innocent
misrepresentation. How the quantum of damages payable is calculated
is beyond the scope of this book. 13 Complexities arise in the calculation
of the quantum because of the interplay of contractual and tortious
principles, as well as the unusual wording of the statutory provisions.
6·418
The final remedy is called an "indemnity" and it is available in
cases of innocent misrepresentation. An indemnity is an obligation
whereby one person ("the indemnifier") is held responsible for the
liability or loss of another person ("the indemnifiee"). An indemnity is
used to help restore the injured party to his status quo ante (the position
he was in beforehand).
6-419
If there is an exemption clause in the contract which protects the
representor, it may be effective to shield the representor from liability.
However, s 3 Misrepresentation Act stipulates that an exemption
clause which attempts to exclude or restrict liabi lity arising from
a misrepresentation will not be enforceable unless it meets the
reasonableness test expressed ins 11 (1) Unfair Contract Terms Act (see
115-428 and 115-429). The Singapore Court of Appeal has held that a
non-reliance clause which prevents the representee from establishing
reliance on the representation can be effective to exclude the
representor's liabil ity for misrepresentation: Orient Centre Investments
Ltd and Another v Societe Generate (2007).
Remedies for Differen t Categories of Misrepresentation
.
-
Fraudulent :
Rescission
+
Damages
Negligent
: Rescission (or damages in lieu) +
Damages
Innocent
: Rescission (or damages in lieu) +
Indemnity
Diagram 6H
MISTAKE
6-501
13.
14.
The last main vitiating factor we will consider is mistake. The law of
mistake is notoriously complex. 14 It is not our purpose to delve into
The quantum of damages is discussed by t he Singapore Court of Appeal in RBC Properties Pte Ltd
v Defu Furniture Pte Ltd (2015). The same court also provided helpful clarification of the scope
and nature of a claim under s 2(1) Misrepresentation Act in Tan Chin Seng & Others v Raffles
Town Club Pte Ltd (No 2) (~6-404).
See the discussion in Phang A B L, above note 11, 4-15. See also a discussion of vitiating factors in general
by the same author: Phang A B L, "Vitiating Factors in Contract Law- Some Key Concepts and Developments" 17 Singapore Academy of Law Journal (2005) 148. On unilateral mistake in the Digi/andma/1 case
(~6-506), see: Kwek ML, "Law, Fairness and Economics- Unilateral Mistake in Digilandma/1" 17 Singapore
Academy of Law Journal (2005} 411.
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the law of mistake in depth. We simply outline the key principles
underlying the concept of mistake, provide some illustrations and
discuss one particular type of mistake - known as non est factum which arises in commercial transactions from time to time.
6-502
From the outset, it should be made clear that the term "mistake" at
law is narrower than its popular meaning. In ordinary speech, all
misunderstandings involve a mistake. However, the law does not
allow every contract to be vitiated simply because there has been a
misunderstanding as between the parties. So, if Andrew buys land
for residential development without realising that it is prone to
flooding, he cannot claim later that the contract is vitiated because
he has made a mistake.
6-503
Indeed, under the law, there are relatively few mistakes which can
vitiate a contract. According to the Singapore High Court in Adani
Wilmar Ltd v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA ('Rabobank
Nederland') (~15-309): "Contracts are robust creatures, they do not fall
to just any mistake. Only mistakes which lie at the root of the contract
would have that effect." At common law, mistake vitiates a contract
such that it becomes void ab initio. This means that no party under
the contract can claim any rights or be under any liability once the
contract is avoided. In equity, however, mistake does not necessarily
render a contract void ab initio. Equitable remed ies may be ordered
to correct the mistake while allowing the contract to remain on foot.
This is to enable the court, in determining whether to grant relief, to
have regard to rights acquired bona fide by third parties: Chwee Kin
Keong & Others v Digilandmall.com pte Ltd (~6-506) and Olivine Capital pte
Ltd and another v Chia Chin Yan (2014). The different treatments given
to mistake by common law and equity is one of the reasons for the
complexity of this branch of the law. Nevertheless, the cases where
contracts have been vitiated by mistake have generally been classified
underfourtypes: common mistake, mutual mistake, unilateral mistake
and cases of non est factum.
Types of Mistake
Mistakes
Common Mistake
Mutual Mistake
Unilateral Mistake
Both parties make
same mistake
Each party makes
different mistake
One party makes
mistake
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6-504
Common mistake occurs when both parties to the contract make
the same fundamental mistake of fact. Each knows the intention of
the other and accepts it, but is mistaken about some underlying fact.
For example, the parties may have entered into a contract relating
to a cargo of corn, unaware that, at the time of making the contract,
the corn had already perished: Couturier v Hastie (1852).
6-505
Mutual mistake occurs when the parties misunderstand each other
and are at cross-purposes: Wei/mix Organics (In ternational)
Pte Ltd v Lau Yu Man (2006). For example, John offers to sell his BMW
car and Jason accepts what he thinks is John's offer to sell a Jaguar
car. If both parties are not aware of each other's mistake, then it is a
mutua l mistake. The Singapore High Court in the Wellmix case
has observed that the doctrine of mutual mistake in fact overlaps
completely with contract formation:
"Put simply, this particu lar aspect of the law relating to mistake
is simply the result of a Jack of coincidence between offer and
acceptance. In other words, both parties are at cross-purposes
and, hence, no agreement or contract has been formed as a result."
6-506
Unilatera l mistake occurs when only one party is mistaken. The
other party knows or ought to have known the f irst party's mistake.
The test is an objective one based on what a reasonable person would
have known in sim ilar circumstances: Ho Seng Lee Construction Pte Ltd v
Nian Chuan Construction Pte Ltd (2001 ). Using the preceding example with
John and Jason, if John is ignorant of Jason's erroneous understanding,
it is a mutual mistake; but if John knows or ought to have known of it,
then it is a unilateral mistake.
Chwee Kin Keong & Others v Digilandmall.com Pte Ltd (2005)
This was an appeal from the Singapore High Court's decision, referred
to in ~3-403. The respondent, Digilandmall, had mistakenly offered
for sale on its website, HP laser printers for $66. The actual price
was $3,854. The appellants placed orders through the Internet for
a substantial number of printers when they discovered the printer's
amazingly low price. The mistake was subsequently discovered and
Digilandmall informed the appellants t hat it would not honour their
orders. The High Court found that the appellants knew or ought to
have known the mistake in the printers' pricing. The court held that
the appellants' constructive knowledge was sufficient to render the
contracts void under common law. On appeal, however, the Court of
Appeal held that it was only where there was actual knowledge by the
non-mistaken party of the mistaken party's error, that the case would
come within the ambit of the common law doctrine of unilateral
mistake. Whether constructive notice alone "should lead the court
to intervene must necessarily depend on the presence of other
factors which could invoke the conscience of the court, such as 'sharp
practices' or 'unconscionable conduct"'. Here, t he court found that
the appellants had actual knowledge of Digilandmall's mistake. So the
court voided the contracts.
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SINGAPORE BUSINESS LAW
6-507
The last type of mistake is called non est factum (it is not my deed).
Non est factum arises when a person signs a document that is
fundamentally different in character from that which he contemplated.
For example, a person may sign a mortgage of her house in favour of
a bank, all the while thinking that the document was nothing more
than a testimonia l regarding the good character of her son: Lee Siew
Chun v Sourgrapes Packaging Products Trading Pte Ltd (1993). To avoid a
contract on the basis of non est factum, the plaintiff must show that:
(a)
the document signed is radically, fundamentally or totally
different in character or substance from that which he
intended to sign. In Mahidon Nichiar bte Mohd Ali and others v
Dawood Sultan Kama/din (2015), the High Court held that the
plaintiff's plea of non est factum failed as the document signed
by him was explained to him by someone w ith the proper
qualifications and skills, in this case, a lawyer. On appeal,
the Court of Appeal disagreed and opined that the lawyer
had failed in the discharge of his duties to the plaintiff as
he did not explain the full significance of the consequences
of executing the document. Hence, the defence of non est
factum was establ ished;
(b)
he had not been careless in signing the document; and
(c)
he took such care as a person in his position ought to have taken.
This is not an objective test but a subjective one, that is, such care
as a person suffering his disabilities could reasonably have taken.
OTHER VITIATING FACTORS
6-601
In add ition to incapacity, illegality, misrepresentation and mistake,
there are other, perhaps less frequently encountered, vitiating
factors. The three other vitiating factors which will be mentioned
briefly here are duress, undue influence and unconscionabi lity.
Duress
6-602
Duress is a common law doctrine through which an agreement entered
into under the constraint of threat or actual injury may be held to
be void or voidable. The duress is usually imposed upon the party
concerned or persons dear to him. The concept of duress rests upon
the notion of "inequa lity of bargain ing power". In Lloyds Bank Ltd v
Bundy (1974), Lord Denning stated:
" ...English law gives relief to one who, without independent advice,
enters into a contract on terms which are very unfair or transfers
property for consideration which is grossly inadequate, where his
bargaining power is grievously impaired by reason of his own needs
or desires, or by his own ignorance or infirmity coupled with undue
influence or pressures brought to bear on him by or for the benefit of
the other [party]."
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Contract : Vitiating Factors
6-603
161
Duress must be distinguished from legitimate pressure arising from
economic competition: Eastern Resource Management Services Ltd v Chiu
Teng Construction Co Pte Ltd (2016). Contracts wi ll very rarely be set aside
for duress when only lawful means or pressure is used: EC Investment
Holding Pte Ltd v Ridout Residence Pte Ltd (2011) and Goh Bee Lan v Yap
Soon Guan and another (2018). According to the Singapore High Court,
for duress to arise the pressure must be illegitimate and also coercive:
Tjong Very Sumito v Chan Sing En (2012) and Goh Bee Lan v Yap Soon
Guan and another (2018). The court also affirmed, in an obiter dictum,
that duress could even arise where the pressure is applied by a third
party not privy to the contract. Below are two cases which high light
the distinction between duress and legitimate business activity.
Atlas Express v Kafco (1989)
Here, an English court held that the plaintiff's claim for a minimum fee
for transporting the defendant's basketware to the Woolworths store
chain was not enforceable. The defendant's agreement to the minimum
fee was made under duress. It was a new term negotiated after the original contract and it was obtained only because the defendant was, by that
stage, in the difficult position of not being able to find an alternative
carrier and fearful of breaching their supply contract with Woolworths.
Sharon Global Solutions Pte Ltd v LG International (S) Pte Ltd (2001)
The defendant refused payment to the plaintiff on the ground that
their contract was unenforceable due to economic duress. According
to the defendant, the economic duress arose because the plaintiff had
refused to perform the contract unless the defendant agreed to share
the increased costs that would have to be incurred. The Singapore High
Court held that a threat to break a contract could be economic duress
but the party raising it as a defence must show that the duress placed it
in such a position that it had no choice but to agree to the other party's
demands. On the facts, the court found that the plaintiff had not
exploited the situation to improve its financial position; moreover, the
defendant was not put into a position where it had no alternative but
to accede to the plaintiff's terms. Under the circumstances, the agreement was reached not as a result of economic duress, but as a result of
"commercial negotiation" between the parties.
6-604
In Citibank NA v Lim Soo Peng & Another (2004), the Singapore High Court
provided a list of considerations for determining whether economic duress
exists:
(a)
whether the defendant did or did not protest;
(b)
whether, at the time of coercion, the defendant had an alternative
course open to him such as an adequate legal remedy;
(c)
whether the defendant was independently advised; and
(d)
whether after entering into the contract, the defendant took steps
to avoid it.
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Undue Influence
6-605
Undue influence is an equitable doctrine. In the context of a
contract, undue influence is the unconscientious use of one's power
or authority over another to obtain a benefit or achieve a purpose
by exerting improper pressure. There are two types of cases of
undue influence. In the first type, undue influence must be actua lly
proven. In the second type, by vi rtue of the close relationship
between the parties, the law automatica lly presumes that undue
influence is present and the burden of proof is then on the party
complained of having exercised undue influence to show that no
undue influence in fact has been exercised: Mookka Pillai Rajagopal
v Khushvinder Singh Chopra (1996) and Malayan Banking Berhad v
Sivakolunthu Thirunavukarasu and Others (2008).
6·606
In Lim Geok Hian v Lim Guan Chin (1994). the comp laint of
undue influence was raised in the context of a brother-sister
relationship. This type of relationship does not automatically fa ll with in
the second type of cases where the relationship is so close that undue
influence is presumed until rebutted. Hence, according to Thean JA,
to establish undue influence in the f irst type of cases, the person who
raises the complaint must establ ish the following:
(a)
the other party had capacity to influence the complainant;
(b)
the influence was exercised;
(c)
its exercise was undue; and
(d)
its exercise brought about the transaction.
In Lim Geok Hian v Lim Guan Chin, Thean JA found that the complainant
failed to establish al l four elements and, therefore, there was no
undue influence on the part of her brother. These principles have
since been affirmed in two Singapore High Court cases which also
fell within the first type of undue influence cases: Pelican Engineering
Pte Ltd v Lim Wee Chuan (2001) (husband-wife relationship) and Tan
Teck Khong & Another v Tan Pian Meng (2002) (mother-son relationship).
Unconscionable Bargain
6-607
In some instances, courts have also interpreted Lord Denning's broad
statement in Lloyds Bank Ltd v Bundy (1975) as giving rise to a third
vitiating factor, usually referred to as "unconscionable bargain".
Broadly speaking, this somewhat vague concept suggests that
any agreement which is manifestly inequitable and constitutes an
unconscionable bargain shou ld be set aside. However, when this
point was raised in Lim Geok Hian v Lim Guan Chin (1994), Thean JA
appeared to adopt a more restrictive approach by stating that:
"Though Lord Denning MR in Lloyds Bank Ltd v Bundy considered
that the common thread underlying the cases of unconscionable
bargains was the concept of 'inequality of bargaining power', it is
insufficient, in itself and in the absence of any unconscionable
conduct, to justify the setting aside of a contract".
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Contract : Vitiating Factors
6·608
163
However, the Singapore courts appear to be willing to adopt a
broader doctrine of unconscionability with respect to performance
bonds: Eltraco International Pte Ltd v CGH Development Pte Ltd (2000)
and Anwar Siraj v Teo Hee Lai Building Construction Pte Ltd (2003). 15 But,
in commercial contracts generally, there is a reluctance to adopt
the doctrine. In E C Investment Holding Pte Ltd v Ridout Residence
Pte Ltd (2011 ), Loh J opined that accepting such a doctrine would
"inject unacceptable uncertainty in commercial contracts and the
expectations of men of commerce".
SUMMARY
6-701
This chapter dealt with factors which can vitiate or undermine a
contract. There are a number of such vitiating factors. Here, we focus on
the four main ones: incapacity, illegality, misrepresentation and
mistake. We also mention in less detail three other vitiating factors:
duress, undue influence and unconscionability.
6·702
Incapacity renders a person incapable of forming a valid contract.
In the case of natural persons, there are three categories of persons
who lack capacity to form a valid contract: minors, mentally
unsound persons and intoxicated persons.
6·703
In Singapore, a minor is any person who is below 21 years of age.
However, the 2009 changes to the Civil Law Act have reduced the
age of contractua l capacity to 18 years for certain business-related
activities. At common law, a minor's contract can be valid, voidable
or ratifiable, depending on its subject matter. As a general rule,
a minor's contract for goods or services which is still executory on
the part of the minor is enforceable against the other party but
not enforceable against the minor unless the contract relates to
necessaries. Necessaries are goods or services which are suitable
to a minor in his particular condition in life as well as to his actual
requirements. A minor's contract of employment may also be
unenforceable against the minor unless, on the whole, the contract
is beneficial to him. Hence, the category of valid contracts covers
necessaries and beneficial contracts of employment.
15. Performance bonds are typically issued by a f inancial institution to guarantee the satisfactory
completion of a construction project by a contractor. If the contractor breaches the contract,
the developer can claim against the performance bond to recoup losses arising from the breach.
The position in Singapore is that courts may grant an injunction to restrain a demand if the
contractor can show proof of unconscionability. Nevertheless, parties can mutually agree to
exclude the ground of unconscionability from being invoked in the event of a demand made
on performance bonds: CKR Contract Services Pte Ltd v Asplenium Land Pte Ltd and another (2015).
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SINGAPORE BUSINESS LAW
6-704
A second type of minors' contracts is voidable at the minor's option.
This covers certain subject matter such as leases, partnerships and
company shares. In such cases, the genera l rule is that the contract
is enforceable against the other party whereas the minor can repudiate
the contract without any liability at any t ime before or within a
reasonable t ime after he reaches the age of majority. A third type of
minors' contract is ratifiable at the minor's option. These are
enforceable against the other party but not against the minor unless
the minor ratifies it after he has attained majority.
6-705
These common law rules on minors' contracts have been partly
modified by provisions in the MCA and the SGA. Section 3(1) MCA
empowers a court, if it is just and equitable to do so, to order a
minor to return any property he obtained under a contract which
is subsequently rendered unenforceable by virtue of his minority.
Section 3 SGA requires a minor to pay a reasonab le price for
necessaries which are sold and delivered to him.
6-706
Just as the law extends limited protection to minors, it also seeks
to protect mentally unsound and intoxicated persons. As a general
rule, a contract entered into by a mentally unsound or intoxicated
person is not enforceable against him if, at the time the contract
was made, he was incapable of understanding the contract and the
other party knew or shou ld have known of his incapacity.
6-707
The second vitiating factor is illegality. We mentioned four types of
illegal contracts: gaming and wagering contracts, contracts which
are contrary to public policy, contracts which are contrary to statute
and contracts in restraint of trade. The first three are largely selfexplanatory. In the business context, it is the fourth type - restraints
of trade- which is more common, appearing usually in employment
contracts and sale of business contracts.
6-708
A restra int of trade contract or clause seeks to prevent a person
from engaging in a specified profession or business. Such restraints
are generally void since they are contrary to the princip le of
competition. However, in limited circumstances, a restraint may be
enforceable if it satisfies three conditions:
(a)
the restraint protects a legitimate interest;
(b)
it is reasonable in nature, namely, its time period, geographical
scope and subject matter; and
(c)
it is not contrary to the public interest.
6-709
For all illegal contracts, the effect of illegality is that the contract is
generally void. Neither party can enforce the contract or recover any
property transferred pursuant to it. However, there are exceptions.
In certain situations, the innocent party may recover his property or,
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CHAPTER 6
165
Contract : Vitiating Factors
depending on the nature of the illegality, even damages from
the defaulting party. Moreover, if the il legal part of the contract can
be severed w ithout undermining the whole contract, then the rest of
the contract may be saved and enforceable.
6-710
The third vitiating factor is misrepresentation. A misrepresentation
arises when a person makes a false statement of fact to another
which induces the other party to enter into a contract, resulting in
loss. If the misrepresentation is made dishonestly, it is a fraudulent
misrepresentation and the representee can rescind the contract
and claim damages. If it is made without fraud but there are no
reasonable grounds for it, then it is a negligent misrepresentation
pursuant to s 2 Misrepresentation Act. Here, the court can rescind
the contract and order damages or order damages in lieu of rescission.
If it is made without fraud and without negligence, it is an innocent
misrepresentation. In this case, the representee can rescind the contract
and claim an indemnity. Alternatively, the court may order damages
in li eu of rescission.
6-711
The fourth vitiating factor is mistake. We outlined four types of mistakes
which cou ld vitiate a contract: common mistake, mutua l mistake,
uni latera l mistake and non est factum. In practice, few contracts are
invalidated because of mistake.
6-712
The remaining three vitiating factors- duress, undue influence and
unconscionabil ity - occur in situations where one party exercises
unacceptable pressure or influence upon the other party. They include cases
where the contract is entered into between family members or between
persons with vastly different barga ining strengths. In each case, the
concern of the law is to protect the weaker party against any
unacceptable terms imposed by the stronger party.
6-713
We have looked at how vitiating factors provide a means
through which a contract which is deemed to be unacceptable,
unfair or contrary to public policy, may be rendered unenforceable.
The extent of the unenforceabil ity depends on the circumstances of
each case. One common feature is that each vitiating factor, in some
way, prevents a contract from being fu lly formed and discharged.
···•·•·•···
U075837L/N1510069
U075837L/N1510069
1,
·.,
: · •
Minors
.
Valid Contracts
Binds both minor &
other party
"':""""
&
I
I
Contracts
in restra int
of trade
I
Severance
Severed part void;
remaining parts valid
Innocent party
can recover goods
or damages
II
I
Contract
contrary to
statute
Defaulting foarty
cannot en orce
cont ract
Contract illegal
generally
Void
Effect of Illegality
Contracts
contrary to
statute
To be va lid
I
----,
-
Negligent
misrepresentation
Lack of care
I
Must not
be contrary to
publ ic interest
Must be reasonable
in duration, scope
and subject matter
Must protect proprietary
or legitimate interest
of covenantee
L__
Innocent
misrepresentation
Error without fault
Induced the
representee
into the contract
Misrepresentation
False
statement
of fact
Fraudulent
misrepresentation
Dishonesty
Illegal Contracts "
Contracts
contrary to
public policy
Binds other party &
binds minor only if
minor ratifies
wagenng
contracts
Gamin~
Binds other party &
binds minor unless
minor
intoxicated persons
or
Mentally unsound
Summary
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One party makes
mistake
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CONTRACT: DISCHARGE
INTRODUCTION
7-101
Once a contract is created, it must be discharged. Discharge refers
to the term ination of a contract. After a contract is discharged,
the parties are generally rel ieved of their obl igations under the
contract. Essentia lly, there are four main ways in which a
contract may come to an end: performance, breach, agreement
and frustration. Th is chapter explains each alternative and examines
the relevant legal principles appl icable to each one.
Means of Discharging a Contract
Discharge ~f Contract
PERFORMANCE
7-201
The first and most obvious means of discharging a contract is by
performance. This means that the parties perform their obligations
as stipu lated in the contract and, once all the obl igations are
performed, the contract comes to an end. By far, the large majority
of contracts are discharged by performance. Each t ime a passenger
boards a bus, pays his fare, and is transport ed to his destination and
disembarks, a contract has been created, performed and discharged.
Each time a person buys a bowl of noodles from a hawker, pays
for it and takes it away contented ly, a contract has been created,
performed and discharged. Every day in Singapore, hundreds of
thousands - perhaps millions - of contracts are discha rged by
performa nee.
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Precise Performance
7-202
At law, the general rule is that if a contract is to be discharged by
performance, the parties must perform their obligations fully and
precisely. In its purest form, the rule can be very strict, as shown in
the following two cases.
Cutter v Powell (1795)
Powell contracted with Cutter, a seaman, to pay him 30 guineas
(about £31) in consideration of Cutter working as a sailor on a sea
journey from Jamaica to Liverpool. The money was to be paid at
the end of the voyage. Cutter died on the ship 19 days before it
reached liverpool. Powell refused to pay the wages. Cutter's
widow sued Powell for part of the money. The court held that
payment was conditional upon completion of the voyage and,
since Cutter did not complete the voyage, payment- even part
payment- need not be made.
Re Moore & Co and Landauer & Co (1921)
A seller contracted to sell canned fruit in boxes of 30. The seller
delivered the goods in boxes containing 24 cans. Although the
total quantity delivered was correct, the court held that the buyer
was lawfully entitled to reject the shipment on the basis of less
than full and precise performance.
Exceptions to Precise Performance Rule
7-203
Over the years, the courts have acknowledged that this rule of full
and precise performance, if applied strictly, may cause unfairness.
Accordingly, the law has developed certain exceptions which soften
this general rule. The exceptions are discussed below.
Exceptions to Rule on Precise Performance
Exceptions to Precise
Performance Rule
Divisible
contracts
Prevented
performance
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partial performance
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Contract : Discharge
CHAPTER 7
De Minimis Rule
7-204
The first exception is th is: if the deviation in performance is microscopic,
then the contract is deemed to have been performed fully and
precisely. 1 What is microscopic is, of course, a matter of judgment
and each case must be evaluated on its own facts: President Marine (Pte)
Ltd v Kojima Singapore (Pte) Ltd (1994).
Arcos Ltd v EA Ronaasen & Son (1933)
The appellant contracted to sell to the respondent wooden staves
for use in making cement barrels. The staves were of different
measurements but all were specified to be 1/2 inch thick. About
80% of the shipments contained staves which were 9/16 inch thick.
The respondent rejected t he shipments. The House of lords held
that, although the staves were of merchantable quality and could
be used t o manufacture cement barrels, the contract was breached
because the staves did not correspond with the description of
the goods. lord Atkin stated:
"If t he written contract specifies conditions of weight,
measurement and the like, t hose conditions must be complied
with. A ton does not mean about a ton, or a yard about a yard.
Still less when you descend to minute measurements does 1/2
inch mean about 1/2 inch ... No doubt there may be microscopic
deviations which business men and therefore lawyers will
ignore .. . But apart f rom this consideration, the right view is
that the conditions of the contract must be strictly performed."
Divisible Contracts
7-205
The second way in which less than precise performance may
discharge a contract is through t he concept of divisible obligations
(a lso called "d ivisib le contracts") . A contract may, in certa in
circumstances, be viewed as compris ing severa l independent
ob ligations. These may be deemed as seve rab le sub-contracts
wh ich may be discha rged separate ly. For examp le, modern
employment contracts are usual ly considered as divisible contracts
with obligations severable on a monthly or wee kly basis. An
employee's two-year contract wh ich has run for eight months
w ill therefore entitle the employee to cla im eight months' wages
at monthly intervals. In this way, the seemingly unfair outcome in
Cutter v Powell (117-202) can be avoided.
Substantial Performance
7-206
1.
The thi rd except ion, based on the doctr ine of substantial
performance, dates back to the case of Boone v Eyre (1779).
According to this p ri nciple, where a promisor has substantial ly
performed h is obligations under a contract, he can cla im the
agreed payment, less the amount necessary to make good the
defect. There are two cautionary remarks which shou ld be borne
in mind when applying the principle of substantial performance.
The Lat in maxim for this exception is de minimis non curat lex (the law is not concerned with
trif les).
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SINGAPORE BUSINESS LAW
7·207
First, if the contract is an entire obligation (as opposed to one consisting
of divisible obligations) and payment is made cond itional upon the
performance of the entire contract, then the promisor may not be able
to invoke substantial performance to claim payment. Such a contract
must be completely performed before payment is due. Whether a
contract is an entire or divisible one is a question of construction:
Hoenig v Isaacs (1952).
Hoenig v Isaacs (1952)
Hoenig was engaged by Isaacs to decorate and furnish a flat for a
total fee of £750. Payment was to be made "net cash as the work
proceeds and the balance on completion". Two part payments
totalling £300 were made in April. By August, Hoenig said he had
completed the contract and requested payment for the balance of
£450. Isaacs complained regarding the work done but nevertheless
paid £100 and occupied the flat. Hoenig then sued for the balance
of £350. The Official Referee (a judge sitting in a slightly different
capacity) held that this was not an entire contract. Further, there
was substantial performance although the wardrobe door and
bookshelf were defective. The cost to rectify these defects was £56
and hence Hoenig was entitled to receive £294. Denning LJ said:
" ... the first question is whether, on the true construction of
the contract, entire performance was a condition precedent to
payment. It was a lump sum contract but that does not mean that
entire performance was a condition precedent to payment. When
a contract provides for a specific sum to be paid on completion
of specified work, the courts lean against a construction of the
contract which would deprive the contractor of any payment at all
simply because there are some defects or omissions."
Bolton v Mahadeva (1972)
Mahadeva engaged Bolton to install a central heating system in his
house for a lump sum of £560. Mahadeva complained that Bolton's
work was deficient as the heating system did not heat adequately
and gave out fumes. To remedy the defects required further
work that would cost £174. The English Court of Appeal held that
the nature of the defects, and the cost of rectifying them as a
proportion of the contract price, were such that it could not be said
that the contract had been substantially performed. Accordingly,
since there was no substantial performance, Bolton recovered
nothing.
7-208
Secondly, there is always the practical problem of determining what
exactly amounts to "substantial performance". If a bui lder is
contracted to construct a white gate and w ishes to claim payment
when he has only inst alled the gate-posts, then it is highly un likely
he wou ld succeed in claiming substantia l performance. However, if
he has completed the entire gate but has omitted to paint it, there is
a possible case of substantial performance. Again, the degree of
completion required to satisfy substantial performance depends on
the facts of each case.
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Contract : Discharge
CHAPTER 7
Prevented Performance
7-209
Where a promisor has performed part of his ob ligations but is
prevented by the other party from performing the rest of his
ob i igations, the contract may be treated as discharged on the
basis of prevented performance. The promisor may sue for
breach of contract or, more commonly, claim payment
commensurate with the ob ligations performed on the basis of
quantum meruit (as much as he has earned; see 118-501).
Planche v Colburn (1831)
Planche agreed with Colburn to author a publication on ancient
armour. His fee was £100. He completed part of the publication
but Colburn then abandoned the entire project. It was held that
Planche was entitled to reasonable remuneration based on
quantum meruit because the contract was discharged by Colburn's
action in abandoning the project.
Acceptance of Partial Performance
7-210
The f ifth except ion to the genera l ru le of ful l and precise performance
arises when the promisee chooses to accept the partial performance of
the prom isor. If the promisee accepts such partial performance, then
the promisor is entitled to reasonable remuneration on a quantum
meruit basis under the law of restitution: Empresswood Enterprise Pte Ltd
v Kao Shin Ping (2005). Note, however, the promisor may still be liable
to the promisee in a cla im for damages for having only performed
part of the contract. An example where the promisor's argument of
acceptance of pa rtial performance failed is found below.
Sumpter v Hedges (1898)
Sumpter agreed to construct a building on Hedges' land for £565.
He fa iled to complete his obligations and Hedges had to complete
the rest of the work. Sumpter sued for the value of work he
performed. The court held that Sumpter's claim fai led because
Hedges did not have a clear choice of accepting or rejecting the
partially completed work. As the partially completed work was on
his land, he had to accept it. If the facts were otherwise and he
did have a clear choice, and chose to accept the partially completed
work, then Sumpter could have succeeded on the basis of
acceptance of partial performance.
BREACH
7-301
The second way in which a contract may be discharged is by breach of
contract. A breach of contract occurs when a party fa ils to perform his
obligations under the contract. From a chronological perspective, there
are two types of breach: actual breach and anticipatory breach. An
actual breach arises when the time of performance for the obligation
has arrived and the promisor fails to perform it. An ant icipatory breach
arises when t he time for performance has not yet arrived but the
promisor, by words or conduct, has clearly expressed his intention not to
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Situations of Discharge
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd & Another Appeal (2007)
Sato Kogyo (SK) was the contractor engaged by the Land Transport Authority (LTA) to build
one of the MRT stations along the Circle Line. SK in turn contracted to purchase readymixed concrete from RDC Concrete (RDC). During the course of the contract, RDC failed
to supply concrete on many occasions to SK. In addition, on LTA's instructions, supply was
suspended for a period of t ime as a result of its unacceptable quality. SK had to purchase
concrete from other suppliers at higher cost. It then deducted the cost differentials from
the outstanding amounts owing to RDC. RDC eventually curtailed its supply of concrete to
SK due to non-payment, and SK terminated the contract shortly afterwards.
One of the issues facing the trial judge was whether SK was entitled to terminate the
contract after ROC's suspension of supply. The judge found in favour of SK and this was
upheld by the Court of Appeal. Although the court acknowledged that it was not necessary
for the decision at hand, it took the opportunity to clarify a significant but complex area
of contract law- that of the general right to terminate a contract for breach. The court set
out two broad categories and the various sit uations flowing f ro m t hem as fo llows:
(A) Where the contract clearly provides for the event(s) in which the innocent party is
entitled to terminate the contract:
Situation 1: Where the contract clearly states these circumstances, the innocent party is
entitled to act accordingly and terminate the contract.
(B) Where the contract does not clearly provide for the event(s) in which the innocent
party is entitled to terminate th e contract:
Situation 2: Where a party, by his words or conduct, renounces all his obligations under the
contract, the innocent party is entitled to terminate the contract.
Situation 3(a): Condition/warranty approach - where a party breaches a condition of the
contract, the innocent party is entitled to terminate the contract. The nature of the term
depends on the intention of the parties to so designate it.
Situation 3(b): the Hongkong Fir approach- where the nature and consequences of the
breach are so serious as to "go to the root of the contract", the innocent party is entitled
to terminate the contract.
The court further stated that in deciding whether an innocent party is entitled to terminate
a contract for breach, the "foremost consideration" is to give effect to the intentions of
the contracting parties. Thus, the condition/warranty approach must take precedence over
the Hongkong Fir approach. It follows that where the term is a condition, the innocent party
would be entitled to terminate the contract, regardless of the consequences of breach.
Significantly, the court then addressed what would happen if the term breached was a
warranty. Phang JA opined [emphasis in original]:
"If, however, the term breached is a warranty, we are of the view that t he innocent
party is not thereby prevented from terminating the contract (as it would have been
entitled so to do if the condition-warranty approach operated alone). Considerations
of fairness demand, in our view, that the consequences of the breach should also be
examined by the court ... In the resu lt, if the consequences of the breach are such as
to deprive the innocent party of substantially the whole benefit that it was intended
that the innocent party should obtain from the contract, then the innocent party
would be entitled to terminate the contract, notwithstanding that it only constitutes a
warranty."
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Contract : Discharge
perform the obligation. The effect of an anticipatory breach provides the
promisee with an immediate right to treat the contract as discharged,
prior to the time for performance arriving: The "STX Mumbai" (2015) and
Tembusu Growth Fund Ltd v AUAtek, Inc and others (2017). So long as the
promisee is able to prove that the promisor has evinced a clear intention
not to perform his obl igations under the contract, this conduct could
demonstrate that a breach has, in substance, occurred even though the
time for performance has yet to arrive.
Repudiation
7-302
7-303
Not every breach of contract resu lts in the contract being discharged.
To constitute a discharge, the breach must amount to a repudiation
of the contract. Otherwise, a breach which does not amount to a
repudiation simply entitles the innocent party to sue for damages.
In this case, the contract remains on foot. For an actual breach to be
considered repudiatory, it must be:
(a)
a breach of a condition: Behn v Burness (1863);
(b)
a fundamental breach, meaning that the breach goes to the
root of the contract: Mizuho Corporate Bank Limited v Woori
Bank (2004); or
(c)
a breach of warranty which entails serious consequences:
ROC Concrete Pte Ltd v Sa to Kogyo (S) Pte Ltd &Another Appeal
(117-301).
A breach of a condition is self-explanatory. If the term that is breached
is a cond ition (see 115-304), then the breach is repudiatory. What is
more debatable is the nature of fundamental breach. Genera lly,
fundamental breach arises where the breach of a term brings about
serious consequences, such that it deprives a party of substantially
the whole benefit which it was intended the contract should confer:
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (115-302).
The innocent party can then terminate the contract. For example,
in commercial contracts, time is usually considered of essence to
the contract because prices can fluctuate significantly over a short
period: Teo Teo Lee v Ong Swee Lan & Others (2002). Performance of
obligations outside the time limits specified in the contract may, in
certain situations, amount to a fundamental breach. In Tate & Another
v Sihan Sadikan (1992) involving a dispute arising from the sa le of a
condom inium unit, the Singapore High Court held that the fai lure to
produce and pass title within the time limits specified in the contract
was fundamental and went to the root of the contract. Furthermore,
in CAA Technologies Pte Ltd v Newcon Builders Pte Ltd (2017), the
Singapore Court of Appeal held that the breach of an implied term
- which made t ime of the essence and required the prom isor to
exercise due diligence- deprived the promisee of substantially the
whole benefit he intended to obtain from the contract; and this was
sufficient to trigger his right to terminate.
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7-303b
Breach of a warranty which entails serious consequences can also give
rise to a repudiation of contract. In ROC Concrete (117-301), the court
held that if the consequences of the breach deprive the innocent party
of substantially the whole benefit of the contract, then the innocent
party is "entitled to term inate the contract notwithstanding that it
only constitutes [a] warranty". A later case, Sports Connection Pte Ltd
v Oeuter Sports GmbH (2009), added a proviso: if the parties expressly
agree in clear and unambiguous language that the term concerned is a
warranty such that a breach of it would never entitle the innocent party
to terminate the contract then, regardless of the serious consequences
of breach, the court would give effect to such intention and the contract
cannot be terminated. However, such expressly agreed warranties are
probably rare in practice.
Four Often Confused Terms
When dealing with the topic of discharge, there are four technical
terms which, because they have been used loosely in the past, have
caused some confusion. These terms are explained below:
Repudiation: The expression, by words or conduct, of a party's
intention not to perform his obligations under a contract. The
innocent party has two choices. He can accept the repudiation in
which case the contract is discharged by acceptance of repudiatory
breach. Alternatively, he can affirm the contract in which case the
contract remains on foot. A repudiation or repudiatory breach can also
be described as a breach which justifies discharge of the contract.
Rescission: The termination of a contract such that it is void ab initio
(void from the start). The result is that the contract is ended and
treated as if it never existed. The proper use of the term "rescission"
should be confined to cases of fraud, mistake or misrepresentation
where restitutio in integrum is possible (see 116-416). Rescission is at times
also used to refer to "cases of rescission by acceptance of repudiatory
breach", although such use tends to breed confusion: Hong Fok Realty
Pte Ltd v Bima Investment Pte Ltd (1993). Such cases should use the term
"repudiation".
Renunciation: This term is usually used synonymously with
repudiation. A party who renounces a contract repudiates it.
Revocation: This term is used in the context of offer and acceptance
and not in the context of discharge of contract. An offer or acceptance
is revoked when it is withdrawn. In contrast, a contract cannot be
withdrawn; it can either be discharged or it remains on foot.
7-303c
In summary, after ROC Concrete (117-301 ), when deciding the legal impact
of a breach, the Singapore courts favour a two-stage analysis where the
parties' intention is the primary consideration and the consequences
of the breach is secondary: Man Financial (S) Pte Ltd v Wong Bark Chuan
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David (2008) and Phosagro Asia Pte Ltd v Piattchanine, louri (2016). The
foremost consideration of the court is to give effect to the intentions of
the contracting parties. If the parties' intention was that the obligation
breached was to have the force of a cond ition then, regardless of the
consequences of the breach, the innocent party would be entitled to
terminate the contract. lfthe parties' intention was that t he obligation
breached was a warranty, fa irness demanded that t he consequences of
the breach shou ld also be examined by the court. If these consequences
were trivial, t hen the innocent party is not entitled to terminate the
cont ract. But if the consequences of the breach deprive the innocent
party of substantially the whole benef it of the contract, then the
innocent party can repudiate the contract despite the term being a
warranty: CM Technologies Pte Ltd v Newcon Builders Pte Ltd (2017).
7-304
For an anticipatory breach to be considered repudiatory, the threatened
non-performance must amount to a breach of a cond ition of the
contract or have the effect of depriving the other party of substantially
the whole benefit which the contract was intended to bestow on him:
Afovos Shipping Co SA v Pagnan (1983) and The "STX Mumbai" (2015).
In ROC Concrete (117-301), the court referred to a renunciation of all
obl igations as a situation that entitles the innocent party to repudiate
the contract (labelled as "Situation 2" in the case). An anticipatory
breach of a condition of the contract would entitle the innocent party
to discharge the cont ract (labelled as "Situation 3(a)" in ROC Concrete).
If the anticipatory breach deprives the innocent party of substantially
the whole benefit which he was supposed to obta in from the contract,
then the innocent party can elect to discharge the contract (labelled
as "Sit uation 3(b)" in ROC Concrete). The determination as to whether
an anticipatory breach fa lls w ith in the ambit of Situation 2, Situation
3(a) or Sit uation 3(b) in ROC Concrete depends much on the precise
fact s of t he case concerned: The "STX Mumbai" (2015).
Hochster v De La Tour (1853)
On 12 April, Hochster agreed to become a courier for De La
Tour commencing from 1 June. On 11 May, De La Tour wrote
to Hochster stating that his services were no longer required.
Hochster took legal action against De La Tour immediately. The
court held that De La Tour's letter constituted a repudiatory breach
entitling Hochster to sue prior to 1 June and claim damages.
The "STX Mumbai" (2015)
The defendant's ship, STX Mumbai, was arrested by the plaintiff
(a bunker supplier) two days before a debt owed to it by the
defendant fell due. The plaintiff's argument for the arrest,
amongst other things, was that the insolvency of STX Pan Ocean,
the parent company of the defendant, resulted in an anticipatory
repudiatory breach of the defendant's obligations to pay the
debt on the due date. The defendant challenged the arrest,
arguing that insolvency could not amount to anticipatory breach.
The Singapore High Court held that insolvency per se did not
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automatically amount to a repudiatory breach in law. Moreover,
as the insolvency of STX Pan Ocean could not be imputed to the
defendant, there was therefore no anticipatory breach. On appeal,
however, the Court of Appeal disagreed with the High Court. The
court did acknowledge that insolvency, in and of itself, could not
amount to anticipatory breach. However, it went further in holding
that STX Pan Ocean's insolvency could, when viewed with other
facts surrounding the plaintiff's claim, lead to a situation where its
insolvency made the defendant unable to make t imely payments
to the plaintiff. Significantly, the court also held that the doctrine
of anticipatory breach applies to both executed and executory
contracts. Thus, in the case of executed contracts where the only
remaining obligation was for one party to make payment at a
future date, the other party does not have to wait for the time
of performance to arrive before taking action. Thus, an innocent
party would not have to wait until its counterparty's performance
fell due before taking steps to protect himself.
7-305
In all cases of breach, whether actual or anticipatory, the repudiation
must be unequ ivoca l. The Singapore High Court has stated that
repudiation occurs if the action or attitude of the party concerned "was
indicat ive of a categorical refusal to perform their obligation": Pacific
Rim Palm Oil LtdvPT Asiatic Persada (2003). An honest misapprehension as
to one's obligations under a contract wh ich leads to non-performance
would not amount to repudiation if there is an underlying wi llingness
to correct one's understanding and fu lfil l those obligations.
Mersey Steel and Iron Co v Naylor Benson & Co (1884)
Naylor Benson agreed to sell 5,000 tons of steel to Mersey Steel, to be
delivered in instalments of 1,000 tons per month. Half-way through
the instalments, a winding-up petition was presented against Naylor
Benson. Mersey Steel wanted to continue receiving t he shipments
and to pay for them but, acting upon what later turned out to be
erroneous legal advice, it withheld payment on the basis of the
winding-up petition. Naylor Benson sued claiming there had been
repudiation on t he part of Mersey Steel. The House of Lords held that
there was no repudiation because Mersey Steel was under a genuine
misapprehension that they should not pay for the shipments.
Wong Poh Oi v Guok Gertrude and Another (1966)
The defendants sold land to the plaintiff and contracted to build
a house for her on the land. Extra costs were incurred which the
plaintiff claimed were necessary to make the house conform to the
original specifications. She refused to pay for these extra works,
claiming that they were part of the price. On the basis of her refusal,
the defendants purported to repudiate the contract. The court held
t hat mere non-payment of an instalment or breach of one term
does not necessarily put an end to a contract. Here, the court found
that the plaintiff did not evince an intention not to be bound by
the contract. Hence, the defendants' purported repudiation was
wrongful.
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Election
7-306
Even when a repudiatory breach is present, the contract is not
automatically discharged. The repudiatory breach grants the innocent
party a right of election as to whether to terminate the contract: ROC
Concrete ('117-301). The right of election must be exercised if it is to be
effective. As noted by Asquith LJ in Howard v Pickford Tool Co (1951):
"An unaccepted repudiation is a thing writ in water and of no value
to anybody; it affords no legal rights of any sort or kind". The innocent
party may choose to accept the repudiation and treat the contract as
discharged or he may affirm the contract so that it remains on foot. The
discharge of the contract arising from a repudiatory breach is contingent
upon the acceptance of the repudiation by the other party: Arokiasamy
Joseph Clement Louis v Singapore Airlines Ltd (2004) and Goh Lay Khim and
others v Isabel Redrup Agency Pte Ltd and another appeal (2017).
7-306b In Aero-Gate Pte Ltd v Engen Marine Engineering Pte Ltd (2013), the
Singapore High Court clarified that it is possible for the innocent party to
elect to affirm the contract for the time being when a repudiatory breach
occurs. This does not in itself amount to an irrevocable waiver of its right
for all time to terminate the contract. This is relevant if the repudiatory
breach requires an assessment of the consequences of the breach
over time. However, the innocent party eventually must communicate
unequivocally to the other party his decision as to whether he accepts
the contract as discharged by repudiation: HG Metal Manufacturing Ltd
v Nam Tat Hardware Co (2006).
7-307
If the innocent party accepts the repudiation, the contract is discharged and
he is entitled to claim damages to put him into the position as if the contract
had been performed properly: Hong Fok Realty Pte Ltd v Bima Investment Pte
Ltd (1993). Such discharge only releases the parties from obligations under
the contract that have not been performed yet. Obligations that have
already arisen before the discharge remain unaffected. If the innocent
party chooses to affirm the contract despite the repudiation, the contract
remains on foot and both parties must continue to fulfill their obligations
and complete the contract. The innocent party, however, still retains the
right to claim damages for the breach.
Repudiatory Breach
Of a Condition
Through fundamental
breach {including
breach of warranty:
ROC Concrete
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Affirming After Anticipatory Breach
7-308
Two points should be noted where the breach is an anticipatory
breach and the innocent party wishes to affirm the contract. First,
the innocent party places himself at risk that a supervening event may
occur, discharging the contract by frustration (see 'f]7-501). If so, then,
subject to the law of f rust ra tion, the defaulting party may be relieved
of his liabil ity because the frustrating event discharges the contract,
wiping the slate clean.
Avery v Bowden (1855)
Bowden chartered a ship from Avery at the Russian port of
Odessa and contracted to provide cargo w ithin 45 days. During
this period, Bowden was unable to provide the cargo and told
Avery to leave the port. Avery rema ined at port hoping that
Bowden would obtain the cargo before the period expired.
At this point, the Crimean War between England and Russia
began and the hostilities prevented the contract from being
performed. It was held that Bowden's liability for the anticipatory
repudiation was relieved by the war which frustrated the contract.
7-309
Secondly, there is a li mitation as to the circumstances in w hi ch
an innocent party can affirm a contract repudiated by anticipatory
breach . The right to affirm is not unfettered . In the absence
of "legit im ate interest", the innocent party must accept the
antici patory breach, treat the contract as discharged and claim
damages: Clea Shipping Corporation v Bulk Oil international, "The
Alaskan Trader" (1984). What amounts to "leg itimate interest" depends
on the facts of each case: MP-Bilt Pte Ltd v Oey Widarto (1999). The
rationale is that, if damages would be a sufficient compensation to the
innocent party, he should not be permitted to perpetuate the contract
which may result in even greater detriment to the defaulting party.
Responses to Anticipatory Breach
Contract
remains on
foot
Frustrating
event
Contract
discharged by
frustration
Contract
discharged by
anticipatory
breach
AGREEMENT
7-401
The third means of discharging a contract is by agreement. The
rationale is found in the principle that what is effected by agreement
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may be undone by agreement. 2 The discharge may be effected by a
term within the existing agreement or by a subsequent agreement.
Existing Agreement
7-402
A contract may include a term that it would be discharged upon the
occurrence of a stipulated event or at the expiration of a certain
period. For example, a contract to underwrite an initial public
offering of shares may include a term that the contract is
deemed discharged if the Straits Times Index falls below 1,000
points. Similarly, a tenancy agreement will have a specified date
on which it will end. However, there may be certain statutory
provisions which might modify the right of parties to discharge a
contract by agreement. The Employment Act, for example, specifies
the minimum periods of notice required to be given by employers to
certain classes of employees in cases of termination of employment.
Subsequent Agreement
7-403
A contract may also be discharged by the parties entering into a fresh
agreement seeking to extinguish the earlier contract. Several types
of discharge are possible.
Mutual Release
7-404
Where the contract is partially or entirely executory, the parties may
execute a mutual release which discharges each party from all their
obligations under that contract. Alternatively, the parties may have
acted in such a manner as to be construed as having abandoned the
contract, such that the contract is terminated as a resu It of the common
intention of the parties that it should no longer bind them: Li Hwee
Building Construction Pte Ltd v Advanced Construction & Engineering Pte
Ltd (2002).
Unilateral Release
7-405
Where one party who has performed all his obligations seeks to
discharge the other party who has not performed all his obligations,
then the first party may execute a release in the form of a deed.
Because the release is in the form of a deed, no consideration is
required to support this new agreement (113-206).
Accord and Satisfaction
7-406
2.
Where one party purchases his release with fresh valuable
consideration provided to the other party, the understanding
The Latin maxim for this principle is: eadem modo quo oritur, eadem modo dissolvitur.
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to do so is the accord and the cons ideration provided is the
satisfaction. The accord and satisfaction discharge the earlier
contract.
Variation
7-407
Where a contract is altered by a subsequent agreement supported
by fresh consideration, there is a variation of that contract.
Depending on the case, that contract may be discharged entirely
or amended by the subsequent agreement.
Waiver
7-408
Where one party, at or without the request of the other party,
volu ntarily grants the other party an indu lgence not to perform an
obligation under a contract wit hout any consideration passing, the first
party has given a wa iver. Although not supported by consideration,
courts traditional ly have enforced waivers on the basis of reason ing
similar to that used in estoppel. Waivers may be given in respect of
specific modes of performance but not usually in respect of the whole
contract.
Leivest International Pte Ltd v Top Ten Entertainment Pte Ltd (2006)
Leivest was the owner of premises in Orchard Towers and Top Ten was
the tenant. A dispute arose over the late payment of $20,000 in costs
pursuant to a settJement agreement, maintenance charges and interest
by Top Ten. Later, Leivest accepted Top Ten's delayed cheque payment
totalling $52,000 which included the current month's rent. The Singapore High Court held that by demanding for and accepting the payment, Leivest had waived the breaches by Top Ten.
Discharge by Agreement
Discharge by Agreement
Subsequent
agreement
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FRUSTRATION
7-501
The last means of discharging a contract is by frustrat ion.
Frustration refers to the situation where a supervening event
occurs, for which neither party is responsible, with the result that
the very basis of the contract is destroyed so that the venture to
wh ich the parties now find themse lves committed is radically
different from that orig inally contemplated.
Davis Contractors Ltd v Fareham Urban District Council (1956)
Davis Contractors contracted w it h the respondent local council
to build 78 dwelling units in eight months at a cost of £94,424.
Instead, the contract took 22 months. Further, a labour and
materials shortage pushed up the costs of construction by around
20% . The appellant argued that the unexpected cost increase
frustrated the contract and that it should be able t o claim t he
actual costs of construction on a quantum meruit basis. The House
of Lords rejected t his claim. The cost increase did not alter the
situation so much that the task undertaken was radically different
from what was originally contemplated by the parties.
Frustration
+
+
Radical change
in circumstances
=
When Frustration Operates
7-502
Whether an event frustrates a contract depends on t he nature of t he
event as well as the contract which it purports to f rustrate. It shou ld
be noted that, on the one hand, frust rat ion does not require strict
impossibility of performance, alt hough impossibility of performance
may give rise to frustration. Impracticability caused by extreme or
unreasonable difficulty, expense or inj ury may be sufficient to trigger
frustration. The doctrine of frustration requires that the failure of
performance must be due t o some "outside event or extraneous change
of situation" and it must take place "without either t he fault or the
default of either party to the contract": Tan Yong Hui vAasperon Venture
Pte Ltd and another (2015).
7-503
The threshold for frustration is not easily reached. In Davis Contractors
v Fareham UOC (117-501), the fact that the cost s of bu ilding materials
and labour have increased unexpectedly, making it very expensive for
a bu ilder to fulfill his construction contract, in itself does not amount
to frustration. The Singapore Court of Appeal in Lee Chee Wei v Tan Hor
Peow Victor (2007) also emphasised that a frustrating event shou ld not
be lightly established and held that "[i]mprudent commercial bargains
could not be aborted or mod if ied merely because of an adverse change
of circumstances."
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Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd (2014)
This case involved an alleged frustration of a contract to supply
ready-mixed concrete to the respondent as a result of a ban on
the export of sand by the Indonesian government in 2007. The
court confirmed that the doctrine of frustration was to be applied
only in exceptional circumstances. An increase in cost per se would
not result in a frustrating event, although it might if that increase
were astronomical. However, as both parties had contemplated
that Indonesian sand would be used in the preparation of the
concrete, the sand ban was a supervening event which rendered
the contractual obligation fundamentally different from what had
been agreed in the contract. The contract was thus discharged by
frustration.
Types of Frustrated Contracts
~ Frustrated Contract~ _:
Destruction of Subject Matter
7-504
One of the clearest examples of frustration is where the subject
matter of the contract is destroyed due to no fault of the parties.
Taylor v Caldwell (1863)
The parties entered into a contract of lease for a music hall.
The hall was accidentally destroyed by f ire prior to the day of
performance. The court held that the contract was discharged by
frustration.
Non-occurrence of Event
7-505
Another example of frustration is where an event whose occurrence
forms the underlying basis of the contract is cancelled or postponed
due to no fault of the parties. The application of this principle,
howeve r, is not without difficulty, as shown by the two cases
below (called the "Coronation Cases" because they emerged in the
context of the coronation of King Edward VII in 1902). It appears
that, ultimately, the rea l issue is whether the event which failed
to occur could reasonably be considered to be one which both
parties hold to be the very basis of the contract such that, if the
event did not take place, the parties would not have contemplated
entering into the contract in the f irst place.
Krell v Henry (1903)
Krell contracted with Henry to rent out a f lat for 26 and 27 June
1902. The f lat had a splendid view of t he coronation parade.
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Contract : Discharge
Henry paid part of the rent, but the coronation was postponed due
to t he illness of Edward VII. Krell sued for t he balance of the rent.
The English Court of Appeal held that the contract was frustrated
because t he basis of the contract was the coronation procession
and t he view afforded by the flat. Once the coronation was
postponed, the purpose for which the flat was rented vanished.
Herne Bay Steamboat v Hutton (1903)
Hutton chartered a boat from Herne Bay Steamboat for 28 June
1902. Hutton intended to take paying passengers on the boat
to view the coronation naval review and tour the fleet. The
coronation was postponed and the review cancelled. The English
Court of Appeal held t hat the contract was not frustrated because
the happening of the naval review was not the sole basis of the
contract. Even though t he naval review was cancelled, a tour of the
fleet was still possible.
Government Interference
7-506
Another possible cause of frustration is government interference. This
is usua lly in the form of an unexpected government action or rul ing
wh ich prevents the performance of a contract.
Metropolitan Water Board v Dick, Kerr & Co (1918)
Dick, Kerr and Co contracted to construct a reservoi r for the
Water Board. During the course of construction, the Minister
of Munitions, acting under st atutory powers available during
World War I, halted t he work. The House of Lords held that the
contract was discharged by frust ration.
7-507
In Singapore, the courts have also held that contracts can be frustrated
because of government interference, as shown below. However, the
opposite was true in Oakwe/1 Engineering Ltd v Energy Power Systems Ltd
(2003). There, a contract to develop a power plant in India was made
economica lly unviable when the payable tariffs were unilatera lly
reduced by the Government of India. However, t his was held to be
insufficient to frustrate the contract because the defendants had
already assumed that risk under the agreement. Thus, the plaintiffs'
claim for breach of contract was allowed.
Shenyin Wangou-APS Management Pte Ltd & Another v Commerzbank
(South-East Asia) Ltd (2001)
The plaintiffs deposited Malaysian ringgit in off-shore accounts
with the defendant bank in Singapore. The maturity date was 3
September 1998. On 1 September 1998, the Malaysian government
implemented capital control measures in response to the Asian
financial crisis prevailing at that t ime. This resulted in the entire
ringgit off-shore market to be wiped out. When the plaintiffs'
deposits matured, the defendant had to pay them in US dollars
instead of the unavailable ringgit. As the plaintiffs had previously
entered into contracts with a third party to sell t he ringgit, they
were obliged to purchase the ringgit at a higher exchange rate in
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order to fulfil these contracts. They sued the defendant for the
substantial losses suffered. On the issue of frustration, the Singapore
High Court endorsed the statement of the law in Davis Contractors v
Fareham UDC (~7-501) and held that the contract had indeed been
frustrated by the Malaysian government's actions. The court stated
that the situation "was brought about directly by the economic
control measures of the Malaysian government in pursuing its
legitimate national objective".
Persona/Incapacity
7-508
A contract for personal services may be frustrated by personal
incapacity if the incapacity affects the performance of the contract
in a fundamental way.
Poussard v Spiers & Pond (1876)
Madame Poussard, an operatic singer, was taken ill and therefore
unable to fulfi ll her contract to perform in an opera production.
The court held that her contract was frustrated because of her
illness.
7-509
It also follows that frustration can also discharge a contract for personal
service if the service provider dies. On this point, it is important to make
a distinction between a contract for personal services and a contract
for services. A contract for personal services is one where the subject
of the contract is the services of a particular person, fo r example, a
singer or an artist. Personal incapacity which affects the performance
of such a contract in a fundamental way wi ll frustrate the contract.
Hence, as stated by Warren Khoo J in Lau Lay Hong v Hexapillar pte Ltd
(1993):
".. .it is well settled that, except in the case of contracts based on
personal considerations, the death of a party to a contract does not
affect the enforceability of the contract."
7-510
On the other hand, a contract for services is one where the subject
is the services specified, whether or not they are provided by a
particular person. When a student enters university, he has entered
into a contract under which the university has agreed to provide
educational services. The university has not contracted to provide
the personal services of particular lecturers. Accordingly, even if
a student's favourite lecturer is inca pacitated in some way and
unable to teach him, the contract is not frustrated. The university
can still perform its part of the bargain- the provision of educational
services- by offering other lecturers.
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Factors Limiting Frustration
7-511
From the above examples of frustrated contracts, it is clear that the
circumstances which give rise to possible cases of frustration are
relatively few in real life. These circumstances include occasions such
as war, natural disasters and death. In addition, the application of
frustration is further limited by three factors: foreseeability, force
majeure clauses, and self-inducement.
Three Limiting Factors
.
.
Frustra_tion - Limiting Factors
Foreseeability
7-512
First, the more foreseeable the event, the more unlikely the event will
be held to frustrate a contract. This appears logical since, if an event
is foreseeable, the parties can be expected to have provided for it in
their contract. Alternatively, they might be taken to have impliedly
agreed that their obligations will continue despite the occurrence of
the event. However, this point must not be taken too far. Several
Eng lish cases have made it clear that mere foreseeabi lity of the event
is no bar to frustration: WJ Tatem Ltd v Gamboa (1939) and Ocean Tramp
Tankers Corporation v V/0 Sovfracht, "The Eugenia" (1964). In Singapore,
the Court of Appeal in Lim Kim Sam v Sheriffa Ta1bah bte Abdul Rahman
(1994) seemed to have concurred with th is view, citing with apparent
approval the comments of Lord Denning in The Eugenia. Hence, all that
can be said is that the greater the foreseeabi Iity of the event, the more
difficult it is to establish frustration.
Housing & Development Board v Microform Precision Industries Pte Ltd (2003)
The defendants, a manufacturer of machine tools, leased two
separate plots of land f rom the HOB. They constructed a factory
building on Plot 1. However, t he problem with Plot 2 was that it was
completely land-locked with no ostensible access. When they fell
behind w ith the rent for Plot 2, the HDB wrote to the defendants to
vacate the land and settle the outstanding rent on the basis t hat they
had repudiated the contract. The defendants argued that since they
were unable to have access to Plot 2, they could not build a factory
there and, consequently, the contract was frustrated. The Singapore
High Court dismissed the defendants' arguments as the facts showed
that they had been aware of t he problem for a long time. They
had even applied to the authorities for access although this was not
granted.
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Force Majeure Clause
7-513
Secondly, many parties today include in their contracts force
majeure clauses. These are clauses which expressly provide for
the occurrence of events such as war or natural disasters
(euphemistical ly called "acts of God") which wil l normally fall
within the class of events which lead to frustration. The effect
of such a clause depends largely on its construction. If the clause
is construed as a complete provision fully governing the situation
which has arisen, then it will be effective to prevent frustration
from arising . There will also be no breach of contract despite its
non-performance.
China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd (1997)
The plaintiff sold prilled urea of USSR origin to the defendant
pursuant to a 1991 agreement containing a force majeure clause:
"Force Majeure means the situation/condition being not under
human control, meaning act of God, such as storms, fire, war,
military action, government emergency order ... etc. The seller
will not be responsible (for] the non-performance of this
contract in case of force majeure, but, when force majeure
happens, the seller must immediately send to the buyer within
30 days ... (a] certificate of the force majeure issued by a
competent government authority at the place where the force
majeure occurred as evidence thereof". (Emphasis added.)
The plaintiff could not ship the urea because of the political
upheaval in the USSR (which eventually led to the USSR being
dissolved in December 1991). The plaintiff could not obtain a
certificate from the USSR to evidence the force majeure, but did
obtain a letter from t he USSR Embassy in Singapore. The Singapore
Court of Appeal held that the force majeure clause applied and that
the USSR Embassy letter, although not strictly complying with the
clause, was "the next best thing" and therefore adequate evidence
of the force majeure. Hence, there was no breach by the plaintiff.
7-513b The Singapore Court of Appeal in ROC Concrete (117-301) took the
opportunity to set out the general principles relating to force majeure
clauses:
(a)
The key purpose of such a clause is to contractually allocate the
risks of specified future events between the parties;
(b)
Precise construction of the clause is crucial in order to determine
its scope. The intention of the parties must be given effect to;
(c)
Force majeure clauses may exclude frustration and also provide
for discharge or other relief for non-frustrating events;
Whi lst a force majeure clause determines how outstanding
(d)
obligations could be resolved upon the happening of a
foreseeable event, the doctrine of frustration determines how
these obligations should be treated due to an unforeseeable
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----------~~~~~~------------------------------------~
(e)
(f)
event. Hence, the doctrine of frustration is still very relevant to
the construction of force majeure clauses. On the whole, such
clauses, by their very nature and function, would usually meet
the criteria required of the doctrine of frustration;
Whilst parties can exclude the doctrine of frustration in
a force majeure clause, the language used to do so must be clear and
unambiguous. The courts wil l construe such clauses strictly;
A party who relies on a force majeure clause must not on ly
bring himself within the clause, but also take "all reasonable
steps to avoid its operation, or mitigate its results".
7-513c While the ROC Concrete principles regarding force majeure clauses
were affirmed in Holcim (Singapore) Pte Ltd v Precise Development
Pte Ltd (2011), the Court of Appeal there questioned whether it is
compulsory "to take all reasonable steps before the force majeure clause
can be relied on". The court stated that whether this is required in a
particular case depends on the precise language of the clause.
7-514
A force majeure clause may in fact be an exemption clause. If so,
then it must comply with the provisions of the Unfair Contract Terms
Act (~5-420). Many force majeure clauses, however, are found in
international contracts which are outside the scope of the UCTA.
Self-Induced Frustration
7-515
Third ly, frustration does not arise if it is self-induced. In other
words, if the frustrating event is the resu lt of the voluntary action
of one of the parties, then there is no frustration.
Maritime National Fish v Ocean Ti'awlers (1935)
Maritime National chartered a fishing trawler from Ocean Trawlers.
The trawler was fitted with a special net called an otter trawl. For
environmental reasons, the use of otter trawls was controlled
because otter trawls have the capacity of catching small fishes.
Maritime National subsequently obtained three licences to use
otter trawls. It decided to allocate the three licences to its three
other ships and not to the trawler chartered from Ocean Trawlers.
Maritime National subsequently argued that its contract with
Ocean Trawlers was frustrated because the government fai led to
issue the licence needed. The Privy Council held that there was no
frustration because the event was self-induced. The unavailability
of a licence for the trawler was due to the allocative decision of
Maritime National.
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Effect of Frustration
7-516
Under the common law, frustration automatically discharges a contract.
Unlike repudiation which must be accepted before it can discharge
the contract, frustration is effective immediately and requires no
commun ication or advice from one party to the other. The contract
is terminated not ab initio but only as for the future. According ly, all
outstanding obligations are no longer required to be performed: Fibrosa
Spofka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1943).
7-517
The common law also ruled that any costs, expenses or losses
incurred prior to the frustrating event must "lie where they fall",
meaning that they must be borne by the party which suffers them.
This can cause much hardship. In Singapore, the Frustrated Contracts
Act (FCA)- which follows the wording of the Law Reform (Frustrated
Contracts) Act 1943 of t he Un ited Kingdom - alters this position.
7-518
The overall effect of the common law and the statutory provisions can
be summarised as follows:
(a)
all future obligations of the parties cease: Fibrosa case;
(b)
money paid prior to time of discharge is recoverable: s 2(2)
FCA;
(c)
money payable ceases to be payable: s 2(2) FCA;
(d)
expenses incurred prior to time of discharge can be recovered:
s 2(3) FCA; and
(e)
benefits conferred (other than money) prior to time of
discharge ca n be compensated with an amount the court
considers just: s 2(4) FCA.
7-519
It should be noted that, pursuant to s 3(5) FCA, the provisions of
the legislation apply to all contracts other than:
(a)
a contract for the carriage of goods by sea;
(b)
certain types of charter-parties;
(c)
a contract of insurance;
(d)
a contract to which s 7 of the Sale of Goods Act applies; and
(e)
a contract for the sale of specific goods where the contract is
frustrated because the goods have perished.
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Contract : Discharge
Frustrated Contracts Act
Section 2:
(1)
Where a contract has become impossible of performance
or been otherwise frustrated, and the parties to the contract
have for that reason been discharged from the further
performance of the contract, this section shall, subject to
section 3, have effect in relation to t hat contract.
(2)
Subject to subsection (3), all sums paid or payable to any
party in pursuance of the contract before the time when t he
parties were so discharged (referred to in this Act as the time
of discharge) shall, in the case of sums so paid, be recoverable
f rom him as money received by him for the use of the party
by whom the sums were paid, and, in the case of sums so
payable, cease to be so payable.
(3)
If the party to whom the sums were so paid or payable under
subsection (2) incurred expenses before the time of discharge
in, or for the purpose of, the performance of the contract,
the court may, if it considers it just to do so having regard
to all the circumstances of the case, allow him to retain or,
as the case may be, recover the whole or any part of the
sums so paid or payable, not being an amount in excess of
the expenses so incurred.
(4)
Where any party to the contract has, by reason of
anything done by any other party to the contract in, or for
the purpose of, the performance of the contract, obtained a
valuable benefit (other than a payment of money to which
subsection (2) applies) before the time of discharge, there
shall be recoverable from him by that other party such
sum (if any), not exceeding the value of that benefit to
the party obtaining it, as the court considers just, having
regard to all the circumstances of the case and, in
particular(a)
the amount of any expenses incurred before the time
of discharge by t he benefited party in, or for the
purpose of, the performance of the contract,
including any sums paid or payable by him to any
other party in pursuance of the contract and retained
or recoverable by that party under subsection (3); and
(b)
the effect, in re lation to that benefit, of the
circumstances giving rise to the f rustration of the
contract.
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SUMMARY
7-601
In this chapter, we saw how a contract, once formed, is discharged or
terminated. We discussed the four main ways of discharging a contract:
by performance, breach of contract, agreement and frustration.
7-602
Of course, the most desirab le alternative for all parties is for a
contract to be discharged by performance. The general rule is that
precise performance is required. There are, however, certain
allowable exceptions:
(a) The de minimis rule allows deviation as long as it is microscopic;
(b) A divisible contract may be viewed as a series of sub-contracts
and a deviation may affect one sub-contract while the other
sub-contract(s) may be performed precisely;
(c)
A contract wh ich is substantially performed may be deemed
to be discharged by perform ance such that the prom isor is
entitled to the contract price subject to the promisee retaining a
portion of it to remedy any defects in the promisor's performance;
(d) If a promisee prevents the promisor from continuing to perform
the contract, then the promisor may claim payment on a quantum
meruit basis; and
(e) If a promisee chooses to accept the partial performance of a promisor, then the promisor may claim payment on a quantum meruit
basis.
7-603
The second way acontract is discharged is by breach. A breach of contract
that entit les the innocent party to treat the contract as discharged and
sue for damages occurs when a party renounces his obligations under the
contract, when there is breach of a condition, or breach of a term with
serious consequences (also known as fundamental breach). In addition,
a breach of warranty that entails serious consequences may also lead to
discharge. The innocent party does not have to discharge the contract;
indeed, he has to elect whether to discharge the contract or affirm it.
In either case, he is entitled to claim damages. Where the contract is
discharged, the defaulting party is said to repudiate the contract by
his breach. Whether a breach is repudiatory is a question of fact to be
determined in each case.
7-604
If the breach occurs before the t ime of performance is due, the breach is
an anticipatory breach. For an anticipatory breach to be repudiatory, the
threatened non-performance must amount to a breach of a condition
of the contract or deprive the innocent party of substantially the whole
benefit of the contract. An anticipatory breach which is repudiatory in
nature also gives the innocent party the right to affirm the contract. In
practice, however, the innocent party in such a situation wou ld typica lly
discharge the contract and claim damages.
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7-605
The third way a contract may be discharged is by agreement.
A contract may expressly include a term which specifies circumstances
in which the contract would be discharged. Alternatively, a subsequent
agreement may be entered into which extinguishes the first contract.
Depending on its terms, this subsequent agreement may be in the form
of a mutual release, a un ilateral release, an accord and satisfaction, a
variation or a wa iver.
7-606
The fourth way a contract may be discharged is by frustration.
Frustration occurs when a superven ing event which is not the fault
of the parties changes the circumstances of the contract such
that they become radically different from what the parties originally
envisaged. Obviously, the more foreseeable the event, the more
unlikely it could render a contract frustrated. Some examples of
frustration include:
(a) where t he subject matter of the contract was destroyed accidentally;
(b) where an event which forms the basis of the contract was cancelled
or postponed due to no fault of the parties;
(c) where unexpected government interference prevents performance
of the contract; and
(d) where a person dies or becomes incapacitated prior to performing
fully his obligations in a contract for personal services.
7-607
To avoid the uncertainties which accompany frustration, many contracts
include force majeure clauses which stipu late the circumstances when
frustration is deemed to occur and the obligations of each party in such
situations. Where frustration does occur, the provisions of the FCA
wi ll apply. Essentially, this leg islation attempts to restore the parties
to their status quo before they entered into the contract.
7-608
Although there are different ways for a contract to be d ischarged,
in reality, most contracts are discharged by performance. Relatively
few are d ischarged by agreement or frustration. However, a
significant number are breached, resulting in disputes. In practice,
the more money is involved in a contract, the more it is likely to result
in a dispute.
··•·•·•···
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Prevented
performance
Acceptance
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Non-occurrence
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CONTRACT : REMEDIES
FOR BREACH OF CONTRACT
INTRODUCTION
8-101
In the preceding chapter, we examined the ways in which a
contract is discharged. Discharge of a contract by performance and
agreement present no subsequent problems; the contract is
discharged and that is that. Discharge of a contract by frustration
typical ly results in the application of the Frustrated Contracts Act
(FCA).
8-102
In the case of discharge by breach, we come to the concept of
remed ies. A breach implies wrongdoing by the defau lting party.
Remed ies are the cures which are available to the injured party to
rectify or compensate for the breach. Conceptually, remedies are
available not only in cases of breach of contract. For example, when
the provisions of the FCA apply to a frustrated contract, the parties
in a sense also enj oy certain "remedies" wh ich he lp them by
provid ing a cure. Similarly, when a contract is rescinded because of
misrepresentation, the rescission can also be viewed as a "remedy".
In this sense, rights and remed ies are like two sides of the same coin.
8-1 03
Nevertheless, this chapter will confine itself to remedies in cases of
breach of contract. We w ill examine two broad categories of
remedies. They are damages at common law as well as specific
performance and injunctions in equity. In addition, we wi ll briefly
Types of Remedies
·
for
Remedies
y; :~·j
Bre~ch of _CQ_n_!raci.J
Quantum
Meruit
(Contract &
Quasi-contract)
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SINGAPORE BUSINESS LAW
discuss Anton Piller orders, claims for quantum meruit and claims for
refunds of money paid. The chapter ends by explaining the concept
of limitation of actions which establishes a time limit within wh ich
these remedies can be pursued.
COMMON LAW REMEDY- DAMAGES
s-201
Damages is the principal common law remedy for a breach of contract.
It refers to the monetary compensation payable by the defaulting party
to the injured party whenever a breach occurs. Note that the general
position at common law is that the injured party will always have a right
to claim damages for loss resulting from breach of contract even if he
is not entitled to terminate the contract, or if entitled, he elects not to
terminate (see ~7-301 to ~7-309). The right to damages is therefore a
separate right from the right to discharge the contract ROC Concrete
pte Ltd v Sato Kogyo (S) Pte Ltd & Another Appeal (~7-301). "Damages"
(plural) must be distinguished from "damage" (singular), which are two
distinct but related concepts: ACB v Thomson Medical pte Ltd and others
(2017). Damage refers to the injury or loss experienced by a person.
Damages is the monetary sum ordered by a court to compensate such
damage.
Types of Damages
Unliquidated damages: This refers to unascertained damages.
When a plaintiff claims unliquidated damages, he is relying upon
the court to determine the amount of damages payable after
considering the circumstances and consequences of the breach.
Liquidated damages: This refers to pre-estimated damages
which have been agreed upon by the parties. In other words,
the amount is no longer in dispute; the only question is whether
the defendant is liable. Accordingly, the legal proceedings will
revolve around issues concerning liability, not quantum.
Nominal damages: This refers to a nominal sum (usually $2)
awarded to a plaintiff when there is a technical breach of contract
but the plaintiff suffers no loss. Awarding nominal damages is
tantamount to acknowledging that the plaintiff has proven his
case against the defendant but, understandably, it provides little
satisfaction to the plaintiff.
General & special damages: General damages are payable in
reference to damage which the law presumes w ill follow from
the wrong done. It does not have to be specifically pleaded by
a plaintiff. Special damages are not presumed by the law and
must be specifically pleaded and proven by a plaintiff. In a typical
claim for personal injury, general damages can be recovered for
pain and suffering while loss of earnings or medical costs incurred
will constitute special damages.
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8-202
Unlike other branches of the law, there is no provision in the law of
contract for damages to be ordered punitively. In tort, aggravated or
exemplary damages may be awarded to punish the defendant and
deter future w rongdoers; in contract, such damages are not awarded
at all . Instead of punishment, the general principle governing damages
for breach of contract is that damages is intended to place the plaintiff,
as far as money can do it, in the same position he wou ld be in if the
contract had been performed properly: Johnson v Agnew (1979) and
Harvester Baptist Church Ltd v Chua Moh Huat Dennis (1992). In most
instances, damages will be assessed as at the date of the breach;
however, the courts can f ix such other date as may be appropriate for
the assessment of damages.
8-202b
The general rule that punitive damages cannot be awarded for breach
of contract was reiterated by the Singapore Court of Appeal in PH
Hydraulics & Engineering Pte Ltd v Airtrust (Hong Kong) Ltd and another
appeal (2017). This wou ld apply even in cases of fraudulent conduct by
the defendant. The court emphasised that it would be anomalous or
even inappropriate for it to regulate the contracting parties' conduct
by awarding punitive damages; to do so would, in effect, amount to
an external standard of conduct establ ished by the court. The court
ought not to award damages that go beyond the bargain struck by the
parties on a voluntary basis. However, the court held that it wou ld not
rule out entirely the possibility that an exceptional case involving "a
particularly outrageous type of breach" may necessitate a departure
from the general rule.
8-203
As pointed out above, contract law damages is compensatory in nature.
Although the principle appears simple at f irst glance, it is actua lly rather
difficult to apply in real life. We examine four aspects of the application
of this principle: causation, remoteness, mit igation and assessment.
Aspects of Damages
- ·-
4 Aspect~ of Damag.e.s ~
Causation
8·204
The first aspect is causation. It is logical that a plaintiff should not be
entitled to recover damages for breach of contract if the breach did
not cause the loss suffered by the pla intiff. For damages to f low, the
loss must have been caused by the breach: lrawan Oarsono & Another
v Ong Soon Kiat (2002). The Singapore Court of Appea l in The Cherry
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(2003) has likened the applicable test to that used in tort (see 1118-328)
and has stated the position as fol lows:
"(A) claimant can recover damages for a breach of contract or in tort
where that breach (or wrong) was the "effective" or "dominant" cause
of the loss. The courts adopt a common sense approach in interpreting
the facts of each case to determine whether the breach was the cause
of the loss or merely gave the opportunity for the loss to be sustained.
Though different terms have been used ... "dominant and effective cause"
in contractual cases ...as opposed to what is termed the "but for" test
often used in tort cases to determine causation...the law of causation in
tort and contract is the same."
Monarch SS Co v Karlshamns Oljefabriker (AlB) (1949)
In April1939, the respondent bought 8,200 tons of soya beans
from the charterers of the vessel SS British Monarch owned by the
appellant. The soya beans were on the vessel steaming from
Manchuria to Europe. The vessel was due in Karlshamns, Sweden,
in July 1939 to discharge the soya beans. However, t he vessel was
delayed due to her unseaworthiness. War broke out between
Britain and Germany in September 1939. The British authorities
prohibited the ship from steaming to Karlshamns and the soya
beans had to be discharged in Glasgow, Scotland. The respondent
incurred losses as a resu lt. The House of Lords held that the
effective cause of the delay was the vessel's unseaworthiness and
hence it was the appellant's fau lt. The prohibition by the British
authorities was not the cause of the delay.
Remoteness
8-205
Once causation is established, the extent of loss can be quite
extensive. This is because the chain of causation can, theoretically,
be infinite. For example, suppose Sam, an owner of a shoe shop,
contracts with Bob to buy a shipment of shoes worth $100,000. For
some reason, Bob breaches the contract and fails to deliver the shoes.
Sam then sues Bob claiming loss of profit on the shoes, say $20,000.
But can Sam go further and claim that he would have used the $20,000
to buy certa in shares in the stockmarket which, because of their
appreciation in price, wou ld have yielded a further ga in of $50,000?
And what if Sam claims that he wou ld have used that additional gain
of $50,000 for another investment, and another, and yet another... ?
8-206
The concept of remoteness of damage prevents such a limitless
scenario from occurring. By saying that a loss is remote, the law
considers the loss, although caused by or a consequence of the
breach, to be beyond the scope of compensation by the defendant.
In other words, for damages to be recoverable, the damage must be
proximate and not remote: Korea Jonmyong Trading Co v Sea-shore
Transportation ?te Ltd & Another (2003).
Hadley v Baxendale (1854)
The operation of Hadley's mill was halted because of a broken
crankshaft. Hadley engaged Baxendale, a common carrier, to
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transport the crankshaft to the manufacturer in Greenwich so that
the manufacturer could produce a new crankshaft. Baxendale
delivered the crankshaft late, causing a delay in the mill
recommencing operations. Hadley sued for loss of profit caused
by the delay, as the mill remained closed until the new shaft was
delivered. On the facts, the court held that such loss suffered by
Hadley was not a usual loss arising naturally as it was unusual for
a mill not to have a spare shaft in case of such exigencies. As the
loss was unusual, before Baxendale would be liable, Hadley must
have actually told Baxendale that delivery of the new crankshaft
must not be delayed since he had none to spare. Hadley did not tell
Baxendale this. Thus the court held that Baxendale was not liable
for the loss of profit. Baron Alderson held that:
"Where two parties have made a contract which one of them
has broken, the damages which the other party ought to
receive in respect of such breach of contract should be such as
may fairly and reasonably be considered either arising naturally
(ie. according to the usual course of things from such breach of
contract itself) or such as may reasonably be supposed to have
been in the contemplation of both parties at the time they
made the contract as the probable resul t of the breach of it."
8·207
The rule in Hadley v Baxendale is usually analysed as having two limbs.
The first limb deals w ith what may be termed as norma l damage or loss
arising naturally: ROC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd & Another
Appeal (~7-301). The second limb deals with what may be termed as
abnorma l damage or loss arising from special circumstances: Singapore
Telecommunications Ltd v Starhub Cable Vision Ltd (2006). The continued
application of this "two-limb test" in Singapore has been affirmed by
the Court of Appea I in PPG Industries (Singapore) Pte Ltd v Compact Metal
Industries Ltd (2013).
Applying Hadley v Baxendale
8-208
At the risk of over-simplifying the law, we have extracted certain
points from subsequent cases to provide a summary of the points
to consider when applying the rule in Hadley v Baxendale.
The Rule in Hadley v Baxendale
Two Limbs:
t-
'-
First limb (normal loss): Such damage as
,.....
may fairly and reasonably be considered 1-arising naturally, ie, according to the usual
Icourse of things from the breach itself;
Second limb (abnormal loss) :Such damage
as may reasonably be supposed to have
been in the contemplation of both parties
at the time they made the contract.
U075837L/N1510069
Usual course of things:
normal business activity
Knowledge includes
imputed & actual knowledge
f-
Probability of occurrence:
serious possibility, quite likely etc
L-
Knowledge of nature of
damage : need not be exact
damage
f...-
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Usual Course of Things
8-209
Knowledge of the ordinary practices and exigencies of the plaintiff's
trade or business is considered to be part of the "usual course of
things" . Accordingly, loss arising from normal business activity will
usually fall within the f irst limb.
Koufos v C Czarnikow Ltd ("The Heron II") (1969)
Czarnikow, sugar merchants, chartered The Heron II from Koufos to
transport sugar to Basra h. The ship was delayed. During the delay,
the price of sugar in Basrah fell. Czarnikow sued Koufos for loss
of profit. Koufos argued that, to be liable, he must have actual
knowledge of the f luctuations in t he Basrah sugar market,
something w hich he did not possess. The House of Lords held that
Koufos must be imputed to know the ordinary pract ices and
exigencies of Czarnikow's business in Basrah - in particular, that
prices in a commodity market can f luctuate. Accordingly, Koufos
was liable under the fi rst limb of Hadley v Baxendale.
Imputed and Actual Knowledge
8-210
Both t he first limb and the second limb imply that the defaulting
party has some knowledge of the likely loss suffered by the plaintiff.
This knowledge includes imputed knowledge and actual knowledge.
Imputed knowledge is knowledge presumed to be known by the
parties and is the subject of the first limb. Everyone, as a reasonable
person, is deemed to know what is the "usual course of things".
Actual knowledge is knowledge actually possessed by the parties and
is the subject of the second limb. In Hadley v Baxendale (118-206) itself,
the defendant was not liable for the lost profits resulting from late
delivery of the crankshaft as he did not have actual knowledge that
late delivery on his part wou ld cause the mill to stop work. Similarly,
in Out of the Box Pte Ltd v Wanin Industries Pte Ltd (2013), the Singapore
Court of Appea l held that the appellant cou ld only claim part of the
advertising expenses it incurred in a failed venture resu lting from the
respondent's breach of contract, as t he latter had no actual knowledge
of t he unusually extensive and exorbitant advertising costs incurred by
the appellant in the venture. It follows that a person who has actua l
knowledge of special circumstances wi ll be liable for the higher loss
wh ich may arise if the breach occurred in those circumstances.
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949)
The plaint iff purchased a new boiler from Newman Industries for
their laundry business. Delivery was to be made on 5 June.
Newman Industries did not deliver the boiler until November.
The plaintiff sued for loss of profit including substantial profits
relating to a dyeing contract with the Ministry of Supply which
they could have obtained had the boiler been delivered on time.
The English Court of Appeal held that, from their existing business
re lationship, Newman Industries knew the plaintiff undertook
dyeing activities. Accordingly, they are presumed to know that
the plaintiff would suffer loss of profit if there was any delay.
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However, in the absence of actual knowledge concerning the
Ministry of Supply contract, Newman Industries would not be
liable for the substantial profits foregone because of the failure
to obtain that contract.
Probability of Occurrence
8·211
Knowledge of the plaintiff's likely damage raises the question as to
the defendant's awareness of the probability of such loss occurring.
According to Victoria Laundry v Newman Industries (~8-210), for the rule
in Hadleyv Baxendale to apply, the defendant must know that the likely
loss is a "serious possibility" or a "real danger". According to Koufos
v C Czarnikow Ltd (~8-209), the standard of likelihood to be applied
is whether the damage is "not unlikely", "quite likely" or "liable to
result". In Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and
Another (2008), the Singapore Court of Appeal observed that the correct
terminology for remoteness of damage in contract, as seen in Hadley
v Baxendale, is "reasonable contemplation", rather than "reasonable
foreseeability" as used in the law of tort. The court stated:
"The rule in Hadley is also important in distinguishing between the
rules and principles relating to remoteness in the law of contract
and those in the law of tort, respectively... Indeed, if the rule
on remoteness in contract were reduced to one of reasonable
foreseeabi lity (which is the test in tort) only, there would be a
confusing conflation between contract and tort."
Type of Damage
8·212
Knowledge of the plaintiff's likely damage also raises the question
as to the type of damage of which the defendant is aware. The
defendant need not have in mind the exact damage actually suffered
as long as he is aware of the type or kind of damage in question: Chuan
Hup Marine Ltd v Sembawang Engineering Pte Ltd (1995).
Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd (1978)
The defendant installed a storage hopper for the plaintiff pig
farmer. The hopper was used to store pig-nuts for the pigs. In
breach of its contract, the defendant failed to supply a functioning
ventilated top with the hopper so as to ventilate the nuts. As a
result, t he pig-nuts became mouldy. 254 pigs which ate the mouldy
pig-nuts died. The English Court of Appeal held that the loss fell
within the second limb because it was within the reasonab le
contemplation of the parties that there was a serious possibility
that t he pigs might suffer as a result of the defendant's breach. It
was sufficient if the parties could contemplate the type or kind of
damage involved (ie, loss due to pigs being adversely affected); it
was not necessary that the exact nature or amount of damage be
contemplated.
Jackson & Another v Royal Bank of Scotland (2005)
The plaintiffs were partners in a business that imported goods f rom
Thailand. They supplied their principal customer, EB, with goods
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which were paid for by means of transferable letters of credit (LC)
issued by the defendant bank. Everything was going well until the
bank mistakenly sent confidential documents to EB that revea led
the exorbitant mark-up charged by the plaintiffs on the goods. As
a result, EB terminated the business re lationship with the plaintiffs.
The plaintiffs sued the bank for breach of confidentiality under
the contract and claimed damages for the loss of opportunity to
earn further profits from their business relationship with EB. The
trial judge held in favour of the plaintiffs and ordered the bank
to compensate them based on a contemplated four-year business
relationship between t he plaintiffs and EB. However, the Court
of Appeal reduced it to one year. On further appeal, the House
of Lords restored the trial judge's award. The House of Lords
reasoned that there was a significant chance the plaintiffs' business
relationship would have continued for a further four years. As the
LC did not limit the bank's liability to any particular period, setting
an arbitrary cut-off point of one year was incorrect in principle. Any
limit to be imposed on quantum would depend only on whether
the loss would have become so speculative after a certain time as
to not sound in damages. Once the test of remoteness in Hadley v
Baxendale is satisfied, the amount of damages to be awarded must
not be artificially limited if the contract itself did not provide for it.
In other words, as long as the kind of damage is contemplated by
the parties, the extent of it need not be.
Mitigation
8-213
Mitigation simply means that a plaintiff cannot recover loss which
he could have avoided. In other words, he is obliged to minimise
his loss. If he fails to do so, the amount of damages he can recover
will be reduced by the amount which he could have saved if he
had mitigated his loss. The principle of mitigation requires the
plaintiff to take all reasonable steps available to him to mitigate his
loss. In British Westinghouse Electric & Manufacturing Co Ltd v Underground
Electric Railways Co of London (1912), Viscount Haldane LC said:
"The fundamenta l basis [of damages) is thus compensation for
pecuniary loss naturally flowing from the breach; but this first
principle is qualified by a second, which imposes on a plaintiff the
duty of taking all reasonable steps to mitigate the loss consequent
on the breach, and debars him from claiming any part of the
damage which is due to his neglect to take such steps."
8-214
The mitigation principle as enunciated in British Westinghouse Electric
is accepted in Singapore: Chua Keng Mong v Hong Realty Pte
Ltd (1994). The burden of proof is upon the defendant to
show that a plaintiff has failed to take reasonab le steps to
mitigate his loss: Ei-Nets Ltd & Another v Yeo Nai Meng (2004). What
amounts to reasonable steps depends on the circumstances of
each case. For example, a wrongfu lly d ismissed employee shou ld
try to obtain suitable alternative emp loyment; if not, he is
entitled to damages less the amount he could have obtained from
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such alternative employment Brace v Calder (1895). At times, a
plaintiff who attempts to ta ke reasonable steps to mitigate his
loss may inadvertently increase his loss. In th is situation, he can
still recover the additiona l loss: Melachrino v Nickol/ & Knight (1920). In
particular, the Singapore Court of Appea l held in PT Master Mandiri v
Yamazaki Construction (S) Pte Ltd (2001) that, as long as a plaintiff acted
reasonably, he would not be barred from recovering his losses "simply
on the ground that, with the benefit of hindsight, he could have acted
differently."
8·215
A somewhat unusual problem arises when the ru le of mitigation is
appl ied t o an anticipat ory breach. An anticipatory breach gives the
injured party the right either to affirm the contract or accept the
repudiat ion and discharge it (~7-301) . Generally, the need to mitigate
on ly arises after the contract has been discharged fol lowing the
breach of contract. If t he injured pa rty chooses to discharge the
contract and claim damages, the mitigation rule wi ll app ly as
expect ed and he will be required to mitigate his loss. The problem
arises if he chooses to affirm the contract. In Singapore, the
duty to m itigate does not arise if the inj ured party decides to
affirm the contract: MP-Bilt Pte Ltd v Oey Widarto (1999). This
raises the possibil ity that, in the face of an anticipatory breach,
a plaintiff may be entitled to affirm the contract and incur (and
perhaps inflate) expenses, performing obl igations wh ich are not
wanted by the defaulting party.
White & Carter (Councils) Ltd v McGregor (1962)
White & Carter provided advertising space on litter bins. McGregor
entered into a contract to utilise advertising space for three years
on these bins. On the same day after the contract was entered
into, McGregor repudiated the contract. White & Carter elected to
affirm the contract despite the anticipatory breach. It prepared the
advertisements and subsequently placed them on the bins for the
next three years. No attempt was made to mitigate its loss by finding
alternative advertisers. It then sued McGregor for the full contract
price. The House of Lords held that it was entitled to succeed.
8-216
The ruling in White & Carter v McGregor wou ld appear to run
contrary to the princip le of mitigation. It is important to note,
however, that the decision in White & Carter v McGregor was
qua lified . Lord Reid said that Wh ite & Carter would not be
entitled to affirm the contract if it had "no legitimate interest,
financial or otherwise, in performing the contract rather than
claiming damages". Subsequently, this qualification was approved
in C/ea Shipping Corporation v Bulk Oil International Ltd, "The Alaskan
Trader" (No 2) (1984). The current position, therefore, is that, because of
the principle of mitigation, the right to affirm a contract in the face of
an anticipatory breach is limited. Affirmation is only available in cases
where the plaintiff has some legitimate interest to protect which cannot
be compensated merely through the payment of damages.
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Assessment
8-217
Up to this point, we have focused on the principles to be applied in
deciding whether and in what circumstances a plaintiff is entitled
to damages. The next stage is to assess these damages. Several
issues arise.
General Principles
8-218
As stated earlier, the basic principle of assessment is that the injured
party is to be placed in the same f inancial position he wou ld be in
if the contract had been properly performed: Alvin Nicholas Nathan
v Raffles Assets (Singapore) Pte Ltd (2016). The award of damages
is calculated on the benefit which would accrue to the injured party
and not on the cost of performing the obligation by the defaulting
party. The Singapore High Court had commented further on the
general principles to be followed in the assessment of damages: AS
Nordlandsbanken v Nederkoorn (2001). In that case, Selvam J stated:
" It is fitting now to state the rule of least benef it to the plaintiff...
It is also called the rule of minimum legal obligation. The basis
of the rule is fairness to the contract breaker and to ameliorate
harshness. In general, civil law, unlike criminal law, does not set
out to punish the wrong -doer. It seeks to compensate the wrong
on a just and fair basis. The plaintiff is not entitled to a windfall. ..
There is then the principle of proportionality. Damages that are
wholly disproportionate to the loss or damage will not be awarded ...
Litigation must not be turned into a lottery. Where therefore the
contract-breaker has a choice of two methods of performance,
damages will be awarded on the basis of minimum legal obligation
-that is to say the method least onerous to the defendant and least
beneficial to the plaintiff will be preferred."
Issues in Assessing Damages
Assessment of Damages
General Principle:
To put the injured party
in the position he would
-
Classification of Loss :
expectation loss &
reliance loss
Speculative losses
Non·pecuniary losses
---i Problematic Cases
be in if the contract had _,liquidated Damages
Clause
been performed
Taxation
properly
-1
-!Interest
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203
Expectation Loss and Reliance Loss
8-219
The damages awarded to an injured party are sometimes classified
under two headings: damages for loss of profit (or loss of a bargain)
and damages for wasted expenditure.1 Loss of profit is often called
"expectation loss" because this loss is the amount which the injured
party would have expected to gain had the contract been performed
properly. Wasted expenditure is often called "reliance loss". This loss
represents the expenses incurred by the injured party who, relying upon
the contract, prepares to perform his obligations, incurring expenses
which are rendered wasted because of the breach: Aero-Gate Pte Ltd v
Engen Marine Engineering Pte Ltd (2013).
Anglia Television Ltd v Reed (1970)
Anglia Television created a television play and engaged Reed to
act the lead role. After significant expenses had been incurred,
Reed repudiated his contract. Anglia Television attempted to save
the play but failed to find an alternative actor. The play was then
abandoned. The court held t hat Anglia Television was entitled to
recover damages of £2,700 representing its wasted expenditure,
regardless of whether the expenditure was incurred before or after
the contract was entered into with Reed.
8-220
Where the injured party is not able to calculate his expectation lossas in Anglia Television - he may frame his claim solely as rel iance loss.
If he can calcu late both his rel iance loss and expectation loss, he
may claim both expectation loss and reliance loss as long as the
expectat ion loss is calculated as a net figure exclusive of expenses.
If the expectation loss is calculated on a gross basis inclusive of
expenses, the injured party cannot also claim reliance loss as this
wi ll resu lt in double-recovery. He then has to choose bet ween
expectation loss (gross basis) and reliance loss. It shou ld therefore be
noted that the Singapore Court of Appeal in Alvin Nicholas Nathan v
Raffles Assets (Singapore) Pte Ltd (2016) stated that claims for expectation
loss and reliance loss are generally alternative claims. The court's
justification was that "if a court awards a claimant both expectation
and reliance losses following a breach of contract, the claimant would
have been put in an even bett er position than he would have been in
if the contract had been wholly performed."
Cullinane v British "Rema" Manufacturing Co Ltd (1954)
The respondent sold a clay pulverizing plant to Cullinane.
The plant was warranted to pulverize clay at the rate of six tons
per hour. It failed to perform according to the warranty.
Cullinane sought damages for the difference between the cost
of the plant and its residual value (capital cost) as well as loss of
profits for lost production. The English Court of Appeal (Morris U
dissenting) held that he could claim either but not both, as to claim
both would, on the facts of this case, amount to double-recovery.
1.
The classification of damages as expectation loss or reliance loss does not determine the
issue as to whether damages are recoverable in the first place. Indeed, in some cases, it is
not possible to classify the damages awarded under either category. The concepts of
expectation loss and reliance loss are useful to understand the nature of damages, but
do not amount to principles of law.
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8-221
In Hong Fok Realty Pte Ltd v Bima Investment Pte Ltd (1993), where a
contract for the sale of a warehouse un it was repud iated and the
purchaser sought damages, the Singapore Court of Appeal made
the following comments:
"The principles applicable to damages recoverable for breach of
a contract for t he sale of land are no different to those applicable
to breach of contract in generaL The starting point is that the
plaintiff is entitled to be placed, so far as money can do it, in the
same position as he would have been in had the contract been
performed. This is qualified by the ru les on remoteness as first
enunciated by Alderson B in Hadley v Baxendale and refined in
subsequent cases ... [S)o far as wasted expenditures are concerned,
the position depends on how the [plaintiff) frames his claim for
damages. If he sues for loss of bargain, the damages he recovers
are the difference between the market value of t he property at the
date of breach and the contract price. A [plaintiff) would frame
his claim in this way where he can establish that the market value
is greater than the contract price... On the other hand, if the
[plaintiff) does not sue for loss of bargain, he can claim all wasted
expenditures provided they are within the contemplation of the
parties."
Difficulty in Assessment
8-222
The fact that damages are difficult to assess shou ld not prevent the
injured party from obtain ing them. Hence, the Singapore High Court
has stated that difficulty in assessing damages would not by itself be
a reason to award nominal damages: JES International Holdings Ltd v
Yang Shushan (2016). Difficulties in assessing damages often arise in
cases where the loss is to some degree speculative in nature. In such a
situation, the court may take into account the probabilities involved
and award damages accordingly: Jackson & Another v Royal Bank of
Scotland (118-212). Interesting ly, Lai J in Asia Hate/Investments Ltd v
Starwood Asia Pacific Management Pte Ltd & Another (2007) observed that
the assessment of damages is "an art, never an exact science".
8-222b
2.
Thus, where a contract to purchase all the shares in a land-owning
company was repudiated, the Singapore Court of Appeal in Straits
Engineering Contracting Pte Ltd v Merteks Pte Ltd (1996)- following Chaplin
v Hicks (1911)- awarded $250,000 damages for the loss of the chance
to make a profit.2 The same court has also deliberated at length on
For an analysis of the Straits Engineering case, see: Kuok C S L, "Loss of Chance in Contract:
Straits Engineering Contracting Pte Ltd v Merteks Pte Ltd" 17 Singapore Law Review (1996) 322. On
causation issues for loss of a chance and where the Asia Hotel case was discussed, see: Lee D,
"Proving Causation in a Claim for Loss of Chance in Contract" 17 Singapore Academy of Law
Journal (2005) 426.
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the requirements for proving loss of a chance in Asia Hate/Investments
Ltd v Starwood Asia Pacific Management Pte Ltd & Another (2005). In MK
Distripark Pte Ltd v Pedder Warehousing & Logistics (S) Pte Ltd (2013), the
court subsequently stated that it is necessary to show whether the
breach caused the loss of a chance and whether the chance lost was a
rea l and substantia l one. In that regard, "a real or substantial chance
could even be rated at or below a 50% chance. However, where the
chance is rated at a point so low as to be speculative, the loss of a chance
claim would be precluded."
Chaplin v Hicks (1911)
Chaplin, an actress, agreed with Hicks, an actor and theatrical manager, to be interviewed by him. Hicks promised he would interview
her together with 49 other actresses, after which he would choose
12 to whom he would give employment. Hicks later breached the
contract by failing to give Chaplin a chance to attend the interview.
The English Court of Appeal held t hat, although there was no certainty t hat Chaplin would be among the 12 chosen for employment,
she should still be allowed t he £100 damages awarded by the jury.
Raffles Town Club Pte Ltd v Tan Chin Seng & Others (2005)
In 2003, the Singapore Court of Appeal held that the defendant,
RTC, had breached its contractual obligation to provide its members
with a premier club (see 116-404). At the trial to assess damages, the
trial judge awarded $1,000 in damages to each plaintiff member for
loss of amenity, accessibility and enjoyment but declined to award
damages for their pecuniary loss based on diminution in value of
the RTC membership. The parties appealed. The Court of Appeal
acknowledged t hat it was very difficult to ascertain the value of a RTC
membership with 5,000 members (as promised by RTC) and one with
19,000 members (the eventual number). This was compounded by the
poor economic conditions at the time and the reliability of evidence
such as sales data from comparable clubs. Nevertheless, the court
event ually awarded each plaintiff $3,000 for the diminution in value
of the membership. The amount was arrived at after taking into account the likely market value of the RTC membership at the relevant
times and the extent of t he depreciation. Given that the decline in
price would also have been due to t he general weakened market condition, as well as the demand for club memberships over the relevant
period, once these were established, it would be fair to assume that
the difference represented the decline due to the defendant's breach.
However, the court denied compensation for the plaintiffs' non-pecuniary losses as t hat would result in double compensation.
Non-pecuniary Losses
8-223
The courts are generally reluctant to award damages for non-pecuniary
(non-monetary) loss. This type of loss covers things such as hurt feelings,
anxiety, or loss of reputation arising from breach of contract.
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Haron bin Mundir v Singapore Amateur Athletic Association (1992)
The plaintiff, Singapore's champion athlete in the 100, 200 and
400 metre track events was sent to Japan on 19 April1989 by the
defendant for three months of intensive training to prepare for
the August 1989 South East Asian Games in Kuala Lumpur. Due to
problems of communication and organisation - which, among other
things, led to hafaf food being unavailable for the plaintiff- he
returned to Singapore on 25 April1989. The defendant undertook
an inquiry into his unscheduled return and suspended the plaintiff
for 18 months from June 1989. The plaintiff sued. The court held
that there was an implied contract between the plaintiff and the
defendant when the plaintiff accepted the defendant's offer to go
to Japan for training. However, the court found the inquiry was
flawed because it was not conducted in accordance with the rules
of natural justice. The suspension order was therefore void. The
court also awarded the plaintiff $1,500 damages, being the amount
he would have received from the defendant if he had won medals
at the SEA Games. The plaintiff's claim for damages for emotional
damage, mental anguish and humiliation was rejected. In the
Singapore High Court, Selvam JC stated:
" ...as a general rule damages for frustration, injured fee ling,
mental distress, humiliation and loss of reputation will not as a
rule be awarded for breach of contract... In recent times one ...
exception has been established where the contract is to provide
comfort, peace of mind or freedom from distress and it is
breached: see Jarvis v Swan Tours Ltd. .. "
8-224
However, over the years, there has been some loosen ing of this
approach. In certain ci rcumstances, non-pecun iary losses may be
compensated. One example is where the plaintiff suffers substantial
physical inconven ience: Bailey v Bullock (1950). Another example is
where a contract, whose very aim is to provide enjoyment or security,
is breached, giving rise to disappointment or distress: Jarvis v Swan
Tours Ltd (1973). Damages for "loss of amenit y" were also ordered in
the wel l-known English case of Ruxley Electronics and Construction Ltd
v Forsyth (1996) when a builder bu ilt a swimming pool 6 feet deep
instead of the specified 7 feet 6 inches. Later, in Farley v Skinner (2001),
the House of Lords loosened the rule further by stating t hat where an
important (not necessarily the sole) object of the contract is to give
pleasure, relaxation or peace of mind, damages are recoverable if the
contract is breached and mental distress results.
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Jarvis v Swan Tours Ltd (1973)
Jarvis contracted with Swan Tours to go on a Swiss holiday. The
holiday package promised a welcome party, candlelight dinner,
fondue party, yodeller evening and farewell party. The holiday
turned out rather disastrously with the events being quite inferior in
quality compared to the promises given. The English Court of Appeal
held t hat Jarvis was entitled to damages comprising the cost of the
holiday plus £60 for the disappointment he suffered.
Farley v Skinner (2001)
Farley was interested to buy a country property for his retirement
to enjoy peace and tranquillity. He engaged Skinner, a surveyor, to
inspect the property, specifically instructing him to check for aircraft
noise, since Gatwick International Airport was nearby. Skinner
reported that it was unlikely that the property would be so affected.
Farley relied on this report, bought the property and spent money
on renovations. After moving in, he discovered that the property
was indeed affected by aircraft noise. He sued Skinner for damages
for breach of his contractual duty of care, including compensation
for non-pecuniary loss. The House of Lords held that damages for
mental distress resulting from breach of contract could be awarded
in exceptional cases like this one: where a major or important object
of the contract had been to give pleasure, re laxation and peace
of mind, and where physical inconvenience and discomfort had
been caused by the breach. It is not necessary that the defendant
guarantees the achievement of such an object- breach of his
contractual duty of care would suffice.
8-224b In Singapore, cases where damages have been awarded for non-
pecuniary losses have generally been few and restrained. Local cases
where the plaintiff was awarded damages for loss of amenity include:
Wee Poh Hueh Florence v Performance Motors Ltd (2004) (loss of amenity
due to loss of prestige in driving an inferior car) and Sonny Yap Boon
Keng v Pacific Prince International Pte Ltd (2009) (loss of amenity arising
from shortfall in floor area of bedrooms of a property, despite no
evidence that the value of the property or the value of the defendant
builder's work had been adversely affected). Notwithstanding the
genera l reluctance to award damages for non-pecuniary losses, the
Singapore Court of Appeal in ACB v Thomson Medical Pte Ltd and others
(2017) recognised, for the very first time, the loss of" genetic affinity"
as a head of loss that would al low a plaintiff to recover damages for
non-pecuniary losses.
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.Jiiit.
1:::1
Blood is Thicker Than Water
ACB v Thomson Medical pte Ltd and others (2017)
The plaintiff was a Singaporean woman of Chinese descent married to a German
of Caucasian descent. The first defendant, Thomson Medical Pte Ltd, was a private
hospital. The second defendant, Thomson Fertility Centre Pte Ltd, was a fertility
clinic wholly owned by the first defendant. The third and fourth defendants were
embryologists employed by the second defendant. The plaintiff underwent an invitro fertilisation ("IVF") procedure and delivered a daughter. The baby's skin colour
was very different from that of the plaintiff and her husband. Subsequently. it was
discovered that the plaintiffs ovum had actually been fertilised with sperm from an
unknown third party, instead of sperm from her husband. The plaintiff sued the
defendants for negligence. The plaintiff also sued the second defendant for breach
of contract in the alternative. The parties' contract included a promise to fertilise the
plaintiffs ovum with her husband's sperm. The plaintiff sought damages for, inter alia,
the full costs of raising the baby ("upkeep costs").
The Singapore High Court held that the plaintiff was not entitled in law to claim
damages for the upkeep costs in both contract and tort. Were the plaintiff to succeed
in her upkeep claim, every cent spent in the upbringing of the baby would remind her
that it was money from a compensation for a mistake. The baby should never have to
grow up thinking that her very existence was a mistake. Furthermore, the obligation
to maintain one's child is an obligation at the heart of parenthood and cannot be a
legally recognised loss to be compensated. To recognise the claim for upkeep costs
would be fundamentally inconsistent with the nature of the parent-child relationship
and would place the plaintiff in a position where her personal interests as a litigant
would conflict with her duties as a parent. Accordingly, in view of these policy
considerations, the court rejected the plaintiffs claim for upkeep costs. The court,
however, laid out possible contractual exceptions whereby the recovery of upkeep
costs might be permitted: firstly, where there is a contractual warranty guaranteeing
a specific outcome, for example, that the child would contain the genetic material of
both parents; and, secondly, where the contract specifically allows for the recovery of
upkeep costs, for example in the form of a liquidated damages clause providing for an
agreed fixed sum of damages.
On appeal, the Court of Appeal affirmed the High Court's ruling but further held
that it was prepared to award damages for loss of "genetic affinity" in both tort and
contract. In recognising the loss of "genetic affinity" as a real non-pecuniary loss
suffered by the plaintiff, the court observed that:
"[i)t is, at its core, a desire for identity bounded in consanguinity. The ordinary
human experience is that parents and children are bound by ties of blood and
share physical traits. This fact of biological experience - heredity- carries deep
socio-cultural significance. For many, the emotional bond between parent and
child is forged in part through a sense of common ancestry and a recognition of
commonalities in appearance, temperament, and physical appearance."
The court, however. observed that there were practical difficulties with the assessment
of its quantum. It noted that there were "no comparable precedents (whether local
or foreign) against which to draw appropriate circumstances." With regard to the
quantum of damages, the court eventually decided to award a conventional sum by
benchmarking t he numerical value against the upkeep costs. The court quantified the
loss of "genetic affinity" as 30% of the full cost of raising the baby, on the basis that
the amount was "just, equitable and proportionate" on the facts of the case.
U075837L/N1510069
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Contract: Remedies for Breach of Contract
CHAPTER 8
Liquidated Damages and Penalties
8·225
Foreseeing the possibility of a breach in certain circumstances, parties to
a contract may agree on the inclusion of a clause specifying the amount
of damages to be paid by the defaulting party to the injured party if
such breach occurs. This clause is called a " liquidated damages clause"
because the damages are liquidated (quantified). Thus, a liquidated
damages clause "is remedial, in the sense that it predetermines the
damages to be paid in the event of breach": Hon Chin Kong v Yip Fook
Mun and another (2017).
8-226
The law governing the enforceability of liquidated damages clauses
in Singapore has followed, for a long time, t he English position taken
in Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd (1915).
Generally, the courts will enforce a liquidated damages clause as long as
it is a genuine pre-estimate of loss. Such a clause will not be enforced
if, in the view of the court, it amounts to a penalty imposed in terrorem
(to cause fear to the other party). This is consistent with the general
principle that damages under contract law are to be compensatory
and not punitive in nature.
Enforceability of LDCs
·, ~~ uquiC!aieCi _ -~
:__ Damages~qa~s.e_
Penalty
Generally not
enforceable
Higher than
actua I loss :
LDC not enforceable.
Can claim only
actual loss
8-22Gb
Lower than
actua I loss :
Can claim either
actual loss or
as per LDC
Genuine
Pre-estimate of loss
Generally enforceable
r
I
Higher than
actual loss :
LDC enforceable
Lower than
actual loss :
LDC enforceable
Whether a liquidated damages clause is a genuine pre-estimate of
loss or a pena lty is largely a matter of construction. The guideli nes for
construing such clauses under Dunlop Pneumatic include the following:
(a)
(b)
(c)
if the liquidated damages are extravagant and unconscionable
in comparison with the greatest conceivable loss, then it is likely
to be a penalty;
if a single lump sum is payable on the occurrence of one or more
breaches, some of which are serious and others trifling, then it
is likely to be a penalty; and
the description of the clause as a "pena lty" or "liquidated
damages clause" is relevant but not conclusive.
U075837L/N1510069
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SINGAPORE BUSINESS LAW
The Singapore Court of Appeal in Xia Zhengyan v Geng Changqing (2015)
affirmed the applicability of the above guidelines in determining
whether a liquidated damages clause is enforceable. 3
8·227
It should be noted that because a liqu idated damages clause is
determined w ith a view to breach, it would be triggered only in the
event of a breach of certain obligations in the contract. As such, in
Singapore, courts would look at the nature of the obligation in question
before applying the guidelines under Dunlop Pneumatic. Generally, ifthe
obligation to pay liquidated damages under the clause is a consequence
of an event of breach, then the test under Dunlop Pneumatic would
apply to the clause. For example, the Singapore High Court held t hat
a clause providing for an increase of the settlement sum along with
accrued interest in the event of the defendant's non-payment of the
sum was subject to the test under Dunlop Pneumatic: Allplus Holdings Pte
Ltd & Ors v Phoon Wui Nyen (Pan Weiyuan) (2016). In contrast, in iTronic
Holdings Pte Ltd v Tan Swee Leon and another suit (20 16), the court held
that the failure to list by the stipulated date was not an event of breach;
hence, the obligation to pay the compensation sums stipu lated in the
liquidated damages clause was not subject to the test under Dunlop
Pneumatic.
8-228
3.
Where the liquidated damages clause is found in a standard form
contract prescribed by statute, there is an inference that such a clause
will be va lid. It is inconceivable that, in these circumstances, the
leg islature wi ll include in the prescribed contract a liquidated damages
clause wh ich could be struck down as a penalty: Golden Bay Realty Pte
Ltd v Orchard Twelve Investments Pte Ltd (1991 ). The Singapore Court of
Appeal held that, where the liquidated damages clause is prescribed
by statute, the injured party can only claim the amount stipulated in
the clause; he is not allowed to elect to claim damages at common
law nor to recover more than what he is entitled to under the clause:
Harris Hakim v Allgreen Properties Ltd (2001 ).
Two recent English cases, Cavendish Square Holding BVv Makdessi and ParkingEye v Beavis (2016) (collectively,
Cavendish) have, however, refined the law governing penalty clauses under Dunlop Pneumatic. In Cavendish,
the UK Supreme Court put forward a reformu lation of the rule: a clause will be a penalty if it relates to
a secondary obligation which is out of proportion to the legitimate interest sought to be safeguarded
by the provision. A secondary obligation is one that arises on the breach of a party's primary obligation
under the contract. For example, a primary obligation may be to deliver certain goods by a specific date,
and the secondary obligation is payment of a monetary amount upon breach of the primary obligation.
The reformu lation under Cavendish has yet to be considered by the Singapore Court of Appeal although
it has been discussed by the Singapore High Court in a few cases. For now, in Singapore, the Cavendish
reformulation is not part of the law; hence, the test under Dunlop Pneumatic continues to determine
whether the liquidated damages clause at issue is a penalty: Han Chin Kong v Yip Fook Mun and another
(2017). For a further discussion of the impact of Cavendish on Singapore law, see Goh Y H & Yip M, "English
Reformulation ofthe Penalty Rule· Relevant in Singapore?" (2017) 29 Singapore Academy of Law Journal
257.
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CHAPTER 8
8-229
211
If the liquidated damages clause is construed as a penalty and the
amount stipulated is higher than the actua l loss suffered, at best
the injured party could obtain damages for the actual loss suffered.
However, if the liquidated damages clause is construed as a penalty
but the amount is in fact less than the actual loss suffered, then the
inj ured party has a choice. He can sue on the clause and recover no
more than the amount stipulated or, he may sue for breach of contract
generally, avoiding the clause, and seek to recover damages in full.
Bulsing Ltd v loon Seng & Co (1972)
The defendant contracted to buy from the plaintiff 50,000 metric
tons of urea at US$69 per metric ton. The defendant was to open
letters of credit to pay for the shipment. The contract contained a
liquidated damages clause: " If the buyer fails to establish the UC
as mentioned above and if the seller fai ls to deliver the goods in
the above mentioned condition, the defaulting party is liable to pay
2 o/o of the amount." The defendant failed to open the UCs. The
plaintiff suffered losses of S$549,000. Under the liquidated
damages clause, the plaintiff could only claim S$207,000. However,
in the Singapore High Court, Chua J held that the clause was a
penalty. Given that the penalty was lower than the actual loss, the
plaintiff had a choice to either claim under the penalty or sue for
breach of contract and claim damages in full.
Taxation
8-230
The general rule is that the amount of damages awarded should
take into account the plaintiff's tax position. The court should
deduct an amount representing the plaintiff's tax liabil ity if the
sum had been paid properly under the contract. This is consistent
with the basic principle that the plaintiff shou ld not recover more
than his actual loss. In other words, the amount of damages payable
to the plaintiff should be net of tax: Teo Sing Keng v Sim Ban Kiat
(1994).
Interest
8-231
The old common law rule is that interest need not be included in an
award for damages involving a debt. Th is rule is now substantially
qualified. Interest (simple or compound) may be included in an award
for damages in the following situations:
(a)
if the contract provided for the payment of interest. This is
the norm for all contracts involving loans and often appears
in other commercia l contracts; .
(b)
if the court finds that the parties have implied ly agreed to
pay interest under the contract; or
(c)
if the court exercises its discretion under paragraph 6 of the
First Schedule, Supreme Court of Judicature Act.
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EQUITABLE REMEDIES
8-301
So far we have considered only the common law remedy of damages.
The Courts of Chancery (~1-307), running in parallel with the common
law courts, developed their own remedies. However, equity developed
the general rule that the party seeking equitable remedies must
come "with clean hands". Th is, however, does not mean that the
plaintiff in equity has to be totally blameless. The question is "whether
in all the circumstances it would be a travesty of justice to assist the
plaintiff given his blameworthy participation or role in the transaction":
Lim Siew Bee v Lim Boh Chuan and another (2014).
8-302
These equitable remedies developed primarily because the Courts of
Chancery saw that, in certain cases, monetary compensation in the
form of damages is not an adequate remedy. Two equitable
remed ies are particularly important: specific performance and
injunction. For many years, the equitab le remedies were on ly
avai lable from the equity courts. A plaintiff in a common law court
could not seek an equitable remedy. In England, this sit uation was
changed in 1873 when the Engl ish Parl iament enacted the Supreme
Court of Judicature Act. As a result of that statute, both common
law and equitable remedies became available in all English courts.
8-303
In Singapore, both common law and equitable remedies are available
in the courts. In particular, paragraph 14 of the First Schedule to the
Supreme Court of Judicature Act, in effect provides that the High Court
has: "power to grant all reliefs and remedies at law and in equity,
includ ing damages in addition to, or in substitution for, an injunction
or specific performance." These powers are also extended to the District
and Magistrates' Court vias 31 (a) and s 52 State Courts Act, respectively.
Specific Performance
8-304
Specific performance is an order of the court requiring a party to
perform his obligations as specified in the contract. The rationale
for specific performance is that, in certain cases, damages are not an
adequate remedy. Suppose a gallery contracted to buy a painting by
Pablo Picasso and the seller defaulted and refused to complete the
sa le. Because the subject matter is a unique painting, the buyer will
probably not be satisfied with monetary compensation. Such a case
calls for the remedy of specific performance: Fa/eke v Gray (1859).
8-304b Other instances where orders for specific performance may be given
include cases involving contracts to buy company shares or debentures
and contracts for the sale of land (on the rationa le that land is unique
since no plot of land on earth is identical with another- the sui generis
rationale). Thus, the Singapore High Court in Coastland Properties pte
Ltd v Lin Geok Choo (200 1) stated as follows:
U075837L/N1510069
Contract: Remedies for Breach of Contract
CHAPTER 8
213
"Specific performance is an equitable and discretionary remedy. It is
not a usual remedy. Damages is the usual remedy for breach of contract
because it is regarded as the most convenient and readily calculable
means to measure the innocent party's loss arising from a breach of
contract .... The courts have long maintained the sensible position
that specific performance would not be granted unless the order can
be enforced, and provided that the subject matter of the contract is
a thing of intrinsic value by reason of which damages may not be a
sufficient recompense... Nonetheless, it does not follow that damages
can never be an adequate remedy, or are incalculable even in such
cases."
8-304c
More recent ly, on the question of contracts for the sa le of land, the
Singapore High Court held that specific performance does not follow as
a matter of right; the court needs to look at all the facts: ECInvestment
Holding Pte Ltd v Ridout Residence Pte Ltd (2011). In New Dennis Arthur
v Greesh Ghai Monty (2012), when the defendant purchasers failed
to complete the purchase of a property upon the discovery of water
leakage problems, the vendors sought to foist the property off onto the
unwill ing defendants. The court refused to grant specific performance
on the basis that the vendors' interest in the sale was purely f inancial
in nature and they would be adequately compensated with damages.
Likewise, in Chew Ai Hua Sandra v Woo Kah Wai and another (Chesney Real
Estate Pte Ltd, third party) (2013), the court held that specific performance
of the sa le of the property was an inappropriate remedy as the property
had already been sold to an innocent third party. Further, in Lim Beng
Cheng v Lim Ngee Sing (2016), the court held that specific performance
was not appropriate because it would lead to a stalemate between
three host ile parties and the plaintiff's interest in the property was
primarily monetary in t he form of an investment.
8-305
In practice, orders for specific performance are relatively rare compared
to orders for damages. The key principles which will guide the court in
deciding whether to exercise its discretion are:
(a)
Where damages would be an adequate remedy, specific
performance may not be available: Beswick v Beswick (1967);
(b)
Where an order for specific performance wou ld require the court
to supervise the performance of obligations on an ongoing basisfor example, a contract for the construction of a building - specific
performance is not available;
(c)
Where one of the parties is a minor, specific performance is not
available because the contract lacks mutuality. Mutuality means
that the contract must be specifically enforceable by both parties;
and
(d)
Contracts to lend money cannot be enforced by specific
performance.
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SINGAPORE BUSINESS LAW
8-305b However, in Tay Ah Poon & Another v Chionh Hai Guan & Another (1997),
the Singapore Court of Appeal held that the presence of a liquidated
damages clause in a contract for the sa le of a flat does not preclude
an order for specific performance. Conversely, in Yeo Yoke Mui v Kong
Hoo (Pte) Ltd and Another (2001), where there was a contract for the
sale of land which is capable of specific performance, an injured party
can elect at the t rial t o claim on ly damages. In each case, the grant
of an order for specific performance is discretionary. In Lee Chee Wei
v Tan Hor Peow Victor (2007), the Singapore Court of Appeal affirmed
the lower court's decision not to exercise its discretion to grant specific
performance. However, once the contract was brought to an end by
the refusal of specific performance, an award of damages in lieu of
specific performance would be appropriate.
Injunct ion
8-306
An inj unction is a court order requ iring a pa rty to abide by a
negative covenant in a contract. A typica l negative covenant in a
dist ribution agreement would impose an obligation upon a
distributor not t o sell motor vehicles of a competing manufacturer.
If the distributor breaches this covenant, his supplier may seek an
injunction to restrain him from doing so. As with an order for specific
performance, an injunction w ill not be granted where damages
would be an adequate remedy: Re Fineplas Holdings Pte Ltd; Sitra Wood
Products Pte Ltd v Fineplas Holdings Pte Ltd (2001).
Types of Injunctions
8-307
An injunction can be inter locutory or interim (temporary) in
nature or perpetual (permanent) in nature. An interlocutory
injunction is usually obt ained by a party facing a threat of breach
of covenant by the other party. It seeks t o maintain the status quo
whi le the main legal p roceedings are pu rsued . A perpetual
injunction is granted when the main legal proceedings have shown
that the plaintiff has a right to injunctive remedy.
Injunctions
. ·: ..
Diagram SF
U075837L/N1510069
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CHAPTER 8
2 15
8-308
There are two basic types of injunctions. A prohibitory injunction is
preventive in that it seeks to restra in a person from conduct which he
has agreed not to do. A mandatory inj unction is .restorative in that
it compels action to restore a breach of covenant which has already
occurred. For example, if a lessee contracted not to construct a build ing
on a leased property but attempts to do so, the lessor may be able to
obtain a prohibitory injunction to prevent the lessee from proceeding. If
the lessee has already constructed a bui lding in breach of the covenant,
then the lessor may obtain a mandatory inj unction requiring the lessee
to demolish it.
8-309
It is important to distinguish a mandatory injunction and specific
performance. Both are orders which require positive action. However,
a mandatory injunction is ordered t o enforce a negative covenant
wh ich has been breached; specific performance is ordered to enforce
a positive obligation which has not yet been performed.
Contracts for Personal Service
8-310
The distinction between injunctions and specific performance is
particularly evident in the case of contracts for personal service. The
general principle is that contracts for personal service, such as
employment contracts, are not enforceable by specific performance.
This is because the law recognises that, as a matter of policy, it is
neither feasible nor desirable for a person to be forced to enter into
persona l relations w ith others against his will. The only remedy for
breach of such contracts is usually damages.
8-311
What if the contract for personal service also conta ins a negative
covenant stipu lating that the employee will not provide his services
to a competitor during the contract period? The case law shows t hat
the court will enforce negative covenants in contracts for personal
service as long as, in doing so, it would not amount to an indirect
way of compelling specific performance.
Warner Brothers Pictures Inc v Nelson (1937)
Nelson (popularly known as Bette Davis) entered into a contract
with Warner Bros, agreeing to provide exclusively to them her
services as an actress. During the contracted period, she agreed
not to render similar services to any other party and not to engage
in any other occupation. She breached her contract by entering
into an agreement to act for another f ilm company. Warner Bros
sought an injunction. The court refused to grant an injunction
to enforce her negative covenant "not to engage in any other
occupation" as this would be tantamount to an order of specific
performance for her to work with Warner Bros. However, the
court ordered an injunction to stop her from working as an actress
for any other party during the contract period.
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SINGAPORE BUSINESS LAW
Mareva Injunction
8-312
Since the case of Mareva Campania Naviera SA v International
Bulkcarriers SA, The Mareva (1975), courts have been willing to grant
an interlocutory injunction against a defendant ordering him not to
remove particular assets from the jurisdiction. Such injunctions are
now called "Mareva injunctions" .4 They are popular in cases where
the plaintiff suspects that the defendant intends to dispose of or
remove assets from the jurisdiction. The Mareva injunction effectively
"freezes" the defendant's assets until the main legal proceedings are
completed.
ANTON PILLER ORDER
8-401
An Anton Piller order, strictly speaking, is not a common law remedy
like damages or an equitable remedy like an injunction. It is an order
which a court may issue as part of its inherent jurisdiction; it forms part
of the armoury of orders which may generally be issued by a court. The
Anton Piller order derives its name from the order granted in Anton
Piller KG v Manufacturing Processes Ltd (1976). The order authorises the
plaintiff to enter onto another person's premises in order to search for,
inspect, photograph and take into custody documents or property of
such person. It is usually granted by the court ex parte (without the
defendant being heard before the issuing court). Anton Piller orders
are commonly used in intellectual property cases such as trade mark
and copyright infringements where the defendant may be intending
to destroy his infringing products.
8-402
Once issued, an Anton Piller order is executed with the defendant's
consent, usually in his presence. Such orders are very helpful in cases
- such as those involving counterfeit goods - where the plaintiff
suspects the defendant intends to destroy or remove evidence
critical to the plaintiff's action. It has been held that an Anton Piller
order is a draconian measure and will only be granted if necessary in
the interests of justice: Peh Yeng Yok v Tembusu Systems Pte Ltd (formerly
known as Tembusu Terminals Pte Ltd) and others (2016). This is to ensure
that the measure is not abused to disadvantage the defendant. A
plaintiff applying for a search order must show that:
(a)
(b)
(c)
(d)
4.
there is an extremely strong prima facie case;
the damage that would be suffered if a search order was not
granted is very serious;
there is a real possibi lity that the defendant(s) would destroy
relevant documents; and
the effect of the search order would not be out of proportion to
the legitimate object of the order.
For a discussion of the power of Singapore courts to grant Mareva injunctions in support of foreign court
proceedings, see Jeyaretnam P and Lau W J, "The Granting of Mareva Injunctions in Support of Foreign
Court Proceedings" (20 16) 28 Singapore Academy of Law Journal 503.
U075837L/N1510069
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217
QUANTUM MERUIT
8-501
An alternative remedy to damages is to claim on the basis of quantum
much as he has earned). Quantum meruit may be cla imed
in cases of contract or cases of quasi-contract. The latter refers to a
group of cases which are notoriously difficult to classify. They do not
possess all the necessary elements of a contract yet the law enforces
obligations as if they are contractual obligations.
meruit (as
8-502
In cases of contract, a claim on a quantum meruit basis may be
available if the court finds that there is an implied promise to pay
for the performance of obligations. However, where the contract
expressly provides for an agent to be paid only upon the happening
of a specified event, payment to him on a quantum meruit basis
would not normally arise as an implied promise to pay would then
be inconsistent with the express terms of the contract: Grossner
lens v Raffles Holdings Ltd (2004). In the case of contracts for
the sale of goods, the right to claim on a quantum meruit basis is
specifically recogn ised ins 8(2) Sale of Goods Act.
Gold Coin Ltd v Tay Kim Wee (1987)
The respondent was employed as a manager in the appellant's
poultry business. His August 1959 letter of appointment stated
that his remuneration included: "Commission: After the
development of sales Equipment and Chicks, a certain amount
of Commission will be given from the profits." The respondent
worked many years and resigned in 1981. During his employment,
he did not receive and, indeed, he did not claim any commission.
He made his claim for commission in 1981. The appellant rejected
the claim, arguing that the commission clause was void for
uncertainty. The Singapore Court of Appeal held that the
respondent could succeed in claiming quantum meruit based in
contract. The employment contract included an implied promise
to pay commission. The court awarded the respondent $80,000
plus interest, being the quantum meruit fixed after taking into
account what was a reasonable commission in the circumstances.
8-503
In cases of quasi-contract, even if some of the elements of a contract
are missing, a plaintiff may still succeed in claiming on a quantum meruit
basis. This is because the law considers it unjust to find otherwise. The
specific theoretical basis for such findings, however, remains elusive.
Craven-Ellis v Canons Ltd (1936)
Pursuant to a written agreement, Craven-Ellis was employed as t he
Managing Director of a company. The agreement was held to be
not binding. Nevertheless, since he had rendered services, the
court ordered compensation on a quantum meruit basis despite the
fact that there was no valid contract.
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SINGAPORE BUSINESS LAW
REFUND OF MONEY PAID
8-601
Another remedy which may be available to a plaintiff is to obtain a
refund of money paid. The Singapore Court of Appeal has held that it
is settled law that, where money is paid by a plaintiff to a defendant
under a contract and the defendant fails completely to discharge his
obligations, the plaintiff has the option of either claiming in contract
for damages for breach or he may elect to terminate the contract on
the ground that the defendant has repudiated it and sue for the refund
of the money in quasi-contract: Ooi Ching Ling Shirley v Just Gems Ltd
(2003).
8·602
In order for a plaintiff to succeed in a claim for a refund, there must
be a total failure of consideration. This occurs when the plaintiff has
not enjoyed the benefit of any part of what he bargained for. The test
has been stated as "whether or not the party claiming total failure of
consideration has, in fact, received any part of the benefit bargained
for under the contract": Rover International Ltd v Cannon Film Safes Ltd
(No3) (1989). To determine th is, we must judge it from the perspective
of the payor-plaintiff: Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe
Barbour Limited (1943). If the plaintiff obtains something from the
contractual arrangement, this remedy would not be available to him
although he can still claim damages from the defendant for failing to
fulfil all his contractual obl igations.
8-603
It may be recalled that in an action for misrepresentation where
rescission is ava ilable as a remedy for the successful plaintiff, the
contract becomes void ab initio and it is treated as if it never existed
(see 1]6-415). If so, total failure of consideration is presumed since
consideration would also be regarded as non-existent. Any money
paid in execution of the contract will be refunded. This was the reason
why the plaintiffs in the Raffles Town Club case (see 1]6-404) wished
to sue the defendant club in misrepresentation as they wanted to
obtain a full refund of the membership fee that they had paid. In the
circumstances, they could not prove misrepresentation and so had to
settle for a lesser sum in damages for breach of contract Raffles Town
Club Pte Ltd v Tan Chin Seng & Others (118-222b).
LIMITATION OF ACTIONS
8-701
The law provides time limits for parties to seek legal remedies in
court. After this period of time has lapsed, no person can initiate
legal proceedings seeking remedies. This period is called the
"limitation period". The rationale for having a limitation period is
that, after some time, a legal claim becomes stale. Evidence which is
necessary to support or defend a claim may have deteriorated or been
destroyed. Moreover, it is generally considered unfair for a potential
defendant to have a perpetual threat of proceedings -like the sword
of Damocles- over his head.
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219
Limitation Legislation
8-702
In the law of contract, the applicable statute is the Limitation Act.
This statute is based largely on the Limitation Act 1939 (United
Kingdom). Section 6 of the Singapore legislation provides that, for
actions founded on contract, there is a limitation period of six years.
Time begins to run from the date the cause of action accrued. In a
breach of contract situation, this wou ld mean the date of the breach.
After that, the action is said to be time-barred and cannot be
initiated.
8-703
Where the claim involves fraud on the part of the defendant or
mistake, the limitation period does not begin to run until the plaintiff
discovers the fraud or mistake or could, with reasonable diligence,
have discovered it: s 29 Limitation Act. In Ching Mun Fang v Liu Cho Chit
(2001), the Singapore Court of Appeal stated that "The provision in
question iss 29(1)(c) of the Limitation Act, which states quite clearly that
time begins to run once the plaintiff 'could with reasonable dil igence
have discovered' the mistake. As far ass 29(1 )(c) is concerned, it is the
plaintiff's means of ascertaining the mistake, and not what the court
eventually decides, that is relevant in determining when the limitation
period begins to run. "
8-704
In Chia Kok Leong & Another v Prosper/and Pte Ltd (2005), the court had to
consider the application and effect of s 24A of the Limitation Act, which
governs the time limits for negligence, nu isance and breach of duty
actions in respect of latent injury and damage, whether the duty exists
by virtue of a contract or otherwise. For actions in respect of latent
injury or damage, this section postpones the commencement of the
limitation period to the date on which the plaintiff first had knowledge
of his rights to bring such a claim. The plaintiff is then required to
institute the action within three years of such commencement date:
Lian Kok Hong vOw Wah Foong and Another (2008).
Laches
8-705
Apart from the above statutory provisions, the equ itable doctrine of
laches also provides for the extinction of a plaintiff's right to remed ies
through the effluxion (passing) of time. In Singapore, this doctrine is
specifically preserved by s 32 Limitation Act. In Management Corporation
Stra ta Title No 473 v De Beers Jewellery Pte Ltd (2001), the Singapore
High Court explained that there are two factors to be considered
with respect to the doctrine of laches: the length of the delay, and
whether such delay caused prejudice or injustice. In Tay Joo Sing v Ku
Yu Sang (1994), the court held that a 25-month delay in seeking legal
redress was unreasonable, and hence equ itable remedies should
not be granted. The court observed that the vendor had suffered
prejudice as he had been lu lled into believing that the purchaser had
abandoned the contract. Otherwise, the vendor would have to face
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SINGAPORE BUSINESS LAW
the prospect of having to hand over a property worth considerably
more than the contract price (due to the price of property having
increased substantially after the recession). In Chew Ai Hua Sandra v
Woo Kah Wai and another (20 13), the court observed that a 16-month
delay was lengthy, noting that specific performance is "after all an
equitable remedy that is being sought, and it is trite that equity aids
the vigi lant and not the indolent."
SUMMARY
8-801
Th is chapter has outlined the key remedies avai lable to an injured
party who has suffered from a breach of contract. The remedies
encompass: the common law remedy of damages, the equitable
remedies of specific performance and injunctions, quantum meruit and
refund of money paid.
8-802
The primary purpose of damages is to compensate the injured party
and not to punish the defaulting party. To succeed in a claim for
damages, the injured party must prove that:
(a) the breach caused his loss;
(b) the loss is not too remote; and
(c) he has undertaken all reasonable steps to mitigate his loss.
8-803
In discussing damages, we also looked at some of the key principles
which a court may apply when assessing the amount of the damages
due to the injured party. The general principle here is that the inj ured
party should be placed in the position he would be in if the contract
had been performed properly. Non-pecuniary losses, such as injured
feelings and distress, are general ly not recoverable in contract.
Pecuniary losses which are recoverable are sometimes classified as
either expectation loss or reliance loss. Although helpful as concepts,
this classification should not be used as the determining factor as
to whether damages are recoverable for particular losses.
8-804
Some contracts provide for the possibility of breach and specify the
amount of damages payable by a defaulting party. If such a liquidated
damages clause appears in a contract, it is usua lly enforceable as long
as it is a genuine pre-estimate of loss. If it is a pena lty, it is not
enforceable.
8-805
Whatever damages are payable, they are usua lly calculated on the
basis that the amount should be net of any tax payable by the
injured party had the amount been earned pursuant to the
contract. An award of damages usually includes interest calculated
either as the contract stipulates or as the court deems appropriate.
U075837L/N1510069
Contract: Remedies for Breach of Contract
CHAPTER 8
221
8-806
As for equitab le remedies, an order for specific performance
compels the defaulting party to perform his obligations as
specified in the contract. The remedy of specific performance is
discretionary. Generally, a court wou ld not order specific
performance if damages are an adequate remedy. An injunction is
an order compell ing a party to comply with a negative covenant
in the contract. Injunctions can be interim or permanent in
nature. A prohibitory injunction restrains a person from conduct,
as stated in the negative covenant. A mandatory injunction
compels a person to remedy a breach of the negative covenant
which has occurred. A Mareva injunction is used to compe l a
party not to remove particular assets from the jurisdiction pending
the outcome of the trial.
8·807
One very usefu l order which a court can ma ke is an Anton Pi ller
order. Th is ex parte order enables a plaintiff to search for, inspect,
photograph and take possession of the documents or propert y of
the defendant where there are strong grounds to believe that the
defendant may destroy such evidence.
8-808
Apart from damages, orders for specific performance and injunctions,
the court may allow a claim in quantum meruit. Essential ly, quantum
meruit is availab le where the court accepts that there is an
implied promise to pay for the performance of certain obligations.
This may arise in contract or quasi-contract. Where a pla intiff claims
a refund of money paid, whether he will succeed depends on whether
he can show tota l failure of consideration.
8-809
For all contract claims, lega l proceed ings must be initiated with in
the statutory time limit of six years. Time runs from the date the
action accrued, typically the date of the breach. In addition, the
equ itable doctrine of laches provides that a plaintiff's right to
remedies is extinguished after the passing of a reasonable amount
oftime.
8-810
With this chapter, we end our discussion on the general principles
of contract law. Diagram 8G attempts to depict the key points
of th is chapter in schematic form. Further, to help visual ise the
overal l picture of contract law as discussed in this and the preceding
f ive chapters, a simplified out li ne is provided in Diagram 8H
showing the stages of a contract from formation to discharge and
remedies.
··•·•·•···
U075837L/N1510069
U075837L/N1510069
General Principle:
To put the injured party
in the position he would
be in if the contract had
been performed properly
Interest
Taxation
liquidated Damages
Clause
Second limb (abnormal loss) : Such damage
as may reasonably be supposed to have
been in the contemplation of both parties
at the t ime they made the contract.
Knowledge of nature of
'- damage : need not be exact
damage
f- Probability of occurrence:
serious possibility, quite likely etc
Higher t han
actua l loss :
LDC not enforceable.
Can claim only
actual loss
Lower than
actual loss :
Can claim either
actual loss or
as per LDC
Penalty
-- --- - Generally not
enforceable
Speculative losses
Difficulty in assessment!--{ Non-pecuniary losses
Classification of Loss :
expectation loss &
reliance loss
First limb (normal loss) : Such damage as
r- Usual course of things:
may fa irly and reasonably be considered
normal business activity
arising natura lly, ie, accord ing to the usual
f- Knowledge includes
course of things from the breach itself;
imputed & actual knowledge
I
Hadley v Baxendale
Summary
Higher t han
actua I loss :
LDC enforceable
Lower than
actua I loss :
LDC enforceable
Genuine
Pre-estimate of Loss
Gel"lerally enforceable
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Vit iating Factors
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UNINCORPORATED
BUSINESS ENTITIES
INTRODUCTION
9-101
In Singapore there are different types of entities which undertake
business transactions. The law treats each entity differently.
These entities fall into two broad categories: unincorporated ones
and incorporated ones. In this chapter we will exami ne unincorporated
business entities. The three types of un incorporated business entities
we w ill discuss are sole proprietorships, partnerships and joint ventures.
We will also briefly discuss the hybrid entity, the limited liabil ity
partnership, which has features of unincorporated partnersh ips and
incorporated private limited companies. We will examine how they
are formed, their main characteristics and how they are dissolved.
Chapters 10, 11 and 12 will deal with incorporated business entities,
in particular, compan ies incorporated under the Companies Act (CA).
Incorporated Entities
9-102
Before proceeding further, it may be useful to explain the concept of
incorporation in greater detail. Through incorporation, an entity is
made to become a separate legal body which has its own legal rights
and obligations. Traditionally, the law recognises that only natural
persons (ie, human beings) can enjoy rights and owe obligations. By
the process of incorporation, the law in effect creates an artificial
entity wh ich is also recognised as being capable of having lega l rights
and obligations. In contrast to natural persons, such entities are called
"artificial persons".
Legal Persons
U075837L/N1510069
CHAPTER 9
22 5
Unincorporated Business Entities
------------------------------------~~
9-103
Incorporation, therefore, creates "personhood" as far as the law is
concerned. This means that the incorporated entity- the corporation
-will have an existence separate and independent of the people who
established it. Once incorporated, the original founders may retire
or leave but the corporation will continue to exist. In this way, a
corporation can continue to function even when the orig inal founders
have died.
9-104
In Singapore, there are various types of corporations. Some are
profit-making enterprises; others are not. For example, a government
statutory board, such as the Economic Development Board (EDB), is a
corporation and has separate legal personality. ' So is a government
educational institution like the Singapore Polytechnic, the National
University of Singapore, or the Nanyang Technological University.2
Anot her kind of incorporated entity is a strata title management
corporation commonly found in private condominiums. 3 There is also
the co-operative society (or co-operative, as it is usually called) which
undertakes business activity for the economic interests of its members.
Prominent examples are the supermarket chain, NTUC Fairprice Cooperative Limited, and the insurance giant, NTUC Income Insurance Cooperative Limited. These corporations enter into business transactions
but are not primarily profit-making organisations.
Types of Organisations
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Strata title
management
corporations
1.
2.
3.
Incorporated under the Economic Development Board Act.
Incorporated under the Singapore Polytechnic Act, the National University of Singapore
(Corporatisation) Act, and the Nanyang Technological University (Corporatisation) Act,
respectively. In the case of NUS and NTU, on 1 April 2006, their original incorporating Acts
were repealed because both universities were corporatised as companies limited by guarantee
(see: 'Ill 0·41 0).
Incorporated under the Land Titles (Strata) Act. A strata title management corporation is
formed by the owners of a condominium to manage the condominium as a whole, including
the common areas (lift lobbies, gardens, etc) which are not the property of a single owner:
see '1114·314.
U075837L/N1510069
226
SINGAPORE BUSINESS LAW
9-105
The large bulk of corporations in Singapore, however, are profitmaking organisations. These are as companies incorporated under
the CA. The most common type of company is the private limited
liability company, more about which is discussed in Chapters 10- 12.
Unincorporated Entities
9-106
Unlike incorporated business entities, an unincorporated business entity
does not have separate legal personality. 4 This means that, in the case
of the unincorporated business entity, the law does not distinguish
between the people who establish the business and the business itself.
The rights and liabilities of the unincorporated entity are thus treated
as the rights and liabilities of the people who own it. In Singapore,
the three most common types of unincorporated business entities are
sole proprietorships, partnerships and unincorporated joint ventures. 5
Since 2005, Singapore also allows the formation of limited liability
partnerships, which have some features of traditional partnerships
although they are incorporated as a separate legal entity and enjoy
limited liability. We will deal with each in turn.
SOLE PROPRIETORSHIP
9-201
As the name implies, a sole proprietorship is essentially a business owned
by a sing le person. Many neighbourhood shops in housing estates, for
example, are sole proprietorships. Because a sole proprietorship is
an unincorporated entity, the rights and obligations of the business
become the rights and obligations of the sole proprietor. The law does
not distinguish between the sole proprietorship's debts and the sole
proprietor's debts. Accordingly, if a customer successfully sues a shop
which operates as a sole proprietorship, then the shop-owner is liable
personally.
Unlimited Liability
9-202
4.
5.
A sole proprietor has unlimited liability as far as his business is
concerned. Whatever is owed by the business is owed by him without
any limitation. Hence, the personal assets of the sole proprietor can
be sought by the unsatisfied creditors of the sole proprietorship. This
unlimited liability characteristic dissuades people from using sole
proprietorships. The reason is that most business people wish to insulate
their personal assets from the risk of failure which is inherent in any
However, an unincorporated society in Singapore may, by virtue of its registration under
s 35(b) Societies Act, acquire sufficient "quasi-corporate" personality to have a
reputation to protect thus giving it standing to sue for defamation: Central Christian Church v Chen
Cheng & Another (1995).
There are other examples of unincorporated business entities but they are beyond the scope
of this book.
U075837L/N1510069
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CHAPTER 9
227
business venture. Nevertheless, some business people still choose to
operate as a sole proprietorship. They value the ease and low cost of
setting up a sole proprietorship and the relatively simple requirements
for maintaining it.
Business Registration
6.
9-203
A sole proprietorship is the simplest form of business entity in
Singapore. If a sole proprietor carries on business using his full name,
there is no legal requirement for registration of his name. However, if
a sole proprietor carries on business using a business name (ie, a name
or designation other than his fu ll name), then he must comply with
the requirements stipulated in the Business Names Registration Act
(BNRA).
9-204
Pursuant to the BRNA, before a person carries on business in Singapore,
the person and the person's business name must be registered: s 5(1)
BNRA. Certain exceptions exist. For example, professionals who possess
qualifications specified by law and carry on business in that profession
(eg, lawyers, accountants, architects) under applicable legislation are
exempted from registration: s4(1)(c) BNRA. Similarly, a company carrying
on business under its corporate name is exempted: s 4(1)(m) BNRA.
9-205
A sole proprietor can operate multiple businesses. For example, one
business could be a retail shop. Another business may provide courier
services. If each business operates under a different name, then there
must be separate registrations made for each business name: s 5(2)
BNRA.
9-206
A sole proprietor has a wide discretion in selecting the name under
which he wishes to carry on business. However, the Registrar of Business
Names would not register a business name if, for example, the name
is undesirable or is identical to another registered business name, or
the na me of any corporation, limited liability partnership, or limited
partnership: s 17(1) BNRA.
9-207
Sometimes, a business name seems to suggest that the business is
a company when in fact it is not. For example, the business name
"Boon San and Company" can be the name of a sole proprietorship or
a partnership. The use of "Company" does not automatically mean
that the business is a company. "Company" (sometimes abbreviated
"Co") is used here in the sense of a group of persons and not to
denote incorporation. Thus, the word "Company" may be used by
companies as well as sole proprietorships and partnerships. Indeed,the
distinguishing feature of practically all companies incorporated under
the CA is the presence of the word "Limited" (abbreviated "Ltd") or
"Berhad" (abbreviated "Bhd") after the company name.6
An exception is the unlimited liability company which, for obvious reasons, does not include
the word "Limited" as part of its name; see generally, '1110-407.
U075837L/N1510069
228
SINGAPORE BUSINESS LAW
9-208
It is important to note that registration of a business name does
not grant any ownership rights to the name: s 10 BNRA. Thus, a sole
proprietor who uses a business name which infringes upon another
person's proprietary right in that name will not enjoy protection simply
because he has registered the business name.
9-209
Take the case of a sole proprietor who opens a computer shop with
the business name "The IBM Shop". He will not be protected against
a trade mark infringement suit by the owner of the IBM trade
mark even though he may have reg istered the business name
under the BNRA.l This highlights the distinction between procedural
law and substantive law (111-331 ). Business name registration is largely
a procedural matter. In contrast, trade mark registration creates
substantive legal rights.
Dissolution
9-210
A sole proprietorship can be dissolved with a minimum of fuss. If it
trades under a business name, then the sole proprietor must send
a notice of cessation of business to the Registrar of Business Names
within fourteen days of ending the business: s 22(1) BNRA. Of course,
he should also pay off his creditors before doing so; otherwise the
unpaid creditors may well pursue him personally to recover their debts.
PARTNERSHIP
9-301
7.
8.
The second common type of unincorporated business entity used in
Singapore is the partnership. The main principles of partnership law
are found in the Partnership Act (PA) which is essentially identical to the
English Partnership Act of 1890.8 Certain provisions of the legislation
may, however, be overridden by agreement among the partners. In
addition, other principles of partnership law which can be found within
the rules of common law and equity continue to apply in Singapore:
s 46 PA.
In practice, the Registrar of Business Names will probably refuse to register such a business
name because it is likely to mislead or confuse people given the well-known "IBM" trade mark.
On trade marks, see 1]14-414.
Singapore partnership law, therefore, generally follows English partnership law. A standard
reference on English partnership law is Banks R C I eta!, Lindley and Banks on Partnership,
20th ed (London: Sweet & Maxwell, 2017). For a local work, see: Yeo H Y. Law of Partnerships in
Singapore including LLP and LP (Singapore: LexisNexis, 2015).
U075837L/N1510069
CHAPTER 9
229
Unincorporated Business Entities
Partnership
~
Natural Person
'C:7
9-302
The t erm "partnership" is often used colloquia lly to include any
venture where there is more than one person involved. This can be
qu ite misleading. For example, three persons who start a restaurant
may describe themselves as "partners" when in fact their lawyers
have incorporated a company, in which they are shareholders, to
operate their restaurant business. Although the use of "partners"
may be colloqu ially acceptable in these circumstances, from a legal
perspective, t his is an inaccurate use of that term. Th is is because the
legal definition of partnership excludes the relationship wh ich exists
among shareholders of a company: s 1(2) PA.
Definition
9-303
At law, a pa rtnersh ip is the relationsh ip "wh ich subsists between
persons carrying on a business in common with a view of profit":
s 1(1) PA. The three key features of a partnership, therefore, are:
(a)
the participation of t wo or more persons;
(b)
the carrying on of a business; and
(c)
a common object ive of generating profit: Lek Bong Hua v Lek
Boon Chye (1999).
In fact, the Singapore High Court has stated that "sharing of profits is
the ha llmark of a partnership": Excel Golf Pte Ltd v Allied Oomecq Spirits
and Wine (Singapore) Ltd (No 2) (2004).
9-304
It is important to appreciate the scope of this partnership definition.
The reason is that the rights and obligations of partners among
themselves and vis-a-vis third parties are significantly different from
t he rights and obligations of persons who carry on business jointly
but w ho are not partners. Generally, partners in a partnersh ip have
greater rights and obligations vis-a-vis each other. Indeed, from a
practical viewpoint, parties in a venture probably shou ld not structure
their relationsh ip as a partnership un less they are fully aware of, and
are wil ling to accept, the implications of being a partner.
U075837L/N1510069
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SINGAPORE BUSINESS LAW
JiiiL
c:::l
Sole Proprietor or Partner?
Wee Soon Kim A nthony v Lim Chor Pee (2006)
The respondents were partners in a law f irm. The appellant, Anthony,
was a client of the firm who had lent money to the firm and to Lim Chor
Pee (LCP) personally. Anthony took legal action under the Bankruptcy Act
against LCP and the firm when LCP failed to make monthly repayments
on t he loans. LCP claimed that he could set-off the legal fees owed to the
firm by Anthony against his debt as he was not only the sole equity partner
but the sole proprietor as well. Anthony argued that LCP was not entitled
to set-off his personal debt in this manner as the firm was not a sole
proprietorship, even if LCP was the sole equity partner. Whether t he firm
was in fact a sole proprietorship or a partnership would further determine
whether LCP's "salaried partner", ML, was also liable for the firm's debts.
Lai Kew Chai J in the Singapore High Court looked at the definition of a
partnership ins 1(1) PA and also examined s 2(3) PA. Thus, where a written
partnership agreement is absent, even though t he sharing of prof its is
prima facie evidence that one is a partner, this can be rebutted on evidence
to the contrary. If there are other circumstances to be considered, they
must be taken into account as a whole so that an inference may be drawn.
Lai J noted that, notwit hstanding ML's status as a salaried partner, whether
ML was in fact a partner in the true sense depended on the "substance
of the relationship between the parties", rather than "any mere label
attached to that relationship" . Since this was a hearing on a preliminary
question of law and not the trial of t he case, Lai J left t he question as to
whether there is a sole proprietorship or partnership as a triable issue to be
determined when the case goes to trial.
This conclusion was later affirmed on appeal. The Court of Appeal agreed
that whether LCP would be entitled to set off his personal debts against
the fees owed to the firm must depend on the true arrangement between
him and ML. If ML was not an equity partner and was not entitled to
a share of the profits of the firm, then the firm was, as between them,
effectively a sole proprietorship and the profits of the firm would belong
to LCP alone. ML would also not be personally liable for the debts of the
f irm. On salaried partners, the court quoted the following passage from an
English case:
"The term "salaried partner" is not a term of art, and to some extent it
may be said to be a contradiction in terms. However, it is a convenient
expression which is widely used to denote a person who is held out to
t he world as being a partner, with his name appearing as partner on
the notepaper of the firm and so on. At the same time, he receives
a salary as remuneration, rather than a share of the profits, though
he may, in addition to his salary, receive some bonus or other sum of
money dependent upon t he profits. [To) the outside world it often
will matter little whether a man is a full partner or a salaried partner;
for a salaried partner is held out as being a partner, and the partners
will be liable for his acts accordingly... But within the partnership it
may be important to know w hether a salaried partner is truly to be
classified as a mere employee, or as a partner."
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Unincorporated Business Entities
CHAPTER 9
231
9-305
The f irst point to note concerning the partnership definition isthat the
word "persons" is not defined in the legislation. However, pursuant
to s 2(1) Interpretation Act, "person" is generally defined to include
companies and other corporate bodies. Therefore, a company may be
a partner in a partnership. Similarly, a minor- a person who has not
reached the age of majority- may also be a partner. Since a partnership
is created by agreement, the ordinary principles of contract law which
apply to minors also apply in this situation.9
9-306
Since the definition specifically states that a partnership must carry on
business, there must be a commercial element in every partnership.
What constitutes "carrying on a business" has been elaborated by case
law. Genera lly, it is any undertaking involving the sale or supply of
goods or services. It also includes every trade, occupation or profession:
s 45 PA. The Singapore High Court has stated that "generally, when
parties join together to transact a single piece of business or a business
of a particular kind which has a limited duration, they would not be
partners as partnership implies a continuing relationship": Rabiah Bee
Bte Mohamed Ibrahim v Salem Ibrahim (2007).
9-307
Clubs, social, religious and charitable groups and other non-profit
associations would fall outside the definition of partnership. This is
because these associations do not operate with profit as their
primary objective.
Formation
9.
9-308
A partnership is formed by contract. The contract may be ora l or
in writing. Obviously, ora l partnerships are less desirable since
the partners have no permanent record of the terms of their
partnership. Wherever possible, therefore, a written partnership
agreement should be executed by the partners. This agreement
should stipulate the respective rights and obligations of the
partners and any qualificat ions they wish to effect upon the
general provisions of the PA.
9-309
No partnership can have more than 20 partners since all partnerships
with more than 20 partners are required to be constituted as
companies: s 17(3) CA. However, professional partnerships which are
governed by specific legislation- such as accountancy and law- may
exceed 20 partners: s 17(4) CA. Several large accountancy firms and
law firms in Singapore in fact have more than 20 partners.
On minors' contracts, see 116-202.
U075837L/N1510069
232
SINGAPORE BUSINESS LAW
9·310
Once a partnership is formed, it is called a "firm". The business name
under wh ich the partnership carries on business is known as the "firmname": s 4 PA. If the partners are individuals and the partnership uses
as its firm-name the fu ll names of al l the individuals, then there is
no requirement for registration under the BNRA: s 4(1)(b) BNRA. If a
partnership uses some other business name, then that business name
must be registered: s 5(1) BNRA. 10 However, certain professiona l
partnerships, such as accountancy firms and law firms, will be registered
pursuant to their relevant legislation since the BNRA generally does
not apply to them: s 4(1)(m) BNRA. 11
Relationship Among Partners
9-312
The relationship among partners is governed by the PA as well as
case law. The statutory provisions, however, may be varied by the
consent of al l partners: s 19 PA. This means that partners have a wide
discretion in determ ining the nature and scope of their rights and
obligations to each other. Whether or not partners take advantage
of this discretion to order their internal arrangements, it is important
to be familiar with the key statutory and common law principles
which govern the relationship among partners. Some of these key
principles are discussed below.
Property
9-313
10.
11.
All property brought into the partnership by the partners, or acquired or
created in the course of partnership business for the firm, is considered
partnership property; moreover, partnership property must be used by
the partners solely for partnership purposes: s 20(1) PA. A corollary
principle is that all property bought with partnership funds is deemed
to be partnership property: s 21 PA. Whi le these principles are easy to
understand, complexities arise in practice where property is used by the
partnership but one partner asserts exclusive ownership by virtue of
the fact that he brought it in or even "created" it. Such a complexity
arose in Guy Neale v Nine Squares Pty Ltd (2015). This case revolved around
a t rademark, "Ku De Ta", used by a partnership. One partner claimed
ownership of the trademark on the basis that he had invented the name
and had reg istered the trademark in Singapore through his company,
Nine Squares Pty Ltd. Further, that partner had caused Nine Squares
to license the trademark to a third party. The Court of Appeal found
sufficient evidence that all the partners intended the trademark to be
registered and held by the company on trust for the partnership. Hence,
in this specific situation, the trademark was partnership property. As
to the partner's fiduciary duty when dealing with the trademark, see
Over time, a f irm -name may become valuable through the goodwill associated with the name.
Consider, for example, firm-names such as KPMG and PWC in the accountancy f ield, and Lee
& Lee in the legal f ield.
For accountants and lawyers, see the Accountants Act and the Lega l Profession Act
respectively. Note that, since 2000, accountancy firms and law firms have been permitted to
incorporate as corporations.
U075837L/N1510069
Unincorporated Business Entities
CHAPTER 9
233
119-3 19. In another decision, Chua Kwee Chen & Others v Koh Choon Chin
(2006), it was ruled that the mere use of property for the purposes
of the partnership without any evidence that it was purchased with
partnership funds, nor evidence of the intention to treat the property
as partnership property, would not suffice to show that the property
is partnership property.
9·314
A creditor cannot execute against partnership property unless the
creditor has a judgment against the firm: s 23(1) PA. Hence, if a partner
has outstanding persona l debts, his creditor cannot execute against
the property of the firm in an attempt to satisfy his personal debts:
Wee Soon Kim Anthony v Lim Chor Pee & Another (2015). However, the
creditor may charge that partner's interest in the partnership property;
in this way, he can appoint a receiver to liqu idate that partner's share
of profits to satisfy the outstanding debt s 23(2) PA.
Management
9-315
The general rule is that every partner is entitled to participate in the
management of the firm: s 24(5) PA. However, in practice, not all
partners exercise this right. In some partnersh ips, there are "sleeping
partners" who contribute on ly capital and do not engage in any
work at all for the firm. The firms in which all partners participate in
management tend to be smaller partnerships. In medium and large
partnersh ips, there is usually one partner designated as t he managing
partner (perhaps because of the old adage: "too many cooks spoil
the broth"). For all practical purposes, he acts li ke a chief executive
officer and is answerable to the rest of the partnership. Sometimes, the
managing partner may choose not to practise his profession at all but
simply focus on managing the firm well. It has been confirmed in the
recent decision of Guy Neale v Nine Squares Pty Ltd (2013) that partners
in a partnership can choose to relegate all management power to one
partner; however, this fact alone does not cause them to cease being
a partnership.
Liability and Indemnity
9-317
The genera l rule is that every partner is entitled to share equa lly in
the f irm's profits and is liable equal ly for the firm's losses: s 24(1) PA.In
practice, partners can agree to bear differing proportions of liability to
reflect the amount of capital each initially contributed or the amount
of work each undertook. However, such an agreement is an interna l
arrangement Koh Ewe Chee v Koh Hua Leong & Another (2003). Thus,
s 24 PA contains the qual ification that the ru les therein are "subject
to any agreement express or impl ied between the partners". As far as
third parties are concerned, each partner is jointly and several ly liable
for partnersh ip debts (for the concept of joint and several liability,
see: 119-323). Correspondingly, the firm is required to indemnify each
partner for expenses and liabilities necessarily incurred by him in the
ord inary and proper conduct of the firm's business: s 24(2) PA.
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Fiduciary Duty
9-318
Apart from the statutory provisions, certain partnership duties
are imposed by principles found in case law. Chief among these
principles is the concept that the relationship among partners is a
fiduciary relationship. This means that the relationship is one of
utmost good faithY The fiduciary nature of the relationship is not
expressly stipulated in the statute. However, it forms the basis of
other duties which are either enshrined in the statute or found in case
law. Together, these duties set the standard of conduct expected of
partners.
9-319
For example, the fiduciary duty owed by partners to each other means
that a partner cannot, without the consent of his partners, engage in
other businesses which compete against the firm: s 30 PA. Hence, a
person cannot be a partner in two competing retailing firms- unless, of
course, all of the partners in both firms consent. Similarly, a partner's
fiduciary duty requires him not to make secret profits through any
partnership transaction or the use of any partnership property, name
or business connection: s 29 PA. On this point, the decision of Guy
Neale v Nine Squares Pty Ltd (2015) discussed in 119-313, is also significant.
In Guy Neale, the court commented that when a partner breaches his
fiduciary duty by usurping a corporate opportunity that belonged to
the partnership, the court is prepared to rule that any profits derived
from that exploitation would be considered as being held on trust for
the partnership.
Relationship with Third Parties
9-320
We now turn to consider the relationship between partners and
third parties. The most significant provision which determines the
relationship between partners and third parties is probably s 5 PA.
Partnership Act
Section 5:
Every partner is an agent of the firm and his other partners for the
purpose of the business of the partnership; and the acts of every
partner who does any act for carrying on in the usual way business of
the kind carried on by the firm of which he is a member bind the firm
and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with
whom he is dealing either knows that he has no authority, or does
not know or believe him to be a partner.
12.
Fiduciary comes from the Latin root fides which means faith. Bona fides means in good faith
or with sincerity.
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Binding the Firm
9-321
The effect of s 5 PAis to enable any partner to bind the firm to a third
party as long as the act is in the usual course of business of the f irm.
Of course, if the third party knows that he is not authorised to bind
the firm or does not believe him to be a partner, then the third party
loses the benefit of this provision: s 8 and s 5 PA.
9-322
The practical significance of this provision is that a rogue partner can
accumulate substantial liabilities upon his f irm. He can simply use the
firm name and enter into unfavourable contracts which are relevant
to the firm's business. Furthermore, every partner is bound by any act
or agreement w ith a third party which is executed in the firm name
by a person authorised to do so, regard less whether that person is a
partner or not: s 6 PA.
Joint and Several Liability
9-323
Once the partners are liable to a third party, it is important to examine
the nature of their liability. In contract and debt, the partners are liable
jointly: s 9 PA. Typically, the th ird party will sue the firm under the
f irm name so as to avoid omitting any of the partners' names: Order
77 Rule 1, Ru les of Court.
9-324
In cases of wrongful acts and omissions, the partners are liable joint ly
and severally: s 10 and s 12 PA. This means that the third party can
bring more than one legal action against the partners. Omitting to
sue one partner or obtaining judgment against one partner does
not bar him from taking legal action against the other partners. The
same is true of s 11 PA which concerns the liability of the firm for the
misapplication of funds by a partner wh ile the funds are in the firm's
custody. If the funds are received by the firm "in the course of its
business", then even if one of the partners acts entirely on his own
and dissipates the money, "the other partners of the firm would be
liable to make good the loss even though they were ignorant of the
defaulting partner's actions and had no part whatsoever to play in
the same": United States Trading Co Pte Ltd v Ting Boon Aun and Another
(2008). However, there are instances where the court has found that
funds were not received by a partner in the ordinary course of business
of the firm, and therefore the other partners were not liable:
Lim Kok Koon v Tan Cheng Yew & Another (2004)
The plaintiff, Lim, consulted Tan (a lawyer) concerning an intended
reverse takeover by his company. Tan advised Lim to furnish an
undertaking through him to the Singapore Stock Exchange. Lim
agreed and gave Tan three cheques for different amounts totalling
$1 million, issued in favour of Tan. Tan later absconded w ith the
money. Lim sued Tan's law f irm, claiming that it was liable for the
money handed over to Tan. The law firm denied liability on the
ground that the payment was a personal matter between Lim and
Tan, and about which it had no knowledge. The Singapore High
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Court looked at s 10 PA which states that a partnership would only
be vicariously liable for the wrongful acts of the partner if the
particular act was done in the ordinary course of the partnership's
business. Whether an act was capable of being performed in the
ordinary course of business was a question of law; whether the
act was so performed was a question of fact. In this regard, the
closeness of the connection between the act which the partner was
authorised to perform and his wrongdoing, must be looked at.
Here, Tan had declared that he held the moneys personally as trustee
for Lim. It was not w ithin the ordinary scope of business of a lawyer
to act as an express t rustee. It was also uncommon for moneys to
be paid to a lawyer personally and Lim should have realised this.
Since Lim was not a client of the firm, Tan had acted on "a frolic of
his own" and had, in his personal capacity, entered into a private
commercial relationship with Lim. As such, the f irm was not liable
for the misappropriation by Tan of the moneys paid to him.
Sleeping Partners and Salaried Partners
9-325
The liabi lity of sleeping partners and salaried partners towards
third parties bears some mention. Sleeping partners are partners
who are not engaged in the day-to-day activities of the f irm.
They act as passive investors in that they usually only contribute
capita l to the firm and simply await their share of profits. At law,
sleeping partners may be treated like any other partner.
Consequently, the liabilities imposed upon partners generally are
also imposed upon sleeping partners.
9-326
Salaried partners are persons who are given the title of partner for
the purpose of deal ings with third parties but who are sti ll employees
as far as the partnership is concerned. They appear to be partners to
third parties but they are actually salaried as employees; hence the
term "sa laried partner". Salaried partners are common in professiona l
partnerships as a means to reward senior staff with the prestige of
"apparent" partnersh ip. The position of salaried partner is also used
sometimes as an intermediate stage prior to being accepted as an
equ ity partner. Since a salaried partner is held out as a partner to th ird
parties, he is liable to th ird parties as a partner despite the fact that
he remains an employee of the firm: s 14 PA. The case of Wee Soon
Kim Anthony v Lim Chor Pee (119-304) offers an example of how the use
of th is term can sometimes cause confusion. Note also the Singapore
Court of Appeal's comments in that case on the status of a salaried
partner vis-a-vis the other partners in a firm.
Retiring Partners and New Partners
9-327
A partner who retires from a firm remains liable for the partnership
debts incurred before his retirement, unless he enters into an
agreement with the creditors and remaini ng partners to be discharged
from his liability: s 17(2) and (3) PA. A retiring partner should also
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Unincorporated Business Entities
ensure that, after his retirement, all the fi rm's clients and the publ ic
generally are notified t hat he is no longer a partner. At the very least,
this would requ ire advertising the change in partnership and ensuring
that all letterheads and f irm stationery are amended according ly. If
no such notice is given, a th ird party may be entitled to claim that the
retired partner appears to have remained a partner and is therefore
liable as a partner: s 36(1) and (2) PA. However, partners are not
liable for the firm's debts incurred after retirement, with respect to
third parties w ho are unaware of their status as partners: s 36(3) PA.
When a partner retires, the partnership is terminated only as regards
the retiring partner. The remaining partners continue to carry on the
business as a going concern . There is thus technically a "dissolution"
of the old partnersh ip and a new partnership is created which "takes
on the assets and liabilities of the old partnership without any break
in the continuity of the business": Chiam Heng Chowv Mitre Hotel (1993)
and Sim Yak Song v Lim Chang & Another (2003).
9-328
The existing partners must give their consent before a person can
be added into the partnership as a new partner: s 24(7) PA. New
partners generally are not liable for partnership debts incurred prior
to them becoming partners: s 17(1) PA.
Dissolution
9-329
Upon dissolution, a partnership ceases to carry on business. There are a
number of grounds which give rise to the dissolution of a partnersh ip.
These grounds fall essentia lly under two categories: voluntary and
involuntary dissolution. We will examine the more important grounds
under these two categories and the consequences of dissolution.
Partnership Dissolution
Ending a Partnership
Voluntary Dissolution
9-330
The partners in a firm may wish to dissolve their partnership
voluntarily for a number of reasons. These include the following
situations:
(a)
if the partnership was for a f ixed term or specific project, at
the expiry of that term or terminat ion of that project:
s 32(1)(a) and (b) PA;
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(b)
(c)
if the partnership was for an indefinite period, by any partner
giving notice to the others: s 32(1)(c) PA; or
where the partnership agreement provides for any other
reason for dissolution, for example, a voting deadlock at a
partnership meeting.
Involuntary Dissolution
9·331
A partnership may also be dissolved involuntarily. This means that
the dissolution was not intended by the partners but nevertheless
occurred by the process of law. The circumstances in which such
involuntary dissolution occurs include where:
(a) one of the partners becomes bankrupt, dies or his share in
the partnership property is charged for his personal debts
(unless the partnership agreement provides otherwise): s 33(1)
and (2) PA;
(b) at the application of a partner, a court decrees the partnership
to be dissolved because another partner becomes unable to
perform his part of the partnership contract or is guilty of conduct
prejudicial to the partnership business; the partnership business
can only be carried on at a loss; or if the court thinks it is just and
equitable that the partnership be dissolved: s 35 PA. 13
Consequences of Dissolution
9·332
13.
Upon disso lution of a partnership, the partnership property is
to be applied in payment of the partnership debts and liabilities,
with the balance to be distributed among the partners according
to their entitlements: s 39 PA. If the partnership agreement does
not specify any guidelines as to how the partnership accounts are
to be settled upon dissolution, then certain statutory provisions
apply: s 44 PA. These provisions, among other things, stipulate the
priorities to be followed in settling partnership accounts. In addition,
the court may, on the application of a partner, make an order for an
account of all profits made by the partnership upon dissolution: Ong
Kay Eng v Ng Chiow Tong (2001).
It has been pointed out that s 351 Companies Act gives a third party the right to petition
the court to dissolve a partnership in cases where the partnership is unable to
pay its debts. However, this provision does not appear to be used much, if at all, perhaps
because of the lack of procedural guidelines: Woon W, Basic Business Law in Singapore,
2nd ed (Singapore: Prentice Hall, 2000) 165. In any event, if inability to pay partnership
debts is the issue, a cred itor should simply take legal action against the partnership
cu lminating in the bankruptcy of one or more partners. This would also lead to the
dissolution of the partnership: s 33(1) and (2) PA.
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Limited Liability Partnership
9-334
In 2005, Singapore introduced the limited liability partnership (LLP)
through the Limited Liability Partnerships Act (LLPA). The LLP allows
partners to incorporate with limited liability while still carrying on
business as a partnership. It combines the benefits of a partnership
w ith those of private limited companies. However, this comes with legal
safeguards to minimise abuse and provide protection to parties who
deal with the LLP. A LLP is a separate legal entity from its partners: s
4(1) LLPA. Like a company, it has perpetua l succession and any change
in the partners of a LLP will not affect its existence, rights or liabil ities:
s 4(2) and (3) LLPA. A firm or a private company may convert to a LLP
by fulfilling the prescribed requirements: s 20 and s 21 LLPA. A LLP is
capable of:
(a) Suing and being sued in its name;
(b) Acquiring and holding property in its name;
(c)
Having a common seal in its name; and
(d) Doing such other acts and things in its name, as bodies corporate
may lawfu lly do and suffer: s 5(1) LLPA.
9-335
Any individual or body corporate may be a partner in a LLP: s 7
LLPA. This includes a natural person, company or another LLP. Upon
registration, a LLP shall have either the words "limited liability
partnership" or the acronym "LLP" as part of its name: s 18 LLPA. The
law relating to partnerships wil l not apply to a LLP: s 6 LLPA.
9-336
The liability of the partners of the LLP is interesting because it is unique
and different from that in a partnership or company setting. Generally
speaking, the partners of the LLP are not personally liable for any
business debts incurred by the LLP: s 8(1) and (2) LLPA. However, a
partner of a LLP may be held personally liable for losses resulting from
his own wrongfu l act or om ission. Further, the LLP (which is a separate
Iega I entity) is Iiable to the same extent as the wrongdoing partner for
acts done in the course of of the LLP's business or with its authority:
s8(3), 8(4) LLPA, and The Singapore Professional Golfers' Association v Chen
Eng Waye (2013). In contrast, an "innocent" partner of the LLP in that
situation is not liable solely by reason of being a partner of the LLP:
s8(3). Overall, the LLP provides more protection to the "innocent"
partner as compared to his equivalent in a normal partnership.
9-33Gb A LLP is required to keep such accounting and other records that will
sufficiently explain the transactions and financial position of the LLP. This
will enable profit and loss accounts and balance sheets to be prepared
so as to give a true and fair view of the state of affairs of the LLP: s
25(1) LLPA. If the LLP fails to do so, the LLP and every partner shall be
guilty of an offence and punished by a fine or imprisonment, or both:
s 25(5) and (6) LLPA. A LLP is not required to submit annual returns to
ACRA. Instead, the LLP must submit to the Registrar of Limited Liability
Partnerships an annual declaration of solvency or insolvency, again
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w ith criminal sanctions for non-compliance: s 24 LLPA. The report of its
solvency status shall be avai lable to the public. The LLP will be taxed as
a partnership, which is why the LLP is not required to disclose publicly its
financial statements, unlike ordinary companies. Similar to a company,
however, the dissolution of a LLP is through w inding-up: s 30 LLPA. The
LLP is recommended for businesses as well as professionals.
Limited Part nersh ip
9-337
In 2009, Singapore introduced the limited partnersh ip (LP) through
the Limited Partnerships Act (LPA). The LP is a partnership comprising
a minimum of two partners, w ith at least one genera l partner and at
least one limited partner: s 3(2) LPA. Genera l partners have unlimited
liability - they are responsible for all the debts and obligations incurred
by t he LP while they are general partners: s 3(3) LPA. In contrast, a
lim ited partner's liabil ity (for debts and obligations) is limited to the
amount agreed upon in the LP: s 3(4) LPA. A general partner may take
part in the management of the firm but a limited partner may not: s
6(1) LPA. A limited partner who does take part in the management
of the LP will be treated as a genera l partner with unlimited persona l
liabi lity: s 6(2) LPA. ALP must appoint a local manager if all the general
partners are not "ordinarily resident" in Singapore: s 28 LPA. Limited
partners must be registered with ACRA; partners who are not registered
wil l be deemed to be general partners: s 10 LPA.
9-338
Any individual or body corporate may be a general or limited partner
in a LP: s 3(5) LPA. Upon registration, aLP sha ll have either the words
"limited partnership" or the acronym "LP" as part of its name: s 16 LPA.
Un like LLPs, the law relating to partnerships will apply to LPs: s 4(1)
LPA. As a result, a LP does not have a separate legal personality from
the partners. Like a LLP, a LP is required to keep accounting records and
may be required to produce these records for audit purposes: s 27(1)
LPA. If the LP fails to do so, every general partner shall be guilty of an
offence and punished by a fine or imprisonment, or both: s 27(5) LPA.
Subject to any agreement between the partners, a LP can be dissolved
by expiration of the partnersh ip term, notice given by any genera l
partner, bankruptcy or death of any genera l partner, an event that
makes it unlawful to carry on the LP's business or by an order of the
court: s 8 LPA (read with ss 32-35 Partnership Act). The LP is usefu l in a
case where venturers like the simplicity of a general partnersh ip and at
least one of them wishes to be a limited partner (essentially a passive
investor with limited liability who is content to leave the management
of the business to the general partners).
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241
JOINT VENTURES
14.
15.
9-401
The third type of unincorporated business organisation used in
Singapore is the joint venture. They are quite common in the
property development sector. 14 For example, a building site may
have a signboard proclaiming that the bui lding project is being
undertaken by the "Koh Construction- Qu ickbui ld JV". This means
that the project is undertaken by a joint venture comprising Koh
Construction and Quickbuild, each of which may be developers in
their own right.
9-402
As the name implies, a joint venture is a business venture
undertaken jointly by two or more parties. The parties may be
natural persons or corporations. Unfortunately, the term "joint
venture" is sometimes used rather loosely to cover a host of
different types of business arrangements. For example, it is also
sometimes used as a synonym for a syndicate or a consortium.
9-403
For our purposes, we will define a joint venture as an association
of persons, natural or corporate, who agree by contract to engage
in some common undertaking for joint profit by combining their
respective resources without, however, forming a partnership or
corporation in the legal sense. 15 This definition makes it clear that
a joint venture is similar to, but may be different from, a partnership. From a legal perspective, the main differences between a
partnership and a joint venture, typically, are:
(a)
A partnership has joint and several liability. A joint venture
usually does not have joint liability. In other words, each
venturer bears his own liabi lity; his liability is several;
(b)
Each partner in a partnership is an agent of the other partners
and can bind the partnership in contracts with third parties.
A joint venturer is usually not an agent of the other
venturers. Each venturer has limited authority to act on
behalf of the joint venture as stipulated in the joint venture
contract;
(c)
A joint venture contract may allow a joint venturer to
transfer his interest in the venture to a third party without
the approva l of the other venturers; and
(d)
Whether the business carried on is of a one-off nature or not.
The Singapore High Court has stated that "[i)f an unincorporated joint-venture is intended to carry on business, that is on
a continual basis, it would be [a) partnership": Canadian Pacific
(Bermuda) Ltd v Nederkoom Pte Ltd (1998); Rabiah Bee Bte Mohamed
Ibrahim v Salem Ibrahim (2007).
See generally, Chow K F, Construction Joint Ventures in Singapore {Singapore: Butterworths,
1985).
Modified form of a definition cited in Latimer P. Australian Business Law, 31st ed {Sydney:
CCH Australia Ltd, 2012), para 9-140.
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9-404
A j oint venture is a useful form of business organisation if the
parties wish to pool their resources but do not w ish to bear
some of the more onerous responsibilities assoc iated with a
partnership. However, care must be taken in structuring the
joint venture and drafting the joint venture contract. If not, the
jo int venture may fulfill the requirements of partnership under
the PA and w il l be deemed at law to be a partnership.
ENDING THE UNINCORPORATED BUSINESS ENTITY
9-501
So far in this chapter, we have seen how business entities are formed
to carry on businesses. At some stage, however, these entities will
eventually cease to carry on t heir businesses and be dissolved. If the
d issolution is voluntary and the entity is able to fully pay its debts with
profit left over, all is well.
9-502
Problems only arise when the entity is unable to pay its debts. In
this situation, creditors may wish to take legal action against the
entity. Since the entity is unincorporated, th is means that the
li abil ity will fall upon its members, namely the sole proprietor,
the partners or the j oint venturers. The debts of the entity
become the debts of its members. The obvious exception is the
hybrid partnership form of the LLP which is an incorporated
entity separate from its members. Where the debtor is a natural
person, such legal action may result in bankruptcy proceed ings. Where
the debtor is a company, it may result in winding-up proceedings.
Both usually mean that the business is at an end. The main principles
of the law of bankruptcy in Singapore and the ru les of winding-up of
compan ies will be dealt with in Chapter 13.
SUMMARY
9-601
This chapter introduced the topic of business organisations and focused
on unincorporated business entities. We began by describing the
concept of incorporation and the differences between incorporated
and unincorporated entities. The rest of the discussion then dealt
with the three main types of unincorporated business entities used in
Singapore: sole proprietorships, partnerships and joint ventures. We
also touched on the LLP and the LP.
9-602
A sole proprietorship is a business owned by one person. It is
characterised by the unlimited liability of its sole proprietor. A sole
proprietorship is easy to set up since the primary requirement is that it be
registered pursuant to the BNRA if it carries on business using a business
name. The dissolution of a sole proprietorship is also relatively simple.
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------------~------------------------------------------~
9-603
A partnership describes the relationship of partners who carry on
business in common with a view to profit. Partnership law comprises
statutory provisions in the PA as well as principles found in case law.
A partnership is formed by a contract. A partnership which carries
on business using a business name must register its business name
pursuant to the BNRA unless it is exempted from doing so. As a general
rule, a partnership cannot have more than 20 partners. like a sole
proprietorship, each partner in a partnership has unlimited liability in
respect of the debts of the partnership.
9-604
An alternative partnership form called the limited liability Partnership
was introduced into Singapore in 2005. The distinctive feature of
the LLP is that all the partners enjoy limited liability and, unlike the
traditional partnership, it is deemed to be a separate legal entity from
the partners. However, unlike ordinary companies, it also enjoys the
benefit of not having to disclose publicly its financial statements. Its
introduction has expanded the available options for businesses and
professionals here.
9-605
Another alternative partnership form is the Limited Partnership. limited
partners enjoy limited liability whereas general partners have the same
liability as partners in a traditional partnership. Apart from the limited
Partnerships Ad, the law relating to partnerships will also govern LPs.
9-606
A joint venture is a venture undertaken by two or more parties.
For some sectors, a joint venture offers a usefu l alternative to sole
proprietorships and partnerships. Joint ventures are used in the
Singapore construction industry. Sometimes it is difficult to distinguish
joint ventures from partnerships. The key differences are:
(a) a joint venturer bears his own liability;
(b) a joint venturer is not an agent of another joint venturer;
(c) a joint venturer can usually transfer his interests to a third party
without obtaining the consent of his co-venturers; and
(d) a joint venturer does not usually intend to carry on business on
an indefinite basis.
9-607
With the exception of the LLP, unincorporated business entities do not
have perpetual life. Eventually, they are dissolved. The dissolution raises
no difficulty as long as the sole proprietorship, partnership or joint
venture has sufficient funds to pay all its debts. If not, then the sole
proprietor, partners and joint venturers may be personally liable for
the debts of the entity. At worst, this may lead to personal bankruptcy,
which is dealt with in Chapter 13.
···•·•·•···
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COMPANIES 1:
FORMATION
INTRODUCTION
1.
10·101
The last chapter dealt with several types of unincorporated
business entities used in Singapore. In this and the fol lowing two
chapters, we turn to consider incorporated business entities, in
particular limited liability companies. For a start. we w ill discuss
the various types of companies avai lable, how they are created,
and the rights and obligations of shareholders. The next chapter,
Chapter 11, wil l look at the legal issues of managing a company.
Chapter 12 w ill focus on aspects of corporate finance.
10·102
Given the complexity of modern company law, these three chapters
can only provide an overview of the topic 1 They highlight the key
aspects of company law which professionals engaged in Singapore
business activities shou ld be famil iar with.
10·103
Singapore company law is regularly updated through amendments
to meet changing business needs. The two most recent amendments
wi ll be mentioned here. In 2014, after extensive review by a
Steering Committee set up by the Ministry of Finance, a Companies
(Amendment) Act was enacted. This 2014 Act contains the largest
number of reforms since the enactment of the Companies Act
(CA) and wil l be referred to as the "2014 Amendments". In 2017,
another Companies (Amendment) Act was enacted to ensure that
Singapore's corporate regu latory regime continues to stay robust
and supports Singapore's growth as a global hub for business and
investors. Th is 2017 Act contains reforms wh ich will be implemented
in three phases. Two phases were implemented in 2017. The thi rd
phase is expected to be im plemented during 2018. Cumulatively,
these reforms wil l be referred to as the "2017 Amendments" .
10-104
This chapter and the subsequent two chapters w ill present the
law as at the time of writing. However, given the sign ificant
impact of the 20 14 Amendments and the 2017 Amendments,
brief comparisons wi ll be made with the preva iling law before the
amendments. It is hoped that such comparisons wil l show the need
for the amendments and he lp improve understanding of the law.
For a more detailed treatment of Singapore company law, see: Tan C H (gen ed), Walter Woon
on Company Law, revised 3rd ed (Singapore: Sweet & Maxwell Asia, 2009) and Woon W (gen
ed), Woon's Corporations Law· Desk Edition (Singapore: LexisNexis, 2016). See also Victor C S Yeo
et al, Commercial Applications of Company Law in Singapore, 5th ed (Singapore: CCH Asia, 2017).
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COMPANIES
10-201 By far the largest number of incorporat ed entities in Singapore are
companies incorporated under the CA. True, as mentioned in Chapter
9, there are other incorporated entities in Singapore apart from
compan ies. However, they are relatively few. Companies incorporated
under the CA are regu lated by ACRA (Accounting and Corporate
Regulatory Authority, www.acra.gov.sg).
Legislation
10-202 With more than 700 pages, the CA is the longest sing le statute in
Singapore. Like the Malaysian companies leg islation, the CA was
original ly based on its English and Austra lian counterparts. Over the
years, however, there have been major changes to the ancestra l acts.
Accordingly, although most of the basic principles remain the same,
there are important areas of divergence between theCA and companies
leg islation overseas. Meanwhile, case law from England, Australia and
Malaysia will continue to be of persuasive authority whenever common
provisions come before the Singapore courts for interpretation.
Corporate Status
10-203 The distinctive feature of companies compared to unincorporated
business entities, such as sole proprietorsh ips and partnersh ips, is
incorporation. At law, incorporation creat es "personhood". Upon
incorporation, a company becomes an artificial person capable of
possessing rights and owing duties independent of its members,
as expressed by s 19(5) CA.
Companies Act
Section 19(5):
On and from the date of incorporation ..., the subscribers to the
constitution ...together with such other... members of the company
shall be a body corporate by the name contained in the constitution
capable immediately of exercising all the functions of an incorporated company and of suing and being sued and having perpetual
succession and a common seal with power to hold land but w ith
such liability on the part of the members to contribute to the assets
of the company in the event of its being wound up as is provided
by this Act.
10-204 Three important consequences of corporate status require
elaboration. First, as a legal person, a company can own property in
its own name. In contrast, a partnership cannot do this. If an
accounting firm which operates as a traditiona l partnership w ishes
to purchase premises for its office, the premises must be registered
under one or more of t he partners. It cannot be registered in the firm's
name. As a corollary to th is, a company can also enter into contracts
and generally exercise rights and owe obligations in its own name.
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10-20s Secondly, because a company is an entity separate from its members,
it follows that the interests of the company and the interests of its
members must be kept distinct. The assets owned by the company
are assets of the company, not of its members. The fact that a
person owns one million shares in Singapore Airlines Ltd does not mean
that he owns any jetliner (or any part thereof) belonging to
Singapore Airlines. Equally, the liabilities of the company are
liabilities of the company, not of its members. If a company fails to
pay its debts, the person to be sued is the company, not its members.
Salomon v A Salomon & Co Ltd (1897)
Salomon manufactured boots and shoes under a sole
proprietorship called "A Salomon and Co." Subsequently,
to give his family members a share in the business, he
incorporated a limited liability company. The company was
owned by his wife and five children (each owning one share) and
himself (owning the balance of 20,001 shares). The company
acquired his business and paid him by issuing debentures, a
secured debt instrument. Salomon continued to run the business.
The company was later wound-up when the business failed. The
company had sufficient assets to pay its secured creditors but not
its unsecured creditors. The liquidator of the company sued
Salomon. On appeal, the House of lords held that Salomon was
not liable because the company was a separate person. Its
liabilities were not those of its shareholders. This was so even
though the company merely took Salomon's position in owning
the business whereas everything else, to all intents and purposes,
remained the same.
10-206 Thirdly, as an artificial person, a company has perpetual succession.
It continues to exist until it is wound-up, even though its membership
may change over time. Unlike natural persons who die and partnerships
which are dissolved when a partner dies, a company can have life in
perpetuity. Thus, although the Aw brothers (of Tiger Balm fame) who
founded the Haw Par group of companies have long since died, their
corporate empire continues.
Lifting the Corporate Veil
10-207 Earlier we stated that, since a company has separate legal personality,
its liabilities are not treated as the liabilities of its members. However,
there are exceptions to this general rule. In certain situations, a court
may go behind this corporate personality and impose liability on its
members. This is called "lifting or piercing the corporate veil". The
veil of incorporation which separates the members from their company
is removed or penetrated so that the acts of the company are deemed
to be the acts of its members. Generally, courts are reluctant to ignore
the separate persona lity of companies unless there are compelling
reasons to do so. Such compelling reasons include the following:
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Companies I : Formation
(a)
If a company is wound-up or sued and it has a debt which was
knowingly created by a company officer who, at that time,
had no reasonable or probable expectation that the company
could pay the debt, then the officer has committed an
offence and can be fined or jailed and may be declared to be
personally liable for the debt s 339(3) and s 340(2) CA;
(b)
If the business of a company has been carried on with the
intention of defrauding creditors of the company, creditors of
other persons or for any fraudu lent purpose, the court, upon
the winding-up of the company, may declare any person who
was knowingly a party to the carrying on of business in that
manner to be personally liable for any or all debts or liabilities
of the company: s 340(1) CA;
(c)
If the company is used by its members to evade legal liabil ity:
Gilford Motor Co v Horne (1933); and
(d)
If the company or a group of companies is used as a fa~ade or
sham by a controller, evidenced by his disregard of the corporate
governance structure and his improper mix of the companies'
assets with his own personal assets: Asteroid Maritime Co Ltd v The
owners of the Ship or Vessel "Saudi AI Jubail" (1987). Where there
is also evidence that a company is used for fraudu lent purposes,
an even stronger case to lift the corporate veil is made: Children's
Media Ltd and Others v Singapore Tourism Board (2009). There, the
court found that the common CEO of two companies had no
bona fide intention to honour the contract which one of the
companies entered into. The CEO merely used the companies
to bear liabilities while he siphoned off the moneys received by
the compan ies. The court commented that the two companies
were "no more t han corporate puppets compliantly dancing to
the tune" of their common CEO and that he "treated their assets
as his own". The corporate veil was lifted and the CEO made
personally liable to reimburse the monies paid to the companies.
INCORPORATION PROCESS
10-301 No group comprising more than 20 persons is allowed to carry on
business in Singapore as an unincorporated entity: s 17(3) CA. This
implies that the maximum size of a partnership is generally 20 persons. 2
When a group exceeds 20 persons, it must seek incorporation. To
incorporate as a company, there must be at least one member: s 20A
CA. The member may be a natural person or another artificial person,
such as another company.
2.
As noted in '119-309, an exception exists for certain professional partnerships such as
accounting f irms and legal firms.
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Constitution
10-302 Traditionally, a proposed company had to prepare two documents- a
Memorandum of Association and an Articles of Association - to be
lodged with the Registrar of Companies. This regulatory burden on
companies was reduced by the 2014 Amendments in several ways.
First, the two documents are now merged into a single document
called the "constitution". Second, certain companies do not need to
prepare or lodge their constitutions. Instead, they can simply adopt the
relevant model constitution prescribed by the Minister for Finance. Such
companies are private companies or compan ies limited by guarantee
which adopt the whole of the model constitution. For other companies,
e.g. public compan ies, the requirement to lodge their constitution with
the Registrar remains: s 36, 37 CA.
10-303 The constitution contains essential information about the company,
including its name, amount of its share capita l, whether it is limited or
not, and details of its initial members (called "subscribers"): s 22(1) CA. It
also contains the rules governing the operation of the company: s 35(1 ).
These rules usual ly govern various matters including the appointment
of directors, the holding of members' and directors' meetings and the
method of issuing shares.
10-304 Upon submission of the papers and the relevant fees, the Registrar
should register the company unless he is satisfied that any of the
grounds for refusing registration under section 20(2) are meU Once
registered, the Registrar must issue a notice of incorporation in respect
of the company: s 19(4) CA. The company obtains legal persona lity on
the date the notice of incorporation is issued: s 19(5) CA.
Company Name
10-305 Before any company is incorporated, the promoters (persons who
undertake the task of incorporating the company) typica lly reserve a
name for their proposed company: s 27(10) CA. The name must not
be identical to any other company name or business name and must
not be an undesirable name or a name which has been declared by
the authorities not to be used: s 27(1) CA. It is particularly important
that promoters do not use a company name which is in fact a trade
mark owned by another person. If this occurs, their company may be
the subject of trade mark infringement proceedings in itiated by the
trade mark proprietor (see ~14-423).
3.
For example, on 11 April 2018, the Registrar refused to register a company, "OSEA Pte Ltd"
on the grounds that its registration would be contrary to Singapore's national interest. This
is reported under the "News and Events" at the website of ACRA at www.acra.gov.sg visited
on 26 Apri l 2018.
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Company Abbreviations
Country
Private company
limited by shares
Public company
limited by shares
Singapore
Malaysia
Australia
United Kingdom
California
Indonesia
France
Germany
Pte Ltd I Sdn Bhd
Sdn Bhd
Pty Ltd
Ltd
Inc I Corp I Ltd
PT
SARL
Gmbh
Ltd I Bhd
Bhd
Ltd
pic
Inc I Corp I Ltd
PTTbk
SA
AG
Note: The above are not absolute equivalents. Most jurisdictions have
several types of incorporated entities, each with differing legal features.
10-306 The type of company can often be determined by its name.
In
Singapore, all companies which are limited by shares or guarantee
must include the word "Limited" or "Berhad" in their names, unless
specifically exempted: s 27(7) and s 29 CA. These words are usually
abbreviated to "Ltd" and "Bhd", respectively.
10-307 Private companies must include the word "Private" or "Sendirian" in
their names: s 27(8) CA. These words are usually abbreviated to "Pte"
and "Sdn", respectively.
Capacity and Ultra Vires
10-308 Within the constitution, there may be a clause listing the objects of
the company. An objects clause specifies the types of businesses the
company is authorised to engage in. In effect, the objects clause limits
the types of activities capable of being undertaken by the company to
those activities specified in the clause. Prior to 2004, every constitution
must have an objects clause. After 2004, an objects clause became
optional: s 23(1A) CA. The general rule now is that a company has full
capacity to carry on or undertake any business or activity and can do
any act or enter into any transaction: s 23(1) CA.
10-309 If a company has an objects clause in its constitution, then the ultra
vires doctrine applies. The doctrine states that if a company acts within
its objects clause, its actions are intra vires (within its power). If it acts
beyond its objects clause, its actions are ultra vires (beyond its power).
Ultra vires acts of a company may be void and unenforceable. The
rationale is that the company lacks capacity to undertake them. To
avoid the ultra vires doctrine, today many companies choose to not
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have an objects clause. Even if a company has an objects clause, the
scope of the doctrine has been narrowed significantly because no act
of a company is invalid solely because a company lacks capacity to
undertake that act: s 25(1) CA. Conversely, s 25 CA has no application
to a company that does not have an objects clause.
Promoters
10-3 10 There is a category of persons ca lled "promoters" who may play a
significant role in the incorporation of a company. In Twycross v Grant
(1877), Cockburn 0 stated that a promoter is a person "who undertakes
to form a company with reference to a given project and to set it going,
and who takes the necessary steps to accomplish this purpose".
10-311
A promoter may incur significant expenses in the formation of the
company. However, these expenses are incurred when the company
was not yet in existence. Hence, there is no contractual basis for
the promoter to claim these expenses from the company. To enable
promoters to be reimbursed for these expenses, some companies
include a provision in the constitution which specifically empowers
a company's direct ors to pay al l the expenses incurred in promoting
and registering the company. Such a provision al lows a company to
reimbu rse promoters but does not entitle a promoter to make a legal
claim on the company for reimbursement.
10-312 A promoter may also enter into contracts on behalf of the company
prior to its incorporation and these "pre-incorporation contracts"
are governed by s 41 CA. The section provides a way by which a preincorporation contract will become binding on the company as if the
company was already in existence at the time the contract was signed:
s 41 (1) CA. This can be useful if a third party wants to ensure that the
signing of a contract with the promoter prior to the incorporation of
the company will not render the contract invalid.
10-313 It is important to note, however, that s 41 CA accords this binding
effect only if the company subsequently ratifies the contract. Prior to
ratification, the promoter is personal ly bound by the contract. Since
ratification is entirely voluntary, this may appear harsh on the promoter.
However, if one thinks of the rationale, such a "back-up" option in
favour of the third party actually benefits the company. Without this
"back-up" option, a third party may hesitate to sign the contract
knowing that the company has not yet been incorporated. Further, the
legislation allows the promoter to contract out of this personal liability:
s 41 (2) CA. Depending on the bargaining power of the promoter vis-avis the third party, this may be attainable. Hence, it may be said that,
overall, s 41 CA presents a fair balance of power and responsibilities
between the promoter, the company to be incorporated, and the third
party.
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TYPES OF COMPANIES
10-401 Pursuant to the CA, companies can be incorporated with different
characteristics. They can be categorised depending on their
characteristics.
10-402 A company which is incorporated under the CA is general ly cal led a
Singapore incorporated company. The provisions of the statute apply to
such companies regardless as to whether they operate only in Singapore
or also overseas.
Classification of Companies
Corporations
regulated by the
Companies Act
Foreign companies
-.
Iregistered in Singapore
.
-Dia-gram 108
; -:~-1 ·-
-.
I
I
I
Limited liability
company
'
Singapore inco.rporated
compames
I
I
I
Unlimited
company
I
Company limited I
Company limited I
by shares
I by guarantee
I
I
I Public company I I Public company I Private Company which
may be an exempt private
and/or a small
~'----I Unlisted II Listed I company
company or neither
Foreign Companies
10-403 In addition, the legislation also has jurisdiction over foreign companies
wh ich are registered in Singapore: s 365 CA. Foreign companies
generally refer to overseas-incorporated companies or overseasunincorporated bod ies which can be sued in their own names. Foreign
companies fall w ith in the definition of "corporation" in the CA. 4 If a
foreign company chooses to carry on business in Singapore, it is required
to register under the CA: s 368 CA. Once registered, it functions as a
Singapore branch of the foreign company.
10-404 In practice, not many foreign entities choose to register themselves as
branches in Singapore. Foreign entities prefer to incorporate a local
company under the CA as their subsidiary and then carry on business
4.
Section 4(1) CA defines "company" as referring only to a company incorporated under the
Act. "Corporation" is defined to include companies and foreign companies. Since most of the
provisions of theCA apply to "companies", they do not apply to foreign companies. Only those
provisions which refer to "corporations" or "foreign companies" apply to foreign companies.
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in Singapore through the local company. A notable exception to this
general preference is banks and other financial institutions. One of
the reasons for this is that certain conditions (such as capital adequacy
requirements) are imposed on financial institutions by the Singapore
authorities. These requirements may be so stringent that they can only
be met by the parent company itself and not by a loca lly incorporated
subsidiary. Accord ing ly, many foreign banks operate in Singapore as
branch offices of their head offices, rather than as subsidiaries of their
parent companies.
t0·404b
For foreign companies, in addition to registering themselves as a
branch or incorporating a local subsidiary, the 2017 Amendments
introduced a third option: the Inward Re-domiciliation Regime. Under
this regime, a foreign company may apply to transfer its domici le
to Singapore and become a Singapore company limited by shares:
Part XA CA. Essentially, re-domici liation al lows a foreign company to
convert itself into a Singapore incorporated company w ithout losing
its corporat e identity and history. Once re-dom iciled in Singapore,
the company is requ ired to de-register itself from its original place
of incorporation. Re-domiciliation is available for compan ies from
jurisdictions- such as Australia, New Zealand, and Canada - which
all ow outward re-domiciliation. Re-domiciled entities enjoy certain
benefits in Singapore including more favourable tax treatment,
ease in repatriation of dividends, as well as benefits from various
government grants and initiatives. However, there are stringent
requirements for a successful re-domicil iation. Other than meeting
the solvency and other criteria, a company has to satisfy at least two
of the following thresholds: its total assets exceeds $10 million; its
annual revenue exceeds $10 million; or, it has more than 50 employees.
Singapore Companies
t0-405
Singapore incorporated compan ies fall into three categories:
companies limited by shares, compan ies limited by guarantee and
unlimited compan ies: s 17(2) CA. To understand the distinctions
among them, it is important to understand the concept of limited
and unlimited liability.
10-406
When a company has limited liability, this means that if the company is
dissolved (a process called "winding-up"- see 1113 401), the members
of the company are liable only up to the amount unpa id on the shares
held respectively by them: s 22(3) CA. In other words, the liability
of members is limited. An unlim ited company, on the other hand, is
one whose members, upon the company being wound-up, are liable
without limitation.
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Companies I : Formation
Unlimited Company
10-407 Among the three categories of companies, unlimited companies are
the rarest. Most people would not use them since they negative
one of the main reasons why companies are used in business
- to limit their members' liability upon winding-up. Unlimited
companies are used in situations where the benefits of incorporation
(eg, separate legal personality and perpetual succession) are desired,
but limitation of liability is prohibited.
10-408 For example, in Singapore, an architect or engineer is permitted to
incorporate his practice as a company. 5 However, to ensure its viability,
the company must meet the minimum stipulated paid-up capital; if not,
it must be an un limited company. In effect, a Singapore architect or
engineer has four choices in structuring his practice. He can operate
as a sole proprietorship, in partnership with others, through a limited
liability company with the specified paid-up capital, or through an
unlimited company.
Company Limited by Guarantee
10-409 Members of a company limited by guarantee must stipulate a
fixed amount in the company's constitution which they undertake
to contribute to the company if it is wound-up: s 22(1)(e) CA. No
money has to be paid immediately. The amount is only paid if the
company is wound-up. This constitutes a "guarantee" by the
members to the company.
10-410 In practice, companies limited by guarantee are also relatively rare.
They are used chiefly in situations where the benefits of incorporation
are desired but no business activities are anticipated. Non-profit
organisations such as Mendaki are established as companies limited
by guarantee. The amount guaranteed by members is usually nominal
-perhaps $1 -since most of the organisation's initial operating funds
are provided by other parties, such as the government.
Company Limited by Shares
10-411 By far, companies limited by shares are the most common type of
companies. A share represents the interest of a member (also called
a "shareholder") in the company which issued the share. It is "a
right of participation in the company on the terms of the articles
of association": Prudential Assurance Co Ltd v Newman Industries (No 2)
(1982). Upon winding-up, members of a company limited by shares are
liable only up to the amount they have paid (plus any amount due but
unpaid) on the shares they own. In this way, their liabi lity is limited.
5.
Part VI, Architects Act (s 20 - 26) and Part VI, Professional Engineers Act (s 20 - 26).
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10-412 Company shares are issued at a specific price_ 6 For example, a share
issued at $1 means that a subscriber has to pay $1 to the company
in order to receive the share. At that point, the subscriber becomes
a member of the company. The aggregate sum received by the
company from subscribers for its issued shares generally constitutes
the company's " issued capital".
10-413 In some situations, a company may wish to issue partly paid shares.
For example, instead of a subscriber paying $1 for each share issued,
he might pay only 30 cents with the understanding that the unpaid
balance is to be paid at specific t imes or when the company makes a
"call" for payment. Issuing partly paid shares is thus tantamount to
allowing subscribers to pay for shares in instalments. The aggregate
sum received by the company from subscribers for its partly paid shares
generally constitutes the company's "paid-up capital". It follows that
the paid-up capital of a company will be either less than or equal to
(but never exceed) the issued capital of the company.
Private and Public Companies
10-414 Another way of classifying companies is to make the distinction
between private and public companies. A private company is typically
a smaller company with fewer shareholders. Pursuant to s 18(1) CA,
the defining features of a private company are that: it has a share
capital; its constitution restricts the right to transfer its shares; and its
members are limited to 50. If a company does not fulfi ll these criteria,
it is not a private company. By default it is a public company. Since
compan ies limited by guarantee do not have share capital, they are,
by definition, public companies.
10-415 The distinction between private and public companies is significant
because public companies are genera lly more strictly regulated.
This is largely because a public company is permitted to raise funds
from the public through issuing shares and debentures and it can
also be publicly listed on a stock exchange. Also, its membership is
usually larger. For example, Singapore Telecommunications Ltd (SingTel),
as a listed public company, has more than 300,000 shareholders.
6.
Prior to 2006, in addition to the price, each share also has a par (or nominal) value. The long
established concept of par value was abolished by the 2005 amendments which came into
effect in January 2006: s 62A(1) CA. In doing so, Singapore followed the footsteps of Australia
and New Zealand. The rationale for abolishing par value was that the concept was an
unnecessary inconvenience for modern business and impeded companies in their capital raising
and capital restructuring activities. For a full discussion on this point, see: Ho Y K & Lan L L,
"The Par Value of Shares: An Irrelevant Concept in Modern Company Law" [1999) Singapore
Journal of Legal Studies SS2.
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Companies I : Formation
----------~--------------------------------------------
Exempt Private Companies and Small Companies
10-416
Within the category of private companies, there are exempt and
non-exempt companies. A private company is exempt if it has no
more than 20 members and all of its issued shares are owned by
natural persons: s 4(1) CA. Such companies are exempted from the
usual requirement of f iling balance sheets and profit and loss
accounts with their annual returns. 7 They can also give certain loans
which may benefit directors whereas non-exempt companies
generally cannot do so: s 162 and s 163 CA.
10-417
The rationale for the distinction between exempt and non-exempt
companies is that exempt companies are likely to be smaller, familyowned or closely-held companies. Therefore, they enjoy slightly
more liberal rules which enable them to maintain confidentiality
over financial statements and the giving of financial assistance to
directors.
10-418
Prior to the 2014 Amendments, certain exempt private companies
also enjoyed an exemption from having to prepare and file audited
financial statements. With the 2014 Amendments, the criteria for
such exemption has been changed to a new framework of "small
companies". Under this new framework, a private company which
fulfills two out of the following three criteria will be exempted from
the statutory requirement of an audit: (a) total annual value does
not exceed $10 million; (b) total assets does not exceed $10 million;
and (c) number of employees does not exceed 50: s 205C read w ith
the Thirteenth Schedu le of the CA. There is no requirement that the
private company must be an exempt private company having only
natural persons as shareholders if it wants to enjoy the exemption. This
framework is similar to the approach taken by the UK, Australia and
New Zealand and has the advantage of recognising the interests of a
broader group of stakeholders (e.g. creditors, employees, customers)
in addition to shareholders.
10-419
7.
Within the category of private and public companies, there are also
"dormant" companies. A dormant company is one which has no
accounting transaction during the relevant period in question: s 2058(2)
CA. A company is exempt from audit requ irements if it has been
dormant from the time of its formation or since the end of the previous
financial year: s 2058(1) CA. However, one or more members holding
not less than 5% of the total number of issued shares may, in
certain circumstances, require the company to obtain an audit of its
accounts for that year: s 2058(6) CA. These provisions thus lighten the
compliance burden of dormant companies by generally waiving the
obligation to obtain an audit of financial statements.
The exemption relates to the filing of these financial statements with ACRA, not the making
of these financial statements.
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Stock Exchange Listing
10-420
With in the category of publ ic compan ies, there is the distinction
between listed and unlisted companies. Listed companies are those
whose shares are quoted on a stock exchange. In Singapore, a public
company can be listed on the ma in board of Singapore Exchange (SGX)
or its junior board, Catalist (see 1112-407). Publ ic companies which
are listed in Singapore must fulfill the requirements imposed by SGX.
Some Singapore companies have multiple listings such that they are
listed on overseas stock exchanges in addition to their primary listing
on SGX.
10-421
Contrary to popular opinion, not all public companies are listed. There
are companies limited by shares with more than 50 members - and are
therefore public companies- but which nevertheless are not listed. Also,
all companies limited by guarantee - which, by definition, are public
companies- are unlisted because they do not issue shares to the public.
10-422
The main advantage of listing on a stock exchange is that the company
can raise funds through the public and that its issued shares can be
readily traded in an open market. Th is makes the company more
attractive to investors. Stock exchange listing also adds prestige since
a stock exchange typical ly lists only compan ies which meet certain
minimum criteria for capital isation and profitability.
Corporate Groups
10-423
A "group of companies" refers to the situation where several companies
are related by some common connection, typically shareholding. The law
does not recognise a group of companies as a legal entity. However, it does
recognise the relationship between a subsidiary and a holding company:
s 5 CA. For this relationship to exist, the holding company must
(a)
control the composition of the subsidiary's board of directors; or
(b)
control more than 50% of the subsidiary's voting power.
10-424
The CA also provides that if the subsidiary itself has a subsidiary, the
latter will also be deemed a subsidiary of the holding company. If
the holding company has a subsidiary but itself is not a subsidiary of
any corporation, then it is ca lled the ultimate holding company of its
subsidiary: s SA CA. A company which is whol ly owned by another
company is cal led a "wholly owned subsidiary": s 5B CA. Companies
which are in a subsidiary-holding company relationship and subsidiaries
which share a common holding company are deemed to be "related
companies": s 6 CA.
10-425
The subsidiary-hold ing company relationship is important because
certain additional provisions apply to such companies. For example,
a subsidiary is genera lly prohibited from owning shares in its
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Companies I : Formation
holding company: s 21 (1) CA. Also, a holding company is required
to prepare consolidated accounts which include the accounts of its
subsidiaries: s 201 (3A) CA. Nevertheless, the Singapore High Court
has stated that, although a company and its subsidiary may be closely
related, "the doctrine of separate legal personal ity is not displaced
simply by virtue of the fact that the companies in question are
organised as a single economic unit": Public Prosecutor v Lew Syn Pau
and Another (2006).
MEMBERS AND SHARES
10-501 A member is a person who is registered as a member of a company
in the company's register of members: s 190(1) CA. Members can
be natural persons or artificial persons. The initial members are the
subscribers who execute the constitution. In a company limited by
shares, every person who subsequently acquires shares and is registered
in the reg ister of members becomes a member of the company.
10-502 Thus, all members must first be shareholders. However, not all share-
holders are necessarily members. For example, a person who owns a
share may not yet be forma lly registered as a member in the
register of members. Correspond ing ly, not all members own their
shares. A shareholder may be ho lding shares as a nominee for
another person. The true (or beneficia l) owner of the shares is the
other person. Thus, the register of members may not revea l the
identity of the true owner but only that of the legal shareholder.
Types of Shares
10-503 The constitution of a company li mited by shares usual ly includes a
provision allowing shares to be issued with different rights. Shares
which are issued with particular rights constitute a particular class. Most
classes of shares carry voting rights, although some do not. Genera lly,
shares can be divided into two broad categories. They are preference
shares and equity shares. Within these two categories, other classes of
shares may be created.
Preference Shares
10-504 Preference shares are shares that entitle the holder to preferential
rights - typically over dividends. For example, a 7% preference share
means that, when dividends are declared, the holder is entitled to
receive a 7% return for every share he holds prior to any distribution
to ordinary shareholders.
10-505 Prior to the 2014 Amendments, theCA contained prescribed mandatory
voting rights to preference shares under certain circumstances. With the
2014 Amendments, such a prescriptive approach has been abandoned
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as it was thought that companies should have the prerogative to
decide what rights should attach to voting rights. Hence for preference
shares issued after the 2014 Amendments, theCA is silent on the rights
attached to them. However, for preference shares issued before the
2014 Amendments, it is only fair that the prescribed mandatory voting
rights are preserved. This is achieved by section 180(2) CA.
Cumulative Preference Shares
10-506 These are preference shares which carry a right to cumulative dividends.
For example, a company may not declare dividends in 2018 but does so
in 2019. The holder of 7% cumulative preference shares will be entitled
to dividend payment for both 2018 and 2019. In other words, his right
to dividends accumulates. In contrast, holders of non-cumulative
preference shares cannot claim for arrears in dividends.
Participating Preference Shares
10-507 These are shares which not only carry a preferred right to dividends,
but also entitle the holder to participate in the balance of profit
remaining after the other shareholders received their dividends. These
shares thus have the potential for "two bites at the cherry", as it were.
The first bite comprises the initial preferred payment. The second bite
comprises participation in the excess profits after the other shareholders
have been paid. Participating preference shares are thus more attractive
to investors, particularly if the company is expected to make large profits.
Redeemable Preference Shares
10-508 These are preference shares which carry a right of redemption by
the company. The holder of a fully paid redeemable preference
share can require the company to buy-back (redeem) his share at
a fixed price on a fixed date: s 70(3) CA. Redeemable preference
shares are useful in venture capital companies. The holder of such shares
can invest in the company with the expectation that the company will
redeem his shares at a future date at an agreed price. Meanwhile, prior
to redemption, the holder is entitled to dividends on a preferred basis.
Equity Shares
10-509 Equity shares are often called ordinary shares.
Equity shares
can come in different classes. For example, certain shares
(sometimes called governing shares) may entitle the holder to appoint
the directors of the company while the remaining ordinary shares
carry no such right. The rights attached to different classes of shares
are usually found in the constitution. Moreover, the constitution
often conta ins a provision which prohibits any amendment of these
class rights unless a specified majority of holders of that class of shares
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agree. This protects the holders of those classes of shares, especially if
the class constitutes a minority within the company. If not, they may
be disadvantaged by the decisions of the majority shareholders should
the majority seek to dilute the minority's class rights.
Treasury Shares
10-510 Treasury shares made their debut in 2006. Previously, theCA al lowed
companies to buy-back their own issued shares as a means to better
plan and manage their capital. A share buy-back in effect returned
unutilised funds to shareholders and the shares bought back were
cancelled. After January 2006, a company which bought back issued
shares has the choice of cancelling them or holding them as treasury
shares: s 4(1) CA and s 768(5) CA. Such treasury shares can be disposed
in a variety of ways, including being transferred as consideration for
the acquisition of assets of another company: s 76K CA. To prevent
treasury shares from being abused, there are detai led provisions as to
the maximum number of treasury shares which a company can hold
at any one time (s 761 CA) and a general prohibition on the exercise
of treasury share voting rights (s 76J CA).
Relationship Among Members
10-511 The constitution amounts to a statutory contract among the members
and between the members and the company: s 39(1) CA. It is a statutory
contract because its contractual force arises from a provision of the
statute. Accordingly, if a company takes a course of action which is
in breach of the constitution, any member can take legal action to
enforce the statutory contract. The same applies to a member who
commits a similar breach. It also follows that once a person is no longer
a member of a company, he is no longer bound by the constitution.
Members, Management and Making Money
'
'
'
Individual members
0 0 0
0 0 0 0
Veil of i~corporation
'
'
'
I
II
Members in
general meeting
IBoard of directors
'
'
~
The
companya separate
Manage+-+ legal entity
0 0 0 0
Individual directors
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10-512 Given that the constitution is a statutory contract, it is clear that
their provisions are important. These provisions determine members'
rights and members' obligations. It follows that, before a person buys
shares in a company, the prudent thing to do, apart from examining
its financial condition, is to peruse the company's constitution.
Meetings
10-513 Most member's rights revolve around members' meetings. This is
because a company is owned by its members and the wishes of its
members are expressed through resolutions passed at members'
meetings. However, over the years, the traditional process of decisionmaking by members has become more flexible such that face-to-face
meetings are now not always essential.
10-514 Basically, there are two types of members' meetings.8 The first is called
the annual general meeting (AGM). Generally, every company has to
hold an AGM once each calendar year: s 175(1) CA. However, with
the 2017 Amendments all private companies will be automatically
exempted from holding AGMs as long as all its members approve.
Usually the constitution provides for various matters to be decided by
the members at the AGM. Typically, at the AGM of a company, the
directors must render an account of their stewardship of the company.
It is thus the occasion when members can review the company's
performance, quiz the directors on particular policies adopted or
actions undertaken by them, decide on dividends to be declared (if
any) and elect new or re-appoint the existing directors. The directors
are responsible for convening the AGM.
10-515 The second type of members' meeting, called the extraordinary general
meeting (EGM), refers to any members' meeting which is not the AGM.
An EGM can be held at anytime at the request ofthe directors. An EGM
can also be held if requested by members holding not less than 10% of
the total number of paid-up shares of the company: s 176(1) CA.
10-516 General meetings are chaired by a chairman. Usually, the chairman
of the board of directors will chair the general meeting. If he is not
available, the members present for the meeting can elect another person
as chairman.
10-516b A company must give notice to its members prior to holding a genera l
meeting. Generally, 14 days' written notice must be given prior to a
general meeting: s 177(2) CA. This notice can be sent electronically:
s 387 CA. With the 2014 Amendments, a new section 387C has been
inserted to provide that notices can be sent electronically in accordance
with the constitution of the company. In effect, this provides even
8.
There is a third type of meeting called the "statutory meeting": s 174 CA. Only public
companies limited by share capital are requ ired to hold a statutory meeting. It is held only
once throughout the life of the company.
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more flexibil ity to the company to provide in its constitution how
the electronic transmission is to be effected. Further, this new section
provides safeguards to allow a shareholder the option of receiving
physical notices instead of electron ic notices.
Attendance
10-517 Essentially, every member has the right to attend, speak and vote at
any general meeting: s 180(1) CA. If a member is unable to attend a
meeting, he may appoint up to two proxies who may act on his behalf.
To do this, the member usual ly completes a w ritten form, called a proxy
form, wh ich must be submitted to the company before the meeting.
The member may grant the proxy the right to vote according to the
proxy's discretion or to vote as per the member's instructions.
10-517b The 2014 Amendments have made key changes to the appointment
of proxies. The general rule that a member may appoint up to two
proxies is retained: s 181 (1 A). However, if a member is a custodian
bank, nominee company or the Central Provident Fund Board holding
shares on behalf of indirect investors, the member istermed a "relevant
intermediary" under theCA and al lowed to appoint more than two
proxies: s 181(1(). Th is effectively allows indirect investors who hold
shares through such relevant intermediaries to attend and vote at
shareholder meetings.
10-518 Before the meeting can proceed, it requires a quorum. A quorum is
the specified number of members requ ired to be present before the
meeting is considered to be validly constituted. The absence of a
quorum does not automatica lly invalidate a meeting but it gives the
court the right to declare the meeting invalid: s 392(1) and (2) CA. The
quorum is usually stated in the constitution . If it is not stated, then
two members are sufficient to form a quorum: s 179(1)(a) CA.
Resolutions
10-519 Decisions at general meetings are made i n the form of
resolutions. There are two types of resolutions: ordinary resolutions
and specia l resolutions. Ordinary resolutions typical ly require a
simple majority of votes for passage. Special resolutions require a
75% majority of votes for passage: s 184(1) CA. Specia l resolutions
are usually required for major decisions, such as amendments of
the constitution. Where a private company genera l meeting is to
consider a special or ordinary resolution, generally 14 days' prior written
notice of the meeting must be given to members: s 177(2) and s 184(1)
(a) CA. For a public company, the notice period for ordinary resolutions
is 14 days while for special resolutions it is 21 days: s 177(2) and s 184(1)
(b) CA. This means that notice of the general meeting must be sent
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to each member specifying the time, date and place of the meeting
as well as the resolutions to be discussed.
10·520 A private company, in certain circumstances, can pass a written
resolution in hard copy or by electronic means without a face-to-face
general meeting: s 184A(1) CA. A special resolution requires agreement
by members representing at least 75% of the total voting rights while
an ordinary resolution requires agreement by members representing a
simple majority of voting rights: s 184A(3) and (4) CA. To protect small
shareholders, s 1840(1) CA provides for members representing not less
than 5% of total voting rights to request a general meeting to discuss
the resolution. In that situation, the written resolution becomes invalid,
presumably unti l such time as the directors convene a general meeting
and the resolution is approved by that meeting: s 1840(2) CA.
10·520b The 2014 Amendments tightened the procedure for written resolutions
in two ways. First, the written resolution is considered passed when it
has been signed by the requisite majority of members, subject only to
contrary provisions in the constitution: s 184(5)(a)(ii). Second, subject
to the constitution, a proposed written resolution will lapse after 28
days of it being circulated if the required majority vote is not attained:
s 1840A.
Voting
10-521
The general rule is that every member can vote at a members' meeting.
There are two types of voting procedures. First, voting can be done
through a show of hands. If so, then, subject to any provisions in the
constitution to the contrary, each member personally present shall
have one vote, regardless how many shares he holds: s 179(1 )(c)(i) CA.
Second ly, voting can be done through a poll. A poll is a written ballot.
Here, each member has one vote in respect of each share held by him:
s 179(1 )(c)(ii) CA.
10·522
The constitution usually specifies the circumstances in which members
or proxies can demand a poll. A proxy can on ly vote on a poll and not
on a show of hands, but a proxy's request for a poll will be treated
as if it were a member's request for a poll: s 178(2) and 181(1) CA.
Since a poll is important, the statute stipulates that an article in the
constitution will be void if it attempts to exclude the right to demand a
poll in various situations: s 178(1) CA. This includes the situation where
five or more members or where members holding not less than 5% of
the total voting rights in the company request a poll: s 178(1)(b)(i) and
(ii) CA. This 5% threshold was reduced by the 2014 Amendments from
10%. The reduction means that this threshold is now aligned with the
threshold which defines a "substantial shareholder" in theCA: s 81(1)
CA.
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SUMMARY
10-601 This chapter dea lt with the most common type of incorporated
business entity in Singapore: compan ies. A company is an artificial
person which has a separate legal personality distinct from its members.
As such, its liability is distinct from the liabi lity of its members. However,
in certain circumstances a court may exercise its discretion and "lift
or pierce the corporate veil", thus rendering the members liable.
Companies are regulated by the CA and case law.
10-602 The company incorporation process typically begins with submission
of the constitution. The liability for any contract entered into by the
promoters in the name ofthe company prior to its formation generally
falls upon the promoters unless the company ratifies the contract upon
incorporation. Once incorporated, the company has power to do all
things which are within the scope of authority of the company.
10-603 There are various types of companies which can be formed pursuant
to the CA. A basic distinction is made between limited and unlimited
liability companies. Limited liability companies can be further classified
as companies limited by guarantee and those limited by shares. The
latter has two types: public companies and private companies. Public
companies may be listed or unlisted. By far, the bulk of companies in
Singapore are private companies limited by shares.
10-604 Companies are owned by its members and managed by its officers. Every
company must have at least one member and one director. Companies
limited by shares are usually structured so that they can issue shares
of d ifferent types. Shares are broadly classified as preference shares
and equity shares. In turn, preference shares can take different forms
such as cumulative, participati ng and redeemable preference shares.
The third category, treasury shares, refers to shares which have been
bought back by the company and which have not been cancelled .
10-605 A lthough company officers stand at the apex of a company's
management structure, officers are accountable to members for
the way they manage the company. Traditionally, a company holds
at least one genera l meeting each year. Through this annua l general
meeting, the members exercise their right to vote and decide the
broad policy issues for the company. In certain circumstances, private
companies can do away with members' meetings and instead pass
written resolutions in hard copy or through electronic means.
···•·•·•···
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MANAGEMENT
& GOVERNANCE
INTRODUCTION
11-101 In the previous chapter, we saw how a company is formed and
· the r ights and obligations of its members. In th is chapter, we
focus on company management. Because the corporate structure
separates ownership from manageme nt, there is a delicate
balance that has to be struck between the rights of members as
shareholders and the rights of company officers as managers. This
balancing of interests - which falls within the broader "corporate
governance" discussion -forms the background from which many of
the rules regarding the rights and obligations of company officers
emerge. 1
11-102 The chapter begins by describing the various officers found in a
company, explaining their roles and responsibilities pursuant to the
Companies Act (CA) and case law. It then focuses on the role of company
secretaries and company directors, especially the duties which a director
owes to his company. Incidental to this, we discuss the legal issues
concerning insider trading since this is a matter which often concerns
management. The last part of the chapter looks at the critical issue of
how minorit y shareholders can protect their rights against the unfair
acts of majority shareholders in the management of a company.
11-103 As mentioned in ~10-103 and ~10- 104, the two most recent sets of
amendments to the CA are the 2014 Amendments and the 2017
Amendments. The 2014 Amendments contained the largest number of
reforms since the enactment of the CA. The 2017 Amendments have
been implemented partially, with the last phase to be implemented
during 2018. This chapter will present the law as at the t ime of writing.
However, given the significant impact of the 2014 Amendments and
the 2017 Amendments, brief comparisons will be made with the
prevailing law before the amendments in order to show the need for
the amendments and help improve understand ing of the law.
1.
On corporate governance in Singapore, see: Anandarajah K, Corporate Governance: Practice and Issues
(Singapore: Academy Publishing, 2010).
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COMPANY OFFICERS
11-201
Although members own a company, typically they do not manage it.
The responsibility for managing a company rests upon its officers.
Of course, a member can also be an officer of the company, in
which case he w ill be a shareholder as wel l as participant of the
management of the company. Such a person, however, has distinct
rights and obligations within each role.
Definition
11-202
Section 4(1) CA defines "officer" to include the directors of the
company, the company secretary and other persons employed in
an executive capacity. Directors are the key officers of a company.
They manage the company. Directors employed by the company are
known as executive directors. Other directors who are not employees
are non-executive directors. The company secretary acts as the main
administrative officer of the company responsible for statutory matters.
The last category, "a person employed in an executive capacity" can
include senior managers at various levels. In addition, when a company
is under receivership or liquidation, the receiver and manager or the
liquidator is also considered a company officer.
Officers as Agents
2.
11-203
A company cannot function without people. Although it is a
separate lega l person, it can only act through decisions made by
people who manage or own it. In most situations, the day-to-day
decisions are made and executed by company officers. Company
officers, in this context, function as agents of the company.
11-204
Whether a company officer is an agent of the company and is
authorised to bind the company in a particu lar transaction is a
question to be determined by the rules of agency (see Chapter 16).
The mere fact that a person is a company officer does not automatically make him an agent of the company. Thus, the cha irman of the
board of directors, although h imself a director, may not have
authority to contract on behalf of the company unless he has
received specific authority to do so: Dart Sum Timber (Pte) Ltd v Bank
of Canton Ltd (1982). 2
On the other hand, where there are only two shareholders who are also directors and
the board has approved the company entering into an agreement, the signing of the
agreement by one director in the presence of the other binds the company, even though
there was no forma l resolution author isi ng that director t o sign the agreement: SAL
Industrial Leasing Ltd v Lin Hwee Guan (1998).
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Actual Authority
11-20s Under the ru les of agency, if a company officer has actual or ostensible
authority to act on behalf of his company, then his acts may bind the
company. The scope of actua l authority for company officers may be
defined in a number of places. As a general rule, a company through
a written document under seal may appoint any person (typically
one of its officers) to act as its agent or attorney in respect of a
specified matter: s 41 (5) CA. In addition, a company's constitution
often stipulates the responsibilities of the board of directors and the
company secretary. For example, directors are usually empowered to
borrow money and issue debentures or other securities on behalf of
the company.
11-206 The constitution may also include a power given to the board to
delegate certain tasks to certa in directors or to appoint a person or
corporation as the company's attorney under a power of attorney. In
other cases, the company's general meeting may expressly authorise
one officer or a committee comprising certain company officers to
represent and bind the company in a particular matter.
Ostensible Authority
11 -207 The situation is not so clear if the issue involves ostensible authority.
Ostensible authority allows a company officer to be deemed as the
company's agent if the company has represented the officer as having
its authority to undertake a certain act, even though in fact no such
authority was given. Whether or not ostensible authority can be
established in a particular case depends on whether the conditions
for ostensible authority stated in Freeman & Lockyer v Buckhurst Park
Properties (Mangal) Ltd (1116-305) are met.
11-207bCertain company officers, however, tend to be more likely to have
ostensible authority than others. For example, a managing director may,
in some situations, be clothed with ostensible authority to do things
wh ich are reasonably considered to be incidental to the company's
business (for an example involving a general manager, see: 1]16-308).
However, each case must be evaluated on its own facts. In Skandinaviska
Enskifda Ban ken AB (Pub!), Singapore Branch v Asia Pacific Breweries (20 11),
the finance manager of a subsidiary of a listed company and part of
a large corporate group had communicated to a bank that he had
authority and that the subsidiary's board of directors had accepted the
bank's credit facility. He had also represented to the bank that certain
board resolutions (which were forged) were genuine documents. In
that case, the Singapore High Court held that the manager had no
actua l or ostensible authority to make the representations to the bank.
11-208 In some situations, s 25A CA may make it easier for a company officer
to be clothed with ostensible authority. If a restriction on the actual
authority of the officer is stated in the constitution, the section makes
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it clear that a third party dealing with that officer is not affected or
deemed to have notice of that restriction merely by the fact that the
constitution is registered with ACRA and available for inspection.
Ratification
11 ·209
An officer acting on behalf of the company without actual authority
may nevertheless have his actions ratified (see ~16-31 0) by the company
subsequently. It follows that, when deal ing with a company officer,
it is important to determine whether he has authority to bind the
company. In practice, especially if the contract involves substantial
amounts of money, the other party, before executing the contract, wi ll
often request evidence of the officer's authority to contract on behalf
of his company.
Directors' Authority and Corporate Capacity
11-210
The directors' scope of authority to undertake specific acts must not be
confused with the corporate capacity of a company: Banque Bruxelles
Lambert & Ors v Puvaria Packaging Industries (Pte) Ltd (in liquidation) (1994).
Corporate capacity is reflected in the genera l rule that a company has
full capacity to undertake any business and enter into any transaction:
s 23(1) CA. This genera l rule can be limited by an objects clause- if the
company has one (~10-308). Corporate capacity thus refers to what a
company can do.
11-21 1
On the other hand, the directors' authority to undertake acts is usually
stated in the company's constitut ion. It refers to what the board of
directors or an individual director is empowered to do. Obviously, the
directors' authority cannot exceed the corporate capacity of a company.
However, the directors' authority need not equate to the corporate
capacity of the company.
11-212
The simplest example is where the company has the lega l capacity to
sell its entire business but the constitution requires this to be done with
the approval of the members in general meeting. In this situation, the
corporate capacity to sell is clear, but the directors' authority to sell
is conditional upon obtaining approval from the members in general
meeting.
Indoor Management Rule
11-213
What happens if a third party contracts with a company through the
company's authorised officer only to discover later that there has
been some irregularity in the officer's authority? An example is
where the authority was granted by the board of directors and it
was later discovered that the board meeting was invalid due to
the absence of a quorum. Is the contract with the third party tainted
by the irregularity in the officer's authority?
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11 -214
The answer is that, genera lly, a third party can assume that all internal
procedures of the company relating to the grant of the authority have
been complied with. This is known as the " indoor management rule".
It is also called the "rule in Turquand's Case", after the case in which the
rule was enunciated. 3 The rationale for th is rule is that a third party
is usually in no position to determine whether a company's internal
procedures have been fully complied w ith.
Royal British Bank v Turquand (1856)
An Act of Parliament incorporated a company granting it the
power to borrow funds. Under its charter, however, the company
could only borrow the amount approved by a general resolution
of members. The company borrowed funds without the necessary
general resolution. It sought to re ly on this fact so as to deny
liability for the loan. The court held that the company was bound
under the loan despite the absence of the general reso lution.
The lender was entitled to assume t hat all the company's internal
procedures to obtain approval of the loan had been complied with.
11 -214b The indoor management rule has been codified with some modifications
in s 258 CA. This section was inserted by the 2014 Amendments. It
provides that if the person representing the company is a director, the
third party dealing with that director is not affected by any restriction
in authority of that director, no matter whether the restriction is found
in the company's constitution or resolution, provided that third party
acted in good faith.
11-215
3.
However, there are severa l situations- of which one is mentioned
here- where a third party may not rely on the indoor management
rule. If a third party, by virtue of his contact with the company,
knows or ought to know that the interna l procedures have not
been compl ied w ith, then he cannot rely on this rule . He also
cannot rely on s 258 CA because it cannot be said that he acted
in good faith - a requirement under that section. For example,
where a company borrowed money from directors secured by
debentures and it turned out that the amount exceeded the limit
stated in the company's constitution, the directors cou ld
not rely on the indoor management rule and enforce the
debentures: Howard v Patent Ivory Manufacturing Co (1888). The
reason is that, as directors, they should have known of the
irregularity in the company's action in the first place. In Singapore, a
company (A) was held unable to rely on the indoor management ru le
against another company (B) where A was the majority shareholder of
Band where A and B have the same controlling shareholder who was
also a director of B: Re Specialty Laboratories Asia Pte Ltd (2001).
The re levant Latin maxim is omnia praesumuntur rite et sofemniter esse acta (everything is
presumed to have been done properly and solemnly which ought to have been so done).
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COMPANY SECRETARY
11·301 We now discuss in greater detail the company officer known as the
company secretary. A company secretary is not to be confused with
a typist found in most firms. The company secretaryship is a statutory
office. Every company must have one or more company secretaries, all
of whom must be natural persons who reside in Singapore: s 171 (1)CA.
11-302 In practice, most companies have only one company secretary. There
is nothing to prevent a director from also being the company secretary
of the same company. However, where an act is required to be done
by a director and secretary, it cannot be satisfied by one person doing
the act in his dual capacity as both director and company secretary: s
171 (5) CA. Moreover, in a company where there is only one director,
that person cannot also be designated as the company secretary: s
171(1 E) CA.
Qualifications
11-303 The work of a company secretary generally requires him to be
fami liar with the provisions of the CA, especially those provisions
concerning the maintenance and filing of various company documents.
Since 2003, directors can appoint as secretary any person whom they
reasonably bel ieve to have the requisite knowledge and experience
to discharge the functions of company secretary: s 171 (1A) CA. In the
case of a public company, however, directors can only appoint suitably
qualified persons -typically an individua l w ith specific professional
qualifications such as a lawyer, accountant or chartered secretary- as
company secretaries: s 171(1AA) CA.
Appointment and Removal
11-304 A company secretary is appointed by the directors: s 171 (3) CA.
Typical ly, the constitution will stipu late that the directors have the
power to remove a company secretary from his position.
Responsibility
11-305 The primary responsibil ity of a company secretary is to ensure that the
company complies w ith all statutory requirements, particularly those
specified in the CA.
11-306 Under the direction of the directors, the company secretary is also
responsible for organ ising and holding shareholders' meetings as well
as directors' meetings. Also, the task of filing all required notices to be
lodged at ACRA, such as annual returns, falls upon his shoulders. He is
thus the officer who is in charge of the administration - as opposed to
the management - side of the company's affairs. It is not surprising,
therefore, that the modern company secretary is considered to have
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the power, at least under the guise of ostensible authority, to enter into
a contract on behalf of the company as long as the contract involves
the administration of the company.
Panorama Developments (Guildford) Ltd v Fide/is Furnishing Fabrics Ltd
(1971)
The defendant's company secretary, Bayne, hired cars from the
plaintiff. He did so as "company secretary" of the defendant, using
the defendant's stationery and allowing the plaintiff to obtain credit
references on the defendant. He told the plaintiff the cars would be
used to transport the defendant's important customers but, in fact,
he used the cars for personal ends. The defendant refused to pay
the cost of hire and the plaintiff sued. The English Court of Appeal
found the defendant liable. Salmon LJ stated:
"[Previously,) a company secretary still occupied a very humble
position- very little higher, if any, than that of a minor clerk.
Today, ...the status of a company secretary [has) been much
enhanced ... I think there can be no doubt that the secretary
is the chief administrative officer of the company. As regards
matters concerned with administration, in my judgment, the
secretary has ostensible authority to sign contracts on behalf of
the company. If a company is ordering cars so that its servants
may go and meet foreign customers at airports, nothing, to my
mind, is more natura l than that the company should hire those
cars through its secretary."
DIRECTORS
11 -401 Whereas a company secretary is responsible for the administrative side
of his company, directors have the overal l management responsibility
over their company: s 157 A CA. In line with this, directors can exercise
all the powers of a company except any power which, pursuant to
theCA or constitution, is required to be exercised by the company in
genera l meeting. In recognition of this practical reality that there is a
separation of powers and duties between the board of directors and
the management, the 2014 Amendments made adjustments to s 157A
CA to provide that the business of a company shall be managed by "or
under the direction or supervision of" the directors.
11-401 b All Singapore companies must have at least one director who must
be ordinarily resident in Singapore: s 145(1) CA. Where there is more
than one director, together they form a board of directors headed by
a chairman. TheCA does not specify a maximum number of directors.
Qualifications
11-402 Unlike certain jurisd ictions where corporate directors are permitted,
Singapore requires that all company directors be natura l persons:
s 145(2) CA. The minimum age for directors is 18 years of age (116-203b).
There is no maximum age specified in theCA for d irectors.
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11-402b Aside
from meeting the age requirements, a director must have fu ll
lega l capacity. Th is means that a person who is incapacitated by a
condition such as dementia or insanity is prohibited from holding a
directorship. However, there is no formal requirement for a director to
have specific professional training or membership in any professional
association. Nevertheless, the Singapore Institute of Directors (www.sid.
org.sg) actively offers and encourages directors to undertake specific
training programs which will help raise their awareness of their lega l
and ethical obl igations as directors.
11-403
Some individua ls are also subject to an automatic disqua lification
from acting as directors. They include undischarged bankrupts (but
see ~13-235), persons disqualified by the court and persons who have
been convicted of fraud or dishonesty: ss 148 -149 and s 154 CA.
11-404
Although not a statutory requirement, the constitution may stipulate
that every director must hold a certain number of shares in the
company. If that is the case, then each director of the company must
fulfill this shareholding requirement prior to his appointment or, at
the latest, within two months after his appointment: s 147(1) CA.
Appointment and Removal
11 -405
The first d irectors of a company are generally appointed upon
incorporation. Usually, the constitution provides for the first directors
to retire at the first annual genera l meeting (AGM) of the company.
The company can then re-appoint a retiring director or appoint any
other person to the board of directors at that first AGM. The genera l
rule as introduced by the 2014 Amendments is that un less otherwise
provided by the constitution, directors are appointed by ordinary
resolution: ss 1498 and 145(4A) CA.
11-406
Directors may resign by notice in writing unless the constitution
provides otherwise: s 145(4A) CA. The resignation is not conditional on
the company accepting the resolution but if there is no other director or
no director ord inari ly resident in Singapore, the resignation is invalid:
ss 145(48) and 145(5) CA. The constitution of the company may also
specify other situations where the office of a director is automatically
vacated, as when he becomes bankrupt or of unsound mind.
11-406b
Directors may be removed before the expiration of their term of
appointment by ord inary resolut io n of shareholders. The 2014
Amendments have made this position clear for al l companies whether
public or private. However, there is one difference in that for a public
company, this right of removal is notwithstanding the constitution
whereas for a private company, this right of removal is subject to the
constitution: s 152(1) and (9) CA. This means that if the constitution
of a private company contains provisions entrenching the position of
a particular director, that director is, essentially, not removable before
the expiry of his term.
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Types of Di rectors
11 -407 In the business world, there are many references to different types
of directors. Some of the distinctions have lega l consequences
wh il e others do not. Among the types of directors commonly
referred to are the ones listed in the box on page 280.
11-408 From the descriptions of the various directors, it is clear that most
(if not all) types of directors fall within the def inition of "director"
under s 4(1) CA. This definition includes a person officially appointed
as a d irector, his alternate or substitute, as well as any person in
accordance w ith whose instructions the officially appointed directors
or a majority of them are accustomed to act. Thus, the real test as to
whether a person is a director is whether he performs the functions of
a director, regard less of his official title. On the other hand, a person
who is officially appointed a director will, at law, be considered to be
a director even if he has compromised himself by allowing others to
control him.
DIRECTORS' DUTIES
11 -501
The law imposes a number of duties upon directors. The main statutory
duty requires a director at all times to act honestly and use reasonable
diligence in the discharge of the duties of his office: s 157(1) CA. In
most companies, the chief executive officer (CEO) is also a director. If
so, then the duties ins 157(1) CA would apply to the CEO. In addition
to the statutory duties in s 157(1) CA, case law also imposes certain
other duties, such as fiduciary duties and the duty to exercise due care
and skill. These duties imposed by case law co-exist with the statutory
duties: s 157(4) CA.
11-so1b Are these duties imposed upon various types of directors in the same
way? On the one hand, in Vita Health Laboratories Pte Ltd & Others v Pang
Seng Meng (2004), the Singapore High Court held that, "Every director
of a company, regardless of whether he has an executive or nonexecutive designation, has f iduciary duties and lega l responsibilities
to his company." Similarly, nominee direct ors have been held to owe
the same duties as any other director: W&P Piling Pte Ltd v Chew Yin
What (2007).
11-SOlc On the other hand, the standard of care for directors' duties may be
applied differently to various types of directors, depending on the facts
of each case. For example, w ith the duty of care, skill and di ligence
(~ 11-508), the standard of care is a continuum which varies according
to factors such as the individual's role in the company: Lim Weng
Kee v Public Prosecutor (2002). Using that reasoning, in Prima Bulkship
Pte Ltd v Lim Say Wan (2017) the Singapore High Court accepted the
common industry practice of appointing nom inee directors who do
not shoulder responsibil ity for commercial decision-making. There the
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court held that the nominee directors in question had not breached
their duty of care by leaving all commercial decisions to be made by
other persons. In contrast, in Ong Chow Hong v Public Prosecutor (2011),
where the transaction concerned the company's failure to comply with
stockmarket rules, the Singapore High Court adopted a strict approach
towards a non-executive director for failing to discharge his duty of
care and criticised the director's over-reliance on his fellow director to
ensure regulatory compliance. These two decisions, with different but justifiable - outcomes, showcase the pragmatic approach of our
courts in applying different standards of care depending on the type of
transaction involved and the role of the director within the company. 3b
Classification of Duties
11-502 There are various ways in which these directors' duties can be
classified. One way is to use a twofold classification of statutory
and common law duties. Others have categorised these duties
under a threefold classification: statutory duties, duty of care and
fiduciary duties. The different classifications exist because these
statutory and common law duties overlap to some extent. For
example, the statutory duty to act honestly in s 157(1) CA is also
part of the fiduciary duty of acting in good faith.
11-503 In this chapter, we will avoid adopting any rigid classification. Instead,
we will focus on the duties themselves as they are delineated by case
law and statute. Using this approach, it is possible to identify at least
five distinct duties:
(a)
duty to act bona fide in the interests of the company;
(b)
duty to act with due care and skill;
(c)
duty to avoid conflicts of interests;
(d)
duty to use powers for proper purposes; and
(e)
duty to disclose ownership and control.
Duties of Directors
Duties of Directors
3b
For a fu ller discussion of Ong Chow Hong and Prima Bulkship, see Huan J, "The Non-Executive Director and
his Duty of Care" www.internationaljournal.org>RJSSM: Volume:06, Number: 11, March 2017, 111·1 12.
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Types of Directors
Managing Director: This is the director who is the chief executive officer
of th e company. He sits at the peak of the management structure and
reports to the board of directors, of which he is a member. The managing
director may, but does not necessarily have to, sit as chairman of the
board of directors.
Executive Director: This refers to a director who has executive
responsibi lity for the day-to-day operations of the company. Examples
include a finance director, marketing director and managing director.
Non-executive Director: This is a director who does not have executive
responsibility for the daily company operations. He may, however, be
an executive director in other companies. Non-executive directors typically
sit on a board primarily for their business experience, independence of
judgment and stature and provide advice to t he board as and when required.
Independent Director: Although not defined in the CA, Guideline 2.3 ofthe
Singapore Code of Corporate Governance 201 2 describes an independent
director as one who has no relationship w it h the company, its related
corporations, its 10% shareholders or its officers t hat could interfere or
be reasonab ly perceived to interfere, with the exercise of the director's
independent business judgment w ith a view to the best interests of the
company.
Nominee Director: This usually refers to a director who has been nominated
by a maj or shareholder and appointed to t he board. The nominee director
is also described in s 386AL(8) CA for the purposes of disclosure obligations
under t hat section. However, for the purposes of all other provisions of the
CA, it is important to note that a nominee director falls within the definition
of "director" ins 4(1) CA. A nominee director thus has all the rights and
obligations of a director.
Alternate or Substitute Director: An alternate or substitute director is a
person who acts in the place of a director for a specified period, for example,
when the appointor director is overseas. Most constitutions provide for the
appointment of alternate or substitute directors subject to the approval
of the rest of the board. Alternate and substitute directors are specifically
included in the definition of "director" ins 4(1) CA.
Shadow Director: The definition of "director" ins 4(1) CA is sufficiently broad
to include persons who may not be officially appointed as directors but who
issue instructions or directions which are followed by the officially appointed
directors. Such persons (sometimes dubbed "puppeteers")are called shadow
directors. It fol lows that a shadow director has all the obligations of a
director.
De facto Director: This is a person who, though not properly appointed a
director, nevertheless acts as a director and is treated by the law as such.
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Duty to Act Bona Fide in the Company's Interests
11·504 The first duty, the duty to act bona fide (in good faith) in the interests of
the company, is one of the fiduciary duties of directors. The duty arises
because a fiduciary is required to discharge his responsibilit ies in good
faith. This duty has been enshrined ins 157(1) CA since the duty to act
honestly is genera lly considered part of the duty to act in good faith.
As long as a director honestly believes his action is in the company's best
interests, the court will not interfere with a decision that is arrived at
bona fide- even if the decision turns out to be commercially ruinous to
the company: Swiss Butchery Pte Ltd v Huber Ernst and Others (2010).
lntraco Ltd v Multi-Pak Singapore Pte Ltd (1995)
lntraco assigned to Multi-Pak debts totalling $2.55 million owed
by two companies, City Carton and Box-Pak, in consideration of
Multi-Pak paying $2.37 million and issuing 20,000 new shares of
$100 each at par to lntraco. lntraco also lent $371,000 to Multi·
Pak. Two of lntraco's directors were later appointed to Multi-Pak's
board. Multi-Pak later got into financial difficulties and was
liquidated. The receivers of Multi-Pak initiated proceedings
against lntraco claiming t hat the purchase of the debts by Multi·
Pak was, among other things, not in its interests. The trial judge
found for Multi-Pak, stating that, at the time the debts were
purchased, City Carton and Box-Pak were technically insolvent and
hence the debts were likely to be worthless. On appeal, the
Singapore Court of Appeal allowed the appeal. Among other
things, the court held that the circumstances were such that a
reasonab le man could infer that the transactions were entered into
bona fide by the directors of Multi-Pak in the company's interests.
The court accepted that these directors would have reasonably
rega rded lntraco's new equity participation in Multi-Pak as
beneficial to Multi-Pak. Although their decision, in retrospect,
was a poor decision, it did not appear to be without bona fides.
Hence, the directors did not breach their f iduciary duty.
Interests of the Company
11·505 What are the interests of the company which must be pursued by
the directors? Generally, the company's interests are the interests of
the company as a separate legal entity. However, s 159(a) CA has
modified this somewhat by stipulating that the interests of the
company include the interests of all its members and its employees.
In other words, although the duty is not owed to shareholders and
employees as such, directors have an obligation to have the interests
of shareholders and employees in mind when discharg ing their
responsibilities.
Interests of Major Shareholder
11-506 This duty to bear in mind the interests of shareholders ra ises a
problematic situations in practice. Consider the situation where a
director is appointed to the board because a major shareholder voted
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him into the position on the understanding that the director wi ll act
as the shareholder's representative on the board, as it were. Such a
nom inee director is usually expected to look after the interests of the
shareholder who facilitated his appointment. However, the law clearly
takes the view that the nominee director's overriding duty is to the
company and not to his patron shareholder. As Winslow J put in Raffles
Hotel Ltd v Rayner (1965):
"A company is entitled to the undivided loyalty of its directors. A
director who is a nominee of someone else should be left free to
exercise his best judgment in the interests of the company he serves
and not in accordance with the directions of his patron.... [A]n action
for an injunction would normally lie to restrain a nominee director
from acting in any manner adverse to the interests of the company."
On the other hand, a nom inee director can disclose to his nom inating
shareholder information gained through his position as director provided that such disclosure is approved by the board and is not
prejudicial to the company: s 158 CA.
Interests of creditors
11 -507 Whi le it is justifiable that the interests of the shareholders should
generally prevail over the interests of creditors, the situation may
change depending on the f inancial state of the company. Several recent
cases have ruled that when a company is solvent, the directors have to
pay more heed to the interests of the shareholders. However, when a
company is insolvent or where there are mounting concerns over the
financial health of the company, the pendulum will swing towards
creditors: Dynasty Line Limited (in Liquidation) v Sukamato Sia (2014)
Duty to Act with Care and Skill
11-508 This duty requires a director to exercise reasonable care and skill in
undertaking his responsibilities. Where breach of this duty gives rise
to civi l and criminal actions against a director, the standard of care
and dil igence applied to both civil and criminal aspects will be the
same: Lim Weng Kee v Public Prosecutor (2002). Furthermore, Lim Weng
Kee held that the standard of care to be applied is objective, albeit on
a continuum depending on various factorsY
"the civil standard of care and diligence expected of a director is
objective, namely, whether he has exercised the same degree of
care and diligence as a reasonable director found in his position.
This standard is not fixed but a continuum depending on various
factors such as the individual's role in the company, the type of
decision being made, the size and the business of the company... [U]
nlike the traditional approach, this standard will not be lowered to
3c
There is a perception that, over time, the standard of care may be rising: Yeo V, " Directors' Duty of Care
and Liability for Lapses in Corporate Disclosure Obligations" (2016) 28 Singapore Academy of Law Journal
598.
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accommodate any inadequacies in the individual's knowledge or
experience. The standard will however be raised if he held himself
out to possess or in fact possesses some special knowledge or
experience."
11-509 In acting with care and skill, to what extent can a director rely on the
expertise of subord inates, professional advisers and fellow directors?
Section 157C CA states that a director is generally entitled to rely upon
the reports, statements, financial information and data provided by
employees, professional advisers and fellow directors provided that
certain conditions are fulfilled. First, the director must have reasonable
grounds to believe that the person providing the material is reliable
and competent (if an employee), has professional or expert competence
(if a professional adviser), or is acting within a designated authority (if
a fel low director): s 157((1) CA. Second, the director must act in good
faith. Fina lly, the director must undertake inquiry if circumstances
require it and he must have no knowledge that reliance is unwarranted:
s 157((2) CA.
Duty to Avoid Conflicts of Interests
11-510 The third duty is the director's duty to avoid conflicts between his
interests and those of his company. For example, a director has
a general duty of disclosure to declare any interest he has in any
transaction or proposed transaction of the company, as wel l as any
conflicts of interest which may be created by virtue of his office or any
property he holds: ss 156(1) and 156(6) CA. This duty is interpreted
widely and its contravention can lead to a criminal prosecution: Yeo
Geok Seng v Public Prosecutor (2000). Moreover, the duty has been
broadened to encompass all transactions where a director's family
member (defined to include a director's spouse, son, adopted son, stepson, daughter, adopted daughter and step-daughter) has an interest:
s 156(8) CA. The 2014 Amendments have extended the coverage of
this duty under s 156 CA, as well as the duty to disclose shareholdings
under s 165, to the CEO. A company's constitution may further provide
that a director who is interested in a proposed contract, after disclosing
his personal interest, is not perm itted to vote when the board votes
on the contract.
11-511 There is also a general rule prohibiting a company (other than an
exempt private company or bank) from making loans to directors or
giving guarantees to benefit them. This prohibition also applies if the
loan is made, or the guarantee is given to benefit directors of related
companies, companies control led by directors, and the spouses and
children of directors: ss 162 and 163 CA. While the 2014 Amendments
expanded the prohibition to cover quasi loans, credit transactions and
related arrangements (which are defined ins 162(3) CA), they increased
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the exceptions so that the overall framework still allows companies
to provide financial assistance to directors in justifiable circumstances.
For example, a company may lend money to executive directors if it
is part of a general employee benefit scheme of the company. Also,
in respect of f inancia l assistance to companies controlled by directors,
the 2014 Amendments introduced a new exception of approva l by
shareholders at general meeting so long as the director concerned, if
he were a shareholder, abstained from voting.
Fiduciary Relationship
11-512
The duty to avoid conflicts of interests also arises from the fiduciary
relationship which exists between a director and his company.
Singapore law holds that there is "no distinction between fiduciary
duties owed by different categories of directors- a nominee director ...
owes the same duties to a company as any other director": W&P Piling
Pte Ltd (in liquidation) v Chew Yin What and Others (2007). As a fiduciary,
a director is required to act selflessly and selfishness is absolutely
prohibited: Kumagai-Zenecon Construction Pte Ltd v Low Hua Kin (2000).
Equity has long held that a fiduciary, acting in good faith, is not entitled
to profit from his position unless, of course, he is expressly allowed to
do so. In Furs Ltd v Tomkies (1935) the High Court of Australia held that:
"No director shall obtain for himself a profit by means of a
transaction in which he is concerned on behalf of the company
unless all the material facts are disclosed to the shareholders and
by resolution a general meeting approves of his doing so ... An
undisclosed profit which a director so derives from the execution
of his fiduciary duties belongs in equity to the company."
11-513
The duty to avoid conflicts of interests, if breached, may result in a
director being held liable for any gain he has made by virtue of his
position as director. This is the case even if he was honest and had
not intended to defraud the company.
Regal (Hastings) Ltd v Gulliver (1942)
The plaintiff, Regal, incorporated a subsidiary, Amalgamated,
to take up the lease of two cinemas. Amalgamated required
additional capital to do this. Since Regal did not have the
additional capital, the defendants, being directors of Regal,
together with other persons, provided the capital by becoming
shareholders in Amalgamated. The proposed lease did not
eventuate and Regal sold Amalgamated. The defendants made
a profit in the sale of their Amalgamated shares. Subsequently,
Regal was also sold. The purchasers of Regal then brought legal
action against the defendants claiming the profit they made on
the Amalgamated shares. The House of Lords held that the
defendants were liable to account for the profit they made on
their Amalgamated shares. This was because the opportunity to
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make the profit arose by virtue of their position as directors of
Regal. Their fiduciary relationship with Regal did not allow them
to make the undisclosed profit, even though t hey acted honestly
throughout and had no intention to defraud Regal.
Disclosure
11·514 However, the duty to avoid conflicts of interests is not an absolute
one. Generally, a director can have a personal financial interest in
contracts entered into by the company as long as such interest has
been disclosed. However, such disclosure must fully comply with the
provisions of theCA and those stipulated in the constitution (~ 11-51 0).
11-515 The duty to avoid conflicts of interests does not necessarily prevent
a person from being a director of two or more competing companies.
The critical point is that his competing directorships must be disclosed
and approved by the respective companies. Moreover, if a director
of one company becomes a director of a competing company for the
purpose of taking business away from the first company, then he may
have breached his fiduciary duty to avoid conflicts of interest.
Canadian Aero Service Ltd v O'Malley (1973)
The plaintiff company was negotiating a contract for a project in
Guyana. The defendants, being the president and vice-president of
the plaintiff, undertook the negotiations on behalf of the plaintiff.
In the midst of the negotiations, the defendants incorporated their
own company, Terra, and resigned from the plaintiff. Terra later
won the contract. The Supreme Court of Canada held that the
defendants had allowed a conflict of interests to arise and thus
breached their fiduciary duty to the plaintiff.
Duty to Use Powers for Proper Purpose
11·516 This fourth duty requires a director to use the powers granted to
him for the proper purpose for which those powers are given. The
use of such powers for personal benefit, collateral purposes or
improper purposes is a breach of this duty. This is so even if he acts
honestly or in ignorance of the proper purpose.
Howard Smith v Ampol Petroleum Ltd (1974)
The appellant and the respondent were both making takeover bids
of a company called RW Miller (Holdings) Ltd. Ampol had control
of 55% of the shares of Miller and could block the bid by Howard
Smith. The directors of Miller, on genuine commercial grounds,
preferred the bid by Howard Smith. To overcome the Ampol
voting power, the directors of Miller, pursuant to the power given
to them under their articles of association, chose to make an issue
of new shares to be subscribed by Howard Smith. This effectively
diluted Ampol's shareholding in Miller. The directors rationalised
that the purpose of the new issue was to raise additional funds for
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Miller. The Privy Council, however, found that the directors of
Miller had used the power to issue new shares for an improper
purpose. The directors must exercise their power as fiduciaries.
Here, the power was intended to enable the company to raise
capital, not to dilute Am pol's shareholding and thus further
Howard Smith's takeover bid. The fact that the directors acted
sincerely and not for their self-enrichment was not decisive.
Effect of Breach of Duty
11·517 Where a director has breached his statutory duty to the company,
the company can either sue for damages or cla im for the profit
earned by the director resulting from the breach: s 157(3)(a) CA.
Such a breach may also constitute a criminal offence: s 157(3)(b)
CA. If a common law duty is breached, in addition to a claim in
damages or an account of profits, a company may rescind the tainted
contract and recover its lawful property. A company can also cla im
full restitution or indemnity: Kumagai-Zenecon Construction Pte Ltd v Low
Hua Kin (2000). In some situations, a tracing order may be obtained to
recover money improperly taken: Caltong (Australia) Pty Ltd & Another v
Tong Tien See Construction Pte Ltd (in liquidation) (2002).
11-518 Any provision in a company's constitution or a contract which exempts
or indemnifies a company officer from liability incurred to the company
in connection with his negligence, breach of duty or breach of trust
is void: s 172 CA. Thus, a director cannot insist on obtain ing from the
company an indemn ity against claims by the company for negligence,
breach of duty and breach of trust as a condition of his agreeing to be
a director of a company. However, it is quite common for a director to
take out a policy of insurance- called "directors' and officers' liability
insurance" - to indemnify him against such claims and a company
is not prevented from maintaining that policy of insurance for him.
With increased globalisation and potential exposure of directors to
claims from third parties (such as class actions from foreign claimants),
the 2014 Amendments inserted a new section to allow a company to
provide indemn ity aga inst liability incurred by its d irectors to third
part ies in limited circumstances: s 1728 CA.
Dut y To Disclose Ow nership And Control
11-519 In addition to the preceding four duties of directors, the 2017
Amendments have introduced a new statutory duty to disclose
ownership and control. This duty requires Singapore companies and
certain other entities to maintain a "register of controllers". This
register is to include details of individuals or corporate entities which
hold a significant interest in or significant control over the company: s
386AB CA. This new duty is aimed at reducing opportunities for misuse
of companies by the persons who effectively own or control t hem. The
register of controllers must be maintained by the company and open for
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inspection by public agencies upon request. The register does not have
to be made available to the public. In this way, the authorities seek to
balance the privacy of controllers without compromising international
efforts to combat practices such as money laundering, tax evasion, and
terrorist financing. 3d
11 -520 The new duty to disclose ownership and control is imposed on
controllers - which is defined to be persons who have a significant
interest in or significant control over the company: s 386AB and 16th
Schedule CA. It is also imposed on nominee directors (as described in
s 386AL(8) CA) in that they must disclose the persons for whom they
are acting as nominee directors. To ensure effective implementation
of these new provisions, the same duties to disclose are imposed on
the affected companies with criminal sanctions for non-fulfillment.
INSIDER TRADING
11-601 After looking at the rights and obligations of company officers and
persons who control the company, we now turn to consider one
particular phenomenon- insider trading. The term "insider trading"
is not statutorily defined in Singapore. It is understood generally to
mean the use of confidential price-sensitive information to trade in
the company's securities, thus making abnormally large profits. Insider
trading is prohibited in many jurisdictions, including Singapore. One of
the main reasons for the prohibition is that insider trading undermines
confidence in the operation of a fair market in securities.
11· 602 There are two common misconceptions concerning insider trading.
First, many people think that insider trading only occurs in relation
to the securities of public companies listed on a stock exchange.
This is incorrect. Insider trading can also occur in relation to the
securities of unl isted or private companies. Secondly, many believe
that insider trading is comm itted solely by company officers, such
as directors, or other connected persons. This is due to the fact that
directors and their associates are more likely to be privy to confidential
price-sensitive information concerning their companies. However, in
fact, insider trading is not confined to company officers and their
associates. It can be committed by any person.
Statutory Provisions
11·603 The statutory provisions prohibiting insider trading are found in the
Securities and Futures Act (SFA). The SFA is a comprehensive legislation
which governs securities and futures markets in Singapore. The SFA
3d
As stated in the parliamentary speech accompanying the 2017 Amendments, these new
provisions enable Singapore to meet international standards on transparency set by the Global
Forum on Transparency and Exchange of Information for Tax Purposes, and the Financial Action
Task Force.
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insider trad ing provisions use t he " information connected" approach
towards insider trading. The effect is t hat the prohibition appl ies to a
"connected person" w ith inside information (s 218 SFA) as well as any
other person wit h "inside information" (s 219 SFA).In add ition, the SFA
has provisions which prohibit other securities violations such as: false
t rading and market rigging (s 197 SFA); securities market manipulation
(s 198 SFA); and fraudulently inducing persons to dea l in securities
(s 200 SFA).
11-604 The SFA provisions against insider trading are based largely on the
insider trading prohibitions introduced in Austra lia in 1990. For this
reason, the Singapore courts, when interpreting the SFA insider trading
provisions, may opt to refer to Australian case law for guidance.4 In
any insider trad ing prosecution, the evidentiary issues are significant.
If insider trading is proven, the sanctions which may be imposed are
substantial. First, it is a crime wh ich attracts a maximum f ine of $250,000
plus imprisonment of seven years: s 221(1) SFA. Second, MAS, w hich
is the regu latory authorit y overseeing the operation of the SFA, may
request the court to order the person who commits insider trad ing to
pay a "civil penalty" of up to $2 mi llion: s 232 SFA. The civil pena lty
is a relatively new concept developed as a hybrid of civi l and criminal
sanctions. Third, the person who commits insider trad ing may face civil
liabi lity in the form of compensation payable to claimants (private
investors) who suffer loss because of the insider trading: s 234 SFA.
11·605 In recent years, a number of insider trading cases have been successfully
prosecuted through the courts. In each case, confidential price sensitive
information was used to trade in a company's securities. Typica lly, the
offence was committed by a senior officer of the company who had
special access to the information.
Lew Chee Fai Kevin v Monetary Authority of Singapore (2012)
Lew was a senior executive of publicly listed WBL. On 4 July 2007, he
sold 90,000 of his shares in WBL when he was in possession of nonpublic price-sensitive information about WBL. He had acquired the
information at an internal executive meeting held on 2 July 2007.
From his share sale, Lew received S$448,200. MAS brought an action
against Lew alleging insider trading. At first instance, Lew was
found liable for insider trading under s 218 SFA and was penalised
with a civil penalty of $67,500. Lew then appealed. On appeal, the
Singapore Court of Appeal dismissed the appeal, finding that Lew
was in possession of material information, including a loss forecast
and a significant impairment charge which was likely to occur. The
court held that Lew ought to have known that such information
was not generally available to the public and that it would have a
material effect on the price of WBL shares if made public. The court
4.
See generally: Chiu H Y, "Australian Influences on the Insider Trading Laws in Singapore",
Singapore Journal of Legal Studies [2002] 574. For a more detailed treatment of securities law in
Singapore, see: Tjio H, Principles and Practice of Securities Regulation in Singapore, 2nd ed (Singapore:
LexisNexis, 2011).
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also stated that the elements of insider trading as set out in this case
applied to both civil and criminal charges of insider trading.
11-606
For companies listed on the SGX, there are rules which specify the
desired standard of conduct perm itted for directors who wish to deal
in shares of their listed companies. For example, Clause 30 of the
Corporate Disclosure Policy (Appendix 7.1 of the SGX-ST Listing Manual)
states:
Issuers should establish, publish and enforce effective procedures
applicable to the purchase and sale of the securities of the issuer
and listed members of its group by officers, directors, employees
and other insiders. The procedures should be designed not only to
prevent improper t rading, but also to avoid any question of the
propriety of insider purchases or sales.
MINORITY PROTECTION
this section of this chapter, we focus on the problem of minority
protection. This problem arises because most company decisions are
made on a majority voting basis. If there is a group which constitutes
a majority among members, there must also be one or more groups
which constitute minorities. These are members who own relatively
smal l parcels of shares in the company. If so, how does the law balance
the concept of majority rule and minority rights? The answer is that
certain provisions have been enacted to protect minority rights. The
key provisions fall into three broad categories.
11-701 In
Minority Rights
Minority Rights
Right to Restrain Ultra Vires Acts
11 -702
One basic right available to all members is the right to restrain the
company from committing ultra vires acts: s 25(2) CA. This right may be
used by minority shareholders if they see that the majority shareholders
are attempting to use the company for purposes not stipulated in
the constitution. This is possible because the constitution constitute a
statutory contract. Similarly, if a member knows that a company director
is about to act in a way contrary to the provisions of the constitution, the
member can take legal action to restrain that person from doing so: s409A
CA.
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Right to Information
11-703 Every member has the right to obta in and receive certain information
concerning the company. Th is means that members can be kept
informed of the company's activities. For example, every member is
entitled t o inspect and obtain copies of minutes of general meetings:
ss 189(1) and 189(2) CA.
11-704 However, members are not entitled to inspect or obtain copies of
minutes of directors' meetings: s 189(2A) CA. 5 Members should also
receive a copy of t he latest audited f inancial statements ofthe company
at least 14 days prior to a general meeting: s 203(1) CA. However,
members are generally not entitled to inspect the accounting records of
the company, although directors and auditors may do so: ss 199(3) and
207(5) CA. Taken t ogether, these rights grant every member sign if icant
access to information concerning the company and its activit ies.
Right to Fair Treatment - No Oppression
11-705 Although decisions are generally made by majority vote, every member
is entit led to fair treatment. This means that majority shareholders and
directors cannot exercise their rights oppressively against any member:
s 216 CA. If a member suffers from oppression, he can apply to the
court for orders to remedy the situation. However, what constitutes
oppressive or unfair conduct has been much debated in the case law.
Re Kong Thai Sawmill (Miri) Sdn Bhd (1978), Lord Wilberforce in the
Privy Council stated that for the case to be brought with in the
Ma laysian equ iva lent provision, s 181 Companies Act (Malaysia), the
compla inant must:
11-706 In
" ...identify and prove 'oppression' or 'disregard'. The mere fact
that one or more of those managing the company possess a
majority of the voting power and, in reliance upon that power,
make policy or executive decisions, with which the complainant
does not agree, is not enough. Those who take interest in
companies limited by shares have to accept majority rule. It is only
when majority ru le passes over into rule oppressive of the minority,
or in disregard of their interests, that the section can be invoked.
As was said in a decision upon the United Kingdom section there
must be a visible departure from the st andards of fa ir dealing and
a violation of the conditions of fair play which a shareholder is
entitled to expect before a case of oppression can be made ... And
similarly 'disregard' involves something more than a fai lure to take
account of the minority's interest: there must be awareness of that
interest and an evident decision to override it or brush it aside or
to set at naught the proper company procedure ... "
5.
Members are also not entitled to access minutes of companies w ith only one director: s 189(2A)
CA.
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11-707
285
In O'Neill v Phillips (1999), the English House of Lords ruled that the
equivalent English provision deals with "commercial unfairness" in the
sense of ensuring that agreements are honoured and promises kept.
They advocated a "contractual approach" to determine whether there
was commercial unfairness. The starting point would be to look for
formal agreements through, for example, the company's constitution;
and then to continue looking for informal agreements (often having
the characteristics of quasi-partnerships) which supplement these
formal agreements. If there was a serious breach of the terms of such
agreements, it was open to the court to grant an appropriate remedy
to the aggrieved party.
A
Family Companies and Oppression
Over & Over Ltd v Bonvests Holdings Ltd and
Another (2010)
This case involved two families: the Sianandar family (which
controlled Unicurrent Finance Ltd and publicly listed Bonvests
Holdings Ltd) and the Lauw family (which controlled Over
& Over Ltd). The families formed a 70%-30% joint venture
company (Richvein Pte Ltd) which developed and managed the
Sheraton Towers hotel.
The 30% minority shareholder, 0&0, claimed that three actions
taken by the respondents over a six-year period amounted to
oppression. The actions were: a transfer of Richvein shares by UF
to its related company, Bonvests; a rights issue in Richvein which
allegedly was partly intended to dilute O&O's shareholding
in Richvein; and several related party transactions involving
Richvein which allegedly benefitted the respondents.
At first instance, the trial judge dismissed all of O&O's three
claims. On appeal, the Singapore Court of Appeal reversed
all the three findings by the trial judge and ordered the
respondent to purchase all of O&O's shares in Richvein at fair
market value without a minority discount. This was on the basis
that 0&0 had suffered oppression.
The court held that the share transfer of Richvein shares f rom
UF to Bonvests "manifestly and irretrievably altered" the
informal nature of Richvein by transform ing it from a private
to semi-public company. This "profound" change caused
a "loss of substratum" which, when considered together
with the respondent's conduct in securing the transfer, was
oppressive. Secondly, the court held that the rights issue was
done "with a complete absence of any commercial justification"
and amounted to a scheme to dilute O&O's shareholding in
Richvein. Ultimately, t he rights issue prejudicially forced 0&0 to
incur unnecessary expenses to inject extra capital into Richvein
for little commercial reason; this was oppressive. Further,
although the related party transactions did not in themselves
amount to oppression and may even benefit 0&0, the court
was of the view that the manner in which the transactions were
conducted, viewed holistically, reinforced its finding that 0&0
suffered oppression.
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11-708 Alternatively, a member can apply to the court that the company
be wound up on the basis that the di rectors have acted unfairly
or unjustly or that it is just and equitable for the company to be
wound up: s 254(1 )(f) and (i) CA. Although the just and equitable
ground for wind ing up (s 254(1)(f) and (i) CA) may overlap with the
oppression ground for w inding up (s 216 CA), they are two distinct
regimes designed to protect a minority shareholder's interests: Sim
Yang Kim v Evenstar Investments Pte Ltd (2006).
11-709 Whilst the scope of unfair treatment is wide, it should be borne in
mind that mere mismanagement does not automatically point to unfair
treatment. The essence of the question is whether the member has
been aggrieved by the conduct of the majority wh ich fal ls below the
standard which is reasonably expected at law.
11 -710 In Singapore, the Court of Appeal has noted that where a company
"has the characteristics of a quasi-partnership and its shareholders
have agreed to associate on the basis of mutual trust and confidence,
the cou rts wi ll insist upon a high standard of corporate governance
that must be observed by the maj ority sharehold ers vis-a-vis the
minority shareholders": Lim Swee Khiang and Another v Borden Co (Pte)
Ltd and Others (2006). The approach of checking for a quasi-partnership
and then seeing if there was commercia l unfairness - in going against
what was agreed to- was aga in endorsed in the recent decision of
Lim Ah Sia v Tiong Auang Yeong (2014). One example where oppression
was found to have occurred in a fam ily-control led company is Over &
Over Ltd v Bonvests Holdings Ltd and Another (111 1-707 ).
Right To Protect Company's Interests
11-711
The earlier discussion on minority's rights dea l with the situation
where the minority's personal rights as shareholders are infringed. A
different problem arises when the company's rights are infringed but
the majority shareholder does not take action to protect the company's
interests. A typical scenario is where a director is alleged to have
breached his duty thereby causing the company to suffer losses, but
the board of directors (which is controlled by directors comprising a
majority) refuses to pass a board resolution for the company to take
lega l action against the errant director. In this situation, the minority
shareholders' interests are affected by the company's losses and they
may want the company to take action. However, they face a procedural
obstacle as illustrated in the famous case of Foss v Harbottle.
Foss v Harbottle (1843)
Two minority shareholders initiated legal proceedings against,
among others, the directors of their company. They claimed that
the directors had misapplied the assets of the company. The court
dismissed their claim. In effect, the court was establishing two
important rules:
(a)
If an injury is suffered by a company, then the proper
plaintiff to initiate legal proceedings is the company, not
its shareholders. Here, the two shareholders had no
standing to initiate their claim. Th is is called the proper
plaintiff principle.
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(b)
7.
287
If the alleged wrong can be confirmed or ratified by a
simple majority of members in general meeting, then the
court will not interfere. This is called the majority rule
principle.
11-712
The rule in Foss v Harbottle 7 clearly inh ibits minority shareholders
from taking legal action where t heir interests have been affected by
an injury suffered by the company. However, over time, the courts
have developed exceptions to t he ru le in Foss v Harbottle, especially
in situations where the majority shareholders attempt to use the rule
to disadvantage minority shareholders. If a case comes within one of
these exceptions, then a mi nority shareholder is able to initiate lega l
proceedings to obta in redress on beha lf of the company, thereby
protecting his rights as a shareholder.
11-713
The exceptions to the ru le in Foss v Harbottle, as developed by the
courts, are called derivative actions under common law. Wh ile these
exceptions remain good law today, there are prob lems in their
implementation. For example, there is no set procedure on how to
commence the derivative action. Moreover, the amount of legal costs
borne by the complainant is usually decided only at the end of the
derivative action - wh ich means t hat the complainant's f inancial risk is
high. Furthermore, it is general ly difficult to succeed using a common
law derivative action because case law stipulates t hat the complainant
has to prove fraud (not just wrongdoing) by the alleged wrongdoer.
11-714
Given the issues involved in undertaking common law derivative actions,
many j urisdictions have supplemented the common law derivative
action by enacting a statutory derivative action . In Singapore, s 216A
CA was enacted for th is purpose. Pursuant to s 216A CA, a shareholder
may apply t o the court for approval to in itiat e a statutory derivative
action by following the procedure prescribed . In terms of substantive
grounds, the shareholder has to show that he is acting in good f aith
and t hat it is prima facie in the interests of the company that the action
be brought. These grounds are easier to establish when compared to
the common law derivative action requirements.
11-715
Prior to 2014, this statutory derivative action was available only to
unlisted companies. It was not made available to listed companies out
of fear that unscrupu lous people would make frivolous applications
to harass listed companies and thereby manipulate the share price.
In any event, shareholders of listed companies had the assurance that
the listed companies were monitored by regulatory authorities and it
was felt that disgruntled shareholders could easily exit by selling their
shares in the open market.
The two principles in Foss v Harbottle are usually referred together as "the rule in Foss v
Harbottle."
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11 -716 However, the 2014 Amendments took a different stance and extended
this statutory derivative action remedy to listed companies. It was
pointed out that the requirement for court approval before the remedy
can be pursued under s 216A CA provides a screening mechanism
for frivolous applications. In response to the argument that listed
companies were monitored by regulatory authorities, it was felt that a
more desirable approach was to empower shareholders to take action
rather than rely solely on regulatory authorities. Overall, it was felt
that extending s 216A CA to listed companies would be one of the
most effective ways to promote the efficient enforcement of directors'
duties and improve protection of minority shareholders' rights. The
2014 Amendments also extended the ambit of the section to cover
arbitration proceedings in respect of a derivative action.
CORPORATE GOVERNANCE
11 -801 In the last part of th is chapter, we exam ine the concept of corporate
governance. The 1992 Cadbury Comm ittee (UK) chaired by Sir Adrian
Cadbury defined corporate governance as "the system by which
companies are directed and controlled" .8 1n the US, corporate governance
has been described as "a system of maintaining accountability between
all players in the corporate triad [ie, shareholders, board of directors,
and management). Shareholders monitor and hold boards accountable;
boards monitor and hold managers accountable." 9
11 -802 At the heart of corporate governance lies the issue of the principa l-
agent relationship. In companies, the separation of ownership from
control gives rise to the "agency problem" of aligning the interests of
shareholders and managers. Management can pursue goals wh ich are
attractive to them in the short-term but which may not be in the interests
of shareholders in the long-term. Thus one challenge is to ensure "goal
congruence" between shareholders and managers. However, this agency
problem involving shareholders and managers is not the only issue in
corporate governance. Increasingly, other issues- such as the welfare
of employees and customers, environmental protection and corporate
social responsibility- are being factored into the corporate governance
debate. The widening of the debate and the globalisation of company
activities make corporate governance even more complex.
11 -803 Globally, there are at least two recognisable models of corporate
governance in developed economies. The first model is the "marketbased model" or "shareholder model" which emphasises the
maximisation of shareho lder va lue. Here, corporate governance
is viewed as the process of administering adequate controls over
8.
9.
Cadbury Committee, Report of the Committee on the Financial Aspects of Corporate Governance
(london: Gee & Co, 1992) paragraph 2.5.
Millstein I M, "The Evolution of the Certifying Board" (1993) 48 The Business Lawyer 1485, 1487.
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management to ensure the maximisation of shareholder wealth. United
States, Canada, the United Kingdom, and Australia have corporate
governance systems which fall within the shareholder model. Singapore
tends to follow this approach.
10.
11-804
The second model is the "relationship-based model" or "stakeholder
model" which emphasises the company as a productive entity in which
the public interest, as well as the interests of multiple stakeholders
(such as shareholders, employees and creditors) are vested. Countries
such as Germany, France, and Japan have corporate governance systems
which fall within the stakeholder model.
11-805
In addition, there is increasing recognition of a third model of
corporate governance which appears to be prevalent in Asia. It has
been variously called "family mercantilism", "family capitalism" and
"personal capitalism" .10 This third model is especially common in Asia
where many companies, incl uding publicly listed companies, are largely
owned or controlled by family groups. The prevalence of family ties
in such companies creates unique issues which may be absent in the
shareholder or stakeholder models of corporate governance.
11-806
With respect to corporate governance in Singapore, since 2001 the
Singapore authorities have established a formal framework through the
Code of Corporate Governance. This Code applies to listed companies
on a comply-or-explain basis. This means that listed compan ies are
required to state in their annual reports whether their corporate
governance practices comply with the guidel ines specified in the Code.
Where a company's practices deviate from the Code, the company
must disclose this and provide an explanation for the deviation. This
"comply or explain" regulatory approach has also been used in other
jurisdictions such as the United Kingdom and Australia.
11-807
The first version of the Code was issued in 2001 and it has been revised
twice, in 2005 and 2012. The current Code of Corporate Governance
has been in force since 2012 (CCG 2012). Since then, Singapore
corporate governance practices have continued to evolve. In addition
to CCG 2012, market participants from various Singapore sectors led
by the Stewardship Asia Centre (www.stewardshipasia.com.sg), with
support from regulatory authorities, have proactively created a set of
stewardship principles- known as the Singapore Stewardship Principles
for Responsible Investors (SSP) - to guide engagement between
investors and companies. The SSP is aimed at promoting stewardship
and governance by encouraging investors to be active and responsible
stewards. In this way, the SSP can be viewed as helping to supplement
CCG 2012 in the continuing effort to further improve Singapore's
corporate governance.
Tabalujan B 5, " Family Capitalism and Corporate Governance of Family-Controlled Listed Companies in
Indonesia" (2002) 25(2) University of New South Wales Law lourna/ 486, 490.
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11-808 In 20 17, the Monetary Authority of Singapore (MAS) convened the
Corporate Governance Council to undertake another review of CCG
2012. 11 As at the time of writing, the revised version of CCG 2012 has not
yet been issued, but a consultation paper on it has been released. The
recommendations in the consultation paper seek "to strike a balance
between the need to keep the Code progressive and on par w ith
international developments, whi le tailoring it to Singapore's context
and the profi le of listed companies in Singapore" .12 lt is anticipated that
the revised version of CCG 2012 will be issued during 2018 (accordingly,
here it is abbreviated as "CCG 2018").
11-809 In terms of content, CCG 2012 (wh ich rema ins in force until a revised
version is issued) covers four broad areas: board matters, remuneration
matters, accountabi lity and audit, and shareholder rights and
responsibilities. In respect of board matters, CCG 2012 views board
quality as key to good governance. Amongst other measures, CCG 2012
requires at least half of a board to consist of independent directors
(IDs) if the chairman and CEO are the same person or related persons.
The proposed CCG 2018 reinforces this emphasis by encouraging board
renewal through a proposed nine-year ru le for IDs. It also enhances
board independence by tightening the defin ition of independence.
The objective is to ensure that IDs are not beholden to controlling
shareholders; instead, they are to take into account the interests of
all stakeholders when discharging their board responsibil ities.
11·810 With respect to the other areas of CCG 2012 as mentioned above,
they remain important but the proposed CCG 2018 modifies the
approach by shifting some key provisions to the SGX-ST Listing Rules.
If imp lemented, this will make the Code more stream lined and
concise. Overall, it appears the aim is to encourage companies to move
away from a simplistic compliance approach towards adopting more
thoughtful corporate governance practices which best support their
long-term business objectives. It is believed that this, in turn, will help
raise investor confidence in Singapore's capital markets.
SUMMARY
11-901 In this chapter, the key lega l issues associated w ith the management
and governance of companies have been examined. We looked at
company officers and their role as agents of the company. We also
briefly considered the indoor management rule which may operate
when company officers deal with third parties.
11
12
The Corporate Governance Council, comprising key private sector players and academics, was established
by the MAS to oversee corporate governance through the issuance and revision of the Code of Corporate
Governance.
See: Consultation Paper, January 2018 ·Recommendations of the Corporate Governance Council, available
from the MAS website (www.mas.gov.sg) as at 18 January 2018.
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11-902
The specific offices of company secretary and director are then
discussed. Their qualifications, methods of appointment and
removal and general responsibilities are outlined. Insofar as
directors are concerned, we also described the various types of
directorships common ly encountered today, ranging from executive
and non-executive directors to de facto directors.
11-903
Since directors have the overall management responsibility of a
company, we devoted a substantial portion of the chapter to a
discussion of directors' duties. We examined five of the key
directors' duties in some detail:
(a)
the duty to act bona fide in the interests of the company;
(b)
the duty to act with due care and skill;
(c)
the duty to avoid conflicts of interests;
(d)
the duty to use powers for proper purposes; and
(e)
the duty to disclose ownership and control.
11 -904
We then considered the issue of insider trading. The phenomenon
of insider trading is looked at from the statutory perspective. We
also briefly mentioned some of the SGX Guidelines which deal with
insider trading.
11-905
Next, we discussed minority protection. This topic arises
because a company is essentially run on the principle of majority
rule; nevertheless, minority shareholders have certain rights. To
ensure that the interests of minority shareholders are not
overlooked, we discussed three specific minority rights:
(a)
the right to restrain the company from committing ultra vires
acts;
(b)
the right to information regarding the company; and
(c)
the right to fair treatment and freedom from oppression.
We also looked at how a minority shareholder can protect the
company's interests through derivative actions.
11-906
In the last part of the chapter, we examined corporate governance.
We briefly explained the concept, the main issues associated with the
concept and the different models of corporate governance. We also
looked at the development of corporate governance in Singapore, the
CCG 2012, and some changes proposed by the upcoming CCG 2018.
...........
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Ill: FINANCE
INTRODUCTION
12-101 Up to this point, we have examined how a company is formed and how
it is managed and governed. In this chapter, we focus our discussion on
the financial aspects of the company. Finance is critical for a company.
Without adequate finance, a company w ill flounder regard less of
how marketable its product is. In fact, many corporate failures can be
attributed to some degree to the problem of undercapitalisation or
f inancia l mismanagement.
12-102 This chapter deals with the question of how a company obtains
finance to engage in business. In particular, we look at the legal issues
involved when a company obtains secured debt finance or makes an
offer of its securities in the capita l market. As a corol lary to that, the
capita l market is described and the rules on takeovers and mergers in
Singapore are outlined. We also examine the role of auditors. Given
the wide scope of this chapter, only the key features of each topic wil l
be sketched. Correspondingly, the references to the varied legislation
will be succinct. 1
CORPORATE FINANCE
12-201 Al l compan ies which undertake business activities require some
form of financing. There are essentially two categories of financing
available to it. They are equity and debt.
Equity
12-202 Equity refers to the capital supplied by members of the company. 2 In
a company limited by shares, this takes the form of payments made
pursuant to the issuing of shares. The advantage of equity over loans
as a form of f inance is that equity genera lly requ ires no repayment.
With the exception of redeemable shares, generally a company has
no obligation to repay any capita l to members on the basis of the
members' shareholding in the company.
1.
2.
For example, the references to the Securities and Futures Act (SFA) will be brief.
Obviously, "equity" is used in a different sense here compared to its use in 111 -308, where equity
refers to the set of principles developed by the English Courts of Chancery. Here, equity means
ownership of a company through shares.
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Debt
12-203 In contrast to equity, debt is provided almost always on the condition
that repayment is made with interest and that the company provides
adequate security throughout the period of the debt. With the
exception of short-term credit from suppliers, the use of unsecured
debt is less frequent in arm's length transactions. This is because of
the risk of non-payment in cases of unsecured debt. In some situations,
parties have tried to create "quasi-security" -through mechanisms
such as negative pledges and set-offs against deposits- in what would
otherwise be unsecured transactions. However, there is a risk that such
quasi-security may not be enforceable ultimately- for an example, see:
The Asiatic Enterprises (Pte) Ltd v United Overseas Bank Ltd (2000). 3
12-204 Typical sources of private debt financing for companies include banks,
finance companies and wealthy members and directors who may be in
a position to grant shareholders' and directors' loans. Of course, debt
financing can also be obtained through an issue of debt securities, such
as when debentures are sold to the public. Like an issue of shares to
the public, an issue of debt securities to the public can also be followed
by the debt securities being listed on a stock exchange. The public can
then trade in these debt securities prior to their maturity.
Regulatory Framework
12-205 Equity and debt financing for Singapore companies is largely regu lated
by the Securities and Futures Act (SFA) and, to a lesser extent, the CA.
The level of regu lation differs depending on two factors: the type
of f inancing and whether the f inancing is obtained from private or
public sources. As to the type of financing, there is a higher level of
regulation involved when a company's debt f ina ncing is secured. In
contrast, unsecured debts are relatively free from statutory regu lation.
In Singapore, the common types of security used in debt f inancing
include mortgages on rea l property and shares (see ~14-219 and ~14220) as well as charges and debentures. They are used regardless as
to whether the debt financing is raised from private or publ ic sources.
12-206 As to the source of financing, the general rule is that every offer of
securities, whether made privately or publicly, requ ires a prospectus
unless exempted. However, when debt or equity is offered to a closed
group or defined circle of private individuals and institutions, there
may be exemptions from the prospectus requirements so that there
are fewer restrictions to be observed. Conversely, there is general ly a
higher level of regulation whenever the financing is obtained from
the public. This is so regardless as to whether the financing is in the
nature of equity or debt.
3.
On quasi-security generally, see: Tan C H, "Quasi-security Interests in Loan Agreements: An
Overview" 5 Singapore Academy of Law Journal (1993) 170. On the Asiatic Enterprises case, see:
Yeo V, "The Quest for Quasi -Security: The Asiatic Enterprises v United Overseas Bank" 29 Asia
Business Law Review (July 2000) 52.
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12-207 Given that there is more extensive regulation over secured debt finance
and finance raised from the public, the next two sections of this chapter
will focus more on these topics. We w ill f irst discuss secured debt
finance, with a focus on debentures, charges and guarantees. Then,
in the next section, we will focus on the regu latory framework for the
issuing of shares and debentures to the public.
Level of Finance Regulation
Equity
Less regulated
More regulated
SECURED DEBT FINANCE
12-301 The rationale for greater regulation of secured debt finance is
simple. In cases where debt is secured, t he security involves some
form of property such as real property, personal property or choses
in action. As soon as property rights are involved, then some form
of system must be developed to ensure that conflicting rights over
property can be avoided or resolved. In the context of compan ies,
we look at two common types of security used in debt financing debentures and charges. We w ill outline the key lega l aspects of
each security and the main provisions of theCA and SFA which apply
to them. We will also briefly describe the use of guarantees as a means
to secure a company's debt.
Secured Debt Finance
Common Forms
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Debenture
12-302 Section 4(1) CA defines "debenture" broadly to include debenture
stock, bonds, notes, and any other securities of a corporation whether
constituting a charge on the assets of the corporation or not (excluding
bills of exchange- see 1117-201) and including promissory notes having
a face value of $100,000 or more with a maturity period of 12 months
or less. This definition shows that a debenture is not to be confused
w'ith a bill of exchange or, in particular, short term promissory notes
of the type used in the money market. The thrust appears to be that
a debenture is a medium to long-term financial instrument.
12-303 A more helpful, though still somewhat imprecise, definition of
"debenture" was given by Chitty J in Levy v Abercorris Slate and Slab Co
(1887):
"In my opinion a debenture means a document which either
creates a debt or acknowledges it, and any document which
fulfils either of these conditions is a "debenture". I cannot
f ind any precise legal definition of the term, it is not either
in law or commerce a strictly technical term, or what is called
a term of art."
12-304 It can be seen, therefore, that "debenture" is a general term which
covers a range of debt securities used to obtain medium to long-term
debt financing for a company. Within this broad category, there are
a number of specific types of debentures which can be identified.
Private and Public Debentures
12-305 A private debenture refers to the instrument which creates or
acknowledges a debt between a company and one or more lenders,
entered into privately. Thus, depending on its wording, a loan
agreement between a company and its bank may constitute a
debenture. In a loan transaction, such a debenture may also constitute
a charge- either a fixed or floating charge, or both.
12-306 A public debenture, on the other hand, involves a debt which has
been offered for public purchase. In a typical debenture issue,
debentures with a face value of $1,000 each may be sold at a
discount by the issuing company. The discount, among other things,
represents the creditworthiness of the company. Interest is payable
by the company to the owner of the debenture on the face value of
$1,000. When the debenture matures, it is redeemed by the
company. Meanwhile, if the debenture has been listed on a stock
exchange, anyone may buy and sell the debentures in the same
way as shares are bought and sold.
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Debenture Stock
12-309 A debenture is a financial instrument with a discrete value.
For
example, a debenture can be issued with a face value of $100, $1,000
or $10,000. It is usua lly transferred only in its entirety. Debenture
stock, on the other hand, is "borrowed capital consolidated into one
mass for the sake of convenience" .4 Debenture stock thus refers to
the collective debt, divided into units which can be held by various
holders. In this way, theoretically, a debenture stock holding can be
transferred in its entirety or in part.
Regulation of Debentures
12-310 TheCA and SFA contain provisions regulating the use of debentures by
companies. The public debenture provisions are found in Subdivision
3 of Part XIII of the SFA (ss 261 - 271 SFA). An outline of these public
debenture provisions in the SFA is given later in th is chapter, following
the section on shares offered to the public.
12-311 Private debentures, on the other hand, are generally not strictly
regulated by the CA. The terms and conditions of private debentures
themselves are not regulated. Ultimately they depend on what is
agreed upon by the parties. The main obligation is that a company
which issues debentures must maintain a register of debenture holders
kept in the registered office or some other place in Singapore: s 93(1)
CA.
Charge
12-312 A charge is a security interest granted by a company in favour of a
creditor in respect of the company's asset. The charge is called a
"fixed charge" if the charge is granted over one or more specified
assets. It is called a "floating charge" if the charge is not over
specific assets but over the company's assets generally or a class of
assets. The provisions which govern the registration of charges are
found in Division 8 of Part IV of theCA (ss 131 - 141 CA).
Fixed Charge
12-313 Assets subject to a fixed charge effectively cannot be sold by the
company because it is encumbered in favour of the creditor. If the
creditor consents to the sale, then the buyer usually takes the asset
subject to the charge. Fixed charges are commonly granted over large
items of equipment and company shares. A fixed charge can even be
created over a ship or a plane or a part thereof. Fixed charges over
land are created through a mortgage.
4.
Schmitthoff C M, (ed}, Palmer's Company Law, 24th ed, vol 1 (London: Stevens & Sons, 1987)
para 44-04.
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Floating Charge
12-314
There is no definition of a floating charge in the CA. However, Lord
Macnaghten defined a floating charge in Illingworth v Hou/dsworth(1904)
as:
" ... a [charge which] is ambulatory and shifting in its nature, hovering over
and so to speak floating with the property which it is intended to affect
until some event occurs or some act is done which causes it to settle and
fasten on the subject of the charge within its reach and grasp."
12-315
The essence of a floating charge is that assets subject to it can be dealt
with by the company as if they are unencumbered. Floating charges
are commonly granted over a class of assets rather than a specific asset,
e.g. a company's inventory. Throughout the period of the charge, the
company is able to use up or replen ish the inventory as it would in the
ord inary course of business.
12-316
A floating charge is especially useful if the inventory comprises goods
which are of little value individually. For example, a clothing retailer will
have great difficu lty persuading a bank to accept a fixed charge over
his stock of clothes in his shop. The clothes are too numerous to charge
individually and, in any event, creating a fixed charge on them prevents
them from being sold to consumers unencumbered. A floating charge
over inventory in this situation is ideal and will enable the retailer to
obtain the loan he requires.
12-317
One unique feature of the floating charge is that a company may deal
with the assets as it would in the ordinary course of business. This has
led to lenders creating new financial products to suit business needs.
Consider the example of book debts or accounts receivable. Lenders
had created an arrangement which allowed the company to use the
proceeds from book debts in the ordinary course of business while under
a f loating charge, although the company was disallowed from assigning
its uncollected book debts while such were under a fixed charge. In that
way, the company could use the proceeds from book debts as much
needed working capital, while the lender was secure because it had a
fixed charge over the uncollected book debts. This arrangement was
endorsed in the UK High Court decision of SiebeGorman&CoLtdvBarclays
Bank Ltd (1979). However, 26 years later, this case was overruled by the
UK House of Lords in Re Spectrum Ltd (2005). There, the court ruled that
the attempt to separate ownership of proceeds from ownership of the
uncollected book debts made no commercial sense. The proceeds were
traceable to the uncollected book debts and should be viewed as the
same class of assets. Since the company could use the proceeds from
book debts in the ordinary course of business, the charge over all the
book debts was deemed to be a floating charge.
12-318
One final point on floating charge requires consideration. Crystallisation
of a f loating charge occurs when an event or act triggers the floating
charge "to settle and fasten" (in the words of Lord Macnaghten) over
the assets specified. Upon crystallisation, a floating charge becomes
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fixed on the assets which exist at that time. A fixed charge thereafter
exists on these assets. There are several circumstances which crystallise
a floating charge. They include situations such as when the company
has a receiver appointed or goes into liquidation. Parties may also agree
that the occurrence of specified events crystallises a floating charge. 5
Registration of charges
5.
12-319
TheCA provides that where a charge is created over certa in types of
assets, it must be registered with the Registrar of Compan ies within
the Accounting and Corporate Regulatory Authority (ACRA). The
types of assets listed in section 131(3) CA include book debts, ships,
aircraft, land, shares of a subsidiary company and a charge to secure
any issue of debentures. The section also lists floating charges on the
undertaking or property of a company as being registrable. The failure
to reg ister is an offence: s 132 CA. In practice, the lender's lawyer will
usually arrange for the registration of a charge since it is in the lender's
interest to ensure that the charge is reg istered promptly.
12-320
Once a charge is registered, it ranks in priority following the usual
rules of priority in time under the law of property. If the charge is not
registered, the lender cannot enforce his security against the liquidator
and any other creditor who has a security over the same asset. The
underlying debt, however, is not prejud iced and, in fact, the debt
becomes immediately payable if the charge is void: s 131(2) CA. Thus,
non-registration resu Its in the loss of the priority ofthe lender, not the
loss of the debt.
12-321
The Registrar of Companies maintains a register of charges lodged for
registration: s 134(1) CA. In this way, charges become a matter of public
record. Every person who deals with a company is thus deemed to have
constructive notice of all charges created over the company's assets.
In practice, a financial institution shou ld always check the register
of charges to determine what assets have already been encumbered
before deciding whether or not to approve credit to a company.
12-322
The company itself is also obliged to maintain a copy of the charge
and a register of charges in its registered office: ss 138(1) and (2) CA.
Every member and creditor is entitled to inspect the instruments
creating the charge without fee; any other person may also inspect
such instruments provided a nomina l fee is paid: s 138(3) CA. Copies
are avai lable at a fee: s 138(3A) CA.
12-323
When part or all of a secured debt under a charge has been repaid, the
company usually files a statement of satisfaction with the Registrar of
In Re Manurewa Transport Ltd (1971), a New Zealand court accepted t hat a f loating charge can
be crystallised if, as stipulated in the debenture creating the charge, the company creates an
encumbrance over its assets ranking in priority to the f loating charge.
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Companies: s 136(1) CA. The same also appl ies if the property under
the charge is released from the charge. The wording of s 136(1) CA,
however, does not impose a mandatory requirement. Nonetheless,
in practice, most companies do file a statement of satisfaction. The
statement constitutes evidence of the payment, satisfaction or release
of the debt or property under the charge: s 136(2) CA.
Priority Among Charges
12-324 Although the detailed rules on priority among charges are too complex
to be dealt with here, it is important to note some general principles
concern ing priority. Generally speaking, between two charges of the
same nature, the first in time prevails. For example, if two f ixed charges
are created over the same asset, the one that was created earlier prevails.
12-325 Different considerations apply when one considers the priority of a
floating charge in relation to other charges. Between a fixed charge
and a floating charge over the same asset, the fixed charge prevai ls
even if it were created subsequent to the floating charge and with
notice of the prior floating charge.
12-326 To deal with this weakness of a floating charge, it is usual for the
floating chargee to negotiate for a clause to be inserted in the charge
instrument to stipulate that the company sha ll not create subsequent
charges ranking pari passu (ranking equally) with or in priority to
the floating charge. Such a clause is called a negative pledge clause.
Whether this clause is effective is not certain under UK case law but
in Singapore, the position appears to be favourable to the floating
chargee. This is because in the form provided by ACRA for registration
of charges, there is a specific section for "Restrictions/Prohibitions" to
be stated. If the chargee has successfully negotiated for a negative
pledge clause in the charge instrument, it will definitely insert the
clause in this section for anyone inspecting the register to see. In a
local decision,6 it has been held that the person asserting priority over
a prior registered floating charge has the burden of proving that
he had no notice of that charge and the particulars registered with
ACRA. Therefore, one can argue that in view of the nature of the form
provided by ACRA, it is practically impossible for a person to prove no
knowledge of a negative pledge clause if the prior f loating charge had
been properly registered with that form at ACRA.
Guarantees
12-327 A company may obtain a loan subject to providing the lender with one
or more satisfactory guarantees from other persons, usually its directors
or shareholders. 7 A guarantee is essentially a prom ise to answer for
the debt of someone else. Thus, if a director of a company gives a
6.
In Kay Hian & Co (Pte) v Jon Phua Ooi Yong (1989), although the judge declined to make a ruling
on what constituted constructive notice of a negative pledge clause in the absence of full
argument on this point, he made a ruling based on the issue of burden of proof.
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guarantee to a bank to secure the bank's loan to the company, then
the director, as guarantor, is making himself legally bound to repay
the loan (with interest, obviously) should the company fail to repay it.
12-328 Guarantees are especially common in small private companies with
low capital isation. There are many private companies today which
are u$1 companiesu in that their paid-up capital is $1. This means t hat
the company has virtually no paid-up equity base. Creditors are wary
of lending money to such companies for obvious reasons. Accordingly,
they usually demand one or more guarantees to be provided as a
condition of the loan.
12-329 At law, a guarantor (also called a usuretyu) is not primarily liable for
the debt.8 The debtor is primarily liable. This means that the lender
must first demand payment of the debt from the debtor. It is only
when the debtor is unable to satisfy the debt that the lender is entitled
to claim under the guarantee. In practice, however, guarantees used
today have often been drafted so as to make a guarantor primarily
liable on the debt in the same way as the debtor. If the word ing has
been drafted properly, such a provision can, in certain circumstances,
be effective.
12-330 If a company itself issues a guarantee, and the guarantee is given for
the benefit of any of its directors or companies controlled by any of
its directors, certain provisions of theCA may apply. This is discussed
in ~11 - 511.
OFFERS TO THE PUBLIC
12-401 Instead of raising funds privately, a company can raise funds by
offering its securities to the public. There are basical ly three types of
securities which are commonly offered to the public: shares, debentures and
units in collective investment schemes. Shares and debentures
have already been expla ined. The term ucollective investment
scheme" replaces the concepts of uinterests other than shares" and
"participatory interests" previously found in the CA. Units in collective
investment schemes is the term used to refer to a range of interests
which are not shares or debentures. The s 2 SFA definition of collective
investment scheme highlights three aspects:
(a)
it is an arrangement in respect of property under which
contributions from participants and subsequent income or
profits are pooled;
7.
8.
See: Low KY. The Law of Guarantees in Singapore and Malaysia, 2nd ed (Singapore: LexisNexis,
2003). See also: Poh C C, Guarantees and Performance Bonds, 3rd ed (Singapore: LexisNexis, 2017).
Strictly speaking, a guarantee is not a security since a guarantee does not involve the granting
of security over an asset. However, in practice, guarantees are widely used to secure (in t he
wide sense of t he word) loans and other forms of credit.
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the participants to the arrangement do not have day-to-day
control over the management of the property but instead the
property is managed by or on behalf of a manager; and
the aim of the arrangement is to enab le participants to
participate in or receive profits, income or other payments
arising from the acquisition, holding or disposal of any right,
interest or title in the property or any part thereof.
12-402
One example of a collective investment scheme is a REIT (rea l estate
investment trust). 9 A REIT is structured as a un it trust. A unit in a unit
trust represents a cla im or a right over part of the trust property. It
is not a share as such; neither is it a debenture. In a REIT, a bund le of
income producing properties, such as commercial buildings, is placed
in a trust and a manager is appointed to manage these assets. Investors
can purchase an interest in the trust by buying units which are listed
on the stock exchange. Accordingly, when units are offered to the
public, then those marketing the units must generally comply with the
provisions governing offers of units in collective investment schemes
found ins 283- s 308 SFA.
12-403
Compared to the rules governing the raising of funds in a private
sphere, the rules governing the ra ising of funds in the public
sphere are more stringent. The underlying rationale is that the
public must be protected against unscrupulous persons who wish to
use shares, debentures or units in collective investment schemes to
defraud unsuspecting individuals. However, protection of the public
must be balanced with the need of companies to raise funds cheaply
and quickly. Accord ing ly, the SFA allows additional ways through
which small and med ium enterprises can raise funds without excessive
regu latory costs. The general rule remains, however, that raising funds
in the public sphere requires a prospectus. In the following paragraphs,
we confine our discussion to the capital market where companies
obtain funds in the public sphere. We focus mainly on shares and
debentures and the requirements of a prospectus.
Capital Market
12·404
9.
The capital market refers to the market where medium to long-term
capital is traded. "Capital" is used broadly here to include both
equity and debt. The equity and debt instruments and collective
investment schemes which are traded in the capital market can be
grouped under the more general term, "securities" . The capital
market (sometimes more generally called the "securities market")
should be distingu ished from the money market which deals with
LeeS F and FooL E, "Real Estate Investment Trusts in Singapore: Recent Legal and Regulatory
Developments and the Case for Corporatisation" (201 0) 22 Singapore Academy of Law Journal
36.
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short-term financial instruments. The capital market, money market,
futures market, and the commodities and currency markets together
comprise the financia l market in Singapore. 10
12-405 The capital market itself can be divided into two sectors. The primary
market deals with the issuing of new securities. Typically, this involves
an offer of securities which is taken up by individuals and corporate
investors. Once new securities have been taken up, they can be traded
in the secondary market. Thus, the primary market deals with new
securities whereas the secondary market deals with issued securities.
The Singapore Exchange (SGX)
12-406 The Singapore Exchange (SGX) operates the securities and derivatives
exchange in Singapore. Thus it plays a major role in the Singapore
capital market. In terms of corporate structure, SGX is an investment
holding company with several subsidiaries performing different services
relating to securities and derivatives trad ing and settlement. For the
purposes of our discussion, the more important subsidiaries are:
(a)
(b)
Singapore Exchange Securities Trading Ltd (SGX-ST) - w hich provides
securities trading; and
Singapore Exchange Derivatives Trading Ltd (SGX-DT) - which
provides derivatives trading.
12-406bSGX has implemented various measures to grow and support a welldeveloped capital market in Singapore. In 2000, SGX became the first
securities exchange in the Asian region to have its shares listed and
traded on its own stock exchange. 11 With this listing, SGX assumed
dual roles: tirst, as a profit-making corporate entity accountable to
shareholders; and, second, as a regu lator to police the securities and
derivatives markets. To quell possible criticism for perceived conflicts
of interest which may arise from its dua l roles, SGX took the next
step of hiving off an independent un it to focus solely on regu latory
functions. In 2017, a new subsidiary, Singapore Exchange Regu lation
(SGX RegCo), was incorporated for th is purpose. SGX RegCo has its
own board of directors which is independent of SGX and SGX-Iisted
firms. SGX RegCo oversees the pol icing of the stock market, ensures
that listed compan ies comply with listing rules, and conducts market
surveillance activities to safeguard investors from illegal activities. 12
10.
11
12.
For a comprehensive treatment of securities law in Singapore, see: Tjio H, Principles and Practice
of Securities Regulation in Singapore, 3rd ed (Singapore: LexisNexis, 2017).
In doing so, SGX was fol lowing in the footsteps of other world class exchanges such as the
London Stock Exchange and New York Stock Exchange.
The establishment of SGX RegCo puts SGX on par with the New York Stock Exchange which
has a not-for-profit arm (called NYSE Regulation) that performs a similar policing ro le.
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12-407 Pursuant to the SFA, the SGX is licensed to operate a securities exchange.
Within SGX there are two distinct equity markets. There is the wellknown SGX Main Board and, for smaller entities, Catalist (previously,
SGX Sesdaq). The requirements for listing on Catalist are less stringent
than those on SGX Main Board. Entities listed on Catalist tend to be
smaller than those listed on SGX Main Board although, over time,
successful Catalist entities may apply for and transfer their listing to
SGX Main Board. Together, as at January 2018, there were about 750
listed companies on the SGX Main Board and Catalist. About 40%
hailed from beyond Singapore. Total market capitalisation was $1.1
trillion as at the end of January 2018. 13
12-408 The second main market operated by the SGX revolves around
derivatives trading. 14 SGX-DT is a leading derivatives exchange in Asia.
The range of derivative products traded on SGX-DT includes futures
and options contracts on stock indices, commodities, interest rates and
energy.
Regu latory Framework
12-409 The regulatory framework governing the capital market comprises
both statutory and non-statutory rules. The statutory rules are
found largely in the SFA and, to a lesser extent, the CA. Other
leg islation, such as the Monetary Authority of Singapore Act which
established the government regulatory watchdog, the Monetary
Authority of Singapore (MAS), are also relevant. Together, the
regulatory framework is intended to mainta in a capital market which
is free from misleading or deceptive behaviour, insider trading, market
manipulation and other conduct which is inimical to the function ing
of a transparent and efficient market.
12-410 The non-statutory rules comprise chiefly the listing Manuals, which are
issued by the SGX, and the Singapore Code on Take-Overs and Mergers
(TC). The Listing Manuals contain the procedures and rules governing
the listing of securities on the SGX Main Board and Catalist. Since the
Listing Manuals are issued by the SGX, they do not have legislative
status. However, because they are approved by the MAS, they can be
said to have semi-official status. Contravention of a listing Manual can
bring about a number of consequences including fines from the SGX
and court action brought about by an aggrieved person (s 25 SFA). The
SGX also has the power to de-list companies, suspend trading in certain
counters as well as suspend intermediaries, such as stockbrokers, from
market activities.
13.
14.
See: SGX News Release, 7 February 2018, "SGX reports market statistics for January 2018".
For an introduct ion to the regulatory f ramework of the derivatives market in Singapore and
Malaysia, see: Gengatharen R, Derivatives Law and Regulation (London: Kluwer, 2001).
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12-411
The TC is created pursuant to ss 139(2) and 321 SFA. The TC is
adm inistered by the Securities Industry Council (SIC) which operates
pursuant to s 138 SFA. The TC supplements the take-overs provisions in
the legislation by providing more detai led rules on the procedures to
be fol lowed in take-overs and mergers of public companies. Modelled
after London's City Code on Take-overs and Mergers, the TC also does
not have legislative status: s 139(3) SFA. It follows that non-compliance
of the TC does not amount to a criminal offence: s 139(8) SFA. The SIC
may, however, publicly censure persons who do not comply with the
TC: s 139(9) SFA.
Share Issues
12-412
There are several methods by which a company may issue new
shares, thereby raising fresh capital. The differences among them
revolve around the way in wh ich the shares are offered to or
eventually placed in the hands of shareholders.
Initial Issue
12-413
If the company is making its debut as a public company, it wi ll be
making an initial issue of shares. Oncethesharesare issued, mostcompanies
will proceed to being listed on the stock exchange.
12-414
There are two common methods for a company to make an initial
issue of shares. The first way is by making an offer to the public
t hrough a prospectus, ca lled an "in itial public offering" (IPO).
Essential ly, a prospectus is a document which advertises securities,
inviting interested persons to make an application to subscribe for
these securities. The price of the secu ri t ies may be f ixed in the
prospectus. Alternatively, the prospectus may invite subscribers to
tender for their shares at various bid prices, leaving the company
with a discretion as to which tender will be accepted.
12-415
The second common method of making an initial share issue is by
a placement of shares. The process of placing sha res requires an
intermediary, usually a stockbroker. The company w ill cont ract with
the intermediary t o allot a fixed number of new shares at a given
subscription price. In return, for a placement fee, the intermed iary
will find investors- usually among its clients - who w ill take up the
allotted shares.
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Share Issues
New Share Issue
Further Issues
12-416 If the company is already a listed public company and it requires
additional fresh capital, it will not be making an initial issue of
shares but, rather, a further issue of shares. There are two common
ways for a company to make a further issue of shares. The first way
is through a placement, a process which has already been described
above. The second way is through a "rights issue".
12·417 A rights issue amounts to an invitation to the company's existing
shareholders to subscribe for a new issue of shares in the company.
An existing shareholder's rights entitlement is usually made on a
proportional basis. For example, for every 10 shares he holds, he may
be given the right to subscribe for one new share. When the new
shares are subscribed, this effectively increases the paid-up capital of
the company.
12-418 Typically, a rights issue is priced at a discount to the prevailing
market price. Thus, a company with shares trading at $2.50 may
make a rights issue priced at $2.20. The discount helps to encourage
existing shareholders to subscribe for the new shares. If an existing
shareholder declines to subscribe, he is usually entitled to sell his rights
entitlement to a third party.
Prospectus Requirements
12-420 The preceding description of share issues refers several times to the
need for a company to issue a prospectus in particular circumstances.
The general rule is that no person is entitled to make an offer of
shares, debentures and units in collective investment schemes unless
the offer is made by a prospectus which complies with the prospectus
requirements and such prospectus is registered with the MAS: s 240(1)
SFA. The requirement to issue a prospectus is designed to protect the
public.
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Exemptions
12-423
A prospectus is not required in several situations, including the
following:
(a)
small offers where the total amount raised within a 12 month
period is below $5 mil lion: s 272A SFA;
(b)
a private placement to less than 50 persons within a 12 month
period: s 272B SFA;
(c)
an offer made in connection with a take-over scheme: s 273(1 )(a)
SFA; and
an offer to enter into an underwriting agreement: s 273(1)(cc) SFA.
(d)
12-424
There are other situations where the prospectus requirements need
not be complied with. For example, there is an exemption for offers
to accredited investors who are deemed sufficiently knowledgeable
about investments. Accredited investors refer to investors with net
assets of at least $10 mil lion in va lue. The rationa le is that such persons
are assumed to be sophisticated investors and do not require the level
of protection and disclosure found in prospectuses.
Contents of Prospectus
12-426
A prospectus is prepared by the company intending to issue or sell
securities, usually with the assistance of its legal and financial
advisers. Once it is finalised, it must be submitted to the MAS for
registration.
12-427
Generally, a prospectus must disclose all the information which
investors and their professional advisers would reasonably require to
make an informed assessment of an investment: s 243(1) SFA. Pursuant
to the Schedules contained in the Securities and Futures (Offers of
Investments) (Shares and Debentures) Regulations 2005 (SFOISD
Regulations), a prospectus must:
(a)
bear the date of registration of prospectus and a statement that
a copy of the prospectus has been lodged with and registered
by the MAS but that the MAS takes no responsibility for its
contents;
include details of the company's share capital; the names,
(b)
occupations and addresses of all its directors and company
secretaries; the nature of the company's business; details of
property acquired; the names and addresses of the company's
auditors and other advisers including bankers, underwriters and
legal advisers; a brief company history; a business overview;
selected financial data and profit forecasts; details of every
material contract entered into by the company in the
preceding two years which are not in the ordinary course of
the company's business; and many more items; and
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(c)
contain selected reports including an auditor's report on the
company; an auditor's report on any business to be purchased by
the company using the proceeds of the issue; an auditor's report
on any company whose shares are to be purchased using the
proceeds of the issue; and a directors' report as to the financial
status of the company between the date of the last aud ited
accounts and the date of issu ing the prospectus.
12-428 The process of registering a prospectus begins with the lodgment of
a draft prospectus with the MAS, accompanied by various supporting
documents. The MAS has between 2-3 weeks to review the prospectus
and register its 240(8) SFA. Upon registration, a prospectus is generally
valid for six months: s 250(3)(b) SFA.
12-429 The MAS retains a discretion not to register a prospectus which,
among other th ings, contains any statement wh ich is misleading,
does not appear to comply with the statutory requirements or which
it deems not to be in the public interest s 240(13) SFA. A person
aggrieved by an MAS refusal to register a prospectus may
appeal to the Minister whose decision is final: s 240(16) SFA.
12-430 Clearly, the overall thrust of these provisions is to make the company
disclose to prospective subscribers of the company's securities as many
relevant details as possible concerning itself and its past, present and
proposed business undertakings. Hence, a printed prospectus is often
quite a thick document w ith a number of financial and other reports
and a host of innumerable details.
Liability Arising from Prospectus
12-•Bl A company may be liable for issuing a prospectus which contains
false or misleading information: s 253 SFA. In addition, a director
and any other person who is responsible for the issuing of
a prospectus may be criminally liable for a fine of up to $150,000 or
imprisonment of up to two years if the prospectus contains fa lse or
misleading information or otherwise fails to comply fully with the
provisions of the statute: s 253 SFA (see the Auston case in 1]1 2-440).
However, that director or person may avoid liability for a false or
misleading statement in a prospectus if he has made all reasonable
inquiries and after doing so believed on reasonable grounds that the
statement concerned was not false or misleading: s 255(1) SFA.
12-•m A director, promoter, and any person responsible for the issuing of a
prospectus may also have to bear civil liability for loss suffered by
subscribers arising from any untrue statement or non-disclosure in
the prospectus: s 254 SFA. An expert, such as an auditor, lawyer or
va luer, whose report is included in the prospectus may also bear
civi l liability for an untrue statement he made in the report as an
expert: s 254(3)(e) SFA. As in the case of criminal liability, there are also
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certain situations listed in which civil liability can be avoided despite
the prospectus being deficient for non-disclosure or having an untrue
statement: s 255 SFA.
Profile Statement
12-433
In certain situations, an offer of securities may be made in or accompanied
by an abridged version of a prospectus called a profile statement s
240(4) SFA. The profile statement does not do away with the prospectus
completely since a copy of the prospectus and the profile statement must
still be registered. However; it does allow an issuer to market the securities
using a less bulky document in the form of the profile statement.
12-434
The profile statement cannot contain any information which is false or
misleading or which is not contained in the prospectus: s 246(2) SFA. The
profile statement is intended to be a shorter version of the prospectus
and must contain certain information including:
(a) identity of the issuer;
(b) nature of the securities;
(c) nature of the risks involved in investing in the securities; and
(d) details of all amounts payable in respect of the securities, including
any commissions and fees.
Debentures
12-435
So far, we have dealt with shares being offered to the public. However,
as noted earl ier, a company can also make an offer of securities in
the form of debentures. Generally, the requirements which apply
to an offer of shares also apply to an offer of debentures. Thus, a
company which offers debentures to the public must also issue a
prospectus: s 240(1) SFA. However, in the case of a company which
issues debentures on a regular basis, the legislation now allows the
use of a base prospectus for a debenture issuance programme: Reg. 7
SFOISD Regulations. Once the base prospectus is registered with the
MAS, a company can make mu ltiple offers for its debentures using an
abbreviated information sheet, thus reducing the cost of the entire
process.
12-436
Debentures are commonly issued as asset-backed securities. Generally, such
an issue is made pursuant to a securitisation transaction where a special
purpose vehicle {typically a company or trust) is formed to own the asset
concerned, debentures are issued to fund the acquisition of the relevant
asset, and payment in respect of the debentures are derived from cash
flows generated by the asset s 262 SFA. For example, a hotel resort can
be acquired by a special purpose vehicle which then issues debentures to
fund the acquisition. The debentures are said to be asset-backed since
the interest payable on the debentures are derived from the cash flows
of the resort.
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12-437 Where an issue of debentures involves a trustee, the trustee generally is
under a duty to ensure that the assets of the borrowing entity are sufficient
to discharge the principal debt as and when it becomes due: s 266(2) SFA.
In this way, the trustee seeks to protect the interests of debenture holders.
12-438 In certain circumstances, t he trustee can apply to MAS or the court to
obtain certain orders or directions in fu lfilling its duties as trustee: s
266(3) and s 267 SFA. Upon such application, a court may make various
orders, including:
(a)
ordering the trustee to convene a meeting of debenture holders
to obtain their directions for the protection of their interest;
and
(b)
appointing a receiver ofthe property which constitutes security
for the debentures.
12-439 Since a trustee is a fiduciary, the usual ru les which apply to persons in
fiduciary positions apply. Moreover, a trustee cannot be indemn ified
against liabi lity for breach of trust if it fai ls t o discharge its duties
with the degree of care and diligence required of it: s 27 1(1) SFA.
Application for Listing
12-440 A company which issues securities t o the public will usually apply to
the stock exchange for listing of these securities. Of course, there is
no obligation to do so. However, few investors will subscribe to an
offer of securities if they are not going to be listed. Without a listing
on the st ock exchange, a person who w ishes to sell his securities w ill
have to locate and arrange f or another person to buy his securities.
On t he ot her hand, listing provides a convenient means for securities
to be traded. Furthermore, a stock exchange listing also confers upon
the listed company a certa in degree of prestige. This is because a stock
exchange will generally accept for listing on ly substantial companies
with good prospects.
12-441 The application to list a company and its securities is made to the SGX,
either in respect of listing on the SGX Main Board or on Cata list. The
application must comply with the SGX-ST Listing Manual or the Cata list
Listing Manua l, as applicable. The application is usually made around
the same time as the company prepares a prospectus for submission
to the MAS. The decision to accept a company for listing is made by
the SGX independently of the MAS.
12-442 According to paragraph 210 ofthe SGX-ST Listing Manual, the minimum
criteria for listing on the SGX Main Board include the following:
(a)
The company must satisfy any one of the three following
quantitive criteria:
(i) Minimum consolidated pre-tax profit of at least S$30 mi ll ion
for the latest financial year;
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(b)
(c)
(d)
(ii} Profitable in the latest financial year and has a market
capitalization of not less than S$150 million based on the
issue price and post-invitation issued share capital; or
(iii} Operating revenue in the latest completed financial year
and a market capitalization of not less than S$300 million
based on the issue price and post-invitation issued share
capital.
The company must satisfy requirements as to shareholding
spread and distribution based on the market capitalisation
of the company. For example, for a company with a market
capitalisation of up to $300 million, there must be a shareholding
spread of 25% of issued shares in the hands of at least 500
shareholders.
The company must be in a healthy financial position.
The directors and executive officers must have appropriate
experience and expertise to manage t he company and there
must be on the board at least two independent directors, i.e.
non-executive directors who are independent and free of any
material business of financial connection with the company.
12-443
According to paragraph 406 of the Catalist Listing Manual, the minimum
criteria for listing on Catalist include the following:
(a)
The company need not meet any minimum operating track
record, profit of share capital requirement but is expected to
have at least 200 public shareholders upon listing and at least
15% of the issued share capital must be held by the public;
(b)
The directors and executive officers must have appropriate
experience and expertise to manage the company and there
must be on the Board at least 2 Independent Directors, i.e.
non-executive directors who are independent and free of any
material business of financial connection with the company.
12-444
Over time, numerous foreign companies have applied for and been
granted listing on the SGX Main Board. These include substantial
companies from Asia and Europe. If these companies have maintained a
listing on a stock exchange in their home jurisdiction (called a "primary
listing"), their listing on the SGX is called a "secondary listing". The
main purpose of a secondary listing is to enable the company's securities
to be more widely traded around the world.
SECURITIES TRADING
12-501
It would be incomplete to discuss corporate finance, particularly in
the public equity market, without touching upon securities trading
generally and the topic of take-overs. From the outset, it is
important to understand the distinction between the trading and
settlement aspects of securities transactions. Trading describes the
process of matching buy and sell orders. Settlement refers to the
process of paying for and transferring title to the securities.
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JIDt..
.:::::11
Misleading statement in Prospectus
Auston International Group Ltd v Public Prosecutor (2008)
In 2003, Auston International Group Ltd was a company which had just been
listed on the SGX-Sesdaq (a predecessor of SGX Catalist). Auston provided
educational services, including courses at tertiary level in association with their
overseas university partners.
In early 2002, the majority shareholder of Auston wanted to list Auston on SGXSesdaq. A public offer of securities was made through a prospectus registered
with the Monetary Authority of Singapore on 14 April 2003. A total of 2.4
million shares were offered at 28 cents per share. Auston was subsequently
listed on SGX-Sesdaq on 25 April 2003. The prospectus included Auston's
audited financial statements for the financial year ending 31 December 2002.
These stated that Auston's profit before tax for the 2002 financial year was
$2,467,000. However, it was later revealed that this sum was overstated.
The overstatement arose in this way. One of Auston's key expenses as a business
was t he payment of "university fee expenses" to its university partners. A
university partner would charge Auston these fees based on the number of
students enrolled by Auston who were undertaking that university's course. In
this instance, Auston received a late invoice from the University of Wollongong
in 2003. It was ascertained that part of this invoice should have been treated
as expenses for the 2002 financial year. However, by this time, Auston's 2002
accounts had been closed. Yeo, the then chief executive officer of Auston,
together with Chua, the then chief financial officer, allegedly decided to fix
the problem by treating these expenses as "academic cooperation fees" for the
2003 financial year. In fact, such treatment was improper from an accounting
and business perspective. It had the result of misstating Auston's 2002 profit
before tax by $374,000.
In December 2004, Auston's new audit committee discovered what appeared
to be irregularities in Auston's earlier f inancial statements. They commissioned
another firm of auditors to examine Auston's accounts. The findings were
issued in February 2005. The fee for this exercise was almost $140,000. The
findings revealed the alleged overstatement of pre-tax profit for the 2002
financial year and the consequential misstatement in the prospectus. This
was reported to the authorities. After further investigation, the authorities
prosecuted Yeo and Chua as the two people responsible for the alleged coverup and misstatement. Yeo and Chua were subsequently convicted.
The authorities also charged Auston for contravening ss 253(1) and 253(4)
SFA for issuing a prospectus containing a false and misleading statement.
Auston pleaded guilty and the District Court imposed a fine of $90,000. Auston
appealed regarding the amount of the fine which it felt was excessive. On
appeal, the Singapore High Court allowed the appeal and reduced the fine
to $10,000. The court was of the view that several mitigating factors were in
favour of Auston. These included the fact that the misstatement was discovered
by Auston who voluntarily reported it to the authorities, and that the true
culprits of the misstatement were Yeo and Chua- who had been charged and
convicted separately.
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12-502 In Singapore, a person who wishes to trade in SGX-Iisted securities
has to open two accounts. The f irst account is a securities account
with the Central Depository (Pte) Ltd which is the heart of the central
depository system. The securities account records all securities held by
that person and records all purchase and sales transactions relating to
these securities. The second account is a trad ing account opened w ith a
stockbroking member of the SGX. A trading account enables trades to
be undertaken. Although a person can only have one securities account,
he is free to open trading accounts with multiple stockbrokers. Bef ore
any securities can be transact ed, the securities and trading accounts
must be linked electronically. Trading is undertaken through a screenbased order system which automatically matches buy and sell orders in
real time. In this way, the entire SGX trading system is computerised.
Settlement
12-503 Al l companies listed on the SGX Main Board and Cata list use a scripless
settlement system, meaning that there is no physica l exchange of share
certificates (scrip) for settlement of securities trading. At the heart of
th is scripless settlement system is an incorporated entity, the Centra l
Depository (Pte) Ltd (COP) which is governed by Part IIIAA of the SFA.
12-505 The COP is a subsidiary of the SGX. A company which seeks listing wil l
issue "jumbo certificates" to the COP and these are deposited with
the COP. The COP maintains a Depository Register with accounts of
depositors reflecting their title in the securities. As the securities are
traded, the COP makes the appropriate entries electronica lly in these
accounts and these book entries effectively operate as transfers.
12-506 In other words, there is no paper being transacted since the entire
transaction is conducted through electronic book entries. Throughout,
the COP acts as a bare trustee of these securities, holding them on trust
for the depositors to whom they are credited: s 8151 SFA.
12-507 Any person can open a personal account with the COP. A lternatively,
to ma intain some degree of confidentia lity, a person may open an
account through a depository agent such as a stockbroker or a bank.
The securities he owns wi ll be registered to that account. Although
the COP is noted as the holder of the shares in a listed company's share
register, it is not deemed to be a member of the company. Instead, the
law deems the person who is registered in COP's Depository Reg ister
as the owner: s 81SJ SFA. Therefore, theoretica lly, a listed company
may have the COP as the only shareholder in its register of members,
while the Depository Reg ister may have thousands of account holders
listed as owning shares in that company.
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The Scripless System
Individuals
jlndividual account holders
I
r
"Jumbo scrip"
I
listed Company
~Securities with scri
Individual
who continues
to hold scrip
12-508
In practice, however, not all owners will hold their securities through
the COP. The legislation allows an owner to withdraw scrip from
the COP and register the scrip directly with the listed company as a
shareholder. However, if he does so, he will not be able to trade his
shares electronically. If he wants to sell his shares, he will have to do
so off the market.
12-509
A listed company can obtain a current list of its members by requesting
the CDP to provide such a list. For the purposes of holding a meeting
of members, there is a cut-off point in that a person is entitled to
attend, speak and vote at the meeting only if his name appears on the
Depository Register 72 hours before the scheduled meeting: s 81SJ(4)
SFA. Book-entry securities can be subject to security interests. Hence, a
person registered by the COP as owning certain securities can make an
assignment or charge over his book-entry by way of an assignment or
a charge in the prescribed form: s 81SS, SFA.
Take-overs
12-510
15.
As mentioned earlier, take-overs in Singapore are regulated by the
TC, SFA and the CA. 15 If the company is listed, the take-over must also
comply with the SGX-ST Listing Manual. The TC applies to listed public
companies. It also applies to unlisted public companies with 50 or more
shareholders and net tangible assets of $5 million or more. The TC is
administered by the SIC: s 139(5) SFA. Take-overs of private companies
(sometimes called "acquisitions") are outside the ambit of the TC.
For take-overs in Singapore, see Chandrasegar C, Take-overs and Mergers, 2nd ed (Singapore:
lexis Nexis, 2010) and Wee M S, "Amalgamation- New Method to Merge and Take-Over
Companies" (2008) 20 Singapore Academy of Law Journa/135 . The latest edition of the TC can
be found on the MAS website (www.mas.gov.sg).
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12-511
A take-over describes the process by which the shares of a public
company (called the "target company") are acquired such that
voting control of the company passes to a new shareholder (called
the "offeror"). An offeror can initiate a take-over in two ways. First,
he can make a voluntary offer to acquire the shares of the target
company: Rule 15.1 TC. He may or may not already be a shareholder
of the target company. Thereafter, a set procedure must be followed
in which details of the take-over offer must be made public.
12-s12
Alternatively, an offeror can initiate a take-over offer by activating
the trigger for a mandatory take-over when he acquires 30% or more
of the voting shares in the target company: Rule 14.1 (a) TC. In this
case, the offeror has no choice: he must make a public announcement
of a take-over. The take-over offer is mandatory because his
acquisition of such a significant amount of shares is deemed to grant
him "effective control" of the target company and thereafter he is
assumed to seek voting control of the target company.
For the purposes of calculating the 30% threshold for a mandatory
take-over, the TC includes the shareholdings of any "persons acting
in concert" with the offeror. This refers to individuals or companies
who are working together with the offeror to obtain control of the
company even though they may appear to be acting independently.
12-513
If persons acting in concert already hold between 30%- 50% of the
voting shares of a public company, then a mandatory take-over wil l
be required if they further acquire more than 1% of the voting shares
within any 6-month period: Rule 14.1 (b) TC. This provision is aimed at
preventing "creeping take-overs" -as when an offeror and persons
acting in concert acquire voting control on a gradual basis.
Procedure
12-514
Not earlier than 14 days and not later than 21 days from when the
pub Iic announcement of the offer was made, the offeror must despatch
to the target company's shareholders the offer document: Rule 22.1
TC. The offer must be open for an initial period of 28 days after the
offer was posted: Rule 22.3 TC.
12-515
Within 14 days after the posting of the offer document, the target (or
"offeree") company is to issue an offeree board circular: Rule 22.2 TC.
The offeree board circular contains the views and recommendations
of the board of the target company as to the terms of the offer. In
the offeree board circular the board of the target company must state
whether or not it recommends its shareholders to accept the offer. If
it does not recommend its shareholders to accept the offer, it must
provide its reasons. The offeree board circular must also include certain
other specified information: Rule 24 TC.
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12-516 Once an offer is made, it can be revised to make it more attractive
to the target company's shareholders. The offeror can improve the
offer by increasing the consideration or extending the offer period.
However, the offeror must allow the offer to remain open for at least
14 days from the date of such revision: Rule 20.1 TC. Also, any higher
consideration wi ll apply to all shareholders who have accepted the
original offer: Rule 20.4 TC.
Acceptances
12-517 If, after the closing date, the offeror has received acceptances
amounting to more than 50% of the voting shares in the target
company, then he has succeeded in taking over the target company.
Where the offeror succeeds in obtaining control of not less than 90%
of the voting shares, it can compulsorily acquire the balance under s
215 CA.
12-518 If the offeror obtains less than 50% of the voting shares and he has
stated a condition concerning minimum acceptances, the provisions of
that condition may apply. Generally, a take-over which results in an
offeror having between 30-50% of the voting shares in a target company
is usually considered a failed take-over because the offeror is not in a
position to control the company with an absolute voting majority.
ACCOUNTS AND AUDITORS
12-601 In the last part of this chapter, we deal with a company's accounting
and audit obligations. The off icers of a company are responsible for
ensuring that the company keeps proper accounting and other records:
s 199(1) CA. These records must be kept in sufficient detail so that they
can explain the transactions and financial position of the company, and
allow the preparation of financial statements. All records are available
for inspection by the directors: s 199(3) CA. The records are to be kept
for a minimum of f ive years, after which they can be destroyed: s 199(2)
CA.
Documents to Members
12-602 As part of their responsibility in managing a company, the directors
are requi red to lay before the annual general meeting of the company
several documents for the benefit of members. These documents
provide basic information from which members can review the
stewardship of the directors in the previous financial year. However,
to reduce the regu latory burden for private companies, the 2017
Amendments (see 1]10-104) exempt private companies from holding
annual genera l meetings if all its members approve, in which case such
documents w ill sim ply be sent to persons entitled to receive notice of
general meetings w ithin a stipulated time period: 175A CA.
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12-603 Where an annual general meeting is to be held, the documents are
generally required to be sent to all persons who are entitled to attend
a general meeting- such as members and debenture holders- at least
14 days prior to the meeting: s 203(1) CA. Failure to do this is an offence
punishable by a fine of up to $5,000: s 203(3A) CA. The documents to
be provided are:
(a)
financial statements which comply with the requirements of
the Accounting Standards and give a true and fair view of the
financial position and performance of the company: s 201 CA;
(b)
a directors' statement signed by 2 directors on behalf of
all directors confirming that in their opinion, the financial
statements give a true and fair view of the financial position
and performance of the company and that there are reasonable
grounds to believe that the company will be able to pay its debts
as and when they fall due; and
(c)
an auditor's report which, among other th ings, states whether
in his opinion, the financial statements are in compliance with
the requirements of the Accounting Standards and give a true
and fair view of the financial position and performance of the
company: s. 207(1) and (2) CA. Note however that a dormant
company (s205B CA) and a small company (s205C CA) is not
required to undertake an audit (see 1110-418).
Auditors
12·604 It is important to distinguish the role of the directors in keeping
proper accounts and the role of auditors in auditing the accounts.
The directors typically will engage book-keepers and accountants as
company employees. Their task will be to maintain the company's
accounts and other records. Auditors, on the other hand, are not
employees of the company. They are outsiders to the company whose
task is to check the company's accounts and render an independent
opinion as to the veracity of the accounts.
Qualification
12-605 According to s 10(1) of theCA, only an accounting entity may act as
auditor of a company. An accounting entity means a public accountant,
an accounting corporation, firm or limited liability partnership: s 4
CA. All of these terms refer to persons registered with or approved by
ACRA under the Accountants Act.
Appointment, Resignation and Removal
12-606 The directors of every company must appoint one or more auditors
for the company within three months of its incorporat ion: s 205(1) CA.
Note, however, that a dormant company or a small company need not
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have its accounts audited (see 1]10-418). An auditor must consent to
the appointment: s 10(10) CA. An auditor holds office until the next
annual general meeting, at which point the members are expected to
re-appoint the aud itor or appoint a new one: s 205(2) CA. An auditor
ca n also be removed from office by the members in general meet ing if
special notice of the proposed resolution has been given: s 205(4) CA.
12-607 Previously, an auditor faced certain restrictions if he wanted to resign
before the end of the term of office for which he was appointed. With
the 2014 Amendments, an auditor of a non-public interest company
may resign before the end of his term of office by giving the company
a notice of resignation in writing: s 205AA CA. As for an auditor of a
public interest companyl 6 or its subsidiary, he may resign before the end
of the term of office if he seeks the consent of ACRA and concurrently
notifies the company of his reasons for resignation: s 205AB CA. Such
resignations wi ll be effected only upon ACRA's consent. This allows
ACRA to stop the resignation in the public interest where necessary
and alerts ACRA to any potential breaches by the company under the
CA. The company is required to appoint a replacement auditor within
3 months: s 205AF CA.
Obligations
12·608 An auditor has a right of access at all times to the accounting and
other records of the company: s 207(5) CA. This includes not only
the company's books of account, but also the various registers
required to be mainta ined under the statute. Furthermore, he can
request such information and exp lanation as he desires for the
purposes of the aud it. Any company officer who fa ils to give the
necessary access or hinders, obstructs or delays an auditor in the
performance of the auditor's duties commits an offence and can be
fined up to $4,000: s 207(10) CA.
12-609 Correspondingly, an auditor has significant duties imposed upon him as
he fulfills his responsibilities. These duties are imposed by the common
law as well as the legislation (eg, s 207(3) CA). An auditor's common law
d uties, especially those duties which are founded in the tort of
neg ligent misstatement, are discussed in ~ 18-401. As for his stat utory
duties, two points require specific mention:
(a)
If an auditor finds that there has been non-compliance with
the statute and the matter cannot be adequately dealt with in
his comments in the audit report or by bringing the matter to
the attention of the directors, then he is obliged to report the
matter to the Registrar of Companies: s 207(9) CA; and
16.
A public interest company means a company which is listed or in the process of issuing its debt
or equity instruments for trading on a securities exchange in Singapore, or such other company
as the Minister may prescribe: s205AA CA
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(b)
If an auditor of a public company or its subsidiary believes that
a serious offence involving fraud or dishonesty - namely an
offence involving a minimum property va lue of $100,000 and
which is pun ishable by imprisonment for not less than 2 yearsis committed against the company by its officers or employees,
then he must immediately report t he matter to the Min ister:
s 207(9A) CA. He is absolved from doing so if he has reported
the matter to the MAS under any other law: s 207(9C) CA.
Audit Committee
12-610 Every listed company in Singapore must have an audit committee:
s 201B(1) CA. The aud it committee is appointed by the board of
directors. It comprises at least three fellow directors, a majority of
whom are not to be executive directors of the company or a related
company, or relatives of such executive directors. A member of t he
audit committee must be in a position to exercise an independent
judgment in ca rrying out his responsibi lities on the committee:
s 201 B(2) CA.
12-611 The function of an audit committee, among other th ings, is to review
with the auditor the auditor's aud it plan, the auditor's eva luation
of the company's interna l accounting controls, the audit report and
the f inancial statements of the company: s 201 B(S)(a) CA. The aud it
comm ittee is also tasked with nom inating one or more persons as
aud itors of the company: s 201 B(S)(b) CA.
12-612 The aud it comm ittee must elect from among their number a
chairman who is not an executive director or emp loyee of the
company or related company: s 201 B(3) CA. The comm ittee has
liberty to regulate its own procedures for its meetings, including
voting and other matters: s 201 B(8) CA.
SUMMARY
12-701 In this fina l chapter on companies, we examined the critical issue of
a company's finances. We looked at both equity and debt as sources
of finance and described the legal framework of corporate finance
in Singapore. We then dealt with the legal aspects of three common
forms of security: charges, debentures and guarantees.
12-702 Given the major role of the capital market, a substantial portion of the
chapter was devoted to the lega l issues of offering shares and other
securities to the public. Different types of share issues were explained.
Since the general rule is that an offer of securities requires a prospectus,
the main prospectus requirements stipulated in the CA and SFA are
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Companies Ill : Finance
outlined, together with the scope of liabi lity arising from issuing
prospectuses. We also considered briefly tthe requirements for issuing
debentures to the public.
12-703 The next section of the chapter focused on securities trading. The
present scripless system used by the SGX was outlined. We also
discussed the phenomenon of take-overs and the regulatory framework
imposed by the SGX, the SFA, CA and TC.
12·704 In the f inal section of the chapter, we discussed the place of accounts
and auditors as part of a company's statutory obligations. We looked
at the responsibility of maintaining accurate accounts, of appointing
auditors to audit these accounts and the role of the audit committee
in the entire process. In this way, this chapter has sought to introduce
the key legal issues surrounding a company's external and internal
financial dealings.
...........
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INSOLVENCY
INTRODUCTION
13·101
The previous four chapte rs examined severa l common types of
business entities used in Singapore. A business entity, whether
incorporated or unincorporated, is typically formed by its founders
to undertake a promising business venture. In the midst of the
excitement of a new venture, the spectre of losing money and their
business entity being dissolved is probably the last thing on the
founders' minds. Yet the risk of the business failing is real. In turn,
this may lead to the entity or, worse, its founders, becoming
insolvent.
13·102
In this chapter, we examine how individuals and companies deal with
inso lvency. Insolvency refers to the situation where a person is
unable to pay his debts as they fall due. Most business entities with
serious financial difficulties wi ll face the problem of insolvency at
some stage. They can either trade their way out of insolvency back
to solvency or they are eventually dissolved.
13·103
The rules which apply to natural persons and companies in cases of
insolvency are broadly similar but are different in detail. The rules
applicable to natural persons generally fall within the law of
bankruptcy and are found in the Bankruptcy Act (BA). The rules
applicable to companies are found in the Companies Act
(CA) . The rules applicable to limited liability partnerships
generally follow the format of companies but are governed by
the Limited Liability Partnerships Act (LLPA). Our focus in this
chapter, however, will be on the insolvency of individuals and the
insolvency of companies.
13-104
Like Singapore company law, Singapore insolvency law is regularly
updated. In recent years, two significant committees were set up
to review the existing law. The first was the Insolvency Law Review
Committee and the second was the Committee to strengthen Singapore
as an International Centre for Debt Restructuring. The work of these
two committees produced the Bankruptcy (Amendment) Act 2015
("2015 BA Amendments") and the Companies (Amendment) Act
2017 ("2017 CA Amendments") (see 1110-103). These two amending
legislation changed substantively the two primary legislation which
deal with insolvency: the Bankruptcy Act which deals with personal
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insolvency (individuals) and the Companies Act which deals with
corporate insolvency (companies). This chapter presents the law as
amended by the 2015 BA Amendments and the 2017 CA Amendments.
13-104b There remains
only one final step in the reform of Singapore insolvency
law- the merger of the two insolvency legislation into one. It has been
announced by the Ministry of Law that there will be a new omnibus
Insolvency Act to govern personal as well as corporate restructuring
and insolvency. 1 Notwithstanding this, in view of this chapter's inclusion
of the 2015 BA Amendments and the 2017 CA Amendments, it is
expect ed that the substance of the law presented here wi ll remain
largely accurate even with the eventual enactment of the new omnibus
Insolvency Act.
INSOLVENT INDIVIDUALS
13-201
Ind ividuals who face insolvency are typical ly sole proprietors or
partners of a firm whose business activities are f inancially unsound.
The fact that an individual faces insolvency should not automatically
lead to despair. It is possible, albeit usually difficult, to overcome
a temporary insolvency and trade back into a healthy financial
position.
13-202
The ru les governing insolvency typical ly aim towards two, sometimes
conflicting, policy objectives. On the one hand, they seek to protect
unpaid creditors by ensuring that the assets and income of the
insolvent person are administered fairly so that creditors can be
repaid as much as possible. On the other hand, as a matter of policy,
an insolvent person or bankrupt should not be penalised excessively
because of his business failure. In the case of bankrupts, not all of
them are dishonest. Thus, bankrupts should, wherever possible, be
given a second chance to enter into the business world again.
Two Regimes
1.
13-205
In Singapore, there are basically two alternative ways of dealing with
insolvency. One route is bankruptcy. Bankruptcy refers to the state
where a natural person who is insolvent is adjudged a bankrupt.
Thereafter, his financial affairs wil l be admin istered and distributed
by others for the benefit of his creditors. Bankruptcy, therefore, is
preceded by insolvency.
13-206
The second route is called "voluntary arrangement". It offers a
method of dealing with insolvency which amounts to an alternative
to bankruptcy. Its procedures are less complex than the bankruptcy
procedures. The aim is to allow the insolvent person to enter into
voluntary arrangements w ith his creditors and trade out of his
insolvency.
See the keynote address by the Minister for Law (www.mlaw.gov.sg) at the Singapore Insolvency
Conference 2017, where he announced that the omnibus Insolvency Bill is targeted to be introduced
in the second half of 2018.
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Two Regimes for Insolvency
· Bankruptcy Act 1995
Voluntary Arrangements
Bankruptcy Proceedings
Voluntary Arrangements
2.
3.
13-208
An insolvent individual or an insolvent firm 2 (if supported by a
majority of the partners) may apply to the court for an interim order
for a voluntary arrangement s 45(1) and (2) BA.
13-209
If the court grants the interim order, a moratorium is imposed on all
lega l proceedings aga inst the debtor for 42 days: s 45(3) and (4) BA.
This means that no creditor is able to take legal action against the
debtor to compel payment of the debt.
13-210
The debtor must appoint a nominee, who is either a public accountant
or a lawyer, to implement the voluntary arrangement: s 46 BA. 3 The
nom inee must prepare a report, based on the debtor's financia l
situation, and submit that report to the court: s 49(1) BA. The report
should include the nominee's recommendation as to whether a
creditors' meeting should be summoned . If the court is satisfied that
a creditors' meeting should be summoned, it will extend the interim
order so that the meeting can be held: s 49(5) BA. If not, the court
cou ld discharge the interim order: s 49(6) BA.
13-211
The voluntary arrangement typically contains a debt-rescheduling
proposa l whereby the debtor undertakes to repay his debts over an
extended period. It may involve a full or partial repayment of the
debts. The rationale for the voluntary arrangement is to enable the
debtor to reach agreement with his creditors through a less formal,
yet court-sanctioned, procedure.
13-212
At the creditors' meeting, the creditors are expected to examine the
voluntary arrangement and, if it is acceptable to them, approve it
s 51(1) BA.
13-213
If the voluntary arrangement is rejected by the creditors' meeting,
the court may discharge the interim order given earlier: s 52(2) BA.
This lifts the moratorium over legal actions against the debtor. At
this point, any creditor can take legal action aga inst the debtor,
including presenting a bankruptcy application to the court in respect of
the debtor.
For ease of reference, an insolvent individual and an insolvent firm is hereafter referred to
as "the debtor".
The Minister of Law may also approve other professionals to act as nominees.
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13-214
If the voluntary arrangement is approved by the creditors' meeting,
the nominee is responsible for supervising the implementation of the
voluntary arrangement: s 55(1) BA. The arrangement takes effect
from the date of the meeting and is binding upon all creditors of the
insolvent person who had notice of and was entitled to vote at the
meeting, regardless of whether the cred itor was present at the
meeting: s 53(1) BA. Assuming that the debtor fully complies with
t he voluntary arrangement, his debts wi ll then be fu lly discharged at
the completion of the voluntary arrangement. He has, in effect,
avoided bankruptcy.
Voluntary Arrangement
Application for voluntary arrangement
Creditors or nominee
can issue bankruptcy 1+----l
proceedings
13-215
If, however, the debtor does not comply w ith the terms of the agreed
voluntary arrangement, the nominee or any creditor bound by the
arrangement may present to the court a bankruptcy application against
the debtor: s 56 BA. At this point, the voluntary arrangement will be
considered a failure and the debtor may have to face bankruptcy
proceedings.
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Bankruptcy
13-216
In Singapore, bankruptcy proceedings are in itiated by a bankruptcy
application (previously referred to in the Act as a bankruptcy
petition) presented to the court. An application may be presented by a
creditor (s 57 BA), a nominee or creditor pursuant to a voluntary
arrangement (s 66 BA) or the debtor himself (s 58 BA) if the debtor is
unable to pay his debt. The debt must be a liquidated amount of at
least $15,000: s 61 BA. In all cases, pursuant to s 60(1) BA, the debtor
must
(a)
be domiciled in Singapore;
(b) have property in Singapore; or,
(c)
within the previous 12 months, have been ordinarily resident
or have had a residence or carried on business in Singapore.
13-217
Pursuant to s 62 BA, a debtor is presumed to be unable to pay his
debt if the debt is payable and:
he does not comply w ith or set aside a statutory
(a)
demand served upon him within 21 days of service;
someone has executed a court judgment upon him and
(b)
it is wholly or partia lly unsatisfied;
(c)
he left or remained outside Singapore to defeat or
delay his creditor's attempt to recover the debt; or
(d)
if within 90 days immediately preceding the bankruptcy
application, the Official Assignee (~13-221) has issued
a relevant certificate relating to a debt repayment
scheme, and the applicant creditor has proved the debt
under the debt repayment scheme. 4
Bankruptcy Application
13·218
4.
5.
The most common basis for a creditor's bankruptcy application is the
failure of a debtor to comply with a statutory demand. 5 A statutory
demand is a written notice in a prescribed format issued by the creditor
to the debtor requiring the debtor to pay the amount due to the creditor.
Upon receipt of the statutory demand, the debtor has two choices.
He can fulfill the demand by paying the debt. Alternatively, he can
challenge the demand in court and seek to have it set aside: Teo Song
Kwang Richard v Seng Hup Electric Co (S) Pte Ltd (2001). If he fa ils to set it
aside or does nothing, then he is deemed to be unable to pay his debt.
The debt repayment scheme (DRS) was introduced in 2009 to provide debtors who owe less than
$100,000 an alternative way to avoid bankruptcy. It is initiated by the debtor himself lodging
a bankruptcy application and then being referred by the court to the Official Assignee. If the
debtor qualifies for t he DRS, a debt repayment plan is created through which he is expected
to pay off his debts within f ive years. However, if the debtor fails to comply with the terms
of the plan, or has his certificate of completion revoked, or is rejected at the outset through
a certificate of inapplicability, s 62 BA as described above applies to subject him to the usual
bankruptcy procedure.
The statutory demand is equivalent to the bankruptcy notice under the previous legislation.
Provisions governing statutory demands are fou nd in the Bankruptcy Rules.
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Bankruptcy Process
Nominee's or creditor's
application from
voluntary arrangement
Debtor unable to
pay debts of
$15,000 or more
Debtor fails to
comply with voluntary
arrangement
Debtor unable to
pay debts of
$15,000 or more
Bankruptcy application heard before the court
Court makes bankruptcy order:
debtor adjudged bankrupt
Administration of bankrupt's
property to discharge debts
13-219 Upon hearing a creditor's ban kruptcy application, the court may
make a ban kruptcy order or it may dism iss the application. The court
will not make a bankruptcy orde r unless the application has
been proper ly served upon the debtor and the debt has not
been paid, secured or compounded: s 65( 1) BA; Lu Yuan Sheng
v Hitachi Credit Singapore Pte Ltd (2004) and Re Rasmachayana
Sulistyo (2005) . The grounds upon which the court may
dismiss the appl ication are listed in s 65(2) BA. They include the
situation where the debtor is able to pay the debt or has made an
offer to secure or compound the debt and such offer has been
unreasonably refused by the creditor: s 65(2)(c) and (d) BA.
13-220 In the case of an application presented by a nominee or creditor under
a voluntary arrangement, the court w ill not make the bankruptcy order
unless certain facts are proven. For example, if the debtor has failed to
comply wit h the terms of the voluntary arrangement or has supplied
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false or misleading material for the creditors' meeting, then a bankruptcy
order may be issued: s 66 BA. In the case of a debtor's own application,
the court will not make the bankruptcy order unless it is satisfied that
the debtor is unable to pay his debts generally: s 67 BA.
Bankruptcy Order
13-221 When the court makes a bankruptcy order in respect of a debtor, the
debtor is adjudged to be bankrupt. Bankruptcy commences from
this point and continues until he is discharged from bankruptcy: s 75
BA. Upon bankruptcy, the debtor's property automatically vests in
the Official Assignee -the government official entrusted to manage
the property of bankrupts. The Official Assignee becomes the
receiver of the bankrupt's property: s 76(1 )(a) and (b) BA. From this
point, no legal proceedings can be continued or initiated against the
bankrupt without the court's permission: s 76(1)(c) BA.
13-222
lfthe creditor who appl ied for the bankruptcy order is an institutional
creditor or a subsidiary of one, he must apply for the appointment of
a private trustee to undertake the role of the Official Receiver. 6 The
private trustee must be either a public accountant or a lawyer who
has consented to act in that capacity: s 34 BA. 7 Unlike the Official
Assignee who is a paid public servant, the private trustee will receive
remuneration as agreed between the creditors and himself or as
determined by the court: s 38 BA.
13-223 The private trustee functions as the Official Assignee in the
administration of the bankrupt's property. He general ly has similar
powers to the Officia l Assignee, with some exceptions: s 36 BA. Yet
he remains under the overal l supervision of the Official Assignee,
who retains the power to request the court to remove him: s 39 BA.
Hereafter, in describing the powers and roles of the Official Assignee,
we also include the private trustee, unless the context indicates otherwise.
Bankruptcy Administration
6.
7.
13-224
After the bankruptcy order is made, the bankrupt must submit to the
Official Assignee a statement of affairs within 21 days containing details
of his financial position : s 81 BA. Every six months, the bankrupt must
submit his accounts to the Official Assignee and hand over so much
of his income which is in excess of necessary expenses for him and his
family: s 82 BA.
13-225
As soon as possible after the making of the bankruptcy order, the
Official Assignee is to compile a list of creditors which is to be filed in
court: s 86 BA. To do this, he must write to every creditor and give
the creditor an opportunity to dispute the amount of indebtedness.
The creditor may be required to submit proof of debts.
The private trustee is officially called the "trustee in bankruptcy".
The Minister of Law may also approve other qualified persons to act as trustees in bankruptcy.
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Secured creditors
Preferred creditors
• Expenses and fees of Official Assignee
• Wages, retrenchment benefits of
employees of bankrupt
• Worker:S compensation payments
• Employees' superannuation or
provident funds contributions
Government taxes
Unsecured creditors
13-226 Once the debts have been proven, the bankrupt's property is to be
distributed in accordance with a fixed priority system.8 This priority
system means that those w ith the highest priority are paid first.
Those at the bottom, therefore, have the lowest chance of being
pa id, especially if the value of a bankrupt's property is sign ificantly
less than his aggregate debts.
13-227 Secured creditors have a privileged position in a bankruptcy.
Technically, a secured creditor does not have to wait for a bankrupt
to enforce his rights. He can enforce his rights in accordance with
the terms of his security. He can also be the petitioning cred itor as
long as he is wil ling to surrender or give an estimate as to the value
of his security: s 63 BA. If a secured cred itor does not real ise his
security w ith in six months of the bankruptcy order, he may not be
entitled to any interest in respect of his debt: s 76(4) BA.
13-228
The ma in task of the Officia l Assignee or the private trustee is to
rea lise the property of the bankrupt and pay off his creditors as much
as possible. To achieve this, the statute contains provisions which
seek to preserve the bankrupt's property against improper disposals
and ensure that the property is not concealed from or made
unavai lable to creditors.
13-229 For example, there are provisions which allow the court, at the
request of the Official Assignee, to reverse undervalued transactions
entered into by the bankrupt up to five years prior to t he date of the
bankruptcy petition: ss 98 and 100(1)(a) BA. Such underva lued
transactions include outright gifts by t he bankrupt to relatives and
friends. Usual ly, this is done with the aim of reducing the amount
of the bankrupt's property ava ilable to be used to satisfy other
creditors.
8.
For a list of preferred creditors, see s 90 BA.
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13-230 Similarly, the court may reverse a transaction in which a bankrupt
has given an unfair preference to another party in the six months
preceding the date of the petition: ss 99 and 100(1)(c) BA. An unfair
preference is anything done or suffered by a debtor which places the
other party in a better position than he wou ld otherwise have been in
the event of the debtor's bankruptcy: Soh Gim Chuan (private trustee of the
estate of Goh Poh Choo in bankruptcy) v Koh Hai Keong & Another (2002).
13-231 In the same vein, any attempt at concealment of property or accounts
and records by the bankrupt may amount to an offence: ss 135-136
BA. The giving of false statements and the fraudulent disposal of
property also constitute offences, as is the obtaining of credit
greater than $500 without informing the credit supplier that he is a
bankrupt ss 137-138 and s 141 BA.
13-232 The law also empowers the Official Assignee to enter the
bankrupt's premises, search it and take an inventory or seize goods
found w ithin the prem ises: s 108 BA. To prevent a bankrupt from
absconding from Singapore, the Official Assignee has the power to
impound a bankrupt's passport or travel document and order the
immigration authorities to prevent the bankrupt from leaving
Singapore: s 116 BA.
13-233 The Official Assignee may also disclaim contracts previously entered
into by the bankrupt which are deemed to be "unprofitable
contracts": s 11 0(1 )(c) BA. This is a significant power because it
means that contracts which are deemed to be disadvantageous to
the bankrupt can effectively be discharged, w ith no further liability
attaching to the bankrupt and the Official Assignee.
13·235 In addition to the provisions of the BA, there are provisions in other
statutes which limit the activities of a bankrupt. For example, s 148
CA prohibits a bankrupt from being a director or taking part in the
management of the company unless he has the consent of the court
to do so.
Discharge
13-236 There are two main ways for a bankrupt to be discharged from
ban kruptcy. The court may, at the request of the Official Assignee,
the bankrupt or any other interested person, discharge a bankrupt
after eva luating the conduct and financial position of the bankrupt:
s124BA.
13-237 The second way of obtaining a discharge is from the Official
Assignee himself. While this way of discharge had existed prior
to 2017, it was felt that without statutorily mandated exit points,
bankruptcy administration was often lengthy. Therefore, the 2017 CA
Amendments introduced a new differentiated discharge framework
where bankrupts can be discharged at fixed exit points: s 125 BA.
First-time bankrupts w ill generally be eligible for discharge in five
to seven years, wh ile repeat bankrupts w ill generally be eligible for
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discharge in seven to nine years. In all cases, the bankrupt's elig ibil ity
for discharge wil l depend on his paying a "target contribution" which
is determined based on his earning potentia l. The aim is to create a
more rehabilitative regime, giving bankrupts clear t imeframes and the
incentive to seek gainfu l employment as a means of achieving their
discharge.
13-238 In addition to the two ma in ways of discharging a bankrupt, a
bankruptcy can also be terminated by an annulment order issued by
the court. A court will annu l a ban kruptcy order if it is satisfied that
t he order should not have been made, or the bankrupt has either pa id
or secured his debts: s 123 BA. Such an annu lment can also be made
by the Official Assignee (without a court order) issu ing a certificate
of annulment where the creditors have accepted a composition or
scheme of arrangement, or if the debts of the bankruptcy have been
fu lly pa id: s 95A, 123A BA.
INSOLVENT COMPANIES
13-301 We now turn t o consider the rules which apply to insolvent companies.
Basically, there are four distinct, though somewhat related, alternatives
which are ava ilable to a company in serious f inancial difficu lty.
Sometimes, these alternatives are imposed by creditors upon the
company. In other cases, the company's management, with the approval
of its members, is able to select the alternative which they think is best
for their company. The ru les governing al l four alternatives are found
in the Companies Act (CA).
13-302 The alternatives are: scheme of arrangement, receivership, judicia l
management and wind ing-up. Winding-up refers to the process of
dissolving a company. Once a company is wound-up, it ceases to exist.
Alternatives for Insolvent Company
Insolvent company
~
~
Scheme of
arrangeme.nt I
compromtse
I
~
Receivership
11
Judicial
management
I rl
~
Winding-up
J
I
r Successfu I I I Not successful
T
I
Company trades
back into solvency
I
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Dissolution
of company
I
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SINGAPORE BUSINESS LAW
13-303 Given the term inal nature of winding-up, it is used on ly in extreme
cases. For example, if the members of a company no longer wish to
allow the company to continue its existence, for whatever reason,
they may wind up their company on a vo luntary basis. In other
situations, creditors may seek the winding-up of a company because
it owes them substantia l debts. The w inding-up of the company in
that situation is intended to allow some re-payment of the debts to
the creditors.
13-304
Undergo ing a scheme of arrangement, receivership and judicia l
management. on the other hand, does not involve the dissolution
of the company. They are intended to provide an insolvent company
with a means to t rade out of it s insolvent state and return to financial
health. If, despite undergoing a scheme of arrangement. receivership
or jud icial management, a company fai ls to overcome its insolvency,
then it is likely that w inding-up will follow.
Scheme of Arrangement
13-305
A scheme of arrangement. or compromise as it is also called, refers to
the procedure whereby a company enters into an arrangement with
its creditors to compromise their claims w ith the approval of the court.
The two comm ittees tasked to review the existing law (1113-1 04) viewed
the scheme of arrangement as an effective tool for debt restructuring and recommended measures to strengthen its effectiveness. The
outline that follows incorporates features introduced by the 2017 CA
Amendments which were modeled in part from Chapter 11 of the US
Bankruptcy Code.
13-306
Schemes of arrangement are governed by ss 210-2 12 CA. Typically, a
scheme of arrangement is proposed by the insolvent company. It is
triggered when the company applies to the court to convene a meeting of creditors to consider the proposed arrangement. At this stage
(or even earlier, if conditions are met), the company can apply for a
moratorium to prevent creditors from enforcing their security rights
or instituting legal proceedings aga inst the company: s 211 B CA. In the
interim period before the court decides whether to grant the moratorium, an automatic temporary moratorium is activated by law: s211B(8)
CA. The ease of obtaining a moratorium gives the company breathing
space to put forward the arrangement as a restructuring proposal to
its creditors.
13-306b At the creditors' meeting, the company must provide sufficient infor-
mation to enable the creditors to vote as to whether to approve the
proposed arrangement. If a majority of creditors representing in value
75% of the company's debts approve the arrangement, the company
may proceed to obtain court approval of the arrangement: s 210(3)
CA. However, even if the required statutory majority is not obta ined,
the company sti ll has the option to apply to court for a "cram down":
this means the court approves the scheme despite the dissenting creditors, provided certain stringent conditions are met- one of which is
that the court must be satisfied that the arrangement is fair, does not
discriminate unfairly, and is equ itable to the dissenting creditors: s
211 H CA. Once approved by the court, the company will proceed to
implement the scheme of arrangement.
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13-306c Aside from the measures above, the 2017 CA Amendments introduced
other measures to strengthen the scheme of arrangement. These
include provisions empowering the court to facilitate rescue financing
by giving super-priority to rescuers which grant new loans to provide
working capital during the restructuring. This opens up new business
opportunities for banks and distressed debt funds to invest in
economically sound but financially strapped companies.
Receivership
13-307
Receivership often goes together with winding-up. However, in theory,
receivership need not lead to winding-up. Receivership is the process
by which a creditor pursuant to a charge (see 1]12-312) appoints a
person, called the receiver, to seize and liquidate assets which are
covered by the charge.
13-308
Receivership in Singapore is governed by Part VIII, ss 217-227 CA.
Unlike a liquidator who is responsible for liquidating all the assets
of the company and paying off all its creditors, the receiver's role is
more limited. His task is simply to realise the particular asset covered
by the charge under which he is appointed and to pay the relevant
creditor. Throughout this process, the company can- at least in theory
-continue to carry on its business.
13-309
If the charge is a floating charge over the whole business, then a receiver
and manager can be appointed. A receiver and manager can manage the
business while performing his task as a receiver. A person who is simply
appointed as a receiver cannot manage the business.
13-310
In practice, however, receivership often precedes a winding-up. This
is because most businesses view receivership as a debilitating sign of
financial trouble. If a company goes into receivership, the likelihood of
it being able to trade out of its financial difficulties is slim.
Judicial Management
13-311
Judicial management is the state in which a company is under the
control of a judicially appointed manager whose task is to manage
the company to resuscitate or rehabilitate it or if that is not possible,
to effect a more advantageous realization of the company's assets.
13-312
Judicial management is governed by Part VIllA, ss 227 A-227X CA.
The application to the court seeking the appointment of a judicial
manager may be made by the company itself or a creditor: s 2278
CA. Once the application is presented, a moratorium which prevents
creditors from enforing their securities or taking legal action against
the company takes effect: s 227C CA. It continues to take effect if the
judicial manager is appointed: s 2270(4) CA. If, on the other hand,
the court dismisses the application, the moratorium ceases and the
court may make such orders as it thinks just and equitable, to redress
any injustice caused by the moratorium: s 2278(9) CA.
13-313 When a judicial manager is appointed, he takes on the powers of the
directors who cease to manage the company: s 227G CA. The judicial
management order remains in force for 180 days unless it is extended
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by the court: s 227B(8) CA. The rationale is that, during this period,
the judicial manager is to prepare a statement of proposals and call
a meeting of creditors at which the proposals are to be presented: s
227M and s 227N CA. If the creditors approve the proposal, the judicial
manager administers the company according to the proposals: s 227P
CA. If the creditors reject it, the court may discharge the judicial
manager: s 227N(4) CA.
13-314
To increase the efficiency of judicial management as a means for financial
rescue, the 2017 CA Amendments introduced within this framework a
super-priority mechanism to facilitate rescue financing similar to that
available for a scheme of arrangement: S227HA (~13-306c).
WINDING-UP
13-401
A company continues to exist until it is wound-up. Winding-up (also called
"liquidation") is the process by which a company is dissolved such that it
ceases to exist. The law provides for two types of winding-up: voluntary
winding-up and winding-up by the court: s 247 CA. Generally, a windingup goes through five stages. These are depicted in Diagram 13F.
Voluntary Winding-up
13-402
As the name suggests, voluntary winding-up occurs when the members
of the company voluntarily decide to liquidate the company. This may
be done for various reasons. The purpose for which the company was
incorporated might have been achieved. Or perhaps the company is
to be reconstructed and its business merged with another company. In
either case, the essence of a voluntary winding-up is that the members
voluntarily decide to proceed with the liquidation process.
Winding-up
t
~-~resol~~
td
p or coult otaers
~~ -,.~P
+
liquidator takes over
control of company
and ascertains debts
+
liquidator converts
all assets to cash and
pays all creditors
+
liquidator
distributes surplus (if any)
to members
l
Company is dissolved
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CHAPTER 13
333
Insolvency
13-403
A voluntary winding-up begins when the members of a company
pass a resolution- usually a special resolution- at a general meeting
to that effect: s 290 CA. If the directors make a declaration of
solvency together with a statement of affairs, then the winding-up
proceeds as a members' voluntary winding-up: s 293 CA. This occurs
in situations where the company is solvent and is able to pay its
creditors within a period not exceeding 12 months from the date of
the resolution.
13-404
The next step is for the company to appoint one or more liquidators:
s 294(1) CA. The task of a liquidator is to liquidate the assets of the
company and pay off the creditors. Once appointed, the powers of
the directors cease and the liquidator takes over as the person
responsible for the company. If all goes well, then the company will
be wound-up in accordance with the time period stated in the
declaration of solvency.
13-405
If, for any reason, the liquidator believes that the company's assets
would not be sufficient to pay off the creditors within the period
specified in the declaration of solvency, then he is to call a meeting
of creditors: s 295(1) CA. In this situation, the winding-up may
proceed as a creditors' voluntary winding-up: s 296 CA.
Winding-up by the Court
13-406
Winding-up by the court involves a more complicated process
because the court must hear the application for the winding-up. The
application is made in the form of a petition. It can only be
presented by certain persons including the company itself or, more
often, a creditor: s 253(1) CA. Generally, the petitioner may be able
to recover from the liquidator at least some of the costs of making
his petition: s 256(2) CA.
13-407
The person petitioning the winding-up must establish one of the
statutory grounds for winding-up. The grounds for ordering a windingup are listed in s 254 CA. They include the situations where: the
company is unable to pay its debts which exceed $10,000; the period
for the company's existence as stated in its constitution has expired; the
directors have acted in their own interests rather than in the interests
of members as a whole; or the court is of the opinion that it is just
and equitable that the company be wound-up. Upon hearing the
petition, the court will decide as to whether it would make the order
for winding-up. If the court finds that there is nothing to support the
ground on which the petition is based, it will dismiss it: Re Management
Recruiters International (Asia) Pte Ltd (fka Humana International (Asia) Pte
Ltd) (2002). The court, in certain situations, may make a buy-out order
instead of a winding up order if it is just and appropriate to do so: s
254 (2A) CA.
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Effect of Winding-up Order
13-408 Once the winding-up order is made, it has a retroactive effect
since the winding-up is deemed to have commenced on the date
the application was presented: s 255(2) CA. 9 Some of the important
effects of wind ing-up are:
(a)
The directors cease to have the power of managing the company.
That power shifts to the liquidator whose chief task isto liquidate
the company;
(b)
Upon making the winding-up order, the court usually approves a
list of contributories: s 280(1) CA. Contributories are persons who
are required to contribute assets to the company in the event of
wind ing-up. Thus, a member who has partly paid shares in the
company will be a contributory;
(c)
All legal proceedings against t he company may be stayed or halted:
s 258 CA; and
(d)
All contracts of employment between the company and its
employees are terminated .
Liquidator
13-409 Every w inding-up of a company requ ires the appointment of one
or more liqu idators. If it is a members' voluntary w inding-up, the
liquidator will be appointed by the members in genera l meeting:
s 294(1) CA. If it is a winding-up by the court, the liquidator wi ll be
appointed by t he court. The liqu idator must be a person approved by
the Minister oflawto be a liqu idator for the purposes ofthe CA: s 9 CA.
A liquidator's remuneration isfixed by agreement between him and the
committee of inspection, by the creditors w ith the specified majority
in general meeting, or by the court: s 268(3) CA. If no liquidator is
appointed, then the Official Receiver w ill act as liquidator: s 263(d)
CA. The liqu idator has to act impart ially and objectively in the course
of discharging his duties: Amrae Benchuan Trading Pte Ltd v Tan Te Teck
Gregory (2006).
13-410 The main task of the liqu idator is to liquidate the company's assets
as quickly as possible so that all cred itors can be pa id and any surplus
distributed to mem bers. He may be assisted by a committee of
inspect ion w hi ch comprises representatives of creditors and
contributories: s 277 CA. Pursuant to s 272(2) CA, the liquidat or has
a range of powers, includ ing the following:
(a) b ri ng or defen d any legal proceedings on behalf of the
company;
(b) compromise any debts not exceeding $1,500 due to the company;
(c) sell the company's immovable and movable property and things
in action by publ ic auction, public tender or private contract.
9.
If there was a resolution for voluntary w inding up before the w inding up application, the
winding up is deemed to have commenced on t he date of the resolut ion: s 255(1) CA
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13·411 In particular, the liquidator may, so far as is necessary for the benefit
of the winding-up, continue to run the business of the company for a
period of four weeks: s 272(1)(a) CA. If he has to run the business of
the company for a longer period, he must obtain the authority of the
court or the committee of inspection.
13-412 In addition, as in the case of the Official Assignee for personal
bankruptcy, the liquidator of a company also has the power to reverse
certain types of transactions entered into by the company during
the relevant period before the commencement of winding-up. For
example, any transfer or payment by the company which, under the
laws of personal bankruptcy, would amount to an undue preference
or an underva lue transaction, is also void or voidable as against the
company: s 329 CA (see 1113-229 and 1113-330). The relevant periods for
the application of this provision are: in the case of undue preference,
up to two years before the commencement of winding-up; and,
in the case of undervalue transactions, up to five years before the
commencement of winding-up. Another provision commonly invoked
iss 330 CA. Pursuant to this section, if the company created a floating
charge in favour of a lender and the liquidator proves that at the
point of creation the company was insolvent, then the charge will be
invalid as security for advances made by the lender before the creation
of the charge. However, the charge remains valid as security for fresh
advances made by the lender at or subsequent to the creation of the
charge. The relevant period for the application of this provision is up
to six months before the commencement of winding-up.
13·413 The above provisions are often called "avoidance provisions". Their
rationale is to preserve the company's property and prevent improper
disposals which will upset the system established by law under which
debts are ranked in accordance w ith their priority, as explained below.
Ranking of Claims
13-414 Once the liquidator has ascertained the debts of the company, payment
of these debts follow a system under which debts are ranked in
accordance with their priority. Essentially, secured creditors are the
most privileged because, as in the case of a bankruptcy, they have
the first claim to the proceeds from the assets which were covered
by their securities. After that come the preferred debts: s 328(1) CA.
Note, however, that holders of a floating charge may rank lower in
priority to certain preferred debts. Last are the unsecured creditors. If
there are any funds remaining after th is, these funds are d istributed
to the members. Subject to s 328 CA, the general rules concerning the
rights of secured and unsecured creditors in a bankruptcy apply to an
insolvency: s 327(2) CA.
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Priority of Claims
Secured
creditors
Preferred debts
• Costs and expenses of winding-u
• Salaries, provident funds and other
payments due to employees
• Taxes
Secured creditors with floating charges
ma rank after certain referred debts.
Unsecured creditors
Dissolution
13-415 In the case of a voluntary wind ing-up, the winding-up process
ends when the liquidator calls a f inal meeting of the members of
the company (together with the company's creditors in the case of
a creditors' voluntary winding-up): s 308 CA. By this stage, the
company's affairs must be fully wound-up and the liquidator simply
presents a final account showing how the winding-up has been
conducted and how the company's assets have been disposed.
13-416 After that, the liquidator must file a return with the Registrar of
Companies and the Official Receiver. The company is deemed to be
dissolved three months after the fi ling of the return. Unti l the final
dissolution of the company, it can still maintain a legal action through
its liquidator, regardless of the fact that the company may be at an
advanced stage of the winding-up: Seagate Technology Pte Ltd v Goh
Han Kim (1995). In the case of a winding-up by the court, upon the
completion of the winding-up, the liquidator must apply to the court
for an order of dissolution: s 275 CA. Upon the grant of the order,
the company is dissolved: s 276 CA.
SUMMARY
13-501 In this chapter we discussed the alternatives available to individuals,
firms and companies when they find themselves insolvent. For
individua ls, the two relevant procedures are voluntary arrangement
and bankruptcy. We outlined the procedures stipulated in the
bankruptcy legislation and dealt with issues ranging from the making
of an application and bankruptcy administration to the discharge of
a bankrupt.
13-502 In the case of companies, we looked at the four alternatives which
are avai lable when a company faces insolvency:
(a) scheme of arrangement;
(b) receivership;
(c) judicial management; and
(d) winding-up.
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We outlined the merits of each alternative. We also highlighted the
recent reforms which were introduced to facilitate debt restructuring
through undertaking a scheme of arrangement or judicial management.
We then looked at the procedure for a winding-up and the effect of a
w inding-up order made by the court. The work of liquidators, which
is critical in a winding-up, was also discussed. This was followed by a
brief mention of the statutory scheme of priorities for debts and the
procedure for dissolving the company.
13-503 What emerges from this chapter is that the alternatives to bankruptcy
and winding-up provide a means by which an insolvent individual, firm
or company can trade out of insolvency into financial health. In this
way, not all cases of insolvency will necessarily lead to financial ruin.
···•·•·•···
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PRINCIPLES OF
PROPERTY
INTRODUCTION
14-101 In this chapter, some key concepts concerning the law of property
in Singapore are introduced. Due to the vastness of the subject, this
chapter merely offers an overview of the main principles governing
this area of the law without delving too deeply into the many detailed
rules. The goal is to generate a greater appreciation of the legal issues
which are likely to be encountered whenever a business transaction
involves property in Singapore.
PROPERTY AND RELATED CONCEPTS
14-201 We begin by examining some of the more fundamental concepts
relating to the study of property rights. After that, we will consider
two specific types of property - real property and intellectual
property- and the legal issues to which they give rise.
Meaning of Property
14-202 From the outset, it is important to understand that the law uses the
word "property" in two different ways. First, it can mean the things
over which ownership can be exercised. These things include tangible
items such as houses, cars and watches as well as intangible items such
as shares, debts and copyright. In this sense, "property" generally refers
to assets which can be bought, sold or given as security for a loan.
14-203 " Property" can also mean the legal rights which exist over things. In
this sense, it generally means ownership. Thus, a person who owns a
house has property rights over it.
Two Meanings of "Property"
lr?iagram 14A
... ~
~Ownership,--~"~
Property
(in t he second sense)
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Asset
Property
(in the first sense)
339
Principles of Property
CHAPTER 14
Classification of Property
14-204 Used in the first sense of assets, the law distinguishes several types of
property, each having its own legal rules. The basic categories are real
property and personal property.
14·205 Real property refers only to land- although, as will be explained later,
the legal definition of land is more than just a reference to the physical
parameters delineating a piece of earth. All other property which is not
rea l property is generally categorised as personal property. Historica lly,
real property was the most valuable type of property a person can own.
After all, land was the source of agricultural wealth. Also, unlike other
property, land is permanent in nature in that it is indestructible. Today,
however, personal property can be just as or even more valuable than
real property. For example, a diamond necklace worth $3.5 million is
clearly more valuable than a $2.5 million house.
14-206 Real property is clearly tangible in nature. However, under the category
of personal property, there are both tangible and intangible items.
Tangible personal property refers to goods or chattels. They are also
called "choses in possession". Common examples are cars, laptops
and cash. Intangible personal property, or "choses in action", refers
to assets which consist of certain rights realisable by way of a legal
action. Common examples include debts, common shares, copyright,
insurance policies and negotiable instruments: Teo Song Kwang v Gnau
Lye Chan (2006).
Classif ication of Property
,. .
,·,- :..
' ~iagram .1.4~ ~
~
'\
14·207 An increasingly important sub-category of choses in action is
inte ll ectua I property. 1 Intellect ual property refers to propert y
created as a result of inte ll ectual effort such as patents, trade
marks, geographical indications, copyright, registered designs and
confidential information. There are specific legislation dealing
1.
In the past, intellectual property was also called "industrial property". Intellectual property
is now the more common nomenclature.
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with the first five types of intellectual property while the sixth is
protected under common law. Essentially, these rights are granted
to a person, usually the author or creator, to enable him to benefit
financially from his intellectual work. For example, take the case
of lan Fleming, the British author who first created the James Bond
secret agent character with the book Casino Royale in 1953. During
his lifetime, Fleming earned substantial amounts of income in the
form of copyright royalties as his 007 thrillers consistently hit the
best-seller lists and were subsequently made into movies.
14-208
In this chapter, we will focus primarily on real property and
intellectual property. Choses in possession, in particular, the legal
issues surrounding contracts for the sale of goods, are dealt with
separately in Chapter 15.
Legal and Equitable Interests
14-209
Earlier, we saw that the word "property" can be used to refer to
the asset itself and, secondly, to the ownership rights which exist over
the asset. Used in the second sense, "property" rights can be further
categorised as legal or equitable. Such rights can also be called "legal
interests" and "equitable interests", or "legal title" and "equitable
title", respectively.
14-210
The distinction between legal interests and equitable interests is rooted
in the historical bifurcation of the common law and equity. In the past,
legal interests were enforceable only in common law courts, whereas
equitable interests were enforceable only in a court of equity. However,
as noted in ~1-310, in the 1870s the English courts were re-organised
into one unified structure with each court empowered to exercise both
legal and equitable jurisdictions. Thereafter, the distinction between
the two types of courts became less important. For our purposes, it
is sufficient to understand that these two types of property interests
exist in Singapore and that, due to their historical development, there
are different rules which apply to each type of interest.
14-211
Perhaps the clearest way to illustrate the difference between legal
and equitable interests is through the concept of a trust. A trust is a
relationship whereby a person (called "the trustee") holds the legal title
over a property (called "the trust property") for the benefit of another
person (called "the beneficiary"). The beneficiary has equitable title
over the same property. In other words, while the trustee is the owner
at law, the beneficiary is the owner in equity. Since the equitable title
prevails over the legal title, the trustee is under an overriding duty
to hold the trust property for the beneficiary in accordance with the
terms of the trust. The beneficiary is thus the true owner.
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Principles of Property
A Trust
Diagram 14C
14-212
Thus, a wealthy father who wishes to provide for his young and only
child can establish a trust in favour of the child. He can appoint a
trusted relative, friend or lawyer as the trustee under a t rust deed in
which the legal title to his property is transferred to the trustee. He
will then specify his only child to be the beneficiary. The trust deed
will contain terms stating that income from the trust property is to
be applied for the benefit of the beneficiary.
14-213
Typically, such a trust will terminate after a fixed period, usually when
the child reaches adulthood. The trust deed will then provide that, at
that time, the legal interest in the trust property is to be transferred
to the beneficiary. Upon completion of that transfer, the beneficiary
becomes the sole and absolute owner of the property.
14-214
The detailed rules which apply to the law of trusts are many. They
are found largely in case law developed for many centuries in the
English Court of Chancery. 2 There is now, however, a significant
body of local case law dealing with th is subject.3 Nevertheless, the
topic of trusts is beyond the scope of this book. For our purposes, it
is sufficient to recognise that both legal and equitable interests can
be concurrently held by different persons over the same property.
Possession and Title
2.
3.
14-21 5
Another important property concept which should be borne in mind
is the relationship between possession and title. Possession refers to
the physical custody of the asset by a person. Title, as we have seen
earlier, refers to ownership. Usually, possession is associated with t itle
since a person who owns property normally has custody of it.
14-216
However, this is not always the case. An owner of property may, for
various reasons, not have possession of the property but still retain
title over it. For example, a car rental company may own a fleet of
vehicles most of which, at any point in time, are in the possession of
For an English textbook of trusts, see: Hayton D Jet a/, Underhill and Hayton: Law of Trusts and Trustees, 19th
ed (London: LexisNexis, 2016).
Yip M, "Equity and Trusts - Dreaming and Building a Singapore Equitable Jurisdiction" in
Goh Y & Tan P (eds), The Development of Singapore Law: Twenty Years of the Application of English
Law Act (Singapore: Academy Publishing, 2015) ch 12.
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individual hirers. From a hirer's perspective, he has possession of the
car but not title to it. Conversely, the car rental company has title to
the car but not possession of it.
Security Interests
14-217 A security interest over a property arises when an owner grants
to another person a limited interest in his property as security for
obligations which he has yet to perform.
14-218 A common situation involving security interests is a loan. The creditor,
such as a bank or a finance company, will usually require security
before lending money to a borrower. For example, if the borrower
is seeking to use the borrowed funds to purchase a condominium,
the bank will usual ly obtain over the condominium a security interest
cal led a "mortgage". If the borrower fai ls to pay, the lender may sell
the condominium and recover the outstanding debt from the sale
proceeds. There are different types of security interests which are
used in business transactions. We will consider three common ones.
Mortgage
14-219 There are two common types of mortgages pertaining to real property
in Singapore: registered mortgage and equitable mortgage. While a
registered mortgage is created through the mechanism provided by
the Land Titles Act, equitable mortgage is created by an agreement
(usually in form of a deed). In both cases, title in the property remains
with the borrower/owner; the mortgage operates only as a charge in
favour of the lender over the property. This is in contrast to a more
traditional form of mortgage which entails a transfer of title of the
property to the lender subject to the borrower's equity of redemption.
A mortgage will be discharged upon the borrower's full repayment of
the debt.
14-220 Mortgages of chases in action are also quite common, especially in
respect of items such as company shares. For example, a person may
obtain a loan by mortgaging his company shares to a finance company.
The mortgage is a legal mortgage if it entails a transfer of title in the
shares to the lender subject to the borrower's equity to redeem the
shares upon repayment of the loan. It is an equitable mortgage if it
is effected simply by depositing with the creditor the documents of
title to the chose in action (in this case the share certificates) together
with signed transfer forms. 4 In an equitable mortgage of shares, the
borrower retains legal title to the shares. The equitable mortgage is
4.
This example applies to shares in private companies and unlisted public companies.
Obviously, listed public companies whose shares are traded on a scripless basis generally
do away with share certificates such that a shareholder cannot create an equitable
mortgage by depositing share certificates with the mortgagee. Shares traded on a scripless
basis can, however, be charged as security: see '1112-509.
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Principles of Property
essentia lly an agreement to create a legal mortgage. If the borrower
fails to repay the loan, the creditor simply completes the transfer forms
already signed by the borrower and effects the legal transfer of the
shares. If the borrower repays the loan as agreed, the share certificates
and signed transfer forms are returned to him, in which case no legal
transfer actua lly takes place.
14-222 Mortgages of choses in possession, such as goods, are typica lly in the
form of a bil l of sale. Bi lls of sa le are governed by the Bills of Sale
Act. The borrower, also called a grantor, issues a bill of sa le in respect
of the goods he owns. The creditor, also called the grantee, advances
a loan to the borrower in exchange for the bil l of sa le. Possession of
the goods is retained by the grantor of the bi ll. The grantee, however,
can take possession of the goods in specific situations, such as when
the grantor breaches a term of the loan.
Pledge
14-223 The second common form of security interest is a pledge. When the
owner of a property pledges the property, he transfers possession of
the propert y as security but reta ins title to it. Th is transaction is also
called a ba ilment. Th is is unlike a traditional mortgage where t itle to
the property is transferred to the lender.
14·224 Pledges are given in respect of choses in possession but not in respect
of rea l property and choses in action . Typically, a borrower (cal led the
''pledgor'' or //pawnor'') w ill be the owner of goods which he hands
over to a lender (called the //pledgee// or //pawnee') who advances to
him a loan . During the term of the pledge, the pledgee cannot use
the goods. If the loan is repaid according to it s terms, the pledgee is
obl iged to retu rn the goods to the pledgor. If the loan is not repaid,
the pledgee is entitled to sell the goods. If the sale proceeds exceed
the amount of outstanding debt, then the excess wil l be returned to
the pledgor.
A Pledge
Pledgor
(owner/borrower)
Ownership
Pled9ee
(credJtor)
Possession
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14-225 In Singapore, the most common type of financing transactions
involving pledges occur in connection with pawnbrokers. Pawnbroking
transactions involves a pledge of goods (usually jewellery or other
personal valuables) in return for a cash advance. Pawnbroking activities
in Singapore are regulated by the Pawnbrokers Act.
Lien
14-226 There are several types of liens, the most common one being the
possessory lien. A possessory lien is the right of a person (called the
"lienor"), who has possession of goods belonging to another, to retain
the goods until the owner has fully paid the lienor's monetary claim.
For example, a car repair shop has a possessory lien over a car left at
the repair shop by the owner who fails to pay for the repairs agreed
upon. Similarly, an accounting firm has a possessory lien over the
accounting records, files and notes of a client who refuses to pay the
professional fees due to the firm.
14-227 Unlike both a mortgage or a pledge, a lien is a less formal kind of
security, the implication of which is that a lienor does not have an
immediate right to sell the goods if the debtor continues to refuse
payment. The lienor will have to obtain a court order to sell the goods
in these circumstances. Neither can the lienor claim additional fees for
storage or costs associated with exercising the lien.
14-228 Two other types of lien may arise in the context of the sale of real
property: vendor's lien and purchaser's lien. A vendor's lien is exercised
by the sel ler by withholding transfer of the property if the purchaser
fails to pay purchase price. A purchaser's lien is exercised by the
purchaser to secure the return of any deposit if the vendor refuses to
complete the sale.
REAL PROPERTY IN SINGAPORE
14-301 Due to land scarcity in Singapore, real property has become one of the
most va luable assets in the nation. Many business transactions involve
real property. The law of real property is a huge topic by itself. In this
section, we do no more than to outline some of the more basic concepts
underlying real property law. 5
Meaning of Land
14-302 There is no single definition of "land" in Singapore. Several statutes
provide different definitions. One definition is found in s 4(1) Land
Titles Act.
5.
For detailed treatment of Singapore land law, see Tang H W & Low K, Tan Sook Yee's Principles
of Singapore Land Law, 3rd ed (Singapore: LexisNexis, 2009); W J M Ricquier, Land Law, 5th ed
(Singapore: LexisNexis, 2017).
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Principles of Property
Land Titles Act
Section 4(1 ):
"land" means ...the surface of any defined parcel of the earth, all
substances thereunder and so much of the column of airspace above
the surface...as is reasonably necessary for the proprietor's use and
enjoyment, and includes any estate or interest therein and all vegetation growing thereon and structures affixed t hereto ... and where the
context so permits, the proprietorship of land includes natural rights
to air, light, water and support and the right of access to any highway
on which the land abuts.
14-303 What is clear is that "land" includes not only a piece of earth but
also structures, such as buildings, erected upon the land. Thus, unless
otherwise agreed, a person who purchases land also purchases any
bui lding on it.
14-304 The common law further extends the definition of land to include
f ixtures. Fixtures are things which are affixed to a bui lding such that
they form part of the land. In deciding whether something is a fixture, it
is necessary to consider the degree and purpose of annexation: Holland
v Hodgson (1872). Where the th ing is f irmly fixed to the build ing, the
presumption is that it is a f ixture, and vice versa. In Singapore, this
issue has been considered by the Court of Appeal in several important
cases, such as: People's Park Chinatown Development Pte Ltd (In Liquidation)
v Schindler Lifts (Singapore) Pte Ltd (1992). Heavy machinery bolted to
the ground or the floor of a factory as well as kitchen and bathroom
equipment affixed in a home have been held to form part of the land:
Gebrueder Buehler AG v Chi Man Kwong Peter (1988).
Ownership of Singapore Land
14-305 Al l land in Singapore is "held of the state" (ie. derived from the state).
Thus, any land which has not been alienated to private individuals
belongs to the state. Also, in the rare case where a private landowner
dies intestate and has no next-of-kin, the land reverts to the state. All
state land is governed by the State Lands Act. Most state land is held
by statutory bodies such as the Singapore Land Authority (SLA), the
Urban Redevelopment Authority (URA), the Housing and Development
Board (HDB), and JTC Corporation (JTC).
14-306 A landowner, be it the state or a private individual, may make
different kinds of grant in respect of the land . This allows the
grantee to use the land for specif ied durations. Some
of the more common grants are described below.6
6.
For historical reasons, some of these grants are known as "estates". An estate is a form of ownership,
which may either be a permanent or temporal right to the exclusive possession of a piece of land.
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Estate in Fee Simple
14-307 A fee simple estate, also commonly known as a f reehold estate, is
essentially an absolute ownership which lasts indefinitely. As such, it
is the most sought-after type of estate in land.
Estate in Perpetuity
14-308 In t he case of state land, the state may grant an estate in perpetuity,
which is simi lar to a fee simple in that both last indefinitely. The only
material difference is that an estate in perpetuity issubject to conditions
and reservations which are impl ied in the State Lands Act.
Lease
14·309 Perhaps the most common type of estate in Singapore is a lease, which
enta ils t he granting of exclusive possession of land for a limited term.
Unlike a f ee simple, a lease has a specified period, such as 99 years.7
In most cases, a lease is carved out from a fee simple est at e, but it can
also be carved out from a longer lease. Like a fee simple, a lease is
an estate in land, and hence inheritable. Whi le a lease is usual ly less
valuable t han a fee simple due to its temporal limitation, some leases
are practically as good as a fee simple. One reported case gives the rare
example of a lease of 999,999 years: Goh Teh Lee v Lim U Pheng Maria
and others (2010).
Licence
14-310 Like a lease, a licence allows the use of a land for a specified duration.
However, a licence is personal to the licensee. This implies that it cannot
be inherited upon the licensee's death. Moreover, a licence usually does
not allow exclusive possession but merely temporary use.
Co-ownership
14·31 1 Land can be owned by one person or jo intly by two or more persons.
There are two types of co-ownership: j oint tenancy and tenancyin-common. The most important hallmark of a joint tenancy is the
operation of the rule of survivorsh ip. Upon the death of one coowner Uoint tenant), the entire interest in the land will be held by
the rema ining joint tenant(s). Nothing passes to the next-of-kin of the
deceased joint tenant. Even if the will of the deceased stipu lated that
his share in the property is to pass to a third person, this will have no
effect. The property wil l thereafter belong solely to the survivor.
7.
For example, Singapore HOB apartments are generally on 99-year leases.
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14-312
Unlike joint tenants, tenants-in-common hold the land in undivided
shares, for example, 30% for Adam and 70% for Eve. Tenants-incommon will have specified their respective shares and this will usually
reflect their respective contributions to the purchase price. If one joint
tenant dies, then his share will form part of his estate which will be
distributed according to his will or the usual rules of intestacy.8
14· 313
Given the different implications for choosing between the two forms
of co-ownership, it is not surprising that joint tenancy is usually
chosen by persons in close relationships while tenancy-in-common is
typically used in the business context. A joint tenancy may, however,
be uni laterally severed to become a tenancy-in-common. This can be
done by complying with prescribed formalities set out in s 53 Land
Titles Act or other modes of severance recognised by the common law
and equity: Diaz v Diaz (1997).
Strata Titles
8.
9.
14·314
In land-scarce Singapore, high-rise private apartments, also called
condominiums, are common. These property developments use the
concept of strata titles as a means to "divide" the ownership of the
property among the condominium owners. 9 Section 3 Land Titles
(Strata) Act (LTSA) defines a "stratum" (singular of strata) to mean
any part of land consisting of a space of any shape which is below,
on or above the surface of land, the dimensions of which are
delineated. In this way, a person can become the owner of any
defined space, including airspace.
14·315
The developer will apply for the bu ilding to be subdivided into separate
condominium un its, each with a strata title. These separate un its can
then be sold to individual purchasers who are also known as "subsidiary
proprietors" . Certain areas, such as lift lobbies, corridors and gardens,
which are shared by the subsidiary proprietors, are designated as
"common property": ss 3 and 13 LTSA.
14-316
Management and ma intenance of strata title developments are
regulated by the Building Maintenance and Strata Management Act
(BMSMA). Upon registration of the strata title plan, the subsidiary
proprietors as a group will constitute a separate incorporated body
called a "management corporation": s 10A LTSA and s 24 BMSMA.
14·317
The task of the management corporation is to manage the building
and maintain the common property. Subsidiary proprietors pay regular
maintenance fees to fund the management corporation: s 39 BMSMA
Intestacy refers to the state when a person dies without having made a va lid will. When a
person dies intestate, his estate wi ll be administered and distributed according to provisions
of the Intestate Succession Act.
On strata t itles, see: Teo K S, Strata Title in Singapore and Malaysia, 5th ed (Singapore: LexisNexis, 2015).
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14-318 Since 2005, each management corporation of a strata title development
can make its own by-laws: s 32 and s 33 BMSMA. These by-laws include
rules specifying the rights and responsibi lities of subsidiary proprietors,
rules govern ing the use of common property (like gardens and sporting
faci lities) and rules applicable to the management corporation itself.
The by-laws can also be prescribed by regulation: s 136 BMSMA.
Transfers of Real Property
14-319 The transfer of real property involves two steps. Typically, the owner
wil l enter into a contract with a buyer for the sale of the property. This
is followed by a conveyance of title in the property, which is undertaken
by their respective lawyers.
Contract of Sale
14-320 A contract for the sale of land must include three basic details:
the parties, the property and the price. For it to be enforceable,
the contract must also be evidenced in writi ng and signed: s 6(d)
Civil Law Act. The contract of sa le can be specially drafted for the
particular transaction or it can be a standard form contract. For
example, contracts for new HDB flats are standard and contain the
HDB conditions of sale. As this makes t he transact ion rather
straightforward, sellers and buyers of HDB flats usual ly do not engage
lawyers. For non-HDB property, parties may incorporate other terms
called The Singapore Law Society's Conditions of Sale. The parties may
add, subtract or vary the standard conditions, in which case they may
wish to engage lawyers to vet the contract before executing it.
Conveyancing
14-321 Once the contract for sale has been executed, the lawyers wil l proceed
with the "conveyance" of the property. Conveyance involves the
transfer of title in the property from the seller to the buyer. Virtually
all land in Singapore is now registered under the Land Titles Act (LTA)
which is based on the Torrens system of land titles reg istration. Under
the Torrens system, there is a land titles register in which every piece
of land is registered. A certificate of t itle is issued for each parcel
of reg istered land, which contains, among other th ings, detai ls of
ownersh ip. The same also appli es to strata titles such that a subsidiary
strata certificate of title is issued to subsidiary proprietors of strata
units: ss 4 and 10 LTSA.
14-322 The LTA requires certain dealings in the property, such as a transfer,
to be registered for it to be effective: s 45 LTA. Thus, notwithstanding
the existence of a contract of sale, title in the property passes to the
10.
The original version was introduced by Sir Robert Torrens in South Australia in 1858. The modified version
in Singapore was introduced in 1956 through the enactment of the Land Titles Ordinance.
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Principles of Property
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buyer only upon registration of the prescribed transfer form on to the
land titles register.
14-323
The LTA also allows certain encumbrances, such as a mortgage, to be
registered over the property. However, case law has recognised that
not all dealings must comply w ith the methods prescribed by the LTA.
For example, instead of a registered mortgage, a creditor might, for
convenience, accept an equitable mortgage. Such an unregistered
interest can be protected by the lodgement of a caveats 115 LTA. The
caveat gives notice to the world of the creditor's interest and prevents
the registration of a subsequently created interest that is inconsistent
with the interest of the creditor. For this reason, creditors typically
lodge a caveat over the to a property in which they have an interest.
Compulsory Acquisiti on
14-324
One final point worthy of brief mention is compulsory acquisitions. 11
Compulsory acquisition refers to the power of the state to acquire real
property from owners compulsorily, subject to the payment of specified
compensation. Compulsory acquisitions are mainly regulated by the
Land Acquisition Act (LAA). 12 The process of compulsory acquisition
begins with the notification in the Government Gazette that certain land
is to be acquired for a specific purpose. The purpose of the acquisition
must be for the public benefit or such other purpose approved by the
President of Singapore: s 5 LAA. The Collector of Land Revenue then
notifies the owners of the proposed acqu isition and invites claims for
compensation to be sent to him.
14-325
The compensation for a compulsory acquisition is set by the Collector
of Land Revenue: s 10 LAA. An owner who disagrees with the level of
compensation set by the Collector of Land Revenue can appeal to the
Appeals Board and, in certain circumstances, to the Court of Appeal: ss
19-37 LAA. Since 2007, a compulsory acquisition of land must generally
be made at the market value of the land as at the date of acquisition.
INTELLECTUAL PROPERTY IN SINGAPORE
14-401
11 .
12.
13.
14.
Having examined the basics of Singapore land law, we now turn to the
law relating to intellectual property. 13 As mentioned earlier, intellectual
property, being intangible in nature, is a sub-category of choses in
action. 14 Following rapid technological advancements and the advent
of the knowledge economy, much of the world's wealth is now in the
See Khublall N, Compulsory Land Acquisition -Singapore and Malaysia, 2nd ed (Singapore:
Butterworths Asia, 1994).
Certain statutory bodies, such as the HOB and the URA, also have the power to initiate
compulsory acquisit ions under their respective enabling legislation.
See generally: Ng-loy W l , Law of Intellectual Property in Singapore, 2nd ed (Singapore: Sweet & Maxwell,
2014). The Intellectual Property Office of Singapore (IPOS) website (www.ipos.gov.sg) also provides a
wealth of information.
For the distinction between choses in action and choses in possession, see: 1)14-206.
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form of intellectual property. Take the smartphone market for example.
Many of the disputes between competitors concern the exterior design
and software rather than the physical thing itself. The legal aspects
of design and software are generally within the scope of intellectual
property law. For this reason, having a basic understanding of the
lega l framework for intellectual property is increasing ly important for
business professionals.
Intellectual Property Protection
14-403 Intellectual property laws aim to balance two competing interests.
On the one hand, to encourage creativity and technical innovation,
entrepreneurs, authors and inventors must be given legal protection
over the fruits of their intellectual effort. An engineer who invents a
new internal combustion engine should be allowed to obtain a patent
wh ich grants him the exclusive right to benefit from his invention for
a specified period. This will enable him to generate sufficient financial
returns for his efforts.
14-404 On the other hand, if the law is overly protective of the inventor, this
reduces the benefit that society may derive from the new invention. For
example, if a drug company discovers a new vaccine for a dangerous
disease, it would obviously want to sell the vaccine for considerable
profit. This monopoly, however, would reduce public access to the drug
due to its high cost. On the other hand, if more than one drug company
is allowed to produce this vaccine, competition wou ld drive prices
down, and this would facilitate public access. This delicate ba lancing
of competing interests underlies much of the evolution of intellectual
property law.
14-405 In recent years, Singapore has bolstered its intellectual property
protection system in recognition of the importance in facilitating
technological advancement and growth of its knowledge-based
industries. Below, some of the key features of intellectual property law
in Singapore are outlined. Our discussion encompasses patents, trade
marks, geographical indications, copyright, registered designs and
confidential information. For the international aspects of intellectual
property protection, see 1119-801.
Types of Intellectual Property
Intellectual Property
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Principles of Property
Patents
14-406 An inventor who successful ly registers a patent over an invention
acquires a monopoly over the invention for a specified period. Patents
for new products are usually called "product patents" while patents
for new processes are called "process patents". Since 1995, Singapore
has established its own patent system administered by the Intellectual
Property Office of Singapore (IPOS).
Patentable Inventions
14-407 The relevant legislation provides that, to obtain a patent, an invention
must be new, involve an inventive step and be capable of industrial
application: s 13(1) Patents Act. 15 An invention is new if it does not
form part of "the state of the art": s 14(1) Patents Act. "State of the
art" refers to all prior and public knowledge: s 14(2) Patents Act. An
invention is taken to involve an inventive step if "it is not obvious to
a person skilled in the art, having regard to...the state of the art":
s 15 Patents Act. For example, in the case of a new internal combustion
engine, this means that the invention must not be obvious to an
engineer skilled in such engines. An invention is capable of industrial
application if it can be used in any industry including agriculture: s
16(1) Patents Act.
Application Procedure
14-408 Patent applications are filed with the Singapore Registry of Patents.
Each application must include a detailed specification describing the
invention and the claims which define the matters for which patent
protect ion is sought s 25(3) and (5) Patents Act. Due to the technical
nature of patent applications, patent agents or patent attorneys are
usually engaged to assist in drafting and filing them: ss 104-105
Patents Act.
14-409 Once filed, the application is published and examined by the
Registrar of Patents: ss 27-28 Patents Act. The examination process
may take some time. If, after exam ination, the Registrar is of the view
that the invention is a patentable invention, a patent will be granted.
Once granted, the patent is valid for 20 years from the date of the
patent application: s 36(1) Patents Act. The patent proprietor may
apply to the Registrar to extend the term of the patent on several
grounds, including an unreasonable delay by the Registrar in granting
the patent s 36A( 1)(a) Patents Act. The period of the extension varies
depending on the circumstances but may extend up to a period of five
years: s 36A(4) Patents Act.
15.
The requirements of s 13{1) Patents Act have been considered by the Singapore Court of Appeal in
several important cases: Towa Corp vASM Technology Singapore Pre Ltd {2017); Muhlbauer AG v Manufacturing
Integration Technology Ltd (201 O); First Currency Choice Pre Ltd v Main-Line Corporate Holdings Ltd (2008); Genelabs
Diagnostics Pre Ltd v lnstitut Pasteur (2000); and Merck &Co Inc v Pharmaforte Singapore Pre Ltd {2000).
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14-410 Singapore is a member of the Patent Cooperation Treaty (PCT), an
international treaty to facilitate patent applications. This means that
a Singapore resident can file his patent application in Singapore and
nominate various PCT contracting states where he also wishes to obtain
patent protection. Detailed examination then follows, including
nationa l examination in accordance with the laws of each PCT state.
The advantage of being part of the PCT system is that the applicant
saves substantial costs and time from not having to file individual
patent applications in each country in which he seeks protection.
Ownership Rights
14·411 A patent is granted to the inventor or joint-inventors of the invention:
s 19(2) Patents Act. In certain situations, however, an employee who
makes an invention in the course of his employment may find that the
patent protecting that invention is deemed to belong to his employer:
ss 49-50 Patents Act.
14-412 Once granted, a patent may be sold, assigned or mortgaged like any
other personal property: s 41(2) and (3) Patents Act. A patent may also
be licensed to other persons. In order to overcome anti-competitive
practices, in certain circumstances - such as where the patent is
not being supplied on reasonable terms -at the application of any
interested person, the High Court may compel the patent owner to
grant a non-exclusive licence to the applicant: s 55 Patents Act. This is
also known as a "compulsory licence". Compu lsory licences are used
to ensure that patented inventions are used to benefit society and are
not simply stored away and not utilised.
Infringement
14-413 Patent infringement occurs when a person, without the consent of the
patent owner, makes or otherwise deals with the patented product, or
uses the patented process: s 66(1) PA. Often, the issue of infringement
is considered by comparing the infringing product with patent claims:
Genelabs Diagnostics Pte Ltd v lnstitut Pasteur (2000). The patent proprietor
can issue lega l proceedings for patent infringement and obtain
compensation or an injunction to stop the infringement. However, in
a number of specified situations, certain otherwise infringing acts may
not give rise to liability. This includes situations where the act is done
privately for purposes which are not commercial, where it is done for
experimental purposes or where the patent is used for the services of
the government: s 66(2) and Part XII Patents Act.
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Trade Marks
14-414
In Singapore, a trade mark can be registered under the Trade
Marks Act (TMA). 16 A trade mark refers to any sign capable of being
represented graphically (such as words, shapes or logos) and which is
capable of distinguishing goods or services from different sources: s
2(1) TMA. The idea of graphical representation is to be understood
broadly; it can include sounds which are capable of being reg istered
as sound marks. When a trade mark becomes closely associated with
a particular product, much goodwill and prestige may be associated
with the trade mark. One only has to see twin golden arches to think
of McDonald's. The value of this trade mark is obvious from the vast
franchising network which McDonald's has established. An extension
of this is the concept of character merchandising where well-known
characters such as Mickey Mouse and Batman can be affixed to all kinds
of merchandise to enhance the selling price.
14-415
Trade marks used in relation to goods are also called goods marks and
those used in relation to services are called service marks. Examples
of goods marks include Yeo Hiap Seng, IBM and Giorgio Armani in
their simple or stylised forms. Examples of service marks include Hyatt
Hotel and American Express in their simple or stylised forms and the
Singapore Airlines logo.
14-416
In Singapore, the most effective way of protecting trade marks is to
register them under the TMA. Alternatively, unregistered trade marks
may also gain some protection through the common law action of
passing off, which is discussed in 1118-502. It should also be noted that
registration of a business name under the Business Registration Act (119·
203) does not in itself grant any proprietary rights in the name.17 Similarly,
the use of a domain name on the internet does not in itself grant any
proprietary rights to the domain name. In this section, we focus on the
protection of trade marks under the statutory registration system.
Registration
14-417
16.
17.
Trade mark reg istration can be made in respect of various goods and
services, with 45 classes of goods and services avai lable for selection.
Registration in respect of one class wou ld grant the proprietor the
exclusive use of the mark in respect of the goods or services specified
in that class. Registration would only be granted if the applicant is
already using the mark or intends to use the mark in respect of those
goods or services. Similarly, a trade mark may be revoked under s 22(1)
(a) TMA for non-use within five years of registration: MC/ Group Holding
SA v Secondment Pty Ltd (2014) and Romanson Co Ltd v Festina Lotus SA
(2015), and Bigfoot Internet Ventures Pte Ltd v Apple Inc (2017).
See generally: Ravindran M, lntelfectual Property· Tfade Marks Act: A Commentary (Singapore: LexisNexis,
2002); Tan T J, Law of Trade Marks and Passing Off in Singapore, 3rd ed (Singapore: Sweet & Maxwell, 2014).
Indeed, the use of a registered business name does not exclude the possibility that the business name
may infringe a registered trade mark: see 1110-308.
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14-418
If the trade mark has already been applied for in a country which is
a member of the Paris Convention or the World Trade Organisation,
and a simi lar application is lodged in Singapore within six months,
then the application date is the date when the mark is applied for
overseas: s 10 TMA. Since Singapore acceded to the Madrid Protocol in
2000, the procedure for making international trade mark applications
has become even easier. 18 The Madrid Protocol allows one trade mark
application to be made in one member country with the effect that similar
applications are deemed to be made in all member countries. However,
the registration authorities in each country still have the discretion to
decide whether to register the trade mark in their respective jurisdictions.
14-419
Generally, the Registrar of Trade Marks has an obligation to examine
each trade mark application to see whether the trade mark is registrable:
s 12 TMA. Certain marks are not capable of registration. They include:
marks which are not distinctive; marks which are wholly descriptive; and
marks which are contrary to public policy or morality: s 7 TMA. Flags,
state emblems, names of international organisations and other such
designations generally cannot be registered as a trade mark without
proper authorisation: ss 56-57 TMA.
14-420
A mark identical or similar to a registered trade mark will not be accepted
for registration if the two marks are to be used for similar goods or
services and this is likely to result in confusion on the part of the public:
s8 TMA. The Singapore High Court has held that the test to be applied is
whether "ordinary, sensible members of the pub Iic would be confused";
it is not sufficient that the confusion involved only "a very small,
unobservant section of the society": The Polo/Lauren Co L.P v United States
Polo Association (2002). In comparing trade marks, one must consider
their "visual, aural and conceptual similarities": Future Enterprises Pte Ltd
v McDonald's Corp (2006). The Singapore Court of Appea l has further
clarified that the visual, aural or conceptual similarity of the marks in
question must be assessed based on the overall impression given by the
marks, bearing in mind their distinctive and dominant components: Hai
Tong Co (Pte) Ltd v Ventree Singapore Pte Ltd (2013); Staywe/1 Hospitality Group
Pty Ltd v Starwood Hotels & Resorts Worldwide, Inc (2014); and Ceramiche
Caesar Spa v Caesarstone Sdot-Yam Ltd (2017).
McDonald's Corp v Future Enterprises Pte Ltd (2005)
The respondent company, FE, decided to enter the instant food
and beverage business in 1995. FE then applied to register three
application marks, "MacTea", MacChocolate" and "MacNoodles", each
accompanied by an eagle device (logo), towards that goal. McDonald's
opposed the application but was unsuccessful. It then appealed to
the Singapore Court of Appeal on, amongst others, the following
ground: that registration of the three marks was likely to deceive
or cause confusion to the public. McDonald's contended that it had
18.
The system of international registration of trade marks is governed by the Madrid Agreement Concerning
the International Registration of Marks and the Protocol Relating to the Madrid Agreement (Madrid
Protocol). Singapore acceded to the Madrid Protocol on 31 July 2000 and it came into force in Singapore
on 31 October 2000.
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established a reputation and goodwill in the prefix "Me", an essential
feature in their family of marks. FE's adoption of the prefix "Mac" in
its application marks could confuse the public by giving the impression
that FE's products came from McDonald's. The court dismissed
McDonald's appeal as their marks and FE's marks were neither visually
nor aurally similar. The rival marks were different in terms of colour,
font and typeface. Moreover, McDonald's could not monopolise t he
prefix "Me" for food and beverages by disregarding the manner in
which FE's products were sold; McDonald's products were always sold in
its restaurants, whereas FE's products were only sold in supermarkets.
With widespread education and a well-travelled public, "one should
be slow to think that the average individual is easily deceived or
hoodwinked" . The very success of McDonald's was also the reason
why confusion was unlikely to result. In assessing the likelihood of
confusion and deception, the court will not view the disputed marks
in isolation but in the light of all surrounding circumstances. These
include the reputation of the existing mark, the use of the proposed
mark, the nature of the goods carrying the mark, the method of sale
and the target customers. Isolated instances of confusion arising would
not be enough to deny registration.
14-421
Once the trade mark is accepted for registration, it must be published.
Third parties are then allowed to lodge objections to its registration by
filing a notice of opposition: s 13 TMA. If there is no notice of opposition,
or if the opposition proceedings are withdrawn or otherwise decided
in favour of the applicant, the Registrar must allow the trade mark to
be registered: s 15 TMA. Once registered, the registration is valid for
ten years and is renewable for subsequent periods of ten years: s 18
TMA. Trade mark proprietors typically use a symbol to denote that their
trade marks are registered. Usually, the symbol is TM or®. Renewal
must be undertaken prior to the expiry of the registration and incurs
a fee: s 19 TMA.
14-422
Apart from the standard trade mark registration, the legislation also
provides for the registration of collective marks and certification marks.
Collective marks are used by members of an association in relation to
their goods or services: s 60 TMA. Certification marks are used to distinguish goods or services which have been certified as to their origin,
quality or some other feature: s 61 TMA.
Trade Mark Registration
Type of Registration
Collective Mark
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SINGAPORE BUSINESS LAW
Infringement
14-423 Genera lly, the proprietor of a trade mark has the exclusive right to use
or authorise other persons to use the trade mark: s 26 TMA. The trade
mark is infringed if a third party, without the consent of t he trade
mark proprietor, uses a sign identical or simi lar to the trade mark for
goods or services within the same class, and such use is likely to result
in confusion among the public (s 27 TMA): Sarika Connoisseur Cafe Pte
Ltd v Ferrero SpA (20 12) and Hai Tong Co (Pte) Ltd v Ventree Singapore
Pte Ltd (2013). So, when a person affixes the Rolex trade mark on a
counterfeit watch, this amounts to a trade mark infringement.
14-424 The importation of goods which infringes a registered trade mark is
subject to severe consequences. The trade mark proprietor can notify
the customs authorities to object to such importation: s 82 TMA. The
custom authorities are given extensive powers to board and inspect
vessels, examine packages and seize infringing goods.
14·425 However, a third party can use his own name or the name of his place
of business, his predecessor's name, or the name of his predecessor's
place of business, without infring ing a similar or identical registered
trademark: s 28 TMA. Similarly, if a third party or his predecessor
has used the trade mark before it was reg istered by another person,
then the continued use of the trade mark by the third party does not
amount to an infringement. In al l of these cases- specified under s 28
TMA - there is a general requ irement that the use be in accordance
with honest practices in industrial or commercial matters.
14-426 Where a trade mark proprietor initiates proceed ings against an
infringer, the court may order the infringer to remove or erase the
offending sign; alternatively, the court may order the goods on which
the infringing sign is affixed to be destroyed or seized: s 32 TMA. On
the other hand, if the trade mark proprietor makes a groundless threat
of trade mark infringement, he will be liable to the alleged infringer
unless he can prove that there was indeed an infringement: s 35 TMA.
14-427 Apart from civil liability an infringer may also be exposed to crimina l
liability: ss 46- 49 TMA. Pena lties include fines and imprisonment.
Ownership and Licensing
14-428 As noted previously, a trade mark is considered as personal property: s
36 TMA. Like all property, a trade mark can be sold and assigned. Such
assignment may- not must- be reg istered: s 39 TMA. Registration
provides certain benefits if there are later conflicting deali ngs involving
the trade mark. A trade mark can also be licensed by the proprietor to
third parties: s 42 TMA. Such licences can be non-exclusive or exclusive:
s 43 TMA. A typical example of licensing is where a foreign trade mark
proprietor licenses a local trader to use the trade mark in the domestic
market in return for payment of a royalty: National Aerated Water Co
Pte Ltd v Monarch Co, Inc (2000).
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Principles of Property
Geographical Indications
14-429 A geographical indication refers to a sign which is used in trade to
identify goods as originating from a place wh ich has given the goods
its special qual ity or reputation. One example is "champagne", which
refers to a type of alcoholic wine which originates from the Champagne
region in France. The product and the region have become so closely
connected in the minds of consumers that the mere reference to the
geographical region brings to mind the product. For t his reason, other
manufacturers of that type of alcoholic wine who are based outside the
Champagne reg ion in France are prevented from calling t heir product
"champagne". Hence, Australian w inemakers use the t erm "sparkling
wine" to refer to their equivalent of "champagne". Similarl y, "cognac"
refers to brandy produced from the Cognac region in France; brandy
producers in the Napa Valley in California must content themselves with
calling their product brandy and not cognac. In Singapore, geographical
indications are wotected under the Geographica l Indications Act
9
enacted in 1998.
14-430 Geographical indications in Singapore need not be registered.
Among other things, the leg islation prohibits the use of mislead ing
geographical ind ications and allows certa in interested parties to obtain
a court inj unction to restra in such un lawfu l conduct. The legislation
also prohibits the reg istration of misleading geograph ical ind ications
as trade marks. However, it is possible that a geographical indication
may also f ulfil l the criteria for a trade mark; if so, it is possible to also
obtain trade mark registration for that geographical indication.
Copyright
14-431 Copyright refers to the right to make copies of an orig inal work.
Generally, the creator ofthe original work has copyright. Unauthorised
reproduct ion of that origina l work amounts to copyright infringement.
The law of copyright, however, protects the expression of ideas and
not the idea itself. Thus, a writer enjoys copyright protection for the
novel he has written but cannot claim copyright for the plot around
which the novel is based. In this way, the law of copyright attempts
to protect the intellectual efforts of those who created the matter
without unduly restricting the freedom of others to express the same
concepts in their own way.
14-432 In Singapore, the law re lating to copyright is found in the Copyright
Act. This statute is based on the Austra lian copyright legislation and
bears similarities with the Un ited Kingdom legislation. The Copyright
Act came into effect in 1987 and appl ies to all matter which can be
copyrighted and created after that date. 20
19.
20.
The Geographical Indications Act was enacted so that Singapore could meet its obligations
under the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs) under
the general f ramework of the World Trade Organisation (WTO).
See generally: Wei G, The Law of Copyright in Singapore, 2nd ed (Singapore: SNP Edit ions,
2000).
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Copyright Matter
Matter in which copyright can subsist
I •Author's
Works
I
Works"
Literary works
I Subject-matter
other than works
" Entrepreneurial Works"
Sound recordings
(includes computer programs)
Cinematograph films
Musical works
Dramatic works
Artistic works
Television & sound broadcasts
Cable programmes
Published editions of works
Scope of Copyright Matter
21.
14-433
Under the Copyright Act, subject matter that is capable of enjoying
copyright protection fal ls into two broad categories: "work" and
"subject-matter other than work". "Work" means literary, dramatic,
musical and artistic works: s 7 Copyright Act. Simple examples are
books, plays, lyrics, musical scores, and paintings. Literary work also
includes computer programs: s 7A Copyright Act. Toget her, these works
are sometimes referred to as "authors' works". "Subject-matter other
than work" covers sound record ings, cinematograph fi lms, television
and sound broadcasts, cable programmes and published editions of
works: ss 82-86 Copyright Act. These are usually created by persons
who are not the authors of the original works.
14-434
Generally, for a literary, dramatic, musical or artistic work to acquire
copyright status, it must be an origina l and previously unpublished
work: s 27(1) and (4) Copyright Act. 21 The requ irement of originality
is not difficult to fulfill. As long as the work is independently created
by the author and involves a minimal degree of intellectual effort, it
can be considered to be an original work. However, mere compilation
of data with no creative input does not attract copyright protection:
Global Yellow Pages v Promedia Directories Pte Ltd (2017), reversing Virtual
Map (Singapore) Pte Ltd v Singapore Land Authority (2009).
Certain published works may also enjoy copyright protection: s 27(2) and (3) Copyright
Act. Also, Singapore has bilateral copyright treaties w ith the United Kingdom, USA and
Australia and, pursuant to s 184 Copyright Act, subject matter which attract copyright in
those countries may be given copyright protection in Singapore.
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CHAPTER 14
14-435
This has two implications. First, orig ina lity does not imply excellence.
Copyright can subsist in ungrammatical articles, lousy plays and
meaningless doodlings. Secondly, two persons can each independently
create a work which is similar to the other and st ill own copyright in
their respective works: Chua Puay Kiang v Singapore Telecommunications
Ltd (1999); Virtual Map (Singapore) Pte Ltd vSingapore Land Authority (2008).
As long as it can be shown that they created the works independently,
each work wi ll be considered an origina l work.
14-436
For sound recordings and cinematog raph f ilms to enjoy copyright
protection, they must be made or f irst published in Singapore, or
created by a Singapore citizen, resident or corporation: s 87- 88
Copyright Act. Te levision and sound broadcasts enjoy copyright
protection if they are broadcast in Singapore by the Media Corporation
of Singapore (MediaCorp) or a person holding a broadcasting licence:
s 89 Copyright Act. Cable programmes enjoy copyright if they are
included in a cable programme service provided by a Singapore citizen,
resident or corporation: s 90 Copyright Act. A publ ished edition of
an author's work enjoys copyright protection if it is first published in
Singapore or the publisher who f irst published it is a Singapore citizen,
resident or corporation: s 91 Copyright Act.
Ownership and Protection
14-437
Copyright in an original literary, dramatic, musical and artistic work
generally vests in the author or joint authors of the work: s 30(2)
Copyright Act. However, there are some exceptions. Where an
employee creates a work for publication in a newspaper or magazine
belonging to his employer, the employer owns t he copyright: s 30(4)
Copyright Act . Simi larly, where a photograph, paint ing, drawing or
engraving is commissioned by a person, copyright in the work vests
in the person who commissioned it, not the photog rapher, pa inter or
engraver: s 30(5) Copyright Act.
14-438
According to s 26(1)(a) and (b) Copyright Act, the proprietor of
copyright in a literary, dramatic or musica l work has the exclusive
right, among other th ings, to:
(a) reproduce the work in a material f orm;
(b) publ ish the work;
(c) perform the work in public;
(d) commun icate the work t o the publ ic; and
(e) make an adaptation of the wo rk and, in respect of the
adaptation, do any of the acts above.
In the case of an artistic work, the exclusive right is similar to the
above except that there is no exclusive right to perform the work in
public. However, the copyright in an artistic work includes the right
to produce a three-dimensiona l form of a two-dimensional work and
vice-versa: s 15(3) Copyright Act. For example, copyright in arch itectural
drawings will be infringed if a builder constructs a building based on the
drawings without the consent of the author. In the case of a computer
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program, the copyright includes the right to enter into a commercia l
renta l agreement in respect of the program: s 26(1)(c) Copyright Act.
14·439
In the case of sound record ings, the proprietor of copyright has the
exclusive right to make copies of the sound recording, enter into a
commercial renta l arrangement and to publish the sound recording: s
82 Copyright Act. For cinematograph films, he has the exclusive right
to make copies of the fi lm, cause the film to be shown in public and to
communicate the f ilm to the public: s 83 Copyright Act. For television
and sound broadcasts and cable programmes, the copyright proprietor
has the exclusive right to make copies or f ilms of the broadcast, screen
or play it to the public, re-broadcast it or otherwise communicate it to
the public: s 84-85 Copyright Act. In the case of a published edition
of an author's work, the copyright proprietor has the exclusive right
to make reproductions of the edition: s 86 Copyright Act.
14·440
Generally, copyright in a literary, dramatic, musical and artistic work
subsists during the life of the author plus 70 years after his death:
s 28(2) Copyright Act. Thus, an author who died in 1970 would
have enjoyed copyright during his lifetime and his estate will
continue to receive royalties from his published works unti l 2040.
If the work is not published before the author's death, copyright
subsists for 70 years after the work is first published: s 28(3) Copyright
Act. In the case of sound recordings and films, copyright generally
subsists for 70 years after it was made or published, but for television
and sound broadcasts and cable programmes, the duration is shorter
at 50 years after it was broadcast or included in a cable programme
service, respectivelyY For a published edition of an author's work,
copyright subsists for 25 years after the edition was first published: s
96 Copyright Act.
Assignment and Licence
14-441
Like any other form of personal property, copyright can be sold,
assigned or licensed. Licensing can be in respect of some or al l parts
of the work. For example, a novelist can license his film rights to a
f ilm producer and his translation rights in Tamil and Mandarin to a
publisher while retaining his other rights.
Infringement
14·442
22.
Copyright is infringed when a person does or authorises the doing
of any of the exclusive acts granted to the copyright proprietor without
the proprietor's consent: ss 31 and 103 Copyright Act. In particular,
the importation and distribution of "pirated copies" of copyrighted
Section 92 Copyright Act for sound recordings, s 93 Copyright Act for cinematograph films,
s 94 Copyright Act for television and sound broadcasts and s 95 Copyright Act for cable
programmes.
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Principles of Property
works are prohibited: ss 32-33 Copyright Act. Infringements may lead
to civil actions initiated by the copyright proprietor and, furthermore,
may constitute criminal offences which attract substantial f ines
and imprisonment.23 However, if the proprietor fai ls to establish an
infringement, he may be liable for making a groundless threat of
copyright infringement Asia Pacific Publishing Pte Ltd v Pioneers & Leaders
(Publishers) Pte Ltd (2011) and Singsung Pte Ltd v LG 26 Electronics Pte Ltd
(2016).
Defences
14-443 Certain actions which would otherwise amount to copyright infringement,
however, may be permissible under one or more of the defences
avai lable under the legislation. The more important defences are:
(a) Fair dealing: a person may copy parts of copyrighted matter for
research or private study, review or criticism and the reporting
of current events in newspapers and period icals: ss 35-37
Copyright Act. Fair dealing also extends to aud io-visual items such
as sound recordings and broadcasts: s 109 Copyright Act. Of
particular interest is s 35(3) Copyright Act which allows,
for purposes of research or private study, a copy to be
made of one article in a periodical. In the case of books, a
"reasonable portion" can be copied, meaning 10% or one chapter
of a book, whichever is greater: s 7(2) Copyright Act.
Where,
however, the published work is stored by electronic means and
is not divided into pages, then a reasonab le portion means
10% of the total number of bytes, words or contents in that
edition: s 7(2A) Copyright Act. What constitutes "fair dealing"
in specific circumstances has to be decided on the facts of each
case: Bee Cheng Hiang Hup Chong Foodstuff Pte Ltd v Fragrance
Foodstuff Pte Ltd (2003). Obviously,the higher the proportion
which is copied, the more difficult it is to prove fair dealing.
(b) Computer programs: a person who purchases a computer program
is generally authorised to make one "back-up copy" to provide
for the unfortunate situation where the original is lost, destroyed
or becomes unusable: s 39 Copyright Act.
(c) Broadcasts: a copy of a sound or television broadcast or cable
programme of a literary, dramatic, musical or artistic work may
be made if it is for the private and domestic use: s 114 CopyrightAct.
This means that a video recording of Star Wars can be made for
home viewing without infring ing the copyright of the copyright
owner.
(d) Libraries and educational institutions: special provisions exist to
allow libraries and educational institutions to make li mited
copies of copyrighted works in certain circumstances without the
consent of the copyright proprietor: ss 44-50 (l ibraries), ss 50A-53
(educational institutions) Copyright Act.
23.
For criminal sanctions, sees 136 Copyright Act. Civil actions must be brought within six years
from the date of infringement: s 142 Copyright Act.
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Registered Designs
14-444 Section 2(1) Registered Designs Act (RDA) defines a design to mean
"features of shape, configuration, pattern or ornament applied to an
article by any industrial process" where the design is not dictated solely
by functional reasons. 24 In simpler terms, a design refers to the unique
shapes of three-dimensional articles which appeal for aesthetic reasons:
Nagasima Electronic Engineering Pte Ltd v APH Trading Pte Ltd (2005).
14-445 Section 2(1) Registered Design Act (RDA) defines a design to mean
"features of shape, configuration, pattern or ornament applied to
an article by any industrial process" where the design is not dictated
solely by functional reasons. In simpler terms, a design refers to the
unique shapes of three-dimensional articles which appeal for aesthetic
reasons: see Nagasima Electronic Engineering Pte Ltd v APH Trading Pte Ltd
(2005). Designs are commonly registered for items such as watches,
kitchenware, office equipment, and furniture. The importance of good
design is underlined by the success of products such as Apple's iMac
computers and iPhones. Designs are commonly registered for items
such as watches, kitchenware, office equipment and furniture. The
importance of good design is underlined by the success of products
such as Apple's iMac computers and iPhones.
14-446 For a design to be registrable, it must be new: s 5(1) RDA. This means
that the design must not have previously been published in Singapore
or elsewhere in respect of the same or any other article: s 5(2) RDA.
Designs which are contrary to public order or morality cannot be
registered: s 6 RDA. Neither are computer programs nor the layoutdesigns of integrated circuits registrable: s 7(1) and (2) RDA. 2s
Registration and Ownership
14-447 Applications for registration of a design are to be filed with the
Registrar of Designs upon payment of a fee: s 11 RDA. As in the
case of trade marks, applicants from member countries of the Paris
Convention or the World Trade Organisation enjoy a right of priority
if the Singapore application is made within six months from the date
it was first filed in that member country: s 12 RDA.
14-448 Upon application, the Registrar is to determine if it satisfies the formal
requirements: s 16(1) RDA. If it does not, then the applicant is to be
notified and given an opportunity to comply: s 16(2) RDA. The Registrar
has a discretion to refuse registration if the design is not new: s 17(2)
RDA. If, on the other hand, the formal requirements are satisfied, then
the design will be registered: s 18 RDA. A design is registered for an
initial period of five years: s 21 (1) RDA. It can then be renewed for two
subsequent periods of five years each, making a total of fifteen years:
s 21(2) RDA.
24.
25.
Generally, see: George Wei, Industrial Design Law in Singapore (Singapore: Academy Publishing, 2012).
There is a separate legislation which protects the layout-designs of integrated circuits: layout-Designs
of Integrated Circuits Act. This 19991egislation was enacted so that Singapore could meet its obligations
under TRIPs.
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14-449
Once registered, the registered owner has the exclusive right to make
in Singapore or import into Singapore for sale or hire or for use in
trade or business any article in respect of which the design has been
registered: s 30(1) RDA. This also applies to items sold in kit form if,
once assembled, the assembled article would infringe the registered
design: s 30(2) RDA. However, persons who had used the design in good
faith before the date of registration may be entitled to continue doing
so: s 31 RDA. A registered design is personal property and can be sold,
assigned and licensed just like other personal property: s 32(1) RDA.
Infringement
14-450
If someone infringes an owner's registered design, the owner is
entitled to initiate infringement proceedings in the High Court: s 36
RDA. The court may grant an injunction to stop the infringement
and order the infringer to pay damages. An exclusive li censee
generally has the same rights as the owner in respect of in itiating
infringement proceedings: s 38 RDA. However, as in the case of
trade marks, potential defendants have a right to seek redress for
groundless threats of infringement proceedings: s 44 RDA.
Design and Copyright Overlap
14-451
There is some overlap between copyright and registered design. This
is because a unique design which may be capable of obtaining design
registration may also attract copyright protection under the Copyright
Act as an original artistic work. As noted in 1]14-438, this copyright
protection includes the right to prevent the reproduction of a twodimensional drawing into three-dimensional articles: s 15(3) Copyright
Act. Such designs, potentially, attract dual (but not identical) protection.
14-452
In light of this overlap, Singapore encourages a design proprietor to
rely on design protection rather than copyright protection: s 71 (1) and
(2) Copyright Act. Such designs based on artistic works are registrable
despite the fact that they may have been published previously: s 9
RDA. The net result is that if the proprietor of a design who is capable
of obtaining design registration fails to do so, general ly, he will not
enjoy copyright protection for his design even though, on general
principles, copyright protection would otherwise have been extended
to the design. According ly, any person who owns a registrable design
should seek registration. Otherwise, he runs the risk of being left
w ithout any intellectual property protection at all.
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A
Mapping out Infringement
Virtual Map (Singapore) Pte Ltd v Singapore Land Authority
(2008)
VM was a provider of online maps whilst SLA published the Singapore
Street Directory. The parties had entered into licence agreements whereby
VM could use SLA's street directory (the "copyright works") to make its
maps. Although these agreements were later terminated, SLA claimed
that VM continued to offer for sale maps that reproduced its copyright
works. However, VM denied this and said that their online maps were
" independently created through the use of global positioning system
("GPS") data and high-resolution satellite imagery."
For copyright infringement to be shown, what is requ ired is a substantial
reproduction by the infringing party of the copyright works. The
Singapore High Court referred to s 10(1)(b) of the Copyright Act which
states that "a reference to a reproduction, adaptation or copy of a work
shall be read as including a reference to a reproduction, adaptation or
copy of a substantial part of the work, as the case may be." Although VM
claimed that its maps were independently created, there were too many
"fingerprints" of the copyright works in VM's maps such as deliberate
errors inserted by SLA.
On the facts, the court found that there was substantial copying amounting
to infringement of SLA's copyright. Tan J held:
"[It is] accepted that VM had improved and beautified SLA's data.
However, the fact remains that VM's actual map-making process
was heavily dependent on SLA's vector data, which provided ...the
"backbone" or "skeleton" of VM's allegedly new maps... In the final
analysis, the evidence presented before the court made it abundantly
clear that VM had failed to prove any independent creation on its
part of all its online maps. VM was also unable to give any cogent
explanation with regards to the "fingerprints" of copying. VM clearly
modelled its online maps on SLA's vector data. SLA had successfully
made out its case of substantial reproduction and following from that,
infringement of copyright by VM of its street directory vector data and
address point vector data."
Confidential Information
14-453 The preceding discussion on patents, trade marks, geographical
ind ications, copyright and registered designs has one th ing in
common. They al l involve intellectual property rights recogn ised by
legislation. In addition to these statute-based intellectual property
rights, it is also common for businesses to use the law of confidential
information as a means to protect trade secrets. In short, information
received in certa in circumstances is regarded as confidential and the
recipient who divulges this information will be liable for breach of
confidence. However, while a statute-based intellectual property
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righ t is enforceable against third pa rties, the law of confidential
information generally applies on ly between the giver and recipient
of the confidential information. If the recipient has forwarded that
information to a third party and the third party uses it, the giver has
no remedy at law aga inst the third party. However, if t he third party
knows about, or has constructive notice of, the recipient's breach of
conf idence, the third party wi ll be subject to the same liability: lnvenpro
(M) Sdn Bhd v JCS Automation Pte Ltd (2014).
14-454 Singapore generally fo ll ows English precedent on the law of
confidential information. The basic elements of the law of confidentia l
information are threefold: (a) the information must have the necessary
qua lity of confidence about it; (b) the information is given in
circumstances im porting an obligation of confidence; and (c) there has
been an unauthorised use or disclosure of the information resu lting in
detriment to the plaintiff: Obegi Melissa v Vestwin Trading Pte Ltd (2008).
Faccenda Chicken v Fowler (1986), the English Court
of Appeal stressed that not all confidentia l information given to an
employee wil l give rise to an obligation to keep the information
confidentia l once the employee terminates the employment. The
obligation may arise if the information can be classed as a trade secret
or was so confidential that it required the same protection as a trade
secret. These principles have been approved by t he Singapore Court
of Appea l in Tang Siew Choy and Others v Certact Pte Ltd (1993); Stratech
Systems Ltd v Nyam Chiu Sin (2005); and Man Financial (S) Pte Ltd v Wong
Bark Chuan David (2008).
14-455 In one lead ing case,
14-456 In Stratech
Systems Ltd v Nyam Chiu Shin, the plaintiff sued two former
employees alleging, among other things, breach of confidentia l
information. In reaching the conclusion that no breach occurred, the
Singapore Court of Appeal held, among other things, that: general ly,
a plaintiff must particularise in deta il the confidentia l information
wh ich is the subject of the claim; the fact that the information is
password-protected does not automatically give rise to an obligation
of confidence which must be maintained by that employee after his
employment is ended; and that the pla intiff bears the bu rden of proof
to show that the information given was indeed so confidential that
it gives rise to an obligation of confidence. From this and other cases
such as Jnvenpro (M) Sdn Bhd v JCS Automation Pte Ltd (2014), it is clear
that parties who w ish to rely on the law of confidential information
to protect their intellectual property rights must take great care in
ensuring that their contracts and dealings with others are such as to
fulfill the key elements discussed above.
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SUMMARY
14-501 In this chapter, we examined some of the basic concepts of property law
which are commonly encountered in the business world. We focused
on land law and the laws which protect intellectual property.
14-502 We began by discussing the nature of property and related propert y
concepts. We drew the distinction between rea l property and personal
property, and further divided the latter into chases in possession and
chases in action. We then looked at concepts such as equitable and
legal interests, possession and title, as well as common security interests
such as mortgages, pledges and liens.
14-503 As real property remains Singapore's most valued asset, we focused
on the basics of Singapore land law. The types of estates and interests
in land were expla ined. The distinction between the two forms of coownersh ip- joint tenancy and tenancy in common- was also discussed.
Fina lly, we briefly expla ined strata titles and the typical conveyancing
process.
14-504 The other major type of property dealt with in the chapter is intellectua l
property. Intellectual property is likely to play an increasingly important
role as Singapore moves towards a knowledge-based economy. In
this last section of the chapter, we looked at the following types of
intel lectual property: patents; trade marks; geographical indications;
copyright; registered designs and confidential information. Given that
all business transactions necessari ly involve property of some sort, it
is critical that the basic legal concepts of property be understood so
that their legal ramifications can be appreciated.
···•·•·•···
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INTRODUCTION
15·101 In this chapter, we focus on one particular type of transaction:
contract s for the sa le of goods. Conceptually, this topic fal ls within
the general rubric of the law of cont ract. However, because many business
transactions today· from buying a plate of rojak to selling jet engines
worth millions of dollars- are in the form of sales of goods, the topic
has developed into an important and distinct branch of contract law.
15-102
Unlike much of the law of contract which is not codified by legislation,
the law relating to sales of goods is underpinned by a major statute
called the Sale of Goods Act (SGA). 1 While general principles of contract
law- everything from formation to remedies- apply to sale of goods
contracts, they are subject to modifications by the provisions of t he
SGA as interpreted by case law.
15-103 In his chapter, our discussion will focus on four main areas concerning
sale of goods contracts:
(a)
the duties of sellers (or, from the other party's perspective, the
rights of buyers);
(b)
the duties of buyers (or the rights of sellers);
(c)
the question as to when title and risk in goods pass from
sellers to buyers; and
(d)
the circumstances where a non-owner of goods can still pass
good title to third parties.
The chapter ends with a d iscussion of the Consumer Protection (Fa ir
Trading) Act which seeks to protect consumers against the unfair trade
practices.
1.
The Singapore SGA - based on the well-known English statute, the Sale of Goods Act of
1893 and its consolidated version, the Sale of Goods Act of 1979- applies in Singapore by
virtue of the Application of English Law Act (AHA}; on the AELA, see: 112·310. For the effect
of the AELA on sale of goods generally, see Neo D S S, "Application of English Law Act 1993:
Sale of Goods and Nemo Oat" Singapore Journal of Legal Studies [1994)150. For a useful textbook on this
topic, see Hunter H, Law of Sales in Singapore (Singapore: Academy Publishing, 2017).
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APPLICATION OF SGA
15-201
To determine the scope of application of the SGA, it is important to
examine first its relationship with other related leg islation and to
understand the definition of "contract for the sale of goods" as laid
down in the SGA.
Other Related Legislation
15-202
Generally, the SGA appl ies on ly to contracts for the sale of goods: s 1(1)
SGA. 2 It does not apply to other types of transactions involving goods.
For example, contracts of hire-purchase are governed in Singapore by
the Hire-Purchase Act. 3 Similarly, contracts for the supply of goods
other than by sale- which covers the supply of goods through contracts
of barter, hire and leasing - are governed by the Supply of Goods
Act. 4
15-203
In such instances, the SGA must be read together with the more specific
leg islation. For example, in the case of contracts for the sale or supply
of food in Singapore, the Sale of Food Act appl ies. Similarly, since 2007,
various items used by humans for therapeutic, medicinal, diagnostic
and cosmetic purposes are regulated by the Health Products Act. Hence,
despite the general application of the SGA to sale of goods, in some
specific instances the same transaction may also attract the application
of other legislation.
Contract of Sale
15-204
The definition of a "contract of sale of goods" is found ins 2(1) SGA.
Sale of Goods Act
Section 2(1):
A contract of sale of goods is a contract by which the seller transfers
or agrees to transfer the property in goods to the buyer for a money
consideration, called the price.
15-205
2.
3.
4.
There is a difference between a seller who "transfers... property" and
a seller who "agrees to transfer... property". The former refers to a
transaction where title passes to the buyer at the time of the contract.
However, the SGA applies mainly to domestic sales contracts. International sales contracts
are discussed briefly in 1] 19-303.
Under a hire-purchase contract, possession of the goods (eg. a car) is granted to the hirer on a bailment
in return for a periodic payment, and the hirer has an option to purchase the goods.
This statute is based on the Supply of Goods and Services Act of 1982 (UK), except that the
Singapore statute excludes the provisions applicable to the supply of services.
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This is called a sale. The latter refers to a transaction where property
will pass to the buyer at some future date. This is an agreement to
sell. Both are contracts. Both relate to the sale of goods. Both are
contracts for the sale of goods falling within the purview of the SGA:
s 61(1) SGA.
Contract for the Sale of Goods
Contracts involving goods
Agreement to sell
6.
15-206
A contract for the sale of goods may be absolute or conditional:
s 2(3) SGA. An absolute contract is not conditional upon an external
event. A conditional contract is one whose performance is subject to
a contingent event. For example, an agreement to sell a car may be
conditional upon the seller first finding a replacement car.
15-207
A contract of sale may be made orally or in writing: s 4(1) SGA.
There are no prescribed formalities such as those required for contracts
for the sa le of land.
15-208
The SGA does not distinguish between a sale of goods contract made
in the course of business or between private parties. Thus, every sale of
goods contract- whether undertaken in a wholesale, retail or private
context- falls within the scope of the statute.
15-209
A problem emerges if the subject-matter of the contract involves
the provision of both goods and services. Is a contract with a tailor
to purchase materia l and make a dinner suit a contract for goods or
services? The answer depends on the facts of each case. Generally, a
distinction can be made between a contract for the sale of goods and
a contract for work and mat erials. 6 If the heart of the contract is the
provision of work and the delivery of goods is secondary, it is likely
to be a contract for work and materials rather than a contract for the
sale of goods.
Contracts for work and materials - which includes repair and maintenance contracts generally fall within the ambit of the Supply of Goods Act.
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1S-209b Thus, a contract with an artist to paint a portra it, with the canvas and
pai