Developments In Singapore Contract Law In 2013

Transcription

1 Developments In Singapore Contract Law In 2013 Asst Professor Goh Yihan, Faculty of Law, National University of Singapore Introduction In this update, we look back at the more significant contract law cases decided in Singapore in The cases considered here deal with almost all issues of contract law. Objective Formation of Contract General Principles It is trite law that a contract can only be formed where there is a coincidence of offer and acceptance. The Court of Appeal in Lim Koon Park v Yap Jin Meng Bryan [2013] 4 SLR 150 ( Lim Koon Park ) reiterated that the formation of a contract is to be determined objectively. It held that once parties have outwardly agreed on the same terms on the same subject-matter, then neither can, generally, rely on some unexpressed qualification that he had not in fact agreed to those terms. A similarly objective approach was adopted in the High Court case of Rudhra Minerals Pte Ltd v MRI Trading Pte Ltd [2013] 4 SLR In that case, Andrew Ang J stated that the test for ascertaining parties intentions is an objective one and thus the language used by one party has to be construed in the sense in which it would reasonably be understood by the other. Formation of contract determined objectively While it is clear offer and acceptance must be ascertained objectively, just exactly how that is done could call for further discussion. Should offer and acceptance be decided on the basis of the last shot doctrine, or through an examination of all the relevant correspondence? The Court of Appeal in Lim Koon Park appeared to endorse a passage in an academic text that suggested that a court must look at the whole correspondence exchanged between parties to decide whether the parties Ascertainment from correspondence 1 Rajah & Tann LLP

2 had, on a true construction, agreed to the same terms (Edwin Peel, Treitel: The Law of Contract (Sweet & Maxwell, 13th ed, 2011) at para 2-017). This raises the question of the correct approach to be applied when considering whether a contract had been formed, and on what terms, in the face of continuing negotiations between the parties. That a contract is formed only upon offer and acceptance applies to all situations, including insurance contracts. In Zhu Yong Zhen v AIA Singapore Pte Ltd [2013] SGHC 37 ( Zhu Yong Zhen ), the plaintiff argued that a Policy Benefit Illustration, which was shown to her by the defendant s insurance agent, was part of eventual insurance policy she purchased from the defendant. Dismissing the plaintiff s claim, Chan Seng Onn J noted that a contract of insurance normally arises from an offer made by an insured and an acceptance of that offer by the insurer. On the facts, the learned judge held that the plaintiff made an offer when she completed an Application for Life Insurance. Application to insurance contracts Subsequent conduct in ascertaining agreement In Bridgeman Pte Ltd v Dukim International Pte Ltd [2013] SGHC 220, the High Court had to consider whether parties conduct subsequent to the contract could be used to determine its terms. The court said that as contractual terms are to be determined at the time the contract was entered into, evidence of subsequent conduct would generally be irrelevant in determining what had been objectively agreed. This is undoubtedly correct. Indeed, in cases where a contract lacks an essential term, that contract would fail for incompleteness in the absence of an agreement subsequently or a present agreement on a mechanism to resolve that essential term. The parties subsequent conduct should not be relevant to resolve what was not agreed before, unless this amounts to a variation of the contract. Subsequent conduct generally irrelevant Consideration & Promissory Estoppel In Rudhra Minerals Pte Ltd v MRI Trading Pte Ltd [2013] 4 SLR 1023, it was held that certainty applied to the doctrine of promissory estoppel as much as it does for contract law. Thus, if the alleged promise was not reasonably clear and definite to both parties, then promissory estoppel would not apply. Promissory estoppels as a cause of action 2 Rajah & Tann LLP

3 Rudhra Minerals also affirmed a more fundamental point that promissory estoppel cannot be used to found a cause of action. The plaintiff had argued estoppel may be pleaded as a cause of action in Australia and New Zealand, relying on Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387. However, Andrew Ang J noted that the Court of Appeal had in OCBC Capital Investment Asia Ltd v Wong Hua Choon [2012] 4 SLR 1206 declined to decide whether promissory estoppel could be used as a sword, ie, to found a cause of action. Accordingly, the learned judge declined to decide whether the plaintiff was correct that promissory estoppel could be used in such a manner. Completeness & Certainty Apart from the coincidence of offer and acceptance, a contract needs to be both certain and complete to be validly formed. A contract is complete when essential terms have been agreed between the parties. Thus, as the High Court noted in Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd [2010] 3 SLR 956 (reversed on appeal in [2011] 4 SLR 617 but on a different point), the parties must reach substantial or essential agreement before a contract can be regarded as concluded. Essential terms must be agreed upon In Stone World Sdn Bhd v Engareh (S) Pte Ltd [2013] SGHC 22, the High Court reaffirmed the trite principle that parties must reach agreement on essential terms for a contract to be certain and complete and hence enforceable. In doing so, the Court cited the well known English case of May and Butcher, Limited v The King [1934] 2 KB 17, where the House of Lords established the principle that: Price is one of the essential terms [U]ndoubtedly price is one of the essentials of sale, and if it is left still to be agreed between the parties, then there is no contract. This case was also referred to with approval by the High Court in Norwest Holdings Pte Ltd (in liquidation) v Newport Mining Ltd [2010] 3 SLR 956 (reversed on appeal in [2011] 4 SLR 617, but not on this point). However, as a qualification to the above principle, such agreement on the essential terms can be ascertained from previous transactions between the parties and the custom of trade. This proposition was cited with approval by the High Court in Grossner Jens v Raffles Holdings Ltd [2004] 1 SLR(R) 202. Ascertainment from previous transactions 3 Rajah & Tann LLP

4 Rudhra Minerals also concerned an argument premised on uncertainty and incompleteness. It demonstrated that while an intention to be bound can be found despite the parties not having agreed on the essential terms, there is a limit beyond which the courts will not venture in seeking to rescue an incomplete contract. In other words, if there is an essential part of the contract that is incomplete, and which cannot be remedied by an implication of a term, then the contract would still fail. This is in line with the premise that courts will not rewrite contracts for parties. Implication of essential terms Subject to Contract Clauses In Rudhra Minerals, Andrew Ang J had to construe a clause that had elements of a subject to contract clause. The relevant phrase read subject to further terms and conditions to be mutually agreed. The defendant had argued that this was a subject to contract clause, with the result that there was no binding contract between the parties. Rejecting this argument, Ang J found that the phrase merely provided that there may be further terms to be agreed in the future apart from what is stated in the FCO. This is entirely in line with the approach taken in Norwest Holdings Pte Ltd v Newport Mining Ltd [2011] 4 SLR 617, in which it was held that whether a clause has the effect of a subject to contract clause must be determined with regard to the context and circumstances. Subject to contract clause or further terms to be agreed? Formalities The standard with regard to part performance as an exception to the formality requirements under s 6(d) of the Civil Law Act arose for consideration in the High Court case of Hu Lee Impex Pte Ltd v Lim Aik Seng (trading as Tong Seng Vegetable Trading) [2013] 4 SLR 176 ( Hu Lee Impex ). It is of course well-established that the doctrine of part performance constitutes part of Singapore law, and is an established exception to the requirements of s 6(d) of the Civil Law Act: see the Court of Appeal case of Joseph Mathew v Singh Chiranjeev [2010] 1 SLR 338 ( Joseph Mathew ). However, Joseph Mathew did not decide exactly how the doctrine of part performance is to be applied. In this regard, there are two opposing views. In the House of Lords case of Elizabeth Maddison v John Alderson (1883) 8 App Cas 467 ( Maddison ), it was held that the acts relied upon as constituting part performance must unequivocally point towards the existence of a contract fitting Part performance as an exception to formality requirements 4 Rajah & Tann LLP

5 the description of the oral contract alleged to exist. In contrast, a more relaxed approach was taken in the subsequent House of Lords case of Steadman v Steadman [1976] AC 536 ( Steadman ). In that case, it was held that the acts relied on to establish part performance no longer need to point unequivocally to the existence of a particular oral contract; part performance will be found if the court is satisfied, upon an analysis of all the circumstances save for evidence pointing to the purported oral contract, that it is more probable than not that the acts were done in reliance on the oral contract. Ang J decided that the Maddison standard should be applied in Singapore. His Honour noted that the current position in England is clear: the doctrine of part performance was abolished legislatively via the repeal of s 40 of the Law of Property Act 1925 and the enactment of s 2 of the Law of Property (Miscellaneous Provisions) Act 1989 in its place. S 2 was enacted to remedy perceived defects in the law following Steadman, such as, first, the uncertainty that surrounded the enforceability of contracts with the loose requirements of Steadman, and second, the uncertain status of the doctrine of part performance since it appears that a unilateral instruction to solicitors to submit a draft conveyance could overcome the formality requirements otherwise needed. These reasons were accepted by Ang J in Hu Lee Impex in preferring the Maddison standard over the Steadman standard. Terms of the Contract Implication of terms In Sembcorp Marine Ltd v PPL Holdings Pte Ltd ( Sembcorp Marine ) [2013] 4 SLR 193, the Singapore Court of Appeal once again reaffirmed (in addition to the earlier Court of Appeal case of esys Technologies Pte Ltd v ntan Corporate Advisory Pte Ltd [2013] 2 SLR 1200) the Singapore courts rejection of the approach adopted by Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 that characterised the implication of a term in fact as a process of contractual interpretation. However, it also prescribed a new three-step process for the implication of terms in fact. The first step requires the court to ascertain that a gap in the contract had arisen because the parties had not contemplated the gap; it is only in such a situation that a term can be implied. Next, the court is to consider whether it is necessary in the business or commercial sense to imply a term in order to give the contract efficacy. Finally, the court is to consider the specific term to be implied. A term is only to be implied if it passes the officious bystander Three-step process for implication of terms in fact 5 Rajah & Tann LLP

6 test, that is, the contracting parties, having regard to the need for business efficacy, would have responded positively to the suggestion of the term to be implied. Terms implied by law In Cheah Peng Hock v Luzhou Bio-Chem Technology Ltd [2013] 2 SLR 577, Quentin Loh J held that unless there were express terms to the contrary, there was a term, implied by law, that an employer owed an employee a duty not to undermine or destroy mutual trust and confidence. This included a duty of fidelity, ie, a duty to act honestly and faithfully, although the content of such a duty would vary depending on the facts of the case. However, Loh J considered that such an implied term of mutual trust and confidence is not the same as a duty of good faith. A duty of good faith is wider and includes positive duties to inform and maintain the employer-employee relationship. Employer must not undermine or destroy mutual trust and confidence Interpretation of terms The continued refinement on the principles relating to contractual interpretation in Singapore, which started with the Court of Appeal decision of Zurich Insurance (Singapore) Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 ( Zurich Insurance ), continued with another significant Court of Appeal decision of Sembcorp Marine. The law on contractual interpretation, after Sembcorp Marine, may be stated to be: Principles relation to contractual interpretation 1. The Zurich Insurance framework governs contractual interpretation in Singapore. It identifies two distinct questions, viz. first, what is the admissible extrinsic evidence to interpret contracts and, second, what is the interpretative approach to interpret contracts. 2. The admissible evidence is governed primarily by the Evidence Act and, secondarily, by the common law, provided that the latter is not inconsistent with the Evidence Act. Therefore: Extrinsic evidence, pursuant to s 93 and 94 of the Evidence Act, is generally inadmissible to contradict, vary, add to or subtract from the terms of the contract. Extrinsic evidence is generally admissible to interpret contracts 6 Rajah & Tann LLP

7 specifically for the purpose of ascertaining whether there is an ambiguity. However, extrinsic evidence that is being relied on for this purpose must: o Be pleaded properly and fulfil the four requirements of civil procedure laid down in Sembcorp Marine (and now embodied in the Supreme Court Practice Directions and Subordinate Courts Practice Directions); o Satisfy all of the Zurich Insurance tripartite requirements, which are all substantiated by provisions of the Evidence Act; and o May be affected by the attributes of the document certain types of documents may mandate a lesser consideration of the extrinsic evidence tending to show context (although it was suggested above this is better viewed as a question of weight). Whether prior negotiations and subsequent conduct can be admitted for this purpose remains an open question. Where there is no ambiguity revealed by extrinsic evidence admissible pursuant to the Zurich Insurance tripartite requirements, such extrinsic evidence may be used to interpret the contract, but this is subject to the interpretative approach laid down in Zurich Insurance that the plain meaning governs in such cases. S 96 of the Evidence Act may also apply to exclude certain types of extrinsic evidence in this regard. Where there is patent ambiguity revealed by extrinsic evidence admissible pursuant to the Zurich Insurance tripartite requirements, then, pursuant to s 95 of the Evidence Act, extrinsic evidence may not be used to resolve the patent ambiguity. While Sembcorp Marine suggests that this restriction is exclusively on parties subjective declarations of intention, s 95 is not phrased so narrowly. Where there is latent ambiguity revealed by extrinsic evidence admissible pursuant to the Zurich Insurance tripartite requirements, then extrinsic evidence is not excluded by s 97, 98 and 99 of the Evidence Act. Subjective declarations of intention are 7 Rajah & Tann LLP

8 specifically not excluded to resolve a latent ambiguity, although it is an open question whether such evidence may be considered under s The interpretative approach to be used is both objective and contextual. The objective principle is concerned with what a reasonable person, with the relevant background knowledge in mind, would have understood the contractual language to mean. The contextual approach requires the consideration of the relevant background facts as revealed by the extrinsic evidence, although the Evidence Act controls the admissible extrinsic evidence. Because of this, the contextual approach may not apply in as strong a fashion as under English law. Pursuant to this approach, the court will first take into account the plain language of the contract together with relevant extrinsic material that is evidence of its context. Then, if in the light of this context, the plain language of the contract becomes ambiguous (i.e. it takes on another plausible meaning) or absurd, the court will be entitled to put on the contractual term in question an interpretation which is different from that demanded by its plain language. Existing canons of interpretation apply, but these are more of guides than absolute rules. Non-absolute obligations In BR Energy (M) Sdn Bhd v KS Energy Services Ltd [2013] SGHC 64, the High Court reaffirmed basic principles concerning best endeavour clauses. The Court s holding can be summarised in the following four points: Principles regarding best endeavours clauses (a) An undertaking to use best endeavours is not a warranty to produce the desired results, nor does it require the obligor to make heroic efforts to do everything conceivable. However, it does require the obligor to do everything known to be usual, necessary and proper for ensuring the success of the endeavour. 8 Rajah & Tann LLP

9 (b) A best endeavours clause obliges the obligor to take all those reasonable steps in good faith which a prudent and determined man, acting in his own interests and anxious to obtain the required result within the time allowed, would have taken. It has been said that the obligor must leave no stone unturned (see Sheffield District Railway Company v Great Central Railway Company [1911] Times LR 451 at 452), subject to the limits of reason, to achieve the objective or carry the process to its logical conclusion. (c) Whether the best endeavour test has been satisfied is a question of fact in each case. (d) The test to determine whether an obligor has exercised its best endeavours is an objective one. It is, however, also a composite test in that the obligor may also take into account its own interests. The Court also noted that there is no hard and fast rule as to whether an all reasonable endeavours clause and a best endeavours clause are different. It all depends on the facts of each case since the interpretation of such clauses, as with the interpretation of all contractual clauses, is contextual and dependent on, inter alia, the factual matrix. The Court of Appeal has since issued its judgment on appeal, and that warrants separate treatment for its extensive treatment of all reasonable endeavours clauses. Difference between best endeavours and all reasonable endeavours Entire agreement clauses In Zhu Yong Zhen, which has been discussed above, Chan J also relied on an entire agreement clause found in the insurance contract between the parties to dismiss the plaintiff s contention that a separate document known as the Policy Benefit Illustration formed part of the insurance policy she had purchased from the defendant. Crucially, the policy contained a clause that stipulated that the policy and the application for it constitute the entire contract. This is a typical entire agreement clause. In the Court of Appeal case of Lee Chee Wei v Tan Hoe Peow Victor [2007] 3 SLR(R) 537, which was cited by Chan J in Zhu Yong Zhen, it was held that an entire agreement clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere. Clause which determines what constitutes the entire contract 9 Rajah & Tann LLP

10 Exception clauses In Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Corp [2013] 3 SLR 1017, Andrew Ang J reiterated that the interpretation of exception clauses is to be done strictly, such that any ambiguity will be construed against the party seeking to rely on the clause. Thus, in construing the phrase any indirect or consequential loss howsoever caused or arising, the learned judge held that this only applied to such losses that fell within the second limb in Hadley v Baxendale (1854) 9 Exch 341. Strict interpretation of exception clauses Right of rejection In Sun Qi (formerly trading as Power King International) v Syscon Pte Ltd [2013] SGHC 38 ( Sun Qi ), the High Court dealt with, inter alia, the right of rejection in a sale of goods context. Briefly stated, the case involved the sale of cranes. There were a series of agreements providing for such sales. The first set of cranes were delivered and installed in December 2008 and the second set was delivered (but not installed) in January When the plaintiff sued the defendant for outstanding payments from the agreements, the defendant countersued for breach of an implied term of quality. The right of rejection in a sale of goods context The defendant additionally also countersued for misrepresentation. The basis of the defendant s claims was that problems with the first set of cranes surfaced in February Consequent to these problems, the defendant sent service requests to the plaintiff repeatedly till May The plaintiff conceded that the problems were indeed breaches of an implied term of quality. The question, however, was whether the plaintiff was entitled to the defence of acceptance by use, that is, the defendant had, by virtue of its use of the cranes for a considerable length of time, lost its right to reject the goods. The defence of acceptance by use The defence of acceptance by use was referred to some time ago by the Court of Appeal in Eastern Supply Co v Kerr [1973] SGCA 7. In that case, the Court stated that once a buyer is deemed to have accepted the goods, he loses his right to reject for breach of conditions. Applied to the facts of Sun Qi, the issue was whether the defendant lost its right of rejection through acceptance by (a) using the first set of cranes for five months after delivery and (b) keeping the second set of cranes without use for seven months. In dealing with this issue, the Court 10 Rajah & Tann LLP

11 referred to the following sections of the Sale of Goods Act: 35(2) Where goods are delivered to the buyer and he has not previously examined them, he is not deemed to have accepted them under subsection (1) until he has had a reasonable opportunity of examining them for the purpose (a) of ascertaining whether they are in conformity with the contract; and (b) in the case of a contract for sale by sample, of comparing the bulk with the sample. 35(4) The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them. The High Court rightly noted that the length of time that constitutes a reasonable time may vary, depending on the type of product involved and whether the defect can be readily discovered or its cause made known. Indeed, this very factdependent nature of the concept of a reasonable time is borne out by the cases: What constitutes a reasonable time for rejection In Eastern Supply, the purchaser had an opportunity of having the car concerned examined by an expert when defects became apparent within the first few days. Hence, the reasonable time concerned was shorter. In Compact Metal Industries v PPG Industries [2006] SGHC 242, the purchaser could reject the paint concerned some six months after delivery because the facts showed that to be a reasonable time. The discovery of the problem did not materialise until six months after delivery. In Super Continental Pte Ltd v Essential Engineering & Construction Pte Ltd [2010] SGHC 365, the purchaser was allowed to reject goods although one year had passed. This was because, although problems with the goods had surfaced shortly after delivery, there were repeated steps at rectifying the problem. These steps were part of the reasonable opportunity to examine the goods. Therefore, summarising the principles in these cases, the Court held that a recipient is not required to immediately reject goods upon discovering that is a potential defect. This is particularly apt in the context of machinery, where defects can be latent and may not manifest themselves until the machines have been used 11 Rajah & Tann LLP

12 for some time, and where problems with function may be due to improper usage or a need for minor repairs or adjustments. Each case rests on its own facts. A reasonable opportunity of examining the goods in such a context should not be limited to an examination upon taking over the machinery, which may or may not reveal a potential problem, but should include the opportunity to: (a) test the machinery, perhaps through use; (b) conduct investigations and/or trials into the cause of any problem that arises; and (c) seek repairs or adjustments, if appropriate. Returning to the facts of Sun Qi, the Court held that the reasonable time to reject the cranes had not lapsed as: The defendant made repeated service requests to the plaintiff; in accordance with s 35(6) of the Sale of Goods Act, a buyer is not deemed to have accepted simply because he makes requests for repairs. The plaintiff held itself out to be an expert on the cranes, and the defendant thus could not be faulted for not having the goods examined by an expert. The problems with the cranes were latent and would have taken time to surface. Illegality The High Court decision of ANC Holdings Pte Ltd v Bina Puri Holdings Bhd [2013] SGHC 97 is a significant one in relation to illegality in contract law. In that case, the plaintiff agreed to assist the defendant s subsidiary in securing housing projects in Saudi Arabia. The plaintiff claimed for commission due under the written agreement. Had this been the only issue, the case would have been very simple, for it is a trite principle that a plaintiff is only entitled to commission should he be the effective cause of the defendant s securing of the projects: see, eg, Emporium Holdings v Knight Frank [1994] SGCA 147. Illegality in intention to bribe The interesting aspect of the case concerning illegality arose because the defendant s witnesses gave evidence that both parties intended to bribe officials to secure the projects. The question for the Court was whether the defendant could now rely on this alleged illegality given that it was never pleaded. 12 Rajah & Tann LLP

13 In dealing with this issue, the Court made the following important (and fundamental) observations concerning illegality: Principles regarding illegality in contract Ex turpi causa is often referred to as a defence. It probably does not harm to do so provided that it is always remembered that strictly speaking, ex turpi causa is not a defence. In adversarial litigation, a defence becomes a live issue only if a party to the litigation raises it. Ex turpi causa is in truth a doctrine, not a defence, and a doctrine founded not on principle but on high policy. Applying the doctrine and upholding the underlying policy has the effect of affording a defendant a defence, but only incidentally so. The ex turpi causa doctrine is a fundamental doctrine of general application to all areas of the law, such as contract and tort. The ex turpi causa doctrine is often called the doctrine of illegality. But according to Lord Mansfield CJ, the doctrine is triggered by an immoral or an illegal act. So a criminal wrong can, of course, trigger the doctrine. But so too can a civil wrong. So too, can behaviour which is reprehensible or grossly immoral even if it is not otherwise a criminal or civil wrong. Thus, illegality as a term must be understood broadly. Lord Mansfield CJ expressly contemplated that the evidence of the turpitude may arise either from the plaintiff s own statements or otherwise. So, the ex turpi causa doctrine is engaged regardless of the manner in which it comes to the court s attention that the plaintiff s claim arises out of his own turpitude. Thus, on the basis of these principles, the Court concluded that illegality can operate even if not pleaded. This is not to afford the defendant an additional defence not otherwise pleaded, but is rather to uphold the policy behind the doctrine. However, in doing so, the court must also take into account the following propositions articulated in Edler v Auerbach [1950] 1 KB 359, and accepted by the Singapore High Court in Koon Seng Construction v Chenab Contractor [2008] 1 SLR(R) 375: Operation of illegality where not pleaded (a) Where a contract is ex facie illegal, the court will not enforce it, whether the illegality is pleaded or not. (b) Where the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be 13 Rajah & Tann LLP

14 admitted unless the circumstances relied on are pleaded. (c) Where facts not pleaded which taken by themselves show an illegal objective, have been revealed in evidence (because, perhaps, no objection was raised or because they were adduced for some other purpose), the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it. (d) Where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not. On the facts, proposition (c) was clearly relevant. Thus, counsel for the plaintiff was right to object to the line of questioning by counsel for the defendant that suggested bribery. However, on the facts, the court was also satisfied that there was illegality from the documentary correspondence. A second point that emerged from the case concerned the issue of whether a lawful contract performed in an illegal manner remained enforceable. In this regard, the Court, referring to St John Shipping v Joseph Rank [1957] 1 QB 267, held that there was no principle that the performance of a lawful contract in an illegal manner can never preclude a party from suing on the contract. In doing so, the Court implicitly accepted that the distinction between a contract illegal as formed and illegal as performed may be false one. Indeed, as an academic text put it: Contracts illegal as formed vs contracts illegal as performed In other words, literal performance in contravention of the statute in question is not itself sufficient to result in adverse civil consequences. What results in the contract becoming void is the fact that the illegal performance has, by virtue of the legislative intent, related back to and (in Devlin J s words quoted above) turned the contract into one that is prohibited a situation similar, for all intents and purposes, to one where the contract concerned is illegal as formed. The linkage that results is that what would otherwise be a mere criminal infraction of the statute becoming a prohibition of the contract is to be found in the legislative intent itself. In Boon Lay Choo v Ting Siew May [2013] 4 SLR 820, Lionel Yee JC discussed the effects of the remoteness of illegality, holding that a backdated option to purchase, ostensibly to avoid new MAS loan regulations, was not illegal so as to be unenforceable, since the illegality concerned was not central to the option to Remoteness of illegality 14 Rajah & Tann LLP

15 purchase. Remedies Loss of Chance In MK Distripark Pte Ltd v Peddder Warehousing & Logistics (S) Pte Ltd [2013] SGHC 84, the High Court made some interesting observations on claiming for damages arising from loss of a chance. The question was whether damages could be claimed for loss of a chance where the chance was not the subject of the contract. In the well-known English case of Chaplin v Hicks, the plaintiff lost her chance to be considered for a prize; there, the subject matter of the contract was indeed the chance concerned. However, the Court of Appeal decision of Straits Engineering v Merteks [1995] 3 SLR(R) 864 seemed to have left open the question of whether the chance concerned must be the subject matter of the contract. In that case, there was a contract to sell shares that was breached, and the plaintiff claimed damages for a loss of chance to expand its business. Must the chance be the subject of the contract? As the Court in MK Distripark explained, it was unclear if the Court of Appeal viewed the subject matter of the contract as being the sale of the shares or, more broadly, a chance for the plaintiff to expand its business using the proceeds from such shares. If the Court of Appeal had adopted the former view, then that case may well be viewed as departing from the position taken in Chaplin v Hicks that the subject matter of the contract must be the chance concerned in order for damages to be claimable in respect of the loss of that chance. However, in the present case, the Court did not need to decide the issue as the subject matter was clearly the chance that was now argued to have been lost. Remoteness In PPG Industries (Singapore) Pte Ltd v Compact Metal Industries Ltd [2013] SGCA 23, the Court of Appeal affirmed that the traditional rules of remoteness (that is, the two-limb test in Hadley v Baxendale) continued to apply in Singapore. More significantly, the same Court in Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2013] 2 SLR 363 again rejected Lord Hoffmann s characterisation of remoteness as being governed by an assumption of responsibility test after a length examination. While retaining the traditional Hadley approach, the Court also laid A practical guide to the test for remoteness of damages 15 Rajah & Tann LLP

16 down the following points for consideration in a remoteness case: (a) First, what are the specific damages that have been claimed? (b) Second, what are the facts that would have had a bearing on whether these damages would have been within the reasonable contemplation of the parties had they considered this at the time of the contract? (c) Third, what are the facts that have been pleaded and proved either to have in fact been known or to be taken to have been known by the defendant at the time of the contract? (d) Fourth, what are the circumstances in which those facts were brought home to the defendant? (e) Finally, in the light of the defendant s knowledge and the circumstances in which that knowledge arose, would the damages in question have been considered by a reasonable person in the situation of the defendant at the time of the contract to be foreseeable as a not unlikely consequence that he should be liable for? The clear approach taken by the Singapore courts may be contrasted with the still unclear understanding of the assumption of responsibility test in England: see, eg, John Grimes Partnership Ltd v Gubbins [2013] EWCA Civ 37. The Singapore approach vs the assumption of responsibility test Rajah & Tann LLP is the largest law firm in Singapore and Southeast Asia, with regional offices in China, Lao PDR, Vietnam, Thailand, Cambodia, Myanmar as well as associate and affiliate offices in Malaysia, Indonesia and the Middle East. Our Asian network also includes regional desks focused on Japan, South Asia and Myanmar. As the Singapore member firm of the Lex Mundi Network, we are able to offer access to excellent legal expertise in more than 100 countries. Rajah & Tann LLP is firmly committed to the provision of high quality legal services. It places strong emphasis on promptness, accessibility and reliability in dealing with clients. At the same time, the firm strives towards a practical yet creative approach in dealing with business and commercial problems. The contents of this Update are owned by Rajah & Tann LLP and subject to copyright protection under the laws of Singapore and, through international treaties, other countries. No part of this Update may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of Rajah & Tann LLP. Please note also that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. It is to your advantage to seek legal advice for your specific situation. In this regard, you may call the lawyer you normally deal with in Rajah & Tann LLP or the Knowledge & Risk Management Group at eoasis@rajahtann.com. 16 Rajah & Tann LLP