1L30G Pte Ltd v EQ Insurance Company Ltd

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Lee Seiu Kin J
• Judgment Date: 02 October 2017
• Neutral Citation: [2017] SGHC 242
• Citation: [2017] SGHC 242
• Published date: 07 October 2017
• Plaintiff Counsel: Daniel Tay Yi Ming (Morgan Lewis Stamford LLC)
• Defendant Counsel: Phua Cheng Sye Charles (Comlaw LLC)
• Date: 02 October 2017
• Hearing Date: 05 May 2017
• Docket Number: Originating Summons No 396 of 2017
• Subject Matter: Postal rule,Interpretation,Contractual terms,Contract

Lee Seiu Kin J: Introduction

In originating summons no 557 of 2015 (“OS 557”), the court declared on 26 October 2015 that the plaintiff had made a valid demand on performance bond no DBPFHQ11-000851 dated 9 February 2012 (“the Bond”) issued by the defendant. Following from that, on 29 October 2015 the defendant paid the plaintiff the sum of $361,200 pursuant to the demand on the Bond.

On 19 January 2017, the plaintiff made a second demand on the Bond for the sum of $158,800. The defendant’s solicitors replied on 24 March 2017 stating that the defendant would not pay the $158,800 demanded. The letter added that the Bond had expired on 26 October 2014, prior to the first demand which was made on 24 February 2015. The defendant’s solicitors requested a refund of the $361,200 that had been paid to the plaintiff on 29 October 2015.

In this originating summons, the plaintiff sought a declaration that the defendant is not entitled to be repaid the sum of $361,200, as well as an order that the defendant pays the plaintiff the sum of $158,800 pursuant to the second demand of 19 January 2017.

After hearing submissions of counsel for the parties, I agreed with the plaintiff and ruled that the defendant was not entitled to repayment of the sum that it had paid to the plaintiff following OS 557. I also ordered the defendant to pay the plaintiff $158,800 pursuant to the second demand. I now give my reasons.

Issues

The matter turns on a single issue: whether the Bond had expired by the time the first call was made on 24 February 2015. The Bond was expressed to be valid from 13 December 2011 until 26 October 2014, with the proviso that it would automatically be extended for successive periods of 180 days unless the defendant gave the plaintiff 90 days’ written notice of its intention not to extend the Bond (“notice of non-renewal”). The relevant clause, cl 3, provides as follows:

Our liability under this guarantee shall continue and this guarantee shall remain in full force and effect from 13th December 2011 until 26th October 2014 provided always that the expiry date of this guarantee and our liability thereunder shall be automatically extended for successive periods of 180 days unless we give you 90 days’ written notice prior to the expiry of our liability of our intention not to extend this guarantee in respect of any future extension and provided further that you shall be entitled, upon receiving such notice of our intention (and within the period specified in Clause 4 hereof), either to:

a. make a claim under this guarantee; or b. direct us to extend the validity of this guarantee for a further period not exceeding 180 days (and this guarantee shall then expire at the end of such further period).

The defendant claimed that the Bond had expired because, in accordance with cl 3, it had sent the plaintiff a letter dated 27 June 2014 which gave notice of its intention not to extend the Bond beyond the expiry date of 26 October 2014 (“the 27 June letter”). If that letter had been effectively served on the plaintiff, the Bond would have expired on 26 October 2014. Thus, after that date, the defendant would no longer be liable to make payment pursuant to any demand by the plaintiff.

On the other hand, the plaintiff claimed that it did not receive the 27 June letter. It further claimed that the defendant was unable to prove that the letter had even been sent, much less that it was ever delivered to the plaintiff.

Accordingly, I had to decide whether the evidence showed that the defendant had sent the 27 June letter and, if so, whether this amounted to giving written notice of non-renewal under cl 3 of the Bond.

Parties’ submissions Plaintiff’s submissions

Both parties agreed that the Bond would expire within 90 days of the defendant giving “written notice” of non-renewal under cl 3. However, the plaintiff’s case was that “written notice” required any letter sent by the defendant to have been actually received by the plaintiff. In support of this interpretation of cl 3, the plaintiff relied on the decision of the High Court in Ho Miaw Ling v Singapore Island Country Club [1997] 1 SLR(R) 640 (“Ho Miaw Ling”). The issue there was whether the club had served adequate notice to a club member to delete her name from its register. The club’s rules provided that a notice by post “shall be deemed to have been duly delivered on the day following the date of posting” (at [7]). The court distinguished between delivery and notice. It held that actual communication was required (at [20]) and that “notice must mean effective notice”, not merely “proof of posting” (at [34]). The plaintiff submitted that cl 3 operated in the same manner. Similar to the club’s rules in Ho Miaw Ling, the defendant’s rights in cl 3 only accrued when the plaintiff “receiv[ed] such notice of [the defendant’s] intention”. Hence proof of actual notice was required.

The plaintiff further submitted that even if the court could not rely on the plain wording of the clause and Ho Miaw Ling, the court should still interpret any ambiguity in cl 3 in favour of the plaintiff. This could be done on the basis of either the contra proferentem rule, or the principle that clauses which take away “valuable proprietary, social and other rights” should be given a strict construction (Lee Seng Choon Ronnie v Singapore Island Country Club [1993] 1 SLR(R) 557 (“Ronnie Lee”) at [26]). The plaintiff submitted that while Ronnie Lee also concerned a club’s internal rules, the principle was one of general application which could apply to this case. Hence, cl 3 required actual receipt.

The plaintiff argued that the Bond had not expired under cl 3 because it did not receive the 27 June letter. Primarily, the plaintiff relied on its director’s affidavit evidence, where he stated that the plaintiff did not receive any such letter. The plaintiff submitted that this was consistent with the conduct of the defendant and two third parties whom the 27 June letter was purportedly copied to – Admin Construction Pte Ltd (“Admin”) and AWG Insurance Brokers Pte Ltd (“AWG”): The defendant’s SingPost Registered Mail receipt only showed that an item had been sent to the plaintiff on 27 June 2014. It did not show what that item was. The defendant could have called Paul Koh, its employee whose email address was on the Registered Mail receipt, to give evidence, but it did not. The defendant proffered no good reason as to why it had inadvertently filed the 27 June letter under another file. Admin, the party whose performance was guaranteed by the Bond, had filed for an injunction against the first demand in OS 557 on 5 June 2015. It would not have done this if it had received the 27 June letter. The plaintiff emailed AWG on 12 December 2014 to ask if the Bond would be automatically renewed. By this time AWG would have received the 27 June letter and would have known that the Bond was terminated. But this was not reflected in AWG’s reply. This email was also referenced in the affidavit of AWG’s CEO, Tey Siang Lim (“Tey”), but Tey did not explain why AWG still considered the Bond valid in December 2014. The plaintiff emailed AWG’s Jeanet Soriano Real (“Jeanet”) on 22 March 2017 to clarify whether AWG received the 27 June letter. Jeanet was the same person copied in the 27 June letter as AWG’s representative. AWG did not reply. Jeanet did not put forth any affidavit evidence explaining the situation.

The plaintiff relied on the above facts as proof that it had not received the 27 June letter. In the alternative, the plaintiff also submitted that even if cl 3 only required the defendant to have posted the notice and did not require the plaintiff to actually receive the notice, the same facts would also support a finding that the defendant did not even send the 27 June letter.

Defendant’s submissions

The defendant’s case was that the postal rule applied to cl 3. This would mean that the requirement of “written notice” in cl 3 was satisfied as long as the defendant could show that it had posted the written notice, regardless of whether it was actually received.

The defendant submitted that the postal rule could be found in the English cases of Adams v Lindsell (1818) 106 ER 250 and Henthorn v Fraser (1891) H 226. Under this rule, the acceptance (of a contract) is complete as soon as it is posted if the circumstances are such that it must have been within the parties’ contemplation that the post may be used to communicate an acceptance in ordinary usage. This rule was adopted in Singapore by the Straits Settlement court in Lee Seng Heng and others (trading as Chop Lian Guan & Co) v The Guardian Assurance Co Ltd [1932] SSLR 110 (“Lee Seng Heng”). In Lee Seng Heng, the defendant sought to terminate a fire policy which required “notice to that effect being given to the insured”. The notice was sent but never reached the plaintiffs because their premises were destroyed by a fire after the letter was sent. The court held that the policy was rescinded as soon as the letter was sent.

The defendant said that this postal rule applies to cl 3. Clause 3 was fulfilled on 27 June 2014 since this was the postal date as shown by the SingPost Registered Mail receipt. In response to the plaintiff’s claim that it did not receive the letter, the defendant said that this was a “self-serving” bare assertion with no evidence.

My decision

I agreed with the plaintiff and found that the requirement of “written notice” in cl 3 was not met in this case. Consequently, the defendant did not validly terminate the Bond. This finding depended on three sub-issues which I will discuss in turn: Whether the defendant posted the 27 June letter. Whether cl 3 only requires the defendant to post the letter, or whether it requires the plaintiff to have also received the letter. If cl 3 requires actual receipt, whether the plaintiff actually received the 27...