Restitution

• Citation: (2006) 7 SAL Ann Rev 397
• Date: 01 December 2006
• Published date: 01 December 2006

Introduction

20.1 2006 has been a quiet year for the law of restitution in Singapore, with no significant superior court decisions turning on the law of restitution, even though it would appear that claims in restitution are now routinely heard in the subordinate courts. A small number of High Court cases did touch upon points of interest in the law of restitution.

Total failure of consideration: Contractual risks

20.2 In Firstlink Energy Pte Ltd v Creanovate Pte Ltd[2007] 1 SLR 1050, the High Court of Singapore once again affirmed that no restitutionary action will be allowed in a case where the risk has been contractually allocated between the plaintiff and the defendant. To cut a long story short, the plaintiff had made certain advances to the defendant company pursuant to a joint venture agreement which subsequently turned sour, and the plaintiff was claiming back the sums on the ground, inter alia, that there had been a total failure of consideration. The court found that the parties had entered into a binding contract of settlement, under which the defendant had promised to pay back the advances upon the failure of certain conditions.

20.3 The plaintiff”s claim in contract succeeded, but its alternative pleading for the recovery of the advances as money had and received for total failure of consideration failed. Andrew Ang J held (at [47]) that the action could not be maintained because the parties had agreed that subject to the satisfaction of certain condition precedents, the advances would be treated as payment for certain shares in the joint venture vehicle allocated as a result of the settlement. When read with the court”s finding of fact (at [46]—[47]) that the settlement contract explicitly provided for the destination of the advances in the circumstances that had materialised, it is clear that the holding was that the restitutionary claim failed not because there was contractual consideration for the advances, but because the parties had made a contractual allocation of risks.

Knowing receipt: Standard of liability

20.4 In Caltong (Australia) Pty Ltd v Tong Tien See Construction Pte Ltd[2002] 3 SLR 241 (‘the Caltong case’), the Singapore Court of Appeal had restated (at [31]) the requirements for establishing the defendant”s personal liability to account as a constructive trustee for knowing receipt of trust property:

(a) a disposal of assets in breach of fiduciary duty;

(b) beneficial receipt by the defendant of assets traceable as representing the assets of the plaintiff; and

(c) knowledge of the defendant that the assets so received are traceable to a breach of fiduciary duty.

20.5 In Firstlink Energy Pte Ltd v Creanovate Pte Ltd (supra para 20.2), the High Court of Singapore applied this test to determine whether the pleadings in the case sufficiently disclosed a claim based on knowing receipt. Counsel for the defendants in the second action of the case (some-time directors of the defendant company mentioned in para 20.2 above) argued that the plaintiff had failed to plead that the defendants had acted dishonestly. Dealing with this argument, Andrew Ang J, relying on the Caltong case, opined that dishonesty was not essential to the claim though knowledge was, and dismissed the claim on the basis that the plaintiff had failed to plead that...