Citation(2010) 11 SAL Ann Rev 517
Date01 December 2010
AuthorYEO Tiong Min LLB (Hons) (National University of Singapore), BCL, DPhil (Oxford); Advocate and Solicitor (Singapore); Yong Pung How Professor of Law, School of Law, Singapore Management University.
Published date01 December 2010


21.1 The most important case on restitution in 2010 is probably the Court of Appeal decision in George Raymond Zage III v Ho Chi Kwong [2010] 2 SLR 589 (Chan Sek Keong CJ, Andrew Phang Boon Leong JA and V K Rajah JA) which discussed the state of knowledge required to establish liability for knowing receipt of misapplied trust property and implicitly rejected the strict liablity restitutionary analysis. In addition, there were a number of decisions on different aspects of the law of restitution. Notable on a preliminary point is Cheng William v DBS Bank Ltd [2010] SGHC 34 at [42] (Lai Siu Chiu J), where the court disallowed an application by the plaintiff at the beginning of the trial to amend the reliefs sought to include a claim for restitution, because such a claim based on unjust enrichment had not been pleaded by the plaintiff. This is a useful reminder that the law of unjust enrichment stands alongside contract and torts as an independent source of obligations to be considered while drafting the pleadings, and it is not a vague principle of justice to be resorted to as a remedy of last recourse.

Restitution and contract

21.2 The High Court made some important observations on the relationship between the law of restitution and the law of contract in Max Media FZ LLC v Nimbus Media Pte Ltd [2010] 2 SLR 677 (‘Max Media v Nimbus Media’) (Andrew Ang J). The contract between the plaintiff and defendant gave the plaintiff the right to sell advertising inventory for cricket matches broadcast in the Middle East for three years, and required the plaintiff to make payment for each cricket event scheduled under the contract. Payments for each of the three years were to be secured by a bank guarantee for each respective year, each valid for a year with a further three-month period for claims. Time was specified to be of the essence for every payment as well as for the provision of each bank guarantee. The contract provided that the defendant was entitled to draw upon and retain the full amount of the bank guarantee in force in the event that the plaintiff missed three payment dates over the entire contract period. It also gave the defendant the right to

terminate the contract if the plaintiff failed to provide a bank guarantee in accordance with the contract or had committed material or persistent breaches of its obligations.

21.3 The plaintiff duly obtained a bank guarantee for the first year, but failed to perform a number of obligations during that period. The plaintiff was late in paying or failed to pay six invoices, and failed to obtain the second bank guarantee. Consequently, the defendant drew on the first bank guarantee, being the sum of US$2.5m, and terminated the contract a day after. The plaintiff claimed for the return of the money paid out under the bank guarantee on the basis that the defendant was not entitled to any payment from the plaintiff for various reasons. The defendant argued that it was entitled to keep the money and counterclaimed for damages for breach of contract. At trial, the parties“ dispute was confined to whether the plaintiff was liable for posttermination damages and for three uninvoiced events: Max Media v Nimbus Media at [18].

21.4 The court applied the established principles on penalties and found that, in the circumstances, the clause providing for the bank guarantee was not penal but specified legitimate liquidated damages: Max Media v Nimbus Media at [26]-[28]. The court also found that the plaintiff was liable for post-termination damages, either because the defendant had terminated the contract based on a breach of condition or breach of an innominate term resulting in substantial losses to the defendant. Although it was not necessary to the decision, in view of the court“s other conclusions, the court also found that the plaintiff was liable to pay for the three uninvoiced events. Thus, the plaintiff “s claim was dismissed while the defendant“s counterclaim was allowed.

21.5 The plaintiff “s restitutionary claim failed because the court accepted the defendant“s argument that (Max Media v Nimbus Media at [24]):

… ordinarily, restitutionary principles are supplemental to the law of contract where the parties are in a contractual relationship … The rationale behind this general rule is that the law of restitution should not redistribute the risks which the parties have, by contract, already allocated.

21.6 Thus, as the defendant had a valid contractual right to keep the money, the plaintiff “s restitutionary claim must fail.

Total failure of consideration

21.7 Even though it was not in issue on the facts, the court in Max Media v Nimbus Media made the following useful observations in

respect of the restitutionary claim for failure of consideration after the termination of a contract (Max Media v Nimbus Media at [24]):

Nonetheless, one recognised exception where restitution may apply to a contract is where the consideration for the contract has failed. The relevant principle applicable here is this: where money has been paid out under a contract that is or becomes ineffective, the payer may recover the money if the consideration for the payment has totally failed; but this right of recovery only arises where there is no express or implied term in the contract making the payment irrecoverable … [emphasis in original]

21.8 The court noted that the failure of consideration is to be judged from the payer“s point of view and refers not to the promise which is referred to as the consideration, but the performance of the promise: Max Media v Nimbus Media at [24]. The court observed that the failure must be ‘total’ because consideration is normally viewed as whole and indivisible and that the court will not divide or apportion it unless the parties clearly intended it to be divisible. Hence, partial failure of consideration will normally bar a claim in unjust enrichment unless the contract is a divisible one.

21.9 The distinction between a claim for reliance damages for breach of contract and a claim for restitution on the basis of total failure of consideration was discussed by the High Court in PT Panosonic Gobel Indonesia v Stratech Systems Ltd [2010] 3 SLR 1017 (‘Panosonic Gobel’) (Philip Pillai JC). This was an appeal by the defendant from a decision of the assistant registrar who had awarded the contract price to the plaintiff as damages for breach of contract. The defendant argued that the plaintiff had not proven any loss and that the award could only be justified on the basis of restitution for total failure of consideration but that the plaintiff had not proven the total failure of consideration. The High Court dismissed the appeal. The court agreed with the observation of the assistant registrar that even though a claim for return of the contract price as reliance damages superficially resembled a claim for restitution for total failure of consideration, the two claims were based on materially different conceptual bases (expenditure in reliance and unjust enrichment respectively) and the former cannot be used as a backdoor means of failing to plead the latter: Panosonic Gobel at [7]. On the facts, the plaintiff “s claim was based on contract and not restitution. The High Court affirmed the decision on the basis that the plaintiff could opt for either expectation or reliance damages for breach of contract, and the defendant had not shown that the plaintiff had received any benefit to offset its prima facie reliance expenditure.


21.10 In Chee Jok Heng Stephanie v Chang Yue Shoon [2010] 3 SLR 1131 (‘Chee Jok Heng’) (Woo Bih Li J), the High Court found that the plaintiff had been deceived by the defendant into believing that the defendant was a lawyer who could assist her in criminal investigations made against her by the Commercial Affairs Department (‘CAD’). As a result, the plaintiff had paid him $15,000 per month for three months ($45,000). In addition, the court also found that after the plaintiff sold a property, she was falsely advised by the defendant that the proceeds may be seized by the CAD, and consequently the plaintiff had handed a cheque for $682,000, which was part of the proceeds of the sale, to the defendant to prevent any such seizure. The plaintiff sought restitution of the two amounts. The court allowed both claims.

21.11 The claim for $45,000 was allowed on the basis that it had to be returned after the contract for services was rescinded for fraudulent misrepresentation: Chee Jok Heng at [18] and [45]. The court did not address the issue of restitutio in integrum, even though it appeared from the evidence that the defendant did perform considerable work for the plaintiff notwithstanding the false pretences: Chee Jok Heng at [46]. However, in view of the view expressed by the court in respect of any quantum meruit claim (see paras 21.15 ff below), it would appear that any argument from the defendant about impossibility of restitutio in integrum or compensation for his services in the course of working out the consequences of rescision may well have received short shrift from the court. In principle, however, upon the rescission of a contract even for fraudulent misrepresentation, the court would endeavour to act to prevent the unjust enrichment of the representee (see, eg, Spence v Crawford [1939] 3 All ER 271 (HL) where the House of Lords affirmed the need for counter-restitution by the representee as a general rule for the rescission of a contract induced by fraudulent misrepresentation). It should be borne in mind that remedies in tort may also be available to the plaintiff for losses caused by the fraud.

21.12 The claim for $682,000 succeeded on two grounds. One ground was money had and received (Chee Jok Heng at [45]), on the basis that it was money procured by deception: Chee Jok Heng at [25] and [28]. The basis for restitution would be mistake, albeit induced by the defendant...

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