Case Note

Citation(2014) 26 SAcLJ 687
Date01 December 2014
Published date01 December 2014


Accepting an Offer to Settle before Damages are Assessed and the Contra Proferentem Rule

Under O 22A r 3(5) of Singapore's Rules of Court (Cap 322, R 5, 2014 Rev Ed), where an offer to settle “does not specify a time for acceptance, it may be accepted at any time before the Court disposes of the matter in respect of which it is made”. But can an offeree accept an offer to settle even after the merits of the case have been adjudicated and appealed upon, on the basis that damages have yet to be assessed? Should it be able to? A recent Singapore High Court decision on this issue is analysed in this case note.

I. Introduction

1 It is widely accepted that the raison d'être of settlement is to terminate litigation as soon as possible so as to save costs and time for the litigants and the courts.

2 But what happens when a party makes an offer to settle (“OTS”) without specifying a time for acceptance and fails to withdraw it even after the case has gone to trial and on appeal — can the other party, in anticipation that the damages to be assessed will probably far exceed the amount that would have been payable under the OTS, choose to accept the OTS?

3 This was, in essence, the central and unprecedented question that confronted the Singapore High Court in Ong … Ong Pte Ltd v Fairview Developments Pte Ltd.1 The court held that even though there appeared to be a lacuna in the relevant procedural rules, in the light of the purpose upon which the OTS regime was founded and the fact that the offeror's offer had some ambiguity, the offeree could validly accept the OTS even though the appeal had been heard. In reaching its decision, the court also made important observations on the applicability of the contra proferentem rule when drafting and interpreting offers to settle.2

II. Context

4 It may be helpful at this point to briefly establish the background to the OTS regime. In Singapore, O 22A of the Rules of Court3 (“ROC”), which was introduced in the 1990s, sets out fairly exhaustively the rules for its OTS regime. This regime, which effectively replaced the antiquated and inflexible payment into court regime under the contiguous O 22 of the ROC as well as the use of Calderbank4 offers under the common law,5 was designed to “spur the parties to bring

litigation to an expeditious end without judgment, and thus to save costs and judicious time”6 by introducing greater clarity and flexibility in the ways in which parties could arrange for settlement of claims.7

5 The OTS regime, generally considered a useful innovation in civil justice in various common law jurisdictions,8 finds its genesis in Canadian provincial and Australian state legislation, though some of those laws have since changed in whole or in part.9 Suffice to say the principal way in which the OTS regime induces and promotes settlement of claims is that a party who rejects a reasonable offer from the other party will, upon being awarded judgment less favourable than the terms of the OTS, be penalised with certain adverse costs orders, while the other party will correspondingly be rewarded with such costs.10

6 But as with any regime that enhances party autonomy with a view to facilitating non-judicial means of dispute resolution, there can be certain gaps in the rules that require judicial intervention and clarification.

7 As will be seen in this case, at issue was the appropriate construction to be given to a supposedly unclear OTS (there was no expiry date for acceptance) combined with a not unusual scenario (the proceedings had been bifurcated into separate hearings for liability and damages); yet this seemingly innocuous combination yielded an uncertain implication in this particular context, for O 22A r 3(5) of the ROC only states that an OTS that is not withdrawn may be accepted at any time before the court disposes of the matter in respect of which the OTS was made, but nothing else in O 22A or the ROC defines what constitutes a matter as having been disposed of or states how else an OTS can no longer be accepted by the offeree.

III. Facts

8 Turning then to the facts of the case, the plaintiff, an architectural firm, had sued the defendant, a property developer, for $10.1m in May 2011. The claim was for fees and loss of prospective fees for a project. The defendant counterclaimed for $23.4m for loss suffered as a result of the plaintiff's delay in providing a letter of release after the defendant had terminated the plaintiff's services.

9 In July 2011, the plaintiff made an OTS for $2.6m in full and final settlement of the claim and the counterclaim; the OTS also spelt out different costs and interest consequences depending on whether the offer was accepted before or after 14 days from the date of the offer.11

The defendant did not respond, and no other OTS was ever made by either party (nor was the plaintiff's OTS amended in any way).

10 The dispute eventually went to trial, and in March 2013, the trial judge allowed part of the plaintiff's claim and dismissed the defendant's counterclaim, with damages to be assessed in a separate hearing as previously ordered and accepted by the parties.12 The plaintiff confirmed to the defendant that the July 2011 OTS nonetheless remained open for acceptance.13

11 In April 2013, a few days before the expiry of the period to file a notice of appeal, the defendant wrote to the plaintiff to ask if they were “prepared to accept the outcome of the matter without taking the matter further to the Court of Appeal”.14 The plaintiff did not respond, but both parties proceeded to appeal against the decision regarding the extent of the defendant's liability (the defendant, however, did not appeal against the counterclaim).

12 The Court of Appeal — the apex court in Singapore — allowed the plaintiff's appeal on 24 September 2013, and later that same day, the defendant informed the plaintiff that the July 2011 OTS would be accepted via a notice of acceptance (“NOA”).15 The plaintiff, however, replied that the OTS was no longer open for acceptance as the court had already ruled on the dispute, notwithstanding the fact that damages had yet to be assessed in the separate hearing.16 The defendant then applied to the High Court for a declaration that the acceptance of the OTS was valid.

IV. Decision of the court

13 The plaintiff mounted three arguments as to why the declaration sought by the defendant should not be granted: first, the defendant's NOA did not mirror the terms in the plaintiff's OTS as the OTS contained terms pertaining to the settlement of the counterclaim and

discontinuance of the counterclaim, but the NOA did not; secondly, the full set of terms in the OTS was no longer capable of being accepted as both the claim and counterclaim had been disposed of by the court, notwithstanding the bifurcation of the proceedings into the determination of liability and assessment of damages phases; and thirdly, the defendant's conduct was contrary to the spirit of the OTS regime as the acceptance was served very late in the proceedings (two years after the OTS had been made).17

14 The defendant, on the other hand, essentially argued that at the time the NOA was made, the court had not yet disposed of the matter in respect of which the OTS was made, as only the issue of liability had been disposed of; the issue of damages, which remained to be assessed at that point, had not.18 In other words, its acceptance of the OTS was in accordance with O 22A r 3(5) of the ROC.

15 The court agreed with the defendant and held that the OTS had not expired on 24 September 2013 (the date of the NOA), and accordingly, the OTS was validly accepted by the defendant on that date.19 Prefatorily, it noted that acceptances of offers to settle must be done without any amendment and condition, and courts would look at the substance of the offer and acceptance rather than the strict form when deciding whether the offer and acceptance is valid.20

16 The court then traced the origins of the OTS regime, highlighting first the limitations of the payment into court regime under O 22 of the ROC and, subsequently, the use of Calderbank offers under the common law.21 Turning to the OTS regime per se, the court noted that reforms to the OTS regimes in Canada and Australia over the years:22

… had a common purpose of encouraging settlement … the imposition of certain cost consequences effectively encouraged settlement by providing parties with a tangible incentive to offer to settle and to treat offers seriously.

It further observed that the OTS regime is meant to save even more legal costs and judicial time than the payment into court regime and the Calderbank offer.23

17 But the first specific reason for the court's holding was that there was unequal pressure on the parties. Specifically:24

… the plaintiff could be entitled to costs on an indemnity basis from [the date of the offer] … had the defendant not accepted the OTS, it would still be liable for indemnity costs for the proceedings to follow, which would be the assessment of damages. The plaintiff, on the other hand, had no such pressure. It had, at a very early stage, been prepared to accept the sum in the OTS.

18 The second reason was that the plaintiff “was in full control of the situation. It was open to the plaintiff (but not the defendant) to withdraw the OTS at any time subject to giving one day's notice”.25

19 The third reason was that as the terms of the OTS were the plaintiff's, it was “open to the plaintiff to limit the period of validity or phrase it in any fashion but it did not do so”.26

20 The fourth reason was that:27

… the court should come down in favour of clear drafting in terms of unambiguous offers and expiry dates. These factors are entirely within the control of the offeror … Any ambiguity will be interpreted contra proferentem. To hold otherwise … would be to arm the plaintiff with...

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