Chai Chung Ching Chester and Others v Diversey (Far East) Pte Ltd

• Jurisdiction: Singapore
• Judge: Goh Phai Cheng JC
• Judgment Date: 29 April 1991
• Neutral Citation: [1991] SGHC 56
• Docket Number: Originating Summons No 86 of 1991
• Date: 29 April 1991
• Published date: 19 September 2003
• Year: 1991
• Plaintiff Counsel: Yeoh Lam Hock and Johnny Cheo (Shook Lin & Bok)
• Citation: [1991] SGHC 56
• Defendant Counsel: KS Lo (Allen & Gledhill)
• Court: High Court (Singapore)
• Subject Matter: Whether professional fees paid part of damages or cost,Costs,Words and Phrases,'Claims in the suit',Construction of settlement agreement and consent order,Civil Procedure,Admissibility of extrinsic evidence,Taxation,ss 93 & 94 Evidence Act (Cap 5, 1970 Ed)

By an action filed in this court by way of Suit No 5626 of 1986 (the action), Diversey (Far East) Pte Ltd (hereinafter referred to as Diversey), who are the defendants in this summons, claimed against the plaintiffs (ie Chester Chai and five others) for, inter alia, (a) injunctive relief to restrain the plaintiffs from using or divulging any trade secrets of Diversey; (b) trading or dealing with any trade suppliers who are suppliers of Diversey; and (c) damages for conspiracy to defraud or injure Diversey. A copy of the statement of claim filed by Diversey in the action is reproduced as exh ` CCCC-1` to the affidavit of Chester Chai Chung Ching filed on 5 February 1991 (hereinafter referred to as the Chester Chai affidavit) in this summons.

On 8 September 1989, just prior to the trial, the plaintiffs and Diversey reached an overall settlement of the dispute in the action. The terms and conditions of the settlement were contemporaneously reduced into writing in an agreement dated 8 September 1989 executed by the respective solicitors on behalf of Diversey and the plaintiffs (hereinafter referred to as the agreement). A copy of the agreement is reproduced as exh ` CCCC-2` to the Chester Chai affidavit. Further, on 11 September 1989, a consent judgment order was recorded by Justice Yong Pung How (as he then was). The said judgment order recorded most of the contents of the agreement. A copy of the said judgment order is reproduced as exh ` CCCC-3` to the Chester Chai affidavit.

Both the agreement and the judgment order provide that Diversey were entitled to taxed costs of the action on a party and party basis. Their bill of costs was duly presented and when it came up for taxation the following two items in the bill of costs were disputed by the plaintiffs:

(a)

Item 639 in the bill for the recovery of the sum of $60,024 being the amount of the professional fees paid by Diversey to Messrs Coopers & Lybrand; and

(b)

Item 649 in the bill for the recovery of the sum of $214.50 being the amount of professional fees paid to Commercial Trademark Services (Far East) Pte Ltd and Lionel Security Services Pte Ltd (collectively hereinafter referred to as CTS).

Diversey had inadvertently misstated in their bill of costs the professional charges paid to CTS as $214.50. This was incorrect and the amount paid to CTS was $57,136.44. At the taxation of the bill of costs, the plaintiffs objected in principle (whilst reserving their right to also object to the quantum) to the inclusion of these fees in the bill of costs. In this respect, two affidavits were filed - one by Eric Trimble, on behalf of Diversey on 2 January 1991 and the other by Chester Chai Chung Ching on behalf of the plaintiffs on 21 January 1991. Copies of these two affidavits are reproduced as exh ` CCCC-5` to the Chester Chai affidavit.

At the hearing of the taxation of the bill of costs on 25 January 1991, the learned assistant registrar, Mr Chan Hian Young, as the taxing master, directed that an application be taken out by the plaintiffs to determine the construction and ambit of the agreement with regard to the judgment order for the purpose of taxing Bill of Costs No 572 of 1990 presented by Diversey in the action. The plaintiffs therefore took out this summons to claim against Diversey for the following reliefs, namely:

(1) a declaration that upon a true construction of the agreement Diversey are not entitled to claim from the plaintiffs the professional fees paid by Diversey to Messrs Coopers & Lybrand and CTS with regard to the action;

(2) pursuant thereto, a declaration that items 639 and 641 of Diversey`s Bill of Costs No 572 of 1990 filed with regard to the action be struck off;

(3) any further or other directions or orders as may be necessary for giving effect to the agreement and in particular with regard to Diversey`s Bill of Costs No 572 of 1990 filed in the action; and

(4) costs.

I heard the application on 21 February 1991 and on 26 February 1991 I granted an order in terms of sub-paras (1) and (4) above. I also made the following additional order:

... a declaration that the defendants are not entitled to claim party and party costs in respect of items 639 and 641 of the defendants` Bill of Costs No 572/90 filed with regard to Suit No 5626 of 1986.

The defendants have appealed and I now give my reasons.

Issues before this court

Mr Yeoh, counsel for the plaintiffs, submitted that the issues before this court are:

(a) Whether the terms and conditions of the agreement are clear and unambiguous; and

(b) whether on a true construction of the agreement, Diversey are disentitled from claiming from the plaintiffs as costs of the action the professional fees paid by them to Messrs Coopers & Lybrand and CTS.

The issues before this court will therefore be determined by the construction which this court will place on two documents - the agreement and the judgment order. In my view, there is really one issue, namely, whether under the terms of the agreement Diversey are entitled to recover the professional fees paid by them to Coopers & Lybrand and CTS in the party and party bill of costs presented for taxation in the action. The preamble to the judgment order made it clear that it was a consent order made pursuant to the settlement reached by the parties.

Preliminary ruling of law sought by the plaintiffs

Mr Yeoh asked this court to make a preliminary ruling of law, namely, that for the purpose of construing the agreement and the judgment order the rule on parole evidence should be applied strictly. In other words, all earlier drafts and pre-agreement negotiations should be disallowed. He submitted that in the construction of a contemporaneous written agreement of compromise like the agreement, no oral evidence should be admitted to contradict, vary, add to or subtract from the terms thereof. He relied on ss 93 and 94 of the Evidence Act (Cap 5, 1970 Ed) (the Act) and also illustrations (a) and (c) to s 94. Section 93 provides that where the terms of a contract have been reduced by the parties to the form of a document, no evidence shall be given in proof of the terms of such contract except the document itself. Section 94 provides that no evidence of any oral agreement or statement as between the parties to any contract which has been reduced to the form of a document shall be admissible for the purpose of contradicting, varying, adding to, or subtracting from its terms except as provided by that section.

Similarly, as the terms of the agreement are clear and unambiguous, Mr Yeoh submitted that evidence of negotiations preceding the agreement and earlier drafts of the agreement should not be admissible. He cited a passage from Sarkar`s Law of Evidence (12th Ed) at p 785 which states that oral evidence of negotiations preceding a written contract is not admissible without first settling to what extent the contract was so ambiguous as to resort to such evidence. He also relied on para 802 of Chitty on Contracts (26th Ed) which states that where the parties have embodied the terms of their contract in a written document, the general rule is that parole evidence is not allowed to be given so as to add to or subtract from, or in any manner to vary or qualify, the written contract and evidence is not admissible to show that the subjective intentions of the parties were not in accord with the written document executed by them.

Mr Yeoh also referred to the following passage in para 802 of Chitty on Contracts (26th Ed):

Extrinsic evidence inadmissible.

Where the parties have embodied the terms of their contract in a written document, the general rule is that `verbal evidence is not allowed to be given ... so as to add to or to subtract from, or in any manner to vary or qualify the written contract`. This rule is often known as the parole evidence rule. Its operation is not confined to oral evidence, but extends to extrinsic matter in writing, such as drafts, preliminary agreements and letters of negotiation. Evidence is not admissible of negotiations between the parties, nor is it permissible to adduce evidence to show that their subjective intentions were not in accord with the written instrument. The rule applies to all contracts whether in writing or under seal, ...

Mr Yeoh also referred to the following dicta of Lord Wilberforce in Prenn v Simmonds [1971] 3 All ER 237 [as stated in the headnote]:

Although in construing a written agreement the court is entitled to take account of the surrounding circumstances with reference to which the words of the agreement were used and the object, appearing from those circumstances, which the person using them had in view, the court ought not to look at the prior negotiations of the parties as an aid to the construction of the written contract resulting from those negotiations. Evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the `genesis` and, objectively, the `aim` of the transaction.

Mr Yeoh cited the case of United Malayan Banking Corp Bhd v Tan Lian Keng & Ors [1990] 1 MLJ 280 where the High Court of Malaysia held that [as stated in the headnote]:

(1) The Evidence Act 1950, by s 91, excludes extrinsic evidence being adduced of the terms of a document by providing that no evidence may be given in proof thereof except the document itself and by s 92 an interdict is imposed on the admissibility of extrinsic evidence being adduced by the parties thereto in variance with or in contradiction of or in addition to or in subtraction of the terms of a document.

(2) Even if evidence of negotiations is admitted because the action raises a question of rectification, or misrepresentation, the court should not allow itself to be influenced by that evidence when it comes to construe the agreement.

(3) The effect of admitting extrinsic evidence of the...