CLARIFYING RECTIFICATION IN SINGAPORE

• Date: 01 December 2015
• Published date: 01 December 2015
• Author: GOH Yihan LLB (hons) (national University Of Singapore), LLM (harvard); Advocate And Solicitor (singapore); Associate Professor, School of Law, Singapore Management University.

Rectification, which has become increasingly important, needs to be clarified in Singapore. For a start, important questions about the relationship between rectification and the Evidence Act have not been asked and, if asked, will reveal that, contrary to English developments, equitable rectification, and not common law rectification, remains significant in Singapore because common law rectification is constrained by the Evidence Act. If this is correct, the ambit and application of both forms of rectification, especially equitable rectification, need to be clarified. The purpose of this article is to provide an understanding of rectification under Singapore law.

I. Introduction

1 “Rectification” is usually taken to refer to the equitable remedy of rectification of documents, otherwise known as “equitable rectification”. This involves the reconstruction or amendment of documents where there is a “mismatch between the parties’ agreement and the instrument which purports to record it”.1 Equitable rectification is often compared with “common law rectification”, which is the use of contractual construction to remedy obvious drafting errors.2 While common law rectification is not substantively rectification in so far as the document itself is not amended but interpreted,3 the comparison has remained. An important difference between equitable and common law rectification is

that exclusionary evidential rules constrain the construction process. This is all the more important in Singapore, given that the antiquated Evidence Act4 (“EA”) still preserves old exclusionary rules that have been dispensed with under English law today. Yet another significant difference is that equitable rectification has traditionally been stated to require a higher degree of probability than other civil remedies.5 This seems to suggest that, between the two, equitable rectification will often be harder to obtain.

2 Rectification, in both senses, has seen a rapid development in the last quarter of a century. Lord Neuberger, in his foreword to David Hodge QC's acclaimed treatise on rectification,6 suggests that the rise of lengthy legal documents, driven in turn by the growth of commercialisation and the arrival of the word processor, has contributed to the increasing use of rectification to amend errors in these documents.7 The situation in Singapore, while of a smaller scale, also reflects the increasing importance of rectification.8 Indeed, as the volume, size and complexity of legal documents increase, it is inevitable that the risk of errors in these documents will increase. And when such increased risk materialises, rectification will assume even greater significance.9

3 It is therefore important that rectification be properly understood under Singapore law. Indeed, as Lord Neuberger MR said in Daventry District Council v Daventry & District Housing Ltd,10 the principles of rectification should be as clear and predictable as possible given the commercial importance of rectification. Singapore cases that have discussed rectification have generally assumed that English law on rectification applies here. However, such an assumption may not be correct because, as mentioned above, Singapore law in this area is constrained by the EA. The EA affects both the common law and equitable doctrines, and hence, unlike the position in England where rules of evidence are non-statutory, may affect rectification in both senses here. Indeed, in Sembcorp Marine Ltd v PPL Holdings Pte Ltd11 (“Sembcorp Marine”), the Court of Appeal emphasised that the law of evidence in Singapore is governed primarily by the EA, even as it

acknowledged that the Act does not directly prescribe a substantive rule of contractual interpretation.12 Similarly, the EA does not say anything about how rectification is to be applied. Nonetheless, given that rectification will almost certainly raise a question of evidence involving proof of the mistake that warrants its application, it is essential that the EA is consulted.

4 Apart from the relationship between rectification and the EA, questions also need to be asked about how the remedy is invoked and applied. Analysis of the few Singapore cases that have considered rectification reveals that, while Singapore law on rectification is largely similar to the English approach, it is not entirely identical. For instance, the ambit of common law rectification needs to be examined in the light of the EA. Also, the EA itself requires a slight amendment to clarify the operation of equitable rectification in Singapore.

5 The purpose of this article is thus to provide an understanding of rectification under Singapore law. It does so on the assumption that the present rules in the EA apply even if there may be a good argument for reforming parts of the EA. It will do this through considering several matters for each form of rectification. First, it will consider the relationship between rectification and the EA. Secondly, it will survey the Singapore decisions that have considered rectification and attempt to state the local law. Thirdly and finally, it will posit a few issues for future consideration as Singapore law shapes its own unique approach in applying rectification.

II. Common law rectification under Singapore law

A. Common law rectification as presently understood in Singapore

6 The leading case governing common law rectification under English law is the English Court of Appeal decision of East v Pantiles (Plant Hire) Ltd13 (“East”). Brightman LJ laid down two conditions for correcting an obvious clerical mistake by the process of construction as follows:14

Two conditions must be satisfied: first, there must be a clear mistake on the face of the instrument; secondly, it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied, then the correction is made as a matter of construction.

7 These requirements must now also be read in the light of the House of Lords' decision in Chartbrook Ltd v Persimmon Homes Ltd15 (“Chartbrook”). Lord Hoffmann held that all that is needed is that “it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant”.16

8 The conditions need further consideration in the light of the parol evidence rule contained in the EA. The first condition does not require recourse to further evidence outside of the contract, the mistake being ascertained “on the face of the instrument”. However, the second condition must be considered together with the EA because parol evidence could very well be needed to make clear “what correction ought to be made in order to cure the mistake” or “what a reasonable person would have understood the parties to have meant”.

9 The statement of common law rectification in East has been accepted and applied by the Singapore courts. The first instance is the High Court case of Ng Swee Hua v Auston International Group Ltd17 (“Ng Swee Hua”), in which the court used common law rectification to amend an investment agreement that misidentified the relevant company. In the court's words:18

In the Investment Agreement, the ‘Company’ is identified as AIMT. Clause 3.2.5 on its face bears out a clear error of drafting which has led to a meaningless clause. A literal reading gives rise to absurdity. It is plain from the language used that a mistake was made by the draftsman. It is necessary to cure the drafting error to reflect the true intention of the draftsman. It is clear what corrections need to be made in order to cure the mistake. Reference to ‘Company’ in cl 3.2.5 should read as Auston.

10 In this case, it is important to note that both AIMT and Auston were existing entities, and also that the court considered that cl 3.2.5 was inconsistent with other clauses of the agreement in finding that there was a mistake.19 We will return to these points below when we consider the effect of the EA on common law rectification in Singapore. For now, Ng Swee Hua is a good example of a Singapore court applying English law on common law rectification.

11 Yet another example is Soon Kok Tiang v DBS Bank Ltd20 (“Soon Kok Tiang”), in which the High Court used common law rectification to correct a clause describing a credit event redemption amount (“CERA”) in an investment agreement. The court accepted the defendant's argument that there had been an obvious clerical mistake in the fourth CERA description: instead of stating that the aggregated principal amount should be multiplied by the “final price”, it stated that it should be multiplied by “(1 — final price)”.21 This rendered it absurd and inconsistent with other parts of the investment agreement that the CERA should be derived by multiplying the aggregated principal amount with the final price.22 Again it is important to note that the court applied East on the basis that such a correction would eliminate the contradiction caused by the clerical error23 and did not refer to evidence outside of the agreement.24

12 A final example is the High Court case of Edwards Jason Glenn v Australia and New Zealand Banking Group Ltd.25 In this case, the court used common law rectification to correct the misdescription of referencing of clauses within the agreement concerned. The court held that if the misdescription were not corrected, the present references would be nonsensical.26

13 In all of these Singapore cases, the courts cited East but did not break up their analysis into East's two constituent conditions. It is clear that, in so far as the first condition is concerned, the mistakes have all been ascertained on the face of the document. As for the second condition, the courts appear to have rectified the documents concerned by recourse to internal consistency — the argument being that, in order to maintain consistency within the contract concerned, the clerical error must be...