Gay Choon Ing v Loh Sze Ti Terence Peter

• Jurisdiction: Singapore
• Judgment Date: 08 January 2009
• Date: 08 January 2009
• Docket Number: Civil Appeals Nos 33 and 34 of 2008
• Court: Court of Appeal (Singapore)

Gay Choon Ing

Plaintiff

and

Loh Sze Ti Terence Peter and another appeal

Defendant

[2009] SGCA 3

Chao Hick Tin JA

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeals Nos 33 and 34 of 2008

Court of Appeal

Contract–Compromise agreement–Requirements for valid compromise–Consideration–Definition–Adequacy benefit–Detriment or loss suffered–Intention to create legal relations–Contextual approach to contractual interpretation–Course of correspondence demonstrated parties' intention to reach amicable solution–Whether there was valid compromise agreement between parties by virtue of contemporaneous execution of Points of Agreement and Waiver Letter

From the early 1970s, Loh Sze Ti Terence Peter (“the plaintiff”) and Gay Choon Ing (“the defendant”) shared a close friendship. The plaintiff was the managing director and shareholder of ASP Company Limited (“ASP”) based in Nairobi, Kenya and invited the defendant to join his Company. From 1981 to 2004, the defendant commenced work with ASP and was eventually made a director of ASP. The defendant was also a shareholder of the Company, a family business started by the defendant's father, which owned and operated a hotel in Little India. In 1993, the Company had plans to redevelop the Hotel. Having undertaken to raise $2.5m for the redevelopment project, the defendant turned to the plaintiff, in view of their long-standing friendship. The plaintiff alleged that this sum of money extended was an investment but the defendant contended that it was a loan. Pursuant to this, the defendant issued shares to the plaintiff and entered into a Trust Deed on 3 January 1994.

From 1995 to 2003, after the signing of the Trust Deed, the plaintiff continued to render assistance in the form of guidance to the defendant in relation to the development of the Hotel and the structure of the Company. In 2003, the plaintiff inquired for details of dividends paid by the Company and learnt that these had not been paid. Relations began to sour in 2003 when the defendant indicated he wished to retire from ASP and requested that he be paid his severance package. A terse correspondence ensued between both parties. On 15 October 2004, the plaintiff sent an email to the defendant indicating that he hoped to reach an amicable solution to the ongoing dispute. The following day, the defendant replied and was agreeable to resolving the matter amicably instead of resorting to litigation. Against this background, the defendant's Kenyan lawyers wrote to the plaintiff on 25 October 2004, seeking payment of the defendant's terminal dues. Two days later, on 27 October 2004, the parties entered into a Points of Agreement (“the POA”). On the exact same day, a waiver letter was sent by the plaintiff in his capacity as managing director of ASP to the defendant (“the Waiver Letter”). This letter was signed by the defendant as well as by the plaintiff on behalf of ASP. After the POA was executed, full payment of $1.5m was made to the plaintiff. However, on 10 February 2005, tempers flared up again and this culminated in an eventual impasse between the plaintiff and the defendant. The trial judge considered each issue in great detail and, based on the arguments canvassed before her, arrived at a conclusion as to the legal status of the Trust Deed. The issue as to whether there was a valid compromise agreement between the parties by virtue of the contemporaneous execution of the POA and the Waiver Letter, however, became a subsidiary issue as parties dealt with it only tangentially in their submissions.

Held, allowing the appeal in Civil Appeal No 33 of 2008 and dismissing the appeal in Civil Appeal No 34 of 2008:

(1) The key issue was whether or not the POA and the Waiver Letter constituted a valid compromise agreement between the parties. From a close analysis of the documents as well as the context furnished by the course of correspondence between the parties from October 2004 to February 2005, it was clear that both the plaintiff and the defendant, for all intents and purposes, acted and proceeded on the basis that there was a concluded compromise. The plaintiff promised to release the defendant from all his obligations under the Trust Deed in accordance with the terms of the POA while the defendant in turn, agreed to relinquish all claims against ASP: at [39].

(2) Compromise could be defined as the settlement of dispute by mutual concession, its essential foundation being the ordinary law of contract. Where parties had demonstrated that they intended to dispose of their actual or potential dispute by reaching an amicable resolution agreeable to both parties, this compromise would be recognised and given effect to by the courts: at [41] to [45].

(3) A compromise would not arise unless certain requirements were fulfilled: first, there had to be an identifiable agreement that was complete and certain; secondly, there had to be consideration; and thirdly, there had to be an intention to create legal relations: at [46].

(4) There had to be an identifiable agreement which was complete and certain, and where negotiations between both parties had crystallised into a contractually-binding agreement in which there was no uncertainty as to the terms of the contract concerned. The courts would adopt an objective test of looking at the whole course of the negotiations between both parties to ascertain if an agreement was reached at any given point in time. Unless the continued negotiations disclosed an agreed rescission of an agreement already concluded, the mere fact that negotiations were continued thereafter did not itself affect the existence of the agreement already concluded: at [47] to [60].

(5) Consideration signified a return recognised in law which was given in exchange for the promise sought to be enforced. The traditional definition adopted was that of the “benefit-detriment analysis”. A practical benefit or detriment, as opposed to a narrower legal benefit or detriment could constitute sufficient consideration in law: at [66] to [70].

(6) Before a compromise could be concluded, there had to be an intention on the part of both parties that the transaction entered into was to have legal effect before a valid contract could be said to have been formed. The parties had to have intended that, if a disagreement arose or the contract was not honoured subsequently, the aggrieved party could invoke the assistance of the court. This depended upon the interpretation the court took of the particular factual matrix concerned. Certain established presumptions existed, for instance, in social and domestic arrangements, there was a presumption that the parties did not intend to create legal relations. However, in business and commercial arrangements, there was a converse presumption to the effect that it was presumed that the parties did intend to create legal relations: at [71] and [72].

(7) With the contemporaneous execution of the POA and the Waiver Letter on the same day, this marked the crystallisation of the ongoing negotiations between both parties into a legally binding agreement in which all existing disputes between them were compromised or settled. The series of correspondence leading up to the signing of the POA and the Waiver Letter demonstrated that both parties had been locked in a dispute. However, as the correspondence progressed, both parties expressed a desire to resolve the ongoing dispute amicably and to move on with their lives. Viewed in this light, the POA and the Waiver Letter were concluded at a crucial point in time: at [73] to [78].

(8) The plaintiff had a more than passing interest in ensuring that the defendant's claims against ASP were settled amicably. The defendant signed the Waiver Letter at the request of the plaintiff and he had done so in light of what he stood to gain as a result of the plaintiff's promise. Through the execution of the POA and the Waiver Letter, both parties in effect, intended to have a “clean break”. The fact that the Waiver Letter was entered into between the defendant and ASP, and not the plaintiff, was legally irrelevant to whether or not the defendant had, by signing the Waiver Letter, furnished sufficient consideration to the plaintiff in return for the plaintiff's promise. The Waiver Letter itself was signed by the plaintiff on behalf of ASP and the defendant by signing it, had suffered a detriment at the plaintiff's request and had thereby furnished sufficient consideration in law for the plaintiff's promise since either a detriment or a benefit could constitute sufficient consideration. Further, looking at the correspondence between the parties and the Waiver Letter and the POA in their relevant context, although the plaintiff was literally acting on behalf of ASP, he also had a personal interest in the defendant signing the Waiver Letter and there was therefore also a benefit to him as well: at [79]to [81].

(9) The element of request was necessary to establish a link between the parties concerned. For instance, if the promisee chose of his own volition to confer a benefit on the promisor, this would not constitute sufficient consideration. If the promisee chose of his own volition, to incur a detriment, then this would not constitute sufficient consideration in the eyes of the law. While past consideration was no consideration, the courts looked to the substance rather than the form. What looked at first blush like past consideration would pass legal muster if there was, in effect, a single contemporaneous transaction, ie, the common understanding of the parties being that consideration would indeed be furnished at the time the promisor made his or her promise to the promisee: at [82] to [85].

[Observation: In spite of the numerous critiques of the doctrine of consideration, it was still an established part of Singapore law as well as the common law. However, because the doctrine did contain certain basic...