How Weng Fan and others v Sengkang Town Council and other appeals

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 07 July 2023
• Neutral Citation: [2023] SGCA 21
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 196, 197, 198, 199 and 200 of 2019
• Hearing Date: 30 November 2022
• Citation: [2023] SGCA 21
• Year: 2023
• Plaintiff Counsel: Netto Leslie, Netto Leslie née Lucy Michael, Roqiyah Begum d/o Mohd Aslam and Chiam Jia-An (Netto & Magin LLC),Chelva Retnam Rajah SC, Eusuff Ali s/o N B M Mohamed Kassim, Yong Manling Jasmine, Rachel Hui Min De Silva and Samantha Tan Sin Ying (Tan, Rajah & Cheah)
• Defendant Counsel: Chin Li Yuen Marina SC, Teo Jin Yun Germaine and Mohamed Shafie Bin Allameen (Tan Kok Quan Partnership),Chan Ming Onn David, Joseph Tay Weiwen, Fong Zhiwei Daryl, Lin Ruizi and Tan Kah Wai (Shook Lin & Bok LLP)
• Subject Matter: Civil Procedure,Pleadings,Orders
• Published date: 02 August 2023

Sundaresh Menon CJ (delivering the judgment of the court): Introduction

In How Weng Fan and others v Sengkang Town Council and other appeals [2022] SGCA 72 (the “Judgment”), we delivered our judgment on the substantive merits of the appeals (the “Appeals”) concerning the liability of members and senior employees of Aljunied-Hougang Town Council (“AHTC”) to AHTC and to Sengkang Town Council (“STC”). These members are Ms Sylvia Lim (“Ms Lim”), Mr Low Thia Khiang (“Mr Low”), Mr Pritam Singh (“Mr Singh”), Mr Chua Zhi Hon (“Mr Chua”) and Mr Kenneth Foo (“Mr Foo”) (collectively, the “Town Councillors”). The senior employees are Ms How Weng Fan (“Ms How”) and Mr Danny Loh (“Mr Loh”) (collectively, the “Employees”).

In the Judgment, we reversed several of the trial Judge’s factual findings and legal conclusions. Among other things, we held that the Town Councillors and Employees did not owe fiduciary or equitable duties to AHTC. We also held that they had acted in good faith in the award of various contracts on behalf of AHTC. However, we held that the Town Councillors and Employees were grossly negligent in implementing AHTC’s payments process (the “System”), which led to the persistence of what were referred to by parties as “control failures” in the System. This was because the involvement of conflicted persons and the absence of safeguards created an inherent risk of overpayment. Furthermore, we held that Ms Lim was liable in negligence for AHTC’s award of a contract to Red-Power Electrical Engineering Pte Ltd (“Red-Power”), having failed to discharge her burden of proof that she had acted in good faith when she chose not to renew the contracts with Digo Corporation Pte Ltd and Terminal 9 Pte Ltd which offered the same services at significantly cheaper rates.

At [455] and [485] of the Judgment, we directed the parties to file further written submissions to address two issues arising out of what appeared to be AHTC’s inadequate pleadings on the following two areas (the “Outstanding Issues”): The control failures in the System: First, in relation to the control failures in the System, AHTC’s pleaded case was that the relevant acts constituted a breach of fiduciary duties. However, AHTC did not plead that the Town Councillors had breached their duty of skill and care in tort and were negligent in implementing the payments process, leading to the control failures in the System. The question in these circumstances was what orders (on liability and apportionment), if any, this court could make in respect of this claim. We shall refer to this as the “Control Failures Issue”. The award of a contract to Red-Power: Second, in relation to our finding that Ms Lim breached her duty of skill and care in tort and was negligent in causing AHTC to award a new contract to Red-Power, it appeared to us that AHTC did not plead this claim. In the circumstances, how, if at all, should Ms Lim’s liability towards AHTC and STC be apportioned on this issue? We shall refer to this as the “Red-Power Issue”.

Having considered the parties’ further submissions, we now address the Outstanding Issues and the appropriate orders to be made in this case. This case presents an opportunity for the court to clarify the relevant legal principles of pleadings and, in particular, when it may be appropriate for a court to find a party liable despite some possible shortcomings in the pleadings.

Brief background and court’s findings

We have, in the Judgment, set out the detailed procedural history of the suits, HC/S 668/2017 (“Suit 668”) and HC/S 716/2017 (“Suit 716”) (collectively, the “Suits”), leading up to the Appeals as well as a comprehensive summary of the subject matter of the Appeals (see the Judgment at [7]–[124]). We do not propose to repeat these matters. It suffices for present purposes to focus on the points relevant to the Outstanding Issues.

As the trial of the Suits was bifurcated, the Appeals only concerned the issue of liability and not damages. On the Control Failures Issue, we found that the Town Councillors and Employees had “breached their duty of care by permitting the ‘control failures’ to exist in the payment process” (see the Judgment at [433]). Specifically, the involvement of conflicted persons for payments to FM Solutions & Services Pte Ltd (“FMSS”) and FM Solutions & Integrated Services (“FMSI”) and the absence of safeguards created an inherent risk of overpayment (see the Judgment at [450]–[454]). This was not mere negligence because the Town Councillors were aware of Ms How’s and Mr Loh’s potential conflict of interest as early as 19 May 2011. In these circumstances, we found that the Town Councillors and Employees had been grossly negligent in this respect, and we accordingly rejected the Town Councillors’ and Employees’ contention that they had acted in good faith in implementing the System (see the Judgment at [452]–[454]).

As we explain below at [51], it is important to appreciate that the Suits were not consolidated. Rather, with the parties’ consent, they were ordered to be tried together (see the Judgment at [7]). To put it another way, AHTC and STC ran independent cases, with independent causes of action, based on independent sets of pleadings. This was so, even though the claims in the Suits arose from a largely common factual substratum. As we observed in the Judgment at [65], AHTC’s pleadings in Suit 668 were narrower than STC’s pleadings in Suit 716.

The parties’ arguments

We first summarise the parties’ arguments on the Outstanding Issues.

AHTC’s position on the Control Failures Issue is that it did adequately plead its claim in tort against the Town Councillors in relation to the control failures in AHTC’s payments process. In the alternative, AHTC submits that this court should nevertheless find the Town Councillors liable to it for the control failures because the Town Councillors were apprised of AHTC’s case in tort and were not taken by surprise at the trial below. Further and in the alternative, AHTC submits that it should be allowed, if necessary, to amend its pleadings now to include a claim in tort against the Town Councillors in relation to the control failures in the System. As for the Red-Power Issue, AHTC concedes that this was a claim made by STC only and therefore does not pray for an order in this respect.

STC takes no position on the Control Failures Issue as it concerns the possible liability of the Town Councillors and the Employees to AHTC in negligence. STC submits that the issue of apportionment of damages between STC and AHTC, assuming that liability is established, is a question that ought to be left to the assessment of damages tranche of the Suits.

The Town Councillors submit that AHTC’s case should stand or fall on its pleadings. Because AHTC did not plead its case in tort against the Town Councillors in relation to the control failures in AHTC’s System and AHTC likewise did not plead any case against Ms Lim in relation to the award of a contract to Red-Power, AHTC should not be allowed to pursue these claims.

The Employees and FMSS submit that it is not that AHTC failed to plead a claim in tort against the Town Councillors, but rather that their attempt to do so was ineffective, resulting in the Employees being held solely liable for AHTC’s claim. They contend that it would be unjust to hold only the Employees liable to AHTC for the control failures when this court had found that all the Town Councillors and Employees were grossly negligent in this regard. Thus, the Employees and FMSS submit that the Town Councillors should be held liable to AHTC for the control failures in AHTC’s System. The Employees and FMSS also submit that any issues on the apportionment of damages should be determined when damages are subsequently assessed.

Finally, the Employees and FMSS highlight a minor issue concerning a consequential order to be made regarding an earlier order made by the Judge in a separate set of proceedings – HC/OS 835/2017 (“OS 835”) – to stay arbitration proceedings between AHTC and FMSS. We address this at [64] below.

Issues

As mentioned at [9] above, AHTC accepts that it did not plead a claim against Ms Lim regarding the award of a new contract to Red-Power, and AHTC confirms that it does not pray for an order in its favour in respect of this claim made by STC. It follows that we hold that Ms Lim is liable only to STC in relation to the award of the contract to Red-Power.

The following remaining issues lie for determination in this case: Regarding the control failures in the System: Did AHTC adequately plead that the Town Councillors breached their duty of skill and care in tort in relation to the control failures in AHTC’s System? If not, should the Town Councillors nevertheless be held liable to AHTC for the control failures in the System? In the alternative, should AHTC be permitted to bring a fresh application to amend its pleadings to include a claim against the Town Councillors for the breach of their duty of skill and care in tort in relation to the control failures of the System? Finally, if the answer to any of the questions at [15(a)] above is in the affirmative, how should the Town Councillors’ liability owed towards AHTC and STC on the control failures issue be apportioned?

Before we address these issues, we first turn to the applicable legal principles.

The legal principles

It is apposite to begin with the law on pleadings. Pleadings form the cornerstone of our civil justice system. They serve at least a dual function. First, pleadings critically define the parameters within which a plaintiff’s claim and a defendant’s defence are mounted. This delineation is crucial in an adversarial system of civil litigation such as ours where “[c]onfrontation and the opportunity for cross-examination is of central significance” (Lee v The Queen (1998) 195 CLR 594 at [32]). The plaintiff has to...