Lucky Realty Co Pte Ltd v HSBC Trustee (Singapore) Ltd

• Court: Court of Appeal (Singapore)
• Judge: Sundaresh Menon CJ
• Judgment Date: 04 December 2015
• Neutral Citation: [2015] SGCA 68
• Citation: [2015] SGCA 68
• Defendant Counsel: Edwin Tong SC, Lee Bik Wei, Lee May Ling and Ang Ann Liang (Allen & Gledhill LLP)
• Published date: 19 January 2017
• Plaintiff Counsel: Julian Tay Wei Loong, April Cheah Wenyi and Kee Shu'en Theodora (Lee & Lee)
• Hearing Date: 19 October 2015
• Docket Number: Civil Appeal No 135 of 2014
• Date: 04 December 2015
• Subject Matter: Contract,Contractual terms,Express terms,Interpretation

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court): Introduction

The present appeal (against the decision of the High Court judge (“the Judge”) in HSBC Trustee (Singapore) Ltd v Lucky Realty Co Pte Ltd [2015] 3 SLR 885 (“the GD”)) was yet another in a series of cases on contractual interpretation which has come before this court in recent times. It underscored, once again, the difficulties which lie in the sphere of application of the law (a point which this court also noted in its recent decision in Y.E.S F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd (formerly known as Soup Restaurant (Causeway Point) Pte Ltd) [2015] 5 SLR 1187 (“YES”) at [2]). Indeed, it was precisely because this court differed from the views of the Judge with respect to the interpretation of a clause of the contract in the relevant context that we allowed the appeal. In essence, whilst the Judge was of the view that the evidence adduced by the lessee (“the Appellant”) with respect to the rent review clause in a lease agreement (“the Contract”) that had been varied between the parties did not relate to a clear or obvious context, we were of the view that the relevant evidence did evince a clear and obvious context that supported the Appellant’s case. We now give the detailed grounds for our decision. However, before proceeding to do so, we should give a brief summary of the applicable principles. These were in fact set out in some detail in YES and therefore need not be rehearsed in extenso in this judgment. Indeed, the parties appeared to be ad idem that these were the applicable principles and, as already mentioned, the principal difficulty lay, rather, in the application of those principles to the rent review clause in the Contract as varied.

The applicable principles

As this court has already observed in YES (at [41]), this court’s decisions in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 (“Zurich Insurance”) and Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal [2013] 4 SLR 193 (“Sembcorp Marine”) “represent the lodestars in the Singapore legal landscape in so far as contractual interpretation is concerned”. Whilst the courts ought to be concerned with both the text and the context, it is important to emphasise that the text of the contractual document ought always to be the first port of call (see also YES at [32]). As we observed in our brief grounds which were delivered in relation to the present appeal, absent the text, the contract cannot be constructed out of context alone. That having been said, it is clear that if the text of the contract is ambiguous, the context is – potentially at least – of signal importance. However, as this court also observed in Zurich Insurance (at [132(d)]), “[t]he extrinsic evidence in question is admissible so long as it is relevant, reasonably available to all the contracting parties and relates to a clear or obvious context” [emphasis added in italics, bold italics and underlined bold italics]. Indeed, as we have already noted, herein lies the nub of the difference in views between the Judge and this court. To reiterate, the Judge was of the view that the relevant evidence did not relate to a clear or obvious context, whereas this court was of a different view altogether.

We should also note that, in YES, this court also considered the situation where the meaning of the text in a contract is plain and unambiguous but would lead to an absurd result (based on the objective evidence available). We were of the view (at [31]) that the court concerned should first ascertain, via a very careful analysis of the text and context, whether the text is indeed plain and unambiguous in the first place. We also observed (ibid) that there might nevertheless be exceptional cases where the text in the contract is so clearly plain and unambiguous that the court is compelled to give effect to the meaning contained therein, notwithstanding that an absurd result would ensue. This would, in the nature of things, be extremely rare (ibid), and would occur only “if the objective evidence clearly bears out a causative connection between the absurd result or consequences on the one hand and the intention of the parties at the time they entered into the contract on the other” (see YES at [32]) [emphasis in original]; this court then proceeded to elaborate upon this last-mentioned point as follows (ibid):

What we mean by this, essentially, is that if the objective evidence demonstrates that the parties had contemplated the absurd result or consequence, the court is not free to disregard this to reach what may seem to it to be a more commercially sensible interpretation of the contract. Avoiding an absurd result is thus one factor (albeit a not unimportant one) which is considered in the entire process of interpretation by the court. Put simply, the court must ascertain, based on all the relevant objective evidence, the intention of the parties at the time they entered into the contract. In this regard, the court should ordinarily start from the working position that the parties did not intend that the term(s) concerned were to produce an absurd result. However, this is only a starting point – and no more. It might, for example, well be the case that the objective evidence demonstrates that the parties were aware of the absurd result that might ensue from the said term(s), but nevertheless proceeded to enter into the contract in question (this was indeed what was, in effect, the finding of the majority of the court in the recent UK Supreme Court decision of Arnold v Britton [2015] 2 WLR 1593 (“Arnold”), which we will consider in a little more detail below). In this last-mentioned situation, the fact that an absurd result might ensue is irrelevant inasmuch as the causative connection referred to above is present. It bears reiterating that what the court cannot do is to ignore and disregard the intention of the parties (based on the objective evidence), thus rewriting the term(s) of the contract for them based on the court’s (subjective) view of what is just and fair by way of looking at an absurd result through the lenses of ex post facto rationalisation when, instead, the parties were, on the objective evidence, perfectly cognisant of the possibility of an absurd result ensuing at the time they entered into the contract (but nevertheless chose to proceed with entry into the said contract). Admittedly, the line between interpreting the terms of a contract and rewriting it is a very fine one, and much will, in the final analysis, depend upon the precise facts and context before the court (as manifested in the objective evidence itself). Finally, it should also never be forgotten that, although the relevant context is also important, the text ought always to be the first port of call for the court (see also the Singapore High Court decision of HSBC Trustee (Singapore) Ltd v Lucky Realty Co Pte Ltd [2015] 3 SLR 885 (“HSBC Trustee”) at [59] (citing the decision of this court in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029 (“Zurich Insurance”) at [57]) as well as per Lord Hope DP in the UK Supreme Court decision in Multi-Link Leisure Developments Ltd v North Lanarkshire Council [2011] 1 All ER 175 (“Multi-Link Leisure Developments”) at [11]). [emphasis in original]

Whilst the fact situation in the present appeal does not relate to contractual text that is plain and unambiguous, an issue that was in fact raised was that the decision arrived at by the Judge would lead to an absurd and uncommercial result. However, given the reasons for our decision in this appeal (which are set out below), this particular issue is irrelevant and therefore not one which we took into account as the basis for our decision.

Finally, we would observe – particularly in relation to the present appeal – that, wherever possible, the court should have regard to all the objective evidence that is relevant to the case. In particular, there should, as far as is possible, be recourse to relevant documentary evidence – especially where (as is the case here) a great number of years have passed. As this court observed in OCBC Capital Investment Asia Ltd v Wong Hua Choon [2012] 4 SLR 1206 (at [41]):

Much emphasis was placed (especially by the Respondent) on the oral testimony given by various witnesses in the court below. Unfortunately, very little of the testimony relied upon by the Respondent was in fact helpful, being neutral at best and either irrelevant or ambiguous at worst. It bears mention that the first port of call for any court in determining the existence of an alleged contract and/or its terms would be the relevant documentary evidence. Where (as in the present case) the issue is whether or not a binding contract exists between the parties, a contemporaneous written record of the evidence is obviously more reliable than a witness’s oral testimony given well after the fact, recollecting what has transpired. Such evidence may be coloured by the onset of subsequent events and the very factual dispute between the parties. In this regard, subjective statements of witnesses alone are, in the nature of things, often unhelpful. Further, where the witnesses themselves are not legally trained, counsel ought not – as the Respondent’s counsel sought to do in oral submissions before this court – to forensically parse the words they use as if they were words in a statute. This is not to state that oral testimony should, ipso facto, be discounted. On the contrary, credible oral testimony can be helpful to the court, especially where (as we shall see below in relation to supporting the Appellant’s case) such testimony is given for the purpose of clarifying the existing documentary evidence. There is, however, no magic formula in determining the appropriate...