Man B and W Diesel S E Asia Pte Ltd and Another v PT Bumi International Tankers and Another Appeal

• Judge: Chao Hick Tin JA
• Judgment Date: 19 May 2004
• Neutral Citation: [2004] SGCA 22
• Citation: [2004] SGCA 22
• Defendant Counsel: Philip Tay Twan Lip (Rajah and Tann)
• Published date: 03 June 2004
• Plaintiff Counsel: N Sreenivasan and Collin Choo (Straits Law Practice LLC) and Charles Lin Ming Khin (Donaldson and Burkinshaw)
• Date: 19 May 2004
• Docket Number: Civil Appeals Nos 75 and 79 of 2003
• Court: Court of Appeal (Singapore)
• Subject Matter: Respondent lost on appeal,Respondent rejected offer,Order 22A r 9(3) Rules of Court (Cap 322, R 5, 1997 Rev Ed),Appellant made offer in settlement of claim at trial,Offer to settle,Civil Procedure,Whether appellant entitled to indemnity costs from date of offer

19 May 2004 Judgment reserved.

Chao Hick Tin JA (delivering the judgment of the court):

1 On 9 March 2004 we delivered a judgment (reported at [2004] 2 SLR 300) allowing an appeal by the appellants-defendants against a decision of the High Court granting damages to the respondent-plaintiff in an action in tort, on account of the fact that an engine supplied by the appellants for use on a vessel of the respondent was defective, thus resulting in the respondent suffering economic losses. We ruled that, in the circumstances of the case, the respondent was not entitled to claim in tort for the economic losses against the appellants.

2 There was also a related appeal which was filed by the respondent who was dissatisfied with the quantum of damages awarded by the judge. In view of our ruling on the defendants’ appeal, it followed that the respondent’s appeal had to be dismissed. The full facts of the case were set out in our earlier judgment and we do not propose to repeat them here.

3 Following our judgment, the appellants’ solicitors wrote to inform this court that on the third day of the trial, 24 April 2002, the appellants made an offer in the prescribed form to pay the respondent the sum of US$1.5m in settlement of its claim. The offer, which was open for acceptance within 14 days, was not accepted.

4 In our judgment, we awarded costs to the appellants in respect of both the appeal as well as the trial below. What the appellants now seek is that, in view of the respondent’s non-acceptance of their offer, they be awarded, pursuant to O 22A r 9 of the Rules of Court (Cap 322, R 5, 1997 Rev Ed), indemnity costs instead of just standard costs.

5 The governing provision for our present purposes is O 22A r 9(3), and it reads:

Where an offer to settle made by a defendant —

(a) is not withdrawn and has not expired before the disposal of the claim in respect of which the offer to settle is made; and

(b) is not accepted by the plaintiff, and the plaintiff obtains judgment not more favourable than the terms of the offer to settle,

the plaintiff is entitled to costs on the standard basis to the date the offer was served and the defendant is entitled to costs on the indemnity basis from that date, unless the Court orders otherwise.

6 The respondent made the following points to argue that the appellants should not be granted indemnity costs:

(a) The offer was not serious and genuine, being substantially less than what the trial judge held to be the damages which the respondent was entitled to.

(b) The offer was made very late, after the trial had commenced. The respondent failed in the claim because this court held that the appellants did not owe the respondent a duty of care, a point which was only raised at the start of the trial when leave to amend the defence was obtained. This court has a wide discretion in the matter and should consider all the circumstances before awarding indemnity costs.

(c) The issue of law in question was a highly controversial one and the court only came to its conclusion after much deliberation. It was a novel point.

(d) Much of the time at trial was spent on establishing the fact that the engine supplied by the appellants was defective and the cause of it.

7 Quite clearly, the court is not obliged to award indemnity costs just because the offer made by one party is more favourable than what the opposing party eventually obtained from the court. This is explicitly spelt out in O 22A r 9(5) which reads:

Without prejudice to paragraphs (1), (2) and (3), where an offer to settle has been made, and notwithstanding anything in the offer to settle, the Court shall have full power to determine by whom and to what extent any costs are to be paid, and the Court may make such a determination upon the application of a party or of its own motion.

and in O 22A r 12 which reads:

Without prejudice to Rules 9 and 10, the Court, in exercising its discretion with respect to costs, may take into account any offer to settle, the date the offer was made, the terms of the offer and the extent to which the plaintiff’s judgment is more favourable than the terms of the offer to settle.

8 In The Endurance 1 [1999] 1 SLR 661, this court, recognising that O 22A was of recent origin, took into account the approaches taken by some Commonwealth countries, where provisions similar to our O 22A exist, eg, Canada and Australia, and held that, generally speaking, the element of compromise should be present in an offer to settle. It said at [43] that “the lack of compromise would be a material consideration in determining whether the plaintiff or the defendant should be penalised with higher costs in cases where there are genuine issues of liability raised”. This is because the rationale behind O 22A is to encourage the speedy termination of litigation by agreement of the parties. The offer to settle should therefore be a serious and genuine offer and not just to entail the payment of costs on an indemnity basis. It should contain in it an element which would induce or facilitate settlement: see Singapore Airlines Ltd v Fujitsu Microelectronics (Malaysia) Sdn Bhd (No 2) [2001] 1 SLR 532 (“SIA v Fujitsu”) at [10]:

Even though the relevant [New South Wales] rules are not identical in wording with ours, we would respectfully agree with those views. In our opinion, for an offer to have the effect contemplated in O 22A r 9, it must contain in it an element which would induce or facilitate settlement. When such an element is missing, then, as held in Data General [see [63] infra], that would be a ground for the court to exercise its discretion to vary the norm relating to costs laid down in r 9.

9 However, we would add one rider to this. Where there is no defence of...