Projection Pte Ltd v The Tai Ping Insurance Co Ltd

• Judge: Chao Hick Tin JA
• Judgment Date: 19 April 2001
• Neutral Citation: [2001] SGCA 28
• Citation: [2001] SGCA 28
• Defendant Counsel: Low Tiang Hock and Jack Lee Tsen-Ta (Chor Pee & Partners)
• Published date: 19 September 2003
• Plaintiff Counsel: Tan Liam Beng and Yap Pett Chin (Drew & Napier)
• Date: 19 April 2001
• Docket Number: Civil Appeal No 110 of 2000
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether consideration provided for compromise agreement,Continuing negotiations,Consideration of parties' correspondence to determine whether agreement to same terms existed,Application of objective test,Settlement agreement,Whether agreement entered into,Agreement made in compromise of insurance claim,Contract,Formation,Validity of compromise agreement not to be confused with success of claim under insurance policy

(delivering the judgment of the court): This is an appeal from the decision of the High Court dismissing the claim brought by the appellants, Projection Pte Ltd (`PPL`), against the respondents, The Tai Ping Insurance Co Ltd (`Tai Ping`), for the sum of $553,560.98 based on a compromise agreement said to be made between the parties on 31 March 1999. The court in a reserved judgment held that no such agreement was made between them. PPL now appeal against that decision.

The parties

PPL were a construction company and were employed by the Singapore Sports Council (`the Sports Council`) as the main contractors for a proposed sports and recreation centre to be constructed at Jurong East Street 31, Singapore (`the Project`). For the Project, PPL took out a Contractors` All Risks Policy (`the Policy`) with Tai Ping, which was valid from 13 June 1996 to 10 December 1999. PPL, the Sports Council and PPL`s sub-contractors were named as the assured in the Policy. In addition, Tai Ping furnished to the Sports Council on behalf of PPL a performance bond for an amount equivalent to 10% of the contract sum.

The facts

On or about 8 July 1997, while PPL were carrying out the construction work, the retaining wall of the Project collapsed, causing damage to a canal belonging to a third party. PPL gave the requisite notice to Tai Ping and claimed under the Policy the loss occasioned by the damage. No claim, however, was made by the Sports Council. There were two sections in the Policy: Section I pertained to liability for material damage, while Section II pertained to third party liability. On or about 11 July 1997, Cunningham International Pte Ltd (`Cunningham`), a firm of loss adjusters, were appointed by Tai Ping to investigate the damage to the wall and canal.

Thereafter, there appeared to be no significant development in connection with this claim for more than a year since it arose. It is unclear when Cunningham completed their investigation, but only on or about 1 October 1998 did they come up with a quantification of the claim. On that day, they wrote a letter to PPL`s consultants, Francis Teo & Associates, in which they assessed PPL`s claim in the sum of $679,065.95 and gave a breakdown of this figure. They qualified their assessment by stating expressly that it was `subject to the approval of the insurers, policy terms, conditions and exclusions`. A copy of this letter was sent to PPL. The figure was subsequently revised in Cunningham`s `Interim Report No 2` to Tai Ping dated 7 October 1998. They adjusted the claim to $679,066.09.

Notwithstanding the reports of Cunningham, nothing appeared to have been done by Tai Ping in relation to the claim of PPL. Several requests for payment were made by PPL, but no payment was received by them from Tai Ping. In particular, on 26 October 1998, PPL wrote to their brokers, OCW Insurance (Brokers) Pte Ltd (`OCW`) requesting the latter to assist in expediting the payment of the claim by Tai Ping. From time to time, PPL`s director, Mr Ong Poh Pieow (`Mr Ong`) telephoned one Mr Douglas Ong (`Douglas`) of OCW to enquire about the progress of the claim. No reply appeared to have been received from Tai Ping. On 11 November 1998, PPL themselves wrote to Tai Ping asking for payment of the assessed amount or the reasons for the non-payment. Arising from this letter, Douglas eventually informed Mr Ong that Tai Ping were processing the claim. PPL promptly wrote to Tai Ping on 21 November 1998, recording what Douglas had said and stating that they expected to receive the payment within the next few days. Unfortunately, no such payment came.

On or about 2 December 1998, Cunningham in their letter to Tai Ping further adjusted the claim to $523,912.68, `subject to liability being engaged under the policy`. The letter was substantially reproduced in Cunningham`s final report to Tai Ping dated 8 December 1998, in which they assessed the Section I loss (with 15% deductible) at $322,374.58 and the Section II loss at $296,483. In respect of the Section II loss, they took into consideration the report prepared in December 1998 by Harris & Sutherland (Asia) (`H & S`), the professional engineers engaged to investigate the cause of the damage to the canal and the retaining wall, and suggested that `the insured could bear 20% to 30% of the loss` and that `this would be subject to direct negotiation`. The quantification thus stood at $523,912.68 or $553,560.98 depending on whether PPL bore 30% or 20% of the Section II loss. Very soon thereafter, on 9 December 1998, Tai Ping wrote to the brokers, OCW, stating that they would pay PPL $523,912,68 on the claim and that before payment they would need a letter from the Sports Council confirming that they have no objection to the payment to be made to PPL. However, unknown to PPL, the Sports Council had, as early as 19 May 1998, requested Tai Ping to expedite payment of the claim to PPL `in order for the contractors to rectify the damages works as soon as possible to avoid further damages to the surrounding works and the canal lining`.

In response to Tai Ping`s proposal for payment of $523,912.68, PPL wrote to Tai Ping on 18 December 1998, enquiring the reasons for paying a sum which was less than the assessed amount notified to Francis Teo & Associates and requesting for a breakdown of the assessment. Mr Ong also called Douglas several times to press for an early settlement of PPL`s claim. Douglas did not appear to have taken very effective actions or steps in pursuing the claim for PPL. Whatever Douglas might or might not have done, there was clearly no response from Tai Ping to PPL`s letter.

The representatives of the parties then met on 9 March 1999 over lunch for a discussion. PPL were represented by Mr Ong and two other directors, while Tai Ping were represented by their assistant general manager, Mr Richard Li Zheng Ming (`Mr Li`). Douglas of OCW was also present at the meeting. OCW were the agents for PPL. At this meeting, PPL requested Tai Ping to increase the settlement sum of $523,912.68. There was some dispute between the parties as to what precisely transpired at this meeting. But there was no dispute that the representatives of PPL requested Mr Li to increase the amount for a settlement. No agreement was reached at that meeting. Thereafter, sometime at the end of March 1999, Douglas again requested Mr Li to increase the settlement offer and suggested that Tai Ping should adjust the proportion of the loss to be borne by PPL for the Section II claim.

On 31 March 1999, Tai Ping wrote to OCW referring to the previous correspondence and discussion and stating that they agreed to adjust the proportion of the Section II loss from 30% to 20% and that the final sum payable was $535,560.98. We shall revert to this letter in detail in a moment. In response, PPL signed and returned the discharge voucher to Tai Ping under cover of their letter of 8 May 1999, saying that they have no objection to signing the voucher in respect of the payment and that the Sports Council need not sign the discharge voucher on the ground that they were not the claimants but were only the nominee for the receipt of the moneys. In addition, PPL inserted the following words to the voucher: `This full and final settlement shall be limited to the aforesaid incident only.`

Despite repeated reminders and requests, PPL did not receive any payment or response from Tai Ping thereafter. In July 1999, Mr Li informed Mr Ong that Tai Ping had been legally advised to disclaim liability. He offered PPL $300,000 as a goodwill settlement which was rejected. On 25 August 1999, PPL`s solicitors wrote to Tai Ping demanding payment of $553,560.98. In response, Tai Ping wrote to PPL on 31 August 1999 rejecting the claim. Shortly thereafter, PPL commenced legal proceedings against Tai Ping, and on 27 September 1999, Tai Ping`s solicitors wrote to PPL`s solicitors withdrawing any offer of settlement that their clients had made.

PPL`s claim

PPL claimed that a compromise agreement was made between the parties sometime in March 1999. In support, they relied on what transpired at the meeting on 9 March 1999 and on Tai Ping`s letter of 31 March 1999. They claimed that Tai Ping had breached the agreement by failing to pay PPL or the Sports Council the sum of $553,560.98 in full and final settlement of the claim. They averred that the parties met on 9 March 1999 to discuss the settlement sum and agreed on the sum of $553,560.98, or in the alternative that an agreement was concluded on 31 March 1999 with the receipt of Tai Ping`s letter on that date. PPL took the position that the parties had always been trying to settle the claim and were negotiating on the quantum of the loss on which the parties finally reached an agreement on 31 March 1999.

Tai Ping`s defence

In their defence, Tai Ping denied the claim of PPL. They averred that the damage occasioned was due to a design error and under the terms of the Policy they were not liable to indemnify PPL, and in this regard, they relied on the opinion of H & S. With regard to the settlement, Tai Ping averred that, owing to the pressure exerted on them by PPL, they despatched the discharge voucher merely to placate PPL and in anticipation of a possible settlement, pending legal advice and the final reports from Cunningham and H & S. In that respect, there was an assumption common to both parties that any settlement was premised on the ground that Tai Ping were liable to indemnify PPL under the terms of the policy. This assumption turned out to be untrue, and there was therefore a fundamental mistake which rendered the alleged agreement void for want of consideration. Alternatively, Tai Ping averred that there was no agreement made between them and PPL, and that if their letter of 31 March 1999 constituted an offer, that offer was not accepted in accordance with its terms, which required the discharge voucher to be signed by both PPL...