Sun Electric Pte Ltd v Menrva Solutions Pte Ltd

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 07 May 2021
• Court: High Court (Singapore)
• Docket Number: Suit No 200 of 2016 (Assessment of Damages No 6 of 2019)

Sun Electric Pte Ltd and another

and

Menrva Solutions Pte Ltd and another

[2021] SGHC 101

Vinodh Coomaraswamy J

Suit No 200 of 2016 (Assessment of Damages No 6 of 2019)

General Division of the High Court

Civil Procedure — Pleadings — Defendant-in-counterclaim failing to plead defences affecting quantum of damages —Whether defendant-in-counterclaim entitled to raise defences at assessment of damages

Contract — Contractual terms —Common law rectification —Abbreviation defined as one entity —Whether use of abbreviation in payment clause was clear mistake on face of contract —Whether common law rectification restricted to clear mistake on face of contract —Whether broader test in Chartbrook Ltd v Persimmon Homes Ltd[2009] 1 AC 1101 consistent with Evidence Act (Cap 97, 1997 Rev Ed) —Sections 97 and 99 Evidence Act (Cap 97, 1997 Rev Ed)

Contract — Contractual terms —Interpretation —Agreement drafted by lay persons —Abbreviation defined as one entity —Whether abbreviation meant or included another entity

Contract — Contractual terms —Interpretation —Agreement for consultancy services —Clause providing that consultant invest in client or in client's projects —No evidence regarding consultant's hypothetical investments —Whether consultant or client bore burden of proving value of hypothetical investments

Contract — Contractual terms —Interpretation —Reliance on evidence of subsequent conduct to interpret clause on fee structure —Parties treating gains from third-party contract as affecting amount of fees —Whether subsequent conduct assisted interpretation

Equity — Remedies — Rectification —Contract providing fee structure as percentages of payments —Parties knowing that third party would receive payments —Whether common mistake

Held:

(1) Sun Electric was entitled to raise the entity ground at the assessment of damages even though it had not been raised at the trial on liability. The entity ground affected only the quantum of damages that Menrva could recover, not liability: at [19], [21] and [22].

(2) Sun Electric was entitled to raise the entity ground even though it contradicted its position at the trial on liability. A party was entitled to take a position adopting a res judicata even if doing so contradicted its position in the proceedings leading up to the res judicata: at [23] and [24].

(3) Sun Electric's failure to plead the entity ground caused no prejudice to Menrva. Menrva had been granted leave to amend its pleadings to advance an alternative defence that met the entity ground: at [28] and [29].

(4) The contract was drafted by lay persons. As such, it was appropriate to adopt a “common sense approach” to interpreting the contract rather than a technical or legalistic approach that unduly focused on its structure and language. The interrelated commercial and contractual concepts in cl 3 taken as a whole and in context established that the contractual trigger for Menrva's right to receive fees was the receipt of payments by “SE”: at [41] and [42].

(5) The text of the contract provided no basis to read “SE” in cl 3(b) as meaning anything other than Sun Electric. The meaning of the text of cl 3 was so clear that there was no scope for the context to prevail over its meaning. That was so even though the meaning of the text led to the wholly absurd and uncommercial result that Menrva was obliged to provide services to Sun Electric with no possibility of receiving any fees: at [49] and [58].

(6) The first element for common law rectification in East v Pantiles (Plant Hire) Ltd[1982] 2 EGLR 111 (“East v Pantiles”) was not made out. There was no clear mistake on the face of the contract. On the face of cl 3, it was perfectly possible for Sun Electric to receive payments and to pay Menrva fees based on those payments: at [62] and [64].

(7) Menrva was entitled to equitable rectification of “SE” in cll 3(a) and 3(c)–3(e) on the ground of common mistake. The parties negotiated the payment structure in cl 3(b) with a continuing common intention that Menrva would be paid a percentage of the net positive payments received by SEP. The entire agreement clause did not preclude rectification: at [81], [91] and [94].

(8) On the CFD ground, Menrva was entitled to damages without taking into account SEP's gains and losses on the CFDs. Clauses 3(a)–3(d) showed that gains and losses on the CFDs were not part of the “net positive payment”: at [99] to [101].

(9) The evidence that Sun Electric had paid Menrva a percentage of the gain on the first CFD was evidence of subsequent conduct. Assuming the evidence was admissible as an aid to interpreting the contract, it did not assist Sun Electric. The evidence did not support the inference that the parties had intended the phrase “net positive payment” in the contract to include gains and losses on CFDs. There were alternative explanations for their subsequent conduct: at [103], [105] and [107].

(10) Sun Electric's failure to plead the Clause 4 ground caused no prejudice to Menrva. Menrva had had the opportunity to prepare and present its defence on the Clause 4 ground: at [32].

(11) Clause 4 imposed an obligation on Menrva to invest in Sun Electric or its projects. Because only Sun Electric made an assertion about the current value of the investments that Menrva would have made, it was Sun Electric that bore the burden of proving that those investments would now be worthless. Sun Electric adduced no evidence of the value of its projects or of its equity over time. There was therefore no basis on which to assess how much Menrva would have invested under cl 4, let alone to assess what its investments would now be worth: at [112], [115] and [116].

[Observation: In Chartbrook Ltd v Persimmon Homes Ltd[2009] 1 AC 1101, Lord Hoffmann extended the first East v Pantiles element by requiring the court always to consider the instrument's background and context in ascertaining whether there was a clear mistake. Lord Hoffmann's approach blurred the important distinctions between: (a) contractual interpretation; (b) implication of terms in fact; (c) common law rectification; and (d) equitable rectification: at [66] and [68].

In English law, the contextual approach was purely a common law doctrine. It was therefore open to Lord Hoffmann to extend English law as he did. In Singapore, however, the contextual approach had to operate within the constraints of the Evidence Act (Cap 97, 1997 Rev Ed). In narrowly defined situations, ss 97 and 99 of the Evidence Act allowed – and might even be said to require – the court to consider extrinsic evidence of background and context on both East v Pantiles elements. Sections 97 and 99 made extrinsic evidence admissible even if the mistake was not clear on the face of the instrument. It sufficed that the mistake became clear once extrinsic evidence was admitted under s 97 or 99: at [70] to [72] and [77].]

Case(s) referred to

Aijaz v Ramsarup A 1931 O 54 (refd)

Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 (refd)

Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 (refd)

Cold Storage Holdings plc v Overseas Assurance Corp Ltd [1988] 1 SLR(R) 255; [1988] SLR 368 (folld)

DS-Rendite-Fonds Nr 106 VLCC Titan Glory GmbH & Co Tankschiff KG v Titan Maritime SA [2013] All ER (D) 224 (refd)

East v Pantiles (Plant Hire) Ltd [1982] 2 EGLR 111 (refd)

Edwards Jason Glenn v Australia and New Zealand Banking Group Ltd [2012] SGHC 61 (distd)

Emjay Enterprises Pte Ltd v Skylift Consolidator (Pte) Ltd [2006] 2 SLR(R) 268; [2006] 2 SLR 268 (distd)

Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 (refd)

FSHC Group Holdings Ltd v GLAS Trust Corp Ltd [2020] Ch 365; [2020] 2 WLR 429 (refd)

Industrial & Commercial Bank Ltd v PD International Pte Ltd [2003] 1 SLR(R) 382; [2003] 1 SLR 382 (refd)

JJ Huber Ltd v The Private DIY Co Ltd [1995] NPC 102 (refd)

Kok Lee Kuen v Choon Fook Realty Pte Ltd [1996] 3 SLR(R) 182; [1997] 1 SLR 182 (refd)

MCH International Pte Ltd v YG Group Pte Ltd [2019] 2 SLR 837 (refd)

Ng Swee Hua v Auston International Group Ltd [2008] SGHC 241 (distd)

Oxley Consortium Pte Ltd v Geetex Enterprises Singapore (Pte) Ltd [2020] SGHC 235 (folld)

Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193 (refd)

Simpson Marine (SEA) Pte Ltd v Jiacipto Jiaravanon [2019] 1 SLR 696 (refd)

Soon Kok Tiang v DBS Bank Ltd [2011] 2 SLR 716 (refd)

Sun Electric Pte Ltd v Menrva Solutions Pte Ltd [2018] SGHC 264 (refd)

Sun Electric Pte Ltd v Menrva Solutions Pte Ltd [2019] SGCA 51 (refd)

Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71 (refd)

Turf Club Auto Emporium Pte Ltd v Yeo Boong Hua [2018] 2 SLR 655 (folld)

V Nithia v Buthmanaban s/o Vaithilingam [2015] 5 SLR 1422 (folld)

Y.E.S. F&B Group Pte Ltd v Soup Restaurant Singapore Pte Ltd [2015] 5 SLR 1187 (folld)

Yap Son On v Ding Pei Zhen [2017] 1 SLR 219 (folld)

Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029; [2008] 3 SLR 1029 (folld)

Facts

Sun Electric Pte Ltd (“Sun Electric”) had been found liable to Menrva Solutions Pte Ltd (“Menrva”) for breach of contract. Under the contract, Menrva had provided consultancy services regarding activities carried out by Sun Electric's subsidiary, Sun Electric Power Pte Ltd (“SEP”). The contract had been drafted by both parties' directors, who were not legally trained.

Clause 3(b) of the contract prescribed the fees that Sun Electric was to pay Menrva by reference to “net positive payment”. Clause 3(a) referred to “SE” receiving a “net positive payment” from third parties. The contract also defined “SE” to mean “Sun Electric Pte Ltd”. Only SEP, however, received the net positive payments.

Clause 4 of the contract obliged Menrva to invest in Sun Electric's projects or in Sun Electric itself. Neither party adduced evidence as to how much Menrva would have invested or the likely current value of those...