Tan Wei Qiang v Chan Tee Wah and another

• Jurisdiction: Singapore
• Judge: Patrick Tay Wei Sheng
• Judgment Date: 18 January 2019
• Neutral Citation: [2019] SGDC 5
• Court: District Court (Singapore)
• Docket Number: District Court Suit No 2110 of 2018, District Court Summons No 3410 of 2018
• Published date: 23 March 2019
• Year: 2019
• Hearing Date: 27 November 2018,18 December 2018
• Plaintiff Counsel: Nicholas Leow (Netto & Magin LLC)
• Defendant Counsel: Ng Bin Hong (Peter Low & Choo LLC)
• Citation: [2019] SGDC 5

Deputy Registrar Patrick Tay Wei Sheng:

The Defendants are husband and wife. They covenanted by Deed to repay to the Plaintiff monies that their son had borrowed from the Plaintiff. The Deed is silent as to the time for repaying the loan. Six months after the Deed was executed, the Plaintiff began making and eventually made multiple demands for repayment. These demands went unmet. Six months after the first demand (and a month after the last demand), the Plaintiff commenced these proceedings and obtained judgment in default of appearance against the Defendants for the monies under the Deed.

The Husband now applies to set the default judgment aside on the ground that the Deed is invalid. In the alternative, he argues that no monies have become due and payable under the Deed because the Deed entitles the Defendants to repay the monies “at any time … without penalty”.

The Wife is not a party to this summons.

Invalidity of Deed

The Husband appears to contend that the Deed is invalid on four grounds: (a) incapacity on the part of the Wife; (b) unilateral mistake on his part; (c) non est factum on his part; and (d) non-performance of the Deed by the Plaintiff.

Incapacity

The Husband submits that because the Wife had been mentally incapacitated at the time when she entered into the Deed, the Deed should be discharged as against her. The Husband submits further that because he had entered into the Deed jointly (but not severally) with the Wife, this release of the Wife thereunder releases him as well.

The Plaintiff accepts that the Wife had been mentally incapacitated at the time when she entered into the Deed, and acknowledges that the Deed refers to the Defendants “jointly” as “the Debtors”. The Plaintiff argues however that because the Wife has not avoided the Deed and is not even a party to this summons, there is no basis to set the default judgment aside as against the Husband.

A mentally incapacitated person remains bound by a contract into which she has entered unless she proves that her counterparty knew of her incapacity at the time of contracting (Lee Pey Woan, “Capacity” in The Law of Contract in Singapore (Academy Publishing, 2012) (Andrew Phang Boon Leong gen ed) at para 09.021 citing The Imperial Loan Co Ltd v Stone [1892] 1 QB 599 (CA) at 601).

When a person enters into a contract and afterwards alleges that he was so insane at the time that he did not know what he was doing, and proves the allegation, the contract is as binding on him in every respect, whether it is executory or executed, as if he had been sane when he made it, unless he can prove further that the person with whom he contracted knew him to be so insane as not to be capable of understanding what it was about.

Further, the contract is not void ab initio but only voidable at the instance of the mentally incapacitated person (Che Som bte Yip and others v Maha Pte Ltd and others [1989] 2 SLR(R) 60 at [23]).

The Wife is not a party to this summons. Before me, too, there is no evidence that the Wife has voided the Deed. There is also no evidence that the Plaintiff had at the material time actual or constructive knowledge of the mental incapacity of the Wife. In these circumstances, there can for the purpose of this application be no release of the Wife under the Deed. In consequence, there can be no release of the Husband under the Deed on account of such a release of the Wife.

This is sufficient to dispose of the issue of any mental incapacity of the Wife. Nevertheless, since the parties made detailed submissions on the nature of the joint obligation of the Defendants under the Deed, I will examine this briefly.

Joint liability

At common law, the cause of action against joint debtors or joint tortfeasors is unitary and indivisible. A release of a joint debtor thus operates as a discharge of every other joint debtor. This is a rule of some vintage, and has been described by the High Court as the “release rule” (Park Regis Hospitality Management Sdn Bhd v British Malayan Trustees Ltd and others [2014] 1 SLR 1175 (“Park Regis”) at [58] citing Duck v Mayeu [1892] 2 QB 511 at 513):

[A] release granted to one joint tortfeasor, or to one joint debtor, operates as a discharge of the other joint tortfeasor, or the other joint debtor, the reason being that the cause of action, which is one and indivisible, having been released, all persons otherwise liable thereto are consequently released.

In other words, where a claimant is owed a debt by joint debtors, he has only one action even though there are multiple defendants who are liable in that action as joint debtors. And because there is only one action, a release of any one debtor operates as a release of all of the joint debtors (Park Regis at [59]).

That said, there appears to be an alternative basis for the release rule: the old common law principle that a cause of action against two or more joint debtors or joint tortfeasors merges into the first judgment recovered against any one of them even though that judgment remains unsatisfied. This principle has however been abrogated in Singapore and other common law jurisdictions. In Singapore, s 17 of the Civil Law Act (Cap 43, 1999 Rev Ed) (the “CLA”) provides:

Judgment recovered against such person liable in respect of any debt or damage is not a bar to an action, or to the continuance of an action against any other person who is (apart from any such bar) jointly liable with him in respect of the same debt or damage.

Even so, as George Wei J observed in Park Regis at [66], the High Court has suggested that the release rule survives in Singapore, albeit without considering the effect of s 17 of the CLA.

… In Industrial and Commercial Bank Ltd v Li Soon Development Pte Ltd [1993] 3 SLR(R) 518 (“ICB”), Chao Hick Tin J (as he then was) held (at [68]) that it was settled law that if liability of guarantors is joint or joint and several that the release of one without the consent of others will discharge all the guarantors unless there is a sufficient reservation of the creditor’s rights against the other guarantors. More recently, Steven Chong JC (as he then was) in Econ Piling Pte Ltd v Sambo E&C Pte Ltd [2010] 3 SLR 764 (“Econ”) had to decide whether a scheme of arrangement in relation to one joint debtor has the effect of compromising the entire debt with other debtors. The learned judicial commissioner noted that the scheme of arrangement was proposed by the judicial manager. The scheme received the approval from three quarters of Econ’s creditors and was sanctioned by an order of court. In this context the question arose as to whether the discharge of a joint debtor pursuant to a scheme sanctioned by the court is tantamount to accord and satisfaction with the effect of discharging joint debtors. After reviewing the case law, the learned judicial commissioner held that the scheme and its attendant legal consequences owed its efficacy entirely to the order of the court that sanctioned it and was therefore tantamount to a release by operation of law. It was not to be regarded as a release by accord and satisfaction. The learned judicial commissioner added that where a joint debtor’s liability was released by operation of law, there was no need for the creditor to reserve its rights to proceed against the other joint debtors. Econ whilst recognising the common law Release Rule did not consider whether the release rule in Singapore was affected by s 17 of the CLA. The same is true of the earlier decision of Chao J in ICB. …

Ultimately, it is, as held by Wei J in Park Regis, at least “plainly arguable as a matter of law” whether the release rule survives s 17 of the CLA and thereby operates to release the Husband from liability under the Deed to the extent that the incapacity of the Wife releases her from the Deed.

The Plaintiff submits that even if the Deed does not bind the Wife, it continues to bind the Husband because his agreement to execute it was not conditional upon the Wife likewise executing it. In support of this submission, the Plaintiff relies on the decision of the English Court of Appeal in Rabiu and others v Marlbray Ltd [2016] EWCA Civ 476 (“Rabiu”).

In Rabiu, a husband entered into a contract to purchase land on behalf of himself and his wife, jointly and severally, and paid the deposit. He did so without the knowledge or consent of the wife. Subsequently, the husband and the wife sought declarations that they had not entered into enforceable contracts with the seller and claimed the return of the deposit. Gloster LJ held that the contract was valid as between the seller and the husband even though the wife had not effectively executed it. Gloster LJ held (at [65]):

Whether or not a valid contract has come into force as between A and B, both of whom have signed the contract, notwithstanding that contemplated party C has not signed the contract, will depend on the common intention of the parties as may be objectively ascertained from the circumstances surrounding the transaction. Put another way, the issue is whether, objectively, B’s agreement to execute and his execution of the contract was, expressly or impliedly, conditional upon C likewise signing the agreement.

In my view, Rabiu does not assist the Plaintiff. Unlike the liability of the husband in Rabiu, the liability of the Husband to the Plaintiff is only joint but not several as well. And it was the “separate and several...