THE SOMEWHAT UNCOMMON LAW OF COMMERCE

• Citation: (2014) 26 SAcLJ 23
• Date: 01 December 2014
• Published date: 01 December 2014

I. Introduction

1 It gives me great pleasure to be here at Lincoln's Inn to deliver this year's COMBAR lecture. As lawyers, we hold membership not just of our own legal systems; we belong also to a global fraternity, and it is in this spirit that I take up this evening's subject. It is a subject which is close to the hearts of both our legal communities, situated as we are in the financial centres of Europe on the one hand and South East Asia on the other. At the same time it is also in the sphere of commerce that the dualism between an international outlook and a domestic rootedness is perhaps at its most visceral. How we choose to structure and propagate our laws of commerce can have an impact on the calculus of economic actors and, consequently, on the behaviour of the markets they transact in.

2 In the age of globalisation this impact has been magnified in both scale and reach. So our subject this evening is not just theoretical — it also impinges on the business end of the law. This is where the law is converted into hard currency, into goods shifting across borders — and, of course, into more or less work for lawyers. To adopt the deliberately broad definition of the foremost thinker about commercial law, Professor Roy Goode, commercial law is that branch of law which is concerned with rights and duties arising from the supply of goods and services in the way of trade.1

3 In looking at this varied area of the law I do not propose to stray from its core source and subject, which is the law of contract. To borrow again from Professor Goode, whose elegant summation cannot be bettered —“commercial law draws for its sustenance on all the great streams of law that together make up the corpus of English jurisprudence, with the law of contract as its core, while equity acts now as its handmaiden, now as the keeper of its conscience”.2 Contract law is so foundational to commercial law simply because contracts are

essential to commerce. Without the certainty or, at least, the security provided by a contract, modern day commerce would not be possible. But how is the understanding of this security likely to differ as borders are crossed?

4 Though our laws and our legal systems share a common heritage — indeed, ours is the progeny of the English system — there are nonetheless divergences in the substance of commercial law between our jurisdictions. It is perhaps no longer surprising that the common law is not quite common after all. What is interesting about some of these divergences though, is their source. To a greater or lesser degree, the influence of European civil law has resulted in the development of new ideas in the English common law.

5 One would expect that such divergences might come at an economic cost. Heterogeneity in commercial law creates friction in the movement of goods and businesses across borders, and seems to swim against the tide of increasing economic integration which has been the story of the post-Cold War world.3

6 I propose this evening to draw out just a few illustrative divergences and then place them within context, so that we might critically evaluate whether this is a problem going forward. More specifically, we might ask whether this is a problem which needs a solution, and what such a solution might look like.

7 I will examine three specific areas of contract law where Singapore has diverged from England — the interpretation and implication of contract terms, remoteness of damage and the duty to act in good faith. In each of these areas, the Singapore courts have felt the tension between our own legal experience and the weight of English case law. As will become evident, there are important differences, but also interesting similarities between us.

II. Setting the context

8 I would like to preface the discussion with a brief survey of Singapore's current legal system. Since the passage of the Application of English Law Act4 in 1993, it has been clear that while English common law continues to have weight and influence in Singapore this is only so far as it is applicable to the circumstances of Singapore and subject to

such modifications as those circumstances may require.5 In the same year, Singapore abolished all appeals to the Privy Council6 and Parliament passed a legislative amendment to constitute a permanent Court of Appeal.7

9 From today's vantage point, I think it is fair to say that although the Singapore legal system continues to have an umbilical relationship with English law, we are growing up on our own terms.8 English law continues to carry persuasive weight and remains extensively cited in our courts;9 on the other hand, there are encouraging signs that our own case law is forming a critical mass.10 Indeed, the emergence of a distinctively Singaporean law of contract can be taken as a bellwether of our progress, this being an area of law where received English authorities were previously taken as cardinal.11 The principal mode of this evening's lecture will consist of looking at what one of our leading textbooks terms as the autochthonous law of contract in Singapore.12

10 While Singapore law has been working through its adolescence, English commercial law has been increasingly shaped by the UK's membership in the European Union (“EU”). The Treaty of Rome which created the European Economic Community was conceived for the express purpose of achieving economic integration through the creation of a common market.13 This project reached a watershed with the creation of a monetary union by the Maastricht Treaty14 and has since been further galvanised by the entry into force of the Lisbon Treaty.15 Despite some recent troubles, the EU, as it stands today, is the pre-eminent model of regional integration in the global economic order. The work of European legislators has been buttressed by a monumental

effort at legal harmonisation led by the European Court of Justice in such early landmark cases as Costa v ENEL16 and Van Gend en Loos17. Following the passage of the European Communities Act in 1972,18 and the decision of the House of Lords in the Factortame case of 1990,19 EU law is now part of the body of commercial law which English courts will have reference to. Under these conditions there can be little room for doubt that English commercial law will gradually take on a more European complexion20 even as London continues to maintain its importance as the preferred venue for international litigation.21

11 The first shades of a similar process are also beginning to emerge in Singapore, with a discernible increase in the number of international litigants coming through our courts. Singapore is also at the forefront of the drive to create an ASEAN Economic Community in 2015, a substantial project that remains on track for completion. Just last month the Prime Minister of India pledged to sign a Free Trade Agreement on services and investment with the ASEAN bloc. This will deepen economic ties between ASEAN and India, and is expected to boost bilateral trade to US$100bn within two years. The crest of economic expansion has been supported by legal change as well. Singapore is leading the ASEAN Integration through Law Project, which seeks to advance the community-building aims of ASEAN through the development of a collective framework of both substantive and procedural legal principles.22 This is an exciting project, and perhaps there will come a day when we can speak of a “Southeast Asian” commercial law in the way one might speak of European commercial law.

12 I do not mean to gaze into the crystal ball. It suffices for present purposes to say that as two separate but similar systems of law in very different parts of the world, Singapore and London are on parallel trajectories. This presents an opportunity for both comparison and commentary, which may yet have some resonance with the harmonisation of commercial law on a grander scale.

III. The interpretation and implication of contract terms

A. Interpretation

13 The law on the interpretation and implication of contract terms in Singapore is set out in a trilogy of decisions from the Court of Appeal. The first case, Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd23 (“Zurich Insurance”), substantively adopted Lord Hoffmann's celebrated restatement in Investors' Compensation Scheme v West Bromwich Building Society24 as the appropriate approach to contractual interpretation in Singapore. Zurich Insurance was a case which concerned the issue of whether fire damage was covered by the terms of an insurance policy, but to reach an answer our apex court had to map out a significant expanse of contract law. The principal result of this endeavour was an affirmation of the contextual approach to contractual interpretation. In the course of doing so the court also found that the parol evidence rule continued to persist in s 94 of the Evidence Act,25 which states that no evidence of an oral agreement shall be admitted as between parties to any agreement which has been reduced into writing for the purpose of varying, adding to, or subtracting from its terms. Zurich Insurance also provides valuable guidance26 on what extrinsic evidence may be admissible to aid in the contextual interpretation of the contract; specifically, it must be evidence which is relevant, reasonably available to all contracting parties and which relates to a clear and obvious context. One might view this as very much aligned with the prevailing approach to contractual interpretation in the wider Commonwealth, and also generally faithful to the English common law.

14 To that extent, Zurich Insurance serves as a useful example to show that where English law has moved in a direction which accords with our judgment of logic, fairness and commercial soundness we have converged even if we were to recognise that the original impetus for such a shift might not be of direct relevance to Singapore. In delivering...