Tiger Airways Pte Ltd v Swissport Singapore Pte Ltd

JudgeJudith Prakash J
Judgment Date06 August 2009
Neutral Citation[2009] SGHC 178
Docket NumberOriginating Summons No 298 of 2009/C
Date06 August 2009
Published date13 August 2009
Plaintiff CounselEdwin Tong and Colin Chow (Allen & Gledhill LLP)
Citation[2009] SGHC 178
Defendant CounselAnthony Lee Hwee Khiam and Pua Lee Siang (Bih Li & Lee)
CourtHigh Court (Singapore)
Subject MatterRules of construction,Whether such clause allowed party to voluntarily cancel its own licence and then terminate contract,Parties were relatively new companies when they entered into contract,Contractual terms,Clause providing for termination if licence was revoked, cancelled or suspended,Admissibility of evidence,Whether such fact could be admitted to interpret contractual term under contextual approach,Contract

6 August 2009

Judith Prakash J:

1 The plaintiff, Tiger Airways Pte Ltd, commenced this action by way of originating summons against the defendant, Swissport Singapore Pte Ltd, alleging breach of contract for wrongful termination of an agreement (the “Agreement”) dated 16 January 2006, between them.

The facts

The Agreement

2 The plaintiff is a low-cost airline that serves a number of destinations from Singapore Changi Airport (“Changi Airport”) and the defendant is a ground handling services provider that used to operate at Changi Airport. Under the Agreement, the defendant contracted to provide the plaintiff with ground handling services at Changi Airport for 5 years, from 26 March 2006 until 25 March 2011.

3 When the parties entered into the Agreement, the defendant held a licence (the “Licence”) to provide ground handling services at Changi Airport. This Licence was granted to the defendant by the Civil Aviation Authority of Singapore (“CAAA”) pursuant to Clause 2 of a Ground Handling Services Agreement (“GHSA”), dated 26 August 2004, between the defendant and CAAA. This Licence allowed the defendant to operate at Changi Airport.

4 However, due to continuing losses amidst the global economic downturn, the defendant decided to exit the Singapore market. It gave notice to CAAS on 15 December 2008 to terminate the GHSA. That notice was accepted by CAAS and it was agreed that the GHSA would be terminated on 31 March 2009, which meant that the Licence would, effectively, also be terminated on 31 March 2009.

5 It was against that background that, on 12 January 2009, the defendant gave the plaintiff notice to terminate the Agreement on 1 April 2009 in reliance of Clause 9.3 of the Agreement (“Clause 9.3”), which reads:

9.3 In the event of Tiger’s or the Handling Company’s permit(s) or licences or other authorisation(s) to conduct its air transportation services, or to perform the Services, as applicable, wholly or in part, being revoked, cancelled or suspended, that party shall notify the other party without delay and either party may terminate the Agreement (or the Services in respect of which the permits, licences or other authorisations have been so revoked, cancelled or suspended), upon the giving to the other party of at least 24 hours written notice.

The dispute and the decision

6 The issue was whether a proper construction of Clause 9.3 allowed the defendant to serve notice to terminate the Agreement after the defendant had effectively terminated its own Licence.

7 Although counsel for the defendant disagreed with the way the issue was framed, it was not disputed that it was the defendant who had requested that the Licence be terminated and that CAAS had acceded to the defendant’s request.

8 Counsel for the plaintiff maintained that the defendant was not entitled to terminate the Agreement because Clause 9.3 did not apply to a situation where the licence was voluntarily terminated by the holder of the licence itself.

9 Counsel for the defendant contended that Clause 9.3 was not concerned with the reasons why or the circumstances in which the licence was cancelled. It was argued that Clause 9.3 was an “exit” clause that gave either party the right to terminate the Agreement unilaterally.

10 I accepted the plaintiff’s interpretation of Clause 9.3 as correct. I also agreed that the Licence was, in substance voluntarily terminated by the defendant. Therefore, I ordered that the defendant pay damages for breach of the Agreement, and that the damages, if any, be assessed by the Registrar. I now set out the reasons for my decision.

The law

11 The law in the area of the interpretation and construction of contracts has received a fair bit of attention lately, and was comprehensively examined in the recent Court of Appeal decision of Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029 (“Zurich Insurance”).

12 As both parties urged this court to consider the surrounding circumstances and the object of the Agreement to advance their respective interpretations of Clause 9.3, it is necessary for me to set out the law in Singapore regarding the admissibility of extrinsic evidence when interpreting and construing contractual documents.

13 The Court of Appeal summarised the contextual approach to extrinsic evidence (Zurich Insurance at [132]):

132 To summarise, the approach adopted in Singapore to the admissibility of extrinsic evidence to affect written contracts is a pragmatic and principled one. The main features of this approach are as follows:

(a) A court should take into account the essence and attributes of the document being examined. The court’s treatment of extrinsic evidence at various stages of the analytical process may differ depending on the nature of the document. In general, the court ought to be more reluctant to allow extrinsic evidence to affect standard form contracts and commercial documents (see [110] above).

(b) If the court is satisfied that the parties intended to embody their entire agreement in a written contract, no extrinsic evidence is admissible to contradict, vary, add to, or subtract from its terms (see ss 93–94 of the Evidence Act). In determining whether the parties so intended, our courts may look at extrinsic evidence and apply the normal objective test, subject to a rebuttable presumption that a contract which is complete on its face was intended to contain all the terms of the parties’ agreement (see [40] above). In other words, where a contract is complete on its face, the language of the contract constitutes prima facie proof of the parties’ intentions.

(c) Extrinsic evidence is admissible under proviso (f) to s 94 to aid in the interpretation of the written words. Our courts now adopt, via this proviso, the modern contextual approach to interpretation, in line with the developments in England in this area of the law to date. Crucially, ambiguity is not a prerequisite for the admissibility of extrinsic evidence under proviso (f) to s 94 (see [114]–[120] above).

(d) The extrinsic evidence in question is admissible so long as it is relevant, reasonably available to all the contracting parties and relates to a clear or obvious context (see [125] and [128]–[129] above). However, the principle of objectively ascertaining contractual intention(s) remains paramount. Thus, the extrinsic evidence must always go towards proof of what the parties, from an objective viewpoint, ultimately agreed upon. Further, where extrinsic evidence in the form of prior negotiations and subsequent conduct is concerned, we find the views expressed in McMeel’s article ([62] supra) and Nicholls’ article ([62] supra) persuasive. For this reason, there should be no absolute or rigid prohibition against evidence of previous negotiations or subsequent conduct, although, in the normal case, such evidence is likely to be inadmissible for non-compliance with the requirements set out at [125] and [128]–[129] above. (We should add that the relevance of subsequent conduct remains a controversial and evolving topic that will require more extensive scrutiny by this court at a more appropriate juncture.) Declarations of subjective intent remain inadmissible except for the purpose of giving meaning to terms which have been determined to be latently ambiguous (see [50] above; see also sub-para (e) below).

(e) In some cases, the extrinsic evidence in question leads to possible alternative interpretations of the written words (ie, the court determines that latent ambiguity exists). A court may give effect to these alternative interpretations, always bearing in mind s 94 of the Evidence Act. In arriving at the ultimate interpretation of the words to be construed, the court may take into account subjective declarations of intent (see [50] above). Furthermore, the normal canons of interpretation apply in conjunction with the relevant provisions of the Evidence Act, ie, ss 95–100 (see [75]–[80] and [131] above).

(f) A court should always be careful to ensure that extrinsic evidence is used to explain and illuminate the written words, and not to contradict or vary them. Where the court concludes that the parties have used the wrong words, rectification may be a more appropriate remedy (see [123] above).

The requirements for admissibility of extrinsic evidence

14 The parol evidence rule lives on in s 94 of the Evidence Act (Cap 97, 1997 Rev Ed). However, the parol evidence rule only operates where the contract was intended by the parties to contain all the terms of the contract. If the contract is one to which the parol evidence applies, then no extrinsic evidence is admissible to contradict, vary, add to or subtract from a contract (Zurich Insurance at [111] –[113]).

15 Notwithstanding the parol evidence rule, extrinsic evidence may still be admissible for the purpose of interpreting a contract (Zurich Insurance at [122]):

122 One qualification to our endorsement of the contextual approach, must, however, be made. In the light of the continued robustness of the parol evidence rule in our law, the courts must remain ever vigilant to ensure that, in interpreting a contract, extrinsic evidence is only employed to illuminate the contractual language and not as a pretext to contradict or vary it. The courts are allowed to depart from the plain and ordinary meaning of the contract to some extent. The very recognition that surrounding circumstances may create ambiguity about the language used in a contract involves acceptance that words do not have fixed and clearly delineated meanings. Rather, words are sometimes penumbral; the context of the contract breaks down the rigidly-defined boundaries of meaning, introduces hues and shades, and defines the contours and limits of the penumbra. Thus, even in its ostensibly conservative reasoning in Citicorp Investment Bank (Singapore) ([82] supra), the Court of Appeal only required that the meaning imputed by the court be one...

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