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  • WSG Nimbus Pte Ltd v Board of Control for Cricket in Sri Lanka[2002] 3 SLR 603; [2002] SGHC 104
    taken advantage of it as the decision was against him he was bound by it and it became his duty to appear in the action and as he chose not to appear and to defend the action he must abide by the consequences which follow from his not having done so The course adopted by the defendant s advocate on March 17 was either a qualified appearance or an unqualified appearance If it can be regarded as a qualified appearance it was an appearance for the purpose of getting a decision of the court on the question whether the defendant was bound by the jurisdiction of the court The decision was against him and thereafter it was not open to the defendant to say that he was not bound The doctrine applicable to these cases is that if the defendant has placed himself in such a position that it has become his duty to obey the judgment of the foreign court then the judgment is enforceable against him in this country see Schibsby v Westenholz LR 6 QB 155 I think that in this case the defendant did submit himself to the jurisdiction of the court of the Isle of Man and therefore it was his duty to obey the judgment 41 Bankes LJ was of the view that as the defendant had appealed to the Manx court to relieve him from a liability which the plaintiff sought to place upon him this imposed an obligation on him to comply with the decision of that court even if it should go against him He said this at p 591 the principle underlying the case of a person resident in the foreign country or of a person who has agreed to submit to the jurisdiction of its courts applies equally to the case of a person who appeals at a preliminary stage to the foreign court to relieve him from an obligation which the plaintiff by means of the action seeks to put upon him In Carrick v Hancock 1895 12 Times LR 59 it was held that the fact that the residence of the defendant in the foreign country was merely temporary was not sufficient to oust the jurisdiction of the courts of that country over him Mr Arthur Cohen in arguing that case said that as a man would be protected from being robbed while passing through a foreign country so also he was liable to the jurisdiction of its courts and Lord Russell of Killowen CJ in giving judgment said that in his opinion the duty of allegiance was correlative to the protection given by a State to any person within its territory This relationship and its inherent rights depended upon the fact of the person being within its territory It seemed to him that the question of the time the person was actually on the territory was wholly immaterial It seems to me that if the duty of allegiance exists in a case like that where a mere temporary protection of the law of the foreign court is enjoyed the case is far stronger when a defendant actually appeals to a foreign court to relieve him from a liability which the plaintiff by his action seeks to place upon him The fact that the defendant has sought the protection of the court imposes upon him an obligation to obey the judgment of the court if it should happen that it is given against him It is in my opinion an entire misconception of the principle applicable to these cases to say that there is a voluntary submission to the jurisdiction of a foreign court only when the defendant by appearing in the action in the technical sense has consented to the jurisdiction 42 Bankes LJ said that t he precise point in this case does not seem to have arisen for decision previously at p 590 And Pickford LJ commented on the difficulty of the issue before them saying at p 589 I do not think the case is an easy one to decide 43 Harris v Taylor supra was considered by a later Court of Appeal in Henry v Geoprosco which involved a Canadian plaintiff resident in Alberta The defendant company was incorporated in Jersey and had its head office in London but had no branch or assets in Canada The plaintiff entered into a service agreement with the defendants in Canada that was governed by English law and had an arbitration clause When the defendant dismissed the plaintiff summarily the latter commenced an action in the Supreme Court of Alberta for wrongful dismissal The plaintiff obtained leave to serve the statement of claim on the defendants outside the jurisdiction and this was effected in Jersey The defendants applied by motion to the Alberta court to 1 set aside the service of the statement of claim and 2 alternatively stay the action by reason of the existence of the arbitration clause The defendants forwarded three grounds for setting aside the statement of claim a the first ground was one that eventually became irrelevant b the second ground was that the plaintiff s affidavit seeking leave of court to serve out of the jurisdiction was defective and c the third was that the Alberta court was not the forum conveniens The defendants motion was refused and their subsequent appeal dismissed Thereafter the defendants took no further part in the Alberta proceedings Roskill LJ who delivered the judgment of the court noted the following features of the case at p 732 It is to be observed that at no time was it argued for the defendants that the Supreme Court of Alberta had no jurisdiction to entertain the action It seems plain that such an argument would have failed having regard to the clear terms of r 30 of the Rules of the Supreme Court of Alberta to which we have referred This was no doubt the reason why no such argument was advanced Grounds 2 and 3 above referred to in effect invited the Supreme Court to exercise its discretion not to allow service to stand The application for a stay because of the arbitration clause was expanded in the notice of appeal to the Court of Appeal of Alberta to allege that the clause was a Scott v Avery clause As a matter of English law this last submission was plainly untenable upon the true construction of that clause 44 Roskill LJ observed that the decision in Harris v Taylor supra had been much criticised in particular by the editors of Dicey Morris The Conflict of Laws 9th Ed 1973 and embarked on a detailed consideration of that judgment in order to ascertain precisely what that case decided at p 736 After setting out the facts of that action including an examination of the first instance decision of Bray J and the judgments of the members of the Court of Appeal Roskill LJ pointed out five salient points of the case It seems to us of crucial importance when considering the ratio decidendi of Harris v Taylor to observe first that the Isle of Man High Court had by its own local law jurisdiction over the defendant secondly that that court had a discretion whether or not to exercise that jurisdiction over the defendant thirdly that that court having heard a plea by the defendant that it could not and should not do so decided both that it could and should exercise that jurisdiction fourthly that it was not argued in the English action that that decision was in any way wrong by the local law and fifthly that the defendant having voluntarily invited the Isle of Man High Court by the appearance which he made to adjudicate upon his submission that that jurisdiction of that court could not and should not be exercised over him and having lost had voluntarily submitted to the jurisdiction of that court so that thereafter the defendant could not be heard to say that that court did not have jurisdiction to adjudicate upon the entirety of the dispute between him and the plaintiff 45 Roskill LJ then examined the line of authorities leading up to Harris v Taylor supra and concluded that they justify three propositions at p 746 emphasis added 1 The English courts will not enforce the judgment of a foreign court against a defendant who does not reside within the jurisdiction of that court has no assets within that jurisdiction and does not appear before that court even though that court by its own local law has jurisdiction over him 2 English courts will not enforce the judgment of a foreign court against a defendant who although he does not reside within the jurisdiction of that court has assets within that jurisdiction and appears before that court solely to preserve those assets which have been seized by that court 3 The English courts will enforce the judgment of a foreign court against a defendant over whom that court has jurisdiction by its own local law even though it does not possess such jurisdiction according to the English rules of conflict of laws if that defendant voluntarily appears before that foreign court to invite that court in its discretion not to exercise the jurisdiction which it has under its own local law 46 Roskill LJ pointed out that there was no decision that specifically held that an appearance in a foreign court solely to protest against its jurisdiction was a voluntary submission He pointed out at p 747 that in Harris v Taylor the defendant went much further than protesting against the jurisdiction It is plain that he was also inviting the Isle of Man High Court not to exercise the discretionary jurisdiction which it undoubtedly possessed under its own local law to allow the order for service out of the jurisdiction to stand a submission which by implication accepted that there was jurisdiction in that court which it was entitled to exercise if it thought fit to do so 47 Roskill LJ concluded that Harris v Taylor supra did not stand for the proposition that an appearance solely to protest against the jurisdiction of a foreign court is a voluntary submission to that court He pointed out that there was authority that an appearance before an arbitrator solely to protest his jurisdiction was not a submission to it The judge said that the cases in fact go further than that and a party can participate in the entire arbitration subject to the protest as to jurisdiction However the distinction could lie in the fact that arbitration was consensual compared to the compulsory jurisdiction of a court Roskill LJ said as follows at p 748 Harris v Taylor must we think therefore be taken as deciding that whatever the position may be in relation to submission to the jurisdiction in arbitrations that position has no direct application to the question of voluntary submission to the jurisdiction of a foreign court It is not open to this court now to hold otherwise The distinction may lie in the fact that whereas an arbitrator s jurisdiction is always wholly consensual in the foreign judgment cases such as Harris v Taylor the foreign court had compulsory jurisdiction by its own local law and it was within the discretion of that court whether or not to exercise that jurisdiction If therefore a defendant enters a conditional appearance or takes some other comparable step he is thereby conditionally agreeing to submit to that jurisdiction If his application to set aside service then fails that condition is fulfilled But in the arbitration cases there is no such conditional submission 48 As the case before the court in Henry v Geoprosco was not one where the defendants had appeared in the Alberta courts solely to protest the jurisdiction Roskill LJ said that the Court of Appeal was not deciding that an appearance solely to protest against the jurisdiction is without more a voluntary submission But at p 748 we do think that the authorities compel this court to say that if such a protest takes the form of or is coupled with what in England would be a conditional appearance and an application to set aside an order for service out of the jurisdiction and that application then fails the entry of that conditional appearance which then becomes unconditional is a voluntary submission to the jurisdiction of the foreign court 49 As alluded to by Roskill LJ the decisions in Harris v Taylor and Henry v Geoprosco have been severely criticised by academic writers Denning LJ had commented as follows in Re Dulles Settlement No 2 1951 Ch 842 at 850 I cannot see how anyone can fairly say that a man has voluntarily submitted to the jurisdiction of a court when he has all the time been vigorously protesting that it has no jurisdiction If he does nothing and lets judgment go against him in default of appearance he clearly does not submit to the jurisdiction What difference in principle does it make if he does not merely do nothing but actually goes to the court and protests that it has no jurisdiction I can see no distinction at all I quite agree of course that if he fights the case not only on the jurisdiction but also on the merits he must then be taken to have submitted to the jurisdiction because he is then inviting the court to decide in his favour on the merits and he cannot be allowed at one and the same time to say that he will accept the decision on the merits if it is favourable to him and will not submit to it if it is unfavourable But when he only appears with the sole object of protesting against the jurisdiction I do not think that he can be said to submit to the jurisdiction 50 Indeed the English position has since been changed by legislation But there is no similar legislation in Singapore and the parties agree that the common law position applies The plaintiffs submit that the rule in Henry v Geoprosco has not been adopted in any decision of the Singapore courts and that I should not adopt it because it is based on an application of the rule in Harris v Taylor supra a decision that the English courts themselves have refused to apply in two subsequent decisions ie Re Dulles Settlement No 2 and NV Daarnhouwer Co v Boulos 1968 2 Lloyd s Rep 259 However the plaintiffs submit that even if this rule is adopted on the facts of the present case the plaintiffs had not asked the Colombo High Court to exercise any jurisdiction but had only raised the issue of its lack of jurisdiction in view of the existence of the arbitration clause On the view that I take in relation to this question I find that it is not necessary for me to enter into a consideration as to whether the rule in Henry v Geoprosco should or should not be adopted in Singapore I will proceed on the basis that it is the law 51 In Henry v Geoprosco Roskill LJ said that in determining whether a defendant had voluntarily submitted to the jurisdiction at p 748 it must depend in each case upon what it was that the defendant did or refrained from doing in relation to the jurisdiction of the foreign court On that note I note that what the plaintiffs did in the proceedings in the Colombo High Court was to take out a motion to raise the plaintiffs objection to it exercising jurisdiction in the second action The motion is on the following terms the defendant wishes to bring to the notice of Your Honour s court that the defendant objects to Your Honour s court exercising jurisdiction over this matter in terms of s 5 of the Arbitration Act No 11 of 1995 This is in accordance with the scheme under s 5 of the Sri Lankan Arbitration Act which provides as follows Where a party to an arbitration agreement institutes legal proceedings in a court against another party to such agreement in respect of a matter agreed to be submitted for arbitration under such agreement the court shall have no jurisdiction to hear and determine such matter if the other party objects to the court exercising jurisdiction in respect of such matter 52 This provision does not operate by giving the court a power to stay proceedings in favour of arbitration Instead it provides that the court shall have no jurisdiction over the proceedings if the other party objects to the court exercising jurisdiction Hence once an objection is made by operation of s 5 the Colombo High Court would have no jurisdiction over the matter It is essential to note that if the plaintiffs do not make this objection then it would appear that the Colombo High Court would have jurisdiction at the very least the plaintiffs could be taken to have waived their right to object Only by making an objection to the court exercising jurisdiction in respect of the proceedings can the plaintiffs deprive it of jurisdiction Furthermore although the plaintiffs have no presence or assets in Sri Lanka they were faced with a purported termination by the defendants of the MRA the subject matter of which were inter alia broadcasting rights to Test Matches played by the Sri Lankan cricket team In the circumstances they had an interest to ensure that the Colombo High Court did not assume jurisdiction which is in the nature of having assets within the jurisdiction 53 These circumstances are therefore quite removed from those in Harris v Taylor supra where by Manx law if the defendant there had done nothing the plaintiff could not have enforced the judgment against him in the Isle of Man because he had no assets there nor in England because the jurisdiction of the Manx court would not have been recognised The plaintiffs had not participated in the proceedings apart from making the objection and submitting that this objection was valid The defendants argue that by such participation the plaintiffs had submitted to the jurisdiction of the Colombo High Court to determine its jurisdiction The House of Lords had in the Williams Glyn s Bank case supra pronounced the existence of such jurisdiction However as explained above that case involved an application for a stay in which the court would have to exercise its discretion whereas the present case involves the making of an objection which would operate to deprive the Colombo High Court of its jurisdiction if an arbitration agreement existed 54 As I have said above the defendants argument based on the dual jurisdiction concept is attractive certainly from a conceptual point of view However it is possible to take an overly theoretical approach to this question and as a consequence lose sight of the woods for the trees In my view that is the danger with the defendants approach This court has to bear in mind that cases of this nature involve real people making business decisions in their endeavour to create wealth for themselves and their employers For my part I would prefer the common sense approach of Denning LJ in Re Dulles Settlement No 2 supra and hold that the true question is whether in raising the objection before the Colombo High Court that it had no jurisdiction over the matter by virtue of s 5 of the Sri Lankan Arbitration Act the plaintiffs had taken a step in the proceedings which necessarily involved waiving their objection to the jurisdiction When posed in that manner the answer is obviously in the negative and I so hold Issues not the same 55 The plaintiffs submit that the questions decided by the Colombo High Court are not similar to the issues that this court has to decide The Colombo High Court had decided that cl 19 of the MRA is not an arbitration agreement within the meaning of s 5 of the Sri Lankan Arbitration Act But before me they submit the question is whether cl 19 is an arbitration agreement within the meaning of s 2 of the Act which adopts the definition in art 7 of the Model Law 56 However I note that the definition of that term in s 50 1 of the Sri Lanka Arbitration Act is on similar terms as follows Arbitration Agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not This is not surprising as the Sri Lankan Act was enacted in 1995 inter alia to give effect to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards the New York Convention as its long title states 57 The plaintiffs submit that the Colombo High Court would apply Sri Lankan law in deciding the issue whereas this court would apply Singapore law This is certainly an interesting argument However this submission was made virtually at the last minute of the last day of submissions and there was not only no opportunity for counsel for the defendants to respond to this the plaintiffs counsel did not have time to develop the argument Ordinarily I would have given the parties an opportunity to make full submissions However a decision is required rather urgently because the arbitrators have fixed the matter for hearing in late May 2002 In the circumstances and in view of the position I have taken on the remaining issues I need not make a finding on this point Public policy 58 The plaintiffs submit that even if they are deemed to have submitted to the jurisdiction the order of the Colombo High Court should not be recognised in Singapore on two grounds 1 the defendants had proceeded with the action in the Colombo High Court with notice and in breach of the anti suit injunction and 2 the order of the Colombo High Court was made without regard to the treaty obligations of Sri Lanka under the New York Convention 59 The plaintiffs point out that following the grant of the anti suit injunction on 29 October 2001 at the adjourned hearing of the plaintiffs objection motion in the Colombo High Court the plaintiffs drew the court s attention to those injunctions The learned judge there had stated that it was for the defendants to decide if they would continue with the second action in view of the injunction Notwithstanding this the defendants elected to proceed The plaintiffs submit that the defendants having proceeded with the second action in breach of an injunction of this Court which they had notice of it would be contrary to public policy to recognise any order made under the second action 60 The plaintiffs refer to these passages in the following texts 1 Cheshire North Private International Law 13th Ed at p 446 No action is sustainable on a foreign judgment which is contrary to the English principles of public policy 2 Volume 8 1 Halsbury s Laws of England 4th Ed Reissue para 1009 Judgment contrary to public policy A foreign judgment will not be recognised or enforced in England if its recognition or É enforcement would be contrary to public policy 3 Dicey Morris The Conflict of Laws 13th Ed Vol 1 at para 14 145 It will be contrary to public policy to recognise or enforce a judgment which has been obtained in disobedience of an injunction not to proceed with the action in a foreign court 61 The plaintiffs also cite Philip Alexander Securities and Futures v Bamberger CA Civil Division Transcript 12 July 1996 The respondents there had commenced proceedings in German courts against the appellants despite the existence of arbitration clauses in the contracts providing for arbitration in London In each case the appellants contested the proceedings on the basis that there was a binding arbitration agreement On the appellants application the English court granted interim anti suit injunctions against the respondents The respondents continued to prosecute their claims despite having notice of the injunctions and obtained judgments from the German courts The English Court of Appeal approved the following statement of the judge at first instance It would seem to me prima facie that if someone proceeds in breach of and with notice of an injunction granted by the English Court to obtain judgments abroad those judgments should not as a matter of public policy be recognised in the United Kingdom 62 In the present case the defendants submit that the plaintiffs themselves had commenced the present action in breach of the order of the Colombo High Court obtained by the defendants on 16 October 2001 enjoining the plaintiffs from preventing the defendants from or interfering with the defendants negotiating with or entering into contracts with any party in respect of matters covered by the MRA Therefore the injunctions obtained in these proceedings are similarly tainted On the plaintiffs own argument the Sri Lankan Court when it heard the plaintiffs own application seeking the Sri Lankan Court s determination of its own jurisdiction was bound not to recognise the injunctions issued by this court as the plaintiffs had obtained it in breach of an order of the Sri Lankan Court The defendants say that this distinction is in itself sufficient to take the present case out of the authority of Philip Alexander Securities and Futures v Bamberger They point out that the anti suit injunctions in Philip Alexander Securities and Futures v Bamberger were not obtained in breach of an injunction of the foreign court 63 The defendants also point out that Philip Alexander Securities and Futures v Bamberger is of limited authority because although the court had stated this principle it had refused to grant the declarations sought by the plaintiff that certain German judgments obtained against it in breach of English anti suit injunctions were not to be recognised or enforced as a matter of English law The Court of Appeal held that it was open to the judge at first instance to decline to make the matter res judicata but leave it open to the German plaintiffs to seek to enforce their judgment in England 64 However the plaintiffs point out that the present injunctions were obtained on 29 October and the defendants notified immediately but they had only taken out this summons on 22 January 2002 They point out that the proper course of action on the part of the defendants would have been to apply to adjourn the second action and take out this application to obtain a discharge before resuming it Instead they had chosen to ignore it taken out judgment and then come to this court almost three months later 65 In my view I cannot ignore the actions of the defendants They were aware of the anti suit injunction and chose to ignore it By virtue of the MRA they had agreed to submit disputes to arbitration in Singapore upon election by any party and the plaintiffs have so elected In the circumstances it would be manifestly against public policy to give recognition to the foreign judgment at the behest of the defendants who have procured it in breach of an order emanating from this court Urgency 66 The plaintiffs application was made pursuant to s 12 6 of the Act Such an application is governed by O 69A r 3 1 c of the Rules of Court which provides that it is to be made to a judge in chambers or the registrar The defendants initially challenge the procedure by which the plaintiffs took out this application but have since abandoned it However the application was made ex parte under O 69A r 3 3 which provides as follows Where the case is one of urgency such application may be made ex parte on such terms as the Court thinks fit The defendants submit that the plaintiffs have not shown that the application was urgent and therefore they were not entitled to make the application ex parte 67 The defendants submission is as follows The second action was commenced on 16 October 2001 and the plaintiffs were aware from 17 October that fresh tenders were invited which would close on 25 October The plaintiffs were also aware of the second action at the very latest on 19 October 2001 when they appointed solicitors and took objection to the exercise of jurisdiction by the Colombo High Court On that day the plaintiffs issued the Notice of Arbitration On and from 19 to 24 October the plaintiffs did nothing in Singapore to restrain the defendants 1 from continuing with the second action In fact the plaintiffs had actively participated in the second action by asking the Colombo High Court to decide on its own jurisdiction and participating fully in the hearings on that issue 2 from entering into a fresh contract covering the same subject matter as the MRA 68 On 24 October the deadline for the tenders was extended to 29 October Between 24 and 29 October the plaintiffs again did nothing in Singapore to restrain the defendants from proceeding with second action or to prevent the defendants from entering into a fresh contract It was only on 29 October that the plaintiffs finally took out this action However that resort was not had on the basis that the Colombo High Court was proceeding against the will of the plaintiffs to determine the question of its own jurisdiction The defendants submitted that from the first affidavit of David Mallinson filed in support of the plaintiffs action the plaintiffs had resorted to the Singapore Court on 29 October 2001 for the purpose of maintaining the status quo until the Colombo High Court had had an opportunity to rule on the issue of its own jurisdiction It was clear say the defendants that the urgency on 29 October 2001 arose from the fact that the plaintiffs realised that they would not be able to get a decision from the Colombo High Court on the issue of the court s own jurisdiction before noon on 29 October 2001 But this was entirely of the plaintiffs own making because they had ample time since 19 October to take the steps which they belatedly took as a matter of urgency before this court on 29 October 2001 The defendants argue that this urgency was entirely manufactured and insufficient to bring the plaintiffs application within O 69A r 3 3 69 Mallinson had stated the following as the reasons for the urgency at paras 34 36 of his first affidavit 34 Given that no ruling on WSG Nimbus Application can be obtained by 12 noon 29 October 2001 and prior to the closing of BCCSL s tender exercise WSG Nimbus wrote to BCCSL on 26 October 2001 on the following terms It has been and remains our position that the Sri Lankan court does not have jurisdiction to hear any dispute between the parties relating to the Master Rights Agreement and or the Terms of Settlement and further that you have brought the proceedings in HC Civil Case No 246 2001 in Sri Lanka in breach of cl 19 of the Master Rights Agreement Unless we receive confirmation from you by 12 noon 27 October 2001 that you will not enter into any contract s or commitment s with any third party parties in any way dealing with the rights forming the subject matter of the Master Rights Agreement we will have no other option but to institute such proceedings in Singapore as may be necessary so as to protect our rights in aid of the pending arbitration proceedings Please let us know within the next twenty four 24 hours hereof whether you wish to be heard in any such proceedings and if so the name s and contact details of your representative s in Singapore 35 By a letter dated 27 October 2001 to WSG Nimbus BCCSL responded thus We re iterate that the Master Rights Agreement has ceased to operate and that the courts in Singapore and the proposed Arbitral Tribunal not yet constituted has no jurisdiction to issue any order against us and we will not be bound by any such order We still have time to reply to your letter of reference to arbitration dated 19 October 2001 As you are no doubt aware we have no representative whatsoever in Singapore We will refer this matter on Monday to our lawyers for necessary action inclusive of whether you could be charged for contempt of court It bears mention that BCCSL failed and or refused to confirm as requested by WSG Nimbus that it would not enter into any contract s or commitment s with any third party parties in respect of the commercial rights 36 In light of the oppressive and vexatious manner with which BCCSL has conducted itself in instituting both the first action and the second action as well as in the procurement of both the first enjoining order and the second enjoining order there is a real risk that if the application herein was made inter partes or with notice to BCCSL BCCSL would procure an injunction from the Colombo High Court restraining WSG Nimbus from instituting any legal proceeding to enforce the arbitration agreement and or in aid of the arbitration This would frustrate the very purpose and intent behind the arbitration agreement that BCCSL had consensually entered into 70 It is clear from Mallinson s affidavit that the reason for the urgency was because the defendants had refused to confirm that they would not deal with the rights the subject of the MRA The extended deadline for submission of tenders was 29 October on which date there was the possibility of a new contract being awarded Further in his fourth affidavit Mallinson had explained that up until 26 October the parties were engaged in negotiations to resolve the dispute He was constrained not to disclose this fact as they were conducted without prejudice However since the defendants had made reference to it in the affidavits filed on their behalf he felt he had to set the record straight 71 From the matters disclosed in the affidavits I am satisfied that the plaintiffs application was sufficiently urgent and fell within the ambit of O 69A r 3 3 Anti suit injunction 72 As I have determined that cl 19 is an arbitration agreement the defendants become subject to the jurisdiction of this court The defendants submit that even so the anti suit injunction should not be granted on the ground that it does not fall within s 12 6 of the Act read with s 12 1 g These provisions state as follows 12 1 Without prejudice to the powers set out in any other provision of this Act and in the Model Law an arbitral tribunal shall have powers to make orders or give directions to any party for a security for costs b discovery of documents and interrogatories c giving of evidence by affidavit d the preservation interim custody or sale of any property which is or forms part of the subject matter of the dispute da samples to be taken from or any observation to be made of or experiment conducted upon any property which is or forms part of the subject matter of the dispute db the preservation and interim custody of any evidence for the purposes of the proceedings e securing the amount in dispute f ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party and g an interim injunction or any other interim measure 6 The High Court or a Judge thereof shall have for the purpose of and in relation to an

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  • Hong Pian Tee v Les Placements Germain Gauthier Inc[2002] 2 SLR 81; [2002] SGCA 17
    to defend would be refused if it was obvious that the allegation of fraud was frivolous citing Codd v Delap 1905 92 LT 510 He argued that the court below should not have followed the decision in Ralli v Angullia 1917 15 SSLR 33 11 Hong further asserted that there were fresh materials to support the allegation of fraud the sworn statements of two witnesses Chew Kia Lee and Yeo Seok Lee which were prepared by Les Placements in the Canadian proceedings but were never produced before the Canadian court Principles governing foreign judgments 12 Quite apart from the arrangements under the RECJA or the REFJA it is settled law that a foreign judgment in personam given by a foreign court of competent jurisdiction may be enforced by an action for the amount due under it so long as the foreign judgment is final and conclusive as between the same parties The foreign judgment is conclusive as to any matter thereby adjudicated upon and cannot be impeached for any error whether of fact or of law Godard v Gray 1870 LR 6 QB 139 In respect of such an action an application for summary judgment may be made on the ground that the defendant has no defence to the claim Grant v Easton 1883 13 QBD 302 The local court will only refrain from enforcing a foreign judgment if it is shown that the plaintiff procured it by fraud or if its enforcement would be contrary to public policy or if the proceedings in which the judgment was obtained were opposed to natural justice see 8 1 Halsbury s Laws of England 4th Ed 1996 Reissue paras 1008 1010 13 In a much earlier case Vanquelin v Bouard 1863 15 CBNS 341 143 ER 817 which was an action in England on a French judgment Erle CJ said It has been well settled that defences which might have been raised in the foreign court cannot be brought forward here for the purpose of setting aside the judgment 14 The rule established in Godard v Gray supra was followed in the local case Ralli v Angullia supra a 1917 decision of the Court of Appeal of the Straits Settlements the predecessor of this court One of the issues determined by the court there was that a foreign judgment was conclusive as to any matter adjudicated upon and could not be impeached for any error of fact or law in an action based on it apart from special grounds A defence which might have been raised in the foreign court and was not raised could not be raised in the forum of enforcement Woodward J who delivered the leading judgment even suggested that the foreign judgment created a new and independent obligation distinct from the original cause of action But he recognised that the exact nature of the obligation still remained unsettled and in his words it may be there is no merger because the original cause of action still subsists but the obligation created by the judgment is nevertheless a new one at p 76 15 However there is a line of authorities starting with Abouloff v Oppenheimer Co 1882 10 QBD 295 which seemed to say that so long as fraud is alleged the defendant is thereby entitled to reopen the issue of fraud This decision considerably extended the fraud exception to the conclusive rule enunciated in Godard v Gray In Abouloff the Court of Appeal held that a foreign judgment could be impeached for fraud even though no new evidence was produced and even though the fraud might have been and was alleged in the foreign proceedings The court sought to justify its approach allowing re opening of the fraud issue by stating that the foreign court would not have itself approved of being misled and permit a judgment so obtained to remain 16 In the later case Vadala v Lawes 1890 25 QBD 310 while the Court of Appeal recognised the problems posed as a result of the decision in Abouloff supra it nevertheless refused to depart from it Lindley LJ observed at pp 316 317 if the fraud upon the foreign court consists in the fact that the plaintiff has induced that court by fraud to come to a wrong conclusion you can reopen the whole case even though you will have in this court to go into the very facts which were investigated and which were in issue in the foreign court 17 It was again reaffirmed in the recent case Jet Holdings Inc v Patel 1990 1 QB 335 at 344 345 1989 2 All ER 648 at 652 where Staughton LJ stated I t is to my mind plain that the foreign court s decision on its own jurisdiction is neither conclusive nor relevant If the foreign court had no jurisdiction in the eyes of English law any conclusion it may have reached as to its own jurisdiction is of no value To put it bluntly if not vulgarly the foreign court cannot haul itself up by its own bootstraps Logically the same reasoning must apply where enforcement is resisted on the ground of fraud If the rule is that a foreign judgment obtained by fraud is not enforceable it cannot matter that in the view of the foreign court there was no fraud But this doctrine makes a great inroad into the objective which is generally desirable of enforcing foreign judgments where in the eyes of English law the foreign court had jurisdiction The defendant may have been served in the foreign country entered an appearance given evidence been disbelieved and had judgment entered against him If he asserts that the plaintiff s claim and evidence were fraudulent that issue must be tried all over again in enforcement proceedings The lesson for the plaintiff is that he should in the first place bring his action where he expects to be able to enforce a judgment The doctrine has encountered criticism from academic writers see Dicey and Morris The Conflict of Laws p 469 footnote 66 A possible view which is taken by some is that the fraud relied on must be extraneous or collateral to the dispute which the foreign court determines But in my judgment it is a hundred years too late for this court to take that view The decisions in Abouloff v Oppenheimer Co 1882 10 QBD 295 1881 5 All ER Rep 307 and Vadala v Lawes 1890 25 QBD 310 1886 90 All ER Rep 853 show that a foreign judgment cannot be enforced if it was obtained by fraud even though the allegation of fraud was investigated and rejected by the foreign court Emphasis is added 18 In Syal v Heyward 1948 2 KB 443 1948 2 All ER 576 the Court of Appeal applying Abouloff supra held it to be immaterial that the facts relied upon to establish a prima facie case of fraud were known to the party relying on them at all material times and could thus have been raised by way of defence in the foreign proceedings 19 We must however point out that the approach adopted in Abouloff supra is completely inconsistent with that adopted by the English court vis à vis its own domestic judgments This is elucidated clearly in the following passage from Dicey and Morris on Conflict of Laws 13th Ed at pp 518 519 A party against whom an English judgment has been given may bring an independent action to set aside the judgment on the ground that it was obtained by fraud but this is subject to very stringent safeguards which have been found necessary because otherwise there would be no end to litigation and no solemnity in judgments The most important of these safeguards is that the second action will be summarily dismissed unless the claimant can produce evidence newly discovered since the trial which evidence could not have been produced at the trial with reasonable diligence and which is so material that its production at the trial would probably have affected the result and when the fraud consists of perjury so strong that it would reasonably be expected to be decisive at the rehearing and if unanswered must have that result But it does not matter whether the fraud is extrinsic e g consists in bribing witnesses or intrinsic e g consists in giving or procuring of perjured or forged evidence 20 In contrast the Canadian courts declined to follow Abouloff supra In Jacobs v Beaver Silver Cobalt Mining Co 1908 17 OLR 496 Garrow JA of the Ontario Court of Appeal offered the following critique of Abouloff and Valada at p 505 It can be matter of little wonder that there should be a hesitation to accept as law all the dicta contained in the judgment in Abouloff v Oppenheimer where the consequences so well pointed out by Hargaty C J in Woodruff v McLennan are or may be to practically abrogate the whole doctrine of res judicata both as to native and foreign judgments A doctrine so useful and so well established resting not alone upon a consideration of the private convenience of litigants but upon the broader foundation of public policy should one would think require more for its abrogation than the mere dicta of one or even more Judges here or elsewhere however eminent Abouloff v Oppenheimer was followed in Vadala v Lawes 25 QBD 310 But the judgment rests not upon the actual decision in the former case but upon the dicta to which I have referred Early in the judgment of Lindley LJ appears this statement p 316 There are two rules relating to these matters which have to be borne in mind and the joint operation of which gives rise to the difficulty First of all there is the rule which is perfectly well established and well known that a party to an action can impeach the judgment in it for fraud Whether it is the judgment of an English Court or of a foreign Court does not matter using general language there is a general proposition unconditional and undisputed Another general proposition which speaking in equally general language is perfectly well settled is that when you bring an action on a foreign judgment you cannot go into the merits which have been tried in the foreign Court But you have to combine those two rules and apply them in the case where you cannot go into the alleged fraud without going into the merits Which rule is to prevail That point appears to me to have been one of very great difficulty before the case of Abouloff v Oppenheimer But until Abouloff s case the difficulty of combining the two rules and saying what ought to be done where you could not enter into the question of fraud to prove it without reopening the merits had never come forward for explicit decision That point was raised directly in the case of Abouloff v Oppenheimer and it was decided I cannot fritter away that judgment etc With the greatest deference it seems to me that this statement is open to two serious objections 1 it in no way takes account of or defines the nature of the fraud which can be successfully opposed to a judgment whether native or foreign for it is admitted the rule is the same and 2 the point was not explicitly raised in Abouloff v Oppenheimer where the facts were all admitted by the demurrer The combination of the two rules with which no one quarrels is made easy and without the reproach of any thing like hairsplitting if my first objection is answered as I think it should be in the line of authorities which no one can question namely that the fraud relied on must be something collateral or extraneous and not merely the fraud which is imputed from alleged false statements made at the trial which were met by counter statements by the other side and the whole adjudicated upon by the Court and so passed on into the limbo of estoppel by the judgment This estoppel cannot in my opinion be disturbed except upon the allegation and proof of new and material facts or newly discovered and material facts which were not before the former Court and from which are to be deduced the new proposition that the former judgment was obtained by fraud The burden of that issue is upon the defendant and until he at least gives prima facie evidence in support of it the estoppel stands Emphasis is added 21 What Garrow JA advocated was that a court should only look into the merits of a foreign judgment if extrinsic fraud was alleged or if the defendant had discovered evidence of intrinsic fraud after the foreign judgment was passed And what would constitute extrinsic fraud was elaborated in the earlier Ontario Court of Appeal decision in Woodruff v McLennan 1887 14 OAR 242 as being the defendant had never been served with process that the suit had been undefended without defendant s default that the defendant had been fraudulently persuaded by plaintiff to let judgment go by default or some fraud to defendant s prejudice committed or allowed in the proceedings of the other court 22 The approach advocated by Garrow JA was followed by the courts of several other provinces in Canada eg Nova Scotia in Manolopoulos v Pnaiffe 1930 2 DLR 169 Alberta in Union of India v Bumper Development Corp 1995 7 WWR 80 and British Columbia in Roglass Consultants Inc v Kennedy 1984 65 BCLR 393 23 In Australia the courts there also seem to be moving away from Abouloff supra The leading case would appear to be Keele v Findley 1990 21 NSWLR 444 where the New South Wales Commercial Division preferred the Canadian approach Rogers CJ NSW held that fraud was a defence to an action on a foreign judgment only if there had been a new discovery of material evidence which would establish fraud and make it reasonably probable that the opposite result would have been reached He felt that the current English position came about because the courts had failed to take proper account of the developments in the law relating to domestic judgments 24 However notwithstanding these Canadian and Australian authorities the English Court of Appeal reaffirmed the ruling in Abouloff supra in Owens Bank v Bracco 1991 4 All ER 833 1992 2 WLR 127 and held that as far as fraud was concerned the enforcement of a foreign judgment was not the same as the enforcement of an English judgment in that there was no requirement of any fresh evidence before an English court could try the issue of fraud This Court of Appeal decision was affirmed by the House of Lords where Lord Bridge with whom the other Law Lords concurred stated that if the law were in need of reform it was for the legislature not the judiciary to effect it While Bracco involved enforcement under the Administration of Justice Act 1920 the House felt that the word fraud in the Act should be given the same sense as in common law 25 Interestingly in this regard there is a Court of Appeal case which sought to limit the scope of the Abouloff line of cases House of Spring Gardens v Waite 1991 1 QB 241 1990 2 All ER 990 Waite concerned two Irish judgments where in the original judgment given in 1983 and on which enforcement was sought the issue of fraud was canvassed and decided upon and the same issue of fraud was also examined in a separate and second action in Ireland in 1987 The court held that it was the judgment in the second action which created the estoppel In seeking to distinguish the situation there from the other cases Stuart Smith LJ stated 1991 1 QB 241 at 251 1990 2 All ER 990 at 997 In none of these cases was the question whether the judgment sued upon here was obtained by fraud litigated in a separate and second action in the foreign jurisdiction 26 In the alternative the court in Waite supra felt that it would amount to an abuse of process to allow the defendant to re litigate the issue But the court also noted that the result would have been different and the question of whether there had been fraud re examined if it had been possible to impeach the 1987 judgment on the basis that the judgment had itself been obtained by fraud or to produce new evidence of fraud in relation to the earlier judgment Our approach 27 There were therefore before us two distinct views as to how a domestic court should treat a foreign judgment where fraud is raised in relation to that foreign judgment One is that enunciated in Abouloff supra and the other advocated by the Canadian Australian cases which sought to limit the circumstances under which a domestic court may re open an issue already determined by a foreign judgment including an allegation of fraud In our judgment the approach adopted in Abouloff has less to commend itself as it would only encourage endless litigation It is of paramount importance that there should be finality Every losing party understandably would like to litigate the issue over again with the hope that a different tribunal would look at the fact situation differently But that can never be a good reason for allowing a losing party to reopen issues To liberally allow a party to do so would be to permit that party to have a second bite at the cherry an eventuality which is generally abhorred by all civilised systems of law Of course we are conscious that the rule against reopening issues is not absolute There are exceptions but they are subject to safeguards In England an issue already adjudicated upon by the domestic courts would

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  • Overseas Union Insurance Ltd v Turegum Insurance Co[2001] 3 SLR 330; [2001] SGHC 147
    to assert at the meeting in October that he had previously made it absolutely plain that the US 220 000 offer no longer stood 48 The finding as to the continued existence of Turegum s offer after 26 August leads on to the next issue which is whether that offer was impliedly withdrawn by the notice which Diarmuid Brennan Co issued on 5 October 1999 telling OUI that unless payment of the balance due on five contracts was made in full by 18 October 1999 arbitration proceedings would be commenced Turegum pointed out that this letter had to be contrasted with the previous negotiations wherein the parties had been negotiating to settle all past business between them which included the five contracts mentioned in the demand letter It submitted that the letter of demand was entirely inconsistent with a continuing intention to enter into an agreement on the terms previously proffered and that after it was made OUI could not objectively have believed that the offer was still in existence to be accepted In any event by causing this letter of demand to be sent Turegum had withdrawn and or revoked any existing offer to commute 49 I accept the above submission The maker of an offer is free to withdraw it at any time before it is accepted Notice of the withdrawal must be given and must actually reach the offeree to be effective It is not necessary however that the notice of withdrawal be explicit It is enough if the offeree is given information which would show that the offeror has changed his mind and no longer wants to proceed with the offer This information need not even come directly from the offeror In this case the instructions which Turegum gave its solicitors to make a formal demand for the balance due and to give notice that arbitration proceedings would be commenced if that demand was not met were clear evidence that Turegum no longer wished to settle its claim This intention was communicated to OUI by Diarmuid Brennan Co s letter OUI received the letter and although its officers stated that they did not regard the letter as a revocation of the offer but simply as an attempt to put pressure on them to settle this assertion was belied by their reaction which was to immediately arrange a meeting with Turegum Mr Tang admitted that OUI s letter to Turegum of 7 October was the first time that OUI had shown an interest in meeting Turegum on its proposed visit to Europe I consider that OUI had been content to wait on events until it received the letter of demand It then realised that matters had reached a serious point and that drastic action had to be taken to prevent arbitration Even if I am wrong in my analysis of the belief held by OUI s officers I consider that an objective person would have realised from the letter that Turegum was no longer minded to settle the claim on the terms previously put forward The 15 October meeting 50 My finding is that at the start of the meeting on 15 October no offer existed OUI did not take that view Mr Yeo s evidence in chief was that Turegum s approach at the meeting was that if OUI did not accept the offer of US 220 000 and reach a settlement it would commence arbitration proceedings Turegum may have been rather doubtful as to the situation at the start of the meeting as according to the evidence of its three witnesses who were present Mr Johnson felt it necessary to state explicitly during the meeting that the offer of US 220 000 was off the table entirely 51 Mr Brennan gave evidence that Mr Peter Yap did most of the talking on behalf of OUI during the meeting Mr Yap who started talking first proceeded to recapitulate the negotiations and noted what he thought was each party s respective position that Turegum had offered US 220 000 and that OUI had offered US 160 000 and asked where parties should progress to It was at this point that Mr Johnson told Mr Yap about the telephone conversation and said that Turegum s offer to commute was off the table He then told OUI that it had to pay the ledger debt first before any further negotiations to commute could take place It appeared to Mr Brennan that Mr Johnson s assertion that the offer to commute had been withdrawn caused concern to OUI and that Mr Yap was surprised to hear it Mr Yap subsequently informed Turegum that he was not authorised to do anything except to commute that is to say he had no authority to settle the ledger debt Mr Yap then expressed regret at not having accepted the offer to commute at US 220 000 Mr Brennan s evidence was that the meeting ended with no agreement having been reached and with no commutation offer in existence 52 I am inclined to accept Mr Brennan s account of the meeting In the first place it is consistent with the evidence given by Mr Johnson and Ms Gard Secondly and more importantly it is substantiated by handwritten notes that Mr Brennan took during the course of the discussion I accept those notes as being contemporaneous and see no reason to doubt their contents Those notes are also supported by an Arbitration Report prepared by Mr Brennan on 19 October in which he referred to the 15 October meeting and stated that OUI s representatives made no meaningful offer to pay beyond their original offer of US 160 000 though it was apparent that they wished they had accepted the US 220 000 that had been on offer 53 I should state that I am not as convinced of the accuracy of the typewritten memorandum prepared by Ms Gard some months after the meeting and which purported to be a sequential account of what occurred In my view that memorandum was a reconstruction of what Ms Gard thought after discussion had happened at the meeting It was prepared after it was clear that the events of the meeting were hotly disputed At this stage it is difficult to de construct the memorandum so as to ascertain what part of it was written from her actual memories 54 Thirdly the evidence that Mr Johnson stated that the offer of US 220 000 was off the table was consistent with the documentary evidence produced by Turegum showing that after 26 August 1999 Mr Johnson s authority to commute was withdrawn and that his superiors wanted to proceed with arbitration and thought that they should get much more than US 220 000 from OUI All Turegum s actions thereafter were aimed at this result When the meeting started Mr Johnson knew the attitude of his superiors By that time he had also seen the DTI report and therefore would have believed that OUI was in a stronger financial position than he had thought earlier There was no reason for him to maintain the offer of US 220 000 and every reason for him to make it clear to OUI that Turegum wanted more 55 Overall I found the evidence given by Turegum s witnesses as to the contents of the meeting to be coherent and convincing The evidence given by OUI s witnesses on the same issue however was not as persuasive When asked the crucial question of whether Mr Johnson had confirmed at the meeting that the commutation offer was withdrawn Mr Yeo s response was equivocal He said I did not recall that there was such a confirmation Why could he not have given a straight answer in the negative since that was OUI s position As it stands it is not Mr Yeo s evidence that Mr Johnson did not confirm at the meeting that the offer was withdrawn This lapse in memory contrasted with his seemingly flawless recollection of other matters that occurred at the meeting for example that Mr Johnson had stated that OUI s final offer of US 160 000 was rejected and that Mr Yap did not respond that OUI had lost a court action and what was stated in its audit accounts was not a true reflection on recovery 56 There were other implausibilities in Mr Yeo s evidence He had testified that in asking for the meeting OUI was making a last ditch attempt to resolve the matter Having said that he then stated that none of OUI s representatives attending the meeting had had any prior discussion amongst themselves on the strategy to be adopted for the meeting It is extremely difficult to believe that they were prepared to attend the meeting and have final discussions without any previously worked out plan of action There must have been such a plan since Mr Yeo as he admitted knew after the telephone conversation that US 160 000 would never be accepted by Turegum 57 Mr Yeo also testified that he had no figure in mind that he hoped to persuade Turegum to agree to when he went for the meeting However he then said that at the back of his mind he had been considering a figure of US 190 000 in order to close the gap Yet he wanted me to believe that despite knowing he had to offer more in order to interest Turegum when it came to the point he had simply asked it to reconsider US 160 000 58 Mr Tang s evidence was that OUI s purpose in attending the meeting was to test Turegum s bottom line In some correspondence it had hinted that it was prepared to move down from US 220 000 so OUI had gone for the meeting to test Turegum s determination But if this was in fact the case OUI should have attempted to put forward its alternative figure for Turegum s consideration This was especially so since Mr Yeo is supposed to have had in mind a figure of US 190 000 Yet this was not done 59 OUI s conduct as related by its witnesses does not make sense to me There was no point in arranging a meeting in London with Turegum simply to repeat an offer that had consistently been rejected by Turegum As at 15 October OUI must have thought that since the figure of US 220 000 had not been expressly withdrawn during the telephone conversation it could with the personal skills of its general manager thrown in still persuade Turegum that it would be better to accept that amount than to go to the expense of conducting arbitration proceedings The OUI representatives must have gone to the meeting with that intention but Mr Yap must have been thrown off course when Mr Johnson said very firmly that that figure was no longer acceptable and therefore no figure was put forward by OUI during the meeting 60 I should also state here that I am drawing an adverse inference from the failure of OUI to call Mr Yap as a witness No reason was given to me as to why Mr Yap could not be called As far as I knew he was still holding his position at OUI at the time the hearing took place Mr Yeo tried to explain away OUI s failure to call Mr Yap by stating that he had only made one insignificant comment ie that agreement could not be reached just when they were about to leave the meeting room Upon further cross examination however Mr Yeo changed his evidence and asserted that Mr Yap had expressed regret that the gap could not be bridged at the meeting That comment was more in line with the evidence given by Turegum s representatives 61 It is not possible to believe as OUI would have me do that Mr Yap the most senior officer among the three representatives of OUI remained absolutely silent during the entire meeting save for one insignificant comment apparently directed at nobody in particular at the end of the meeting when everyone was about to leave the room Mr Yap s testimony would have helped shed light on the events that occurred I can only conclude that his failure to take the stand is because if he had he would have had to explain why all three of Turegum s witnesses testified that Mr Yap did the talking for OUI and that he said that it was a pity that the offer to commute at US 220 000 had been withdrawn I therefore infer that Mr Yap s account of the meeting would have been more consistent with that given by Mr Brennan than that given by Mr Yeo 62 The result of the above is that on 15 October there was no existing offer to commute at US 220 000 The purported acceptance of 21 October therefore did not result in any concluded commutation Looking at the course of events in the manner suggested in the Projection case supra cannot change this outcome To an objective observer it is plain that on 15 October no agreement could have been reached since the parties were not of like minds Turegum no longer wished to effect a commutation at US 220 000 and OUI knew this The events of 20 and 21 October 63 Whilst the finding above makes consideration of the subsequent events unnecessary in view of the submissions I have received I will express my views on them 64 I have construed Diarmuid Brennan Co s letter of 5 October as a revocation of any existing offer to commute made by Turegum The letter which Diarmuid Brennan Co sent on 20 October giving notice of arbitration must be similarly construed That in fact was an even stronger manifestation of Turegum s decision not to compromise on the issue and to withdraw all previously existing offers 65 According to the evidence adduced by Turegum the notice of arbitration was successfully faxed to OUI s office at just after midnight on 20 October 1999 Singapore time or 16 07hrs London time as shown on the relevant fax transmission report No evidence was provided by OUI to show that the date and time printed on this report were inaccurate Nor did it provide any affirmative evidence that its office had actually received the notice of arbitration at any other time or date I accept the evidence adduced by Turegum on this point and find that OUI received the notice of arbitration in the early hours of 21 October 1999 It was therefore available to be read by OUI s officers when they came into the office at the start of business that morning 66 Although Mr Yeo s evidence in chief was that he only saw the arbitration notice after sending out OUI s acceptance of the US 220 000 offer on 21 October OUI did not use this assertion as the basis of its contention that the notice had not withdrawn the offer Instead it pleaded in its reply and defence to counterclaim that the notice was invalid and inoperative as the reinsurance contracts contained no arbitration clause In its closing submissions OUI took another tack entirely It was submitted that since according to Turegum s case the offer had already been withdrawn by the time the notice was sent out the notice could not have been a withdrawal of the offer Further Turegum could not have intended the notice to have the effect of withdrawing the offer since the withdrawal had already been made Counsel stated that OUI did not read the notice as having that effect How then counsel asked could the objective meaning of the notice be different from what both parties originally intended 67 I do not accept the above submissions Whilst Turegum did not send out the notice of arbitration as an express withdrawal of the compromise offer since in its mind the offer no longer existed the objective interpretation of the notice must be that Turegum did not want to compromise and that any previous indication of its willingness to do so was no longer effective Secondly having heard the witnesses and considered the evidence as a whole I do not believe that the notice of arbitration was not seen by OUI prior to the acceptance letter being sent out Mr Yeo might not have realised at that time that the notice of arbitration had the effect of destroying a compromise offer if any then existed but he obviously knew that it meant Turegum was now intent on full recovery and that was what prompted the issue of the acceptance Only the previous day Mr Yeo had sent Diarmuid Brennan Co a fax asking for a further three weeks to look into the papers relating to the reinsurance contracts I do not believe that he would have sent out the acceptance the very next day if it had not been for the arrival of the notice of arbitration It was also telling that the submissions relied on legalities and inferences and logic ie on the inference to be drawn from the notice and not on the bald assertion that the notice was not sighted before acceptance Obviously that evidence was not regarded as compelling Conclusion on first issue 68 I therefore hold that no commutation was concluded between the parties on 21 October 1999 Second issue Do the reinsurance contracts contain arbitration clauses The background 69 There are four reinsurance contracts which are now in issue between OUI and Turegum Originally there were five but Turegum has not been able to find any documents evidencing the fifth contract and is therefore not proceeding on its claim on that contract for the time being The four contracts which Turegum seeks to refer to arbitration have been known during the proceedings as contract Nos 3TD69 3TD70 3TD71 and 3TG71 70 Before I go on to discuss the issues relating to these contracts it would be helpful to give a brief account of how such contracts usually come about An insurance contract placed in the London market is initiated when an insurance broker presents a proposal for insurance or reinsurance to underwriters at Lloyds or to insurance companies The procedure is described by Lord Diplock in American Airlines Inc v Hope 1974 2 Lloyd s Rep 301 at 304 305 What happens is that the broker acting for the assured prepares the slip a folded card and indicates in brief terms the cover the assured requires Thereafter as Lord Diplock says He takes the slip to an underwriter whom he has selected to deal with as leading underwriter i e one who has a reputation in the market as an expert in the kind of cover required and whose lead is likely to be followed by other insurers in the market If it is the first contract of insurance covering that risk in which a particular underwriter has acted as leading underwriter it is treated as an original insurance The broker and the leading underwriter go through the slip together They agree on any amendments to the broker s draft and fix the premium When agreement has been reached the leading underwriter initials the slip for his proportion of the cover and the broker then takes the initialled slip round the market to other insurers who initial it for such proportion of the cover as each is willing to accept For practical purposes all the negotiations about the terms of the insurance and the rate of premium are carried on between the broker and the leading underwriter alone After the slip has been initialled by all the insurers it is retained by the broker In due course often after several months he prepares the policy from the slip In the case of an original insurance he generally agrees the wording of the policy with the leading underwriter before taking it to Lloyd s Policy Signing Office for signature 71 When the slip is signed it constitutes a binding contract At that stage the whole of the contract is found in the slip It has been described as free standing See Insurance Co of the State of Pennsylvania v Grand Union Insurance Co 1990 1 Lloyd s Rep 208 and The Zephyr 1984 1 Lloyd s Rep 58 OUI relies on these principles in relation to the two slips for contracts 3TD70 and 3TG71 which it has in its possession and argues that since these slips do not contain arbitration clauses or any reference to any arbitration clause in any other document the contracts of insurance do not contain any agreement to submit disputes to arbitration 72 The slip is usually only the first stage in the process Following its signing the broker will issue a cover note to its own client confirming the cover which has been placed on the client s behalf As stated in The Law of Reinsurance in England and Bermuda by O Neill and Woloniecki the cover note is not provided to the insurer and thus cannot be a contractual document It is however prima facie evidence of a contract and may be used to establish the terms of that contract when the slip is lost 73 Further it is often clear from the slip itself that the parties intend that a policy or treaty wording be issued subsequently The purpose of this is to expand on the terms found in the slip which are usually short and often only titles of the clauses required According to another text Reinsurance Practice and The Law 1993 put out by a firm called Barlow Lyde and Gilbert once a wording is executed by both parties it replaces the slip as a contract document Should any inconsistency between the slip and the wording need to be resolved it is the wording which is paramount see 10 5 1 3 This statement was based on the holding in Youell v Bland Welch Co 1990 2 Lloyd s Rep 423 HC 1992 2 Lloyd s Rep 127 CA which discussed the ranking of the slip versus the wording and ruled that if formal wording was subsequently issued the slip would be inadmissible as an aid to construction of the policy The judge at first instance Philips J also stated at p 429 An insurance slip customarily sets out a shorthand version of the contract of insurance in terms which may neither be clear nor complete Where as here the slip provides for the formal wording to be agreed by the leading underwriter the other subscribers to the risk anticipate and agree that the leading underwriter will on their behalf agree the final wording that will spell out their rights and obligations If differences between the wording of the slip and that of the formal contract which is embodied in the policy give rise to the possibility that the natural meaning of the slip differs from that of the policy the natural assumption is and should be that the wording of the policy has been designed the better to reflect the agreement between the parties To refer to the slip as an aid to construction of the policy runs counter to one of the objects of replacing the slip with the policy The pleadings on the reinsurance contracts 74 The reinsurance contracts which Turegum seeks to enforce go back more than 30 years As a result it is not clear whether the documentation that has been produced is all of the documentation In relation to certain of the contracts OUI is not willing to accept the authenticity of the documents produced by Turegum as it does not have copies of the same The difficulty is that OUI acted through agents in the London market and these agents have since closed and the files have been transferred more than once Retrieval of documents and information has been piecemeal and slow 75 In its amended statement of claim OUI pleaded that sometime between 1963 and 1979 it had entered into five reinsurance contracts with Turegum in respect of excess of loss As particulars of this assertion OUI stated that the contracts of reinsurance were as contained in and or as evidenced by and or to be inferred from the slips issued at the time of placement OUI further stated that in particular it relied on two slips signed by it through its underwriting agents in December 1969 and July 1971 and that it was unable to produce or give precise particulars of any other slips due to the substantial lapse of time It averred however that the terms of all the five reinsurance contracts were either contained in or expressly referred to in slips It went on to plead that the purported notice of arbitration given by Turegum and all further proceedings consequent upon the notice were null and void because the reinsurance contracts made no reference to nor contained any arbitration clause OUI averred that in the circumstances there was no agreement to refer any disputes to arbitration and it further put Turegum to strict proof of the existence of any agreement to refer disputes to arbitration 76 In Turegum s re amended defence and counterclaim it gave brief details of the five reinsurance contracts which it originally intended to claim under Paragraph 4 stated that following the issuance of the respective slips when placement of the reinsurances was concluded Turegum or the brokers issued the full set of terms and conditions of the respective contracts to OUI or its agents Turegum further averred that each set of the full terms and conditions was signed by OUI and or its agent It admitted that it did not have in its possession all five slips or sets of the signed terms and conditions but asserted that the contracts were contained in and or expressly set out in the respective sets of terms and conditions It also pleaded that the slips contained a clause reading Conditions Wording to be agreed L U only and that by virtue of these words because of the usage or custom of the London reinsurance market OUI and Turegum had agreed to be bound by the full wording and terms and conditions of the reinsurance contract as agreed including any arbitration clause 77 By paras 6 and 7 Turegum pleaded that it was an implied term of the five reinsurance contracts that the proper law of the same was English law or in the alternative objectively the proper law was English law In para 8 it pleaded that by virtue of the provisions of the English Arbitration Act 1996 each of the reinsurance contracts contained an arbitration agreement Paragraphs 9 10 and 11 contained alternative pleas that the arbitration agreements were made in writing or evidenced in writing in accordance with the provisions of the Act 78 In its reply OUI pleaded that apart from the reinsurance slips no other documents were issued or signed by it or its agents in relation to the reinsurance contracts OUI further averred that even if the slips contained the wording relating to the leading underwriter such wording did not have the effect of nor was it capable of incorporating any terms and conditions contained in any other documents into the contract between the parties It denied also that there was any custom or usage in the London market which dictated that such wording was capable of incorporating terms and conditions in other documents into the contract between the parties 79 In relation to the governing law OUI s main plea was that the proper law of the five reinsurance contracts was Singapore law Even if English law governed these contracts however the English Arbitration Act 1996 did not apply and in any case did not have the effect which Turegum had contended it did 80 Whilst it can be seen from the above account that various issues arise in relation to the form and content of the reinsurance contracts in summary OUI s case is that of the four contracts Turegum now seeks to enforce it is only aware of two It says those contracts are contained in the slips and since the slips do not have arbitration clauses it cannot be forced into arbitration over Turegum s claims As for the other two contracts OUI does not accept that it is a party to these and challenges the admissibility and authenticity of the documents which Turegum relies on to establish the contracts 81 I will deal first with the issue of the governing law There are other common issues which will arise when I consider the individual contracts but I think it better to deal with those issues in the concrete environment of an individual contract rather than abstractly Governing law 82 There are three stages in determining the governing law of a contract The first stage is to examine the contract itself to determine whether it states expressly what the governing law should be In the absence of an express provision one moves to the second stage which is to see whether the intention of the parties as to the governing law can be inferred from the circumstances If this cannot be done the third stage is to determine with which system of law the contract has its most close and real connection That system would be taken objectively as the governing or proper law of the contract See Las Vegas Hilton Corp v Khoo Teng Hock Sunny 1997 1 SLR 341 and Dicey Morris on The Conflict of Laws 11th Ed at Rule 180 83 It is common ground here that none of the contracts whether they are considered as being contained in the slips alone or whether their terms are reflected in other documents such as treaty wording or policies contains an express choice of law clause Should I then go on to the second stage In the Las Vegas case Chao J gave examples of circumstances from which it may be possible to infer a common intention as to the proper law of the contract like clauses giving jurisdiction to the courts of a particular country to decide disputes arising out of the contract and matters like the currency of the transaction or its commercial purpose He decided however that in the circumstances of the case before him which dealt with an alleged oral contract it was not meaningful to go into an exercise to try and determine the intention of the parties from inference Instead he went straight to the third stage of determining with which law the transaction before him had its closest and most real connection I think I should do the same Since in this case the parties acted entirely through brokers and OUI did not even see many of the documents for years if at all it would be absurd to try and infer any intention 84 OUI s submission was that the three stages had to be applied in strict chronology It said that the second stage would only be looked at if there was proof that the first stage was inapplicable and the third stage only applied when there was proof that the second stage could not apply In this case it agreed that the first stage could not apply as there was no express reference to the proper law of the contract OUI then went on to submit that since no evidence had been adduced of the implied intention which stage two looks for the court could not move to stage three I cannot accept this argument The passages from Dicey Morris in the commentary for Rule 180 make it clear that the exercise to determine the proper law is one of legal analysis based on the facts in evidence and not one of following mandatory rules in such a manner that if one cannot be followed the rest are inapplicable The following passage makes this clear the line between the search for the inferred intention and the search for the system of law with which the contract has its closest and most real connection is a fine one which is frequently blurred In theory in the absence of an express choice as the first test the court should consider as a second test whether there are any other indications of the parties intention and only if there is no such indication go on to consider the third stage namely with what system of law the contract has its closest and most real connection But in practice the same result can be reached by the application of the second or third tests and frequently the courts move straight from the first stage to the third stage This is largely because the tests of inferred intention and close connection merge into each other and because before the objective close connection test became fully established the test of inferred intention was in truth an objective test designed not to elicit actual intention but to impute an intention which had not been formed at p 1162 85 Proceeding with the analysis to elicit the governing law I note that the only connection that any insurance contract that came into being had with Singapore is that the reinsurer OUI is incorporated in Singapore and has its place of business here On the other hand there are many factors that connect the contracts with English law First although Turegum is incorporated in Switzerland it had an office in London at the material time Secondly the negotiations for the reinsurance contracts took place in London and any contracts that resulted were entered into in London between the respective brokers agents of OUI and Turegum Thirdly the risks undertaken were placed in the London reinsurance market and the lead underwriters carried on business in London Fourthly all the contract documents were prepared and issued in London and the terminology of the slips was characteristic of slips issued in the London market Fifthly the claims made against Turegum under the policies reinsured with OUI were received and processed in London by Turegum or its brokers Sixthly the brokers acting for both parties were situated in London and OUI s London agents were the ones who administered and dealt with the claims in London from inception up till 1992 Turegum also pointed out that the arbitration clauses which were contended to be part of the contracts provided for arbitration in London Even if I leave this last factor out of consideration since it has not yet been established the connections between the contracts and London and therefore English law are overwhelming The only reasonable and logical finding is that English law is the governing law of the insurance contracts as being the law that has the closest and most real connection to them Contract 3TD69 86 The relevant documents produced in court in relation to this contract were the following 1 the original copy of the slip Attached to it was a document bearing the heading Turegum Insurance Company Third Party etc Excess of Loss Insurance on which was handwritten Agreed Wording R01692 2 premium slips also attached to the original slip and 3 a folder prepared by Rose Thomson Young Reinsurance Ltd Rose Thomson Turegum s agents containing a cover note dated 27 February 1969 issued by Rose Thomson in respect of this insurance contract a letter dated 22 July 1969 forwarding to Turegum a copy of the treaty wording of the contract which had been agreed by the leading underwriter and the treaty wording itself which in terms was identical to that attached to the slip It should be noted that the slip was in respect of excess of loss reinsurance covering losses occurring within 12 months from 1 January 1969 and the interest covered was all policies and or contracts of insurance and or reinsurance covering Third

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    Law Watch Headline News Commentaries Judgments Legislation Notices Directions Continuing Legal Education Resources Media Press Releases Speeches Publications Online References Sample Clauses Directory of Law Practices Latest Singapore Rankings Events Upcoming Events Archive Events Archive 2013 Events Archive 2012 Contract Display By Year select 2005 1999 Chwee Kin Keong and Others v Digilandmall com Pte Ltd 2005 1 SLR 502 2005 SGCA 2 Decision Date January 13 2005 MP Bilt

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  • Chwee Kin Keong and Others v Digilandmall.com Pte Ltd[2005] 1 SLR 502; [2005] SGCA 2
    a party who knows that the objective appearance does not correspond with reality It would go against the grain of justice if the law were to deem the mistaken party bound by such a contract 32 One of the earliest cases which propounded this principle was Smith v Hughes 1871 LR 6 QB 597 where Hannen J said at 610 The promiser is not bound to fulfil a promise in a sense in which the promisee knew at the time the promiser did not intend it And in considering the question in what sense a promisee is entitled to enforce a promise it matters not in what way the knowledge of the meaning in which the promiser made it is brought to the mind of the promisee whether by express words or by conduct or previous dealings or other circumstances If by any means he knows that there was no real agreement between him and the promiser he is not entitled to insist that the promise shall be fulfilled in a sense to which the mind of the promiser did not assent 33 Indeed in law there are three categories of mistake namely common mutual and unilateral mistakes In a common mistake both parties make the same mistake In a mutual mistake both parties misunderstand each other and are at cross purposes In a unilateral mistake only one of the parties makes a mistake and the other party knows of his mistake For the purpose of the present proceedings we are only concerned with the effect of a unilateral mistake 34 However it does not follow that every mistake would vitiate a contract It has to be a sufficiently important or fundamental mistake as to a term for that to happen There is no doubt that the error in the present case as to the price is a fundamental one Accordingly it is wholly unnecessary for us to deal with the question as to what nature of mistake would constitute a serious mistake sufficient to vitiate a contract It is also unnecessary for us to address a related controversial question whether a mistake as to quality or the substance of the thing contracted for is of sufficient gravity to negate an agreement 35 The locus classicus on unilateral mistake is Hartog There the defendants offered to sell to the plaintiff Argentine hare skins but by mistake offered them at a price per pound instead of at a price per piece The offer was accepted However the court held that the apparent contract was void because the plaintiff must have known and did in fact know that there was a mistake in the offer because their previous negotiations had proceeded on the basis as was usual in the trade that the price was by per piece and not by weight The case represents a typical scenario where a party who knowing of the mistake of the other party sought to hold the latter to it Phrases such as must have known could not reasonably have supposed are really evidential factors or reasoning processes used by the court in finding that the non mistaken party did in fact know of the error made by the mistaken party 36 Hartog was applied in McMaster University v Wilchar Construction Ltd 1971 22 DLR 3d 9 McMaster University In the latter case the defendant tendered for the construction of a building but due to an error omitted a wage escalator clause in the tender All the other tenders contained such a clause The court found that when the plaintiff accepted the defendant s tender it knew that the defendant had made a mistake in the tender 37 Accordingly the law will declare void a contract which was purportedly entered into where the non mistaken party was actually aware of the mistake made by the mistaken party This proposition is not in dispute But should this rule also apply to a case where the non mistaken party did not have actual knowledge of the error but ought to have known about the other party s mistake ie where there is constructive knowledge The judge below thought that it should be the case 38 Rajah JC found at 140 and 142 that the appellants had actual knowledge that the price stated on the websites was a mistake However he also found in the alternative that the appellants had constructive knowledge at 144 145 I find in the alternative that the appellants given each of their backgrounds would in any event each have separately realised and appreciated before placing their purchase orders that a manifest mistake had occurred even if no communications on the error had taken place between them Further the character of the mistake was such that any reasonable person similarly circumstanced as each of the appellants would have had every reason to believe that a manifest error had occurred If the price of a product is so absurdly low in relation to its known market value it stands to reason that a reasonable man would harbour a real suspicion that the price may not be correct or that there may be some troubling underlying basis for such a pricing 39 The authors of Chitty on Contracts Sweet Maxwell 28th Ed 1999 think that the position is still fluid as they state at para 5 035 It is not clear whether for the mistake to be operative it must actually be known to the other party or whether it is enough that it ought to have been apparent to any reasonable man In Canada the latter suffices 40 It is clear that the state of a person s mind is a question of fact It has to be proved like any other fact In Vallance v The Queen 1961 108 CLR 56 Windeyer J put the point very eloquently at 83 A man s own intention is for him a subjective state just as are his sensations of pleasure or of pain But the state of another man s mind or of his digestion is an objective fact When it has to be proved it is to be proved in the same way as other objective facts are proved 41 As is so often alluded to in the cases in the absence of an express admission or incontrovertible evidence the fact of knowledge would invariably have to be inferred from all the surrounding circumstances including the experiences and idiosyncrasies of the person and what a reasonable person would have known in a similar situation If a court upon weighing all the circumstances thinks that the non mistaken party is probably aware of the error made by the mistaken party it is entitled to find as a fact that the former party has actual knowledge of the error Following from that holding the court should declare the contract so formed as void on the ground of unilateral mistake 42 In order to enable the court to come to the conclusion that the non mistaken party had actual knowledge of the mistake the court would go through a process of reasoning where it may consider what a reasonable person placed in the similar situation would have known In this connection we would refer to what is called Nelsonian knowledge namely wilful blindness or shutting one s eyes to the obvious Clearly if the court finds that the non mistaken party is guilty of wilful blindness it will be in line with logic and reason to hold that that party had actual knowledge 43 This then gives rise to the question as to the circumstances under which a party should make inquiry When should such a party make inquiries failing which he would be considered to be shutting his eyes to the obvious We do not think this question is amenable to a clear definitive answer Situations in which such a question could arise are infinite But we could accept what Mance J said in OT Africa Line Ltd v Vickers Plc 1996 1 Lloyd s Rep 700 OT Africa at 703 that there must be a real reason to suppose the existence of a mistake What would constitute real reason must again depend on the circumstances of each case Academicians may well query whether this should be based on an objective or subjective test At the end of the day the court must approach it sensibly The court must be satisfied that the non mistaken party is in fact privy to a real reason that warrants the making of an inquiry 44 Here we would reiterate that expressions such as taking advantage good faith snapping up used by the courts to describe the situations under consideration were often just the bases upon which the court in each case had come to its conclusions as to whether the non mistaken party had actual knowledge of the error made by the mistaken party While we recognise that the distinction between actual knowledge and constructive knowledge can be a fine one and can often be difficult to discern it is nonetheless not something unfamiliar to the courts The courts are accustomed to making such a distinction 45 In coming to his conclusion that constructive knowledge would suffice to bring a case within the common law principle of unilateral mistake the judge had relied on Canadian cases and on OT Africa and Ho Seng Lee Construction Pte Ltd v Nian Chuan Construction Pte Ltd 2001 4 SLR 407 Ho Seng Lee Construction 46 We must note that the Canadian cases tend to adopt a fused and more elastic approach than permitted by the doctrine of the common law They subsume the common law principles under equity They emphasise more on the need to do justice and to relieve hardship In many of the cases the courts had held that constructive notice of the mistake would be a sufficient basis to grant relief However it is vital not to conflate actual knowledge of the mistake by the non mistaken party with deemed or constructive knowledge by that party for the reason that the consequences vis à vis innocent third parties are different A contract void under common law is void ab initio and no third parties can acquire rights under it see Shogun Finance Where a contract is voidable under equity the court in determining whether to grant relief would have regard to rights acquired bona fide by third parties Statements such as this at 22 60 of McMaster University should be read with care In my view this is truly a case of unilateral mistake F rom the circumstances the plaintiff must in any event be taken to have known of the mistake before acceptance of the offer In this context it should be stressed that one is taken to have known that which would have been obvious to a reasonable person in the light of the surrounding circumstances see Hartog v Colin and Shields 47 The second sentence of the passage above indicated a finding of the court that the plaintiff must have known and did in fact know of the mistake The reference in the third sentence to what a reasonable man would have known in the circumstances was not to suggest that an objective test was to apply to the non mistaken party and thus impute knowledge to him Such references as indicated before are really reasoning processes and unless there are other reasons which indicate to the contrary the court is entitled to infer that a person would know what any other reasonable person would have known in similar circumstances Therefore the following passage in Cheshire Fifoot and Furmston s Law of Contract 2nd Singapore and Malaysian Ed 1998 by Andrew Phang at p 418 should be viewed in a similar light We must now consider the attitude of common law to unilateral mistake the distinguishing feature of which as we have seen is that the mistake of X is known to the other party Y It must be stressed that in this context a man is taken to have known what would have been obvious to a reasonable person in the light of the surrounding circumstances 48 The fused Canadian approach appears clearly in First City Capital Ltd v British Columbia Building Corp 1989 43 BLR 29 First City Capital where the defendant purportedly entered into a contract to purchase a portable building when it was already informed that the owner had previously entered into an agreement to sell it to another party but chose to disbelieve it Later another employee of the owner mistakenly delivered a bill of sale for the building to the defendant The owner and the first buyer instituted proceedings to rescind the transaction on the ground of mistake since the defendant had entered into the transaction in bad faith The Supreme Court of British Columbia rejected the argument that the court s power to relieve against the consequences of mistake was confined to cases of mistake as to the identity of the subject matter and instead held that since Bell v Lever Brothers Limited 1932 AC 161 Bell v Lever Bros the law had developed further McLachlin CJSC held at 20 that the haste with which the defendant moved to consummate the transaction leads me to conclude that it in fact knew or at very least suspected that such a mistake had been made In discussing precedents the court did not expressly distinguish between the positions in common law and in equity It also said that the equitable jurisdiction should be applied to relieve against mistake even where fraud in the strict legal sense was not present It would apply to a situation where there was fraud in the wider sense namely equitable fraud or constructive fraud 49 However we must point out that in First City Capital the court did in fact find that the defendant probably knew that the owner was operating under a mistake when it agreed to transfer the building to the defendant On this finding the court could have declared that the transaction was void in law It did not do so Perhaps that was because the relief prayed for in the action was an equitable one ie rescission However the court did go on to hold at 34 that if it was wrong to have made that finding this is most certainly a case where the defendant ought to have known that the owner had no right to sell the building to it Nevertheless the defendant in its negotiations with the owner pursued a course designed to inhibit discovery of the mistake moving with uncharacteristic haste to snap at the owner s mistaken offer 50 Equally reflective of the fused approach is this statement of Baker J in Craig Estate v Higgins 1993 86 BCLR 2d 64 at 72 25 The court may grant relief from a contract entered into on the basis of unilateral mistake where the plaintiff has established and has met the high burden imposed upon it of doing so that a mistake has been made and that it would be unjust or inequitable for the court to allow the other party to uphold the bargain One of the grounds on which a court may find that it would be unfair or inequitable is if the party seeking to enforce it had actual knowledge or constructive knowledge that a mistake had been made prior to acceptance of the offer emphasis added 51 We cannot glean from the Canadian cases that the common law principles on unilateral mistake would encompass a case where the non mistaken party has only constructive knowledge of the mistake The fact of the matter is that they had fused the application of common law and equitable principles and had referred to them interchangeably Those decisions were founded in equity rather than in law This appears clearly from the judgment of Donald JA of the British Columbia Court of Appeal in the case of 256593 BC Ltd v 456795 BC Ltd 1999 171 DLR 4th 470 where he said at 25 In summary therefore the equitable jurisdiction of the Courts to relieve against mistake in contract comprehends situations where one party who knows or ought to know of another s mistake in a fundamental term remains silent and snaps at the offer seeking to take advantage of the other s mistake In such cases it would be unconscionable to enforce the bargain and equity will set aside the contract emphasis added 52 As regards the two cases 45 supra namely OT Africa and Ho Seng Lee Construction which were relied upon by the judge below we would only say this Both cases did not really examine the doctrinal issue as to whether constructive knowledge by a non mistaken party of the mistake would suffice to vitiate the contract ab initio They assumed that to be the position Moreover in OT Africa the court added that for constructive knowledge to void a contract there had to be some real reason to suppose the existence of a mistake clearly a reasoning process to determine actual knowledge Similarly in Ho Seng Lee Construction reference was made by the court to fraud or a very high degree of misconduct before the non mistaken party could be affixed with constructive knowledge 53 In our opinion it is only where the court finds that there is actual knowledge that the case comes within the ambit of the common law doctrine of unilateral mistake There is no consensus ad idem The concept of constructive notice is basically an equitable concept see The English and Scottish Mercantile Investment Company Limited v Brunton 1892 2 QB 700 at 707 per Lord Esher MR In the absence of actual knowledge on the part of the non mistaken party a contract should not be declared void under the common law as there would then be no reason to displace the objective principle To the extent that the judge below seems to have thought otherwise ie that where the non mistaken party has constructive knowledge of the mistake the contract thus entered into would be void under common law we would respectfully differ 54 The following statement of Thompson J in McMaster University succinctly encapsulated the inter relation between law and equity in the area of unilateral mistake at 18 47 As a general rule equity follows the law in its attitude towards contracts which are void by reason of mistake If the contract is void at common law equity will also treat it as a nullity Equity however will intervene in certain cases to relieve against the rigours of the common law even though the mistake would not be operative at law If for lack of consensus no contract comes into existence there of course is nothing to which an equity can attach It is only in cases where the contract is not void at law that equity may afford relief by declaring the contract voidable It gives relief for certain types of mistakes which the common law disregards and its remedies are more flexible Thus equity does not require the certainty which had led to the narrow common law doctrine of fundamental mistake It seeks rather the more broad and more elastic approach by attempting to do justice and to relieve against hardship emphasis added 55 Accordingly we would endorse the following views expressed by Steyn J in Associated Japanese Bank International Ltd v Crédit du Nord SA 1989 1 WLR 255 Associated Japanese Bank at 267 268 No one could fairly suggest that in this difficult area of the law there is only one correct approach or solution But a narrow doctrine of common law mistake as enunciated in Bell v Lever Brothers Ltd 1932 AC 161 supplemented by the more flexible doctrine of mistake in equity as developed in Solle v Butcher 1950 1 KB 671 and later cases seems to me to be an entirely sensible and satisfactory state of the law Equitable jurisdiction 56 We now move to consider the second issue of law raised by the court below namely whether there should be an equitable jurisdiction in the courts to grant relief where there is a bona fide unilateral mistake on the part of one party which does not come within the common law doctrine of unilateral mistake and if the answer to this issue is in the affirmative to consider the circumstances under which equity should intervene to grant relief The case which is at the heart of the controversy is Solle v Butcher 1950 1 KB 671 That is a case which concerned a common mistake ie where both parties assumed that a flat was no longer subject to rent control when in fact it was The majority in Solle v Butcher held that the contract entered into on the basis of that common mistake should be rescinded The minority Jenkin LJ thought that rescission was not possible because the mistake was not one of fact but of law 57 In that case the basis of the equitable principle was enunciated by Denning LJ at 692 in the following general terms Let me next consider mistakes which render a contract voidable that is liable to be set aside on some equitable ground Whilst presupposing that a contract was good at law or at any rate not void the court of equity would often relieve a party from the consequences of his own mistake so long as it could do so without injustice to third parties The court it was said had power to set aside the contract whenever it was of opinion that it was unconscientious for the other party to avail himself of the legal advantage which he had obtained Torrance v Bolton 1872 LR 8 Ch 118 at 124 per James LJ 58 However in his judgment Denning LJ seemed to have conflated law with equity He gave as an example of the special circumstances where the court would grant relief the case where one party knowing that the other is mistaken about the terms of an offer or the identity of the person by whom it is made lets him remain under his delusion and concludes a contract on the mistaken terms instead of pointing out the mistake at 692 Surely in such circumstances the common law would in any event have held that there was no contract It seems to us that Denning LJ gave this illustration because he thought in our view erroneously that following Bell v Lever Bros only mistake relating to identity or subject matter would come within the common law doctrine of common mistake Mistake of any other nature however important would not In those situations relief could be obtained only in equity It was probably on that basis that Denning LJ opined at 693 that a common mistake even on a most fundamental matter would not render a contract void at law a view which he reiterated in Magee v Pennine Insurance Co Ltd 1969 2 QB 507 at 514 59 It appears to us that these views of Denning LJ were not sanctioned in Bell v Lever Bros On the contrary they have been the subject of much criticism see Associated Japanese Bank at 266 267 per Steyn J 60 Be that as it may subsequent to Solle v Butcher the courts had in several cases held that there was an equitable jurisdiction to set aside a contract even though it did not meet the strict criteria necessary in common law to establish that it was void for common mistake eg Grist v Bailey 1967 Ch 532 Magee v Pennine Insurance Co Ltd Laurence v Lexcourt Holdings Ltd 1978 1 WLR 1128 61 In Associated Japanese Bank Steyn J having held that the guarantee in question was void ab initio at common law went on to opine at 270 that Equity will give relief against common mistake in cases where the common law will not and it provides more flexible remedies including the power to set aside the contract on terms If I had not decided in favour of the defendants on construction and common law mistake I would have held that the guarantee must be set aside on equitable principles 62 The equitable jurisdiction of the courts has developed over the years to ameliorate the rigours of the common law and to give relief where justice so requires The main authority which the court below relied upon to reject the existence of an equitable jurisdiction in the courts to deal with unilateral mistake is Great Peace Shipping where Lord Phillips of Worth Matravers MR who delivered the judgment of the English Court of Appeal found difficulties with Denning LJ s broad formulation of the equitable jurisdiction in Solle v Butcher because of his failure to distinguish between what was void in law and what was voidable in equity 63 However it seems to us that there is probably another reason why the court below had to come to that conclusion By holding that the doctrine of unilateral mistake in common law encompasses even situations where the non mistaken party does not have actual knowledge but only constructive knowledge of the mistake there will hardly be any need or room for the intervention of equity This is of great importance for as we will come to later even in equity constructive knowledge per se will not entitle the mistaken party to relief Rajah JC s concept of the common law doctrine of unilateral mistake would be wider than what we envisage the scope of the court s equitable jurisdiction should be 64 In Great Peace Shipping a contract was entered into under the mistaken belief by both parties that a vessel which was to be engaged to assist the crew of another vessel which was in distress was only 35 miles away from the latter It later transpired that the two vessels were in fact 410 miles apart Upon obtaining knowledge of the true position the defendant did not cancel the contract straight away but sought to engage another vessel which was nearer A few hours later the defendant found such a vessel and then cancelled the contract The Court of Appeal rejected the defendant s averment that the contract was void at common law or voidable in equity for common mistake and instead allowed the claimant s claim for the contract sum 65 The contention of the defendant in that case was that it was a fundamental assumption of the two parties under the contract that the rescuing vessel was only a few hours sailing time away from the distressed vessel when in fact the two vessels were much further apart and that it would take about 39 hours for the rescuing vessel to reach its target The Court of Appeal put the issue on appeal to be whether the mistake as to the distance between the two vessels had the effect of rendering the services that the rescuing vessel was to provide essentially different from that to which the parties had agreed The Court of Appeal answered this question in the negative and upheld the decision of the first instance judge What the court seems to be saying was that the distance between the two vessels was not really that critical a matter 66 That was not all that was decided in Great Peace Shipping The court went on to disapprove the views of Denning LJ in Solle v Butcher and held that there was no room for rescission in equity if a contract would already have been void under the common law However it also noted at 96 that It is axiomatic that there is no room for rescission in equity of a contract which is void Either Lord Denning MR was purporting to usurp the common law principle in Bell v Lever Bros Ltd and replace it with a more flexible principle of equity or the equitable remedy of rescission that he identified is one that operates in a situation where the mistake is not of such a nature as to avoid the contract The alternative approach postulated by the Court of Appeal above would be an eminently proper basis to found an equitable jurisdiction That was indeed the genesis of the jurisdiction 67 The House of Lords decision in Bell v Lever Bros a case of common mistake played a pivotal part in the consideration of the Court of Appeal in Great Peace Shipping While Bell v Lever Bros was a majority decision the minority did not disagree with the law enunciated by Lord Atkin who was in the majority but differed on how the law was to be applied to the facts of the case There the parties erroneously assumed that the contract of service could not be terminated except by agreement A new agreement was made under which the employer agreed to pay two employees a sum each to terminate the service contracts Later the employer discovered that the contracts of service had been rendered voidable by reason of the two employees breach of fiduciary duties in trading for their own account The minority thought that the assumption was essential and was the foundation upon which the termination agreements were entered into The majority held otherwise and they distinguished between a case where the subject matter of a contract did not exist and a case where the mistake related to the quality of the subject matter In the latter situation the quality must be such that without it the subject matter of the contract would be essentially different from the thing it was believed to be In other words the mistake must render the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist Unless this test was satisfied the contract would be valid in law and following from this there would be no basis to set aside such a contract on account of a variation in the quality of the subject matter 68 It seems to us that the principal reason the Court of Appeal in Great Peace Shipping re examined the foundation of Denning LJ s judgment in Solle v Butcher was the absence of any test to determine how the equitable jurisdiction should be applied to rescind a contract which was distinct from that which rendered a contract void in law It noted at 153 that since the decision in Solle v Butcher it had not proved possible to define satisfactorily two different qualities of mistake one operating in law and one in equity It said at 156 that Bell v Lever Bros had set out the perimeters of the common law rule and the effect of Solle v Butcher was not to supplement or mitigate the common law it is to say that Bell v Lever Bros Ltd was wrongly decided The court was therefore constrained to declare that there was no jurisdiction in equity to grant rescission of a contract on the ground of common mistake where that contract was valid and enforceable on ordinary principles of contract law 69 The courts have exercised equitable jurisdiction to set aside a contract made under a common mistake as early as in the case of Cooper v Phibbs 1867 LR 2 HL 149 There A agreed to take a lease of a fishery from B However contrary to the belief of both parties at the time A was a tenant for life of the fishery and B did not have any title to it Lord Westbury held that the agreement was liable to be set aside as having proceeded upon a common mistake However Lord Atkin in Bell v Lever Bros in commenting on Cooper v Phibbs said that such a contract should in fact be held to be void rather than voidable Following from this Lord Phillips MR in Great Peace Shipping noted it was significant that the majority in Bell v Lever Bros did not see it fit to grant relief on the basis of equity He concluded at 118 Lord Atkin s test for common mistake that avoided a contract while narrow broadly reflected the circumstances where equity had intervened to excuse performance of a contract assumed to be binding in law 70 It is not possible to reconcile the cases or the reasoning in each case It may well be that in Cooper v Phibbs the court could have held that the agreement was void But it did not Moreover as pointed out in 60 above the courts had subsequent to Solle v Butcher exercised equitable jurisdiction in granting relief The case of Riverlate Properties Ltd v Paul 1975 Ch 133 is instructive as it illustrated the circumstances under which the court should exercise its equitable jurisdiction There the plaintiff lessor through its agent had mistakenly omitted to insert a clause to place the defendant lessee under an obligation to bear a part of the cost of the exterior and structural repairs of the demised premises The lessor sought rectification or alternatively rescission in equity on the ground that the lessor had made a mistake which the lessee and or her agent knew The English Court of Appeal held that as the error was purely that of the lessor and or its solicitors and the lessee and or her solicitors had no knowledge of such error and were not guilty of anything approaching sharp practice there were no grounds to intervene Russell LJ said at 141 If reference be made to principles of equity it operates on conscience If conscience is clear at the time of the transaction why should equity disrupt the transaction If a man may be said to have been fortunate in obtaining a property at a bargain price or on terms that make it a good bargain because the other party unknown to him has made a miscalculation or other mistake some high minded men might consider it appropriate that he should agree to a fresh bargain to cure the miscalculation or mistake abandoning his good fortune But if equity were to enforce the views of those high minded men we have no doubt that it would run counter to the attitudes of much the greater part of ordinary mankind not least the world of commerce and would be venturing upon the field of moral philosophy in which it would soon be in difficulties 71 Russell LJ then reviewed the authorities including the decision of the High Court in Redbridge London Borough Council v Robinson Rentals Ltd 1969 211 EG 1125 Redbridge and in giving approval to that case he said at 145 In Redbridge it was clearly held that mere unilateral mistake on the part of the plaintiff unknown to the defendant was no ground for rescission of the lease in question and consequently there was no jurisdiction to make an order for rescission with an option to the defendant to accept rectification This is in our view correct 72 In contrast in Taylor v Johnson 1983 151 CLR 422 the vendor by a written contract agreed to sell two adjoining pieces of land each of about five acres for a total price of 15 000 The vendor subsequently refused to proceed with the sale on the ground that at the time she executed the contract she believed it provided for a price of 15 000 per acre While the trial judge found that the vendor indeed had been so mistaken the purchaser was unaware of the mistake The trial judge ordered the vendor to perform the contract On appeal by the vendor the New South Wales Court of Appeal upon a review of the evidence held that the purchaser believed that the vendor was probably mistaken as to the price and set aside the contract On further appeal the majority of the Australian High Court affirmed the decision of the Court of Appeal on

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  • Equity and Trusts
    Judgments Legislation Notices Directions Continuing Legal Education Resources Media Press Releases Speeches Publications Online References Sample Clauses Directory of Law Practices Latest Singapore Rankings Events Upcoming Events Archive Events Archive 2013 Events Archive 2012 Equity and Trusts Display By Year select 2010 2009 2007 2005 2004 2003 2002 2001 2000 1999 1998 1996 1995 1994 1993 1992 1991 1987 George Raymond Zage III and another v Ho Chi Kwong and another 2010 2 SLR 589 2010 SGCA 4 Decision Date February 10 2010 Zim Integrated Shipping Services Ltd and others v Dafni Igal and others 2010 2 SLR 426 2010 SGHC 8 Decision Date January 11 2010 Ng Eng Ghee and others v Mamata Kapildev Dave and others Horizon Partners Pte Ltd intervener and another appeal 2009 3 SLR R 109 2009 SGCA 14 Decision Date April 2 2009 Yuen Chow Hin and another v ERA Realty Network Pte Ltd 2009 2 SLR R 786 2009 SGHC 28 Decision Date February 5 2009 Lau Siew Kim v Yeo Guan Chye Terence and another 2008 2 SLR R 108 2007 SGCA 54 Decision Date November 30 2007 Asian Corporate Services SEA Pte Ltd v Impact Pacific Consultants Pte Ltd and Others 2005 4 SLR 61 2005 SGHC 138 Decision Date August 4 2005 Lee Tat Development Pte Ltd v Management Corporation of Strata Title Plan No 301 2005 3 SLR R 157 2005 SGCA 22 Decision Date April 12 2005 QBE Insurance International Ltd v Winterthur Insurance Far East Pte Ltd 2005 1 SLR R 711 2005 SGHC 11 Decision Date January 24 2005 Chwee Kin Keong and others v Digilandmall com Pte Ltd 2005 1 SLR R 502 2005 SGCA 2 Decision Date January 13 2005 MAE Engineering Ltd v Fire Stop Marketing Services Pte Ltd 2005 1 SLR 379

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