Compromising on Consideration in Singapore: Gay Choon Ing V Loh Sze Ti Terence Peter Goh Yihan*
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Supreme Court of Singapore, 1 Supreme Court Lane, Singapore 178879, t: (65)-6332-1020 _________________________________________________________________________________________________ We are grateful to the authors, editors and publishers for their kind permission granted to post the respective articles on the Singapore Judicial College website. No article posted here may be circulated or reproduced without the prior permission of the author(s), editor(s) and publisher (where applicable). Our Vision: Excellence in judicial education and research. Our Mission: To provide and inspire continuing judicial learning and research to enhance the competency and professionalism of judges. Compromising on consideration in Singapore: Gay Choon Ing v Loh Sze Ti Terence Peter Goh Yihan* Introduction It is not often that a judgment contains a reference to Aris- tal difficulties’.5 The facts that allowed the opportunity to totle’s work or a coda at its conclusion. The recent Singa- re-evaluate consideration reflected the ebb and flow of pore Court of Appeal1 judgment of Gay Choon Ing v Loh friendship, captured by Aristotle in his Nicomachean Ethics Sze Ti Terence Peter2 (delivered by Andrew Phang JA) con- (Book VIII),6 and interestingly cited by the Court in a rare tained both, the latter of which an extensive judicial expo- judicial nod to classical literature.7 The appellant in Gay sition on the difficulties (and tentative solutions) relating to Choon Ing was a close friend of the respondent and was the contractual doctrine of consideration. This re-evalua- employed by the latter’s company in Kenya, ASP, until his tion of consideration at the slightest opportunity is unsur- resignation in 2004. In 1993, the appellant’s family business prising, given the conceptual problems that have afflicted in Singapore had plans to redevelop a hotel and the appel- the doctrine. There have been various judicial solutions, lant sought the respondent’s financial assistance. The generally capable of classification into two distinct types: respondent acceded to this request and entered into a trust first, through an internal re-definition of concepts within deed wherein the appellant was to hold some shares in his consideration (for example, the equation of factual and family business on trust for the respondent in exchange for legal benefit or detriment in Williams v Roffey Bros & funds. This investment remained uneventful until 2002, Nicholls (Constructors) Ltd3); second, through the applica- when the respondent suspected that he was not informed tion of an external doctrine in conjunction with or in whenever dividends were declared. The respondent’s suspi- replacement of consideration (for example, the arguable cion was confirmed in 2003 when the appellant indicated substitution of promissory estoppel for consideration in his desire to leave ASP with an appropriate severance pack- Collier v P & MJ Wright (Holdings) Ltd4). For convenience, age, thereby straining the parties’ friendship. Following a the former type will be termed the ‘internal solution’, and consensus to resolve matters amicably, the parties conclud- the latter termed the ‘external solution’. The application of ed a ‘Points of Agreement’ in 2004 wherein the appellant either type of solution has different implications about the agreed to purchase the shares held on trust for a sum of continued utility of consideration. Whilst leaving its final money. At the same time, a waiver letter from ASP was sent conclusion deliberately undecided, the Court in Gay to the appellant, stating that ASP had no claim against the Choon Ing seemingly preferred an external solution, pro- appellant and that the appellant could leave ASP but with- viding yet another string to the bow for the abolition of out any severance pay. The appellant signed this letter in consideration in contract law, at least in the Singapore con- acceptance of its terms. However, following another alter- text. However, questions remain as to the consequences of cation in 2005, the respondent initiated a claim for breach such abolition, particularly when, as this comment will sug- of trust and an account of all sums due to him. At first gest, there is insufficient recognition of the distinction instance, the Singapore High Court found for the respon- between (and consequences of) internal and external solu- dent and ordered that the ‘Points of Agreement’ be rescind- tions to the considerable problems of consideration. ed and that the appellant account for dividends payable to the respondent. However, the appellant was not found to Facts and the Court’s re-evaluation of consideration be in breach of trust. Both parties later cross-appealed. Despite the Court’s extensive discussion of consideration, The Court allowed the appellant’s appeal. It thought the actual application of the doctrine raised no ‘fundamen- that the central issue was in contract law (as opposed to March-May 2009 Commercial Law Quarterly 11 trust law), viz, whether the contemporaneous execution of duty owed to the same party; it had no application where the ‘Points of Agreement’ and the waiver letter constituted the promise is to pay less in discharge of an entire debt (for a valid compromise agreement between the parties, there- example, in Foakes v Beer14). Neither did the innovation by releasing both parties from their obligations to each have any relevance in a promise to perform an existing other.8 The actual resolution of this issue on the require- duty imposed by law (for example, in Glasbrook Brothers, ment of consideration was not difficult: relying on the clas- Limited v Glamorgan County Council15) nor in a promise sical definition of consideration in Misa v Currie,9 the to perform an existing duty owed to a third party (for Court found that it was sufficient for the respondent to example, in New Zealand Shipping Co Ltd v A M Sat- have suffered a detriment through his promise to relinquish terthwaite & Co Ltd16). Indeed, both of these situations are all claims against ASP, such that it did not matter that ASP conventionally explained by the orthodox requirement of or the respondent may not have been conferred a benefit. a legal benefit or detriment. Having implicitly considered In any event, the Court was prepared to find the confer- that the internal reformation of consideration by the ment of a benefit on the respondent in view of his person- Williams innovation to be unsatisfactory, the Court indi- al interest in not having his company sued. It was also irrel- cated a tentative (if rather obvious) preference for the evant that ASP (and not the respondent in his personal external application of economic duress as a replacement capacity) signed the waiver letter because the appellant had for consideration, noting that the situations in Glasbrook done likewise at the respondent’s request.10 Having found and The Eurymedon may be adequately dealt with by eco- the other essential elements of a compromise present, the nomic duress.17 It stopped short of crystallising this prefer- Court had no difficulty ruling in favour of the respondent. ence into law because, quite apart from the fact that this While this uncontroversial application of the present issue was not argued, economic duress (and its related law is unproblematic, it may be questioned whether the doctrines of unconscionability and undue influence) is not two documents were ever intended to constituted a com- free from difficulties.18 Nonetheless, the Court staunchly promise between the parties. There is of course nothing to noted that consideration would need to be reformed; in prevent the essence of a compromise to be found within the Court’s own words (at [117]): two or more documents, but the Court evidently took a ‘However, because the doctrine of consideration does pragmatic view of the facts in finding that the parties contain certain basic weaknesses which have been pointed intended to form a compromise by these two documents. out, in extenso, in the relevant legal literature, it almost Indeed, it was prepared to look over the fact that both the certainly needs to be reformed. The basic difficulties and ‘Points of Agreement’ and the waiver letter technically alternatives have been set out briefly above but will need involved different parties, preferring instead to view both to be considered in much greater detail when the issue parties in their ‘relevant context’.11 Although, as the Court next comes squarely before this court. One major difficul- correctly stated, this would have no legal effect vis-à-vis the ty lies in the fact that a legal mechanism must be main- consideration issue, one may have cause to wonder if the tained that will enable the courts to effectively and practi- parties themselves saw the two documents as a valid com- cally ascertain which promises ought to be enforceable.’ promise, particularly when, as the Court pointed out on Indeed, it seems that the time that the Court has ear- numerous occasions, the parties’ counsel never made com- marked to do so is when a viable alternative relatively promise a major issue either in proceedings below.12 free of problems is found. However, it is probably the case that the conclusion, on an objective construction of the documents concerned, Two innovations in the potential future reform was the correct one. What might be legally interesting, of consideration however, is that notwithstanding the rudimentary applica- The supposed need to reform consideration is not new, tion of consideration, the Court proceeded to discuss the and has in fact been advocated by many.19 In this principal difficulties of the doctrine, as well as the main respect, the Court’s unusual coda contains two innova- alternatives available for future determination. Pursuant to tions, one general and the other specific, which may be this endeavour, the Court stated the Williams innovation of interest in any discussion relating to the potential generated ‘very practical difficulties’ in as much as it ren- reform of consideration.