Gay Choon Ing v Loh Sze Ti Terence Peter and Another Appeal

1. Andrew Phang Boon Leong JA (delivering the judgment of the court):

2. Introduction

3. [1]

   [1] These are two related appeals against the decision made by the High Court in Suit No 341 of 2005, taken out by Loh Sze Ti Terence Peter, the plaintiff, against Gay Choon Ing, the defendant, respectively. For ease of reference, we shall continue to refer to the parties here as “the plaintiff” and “the defendant”. The appeals arise out of the same facts, and it is convenient to deal with them together in this judgment.

4. [2]

   [2] In Civil Appeal No 33 of 2008 (“CA 33/2008”), the defendant appealed against the orders made by the trial judge (“the Judge”) which included, inter alia, an order declaring that the defendant held 1.55 million ordinary shares of $1 each (“the Shares”) in the defendant’s family company, Gay Lip Seng & Sons (Pte) Ltd (“the Company”), on trust for the plaintiff. Being dissatisfied with various aspects of the decision made by the Judge (see Loh Sze Ti Terence Peter v Gay Choon Ing [2008] SGHC 31 (“the GD”)), the plaintiff appealed to this court via Civil Appeal No 34 of 2008 (“CA 34/2008”). Three documents signed and concluded between the plaintiff and the defendant are particularly integral to the proceedings themselves: first, a trust deed concluded between both parties as at 3 January 1994 (“the Trust Deed”); second, points of agreement (“the POA”) signed between both parties on 27 October 2004; and, third, a waiver letter concluded contemporaneously with the POA.

5. [3]

   [3] Having heard and carefully considered the submissions of the respective parties, we have decided to allow the defendant’s appeal in CA 33/2008 and dismiss the plaintiff’s appeal in CA 34/2008. We now set out the reasons for our decision.

6. The decision in the court below

7. [4]

   [4] The Judge carefully considered the arguments of both parties in the court below and arrived at the conclusion, inter alia, that the defendant held the Shares on trust for the plaintiff and that the POA should be rescinded. Central to her decision was the emphasis placed on the construction of the Trust Deed. First, she held, inter alia, that the approach to adopt towards the acrimonious dispute was to “construe the Trust Deed in its entirety to determine whether or not the declaration of trust was to create a trust of the Shares with [the plaintiff] as the beneficial owner” (see the GD at [19]). She reasoned that the substance and form of the Trust Deed suggested that the document bore the “hallmarks of an express trust” (at [20]). Further, cl 3 of the Trust Deed specifically indicated that the beneficiary would indemnify the defendant for obligations arising by reason of the Shares being registered in his name.

8. [5]

   [5] Secondly, the Judge had to consider if the sum of $1.55m, which the plaintiff had allegedly paid for the Shares, was a loan to the defendant or an investment in the Company. The Judge embarked on an extensive analysis of the testimony of both parties during cross-examination as well as the various arguments canvassed by both parties. She held that there was no contemporaneous documentary evidence of the purported loan extended by the plaintiff, and accepted that the only formal documentation of the parties’ relationship was embodied in the Trust Deed. Further, and notwithstanding the defendant’s assertions, she acknowledged that while both the plaintiff and defendant shared a close relationship, the circumstances were not such “that the common sense of the situation bore out a loan even out of kindness” (at [31]). Contrary to the defendant’s suggestion of a loan, the plaintiff’s investment represented a substantial block of shares in the Company and allowed the defendant to take control of the Company. On this basis, she found that the defendant held the Shares on trust for the benefit of the plaintiff.

9. [6]

   [6] Having decided these two issues in favour of the plaintiff, the Judge proceeded to consider the plaintiff’s complaints in relation to, first, breaches during the period of trusteeship before the signing of the POA and second, whether the signing of the POA had been induced by misrepresentation or breach of trust.

10. [7]

    [7] The plaintiff alleged, inter alia, that the defendant had misappropriated his share of profits and dividends, dealt with the Shares without informing him or obtaining his prior consent, held himself out as the beneficial owner of the Shares and withheld material information of the Company from him. The plaintiff further averred that the defendant had fraudulently or negligently misrepresented to him that the dividends due to him amounted to $100,000 and that the fair value of the Shares was $1.4 m. The plaintiff therefore sought to have the POA rescinded on the ground of misrepresentation. He also sought to have the POA rescinded for alleged breach of trust by the defendant.

11. [8]

    [8] The Judge discussed extensively the scope of the defendant’s duties as trustee under the Trust Deed. Addressing the plaintiff’s four main allegations, the Judge concluded, first, that there were neither pre-emption provisions in the Company’s articles of association restricting the transfer of shares by a member to an existing member or stranger nor any legal obligation on the part of a member “desiring to sell his shares to first offer them for sale to all the existing members of the Company”, and not just to the defendant (see the GD at [52]). Second, the Judge found that the plaintiff was, on a balance of probabilities, aware that the issue of the Company’s bonus shares were “for the original ten shares as the bonus issue was a result of a capitalisation of the revaluation of the Company’s property prior to the issuance of the new shares” [emphasis in original] (at [63]). Third, she held that the plaintiff was only entitled to dividends declared on the 1.55 million shares. The plaintiff was entitled to receive dividends in respect of the Shares from the time they were first declared in 1999 up to recent times and credit was to be given for all sums received by the plaintiff already. Fourth, she found that there had been no breach of trust in relation to the purchase of an apartment by the defendant using the Company’s funds, on the basis that the plaintiff could not conflate the defendant’s “role as trustee director and as trustee of the Shares” (at [74]).

12. [9]

    [9] Turning to the POA, the Judge considered whether the signing of the POA was induced by misrepresentation or in breach of trust. First, on the allegation of misrepresentation, she held that the plaintiff was unable to point to any representations made by the defendant and, further, that the elements of inducement and reliance had not been made out. Second, she considered if the POA could be rescinded on the basis of the “fair dealing” rule. She held that a conflict of interest had arisen when the defendant failed to disclose the value of the Shares by the date of execution of the POA. Further, she reasoned that, considering that there had been a lack of material disclosure (at [92] of the GD):

13. This then led the Judge to consider the defendant’s argument that the POA was a compromise settlement between the parties, having regard to the contemporaneous waiver letter that both parties had signed. Her reasons for rejecting this argument can be broadly classified into two main categories: first, she held that the defendant had not furnished sufficient consideration in law as the waiver letter “was vis-à-vis [the plaintiff] in his capacity as representative of ASP [a Kenyan company of which the plaintiff was the managing director and shareholder] and not in his personal capacity” (at [95]); secondly, she was of the view that the defendant’s denial of the contents of the waiver letter and his subsequent “fresh assertion through his Kenyan lawyers for severance pay [pursuant to his resignation from ASP] even after the POA was signed” did not support his contention that the POA and the waiver letter were to be construed as a valid compromise or settlement between the parties (ibid).

14. [10]

    [10] Having rejected the defendant’s argument, she concluded that the defendant had breached the fair dealing rule and ordered that the POA be set aside. As a condition of rescission, she further ordered the plaintiff to hand over a sum of $1.5m (which the defendant had paid to the plaintiff pursuant to the POA) to the defendant and that he (the plaintiff) would be allowed to set off, from this sum, dividends payable to him.

15. [11]

    [11] It must be noted that the Judge addressed each issue in great detail and spared no effort in considering the arguments put forth by the parties. Based on the arguments presented before her, she arrived at a conclusion as to the legal status of the Trust Deed. With respect, however, there is an issue which (for reasons which we will elaborate upon below) is of signal importance to the resolution of the appeal in CA 33/2008, but which was dealt with as a subsidiary issue by the Judge (see the GD at [95]). This centres on whether or not there had, by virtue of the contemporaneous execution of the POA and the waiver letter, been a valid compromise agreement between the parties. If there had been such an agreement, then the defendant would have been released from all his legal obligations under the Trust Deed provided that he had complied with the relevant terms of the POA, and the plaintiff would be released from any possible liability to the defendant with respect to the latter’s claims in relation to severance pay (see [9] above). However, this question (as to whether or not there had indeed been a valid compromise agreement between the parties) appears to have been dealt with only tangentially by the parties themselves. This (unfortunate) lack of assistance by the parties relegated this important issue to the margins and was (justifiably) dealt with as such by the Judge. The Judge came to the conclusion that there had been no valid compromise agreement (at [94]–[95]; see also above at [9]). Running slightly ahead of the story, so to speak, we regretfully differ from this conclusion for reasons which we set out in detail below. Before proceeding to do so, however, it would be apposite to set out the relevant factual background to the present appeal.

16. Factual background

17. Development of friendship between both parties

18. [12]

    [12] Aristotle once observed in Nicomachean Ethics, Book VIII (Cambridge University Press, 2000) (Roger Crisp trans & ed) ch 3, at p 147:

19. This was, in a sense, true of the relationship between the plaintiff and the defendant, whose chapters of friendship unfolded over the last 30 years. Both parties were by no means strangers to each other and the history of their acquaintance can be traced back to its roots, nearly three decades ago in the early 1970s, when both men served alongside each other in the Singapore Armed Forces (“SAF”). As fellow comrades-in-arms, a steady friendship blossomed between both men that surpassed the vagaries of time and continued even after they left the SAF and embarked on their separate paths in life.

20. [13]

    [13] This friendship was further cemented when both men worked alongside each other in managing the plaintiff’s business. The plaintiff was the managing director and a shareholder of a company called ASP Company Limited (“ASP”), located in Nairobi, Kenya. In the early 1980s, the plaintiff, who had business interests in Thailand, sounded out the defendant as to whether he would be interested in taking up employment in Thailand. The defendant was agreeable to this and commenced his employment in 1980 with Sathask Driam Company in Thailand. In 1981, the plaintiff asked the defendant to move to Kenya and the defendant was (again) willing to do so, joining ASP as its general manager in 1981. Thereafter, from 1981 to 2004, he continued to work for the plaintiff who was both his friend as well as his immediate boss. After 1995, the plaintiff and his family moved back to Singapore from Kenya and the defendant was left to run ASP by himself, reporting to the plaintiff often by e-mail. The defendant rose through the ranks and was eventually named a director of ASP although he did not hold any shares in ASP. During his tenure of employment with ASP, the defendant’s job entailed travelling to states where ASP had its business interests, to places such as China, even as he continued to be based in Kenya.

21. [14]

    [14] With the development of such a close-knit and inextricably intertwined bond between both men, it was hardly surprising that there was a level of implicit trust and mutual respect that developed between both parties. Indeed, this almost symbiotic friendship continued to thrive through the years, extending beyond purely business relations into their personal lives. Both families were close and went on family outings together, with the plaintiff serving, in some respects, as a mentor and role model to the defendant’s two children, Rosemary and Larry. As an illustration of the close bond shared between both men, the plaintiff further arranged for Rosemary to gain admission to a good school and also financed the defendant’s children’s education in Australia entirely out of his own pocket. It was telling that despite the spate of proceedings in the present case, we note, in passing, that in the defendant’s affidavit of 3 November 2006, he acknowledged this close bond and remarked affirmatively of the plaintiff that “[h]e was my friend, my boss and the most trusted person outside my immediate family”.[note: 1]

22. Events leading up to the signing of the Trust Deed in 1994

23. [15]

    [15] The defendant was a shareholder of the Company, a family business started by the defendant’s father. The Company owned and operated a hotel known as Tai Hoe Hotel (“the Hotel”), a two-storey pre-war building located in Little India. Prior to 1993, the defendant held one of ten ordinary shares of $1 each in the equity of the Company. The other shareholders in the Company were the defendant’s brothers and his father. After his father’s demise in 1989, his father’s shareholding was transferred to the defendant’s mother in 1995.

24. [16]

    [16] In 1993, the Company decided to redevelop the Hotel. Pursuant to this suggestion, a meeting of the shareholders of the Company was called sometime in 1993 when it was agreed that $3m represented the value of the Hotel’s property and it was further agreed that for each one share currently held, additional shares of 299,999 shares would be issued (“the bonus shares”). The Company increased its authorised capital to $5.5m. The bonus shares were to be distributed “amongst the persons who were registered as holders of the issued share capital of the Company at the closing of the Register on 13 December 1993”.[note: 2] Therefore, a total of 2,999,990 shares would be issued, giving a total of $3m in issued share capital, and $2,999,990 was credited to the capital reserve account of the Company.

25. [18]

    [18] Having undertaken to raise $2.5m for this redevelopment project, the defendant turned to the plaintiff in view of the friendship they shared. The plaintiff alleged that the defendant approached him to entice him into investing in the Company to enable the rebuilding and redeveloping of the Hotel. However, the defendant’s recollection of this event differed – he alleged that the plaintiff “readily agreed to extend a loan”[note: 3] [emphasis added] to him and that he (the plaintiff) would do anything to have him remain in Kenya as he required him to continue to run the operations of ASP’s business. The defendant further alleged that he confided in the plaintiff that he would prefer to secure the loan and would pledge an equivalent number of shares to him. This was to ensure that, in the event of his demise, the plaintiff would be able to recover his loan.

26. [19]

    [19] Whether the sum of money extended by the plaintiff was an investment or a loan, what is clear is that, pursuant to this arrangement between the parties, the defendant issued shares to the plaintiff. According to the plaintiff, both he and the defendant appointed Peter Chua, a solicitor with M/s Peter Chua & Partners, to document the arrangement. Both of them were agreeable to the terms and signed the Trust Deed on 3 January 1994. The Trust Deed provided as follows:

27. [20]

    [20] By this document, the defendant understood it to mean that $1.55m would be lent by the plaintiff to him. However, the plaintiff understood it, on the contrary, to be an investment and that the defendant held the Shares on trust for him. Quite apart from this particular dispute, the quantum of money the defendant received for the Shares was the subject of some dispute between both parties; the defendant vigorously contended before the Judge that he had only received $1.4m but the plaintiff argued that the amount in question was higher, viz, $1.55m. The defendant contended that when a total of $1.4m was eventually received from the plaintiff after the signing of the Trust Deed, he did not endeavour to correct the Trust Deed as he trusted the plaintiff.

28. Events after signing of the Trust Deed –- 1995 to 2003

29. [21]

    [21] After the signing of the Trust Deed, the plaintiff continued to render assistance in the form of guidance to the defendant in relation to the development of the Hotel and the structure of the Company. Sometime in January 2001, the defendant acknowledged the plaintiff’s contributions and wrote to the plaintiff thanking him for his help. In February 2003, the plaintiff contacted Rosemary to ask for details of dividends paid by the Company. Rosemary responded to the plaintiff’s query and he was informed of the dividends paid in relation to 1.4 million shares. On 2 June 2003, the plaintiff followed up with further enquiries relating to the dividends payable for 2002. He was informed that these had not been paid.

30. A turn for the worse – 2003 to 2004

31. [22]

    [22] However, relations between the plaintiff and the defendant began to sour in 2003. In August 2003, the defendant indicated to the plaintiff that he wished to retire from ASP and mentioned that ASP paid retirement sums to its employees on their retirement from ASP. The plaintiff sought to persuade him to stay on for another year. The defendant agreed to do so but this did not dissuade him from wanting to retire eventually. On 30 July 2004, the defendant wrote to the plaintiff reiterating his intention to retire from ASP with effect from 31 October 2004 and asked that ASP “work out [his] terminal dues before [his] departure date”.[note: 4]

32. [23]

    [23] Subsequently, in August 2004, the defendant again informed the plaintiff of his intention to retire but the plaintiff asked him to stay on for another three months to assist in a project and for time to work out the termination money payment. On 11 August 2004, the defendant wrote an e-mail to the plaintiff as follows:[note: 5]

33. [24]

    [24] On 12 August 2004, the plaintiff responded tersely to the defendant’s e-mail, confessing openly that he felt betrayed by the defendant’s decision to leave the employment of ASP:[note: 6]

34. [25]

    [25] The relationship between the parties began to spiral out of control, taking a turn for the worse with the plaintiff, on one hand, accusing the defendant of withholding information from him and treating the Trust Deed as an investment and the defendant, on the other hand, becoming increasingly exasperated by the deepening rift that was widening between them. On 5 October 2004, the defendant wrote to the plaintiff seeking to work out the severance pay with regard to the local contract (what he had referred to in his earlier letter of 30 July 2004 as his “terminal dues” (see above at [22])). The letter encapsulates how embittered and tenuous relations between both parties had become:[note: 7]

35. [26]

    [26] On 6 October 2004, the defendant again wrote to the plaintiff, copying the e-mail to a few other employees of ASP, as follows:[note: 8]

36. In this letter, the defendant proceeded to cite several instances of how he had succeeded in resolving business problems encountered in his employment at ASP. The contrast between the intensity of the bond once shared between the parties and how it had been broken is apparent in the letter. A note of resignation with a view to moving on is noticeably present in the undertones of the e-mail:

37. [27]

    [27] In an e-mail sent by the plaintiff to the defendant on 15 October 2004, he (the plaintiff) appeared to recognise this practice of paying retirement sums to employees:[note: 9]

38. He voiced how he wished to work out an amicable solution because they were “friend[s] and strong all[ies]”:[note: 10]

39. [28]

    [28] On 16 October 2004, the defendant replied to the plaintiff’s e-mail and assented to resolving to the matter amicably instead of seeking to litigate:[note: 11]

40. [29]

    [29] As can be seen from the above exchange of correspondence, both parties were highly strung and emotional over the acrimonious relations and disagreements that had resulted from the ongoing dispute. However, in the midst of the negotiations, both men acknowledged and recognised their past bond as both friends as well as business allies and, on the basis of this friendship and bond once enjoyed, they sought to settle matters amicably rather than legally.

41. Signing of the POA

42. [30]

    [30] On 25 October 2004, the defendant’s Kenyan lawyers, M/s G N Gichuhui Ngari & Co Advocates, wrote to the plaintiff seeking payment of the defendant’s “terminal dues” within seven days. This culminated in the signing of the POA by both parties two days later, on 27 October 2004. With respect to this document, the defendant alleged before this court, first, that he had no input into the POA; second, that the document was prepared by the plaintiff; and third, that the waiver of the retirement dues was only for the foreign contract and the plaintiff would pay him under the local contract as the amount involved was small. The POA in fact stated (in full) as follows:

43. [31]

    [31] What was particularly significant was that on the exact same day, a waiver letter was sent by the plaintiff in his capacity as managing director of ASP to the defendant (“the Waiver Letter”), stating the following:

44. This letter was signed by the defendant as well as by the plaintiff on behalf of ASP. Bearing in mind the chain of correspondence between both parties set out above and the fact that both parties signed both documents contemporaneously on the same day, three significant conclusions can be drawn from this: first, far from suggesting that the parties were seeking to initiate legal proceedings to resolve the outstanding disputes, both parties were keen on resolving matters amicably; second, this intention to resolve matters amicably had effectively materialised with the execution of these two documents, where each party in effect promised to have “no claims against [the other] whatsoever”; and, third, the Waiver Letter was signed by the defendant at the request of the plaintiff, thus sealing this commitment between both parties towards resolving matters amicably.

45. [32]

    [32] After the POA was executed, the defendant returned to Singapore and, by 10 January 2005, full payment in the sum of $1.5m was made to the plaintiff. Receipt of this sum was acknowledged in an e-mail sent by the plaintiff to the defendant on 10 January 2005:[note: 12]

46. [33]

    [33] However, tempers (unfortunately) flared up again when on 10 February 2005, the plaintiff wrote to the defendant, alleging that the defendant may have committed criminal breach of trust and that the defendant had made threats to him at a dinner in Shanghai, even as he reiterated his intention that he had hoped to resolve matters amicably:[note: 13]

47. [34]

    [34] Under the present cloud of simmering tensions, this unfortunate turn of events unsettled both parties and culminated in an eventual impasse. The plaintiff’s letter was followed by the defendant’s reply in his defence on 21 February 2005,rebutting the plaintiff’s allegations of criminal breach of trust as “unjustified and unwarranted”, as follows:[note: 14]

48. [35]

    [35] On 21 March 2005, the plaintiff, through his lawyers, M/s Manjit Govind & Partners, wrote to the defendant requesting for true copies of the Company’s accounts in view of his investment, alleging that the defendant was a “trustee of his interest in … the Company” and that “as his trustee [the defendant had] withheld information that would affect the value of his shares”.[note: 15]

49. [36]

    [36] On 30 March 2005, the defendant, through his lawyers, M/s Lim & Lim, refuted the plaintiff’s allegation that the plaintiff had invested in the Company and first, alleged that the money was an interest-free loan for which “as security, 1.55 million shares would be ‘pledged’ to [the plaintiff]”; second, indicated that he (the defendant) was willing to have the plaintiff’s auditors look at the Company’s audited accounts to confirm the status of the dividends; and third (most critically in our opinion), sought to frame the signing of the POA as an initiative engineered by the plaintiff although he confirmed on record that the plaintiff had requested him to sign the Waiver Letter to promise that he would have no claims against ASP whatsoever:

50. It should be noted that the contents of this particular letter belied the parties’ intention and effort, at the point of execution of the POA, to extinguish their claims against one another and the plaintiff’s intention, by extending the Waiver Letter on the same day and requesting the defendant to countersign on the letter, to cement this effort at reaching a final (and legally binding) reconciliation. This was by no means a half-hearted attempt at putting a stop to the escalating tensions mounting between them.

51. The issues on appeal

52. [37]

    [37] The defendant appealed, inter alia, against the following aspects of the Judge’s decision:

53. (a) that he held the Shares on trust for the benefit of the plaintiff;

54. (b) that the POA between the parties be rescinded; and

55. (c) that he account for dividends payable to the plaintiff in respect of the Shares, which dividends were first declared by the Company in 1999 right up to recent times.

56. [38]

    [38] The plaintiff appealed against those aspects of his case which the Judge did not agree with, including, inter alia:

57. (a) that as a condition to the rescission of the POA, he was to hand over the sum of $1.5m to the defendant;

58. (b) that he was not entitled to 61.9% of the shares of the Company; and

59. (c) that the defendant was not in breach of his duties as trustee and at law in failing to offer him the proportion of the Shares held on trust.

60. [39]

    [39] In our view, these issues, with respect, miss the real focal point of the dispute between the parties. The key inquiry, having regard to the events that transpired and led to the present proceedings as mentioned above, was whether or not the POA and the Waiver Letter constituted a valid compromise agreement between the parties. Running slightly ahead of the story, so to speak, it was in fact clear to us, from a close analysis of these documents as well as the context furnished by the course of correspondence between the parties from October 2004 to February 2005, that both the plaintiff and the defendant, for all intents and purposes, acted and proceeded on the basis that there was a concluded compromise. The plaintiff promised to release the defendant from all his obligations under the Trust Deed in accordance with the terms of the POA while the defendant in turn, agreed to relinquish all claims against ASP. It is also pertinent to note, first, that the settlement sum extended was ultimately paid and received without any qualification; and, second, that the plaintiff wished the defendant well in his future endeavours. Both parties clearly were keen to move on and put aside their differences. What appeared to derail these hitherto settled relations were the purported threats made over the dinner in Shanghai. However, this would not affect the already concluded compromise agreement between the parties which, in our view, effected a “clean break” between them, leaving no outstanding legal issues between them under the Trust Deed as well as between the defendant and ASP with regard to the former’s claims for severance pay.

61. [40]

    [40] We should, however, emphasise, at the outset, that we find the findings and reasoning by the Judge with regard to all the remaining issues to be both meticulous as well as correct. Hence, we need focus only on whether or not the parties concluded a valid compromise agreement. Our decision on this particular issue is relevant to the appeal in CA 33/2008. This is because, although we have affirmed the findings and reasoning of the Judge with respect to the remaining issues, the defendant would nevertheless succeed in his appeal if there is a valid compromise agreement. However, it necessarily follows then that the plaintiff’s appeal in CA 34/2008 must fail. We turn now to the reasons why we find that the parties had concluded a valid compromise agreement.

62. Our decision

63. The law on compromise

64. [41]

    [41] In the leading Commonwealth textbook on compromise and settlements, Foskett QC sets out the following definition of a “compromise” (see David Foskett, The Law and Practice of Compromise (Sweet & Maxwell, 6th Ed, 2005) at para 1-01):

65. This definition finds, in fact, judicial expression in several old English cases such as the English Court of Appeal decision of Plumley v Horrell (1869) 20 LT 473, where Lord Romilly MR observed, as follows (at 474):

66. In the (also) English Court of Appeal decision of Knowles v Roberts (1888) 38 Ch D 263, Bowen LJ reiterated (at 272) that a compromise essentially puts a dispute to an end:

67. [42]

    [42] Bearing in mind the mechanics of an adversarial system of litigation, it is not surprising that parties may seek to give effect to the terms of their agreement to compromise and settle their disputes, whether prior to or at the trial itself. The courts would permit this, if certain requirements are satisfied. The rationale for this has been alluded to briefly by K S Rajah JC in the Singapore High Court decision of Lee Hong Choon v Ng Cheo Hwee [1995] 2 SLR 663, as follows (at 666, [11]):

68. Put simply, where parties have demonstrated that they intend to dispose of their dispute by reaching an amicable resolution agreeable to both parties, this compromise or settlement will be recognised and given effect to by the courts.

69. [43]

    [43] As Foskett observes (at para 3-01), a compromise is essentially founded on contract. Before a compromise can be reached between two parties, there must, of necessity, be an actual or potential dispute between parties that can be disposed of, as established in cases such as Chapman v Chapman [1954] AC 429, Mercantile Investment and General Trust Company v International Company of Mexico [1893] 1 Ch 484 (“Mercantile”) and Sneath v Valley Gold, Limited [1893] 1 Ch 477. In the English Court of Appeal decision of Mercantile, an action was brought by the holders of 125 debentures (issued by the defendant American company) with the aim of recovering interest due on them. The defendant company alleged that, at a prior company resolution, a majority of the debenture holders had resolved that the debentures of the company be exchanged for paid-up preference shares in an English company which had taken over the assets and liabilities of the defendant company. Hence, the defendant company argued that the plaintiffs’ rights as debenture holders had determined, given that the resolution was binding on the plaintiffs. In considering the validity of the resolution and whether it modified or compromised the rights of the debenture holders against the defendant company, Fry LJ observed (at 491) that:

70. [44]

    [44] In the Singapore High Court decision of Info-communications Development Authority of Singapore v Singapore Telecommunications Ltd (No 2) [2002] 3 SLR 488 (“Info-communications”), Lai Kew Chai J, citing Foskett, observed at [120] that:

71. The learned judge further noted, in a similar vein, as follows (at [124]):

72. [45]

    [45] What can be gleaned from the aforementioned extracts is that without an actual or potential dispute, it is obvious that nothing can be settled or compromised. A compromise or settlement is the result of the resolution of an actual or potential dispute.

73. Essential requirements of a compromise

74. [46]

    [46] As already alluded to above, the general principles of contract law apply with equal force to the law of compromise as in other contractual contexts. As Foskett has observed (at para 3-01, and adopted in Info-communications (at [115])), a compromise will not arise unless certain requirements are fulfilled; these include (differing somewhat, though, from the precise sequence Foskett has adopted) what is, in fact, traditionally required under the general common law of contract, viz, an identifiable agreement that is complete and certain, consideration, as well as an intention to create legal relations. As these requirements are elaborated upon in detail in all the leading textbooks on contract law, just a basic outline will suffice for the purposes of the present appeal.

75. An identifiable agreement that is complete and certain

76. [47]

    [47] First, there must be an identifiable agreement, which is complete and certain. Essentially, this means that negotiations between the parties must have crystallised into a contractually-binding agreement in which there is no uncertainty as to the terms of the contract concerned. The traditional tools of analysis centre around the concepts of offer and acceptance. An “offer” has been described as follows (see M P Furmston, Cheshire, Fifoot and Furmston’s Law of Contract (Oxford University Press, 15th Ed, 2007) (“Cheshire, Fifoot and Furmston”) at p 40):

77. An “acceptance” has been described as follows (see Edwin Peel, Treitel: The Law of Contract (Sweet & Maxwell, 12th Ed, 2007) (“Treitel”) at para 2-015):

78. [48]

    [48] An “offer” must be distinguished from an “invitation to treat”. The former has already been defined above (at [47]). The latter, on the other hand, is simply an attempt to initiate negotiations, to induce offers; hence, a response to an “invitation to treat” can never result in a concluded contract. Although there are decisions illustrating specific instances of “invitations to treat”, the distinction between an “offer” on the one hand and an “invitation to treat” on the other is, at bottom, a question of the intention of the party concerned (viz, whether his or her intention was to make “a definite promise to be bound provided that certain specified terms are accepted” (an offer; and see above at [47]) or merely attempting to induce offers instead (an invitation to treat)).

79. [49]

    [49] It should be noted, however, that the concepts of offer and acceptance are not always helpful – not, at least, where they are applied in a mechanistic fashion. But, of that, more later (see below at [61]–[63]).

80. [50]

    [50] It should be further noted that before a contract can be said to have been concluded, the terms of the contemplated contract must be both certain and complete (see the oft-cited House of Lords decision of G Scammell and Nephew, Limited v HC and JG Ouston [1941] AC 251). Possible gaps may be filled by a previous course of dealing between the parties or by trade practice or where a definite formula exists (see, in this last-mentioned regard, for example, the English decision of Brown v Gould [1972] Ch 53; the Malaysian Privy Council decision of Kepong Prospecting Ltd v Schmidt [1968] 1 MLJ 170; and the decision of this court in British Malayan Trustees Ltd v Sindo Realty Pte Ltd [1999] 1 SLR 623).

81. [51]

    [51] Turning to a specific illustration where a valid compromise agreement was found by the court, in the Malaysian Federal Court decision of The Ka Wah Bank Ltd v Nadinusa Sdn Bhd [1998] 2 MLJ 350, the respondents were directors of a company that had been granted banking facilities by the appellant bank. The respondents defaulted in payment and the bank commenced three suits against them. The respondents contended that the first suit had been compromised as a result of an exchange of correspondence passing between their solicitors and an authorised agent of the bank. They averred that the totality of the letters read as a whole constituted a binding agreement in full and final settlement. Not surprisingly, the bank denied that this was a valid compromise.

82. [52]

    [52] The Federal Court focused on the construction and the effect of the correspondence exchanged between the parties to see if “there [was] to be found in them an offer substantially accepted in terms which constitute a contract” (at 366). Citing the House of Lords decision of Gibson v Manchester City Council [1979] 1 WLR 294 (“Gibson”), the court referred to Lord Diplock’s observation in that case (at p 297) that:

83. Adopting this approach, the Federal Court considered the chain of correspondence between the bank’s authorised agent and the respondents’ solicitors and came to the conclusion that there was a valid compromise in the circumstances, on the basis of two letters suggesting that the bank would accept shares owned by the respondents (and the transfer forms duly executed) as full and final settlement of the sum owed.

84. [53]

    [53] The aforementioned paragraphs suggest (correctly, in our view) that the courts look at the whole course of the negotiations between both parties in order to ascertain if an agreement is reached at any given point in time. It should further be noted that where such a point is identified, the mere fact that negotiations are continued thereafter does not of itself affect the existence of the agreement already concluded. Of course, if the continued negotiations disclose an agreed rescission of an agreement already concluded, then the position is quite different.

85. [54]

    [54] Once an agreement has been established by the court, that concludes the matter. In the Singapore High Court decision of Tan Kee v The Titular Roman Catholic Archbishop of Singapore [1997] SGHC 281, for example, G P Selvam J observed, as follows (at [31]):

86. [55]

    [55] More recently, in Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR 663, this court considered whether a termination agreement entered into between the appellant and the respondent constituted a fresh contract or a settlement agreement, and observed (at [40]) that:

87. [56]

    [56] Indeed, the objective nature of the entire inquiry has been underscored in many cases. For example, in the decision of this court in Aircharter World Pte Ltd v Kontena Nasional Bhd [1999] 3 SLR 1, M Karthigesu JA noted (at [30]) that:

88. [57]

    [57] In a similar vein, Yong Pung How CJ, also in a decision of this court in Tribune Investment Trust Inc v Soosan Trading Co Ltd [2000] 3 SLR 405, observed as follows (at [40]):

89. [58]

    [58] And, in the Singapore High Court decision of Chia Ee Lin Evelyn v Teh Guek Ngor Engelin née Tan [2004] 4 SLR 330, Lai Kew Chai J held, inter alia, that there had been no valid compromise arrived at by the parties concerned on the facts. The learned judge emphasised the importance of the objective test which has just been referred to, as follows (at [43]):

90. [59]

    [59] On appeal, his decision was affirmed (see the decision of this court in Teh Guek Ngor Engelin née Tan v Chia Ee Lin Evelyn [2005] 3 SLR 22). Choo Han Teck J, delivering the judgment, noted that it was doubtful that a valid compromise had arisen given the lack of convincing evidence (at [12]):

91. [60]

    [60] It should, however, be mentioned (in passing) that although the objective test is adopted (and is, indeed, necessary in order to enable the courts to administer legal criteria that are not inherently arbitrary), the practical reality is that much will depend on the precise facts before the court concerned. In particular, the court will, wherever possible, rely on relevant documents. Where, however, there is a dearth of objective criteria (such as documents), the court will nevertheless attempt its level best by examining closely (and in particular) the precise factual matrix.

92. [61]

    [61] As alluded to above, however, the rules relating to offer and acceptance can, on occasion, be rather technical. One result is that rather fine distinctions have sometimes been drawn (see, for example, the English Court of Appeal decisions of Chapelton v Barry Urban District Council [1940] 1 KB 532 and Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163). On other occasions (thankfully not often), entire contracts might even be “invented”, resulting in no small measure of artificiality (see, for example, the oft-cited House of Lords decision of Clarke v The Earl of Dunraven and Mount-Earl [1897] AC 59 and the English High Court decision of Shanklin Pier Ld v Detel Products Ld [1951] 2 KB 854). Indeed, in the Privy Council decision of New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 (“The Eurymedon”), Lord Wilberforce, delivering the judgment of the majority of the Board, observed thus (at 167):

93. [62]

    [62] It was perhaps the somewhat technical nature of the rules relating to offer and acceptance that prompted Lord Denning MR in the English Court of Appeal decision of Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401 (“Butler Machine Tool Co”) to adopt a somewhat more fluid (and, in our view, rather radical) approach, as follows (at 404):

94. [63]

    [63] It should, however, be noted that Lord Denning was alone in advocating the above approach. The majority of the court in Butler Machine Tool Co adopted the traditional method of analysis, examining each “shot” which was “fired” by each of the respective parties, finding a concluded agreement only when a final and unqualified acceptance had been identified in accordance with the principles set out briefly above. It is also noteworthy that Lord Denning himself, despite advocating the broad approach referred to in the preceding paragraph, nevertheless also endorsed the traditional approach. More importantly, perhaps, Lord Denning’s broader approach has not really found favour with the courts and, indeed, appears to have been all but rejected in Gibson ([52] supra). Whilst it is true that the court concerned must examine the whole course of negotiations between the parties (see above at [53]), this should be effected in accordance with the concepts of offer and acceptance. What is required, however, is a less mechanistic or dogmatic application of these concepts and this can be achieved by having regard to the context in which the agreement was concluded. Looked at in this light, the traditional approach is not, in substance at least, that different from the broad approach advocated by Lord Denning. Indeed, the traditional approach is probably the approach that has hitherto been adopted in the Singapore context (see, for example, the Singapore Privy Council decision of The Master Stelios [1982-1983] SLR 39 as well as the Singapore High Court decision of Pac-Asian Service Pte Ltd v Westburne International Drilling Ltd [1986] SLR 390) and, as just mentioned, we see no reason why it should not continue to be adopted (albeit with the context of the contract always being borne in mind).

95. Consideration

96. [64]

    [64] Another pre-requisite is that of consideration. As we shall see (in the coda to this judgment), the doctrine of consideration has been heavily criticised. There have even been calls for its abolition. However, the doctrine itself has weathered such criticism and is still a standard requirement before a valid contract can be said to have been formed.

97. [65]

    [65] The doctrine is, however, dispensed with for contracts under seal (ie, which are concluded by way of a deed). This is due to historical circumstances which we need not go into in the present appeal. That this is the position in Singapore is clear (see, for example, the Singapore High Court decisions of Development Bank of Singapore Ltd v Yeap Teik Leong [1988] SLR 796 at 802, [28] and Hong Leong Finance Ltd v Tay Keow Neo [1992] 1 SLR 205 at 223, [59]; but cf with regard to covenants in restraint of trade, as to which see the (also) Singapore High Court decision of Asia Polyurethane Mfg Pte Ltd v Woon Sow Liong [1990] SLR 407 at 411, [15]).

98. [66]

    [66] Very generally put, consideration signifies a return recognised in law which is given in exchange for the promise sought to be enforced. That is why it is stated as a matter of course that consideration must always move from the promisee to the promisor.

99. [67]

    [67] On a more specific and precise level, the traditional definition adopted is the “benefit-detriment analysis”. It also functions as a practical approach. Although various criticisms have been levelled against it, it continues to remain the most workable of all the definitions. The most oft-cited formulation is by Lush J in the English decision of Currie v Misa (1875) LR 10 Exch 153 (affirmed in Misa v Currie (1876) 1 App Cas 554), as follows (at 162):

100. [68]

     [68] An alternative definition was suggested by that great jurist, Sir Frederick Pollock, and was adopted in the House of Lords decision of Dunlop Pneumatic Tyre Company, Limited v Selfridge and Company, Limited [1915] AC 847 at 855. It utilises the language of “purchase and sale”. In other words, the promisee “purchases” the promisor’s promise by either doing some act or by offering a counter-promise in return. Whilst this particular definition is theoretically attractive (and has been accepted in many quarters as the “bargain theory of consideration”), the “benefit-detriment analysis” is probably more helpful in terms of practical application. Indeed, there is, in our view, no necessary inconsistency between both definitions (as suggested in some quarters (see, for example, Cheshire, Fifoot and Furmston ([47] supra) at pp 96–97; but cf Treitel ([47] supra) at para 3-007), with (as just mentioned) the former focusing on the theoretical aspect and the latter focusing on the practical aspect (and leaving aside nice theoretical arguments as to whether or not the “benefit-detriment analysis” is consistent with the concept of executory consideration, which is discussed in the following paragraph).

101. [69]

     [69] Consideration can, of course, be either executory or executed. Consideration is executory when it consists in a counter-promise, and is executed when it consists of an act. The former occurs, therefore, in the context of a bilateral contract (where there is a counter-promise by the promisee, which constitutes (as just mentioned) the consideration for the promisor’s promise; see also the recent decision of this court in Ong Chay Tong & Sons (Pte) Ltd v Ong Hoo Eng [2008] SGCA 42 at [30] (“Ong Chay Tong”)). The latter occurs in the context of a unilateral contract (where (as also just mentioned) the act by the promisee constitutes the consideration for the promisor’s promise), a classic example of which can be found in the fact situation in the leading English Court of Appeal decision of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256. We note that there remains some controversy as to whether or not executory consideration may contain an element of self-reference. This has, in fact, been dealt with convincingly by Prof Treitel (see Treitel, especially at para 3-008). However, the concept of executory consideration in the context of a bilateral contract is now too well established to admit of any doubt.

102. [70]

     [70] There are several other legal principles, many of which will be dealt with in their application to the facts of the present appeal as well as in the coda to this judgment. At this juncture, it might be appropriate, however, to mention briefly the English Court of Appeal decision of Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (“Williams”). The importance of this particular decision lies in its endorsement of the much wider concept of consideration to the effect that a practical benefit or detriment (as opposed to a (narrower) legal benefit or detriment) could constitute sufficient consideration in law. Indeed, this principle in Williams has been ostensibly applied (or at least recognised) in the Singapore context (see, for example, the decision of this court in Sea-Land Service Inc v Cheong Fook Chee Vincent [1994] 3 SLR 631 (commented upon in J W Carter, Andrew Phang & Jill Poole, “Reactions to Williams v Roffey” (1995) 8 JCL 248 (“the Reactions article”) at 262–264); the Singapore High Court decision of Teo Seng Kee Bob v arianecorp Ltd[2008] 3 SLR 1114 at [88]–[92]; as well as the (also) Singapore High Court decisions cited below at [96] and [97]).

103. Intention to create legal relations

104. [71]

     [71] There is also the requirement that there be an intention to create legal relations on the part of the parties concerned. Put simply, it must be demonstrated that there was an intention on the part of both parties that the transaction entered into was to have legal effect before a valid contract can be said to have been formed. Put another way, the parties must have intended that, if a disagreement arose or the contract was not honoured subsequently, the aggrieved party could invoke the assistance of the court. Much will of course depend upon the interpretation the court takes of the particular factual matrix concerned. Indeed, it has been argued that, in the light of the doctrine of consideration itself, there is no real need for a separate requirement that there be an intention to create legal relations (cf Treitel at para 4-027). However, the requirement that there be an intention to create legal relations on the part of the parties concerned is a well-established one. More importantly, perhaps, the suggestion that the doctrine of consideration is an appropriate substitute for the requirement that there be an intention to create legal relations presupposes a relatively problem-free doctrine of consideration. As we shall see in the coda to this judgment, however, that is far from being the case.

105. [72]

     [72] It is unnecessary, for the purposes of the present appeal, to enter into a detailed discussion of this particular doctrine which (as already noted in the preceding paragraph) is, in any event, heavily dependent on the specific factual matrix concerned. It may nevertheless be observed that there are established presumptions. In particular, in social and domestic arrangements, there is a presumption that the parties do not intend to create legal relations (see, for example, the leading English Court of Appeal decision of Balfour v Balfour [1919] 2 KB 571). However, in business and commercial arrangements, there is a converse presumption to the effect that it is presumed that the parties do intend to create legal relations (see, for example, the leading English Court of Appeal decision of Rose and Frank Company v J R Crompton and Brothers, Limited [1923] 2 KB 261, which was affirmed by the House of Lords in Rose and Frank Company v J R Crompton and Brothers, Limited [1925] AC 445).

106. Whether there was a valid compromise or settlement in the present proceedings

107. [73]

     [73] Let us now apply the general principles to the facts of the present proceedings in order to ascertain whether there was a valid compromise or settlement in the present case, bearing in mind that the test is an objective one. Counsel for the defendant, Mr Tan Teng Muan (“Mr Tan”), in his written submissions, briefly alluded to the issue of the legal status of the POA and the Waiver Letter.[note: 16] He argued that, first, it was the plaintiff who had decided to link the defendant’s claim for severance pay together with the cancellation of the Trust Deed. He further averred that it was the plaintiff who required the Waiver Letter to be signed before the POA was executed. Second, he drew a distinction between a foreign contract component and a local contract component, submitting that the waiver was supposed to be limited to the defendant’s foreign contract component and that he should still be paid his local contract component. Third, he argued that the defendant did furnish consideration even though it did not flow to the plaintiff. He emphasised that:[note: 17]

108. [74]

     [74] Counsel for the plaintiff, Mr Manjit Singh (“Mr Singh”), on the other hand, in his written submissions[note: 18] endorsed the Judge’s findings that first, there could not have been a valid compromise as the defendant had undermined this by making a fresh assertion for severance pay via his Kenyan lawyers after the signing of the POA. Second, Mr Singh argued that the Waiver Letter involved different parties and the plaintiff acted only as a representative of ASP.

109. [75]

     [75] As already mentioned earlier in this judgment, we found that both parties neglected to direct their minds in the court below to what, in our view, constituted the crux of the issue in the present proceedings, neglecting (in particular) to see the importance of the POA and the Waiver Letter being executed contemporaneously on the same day (see, further, the reference by the Judge in the GD at [94] (quoted in the next paragraph) to the fact that this was merely a “fallback argument” by counsel on behalf of the defendant).

110. [76]

     [76] Not surprisingly, therefore, the Judge dealt with this particular issue in accordance with the importance (or, more to the point, lack thereof) with which both counsel accorded to it. As already mentioned above (at [9]), the Judge came to the conclusion that there had been no valid compromise agreement and her reasons are to be found in the GD at [94]–[95], as follows:

111. [77]

     [77] In our view, the POA and the Waiver Letter were executed contemporaneously on the same day and this marked the crystallisation of the ongoing negotiations between both parties into a legally binding agreement in which all existing disputes between them were compromised or settled. As alluded to above (at [23]–[29]), the series of correspondence leading up to the signing of the POA and the Waiver Letter between the plaintiff and the defendant demonstrated that both parties had originally been locked in a dispute. However, as the correspondence between them progressed, both parties expressed a desire to resolve the ongoing disputes amicably and to move on with their respective lives. Viewed in this light, the POA and the Waiver Letter were concluded at a crucial point in time. Both parties voiced how they wished to work out an amicable solution because they were “friend[s] and strong all[ies]”.[note: 19] In the midst of the spate of correspondence between them, both men were weary of fighting the ongoing dispute and acknowledged, as well as recognised, their past bond as friends and business allies. On the basis of this friendship once enjoyed (and perhaps, their initial reluctance to institute legal proceedings), they sought to reconcile matters amicably rather than litigate them. The result of this intention was the POA and the Waiver Letter. We also note that, on 16 October 2004, barely ten days before the POA and the Waiver Letter were executed, the defendant replied to the plaintiff’s e-mail and agreed with the plaintiff that resorting to litigation “can be [a] long drawn battle” but admitted that he was “not fighting the battle”. Instead, the defendant looked forward to being called by one of the “mediators” on behalf of ASP for a final agreement.[note: 20] The fact that both parties had sought to resolve their disputes by mediation also served to support this particular construction of the POA and the Waiver Letter.

112. [78]

     [78] By way of a preliminary observation, what the parties intended – and, in our view, effected – through the POA and the Waiver Letter was a “clean break”. Perhaps such terminology (used in the context of matrimonial proceedings) is not wholly inappropriate, given the hitherto close relationship between the plaintiff and the defendant which had (unfortunately) then (to adopt the terminology of matrimonial proceedings once again) broken down irretrievably. Turning to specifics, the plaintiff promised to release the defendant from all his obligations under the Trust Deed in accordance with the terms of the POA (“the plaintiff’s promise”) in return for which the defendant would relinquish all his claims against ASP (“the defendant’s promise”). There was no doubt, in our view, that the parties clearly intended to create a legal relationship through the signing of these documents. However, did it matter (as the Judge appeared to suggest) that the defendant’s claims were against ASP instead of the plaintiff? One approach would be to pierce the corporate veil and state that these claims were therefore (and in effect) against the plaintiff as well. However, there was insufficient evidence to arrive at such a conclusion. In our view, this was not legally relevant in any event. Let us elaborate.

113. [79]

     [79] It was clear – and this was borne out by the entire factual context leading to the signing of both the POA and the Waiver Letter on the same day – that the plaintiff had a more than passing interest in ensuring that the defendant’s claims against ASP were settled amicably. Indeed, as we have noted, the defendant signed the Waiver Letter at the request of the plaintiff. It was also clear, in our view, that he had done so in the light of what he (the defendant) stood to gain as a result of the plaintiff’s promise. Indeed, as we observed in the preceding paragraph, both parties would, as a result of the combined legal effect of the POA and the Waiver Letter, effect a “clean break”. However, at this juncture, it might be queried whether the defendant’s promise to relinquish his claims against ASP for severance pay constituted sufficient consideration in the eyes of the law in return for the plaintiff’s promise.

114. [80]

     [80] In our view, the fact that the Waiver Letter was entered into between the defendant and ASP (and not the plaintiff) is legally irrelevant with regard to the issue as to whether or not the defendant had, by signing the Waiver Letter, furnished sufficient consideration to the plaintiff in return for the plaintiff’s promise. It is true that ASP stood to benefit as a result of the defendant’s signing of the Waiver Letter. However, this was done at the request of the plaintiff. Indeed, the Waiver Letter itself was signed by the plaintiff on behalf of ASP. The status of the plaintiff’s shareholding in ASP as well as other related matters mentioned in the GD at [95] (reproduced above at [76]) are immaterial inasmuch as the defendant had, by signing the Waiver Letter, suffered a detriment at the plaintiff’s request and had thereby furnished sufficient consideration in law for the plaintiff’s promise since (as already noted at [67] above), either a detriment or a benefit can constitute sufficient consideration in the eyes of the law (a point to which we will also return in some detail in the next paragraph). The fact that the plaintiff had not personally benefited (in an obvious manner) from the defendant’s signing of the Waiver Letter was not relevant in the present context; neither was the (related) fact that the request was literally made by the plaintiff on behalf of ASP. To elaborate, it is clear, from the correspondence between the parties set out above, that although the plaintiff was literally acting on behalf of ASP, he also had a personal interest in the defendant signing the Waiver Letter (and there was therefore a benefit to him, albeit in a less obvious manner). Further, one cannot, in the nature of things, look at the Waiver Letter in isolation, shorn of its context. As already mentioned, it is crucial, for the purposes of the present appeal, to view both the Waiver Letter and the POA as set in their relevant context. Looked at in this light, it is clear (having regard, in particular, to the fact that both documents were signed contemporaneously as well as, in general, to the correspondence referred to above) that the plaintiff clearly had a personal interest in requesting (and ensuring) that the defendant sign the Waiver Letter.

115. [81]

     [81] In many contractual situations, it is true that there will be, simultaneously, a detriment incurred by the promisee (here, the defendant) and a benefit conferred on the promisor (here, the plaintiff). However, as already mentioned in the preceding paragraph, this need not necessarily be the case; there is sufficient consideration if there is either detriment incurred by the promisee (at the request of the promisor) or a benefit conferred by the promisee on the promisor (again, at the request of the promisor) (and see generally above at [67] as well as Treitel ([47] supra) at para 3-005). That having been said, having regard to the analysis in the preceding paragraph, it is equally clear, in our view, that the defendant had, by signing the Waiver Letter, also conferred a benefit on the plaintiff (having regard to the latter’s personal interest in the matter). This benefit was not merely factual but was also legal in nature inasmuch as the plaintiff had hitherto no legal entitlement as such vis-à-vis the signing of the Waiver Letter by the defendant.

116. [82]

     [82] It should be noted, parenthetically but not unimportantly, that the element of request is necessary in order to establish a link between the parties concerned. So, for example, if the promisee chooses, of his or her own volition (and without more), to confer a benefit on the promisor, this will not constitute sufficient consideration in the eyes of the law. Likewise, if the promisee chooses, of his or her own volition, to incur a detriment, then (as the leading English Court of Appeal decision of Combe v Combe [1951] 2 KB 214 (“Combe”) clearly illustrates) that would not constitute sufficient consideration in the eyes of the law. In Combe, the plaintiff wife failed in an action against her ex-husband for a promise made by him to pay her maintenance as the court held that the fact that she had voluntarily refrained from claiming maintenance against him in a court of law did not constitute sufficient consideration because it was done entirely at her behest, with no request whatsoever coming from her ex-husband. She also failed in her claim based on promissory estoppel as the court held that the doctrine of promissory estoppel could only be used as a “shield” and not as a “sword” (see also below at [115]).

117. [83]

     [83] It should also be noted that an absence of linkage between the parties can also occur if the consideration is past – hence, the oft-cited principle that “past consideration is no consideration”. However, the courts look to the substance rather than the form. Hence, what looks at first blush like past consideration will still pass legal muster if there is, in effect, a single (contemporaneous) transaction (the common understanding of the parties being that consideration would indeed be furnished at the time the promisor made his or her promise to the promisee). This was established as far back as the 1615 English decision of Lampleigh v Braithwait (1615) Hob 105; 80 ER 255 and, whilst often referred to as an exception to the principle, is not really an exception for (as just stated) its application results in what is, in substance, a single transaction to begin with. A somewhat more recent decision is that of the English Court of Appeal in In re Casey’s Patents [1892] 1 Ch 104, and a modern statement of this particular legal principle can be found in the Hong Kong Privy Council decision of Pao On v Lau Yiu Long [1980] AC 614 (“Pao On”), where Lord Scarman, delivering the judgment of the Board, observed thus (at 629):

118. [84]

     [84] The element of request (see above at [82]) may also be usefully noted. It bears mention that the statement of principle in Pao On quoted in the preceding paragraph has, in fact, been affirmed in the local context. Indeed, in the Singapore High Court decision of Sim Tony v Lim Ah Ghee [1994] 3 SLR 224, Lai Siu Chiu J also referred to this particular statement of principle (at 237, [51]) as being “one apparent exception” [emphasis added] to the general rule that past consideration cannot constitute sufficient consideration in law. This court affirmed Lai J’s decision and endorsed her view to the effect that a court should not take a strict view from literal chronology in ascertaining whether the consideration concerned was past: see Sim Tony v Lim Ah Ghee [1995] 2 SLR 466, especially at 471–472, [16].

119. [85]

     [85] In the present appeal, no issue of past consideration in fact arises. Both the POA as well as the Waiver Letter were in fact entered into contemporaneously and were clearly intended to constitute a contemporaneous compromise agreement.

120. [86]

     [86] We should add that there were no other legal impediments from the perspective of the doctrine of consideration. Indeed, it has been long established that legal sufficiency must be distinguished from the layperson’s perception of adequacy in so far as the doctrine of consideration is concerned. In the circumstances, the court will not inquire into the actual adequacy of the consideration concerned so long as there is sufficient consideration furnished by the promisee in the eyes of the law. Indeed, as we allude to below, this somewhat artificial approach (mandated, in our view, by the perceived need of the courts to give effect to the rationale of freedom of contract) in fact contributes toward the emaciation of the doctrine of consideration itself.

121. [87]

     [87] Other possible legal impediments relate to various situations where the promisee merely promises to perform (or performs): (a) an existing duty imposed on the promisee by law; or (b) an existing contractual duty owed to a third party; or (c) an existing contractual duty owed to the same party (viz, the promisor). The facts of the present appeal do not relate to any of these situations and we therefore say no more about them at the moment save that these situations, whilst standard “fare” for every contract textbook, are not unproblematic. In particular, situation (c) must now, apparently, be viewed quite differently in the light of recent decisions (especially that of the English Court of Appeal in Williams ([70] supra), which has been referred to briefly above (at [70]). None of these situations arises on the facts of the present appeal. However, given the difficulties engendered by each of these situations as well as the need to consider them from the perspective of possible reform when they are raised squarely for consideration by this court (or even the Legislature), we will deal with them in the briefest of fashions in a coda to the present judgment.

122. [88]

     [88] Although the defendant appeared to deny the contents of the Waiver Letter, subsequent to the signing of the POA, by making a fresh assertion through his Kenyan lawyers with regard to his claim for severance pay, it is important to note that the POA and the Waiver Letter had already been concluded and that this fresh assertion was, in any event, wholly at variance with the terms and tenor of the concluded contract between the parties and ought not, therefore, to have been taken into account. In addition, we have already noted that, after the parties had concluded their agreement, further acrimony arose and the defendant’s later actions ought to be construed in the light of these further (and unfortunate) developments. Whilst this court observed, in Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029 at [132(d)], that “there should be no absolute or rigid prohibition against evidence of previous negotiations or subsequent conduct”, it also observed that “such evidence is likely to be inadmissible for non-compliance” with the requirement that the parties’ intentions be objectively ascertained and the threshold requirement (in order for the court to adopt a different interpretation from that suggested by the plain language of the contract) that the context of the contract be clear and obvious. The court did also add that “the relevance of subsequent conduct remains a controversial and evolving topic that will require more extensive scrutiny by this court at a more appropriate juncture” (ibid). That having been said, it is clear that the subsequent conduct in the present proceedings, being in direct contradiction of the terms of the concluded contract between the parties, cannot be admitted.

123. [89]

     [89] In the circumstances, therefore, we are of the view that the POA and the Waiver Letter constituted a valid compromise or settlement agreement between the plaintiff and the defendant.

124. Conclusion

125. A coda on the doctrine of consideration

126. Introduction

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