Ong & Ong Pte Ltd v Fairview Developments Private Limited

Lee Seiu Kin J:

[1] In this summons the defendant applied for a declaration that its acceptance on 24 September 2013 of the plaintiff’s offer to settle dated 28 July 2011 was valid and that the action had been settled on the following terms:

(a) The defendant is to pay to the plaintiff the sum of S$2,588,666.

(b) The defendant is to pay to the plaintiff the plaintiff’s costs of the claim and counterclaim to be taxed if not agreed:

(i) on a standard basis, from the date of commencement of these proceedings on 20 May 2011 to 11 August 2011; and

(ii) on an indemnity basis, from 12 August 2011 up to the date of the defendant’s notice of acceptance (ie, 24 September 2013).

(c) The defendant is to pay to the plaintiff interest at 1.5% per annum, for the period from 20 May 2011 up to the date of payment.

(d) The plaintiff is to discontinue its claims against the defendant within seven days of payment of the sum of S$2,588,666, interest and costs.

[3] The issue in this appeal is whether the plaintiff’s offer to settle of 28 July 2011 had expired prior to the defendant’s acceptance on 24 September 2013.

[4] The background to the matter is as follows. The plaintiff commenced this action, Suit No 369 of 2011, on 20 May 2011. The claim was for a sum of $10,138,128.28, which consisted of two parts:

(a) Loss of prospective fees for architectural works not carried out amounting to $5,626,653.31; and

(b) Fees of $4,511,474.97 for certain architectural work carried out.

[5] The defendant in turn counterclaimed for the sum of $23,410,000. This was for loss and damage suffered as a result of the plaintiff’s delay in providing the defendant with a letter of release after the defendant terminated the plaintiff’s services.

[6] On 28 July 2011, some two months after the writ was filed, the plaintiff’s solicitors, M/s MPillay (“MPillay”), sent a letter (“the OTS”) to the defendant’s then solicitors, M/s Kelvin Chia Partnership. In it, the plaintiff offered to settle its claim against the defendant for the sum of about $2.6m. The letter stated as follows:

[7] On 8 February 2012, the plaintiff applied in summons no 603 of 2012 for bifurcation of the suit to determine the issues of liability and quantum in separate trials. The court granted the application on 7 March 2012. The trial on liability was heard in October 2012. On 26 March 2013, I issued my decision, allowing part of the plaintiff’s claim and dismissed the rest. I also dismissed the defendant’s counterclaim. I ordered damages to be assessed by the registrar.

[9] On 24 September 2013, the Court of Appeal heard the appeals. The plaintiff’s appeal was allowed and the defendant’s appeal dismissed. Later that same day, JYC sent to MPillay a document entitled “Notice of Acceptance of Plaintiff’s Offer to Settle”. This document (“the NOA”) purported to accept the OTS. It stated as follows:

By a letter dated 25 September 2013 from MPillay to JYP, MPillay stated, among other things, that the OTS “remained open for acceptance so long as the Court had not disposed of the matter in respect of which the OTS was made” and as “that had ceased to be the case before [the defendant’s] purported acceptance”, the OTS was “no longer capable of being accepted”. There was further exchange of correspondence between the solicitors on whether the defendant’s purported acceptance of the OTS was valid and therefore had compromised the action, but such correspondence are not relevant for my determination of the issue.

[10] The defendant’s position was that the OTS did not specify a time for acceptance. Order 22A r 3(2) of the Rules of Court (Cap 322, R5, 2006 Rev Ed) (“ROC”) states that an offer may be withdrawn at any time after the expiry of 14 days from the date of service of the offer on the other party, provided that at least one day’s prior notice is given. Order 22A r 3(5) of the ROC provides that, if not withdrawn, the offer may be accepted at any time before the court disposes of the matter in respect of which the offer is made. As no such notice was given in this case, it remained open for acceptance at the time the NOA was served.

[11] The defendant submitted that, at the time of the NOA, the court had not disposed of the matter in respect of which the OTS was made (O 22A r 3(5)). This was because the OTS was made in respect of the entire suit as it dealt with both issues of liability and damages. As at the date of the NOA, 24 September 2013, only the issue of liability had been disposed of. The issue of damages, which remain to be assessed, has not yet been disposed of.

[12] The defendant highlighted that the OTS was an offer to “fully and finally settle all of the Plaintiff’s claims, all of the Defendant’s counterclaims and all matters arising in the Suit”. While it was a term of the OTS that the defendant was to discontinue its counterclaim against the plaintiff, it had become irrelevant by 24 September 2013 because there was no counterclaim for the defendant to discontinue. The defendant further pointed out that, even after the defendant’s counterclaim had been dismissed by the High Court, the plaintiff itself had maintained, by way of a letter, that the OTS remained open for acceptance by the defendant.

[13] The defendant also submitted that its position made eminent sense. Its argument was as follows:

(a) The defendant’s position may be tested by looking at the matter from the plaintiff’s perspective.

(b) Pursuant to O 22A r 9(1) of the ROC, where an offer to settle made by a plaintiff:

(i) is not withdrawn and has not expired before the disposal of the claim in respect of which the offer to settle is made; and

(ii) is not accepted by the defendant, and the plaintiff obtains a judgment not less favourable than the terms of the offer to settle;

(a) the plaintiff is entitled to costs on the standard basis to the date the offer to settle was served, and costs on the indemnity basis from that date, unless the court orders otherwise.

(c) Could the plaintiff rely on O 22A r 9(1) of the ROC, and its OTS if it were subsequently awarded damages of more than S$2,588,666 (assuming the OTS was neither accepted nor withdrawn in the interim)?

(d) The answer must be “yes”. Otherwise, the plaintiff would be put in the absurd situation of its OTS being nullified, and losing the advantage of making that OTS, simply because the Court had decided on the issue of liability first.

(e) More importantly, if the plaintiff was entitled to rely on the OTS when damages are determined, then why could not the defendant accept it before that determination? If the plaintiff were to have the advantage of the OTS, it must necessarily follow that the OTS remained open for acceptance by the defendant until the issue of damages was determined.

[14] The defendant further submitted that its position was consistent with the policy behind offer to settle, and the contra proferentum rule for the following reasons:

(a) The whole object of offer to settle was to spur the parties to bring litigation to an expeditious end without judgment, and thus to save costs and judicial time: Singapore Court Practice 2009 (Jeffrey Pinsler gen ed) (LexisNexis, 2009) at para 22A/1/2; Singapore Airlines Ltd v Tan Shwu Leng [2001] 3 SLR(R) 439 at [37] (“Singapore Airlines Ltd”).

(b) Consistent with this principle, an offer to settle made in a bifurcated action, and which dealt with both liability and damages, must remain open for acceptance after liability had been determined but before damages were assessed as a party could not benefit from its offer to settle if it were withdrawn before the disposal of the claim in respect of which the offer to settle was made: see O 22A r 9(1) of the ROC; also see Man B&W Diesel S E Asia Pte Ltd and another v PT Bumi International Tankers and another appeal [2004] 3 SLR(R) 267, in which the Court of Appeal held that the appellants were not entitled to indemnity costs because their offer to settle (which was valid only for 14 days) had expired before the disposal of the claim. In other words, the offer to settle was, according to O 22A r 3(4), deemed to have been withdrawn after the 14 days.

(c) Indeed, one of the benefits of bifurcation was precisely to allow parties to settle once liability had been decided.

(d) Further, if there were any ambiguity about the meaning of the OTS, the words must be construed against the plaintiff, who made the offer. Not only was this consistent with the contra proferentum rule, where the words of an ambiguous document will be construed against the person who put them forward: Kim Lewison, The Interpretation of Contracts (Sweet & Maxwell, 5th Ed, 2011) at para 7.08, it was also consistent with the object of offers to settle, which was to encourage the speedy termination of litigation by agreement of the parties.

(e) Indeed, after the interlocutory judgment, the plaintiff took the position that the OTS remained open for acceptance, which the defendant accepted on 24 September 2013.

[15] The plaintiff’s submissions were threefold:

(a) The defendant’s acceptance was invalid as it did not accept the OTS on its terms.

(b) The OTS was no longer capable of being accepted, as the Court has disposed of the matter in respect of which it was made.

(c) The defendant’s conduct in these proceedings ran contrary to, and made a mockery of the rationale underpinning the offer to settle regime.

[18] The plaintiff next referred to Ip Yun Ha v Dennis Wee Realty Pte Ltd [2011] SGDC 15 (“Ip Yun Ha”) and to Re Desanto et al v Cretzman et al 53 OR (2d) 732; 1986 CanLII 2663 (“Re Desanto”), a District Court of Ontario decision, for the proposition that an acceptance must be done without any amendment or variation and must be unqualified and unconditional. If a party qualified its acceptance of the offer to settle, it would amount to a counter-offer, not an acceptance. This is correct in principle, but it is a question of fact and law whether the purported acceptance is an acceptance of the offer or is a counter-offer.

[20] The plaintiff submitted that the OTS was no longer capable of being accepted as the court had disposed of the matter in respect of which it was made, ie, both the claim and the counterclaim, in the sense that the counterclaim was already disposed of, even though the quantum of the claim was not. This argument relied on an interpretation of the OTS not apparent on its face, ie, that the OTS would no longer be open for acceptance if the claim was finally determined.

[23] To understand the law relating the offer to settle regime established by O 22A of the ROC, it would be instructional to trace its origins. I now do so.

[25] Strict clarity is required on the terms of any payment into court. Rule 1(4) requires the offeror to specify which of several causes of action the payment is made for and r 1(5) empowers the court to order a party to clarify an ambiguous offer. Rule 6 provides that rules apply with necessary modifications to a counterclaim. Rule 3(5) provides as follows:

These requirements are encapsulated in the prescribed notice of payment, Form 31, which requires a statement as to the cause or causes of action for which payment is made and whether it includes settlement of the counterclaims.

[26] Under O 22 r 3 of the ROC, a plaintiff has 14 days from the receipt of the notice of payment, or within 14 days of receipt of an amended notice, to accept the payment or amended payment, but such acceptance must be done prior to the commencement of the trial or hearing. After such commencement of the trial, the plaintiff has two days of receipt of notice of payment or amended notice but this must be done before the Judge has begun to deliver judgment. Upon acceptance, all further proceedings in the action, or in respect of the causes of action and counterclaims, the subject of the payment into court shall be stayed – O 22 r 3(4) and (5).

[27] It should be noted that O 22 is silent on the situation where a counterclaim is finally determined before the claim is determined. As to withdrawal, O 22 r 1(3) states that a payment into court “may not be withdrawn or amended without leave of the Court which may be granted on such terms as may be just” although a defendant may, without leave, give notice of an increase to any payment into Court.

[38] The Calderbank offer was much more flexible than the payment into court procedure as it was available even before the writ was filed and applicable to the plaintiff as well as the defendant. It could also handle circumstances that did not involve cash. An important and practical difference between a Calderbank offer and payment into court was that the latter procedure required a defendant to actually come up with the money to make the payment into court. This was an inconvenient procedure compared to the Calderbank offer, especially at an early stage in the proceedings. In practice, this meant that the payment into court procedure became otiose as defendants would simply resort to Calderbank offers as opposed to coming out with cash at the outset. In Cutts, Oliver LJ cautioned that a Calderbank offer cannot be used as a substitute for payment into court, stating as follows (at 312):

[39] The caution sounded by Oliver LJ was incorporated in the UK Rules of the Supreme Court by the addition of O 22 r 14 in 1986. This rule gave legislative effect to the Calderbank offer but excluded from its ambit any offer that, at the time it was made, was capable of being the subject of a payment into court under the same order. Following the changes to the English rules, a similar change was enacted in O 22 r 13 of the Singapore’s Rules of the Supreme Court and Rules of the Subordinate Courts in 1992. As with the UK amendment, the Singapore amendment ensured that the “Calderbank letter is only available to a party who could not have protected his position by payment into court”: see Jet Holding Ltd and Others v Cooper Cameron (Singapore) Pte Ltd and Another [2006] SGHC 20 at [12].

[41] As the provisions in British Columbia, Ontario, New South Wales and Victoria constituted important background to the enactment of O 22A of the ROC, it would be useful to briefly examine their underlying purpose.

[43] Likewise, the Ontario procedure was established with a mind to encourage settlement. In Data General, Morden ACJO had stated (at 398(h)):

[45] Subsequently, r 49 of the Ontario Rules of Civil Procedure formed the basis upon which the Australian rules were derived and a similar procedure, called “offer of compromise”, was adopted in, among other Australian states. New South Wales (Supreme Court Rules 1970, Pt 22 and Pt 52 r 17) and Victoria (General Rules of Procedure in Civil Proceedings 1986, r 26): see The Laws of Australia vol 5 (5.1–5.6) (Sheryl Jackson, Chris George, BC Cairns & Grant T Riethmuller eds) (Thomas Reuters) at para 60; Bernard C Cairns, Australian Civil Procedure (The Law Book Company Limited, 3rd Ed, 1992) at p 376.

[50] In Singapore Airlines Ltd, Chao JA set out the policy behind the O 22A procedure in the following terms (at [38]):

[51] There is one final point to be made. To the extent that O 22A of the ROC, when enacted, overlapped with payment into court as a means to initiate settlement, it rendered the latter otiose. This is to be expected given that O 22A did not require a party making an offer to pay money into court, and was, on the whole, a more convenient and flexible method. In the scheme of things, the availability of O 22A as a tool to promote settlement meant that payment into court would dwindle in significance, although it would still have its uses in other areas, such as the payment into court to fulfil a condition for obtaining leave to defend. Along with the enactment of O 22A, O 22 r 13 was repealed and the Calderbank offer was effectively replaced by the offer to settle mechanism in O 22A.

[52] Having traced the origin of the O 22A procedure and the policy upon which it is founded, I turn to consider the facts of the present case in the light of that policy. The following are the salient features of the case:

(a) Unequal pressure on the parties: The writ was filed on 20 May 2011. The defendant filed its defence and counterclaim on 27 June 2011 and an amended defence and counterclaim three weeks later on 20 July 2011. The plaintiff had made the OTS under O 22A on 28 July 2011. By operation of O 22A r 9, the plaintiff could be entitled to costs on an indemnity basis from that date onwards. The action proceeded to trial which lasted some ten days and one appeal which was disposed of in September 2013, more than two years from the date of the OTS. The peril for the defendant was that it could face substantial indemnity costs were the plaintiff to recover a sum higher than the amount offered in the OTS. Since the OTS was on the basis that the defendant would pay indemnity costs from 12 August 2011, had the defendant not accepted the OTS, it would still be liable for indemnity costs for the proceedings to follow, which would be the assessment of damages. The plaintiff, on the other hand, had no such pressure. It had, at a very early stage, been prepared to accept the sum in the OTS. If it did obtain more than that sum at the end of the assessment of damages, the costs advantage it had accrued from 12 August 2011 meant that it would recover a sum that is close to its full legal costs.

(b) Plaintiff had full control: The plaintiff was in full control of the situation. It was open to the plaintiff (but not the defendant) to withdraw the OTS at any time subject to giving one day’s notice under O 22A r 3(2).

(c) Terms of OTS determined by the plaintiff: Most importantly, the terms of the OTS were the plaintiff’s. It was open to the plaintiff to limit the period of validity or phrase it in any fashion but did not do so.

[54] The question in the end is, faced with an ambiguity, where should the court draw the line. To me, it is clear from the features set out in [52] above that the court should come down in favour of clear drafting in terms of unambiguous offers and expiry dates. These factors are entirely within the control of the offeror. There should be no scope in the O 22A regime for the offeror to turn it into an instrument of oppression against the offeree. A party making an offer to settle must state clearly the time within which it is open for acceptance if there is to be such a limitation. If the acceptance is to be limited by circumstances rather than a date (eg, first day of the trial of the action), then it must be stated in the clearest of terms. Any ambiguity will be interpreted contra proferentem. To hold otherwise in this case would be to arm the plaintiff with a double edged sword against the defendant.

[55] Keeping in mind that the offer to settle regime was aimed at promoting settlement, it is most unfortunate that the OTS in this case had spurred parties to further litigate on the offer itself (rather than to settle) because the ambiguity of the terms had attracted conflicting interpretations. In my view, favouring clear and certain terms in an offer to settle can only accord with the policy of encouraging settlement. If an offer to settle is to come to an end according to its own terms, it is sensible that the terms should be clear enough, such that both parties are able to pinpoint when exactly the offer expires and the offeree can make a considered decision on whether, and if so, when to accept.

[56] The plaintiff made three points in its submissions (see [15] above). My responses are as follows:

(a) Acceptance not on terms of OTS: I have pointed out in [17] above that Fuyawa Enterprise showed that the court would look at the substance of the offer rather than the strict form when considering whether a purported acceptance is valid. If the acceptance is qualified or has conditions attached to it such that it amounts to a counter-offer, then it will not be valid, as was held in Ip Yun Ha and in Re Desanto; see [18] above. In the present case, there was no qualified or conditional acceptance in the way that was envisaged in Ip Yun Ha and Re Desanto. This was simply a case where, by the time of the defendant’s acceptance of the OTS, the counterclaim had been determined and therefore there was no need for the defendant to undertake to discontinue it.

(b) OTS no longer capable of acceptance as counterclaim had been determined: As alluded to in [20] above, this argument relies on an implied term that the OTS would no longer be open for acceptance if the counterclaim was settled. I have held in [54] above that the OTS will be interpreted contra proferentem and therefore that interpretation is not available to the plaintiff.

(c) Defendant’s conduct: I can see nothing in the manner in which the defendant accepted the OTS that could operate to deprive them of the right to accept the OTS where they otherwise would be entitled to do so. Order 22A does not impose any limitation on the acceptance so long as the offer has not been withdrawn. Indeed the Order envisages acceptance at any time before final determination. If a party chose to accept near the conclusion of the suit it is because that party has deemed it to be in its best interest to do so. It must be remembered that the defendant in this case had elected to pay indemnity costs up to the date of acceptance even when the possibility was still there that he may only incur standard costs should the final award be less favourable than the offer. So long as the offer has not been withdrawn, and the risk of indemnity costs being incurred continues, there cannot be any reason why the court would disallow acceptance at any stage.

[57] For the reasons given above, I held that the OTS had not expired on 24 September 2013 and it was therefore validly accepted by the defendant on that date. Accordingly I gave the declarations prayed for in this summons.