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    12:16 AM Denise Wong (Assistant Professor, Singapore Management University)

    Clarification on the Offer to Settle Regime in Order 22A of the Rules of Court: Ong & Ong Pte Ltd v Fairview Developments Pte Ltd [2015] SGCA 5

        

    The decision of Ong & Ong Pte Ltd v Fairview Developments Pte Ltd [2015] SGCA 05 provides important clarification on the offer to settle (“OTS”) regime as set out in Order 22A of the Rules of Court. 

    Facts

    The appellants were engaged by the respondents to provide architectural services. These services were subsequently terminated and the appellant claimed for loss of prospective fees for works not carried out as well as fees for work done. The respondent counterclaimed for losses and damages suffered on account of the appellant’s delay in furnishing a letter of release. 

    On 28 July 2011, the appellant’s solicitors served an OTS to settle the claim. Pertinently, the OTS stated that the appellant was offering to fully and finally settle all of the appellant’s claims, all of the respondent’s counterclaims and all matters arising out of the suit between them. 

    On 7 February 2012, the suit was bifurcated. The trial on liability was decided in favour of the appellant’s claim for fees for work done, but not for loss of prospective fees. The respondent’s counterclaim was dismissed. Both parties appealed against the decision in respect of the appellant’s claim. The respondent did not appeal the dismissal of its counterclaim. The Court of Appeal heard the cross appeals on 24 September 2013 (“the Court of Appeal decision on liability”). The appellant’s appeal was allowed and the respondent’s appeal dismissed. Immediately after, the respondent attempted to accept the OTS. The terms of the notice of acceptance varied from the terms of the OTS in that the former did not mention the counterclaim. The appellant took the position that the OTS was no longer capable of being accepted. 

    Decision

    The matter thus went before the Court of Appeal again in order to determine three issues –

    • Did the OTS lapse following the Court of Appeal decision on liability?
    • If the OTS did not lapse, did the respondent validly accept the OTS?
    • If there was valid acceptance of the OTS, was there any reason why the court should not incorporate the terms of the accepted OTS as a judgment?

    Did the OTS lapse following the Court of Appeal decision on liability?

    In respect of the first issue, the court first addressed its mind to whether the contractual principles of offer and acceptance apply generally to the OTS regime under Order 22A. In this regard, the court held that general contractual principles do not apply as the Order 22A regime clearly modifies some of the most basic principles governing the formation of a contract. The regime instead exists to promote certainty and encourage settlement between the parties so that they will not face the uncertain cost consequences that litigation entails. 

    The court further held that Order 22A r 3(5) should be interpreted to mean that an OTS remains open for acceptance so long as there is an outstanding matter not disposed of which is within the scope of the OTS. This is in line with the purpose of the OTS regime, which is to encourage disputes by agreement in order to save costs and judicial time. The court should therefore be slow to find that an offer has lapsed where the offer has not expired or been withdrawn. Any unfairness to the offeror is mitigated by the fact that (a) the offeror can withdraw the offer in accordance with Order 22A and (b) the court will determine whether it is fair and just in the circumstances for the OTS to be enforced against the offeror. On the facts, the OTS had not lapsed even though the counterclaim had been resolved as there were matters falling with the scope of the OTS that had yet to be resolved. 

    Was there a valid acceptance of the OTS?

    The court held that the OTS was validly accepted even though the notice of acceptance did not repeat the counterclaim. This was as the counterclaim was already dismissed and res judicata should therefore apply. 

    Should the OTS be enforced?

    The court held that the fact that the OTS had been validly accepted by the offeree did not mean that it would be automatically enforced by the court. The court has a discretion as to whether to enforce an accepted OTS. In exercising this discretion, the court should have regard to ordinary contractual principles as well as general principles of fairness and justice. 

    On the facts, the court considered the following issues in exercising its discretion – 

    (a) Was there a sufficient change of circumstances after the OTS was made so that the appellant should have been given an opportunity to withdraw or modify his offer without being held to it?

    (b) Did the respondent engage in any unfair conduct or exploit the appellant’s mistake?

    (c) Would the enforcement of the OTS cause any injustice such that the courts ought not to give effect to it?

    With regard to (a), the court considered the doctrine of fundamental change, wherein a fundamental change of circumstances occurring between the time an offer was made and the time the offer was purportedly accepted would cause an offer to lapse. The court took the view that while there was room for the application of this doctrine in Singapore, it did not apply on the facts since the appellant knew that the counterclaim had been dismissed and that the time for the appeal had lapsed, and yet did not take steps to withdraw the OTS. 

    With regard to (b), the court held that the respondent’s acceptance of the OTS immediately after the Court of Appeal decision on liability could not be regarded as exploitative or unfair. With regard to (c), the court also decided that enforcing the terms of the OTS would not be unjust. As such, the court concluded that there had been a valid acceptance of the OTS, which was enforceable. 

    Conclusion

    This case caused difficulties for a number of reasons. First, the OTS was drafted as a global settlement of both the claim and the counterclaim. When the counterclaim was resolved before the main claim, uncertainty arose as to whether the OTS continued to be open for acceptance. This was further complicated by the fact that the suit was bifurcated, which meant that until damages were assessed, it was difficult for the parties to tell whether the amount awarded by the court would be higher or lower than the amount stated in the OTS, and as a consequence, whether costs should be borne on an indemnity basis. The fact that there were cross-appeals to the Court of Appeal in respect of the appellant’s claims on liability, but that there was no appeal on the High Court decision to dismiss the counterclaim, added further procedural complexity and ambiguity as to whether the OTS was still capable of being accepted. Litigators would thus do well to craft offers carefully in order to avoid an ambiguity as to whether and when the offer lapses. In situations where the court is called upon to enforce an OTS, this case makes clear that the court will have regard to the purpose of the Order 22A regime, and will not strictly adhere to general contractual principles. Ultimately, the discretion lies with the court to decide if the terms of an accepted OTS should be enforced. 

    * This blog entry may be cited as Denise Wong, "Clarification on the Offer to Settle Regime in Order 22A of the Rules of Court: Ong & Ong Pte Ltd v Fairview Developments Pte Ltd [2015] SGCA 5", Singapore Law Blog (3 March 2015) (http://www.singaporelawblog.sg/blog/article/93)

    ** A PDF version of this entry may be downloaded here

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