SGCA rules on validity of accepting offer to settle after judgment on merits

This article is produced by CMS Holborn Asia, a Formal Law Alliance between CMS Singapore and Holborn Law LLC.

In the recent decision of Michael Vaz Lorrain v Singapore Rifle Association [2020] SGCA 72 (“Lorrain v SRA”), the Singapore Court of Appeal (“CA”) ruled on the issue of whether an offer to settle containing a discontinuance term – i.e. a term that requires that a Notice of Discontinuance to be filed in an action upon acceptance of an offer to settle (“Discontinuance Term”) – can be validly accepted after a judgment on the merits is rendered. In answering this in the negative, the CA also considered broader issues on whether an offer to settle in general can be accepted after judgment.

We review the CA’s decision and provide our takeaways.

Background facts

The Singapore Rifle Association (the “Respondent”) commenced an action against Mr Michael Vaz Lorrain (the “Appellant”) for an alleged breach of a mediation agreement and/or a duty of confidence. The issue of liability was not contested by the Appellant. A judgment was subsequently entered against the Appellant and the High Court awarded damages in favour of the Respondent (the “Judgment”). Both the issues of liability and damages were determined by the High Court in the Judgment.

Prior to the issuance of the Judgment, the Appellant made an offer to settle containing a Discontinuance Term which provided for the Respondent to file a Notice of Discontinuance upon receipt of the settlement sum from the Appellant (“the OTS”).

The Appellant appealed against the damages awarded by the High Court. However, prior to the hearing of the appeal, the Respondent purported to accept the OTS. The parties then posited the following questions to the CA: whether the OTS provided for costs; and if not, whether certain cost consequences under the Rules of Court would apply.

In dealing with these questions, the CA had to address the preliminary issue of whether the OTS could be validly accepted at law in the first instance, given that Judgment had already been rendered by the High Court.

The parties’ submissions

The Appellant argued that the OTS could not be validly accepted by the Respondent. Once Judgment had been delivered, the Respondent was no longer in a position to comply with the Discontinuance Term. As such, the OTS had lapsed and ceased to be open for acceptance.

On the other hand, the Respondent took the view that the existence of the Discontinuance Term did not make the OTS incapable of acceptance. The Respondent noted that the OTS did not state a time for acceptance.

Citing the Court of Appeal’s earlier decision in NTUC Foodfare Co-operative Ltd v SIA Engineering Co Ltd and Anor [2018] 2 SLR 1043 (“NTUC Foodfare”), the Respondent argued that where an offer to settle did not specify a time for acceptance, it may be accepted at any time before the court disposes of the matter. In NTUC Foodfare, the Court of Appeal had found that a matter is disposed of only when the appellate court renders its decision on the merits.

The Respondent further argued that the fact that the OTS contained a Discontinuance Term did not mean it was incapable of acceptance. Citing NTUC Foodfare and another Court of Appeal decision in Ong and Ong Pte Ltd v Fairview Developments Pte Ltd [2015] 2 SLR 470 (“Ong & Ong”) for support, the Respondent noted that in both cases, the offers to settle contained a Discontinuance Term but remained open for acceptance.

The CA’s decision

Ruling in favour of the Appellant on the preliminary issue, the CA held that the Respondent’s acceptance of the OTS was invalid. In reaching this conclusion, the CA observed as follows:

1st issue: An action can only be discontinued before judgment

At the outset, the CA took the view that once a judgment has been given, the cause of action merges with the judgment. Therefore, the parties cannot possibly “discontinue” an action once a judgment has been entered. Accordingly, save for interlocutory judgments, it is a matter of coherence in the law that an action cannot be discontinued after a judgment on the merits.

2nd issue: An OTS containing a discontinuance term cannot be accepted after judgment

The CA noted a scenario where only part of the matter has been disposed of by the court. In such a case, as long as there is an outstanding matter that is within the scope of the offer to settle – such as damages, for example – the offer to settle will remain open for acceptance.

Distinguishing the Court of Appeal’s earlier decisions in NTUC Foodfare and Ong & Ong, the CA held that in both cases, “the court did not squarely address the preliminary issue – whether an offer to settle which contains a Discontinuance Term can be validly accepted after judgment”.

Further, the CA found that both cases can be distinguished on other bases.

In Ong & Ong, the question was whether an offer to settle can be accepted if the court disposed of part of the matter. In Ong & Ong, it was found that there were “outstanding matters which had not been disposed of” as damages were yet to be assessed for the plaintiff’s claims.

In NTUC Foodfare, the offer to settle was never accepted by the plaintiff, whereas in Lorrain v SRA, the Respondent had purported to accept the OTS.

The CA therefore distinguished the earlier decisions from the case at hand, as both the issues of liability and damages had already been disposed of by the High Court in Lorrain v SRA. Since an action can only be discontinued before judgment and the OTS required the discontinuance of a concluded action that was no longer legally possible, the CA held that the OTS was impotent and incapable of acceptance.

3rd issue: Whether an OTS can be accepted after judgment regardless of a Discontinuance Term

As the 1st and 2nd issues had been answered in the negative, the CA refrained from reaching a conclusive view on the broader issue of whether an offer to settle can be accepted after judgment, regardless of whether it contains a Discontinuance Term.

However, the CA made the following observations:

1. Order 22A rule 3(5) of the Rules of Court states that where an offer to settle does not specify a time for acceptance, then it can be accepted at any time before “the Court” disposes of the matter. In construing a specific definition of “the Court”, the CA noted Order 1 rule 4(2), which defined “Court” as the High Court or a District Court. As the other provisions of the Rules of Court make specific references to the Court of Appeal when required, it seemed arguable that the reference to “Court” in Order 22A rule 3(5) would refer exclusively to a first instance court only (i.e. the High Court or District Court only).
2. There were also policy reasons why an offer to settle should not be open for acceptance after judgment. In particular, the key purpose of Order 22A is to spur the parties to bring litigation to an expeditious end without judgment. Thus, if an offer to settle can be accepted after judgment, this may encourage offerees to adopt a “wait and see” approach. Further, if an offer to settle can be accepted at any time before the appellate court disposes of the matter, it could also mean that it can even be accepted after the hearing of the appeal, let alone the first instance judgment. In the CA’s view, this does not further the purpose of the Order 22A regime.

As such, it would appear that the CA sitting in Lorrain v SRA would be inclined to the view that an offer to settle cannot be accepted after judgment, regardless whether there is a Discontinuance Term or not.

Takeaways

The decision in Lorrain v SRA reiterates the fundamental objective of the offer to settle regime – to facilitate an expeditious conclusion of litigation between parties.

Whilst the analysis provided by the CA in Lorrain v SRA is in itself fairly compelling, it would appear to signify a departure from the Court of Appeal’s earlier decisions in NTUC Foodfare and Ong & Ong. The CA was however careful to state that it was merely making “preliminary observations” and “it is not necessary for [the CA] to reach a conclusive view on whether an offer to settle can be accepted after judgment” in general.

The broader question of whether an offer to settle can be accepted after judgment is therefore left to be properly determined on a future occasion.

Parties now know that their offers to settle may no longer be open to acceptance after a judgment on the merits have been fully rendered by the first instance court, i.e. both issues of liability and damages have been decided. This is because such an action, having been conclusively determined, would be incapable of being “discontinued” by way of filing a Notice of Discontinuance. This would appear to be the case even if the matter becomes the subject of a pending appeal to the Court of Appeal.