[1999] SGCA 36

In the Court of Appeal of the Republic of Singapore

[1999] SGCA 36

CA 207/1998

Between

Aircharter World Pte Ltd

… Appellant

And

Kontena Nasional Bhd

… Respondent

grounds of decision

Civil Procedure — Appeals; Contract — Formation — Acceptance

This judgment is subject to final editorial corrections approved by the court and/or redaction pursuant to the publisher’s duty in compliance with the law, for publication in LawNet and/or the Singapore Law Reports.

Aircharter World Pte Ltd v Kontena Nasional Bhd

[1999] SGCA 36

CA 207/1998
Karthigesu JA; L P Thean JA; Yong Pung How CJ
18 May 1999

1 KARTHIGESU JA

3 Background

5 The appellants are an exempt private limited company registered in Singapore principally engaged in aircraft lease and charter brokerage. The respondents are a public company registered in Malaysia providing haulage, depot, warehousing and freight forwarding services to, inter alia, the Government of Malaysia.

[w]ith the acceptance of your [ie the respondents`] quotation by the Government, you are advised that there is a binding contract between the Government and yourselves. A formal contract ... will be executed later with the inception of all the quotation terms as amended. You will be informed later by the Government once the contract document is ready to be executed by yourselves.

19 The decision below

21 The learned judge disallowed the appellants` claim. He disbelieved the evidence of Teo and Abdul Hamid that they had made an oral agreement over the telephone on 14 September 1995, as he found their evidence to be `confused and unsatisfactory`. He therefore found that no oral agreement had been made on 14 September on either the deposit or the cancellation fee. In addition, although the statement of claim described the US$200,000 claimed as a deposit and reduced cancellation fee payable under the oral agreement, it was not really for that. The invoice was for the `advance contractual fee` payable by the appellants to their principal, which was not provided for in either draft of the charter agreement or the oral agreement. It was thus doubtful whether the appellants` claim came within the alleged agreement. In the result, the appellants` claim was dismissed.

22 Contentions of the appellants

24 The appellants essentially contended first, that there was an oral agreement between the respondents and themselves made on 14 September 1995; second, that the learned judge had erred in failing to consider the contemporaneous documentary and other evidence which showed not only that the respondents were aware of the deposit required to book the aircraft but also that they considered themselves liable to pay it (the appellants referred especially to the fact, which was not disputed, that the respondents had made a claim for US$200,000 from Mindef by submitting the appellants` invoice); and third, that the learned judge had misinterpreted some of the documents and evidence of the respondents in their favour.

26 The appeal

28 Whether there was an oral agreement between the appellants and the respondents

29 The learned judge`s finding that no oral agreement was concluded between the appellants and the respondents on 14 September 1995 was a finding of fact. In particular, as what was alleged was an oral agreement, the correctness of the finding turned in large part on the credibility of the parties` respective representatives, Abdul Hamid and Teo. Although both testified that they had spoken on the telephone and that the agreement was made thereby, the learned judge was not impressed with their evidence and rejected it. This was a decision which was amply warranted by the evidence. As such, the appellants` contention that the learned judge had erred in not weighing their evidence properly and in coming to a wrong assessment of their credibility was simply unsustainable.

30 Powell v Streatham Manor Nursing Home [1935] AC 243, where Viscount Sankey LC declared at p 249 that the Court of Appeal should not set aside a finding of fact `unless the appellant satisfies the court that the judge was wrong and that his decision ought to have been the other way`. In the oft-cited case of Chow Yee Wah & Anor v Choo Ah Pat [1978] 2 MLJ 41 , the Privy Council approved the following statement of principle on appellate intervention expressed by Lord Shaw in Clarke v Edinburgh and District Tramways Co 1919 SC (HL) 35 at p 36:

When a judge hears and sees witnesses and makes a conclusion or inference with regard to what on balance is the weight of their evidence, that judgment is entitled to great respect, and that quite irrespective of whether the judge makes any observations with regard to credibility or not. I can of course quite understand a Court of Appeal that says that it will not interfere in a case in which the judge has announced as part of his judgment that he believes one set of witnesses, having seen and heard them, and does not believe another. But that is not the ordinary case of a cause in a court of justice. In courts of justice in the ordinary case things are much more evenly divided; witnesses without any conscious bias towards a conclusion may have in their demeanour, in their manner, in their hesitation, in the nuance of their expressions, in even the turns of the eyelid, left an impression upon the man who saw and heard them which can never be reproduced in the printed page. What in such circumstances, thus psychologically put, is the duty of an appellate court? In my opinion, the duty of an appellate court in those circumstances is for each judge of it to put to himself, as I now do in this case, the question, Am I - who sit here without these advantages, sometimes broad and sometimes subtle, which are the privileges of the judge who heard and tried the case - in a position, not having those privileges, to come to a clear conclusion that the judge who had them was plainly wrong? If I cannot be satisfied in my own mind that the judge with those privileges was plainly wrong, then it appears to me to be my duty to defer to his judgment.

31 Watt v Thomas [1947] AC 484 at pp 487-488:

... an appellate court which is disposed to come to a different conclusion should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses could not be sufficient to explain or justify the trial judge`s conclusion. ... The appellate court, either because the reasons given by the trial judge are not satisfactory or because it unmistakably so appears from the evidence, may be satisfied that he has not taken proper advantage of his having seen and heard the witnesses, and the matter will then become at large for the appellate court.

I spoke to Teo on 14 September 1995 to confirm that the charter was proceeding. I wanted Teo to confirm to me on the telephone that the contract was firm and he did so confirm. I then on behalf of the [respondents] sent the [appellants] a confirmation [the facsimile of the same date]. ...

On 14 September 1995, an oral agreement was made between [Abdul Hamid] for and on behalf of the [respondents] and I for and on behalf of the [appellants] over the telephone. The [appellants] agreed to lease the ... aircraft on a wet charter basis to the [respondents] for the purposes of the movement of the troops ... . The [respondents`] fax of 14 September 1995 to the [appellants] confirmed in writing that the [appellants] were to `make all the arrangement [sic] to execute the service as per the terms and conditions of the tender document`. The [respondents] also requested for the copy of the charter agreement for their perusal and required that I attend a meeting that Saturday, 16 September 1995 at 0900 hours at the Ministry of Defence, Malaysia, to confirm all the necessary arrangements for the service. ...

There was no expression of any difficulty with his memory when he gave evidence on the first day. He must have known before he came to court that he would be giving evidence on the conversation, and could not have been surprised to be questioned on it. On the second day he was not filling gaps in his recollection after further reflection. He was making radical overnight changes to his evidence for reasons best known to him.

[t]his $200,000 is to fix the aircraft contracted, whether cancellation or deposit it is my contract with Kontena Nasional [the respondents].

43 Whether an agreement was constituted by the respondents` facsimile of 14 September

44 The finding that no oral agreement was concluded between the appellants and the respondents on 14 September 1995 was not a finding that the alleged conversation between Abdul Hamid and Teo, if it took place, was in law insufficient to satisfy the essentials for the creation of a contract. In other words, it was not a finding that, had there been such a conversation as alleged, it did not amount to a legally binding contract. Rather, it was a finding premised on the inadequacy of the evidence adduced by the appellants in support of their claim that there was an oral agreement. However, when the documentary evidence, in particular the respondents` facsimile of 14 September, is considered, the picture is entirely different. The appellants contended that this evidence was a confirmation of the alleged oral agreement, and not that it was sufficient in its own right to constitute an agreement between themselves and the respondents. In our opinion, this contention was misplaced. As has already been explained, the finding that there was no oral agreement, a finding which involved an assessment of the credibility of the witnesses, Abdul Hamid and Teo, was really quite unarguable. The fact, therefore, that the contemporaneous documentary evidence may have appeared to afford some support for the alleged oral agreement did not affect the true position. Instead, the difference brought about by the respondents` facsimile was that it suggested that a firm agreement between the appellants and the respondents was constituted thereby. The facsimile was from Abdul Hamid to Teo and was in the following terms:

We are pleased to inform you that we (Air Charter KN) [ie the appellants and the respondents] have been appointed by Mindef/UN to provide the service for the above movement [of peacekeeping troops to Bosnia].

Please make all the necessary arrangement[s] to execute the service as per the terms and condition[s] of the tender document. [Emphasis added.]

Please forward us [sic] the draft copy of the charter agreement for our perusal.

We are required to be present at Mindef on Saturday 16/09/95 at 0900 hours to confirm all the necessary arrangement[s] for the services and also on the additional condition[s] as listed in our fax dated 11/09/95.

We look forward to working together with you and provide excellent service [sic]. ...

46 Chitty on Contracts (27th Ed, 1994) at p 89 et seq, the normal test for determining whether the parties have reached agreement is to ask whether an offer has been made by one party and accepted by the other. In deciding whether the parties have reached agreement, the courts normally apply the objective test. Under this test, once the parties have to all outward appearances agreed in the same terms on the same subject-matter, then neither can, generally, rely on some unexpressed qualification or reservation to show that he had not in fact agreed to the terms to which he had appeared to agree. Such subjective reservations of one party, therefore, do not prevent the formation of a contract. The objective test of agreement applies as much to an acceptance as it does to an offer. An offer, simply defined, is an expression of willingness to contract made with the intention (actual or apparent) that it shall become binding on the person making it as soon as it is accepted by the person to whom it is addressed. At this juncture, it is perhaps convenient to state that, in the context of tenders, it is established that an invitation for tenders for the supply of goods or services, or for the execution of works, as the case may be, is generally not an offer, even though the preparation of the tender may involve considerable expense. The offer comes from the person who submits the tender and there is no contract until the person asking for the tenders accepts one of them. So in the present case, the appellants when they submitted their quotation were the offerors while the respondents were the offerees, and there was no contract until the respondents accepted the appellants` offer - which is precisely the question in issue here. Reverting to the objective test of agreement, from the perspective of the offeree, an apparent intention to be bound may suffice, ie the alleged offeror (A) may be bound if his words or conduct are such as to induce a reasonable person to believe that he intends to be bound, even though in fact he has no such intention.

47 Chitty on Contracts at p 91 para 2-002 state that the objective test does not apply to the third situation because in it there is, by reason of B`s state of mind, no risk of his suffering any prejudice as a result of the objective appearance of A`s intention. Similarly, the objective test of agreement applies to an acceptance. An acceptance is a final and unqualified expression of assent to the terms of an offer. From the point of view of the offeror, an apparent intention to be bound may suffice, ie the alleged offeree (B) may be bound if his words or conduct are such as to induce a reasonable person to believe that he intends to be bound, even though in fact he has no such intention. Again, however, whether B is actually bound by his apparent acceptance depends on the state of mind of the offeror (A); to this extent, the test is not purely objective. With regard to A`s state of mind, the same three possibilities arise as in relation to B`s state of mind, mutatis mutandis, and we do not propose to go through them again.

48 Smith v Hughes [1871] LR 6 QB 597 at p 607, Blackburn J said:

If, whatever a man`s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party`s terms. [Emphasis added.]

49 Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854 at pp 915-916, Lord Diplock said:

To create a contract by exchange of promises between two parties where the promise of each party constitutes the consideration for the promise of the other what is necessary is that the intention of each as it has been communicated to and understood by the other (even though that which has been communicated does not represent the actual state of mind of the communicator) should coincide. That is what English lawyers mean when they resort to the Latin phrase consensus ad idem and the words that I have italicised are essential to the concept of consensus ad idem, the lack of which prevents the formation of a binding contract in English law.

Thus if A (the offeror) makes a communication to B (the offeree), whether in writing, orally or by conduct, which in the circumstances at the time the communication was received, (a) B, if he were a reasonable man, would understand as stating A`s intention to act or refrain from acting in some specified manner if B will promise on his part to act or refrain from acting in some manner also specified in the offer, and (b) if B does in fact understand A`s communication to mean this, and in his turn makes to A a communication conveying his willingness so to act or refrain from acting which mutatis mutandis satisfied the same two conditions as respects A, the consensus ad idem essential to the formation of a contract in English law is complete.

Q: DB30 - war risk was not mentioned? A: Yes. Q: War risk discussed? A: It was not. Q: Why are you so sure? A: There is no figure involved. Three committee members and accountants. Anything dealing with figures will be minuted [sic]. Q: On 14/9 was war risk an important matter? A: It was not mentioned. Q: Was it important to you?` A: Yes. Q: Did you ask what the war risk was? A: No. Q: Did the other committee members ask? A: To the best of my recollection, no. Q: How many FTC meetings have you sat on? A: A lot. Q: War risks is something which affect the charter price? A: Agree. Q: It affects how much the defendants are going to pay? A: Yes. Q: It affects the defendants` profits? A: Yes. Q: Part of the FTC`s job is to see how much the defendants can make? A: Yes. Q: Why did it not occur to the committee to ask about war risks? A: Because it was not mentioned by [Abdul Hamid]. We were not aware of war risks . [Emphasis added.]

56 Chitty on Contracts at pp 101-102 para 2-017 and p 136 para 2-081. Neither of these possibilities was the case here.

58 Pioneer Shipping Ltd v BTP Tioxide Ltd; The Nema [1982] AC 724 at p 736 per Lord Diplock; but the court is concerned to ascertain, not what were the mutual intentions of the actual parties to the contract, but what would have been the intentions of the hypothetical reasonable parties, placed in the same position as the actual parties, and contracting in the words used by the actual parties. Thus in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 3 All ER 570 at p 574; [1976] 1 WLR 989 at p 996, Lord Wilberforce said:

When one speaks of the intention of the parties to the contract one speaks objectively - the parties cannot themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties.

59 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] 149 CLR 337 at p 352, Mason J said:

... when the issue is which of two or more possible meanings is to be given to a contractual provision we look not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties` presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the contract.

60 Great Western Rly v Bristol Corp [1918] 87 LJ Ch 414 at p 424:

... one hears much use made of the word `intention`, but courts of law when on the work of interpretation are not engaged upon the task or study of what parties intended to do, but of what the language which they employed showed that they did; in other words, they are not constructing a contract on the lines of what may be thought to have been what the parties intended, but they are construing the words and expressions used by the parties themselves. What do these mean? That when ascertained is the meaning to be given effect to, the meaning of the contract by which the parties are bound. The suggestion of an intention of parties different from the meaning conveyed by the words employed is no part of interpretation, but is mere confusion.

61 Quainoo v NZ Breweries Ltd [1991] 1 NZLR 161 at p 165 that:

[o]ften the words the parties use have only one meaning, and then there is unlikely to be occasion to look outside the contract itself. But where the words are susceptible of more than one meaning the court is entitled to look, indeed it must look, at the surrounding circumstances in order to ascertain from them, if it can, what the intention was. This is quite different from listening to the parties` version of what they each meant. A contract must be construed objectively, but not in disregard of its factual context and purpose.

62 Vitol BV v Compagnie Europeene des Petroles [1988] 1 Lloyd`s Rep 574 at p 576 gave a lucid summary of the relevant principles:

The approach of English law to questions of the true construction of contracts of this kind is to seek objectively to ascertain the intentions of the parties from the words which they have chosen to use. If those words are clear and admit of only one sensible meaning, then that is the meaning to be ascribed to them - and that meaning is taken to represent what the parties intended. If the words are not so clear and admit of more than one sensible meaning, then the ambiguity may be resolved by looking at the aim and genesis of the agreement, choosing the meaning which seems to make the most sense in the context of the contract and its surrounding circumstances as a whole. In some cases, of course, having attempted this exercise, it may simply remain impossible to give the words any sensible meaning at all in which case they (or some of them) are either ignored, that is to say, treated as not forming part of the contract at all, or (if of apparent central importance) treated as demonstrating that the parties never made an agreement at all, that is to say, had never truly agreed upon the vital terms of their bargain.

65 Conclusion

67 There was, however, some uncertainty as to the true quantum of loss suffered by the appellants, apart from the deposit payable to their principal, ACW (USA). We therefore allowed the appeal but ordered damages to be assessed by the registrar.

Karthigesu JA
L P Thean JA
Yong Pung How CJ

Yap Teong Liang (Salem Ibrahim & Partners) for the appellants
RS Bajwa and CA Monteiro (Bajwa & Co) for the respondents