PLEADING AND PROOF OF ORAL AGREEMENTS
In this week’s blog, we take a quick look at Chan Tam Hoi (alias Paul Chan) v Wang Jian and other matters [2022] SGHC 192, where the Court addressed certain basic issues relating to pleading and proof of oral agreements.
Brief facts. Chan Tam Hoi (alias Paul Chan) v Wang Jian and other matters [2022] SGHC 192 (the “Decision”) is an appeal against the decision of the learned District Judge in Wang Jian v NSC Capital Pte Ltd & Anor [2021] SGHC 282 ([1] Decision). In the appeal, the key issue was whether an alleged oral agreement had been validly formed between the parties ([1] Decision), and in the course of the Decision, Judicial Commissioner Goh Yihan addressed certain fundamental points pertaining to the pleading and proof of oral agreements, which is the subject of today’s blog.
Evidence: Burden of proof. As set out in [38] Decision, the burden of proof always remains on the plaintiff to prove its positive case. Therefore, it is important “… not to confer an unintended advantage to the plaintiff where the defendant’s defence is unsustainable” ([38] Decision).
However, this burden of proof is distinct from the evidential burden ([41] Decision): while the plaintiff-respondent bore the legal burden of proof to prove its case, if the plaintiff can prove a prima facie case, then the evidential burden will shift to the defendant-appellant ([43] Decision).
This principle is important to bear in mind because Goh JC found that the learned District Judge had erred in applying the principle in “… striking down the appellant’s defence before considering the respondent’s case that an oral agreement exists…”, as the learned District Judge had “… failed to appreciate that the respondent had the burden of first adducing evidence to show that there was such an oral agreement before the appellant would have the burden of adducing rebuttal and explanatory evidence as to why the respondent’s case should fail.” ([44] Decision; emphasis in original)
Goh JC also found that the burden of proof was misunderstood by the respondent at [45] Decision. Goh JC held that the respondent “… cannot make out her case indirectly merely by eliminating the other possible scenarios. The enduring legal burden remains with the respondent throughout, and it is for the respondent to prove the elements of the Alleged Oral Agreement (see the High Court decision of Tan Swee Wan and another v Johnny Lian Tian Yong [2018] SGHC 169 (“Tan Swee Wan”) at [222]). If the respondent is unable to establish even a prima facie case, then the evidential burden will not shift to the appellant to rebut her case.”
As an illustration of the above principle, we set out [75] Decision below:
“75 Thus, on the face of it, in the absence of rebuttal evidence from the respondent, the consideration for the Shares is as stated on the 2018 Share Transfer Form, which is $1. However, to accept that the 2018 Share Transfer Form reflected this would potentially lead us to an absurd result. It would require me to accept that the respondent chose to relinquish the Shares which she had ostensibly acquired for $400,000 (as mentioned above at [4]) for the nominal consideration of only $1. Notwithstanding this, when we bear in mind the burden that the respondent must discharge, the 2018 Share Transfer Form does not assist in ascertaining the existence of the Alleged Oral Agreement. This is because the respondent is referring to the 2018 Share Transfer Form to disprove the appellant’s case that the agreement was for the Shares to be sold at $1. However, it remains the respondent’s burden to prove that there was an oral agreement concluded between the parties in November 2018 at the price of $467,165. She cannot discharge that burden by refuting the appellant’s defence that the parties had entered into an agreement to purchase the Shares for $1, as evidenced by the 2018 Share Transfer Form. Even if I were to accept that the respondent did not transfer the Shares for $1, that does not, in and of itself, mean that the parties had agreed for the Shares to be sold at $467,165 in November 2018.”
(emphasis added)
While the respondent may be able to show that it would be “absurd” for the consideration for the shares to be $1.00, this does not prove the respondent’s case of the consideration being $467,165.00. Therefore, it is important not to lose sight of this fundamental principle in the cut-and-thrust of litigation.
Evidence: pleaded case and oral agreements. Further, as set out in [46] – [47] Decision, a party in litigation must prove the pleaded case, and not any other case.
“46 The second preliminary (and connected) point I make concerns the importance of pleadings especially in cases involving oral agreements. Central to the determination of who bears the burden of proof in civil trials is the state of the parties’ pleadings. This is because it is in the pleadings that one finds the material facts that each party asserts to establish its claim or defence and, as is trite law, he who asserts must prove. This is a rule which is consistent with the general principle underlying ss 103 and 105 of the Evidence Act 1893 (2020 Rev Ed) (the “EA”) (see the decision of the Court of Appeal in Cooperatieve Centrale Raiffeisen-Boerenleenbank BA (Trading as Rabobank International), Singapore Branch v Motorola Electronics Pte Ltd [2011] 2 SLR 63 at [31]).
47 In my view, pleadings are even more important in cases involving oral agreements. In the absence of a written document that proves the parties’ agreement, it is important for the plaintiff to plead the material particulars of an alleged oral agreement so that the defendant knows the case it must meet. In saying this, I accept that a court is not required to adopt an overly formalistic and inflexibly rule-bound approach, and departure from the general rule is allowed where no prejudice is caused to the other party at trial or where it would clearly be unjust for the court not to do so (see the decision of the Court of Appeal in V Nithia (co-administratrix of the estate of Ponnusamy Sivapakiam, deceased) v Buthmanaban s/o Vaithilingam and another [2015] 5 SLR 1422 at [39]–[40]). While I understand that it may not be possible to plead particulars of an oral agreement with the level of precision as in the case of a written agreement, it is still incumbent on the plaintiff to plead its case to a sufficient degree of certainty. For example, while it may not be possible to plead the exact date on which an oral agreement was reached, it is still necessary to plead the precise range of dates on which the contract was allegedly concluded.”
(emphasis in original)
In the Decision, this issue was crucial because the respondent had consistently pleaded and adduced evidence on the premise that the alleged oral agreement was made in or around November 2018 ([48] – [49] Decision).
However, during the hearing, the respondent sought to amend its pleadings to reflect that the alleged oral agreement had only materialised in January 2019 ([50] Decision).
This application was dismissed as Goh JC held that there was a material difference between the pleaded case that the alleged oral agreement was concluded in November 2018, versus a case that it was only concluded in January 2019 ([51] Decision).
Goh JC held that “… [t]here must be a single point in time when the necessary consensus ad idem is reached. Even leaving aside this trite principle that there must be a definite point of formation for every contract ….” ([51] Decision).
Applying the principle that a party must prove its pleaded case, Goh JC held that while some latitude would be allowed in relation to the pleading when the contract must formed for oral agreements, such as by pleading a range of dates in a specified period, this “ … latitude cannot extend to changing the narrative completely by saying that the oral agreement materialised several months later from the original pleaded date. This will prejudice the appellant as he has always run his defence based on an oral agreement in November 2018, not an agreement at a completely different point in time.” ([51] Decision).
It is important to note that Goh JC distinguished the facts of the Decision from the case of Day, Ashley Francis v Yeo Chin Huat Anthony and others [2020] 5 SLR 514 on the basis that the amendment sought in that case concerned an amendment to a new date which fell within the period originally pleaded, whereas the amendment sought in the Decision concerned a date that was never within the originally pleaded period ([52] Decision).
It is also important to note that the amendment in the Decision was sought during the hearing. If the amendment application had been taken up earlier in the proceedings, such that the appellant had the opportunity to meet the case, a different result may possibly have been reached.
Oral agreement: uncertain. While it is beyond the scope of today’s blog, we highlight that Goh JC also held at [97] – [99] Decision that, regardless of the parties’ pleadings, the “… issue of certainty of a material term ultimately turns on the court’s interpretation of the contractual terms. … the court is entitled to find that no contract had been concluded even though neither party had pleaded that there was a failure to agree an essential term”; hence, Goh JC therefore could, and did, consider the point that the term relating to the price of the shares was too uncertain even though it was not pleaded by the appellant.
Takeaway. In Goh JC’s conclusion at [107] – [108] Decision, Goh JC stated that he understood and empathised with the respondent’s counsel submission that since the shares in question had already been transferred, Goh JC’s overturning of the District Judge’s decision would mean that the appellant would end up with the shares in question for $1.00. Nonetheless, Goh JC held that “… I can only rule on what I can see (the pleadings and evidence), and even what I do not see (by way of an inference), but I certainly cannot rule on what I know I should not see (an alternative case that was not pleaded and the approach of ascribing too much importance on the feasibility of the appellant’s defence before considering if the respondent had even made out a prima facie case). The justice of every case requires the court to do just that.” (emphasis added).
This case illustrates the importance of pleadings and the burden of proof for oral agreements. The alleged oral agreement in question must be carefully pleaded, paying close attention to whether all the requirements for an oral agreement to be formed have been met. The necessary evidence to establish the pleaded case should also be mustered, bearing in mind that, as held by Goh JC, a party cannot make out its pleaded case indirectly merely by eliminating the other possible scenarios.
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