IMPLYING A TERM IN FACT
In Writers Studio Pte Ltd v Chin Kwok Yung [2022] SGHC 205, Justice Lee Seiu Kin (“Lee J”) dismissed a claim for breach of contract on the basis that the plaintiff had failed to properly plead the contract into which terms are to be implied in fact.
Facts. The plaintiff, Writers Studio Pte Ltd (“Writers Studio”), is in the business of providing education support services to students in primary school (at [3]). Writers Studio commenced the suit in question against Chin Kwok Yung (“Mr. Chin”), a tuition teacher engaged by Writers Studio (at [4]), claiming for, among others, damages for alleged losses suffered as a result of Mr. Chin’s conduct and/or inappropriate behaviour and/or breach of his implied contractual duties and/or breach of his duty of care (at [1]).
Parties disputed the nature of their working relationship, as Mr. Chin took the view that he was an employee of Writers Studio at all material times (pursuant to an implied contract of service), while Writers Studio contended that Mr. Chin was a freelancer engaged pursuant to a contract for service (at [4]).
In this blog, we will focus mainly on the second of four issues before Lee J, namely, whether Mr. Chin caused loss to Writers Studio by breaching implied terms containing the duty of obedience and duty of fidelity and good faith (at [52]). We will not be focusing on the other issues, such as, e.g., Writers Studio’s claim in negligence.
Independent contractor under employment for service. However, we will just briefly highlight that, as set out at [66] – [69], Lee J found that Mr. Chin was engaged as an independent contractor under an employment for service. In other words, Mr. Chin was not engaged under a contract of service, but rather a contract for service.
Implied duties. This is important because while Writers Studio had amended their pleadings to plead that Mr. Chin was not an employee, Writers Studio continued to plead that Mr. Chin nevertheless owed duties of obedience, fidelity and good faith (the “Duties”) “… without further particulars of how such duties arose in the circumstances of the present case” (at [71]; emphasis in original).
This is crucial as Lee J held that these Duties are not implied into contracts for services: any such duties may only be implied in fact, unlike in employment contracts (i.e., employer-employee relationship) where such duties are implied terms in law (at [72] – [75]).
Contract must first be identified. To imply a term in fact, the applicable three-step test is that as set out by the Court of Appeal in Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal [2013] 4 SLR 193 (“Sembcorp”) (at [75] – [76]).
However, the three-step test “… hinges on the existence of some subsisting contract between the parties” (at [80]). Therefore, if a party fails to even identify any contract properly in the pleadings, the three-step test is inapplicable.
Dismissal for failure to plead the contract. This was crucial as Lee J dismissed Writers Studio’s case for breach of contract on the basis that Writers Studio had failed to plead the contract into which the alleged terms are to be implied. We set out Lee J’s holding below:
“80 My second observation is that Writers Studio does not even plead the contract into which such alleged terms are to be implied in fact. The three-step test summarised above assumes and necessarily hinges on the existence of some subsisting contract between the parties before the first step can even be considered. Without the proper identification of any contract (such as an oral contract) between the parties, the three-step test is simply inapplicable. In my judgment, this is fatal, and sufficient to dispose of Writers Studio’s claim for breach of such implied terms.”
(Emphasis in original)
For completeness, Lee J proceeded to consider whether the Duties were implied terms in the parties’ Agreement (which was an email chain in relation to the engagement of Mr Chin). Lee J found that:
While there was a “true” gap in relation to the alleged Duties, the alleged Duties did not pass the test under Sembcorp (at [81]). Among others, Lee J found that the test as argued by Writers Studio was not the test to determine business efficacy, and that the terms failed to pass the officious bystander test as they were not clear.
Even if such Duties were implied in fact, the facts upon which Writers Studio sought to substantiate its claim for breach of the same were insufficient to make out its case (at [82]).
Significance. Pleadings are important. Parties must ensure that the material facts pleaded support the cause of action (see also Order 18 rule 7(1) of the Rules of Court (Cap. 322, R 5, 2014 Rev. Ed.).
On the facts of this case, pleading that Mr. Chin, as a non-employee, had breached the duties of obedience, fidelity and good faith, meant that Writers Studio had to meet the Sembcorp test in order to imply a term in fact.
However, since Writers Studio was seeking to imply a term, Writers Studio then had to first plead the contract into which such terms were to be implied. The failure to do so was fatal to Writers Studio’s claim in breach of contract.
It also bears highlighting that, as set out in [54] – [55] of the decision, “implied contracts” and “implied contractual duties and terms” are distinct concepts and should not be conflated. Further, even if a contract can be implied (assuming that it was properly pleaded), the terms to be implied must also be properly pleaded and proved.
To sum up, pleadings are important. A failure to properly plead a case can result in the court dismissing the claim based on the pleadings.
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