Koh Lin Yee v Terrestrial: Enforceability of No Set-Off Clause under UCTA
In Koh Lin Yee v Terrestrial Pte Ltd, the Singapore Court of Appeal heard an appeal by Koh Lin Yee and Allgo Marine Pte Ltd against a summary judgment granted to Terrestrial Pte Ltd for unpaid loans. The Appellants argued they were entitled to set off monies due under the loan agreement against sums owed to them by Terrestrial under a separate contract. The court dismissed the appeal, upholding the enforceability of a 'no set-off' clause in the loan agreement and clarifying its position on the applicability of the Unfair Contract Terms Act to such clauses.
1. Case Overview
1.1 Court
Court of Appeal1.2 Outcome
Appeals dismissed
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The Singapore Court of Appeal addressed whether a contractual clause excluding set-off is subject to the Unfair Contract Terms Act (UCTA), ultimately dismissing the appeal.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Koh Lin Yee | Appellant | Individual | Appeal Dismissed | Lost | |
| Allgo Marine Pte Ltd | Appellant | Corporation | Appeal Dismissed | Lost | |
| Terrestrial Pte Ltd | Respondent | Corporation | Appeal upheld | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chao Hick Tin | Justice of Appeal | No |
| Andrew Phang Boon Leong | Justice of Appeal | Yes |
| Judith Prakash | Judge | No |
4. Counsels
4. Facts
- Allgo agreed to sell a flat top barge to Terrestrial for $1.2m but failed to deliver it.
- Terrestrial made loans to Allgo totaling $350,000 to enable Allgo to pay its barge builder.
- Koh guaranteed Allgo’s obligations to repay the loans.
- Allgo failed to repay the loans when they became due.
- The Loan Agreement contained a clause stating that all payments were to be made without set-off or counterclaim.
- Allgo claimed Terrestrial failed to pay monies owed under a separate contract for the sale of a tug.
- Allgo argued it was entitled to set off the monies due under the Loan Agreement against the sum owed for the Tug Contract.
5. Formal Citations
- Koh Lin Yee v Terrestrial Pte Ltd, Civil Appeals Nos 98 and 157 of 2013, [2015] SGCA 6
- Terrestrial Pte Ltd v Allgo Marine Pte Ltd and another, , [2014] 1 SLR 985
6. Timeline
| Date | Event |
|---|---|
| Allgo agreed to sell a flat top barge to Terrestrial for $1.2m. | |
| Terrestrial agreed to make two short term loans to Allgo of $300,000 and $50,000. | |
| Terrestrial served a letter of demand upon Allgo for the payment of the monies due and payable pursuant to the Loan Agreement and the Additional Loan. | |
| Terrestrial served a letter of demand upon Koh for payment pursuant to the guarantee given in the Loan Agreement. | |
| Assistant registrar granted summary judgment. | |
| Court of Appeal dismissed the appeals. |
7. Legal Issues
- Enforceability of contractual 'no set-off' clause
- Outcome: The court held that the 'no set-off' clause was enforceable and that the UCTA may apply to such clauses, potentially subjecting them to a reasonableness test.
- Category: Substantive
- Sub-Issues:
- Exclusion of equitable set-off
- Application of Unfair Contract Terms Act
- Reasonableness of exclusion clause
- Applicability of the Unfair Contract Terms Act (UCTA)
- Outcome: The court found that the UCTA did not apply because the Appellants were not dealing as consumers nor contracting on the Respondent's standard terms of business.
- Category: Substantive
- Sub-Issues:
- Dealing as consumer
- Standard terms of business
8. Remedies Sought
- Summary Judgment
- Monetary Damages
9. Cause of Actions
- Breach of Contract
- Debt
10. Practice Areas
- Commercial Litigation
- Appeals
11. Industries
- Shipping
- Finance
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Gao Bin v OCBC Securities Pte Ltd | High Court | Yes | [2009] 1 SLR(R) 500 | Singapore | The Judge disagreed with Gao Bin on the point of law on whether a contractual clause excluding a right of set-off is capable of being subject to the requirement of reasonableness in the Unfair Contract Terms Act. |
| Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd | N/A | Yes | [1974] AC 689 | England and Wales | Cited for the principle that parties can contract out of the right of set-off if they use clear words. |
| Coca-Cola Financial Corp v Finsat International Ltd and others | N/A | Yes | [1998] 1 QB 43 | England and Wales | Cited for the principle that parties can contract out of the right of set-off if they use clear words. |
| R & B Customs Brokers Co Ltd v United Dominions Trust Ltd | Court of Appeal | Yes | [1988] 1 WLR 321 | England and Wales | Cited for the construction of the phrase “in the course of business”. |
| Hadley Design Associates Ltd v The Lord Mayor and Citizens of the City of Westminster | High Court | Yes | [2003] EWHC 1617 (TCC) | England and Wales | Cited for the explanation of the phrase 'standard terms of business'. |
| Stewart Gill Ltd v Horatio Myer & Co Ltd | Court of Appeal | Yes | [1992] 1 QB 600 | England and Wales | The court held that a clause excluding the other party’s right to a set-off would fall within the ambit of the UK UCTA because of how ss 3 and 13 of that Act were interpreted. |
| Continental Illinois National Bank & Trust Company of Chicago v Papanicolaou (The Fedora) | N/A | Yes | [1986] 2 Lloyd’s Rep 441 | England and Wales | The court considered closely the commercial purpose of the transaction which was that the bank would be paid quickly upon default by the borrower and the natural meaning of the words was that all set-offs and counterclaims were excluded. |
| Skipskredittforeningen v Emperor Navigation | High Court | Yes | [1998] 1 Lloyd’s Rep 66 | England and Wales | In Stewart Gill the clause contained express provisions which were so wide and obviously unacceptable as to invite over-all rejection of the clause. |
| United Trust Bank Limited v Dalmit Singh Dohil | High Court | Yes | [2011] EWHC 3302 | England and Wales | Stewart Gill has also been applied in other decisions. |
| F G Wilson (Engineering) Limited v John Holt & Company (Liverpool) Limited | High Court | Yes | [2012] EWHC 2477 (Comm) | England and Wales | Stewart Gill has also been applied in other decisions. |
| Schenkers Ltd v Overland Shoes Ltd | Court of Appeal | Yes | [1998] 1 Lloyd’s Rep 498 | England and Wales | In Stewart Gill Ltd., it was established, and is not in dispute in this case, that the effect of s. 13 of the 1977 Act, dealing with exemption clauses, is to apply s. 3 of the Act inter alia to “no set-off” clauses. |
| AXA Sun Life Services Plc v Campbell Martin Ltd | Court of Appeal | Yes | [2011] 2 Lloyd’s Rep 1 | England and Wales | In Stewart Gill Ltd v Horatio Meyer & Co Ltd [1992] 1 QB 600 the Court of Appeal held that a provision materially identical to [the clause under review] was within the scope of section 3 of UCTA as extended by section 13. That decision is binding on us, even if I disagreed with it, which I do not. The [clause under review] is valid only to the extent that it is reasonable. |
| Electricity Supply Nominees Ltd v IAF Group Ltd | N/A | Yes | [1993] 1 WLR 1059 | England and Wales | Stewart Gill has also been applied in other decisions. |
| WRM Group Ltd v Wood & Ors | Court of Appeal | Yes | [1998] CLC 189 | England and Wales | Stewart Gill has also been applied in other decisions. |
| Röhlig (UK) Ltd v Rock Unique Ltd | Court of Appeal | Yes | [2011] EWCA Civ 18 | England and Wales | Stewart Gill has also been applied in other decisions. |
| The Society of Lloyd’s v Leighs | Court of Appeal | Yes | [1997] CLC 1012 | England and Wales | Stewart Gill has also been applied in other decisions. |
| Empire International Holdings Ltd v Mok Kwong Yue and another | High Court | Yes | [2004] 4 SLR(R) 820 | Singapore | The Fedora endorses the possibility of contractual inclusions of no set-off clauses, legal or equitable. |
| Johnstone v Bloomsbury Health Authority | Court of Appeal | Yes | [1992] 1 QB 333 | England and Wales | If we have regard to the general policy of the UCTA which tends, ceteris paribus, against the enforcement of exception clauses, there is no reason in principle why a clause excluding a set-off ought not to be at least potentially subject to the reasonableness test under the UCTA. |
| Deutsche Bank AG v Chang Tse Wen and another appeal | Court of Appeal | Yes | [2013] 4 SLR 886 | Singapore | It is however impossible to overlook the fact that UCTA is designed to be a deliberate incursion into the freedom to contract. The intent appears to be to capture any and all attempts at exoneration from liability for negligence, even extending to clauses which would effectively prevent a duty of care from arising in the first place. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Unfair Contract Terms Act (Cap 396, 1994 Rev Ed) | Singapore |
| Civil Law Act (Cap 43, 1999 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Set-off
- Unfair Contract Terms Act
- Loan Agreement
- Guarantee
- Reasonableness
- Standard Terms
- Consumer
- Exclusion Clause
15.2 Keywords
- contract
- loan
- set-off
- UCTA
- Singapore
- appeal
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Set-off | 90 |
| Unfair Contract Terms Act | 85 |
| Contract Law | 80 |
| Breach of Contract | 75 |
| Interpretation of contractual terms | 65 |
| Guarantee | 60 |
| Guarantees and indemnities | 55 |
| Summary Judgement | 50 |
16. Subjects
- Contract Law
- Commercial Law
- Civil Procedure