Month: July 2021

A garnishee is a technical term for someone who owes another person a debt. If a party has won a lawsuit against a debtor, the winner can apply various methods to enforce the Court’s judgement. One popular way to enforce judgements is by applying for Garnishee Proceedings (also known as Garnishee Orders).

In this guide, we’ll talk about:

• How to file Garnishee Proceedings?
• What assets can be seized by Garnishee Proceedings?
• How are bank accounts seized by Garnishee Proceedings?
• Can joint bank accounts be seized by Garnishee Proceedings?
• When will Garnishee Proceedings be lifted from debtors?
• How to protect yourself against Garnishee Proceedings?

How to file Garnishee Proceedings?

The procedure to file Garnishee Proceedings is found under Order 49, of the Rules of Court. If you’re a creditor and you have a lawyer, your lawyer will do all these steps for you.

Step 1: File Summons with Court

The Creditor (the person to whom money is owed) must file a Summons, along with an affidavit. An affidavit is a document detailing the evidence that supports a particular legal application.

The affidavit must contain the points below:

• Cite the specific Court judgement to be enforced
• Amount of unpaid debt, to show the garnishee has not fulfilled their obligations to their creditors
• Garnishee’s identity
• Additional evidence, e.g. garnishee’s finances, bank accounts, etc.

Step 2: Debtor presents defence (if any)

The Debtor will then be allowed to provide evidence on why they should not have a Garnishee Proceedings placed on them. The Court will arrange a hearing date for this. The Creditor must then personally serve (usually this is done by their lawyers) notice to show up for the hearing at least 7 days before the arranged court date.

If the Debtor pulls a no-show at the hearing, or does not contest that they owe the debt, the Garnishee Proceedings can be made final very quickly.

If the Debtor argues they don’t owe the debt anymore (e.g. they have already made payments), they must prove their case.

Step 3: Approval of Garnishee Proceedings

If the Court sides with the Creditor, the Court will approve the Garnishee Proceedings. The Debtor must pay all their debts owed to their Creditors.

What assets can be seized by Garnishee Proceedings?

The garnishee proceedings can target the Debtor’s bank account. The Creditor can specify the Debtor’s bank accounts to be frozen. The garnishee proceedings can force the bank to take money out of the Debtor’s account, and then transfer the money to the Creditor.

The power for Creditors to apply garnishee proceedings against bank accounts is provided under the Rules of Court, Order 49 Rule 1(3).

How does the Creditor know which bank accounts the Debtor has?

Bank accounts are usually private information. Thankfully, the law allows for Creditors to gain information on the Debtor’s bank accounts. This process is called Examination of the Judgement Debtor.

If the creditor has no information on the Debtor’s financial standing and bank accounts, or needs more information related to this, they can make an application to the Court. If approved, the Court will compel the Debtor to attend a hearing to provide evidence on their finances. The Debtor must also provide information on relevant assets they own. For instance, if the Debtor is a company, they will have to provide information like the financial statements, bank accounts, assets owned by the company, etc. If the Debtor is an individual, they will need to provide information on assets like their cars, houses, land, bank accounts, and other assets owned.

At the Examination, the Debtor must share information with the Creditor. The information revealed through this process will allow the Creditor to apply for garnishee proceedings. Refusing to show up to an Examination is an offence, and offenders can be jailed up to 12 months (or even 3 years). This provides a strong incentive for Debtors to not run and hide.

Also, lying during the Examination (e.g. providing incomplete set of bank accounts) is considered perjury. That is a very serious jailable offence. Those who lie in Court can be jailed up to 7 years.

Once the Debtor provides this information, the Creditor can pursue garnishee proceedings against the specific bank accounts that they wish to reclaim debts from.

Can Debtors transfer money away from accounts to be garnished, to prevent Creditors from claiming the funds?

Yes, but that would not be a smart move, because it would be discovered during the Examination process. Transfers can then be reversed once discovered.

How are bank accounts seized by Garnishee proceedings?

Creditors must serve the Court order onto the bank. Once that is done, the bank will comply and freeze the Debtor’s account. The Court can then make a final garnishee proceeding to seize the money in the bank account, and transfer it to the Creditor.

Can joint bank accounts be seized by Garnishee Proceedings?

Yes, joint accounts can be seized.

In the past, Singapore Courts were reluctant to allow joint accounts to be seized. However, in a recent landmark case, the High Court has ruled that joint accounts can be seized, as long as it can be proved all the money in the joint account actually belongs to the Debtor. This decision was made in the case Timing Limited v Tay Toh Hin & Anor [2020] SGHC 169.

In order to seize joint accounts, Creditors must:

• Prove that all (not just some) of the money in the joint account belongs to the Debtor
• Notify all the joint account holders of the Garnishee Proceedings being pursued
• Promise to repay money (and additional costs) , should the court be satisfied that the money in the joint account subject to the order, is not, in fact, all payable to the judgment debtor

These requirements are a relatively high bar to clear. However, it’s important that joint accounts have this substantive level of protection against Garnishee Proceedings. This is key to protecting innocent joint account holders against the risk of having their money confiscated, simply because they shared an account with a debtor. That would be manifestly unjust.

Although it has not been tested in another case yet, this landmark ruling may lead to other cases where Creditors might be able to apply for Garnishee Proceedings in joint accounts where 100% of the money doesn’t belong to the Debtor. If the Debtor’s exact share of the joint account can be ascertained, then Garnishee Proceedings might be able to apply. We’ll have to wait for a new case to test whether the Courts will allow this to happen.

When will Garnishee Proceedings be lifted from Debtors?

The garnishee proceedings will only be lifted once the Debtor repays their debts in full.

How to protect yourself from Garnishee Proceedings and lawsuits?

Having your bank account garnished is an extremely stressful and financially damaging step. Don’t wait till this happens. Get Professional Indemnity Insurance, so that you won’t have to endure this.

With Professional Indemnity Insurance, the insurance company covers for your lawyer’s fees, and the cost of settlements/damages you become liable to pay. This way, you won’t have to deal with being unable to pay damages, and be forced into giving up your bank account to pay for debts. These two costs could easily add up to hundreds or thousands, or even millions – which is why companies that are not insured often end up having their accounts garnished, or even being made bankrupt.

Professional Indemnity Insurance covers a broad range of lawsuits, including (but not limited to):

• Negligence lawsuits
• Errors & omissions lawsuits
• Defamation lawsuits
• IP infringement lawsuits
• Lawsuits related to subsidiaries
• Employee dishonesty lawsuits
• Breach of confidentiality lawsuits
• …and much more

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In a lawsuit, an injunction is a court order to one party to refrain from certain actions, or to perform certain tasks. Injunctions are commonly used to enforce judgements in lawsuits. If you run a business, there’s a chance you could get involved in a business-related lawsuit, so it’s good to familiarise yourself with what injunctions are, and how they work.

We’ll go over:

• What is an injunction?
• How do I apply for an injunction?
• Can you block an injunction?
• What happens if you breach an injunction?
• What are the 7 types of injunctions?
• How to protect yourself against the costs of legal action?

What is an injunction?

Injunctions are orders from Singapore Courts to stop doing something (or alternatively, to do something). Injunctions are vital legal tools that help the Court, and litigants, enforce Court judgements. Ignoring an injunction is a punishable offence that can land you in jail and/or facing a heavy fine. The threat of such punishment helps ensure compliance with decisions that the Court makes on lawsuits.

For instance, if a party wins a lawsuit against a debtor, the winning party may ask for the Court to apply an injunction against the other party. This injunction (called a “Mareva Injunction”) may be to stop the other party from selling away their assets, so that the debtor cannot claim they have no assets left to pay their debts.

How do I apply for an injunction?

If you have a lawyer, they will do this for you. The process is rather technical, involving the filing of Summons and affidavits. If the injunction needs to be urgently obtained, the Court can do so within a few days. Singapore Courts, depending on the matter, can even accept injunction applications on weekends and Public Holidays.

Can you block an injunction if one is filed against you?

Yes, although your ability to block it will vary depending on the strength of your legal case.

What happens if you breach an injunction?

As we’ve just established, an injunction is an order of the Court. Defying a Court order is a serious offence. In law, defying a Court order is called “contempt of court” (you’ve probably heard this term before).

Punishments for defying the Court, and thereby being found guilty of contempt, depends on which Court the individual has offended against.

If contempt is carried out against the High Court or Court of Appeal, you can be jailed for up to 3 years and/or fined up to S$100,000.

If contempt is carried out against any other Court, you can be jailed for up to 12 months and/or fined up to S$20,000.

Also, the Court may demand that you make a private or public apology. The Court can also refuse to hear further cases from the person who committed the contempt, until rectifications have been made for the contempt (e.g. jail, fine, apology, compliance with Court injunction, etc.).

What are the 7 key types of injunctions?

#1. Mareva injunction (a.k.a. Mareva order, or “Don’t anyhow lelong”, or ”Don’t say no money to pay”)

A Mareva injunction stops the defendant from selling their assets away. Mareva orders can apply to assets in Singapore, or assets held anywhere in the world. Mareva injunctions prevent the defendant from getting rid of their assets to deprive their creditors of compensation. For example, slippery debtors may attempt to quickly sell off their stocks, properties, and other assets if they get sued by their creditors, and lose the case. They’ll likely try to hide their assets, so that it appears they’re penniless, or they only have to give up a small portion of their true assets to the people they owe money to.

Real-life example: In 2017, Song Fan Rong, a naturalised Singapore citizen, was sued for $9.5 million by three Chinese businessmen for cheating. Ms. Song had allegedly defrauded the three businessmen to invest millions of dollars in her business, on the pretext for helping them immigrate here. She lost the case. Amongst other judgements, the Court handed down a Mareva injunction against Ms. Song and her husband. This was to prevent Ms. Song from trying to sell her assets off to avoid them being claimed by her creditors. However, both Ms. Song and her husband flouted the injunction. They sold some shares in their business away. As we’ve explained earlier, defying a Court injunction is considered contempt of court – a jailable offence. Upon discovery, Ms. Song was jailed for 12 months, and her husband was jailed for 2 weeks.

Mareva orders get their name from the English case of Mareva Compania Naviera SA v International Bulkcarriers SA.

#2. Final injunction (a.k.a. “Perpetual injunction, or “Diam diam la”)

When the Court has delivered a final judgement on a case, and also hands down an injunction, that injunction is known as a final or perpetual injunction.

#3. Interim injunction (a.k.a. “interlocutory injunction”, or “Don’t siam, I give you some more”)

An interim injunction is an order delivered by the Court, before the lawsuit has been concluded and final judgement has been handed down. Interim injunctions are commonly applied for urgent issues, where one party needs to very quickly stop the other party from doing something (or have them quickly do something to rectify a problem).

Example: Sarah and Harry are going through a divorce. They have a child. One day, Harry takes their child away to his own home. Sarah is distraught. Sarah can file for an interim injunction to prevent Harry from taking their child away, until the judge rules on who should have custody of the child.

#4. Prohibitory injunction (a.k.a. “Don’t do ah, or I slap your face”)

A prohibitory injunction is a court order restraining a party from doing or continuing to do a wrongful act. In the landmark case RGA Holdings International v Loh Choon Phing Robin and another [2017] SGCA 55 (“RGA Holdings”), the Singapore Court of Appeal stated that prohibitory injunctions will be granted readily to plaintiffs. This will be done if the defendant (person being sued) has already breached (or is about to breach) a negative covenant in a contract. A negative covenant is a promise not to do something (e.g. not to sell certain equipment, not share confidential information etc.).

Example: RGA Holdings entered into a Share Sale Agreement with Robin Loh, and other parties. The Share Sale Agreement involved RGA Holdings investing into a company owned by Robin Loh, along with extending loans to it. In exchange, Robin Loh and related parties in the contract agreed not to sell 2 residential properties, located at 246 and 248 Carpmael Road. After disputes arose, Robin Loh and related parties tried to sell off the 2 properties. The plaintiff quickly applied for a prohibitory injunction to stop the sale of the properties. The prohibitory injunction was granted.

#5. Mandatory injunction (a.k.a. “Better do, else I hamtam you”)

A mandatory injunction is a court order compelling a party to perform a positive act. A mandatory injunction may have a similar effect with an order for specific performance.

Example: In 2018, the Singapore High Court delivered a judgement in Disney Enterprises Inc and Others v M1 and Others. Disney had sued M1, claiming that M1 allowed users to access Disney-copyrighted content. Disney won the case. The High Court issued injunctions to M1 directing the company to block IP addresses and websites that hosted pirated Disney content.

#6. Quia timet injunction

Quia timet is Latin for “because he fears”. If it’s not apparent by now, lawyers love fancy Latin words. They also adore alliterative aphorisms (get it?).

As the name suggests, a quia timet injunction is a Court order to stop a party from committing wrongful acts that they’ve threatened. Parties who request for quia timet injunctions should show proof of imminent danger, or threats that they’ve received.

Example: A temporarily-vacant warehouse is being used for illegally organised, large-scale parties. The owner of the warehouse files a lawsuit against the organiser of these parties. The owner seeks a quia timet injunction against the party organiser to stop them from organising future events, which according to Facebook events, are scheduled to take place again soon. The Courts can grant a quia timet injunction to prevent the party organiser from further trespass onto the warehouse owner’s property.

#7. Anton Piller injunction (a.k.a. “You don’t destroy evidence ah”)

An Anton Piller injunction is a Court order allowing a party to enter the another party’s premises to search for and seize evidence related to a legal dispute. Anton Piller injunctions allow litigants to quickly seize evidence, if there is fear that the other party might destroy or tamper with crucial evidence.

Example: A hedge fund is being sued for misleading investors on its ability to generate returns. The investors’ legal team is concerned that the hedge fund may delete incriminating evidence, like pitch decks and other fund presentation materials. They therefore file for an Anton Piller injunction against the hedge fund. The Court grants the injunction, and the legal team is able to swoop into the hedge fund’s office, seizing relevant evidence to further strengthen their case.

How to protect yourself against the costs of lawsuits?

If you run a business, dealing with injunctions and lawsuits is the last thing you need. Being sued is a huge drain on your time and financial resources. But did you know that there’s a type of business insurance that can protect you comprehensively from lawsuits? It’s called Professional Indemnity Insurance. Provide is the first business insurance platform that allows you to purchase Professional Indemnity Insurance online. You can even get zero deductibles, which means you won’t have out-of-pocket expenses for valid claims (average deductibles are $10,000 to $20,000).

With Professional Indemnity Insurance, the insurance company will cover your legal expenses. The insurer pays for your lawyer’s fees, and the cost of settlements/damages you become liable to pay. For uninsured companies, these two costs could easily add up to hundreds or thousands, or even millions.

Professional Indemnity Insurance covers a broad range of lawsuits, including (but not limited to):

• Negligence lawsuits
• Errors & omissions lawsuits
• Defamation lawsuits
• IP infringement lawsuits
• Lawsuits related to subsidiaries
• Employee dishonesty lawsuits
• Breach of confidentiality lawsuits
• …and much more

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If you’ve breached a contract and are being sued, you might be worried about whether the Court is going to levy additional damages to punish you for not honouring your contract. If you’re suing someone else, I suppose the opposite is true – your hopes are that the judge sides with you, and throws the book (and gavel) at the other party!

In contract law, the main purpose for damages is compensation, rather than punishment. The Singapore Courts generally shy away from awarding punitive damages. However, there are exceptional cases when punitive damages will be awarded in Singapore. These circumstances involve “malicious, oppressive and high-handed” behaviour, although the bar to qualify for such behaviour is set relatively high. We discuss this, and other matters, in this guide.

We’ll explain:

• What are punitive damages in contract law?
• Can punitive damages be awarded for breach of contract?
• Are there exceptions where punitive damages might be awarded for contract breaches?
• How can I protect myself from punitive damages, or damages in general?

What are punitive damages?

Under civil law, a plaintiff (the person suing) can initiate a lawsuit against a defendant (the person being sued) for breach of contract. If the Court agrees with the plaintiff, the Court can award two kinds of damages:

• Compensatory damages: This is the amount of money that the Court orders someone to pay, to compensate another party for a loss.
• Punitive damages: Punitive damages are a sum of money that the Court orders someone in a lawsuit to pay, over and above compensation damages.

Punitive damages are used to achieve three main purposes:

• To punish the defendant for reprehensible behaviour
• To deter the defendant from committing the same wrong again, and deterring others in society from committing similar acts
• To signal that society will not tolerate such amoral behaviour

Can punitive damages be awarded for breaches of contract in Singapore?

Punitive damages generally are not levied in breaches of contract. Punitive damages can be awarded, if the breach of contract is “exceptional”. The breach of contract has to be generally “arrogant”, and demands “compensation [or punishment] by the Court”.

Later in this guide, we’ll talk about one such “exceptional” case that serves as a good example for when punitive damages can be awarded.

Tip: Punitive damages are actually common in many lawsuits for personal injury (e.g. someone assaulted you), or property damage (e.g. someone smashed your car).  It’s only for breach of contracts that punitive damages are uncommon.

Here are the key reasons why punitive damages are generally not awarded for breach of contract:

#1. Punishment, as a legal concept, is not a central part of contract law

When two parties enter into a contract, they do so voluntarily. Both parties would have willingly set out the roles and responsibilities that each should bear. If the contract is breached, the Court should not retroactively interfere in the contract, and make opinions about what additional responsibilities one or another party should have. Such actions would not be legally, or logically, sound.

The primary purpose of contract law is really to make good any losses that a party has suffered. If a party has suffered $100,000 in lost profit due to breach of contract, then contract law is designed to compensate the party for that lost $100,000. Punishing the party who caused the loss is not, generally speaking, the purpose of contract law. Therefore, in most cases, the Court’s role should be to judge the degree of harm caused, and then award the right amount of damages to compensate the party that’s been harmed.

#2. It is not easy to specify exact criteria when punitive damages should be awarded

Case law – the compendium of previous lawsuits, whose judgements help judges make decisions – is well-established for personal injury/property damage lawsuits. Therefore, judges can make relatively straightforward decisions for punitive damages in such cases. However, the case law for punitive damages for breach of contracts is not well-established. This makes it more difficult for punitive damages to be awarded.

Without a large body of previous cases to reference, it is not straightforward to decide when someone who’s breached a contract has acted in an “[exceptionally] malicious, oppressive, and high-handed” manner. These terms can be interpreted differently from one case to another.

#3. Frequently awarding punitive damages for contract breaches may have adverse policy effects

If punitive damages are commonly awarded for contract breaches, plaintiffs might inflate the quantity and seriousness of their claims. They may do this because they know they will stand a higher chance of getting punitive damages from the Court. This may lead to an imbalance of justice, and also make court processes longer and costlier. This would contribute to additional strain on the legal system, which needs to be efficient.

Also, punitive damages may be used as leverage by plaintiffs to pressure the other party in inflated settlements, lest they be made to face a costly and difficult Court trial.

These key reasons, among others, are why punitive damages are generally not awarded for breach of contract, unless the case meets the “exceptional” standards that we described earlier.

What might constitute an “exceptional” breach of contract deserving punitive damages?

In 2017, the Court of Appeal published published a landmark ruling. In this ruling, the Court of Appeal overturned a previous decision made by the High Court in 2015, that had originally granted punitive damages to a litigant. This decision to overturn the High Court’s original judgement reinforced the notion that punitive damages are generally not awarded in breach of contract lawsuits.

This landmark case was Airtrust (Hong Kong) Ltd v PH Hydraulics & Engineering Pte Ltd.

The case involved a marine engineering firm, PH Hydraulics & Engineering Pte Ltd, that sold a Reel Drive Unit (RDU) to a customer, Airtrust (Hong Kong) Ltd. The RDU was a large 300-tonne machine, used to lay undersea cables. The customer installed this machine onto their ship, so they could lay cables in the ocean. Soon after the customer began to of the machine, the machine broke down. Parts of the machine even came apart. The machine suffered a fair amount of damage, and the customer had to bear financial losses to repair the defective equipment, amongst other costs. The customer sued the PH Hydraulics & Engineering, claiming breach of contract for selling them an inherently defective machine.

Upon investigation, it was revealed that the marine engineering firm failed to design the machine to the specifications that the customer required.

The marine engineering firm:

• Used an RDU design from another project, without performing the required engineering calculations to make sure that the new RDU would safety fit the customer’s needs
• Assigned a junior engineer to design a complex piece of equipment
• Misled an engineering certification agency to gain the necessary approvals for the RDU
• Installed defective or improper components into the RDU

Although these actions could be considered fraudulent, the Court of Appeal wrote that even fraud is not sufficient to garner punitive damages.

How can I determine whether I am eligible for punitive damages?

Your best bet is to speak with a qualified lawyer. If you are suing someone else, a legal professional will be best placed to advise you on whether the other party’s conduct is likely to win you punitive damages. If you’re being sued, your lawyer can advise you on whether damages assessed against you are likely to include a punitive element, and therefore be higher than normal.

How can I protect myself from punitive damages, or damages in general?

Lawsuits are terribly expensive. Lawyers cost a bomb. If you have to negotiate a settlement, or if the Court rules against you, you could potentially have to pay huge sums in settlement fees. The exact amount will really depend on the specific case, but could easily be hundreds of thousands, or millions. For example, when Fish & Co. sued Manhattan Fish Market, Manhattan Fish Market was ordered to pay almost $800,000 in damages to Fish & Co.!

If you don’t wish to pay such large amounts of cash to fight your opponents, then make sure you carry Professional Indemnity Insurance. Professional Indemnity Insurance is a fantastic type of liability protection, covering you from many business-related lawsuits.

Professional Indemnity Insurance covers:

• Negligence lawsuits
• Errors & omissions lawsuits
• Defamation lawsuits
• IP infringement lawsuits
• Lawsuits related to subsidiaries
• Employee dishonesty lawsuits
• Breach of confidentiality lawsuits
• …and much more

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Contracts will very frequently contain a clause that specifies which ‘governing law’ is to apply to the contract. The governing law refers to the country’s laws that will apply to the contract. Laws can vary significant between different countries, so it’s important for parties entering into a contract to know which laws to apply. This is particularly true for cross-border contracts, but it’s also important even if both parties reside in the same country.

In this guide, we discuss:

• Why is governing law important?
• What should a governing clause cover?
• Can I use a foreign law to govern contracts in Singapore?
• Can a foreign governing law be ignored?
• Which law should I use for signing contracts in Singapore?
• What happens if a governing law is not specified?
• How should I protect myself if another party sues me?

Why is the governing law important?

The governing law of a contract is of utmost importance. The choice of governing law will have significant consequences in determining whether parties have lived up to, or breached, their contractual requirements. The choice of governing law will also affect the type, and amount, of compensation that parties can claim, if they’ve suffered from losses due to breach of contract.

In civil lawsuits, Courts will use the governing law of the contract to interpret the contract’s terms. This will extend to whether the contract is valid, how to read the contract’s different clauses, whether there has been consideration (a legal concept of an exchange of interests, vital for forming a valid contract), whether the parties have fulfilled their obligations, and much more. The same contract, using different governing laws, can lead to very different outcomes!

What should a governing clause cover?

In contracts, there are two kinds of obligations:

• Contractual obligations: Your responsibilities stated in the contract.
• Non-contractual obligations: Your responsibilities in general law, outside of the contract. For instance, the contract might not hold you liable for personal injury, but under Singapore law, you can’t exclude liability for personal injury.

Parties who are drafting a contract should therefore think about whether they want to the same country’s governing law to apply to both contractual vs non-contractual obligations, or only to one. In many contracts which are carried out in Singapore, people will usually have Singapore law govern both obligations for simplicity.

Can I use a foreign law to govern contracts in Singapore?

Yes, you can.

Contracts that are formed in Singapore can certainly state a foreign governing law. This is allowed because Singapore’s legal system (along with most legal systems around the world) recognise the power of parties to define their own contractual relationships.

For instance, a European multi-national conglomerate may award a software development contract to a Singapore-based IT company. The European corporation may require the Singapore IT company to sign Non-Disclosure Agreements and a Sale and Purchase Agreement, that are governed by EU law, rather than Singapore law. If the two parties have a legal dispute, the lawsuit will be tried using EU law.

When you sign a contract, you can specify:

• The law you wish to apply (e.g. Singapore law, Malaysian law, German law, etc.)
• The Court and/or arbitration centre you wish to hear disputes in (e.g. Swiss Court, Swiss Arbitration Centre, Courts in New York, USA, Courts in New Zealand, etc.)

When applying Singapore law to contracts, the result is fairly straightforward – cases will be heard in Singapore Courts, under Singapore law. Most such contracts will also state that arbitration cases are to be heard in the SIAC (Singapore International Arbitration Centre) – a world-renowned locus for arbitration.

When entering into international contracts, it can get a little trickier, depending on the specific contract. For instance, if you enter into a contract with a US-based entity, you should remember that there are 50 States in the US. Each State has its own unique regulations. A US-based entity could have its contract governed by the State of New York, USA, but its Court seat (i.e. location where trials will take place) could be in Los Angeles, CA – that’s the other end of the country.

Can a foreign governing law be ignored in Singapore?

Yes. If a contract is stated to be governed by a foreign law for the express purpose of evading Singapore’s Unfair Contract Terms Act, then the foreign governing law will be ignored by the Courts. Singapore law will automatically override the foreign governing law clause.

For example, the Unfair Contract Terms Act states that you cannot exclude liability for death or personal injury. So if you run an outdoor adventure business, and try to get around this by applying some foreign law that does protect you from liability for death/personal injury, that contract won’t be valid. Singapore law will override it, and participants will be free to sue you if they suffer death or injuries.

Which governing law should I apply for contracts in Singapore?

If the contract is to be carried out in Singapore, then it’s best to use Singapore law. This is usually the most convenient for both parties. Both parties will have access to the widest pool of lawyers, since the majority of legal professionals here will be most experienced with local law.

Applying a foreign law in a local Court would require litigants to invest additional resources. It would require lawyers who are experts in that specific foreign law (e.g. imagine hunting for a local expert in Egyptian law or Brazilian law), calling for foreign expert witnesses, and additional evidence to support the case. All this could make any lawsuit much more expensive and time-consuming.

Additionally, if a foreign law and a foreign court is specified, your lawyers and you will have to physically travel to that country’s Court to hold the lawsuit. For instance, if entered an international contract overseen by Australian law, in the Australian Courts, you’d have to fly to the country to fight your case. This can be a big stumbling block in mounting an effective lawsuit, if you don’t carefully review the governing law of your contract.

What happens if a governing law is not specified?

If a governing law is not specified in the contract, and a lawsuit later erupts, the Court may make its own decision on what law to use. Usually, the governing law chosen will be the one that can fit best to the terms of the contract. You don’t want to leave it to the Courts to decide, so it’s best to remember to state the governing law in your contracts!

If you’re entering into a contract and the other party insists on using a law other than Singapore law, you might want to consult a lawyer to understand the implications of this, before signing the contract.

Examples of governing law clauses for international contracts:

Here’s an example of a governing law for a cross-border contract that is to be overseen by the law of the State of Massachusetts, in the USA. The arbitration is in Geneva, Switzerland.

“This Contract shall be governed by the laws of the State of Massachusetts, which is applicable to contracts made and to be performed within or outside such State. Any dispute or claim arising from, or in any connection to this Contract, shall be resolved by arbitration. Arbitration procedures shall be conducted with the Swiss Rules of International Arbitration in force on the date when the Notice of Arbitration is submitted in compliance with these Rules. The number of arbitrators is to be five. The arbitration location shall be at Geneva, Switzerland. The arbitration will be conducted in Swiss German and all documents shall be provided in the Swiss German language, or with translations into the English language if necessary.”

If you’re a Singapore company and you sign a contract with terms like this, you should prepare a good amount of resources. If there’s any legal dispute, you’ll taking frequent holidays to Geneva to settle your argument!

Such a clause shows why it’s important to review governing clauses, especially when signing contracts with foreign parties.

Examples of Singapore governing laws in local companies:

Here are some examples of governing law. These are found in the Terms and Conditions section of companies in Singapore.

1. Grab: Grab states that its Terms of Use are governed by Singapore law.
2. Best Denki: Best Denki states that its Terms & Conditions are governed by Singapore law.

How should I protect myself from lawsuits?

If you enter into a contract and get sued, you can expect to fork out a big sum. You’ll need to pay lawyers (who are very expensive), and also potentially pay for damages/settlements. Even if you’re in the right and did nothing wrong, you still need to fight lawsuit to prove to the Court that you’re innocent. That takes money – lots of it. If you don’t have sufficient resources, the other party could simply steamroll you. That’s where Professional Indemnity Insurance comes in.

Professional Indemnity Insurance covers a broad range of lawsuits, such as:

• Negligence lawsuits
• Errors & omissions lawsuits
• Defamation lawsuits
• IP infringement lawsuits
• Lawsuits related to subsidiaries
• Employee dishonesty lawsuits
• Breach of confidentiality lawsuits
• …and much more

Don’t wait till it’s too late to protect yourself from lawsuits.

Buy Professional Indemnity Insurance online in 3 mins. From only $42/month!