Singapore’s Court of Appeal has just laid down guidance on how professionals should approach their fee engagements with clients.1 The judgment reveals an expectation of strict adherence to the terms of the letter of engagement. It also serves as an admonishment to retain a detailed inventory of the work done.


The professionals had been engaged by a company in financial distress to advise on the restructuring of its liabilities. The engagement letter provided for “time costs” and a value added fee (VAF) based on the total gross value added by the firm.

As matters turned out, the company’s creditors did not commence legal proceedings against it and it eventually repaid all its debts to its creditors. Shortly before the debts were repaid, the company terminated the professionals’ services.

Time Costs

The professionals had rendered two invoices for their work. These were in respect of the time costs. The company had placed on deposit with the professionals an amount that was in excess of the total of the two invoices, and sought a refund of the balance. The company did not dispute the time costs. The professionals retained the balance on the basis that the VAF would exceed the balance.

Some three and a half years later, the company filed proceedings for the balance of the deposit and also to compel the professionals to render an account of its time costs billed in the course of its engagement. It was not in dispute that an account should be provided. The trial judge in the High Court had, however, found that the company’s conduct was neither genuine nor bona fide and dismissed that part of its claim.

The Court of Appeal disagreed. It held that the company had 6 years to require an account. Further, the Court held that the professionals were obliged to provide an account in the form prescribed in an earlier decision on the remuneration of court supervised liquidators,2 namely that the account “… was sufficiently organized and contained adequate detail of the work performed by each [professional] over the time period billed for …”.


Turning to the VAF, the Court applied a strict reading of the engagement letter. It rejected the contention that the securing of an informal standstill could constitute a "restructuring" in the context of the phrase “… liabilities written off, extinguished, avoided or restructured”. In the Court’s view, the VAF was additional remuneration which was earned only where there was some systemic change to the operational activities and/or financial arrangements of the company. The Court of Appeal emphasized that it was interpreting the engagement letter and not prescribing how restructuring arrangements should be conducted.

The Court further rejected the professionals’ involvement in an investment into the company as entitling them to the VAF. The engagement letter provided that the professionals would be entitled where they advised and assisted “… in reviewing and developing strategic options …”. This was criticized as being overly broad and the Court interpreted the engagement letter as requiring the payment of VAF only where there is "… substantive (and additional) value which has resulted from [the professionals’] work …" and it could not have been the parties' intention that all kinds of new equity and/or debt raised would trigger the payment of the VAF.


The judgment is likely to be an impetus to professionals in Singapore or who have their retainers subject to the jurisdiction of Singapore courts to thoroughly review their terms of engagement and to implement a system of retaining detailed statements of their activity on tasks for an extended period of time. It is clear from the Court of Appeal's judgment that it places great emphasis on there being a demonstrable connection between the wording of a letter of engagement and the outcome on an engagement.