ABB Holdings Pte Ltd and others v Sher Hock Guan Charles

Shaun Leong Li Shiong AR:

[1] The present matter involves an application by the plaintiffs in ABB Holdings Pte Ltd and others v. Sher Hock Guan Charles [2009] 4 SLR(R) 111 (‘ABB Holdings’) for leave to amend its Statement of Claim (Amendment No. 3). Judgment has been granted in ABB Holdings for the second and third plaintiffs to elect between damages to be assessed or an account of the defendant’s profits to be taken. The plaintiffs now seek, by way of an amendment to the statement of claim, to obtain remedies in general damages and restitutionary damages.

[2] The plaintiffs are part of a worldwide group of companies which bear the name (“ABB Group”). The defendant worked for various companies in the ABB Group. While still in the employ of the second and third plaintiffs, the defendant had communicated with a former ABB Group employee (‘Mr Leonhardt’) in relation to enquiries by a Chinese body, Xian High Voltage Apparatus Reasearch Institute ("XIHARI"), regarding whether the former employee would act as XIHARI's technical advisor in research and development projects relating to the development of a new generation of medium voltage circuit breakers. After leaving the second and third plaintiffs in 2003, the defendant joined a company in China called Xiamen Huadian Switchgear Co Ltd ("Huadian") as its General Manager. Huadian was a manufacturer of, inter alia, medium voltage circuit breakers. The defendant later became the Managing Director of Huadian.

[3] Subsequently, the plaintiffs commenced proceedings against the defendant, alleging that the defendant was in breach of several express and implied fiduciary duties and that he had caused damage to the plaintiffs by such breaches. The parties have agreed to leave the question of “assessment of damages or calculation of profits” at a later stage. A consent order was granted on 7 January 2009 for the trial to be bifurcated with “damages (if any) or calculation of profits (if any) to be assessed at a later stage” (‘consent order’).

[4] In ABB Holdings, the Court found that the defendant did not owe any fiduciary duties to the first plaintiff. The defendant was however found to be a fiduciary of the second and third plaintiffs, and on the facts, he had been in breach of the fiduciary duties owed. He was also in breach of his duty of fidelity to the third plaintiff. The Court granted judgment in favour for the second and third plaintiffs against the defendant for damages to be assessed.

[5] Thereafter, the plaintiffs requested for an audience before the same Judge who heard ABB Holdings (‘the Judge’) to clarify the options of remedies available to the plaintiffs. The plaintiffs stated in a letter dated 8 July 2009 that they have yet to elect the specific remedy to satisfy the plaintiffs’ claim, and requested for a clarification of the judgment to be read as “damages to be assessed or an account of profits, at the plaintiffs’ option”. After hearing submissions from both parties, the Judge gave a Final Judgment dated 6 July 2009 (‘Final Judgment’) that:

[8] The only issue that remains is whether the plaintiffs can amend its statement of claim to seek for restitutionary damages in addition to general damages for the losses it suffered.

[10] In the present case, the correspondence which showed the agreement to bifurcate the trial had made no mention of restitutionary damages. The parties decided to bifurcate on the basis that damages will be assessed or an account of profits will be taken at a later stage. The plaintiffs’ letter dated 1 December 2008 invited the defendant to bifurcate the matter on this basis:

[11] The defendant’s letter dated 30 December 2008 states:

[12] The parties’ intentions were crystallised in a consent order dated 7 January 2009 for the trial to be bifurcated with “damages (if any) or calculation of profits (if any) to be assessed at a later stage”. After the conclusion of the trial, the parties’ appeared before the Judge on 20 July 2009 to clarify the options of remedies available to the plaintiffs. The plaintiffs insisted in its right to elect its remedies between damages and the alternative of an account of profits. Thereafter, the Judge made an order of the remedies available to the 2 and 3 plaintiffs in the Final Judgment, where they can elect between damages and an account of profits.

[13] The specific question is whether the plaintiffs can include an additional remedy of restitutionary damages in light of the Final Judgment. In Tang Man Sit v. Capacious Investments Ltd [1996] AC 514 (‘Tang Man Sit’), the Privy Council decided that a plaintiff can change his choice of remedies even at a very stage, so long as the Court has not rendered judgment for the remedy to be given:

[14] The same position was adopted by the House of Lords decision of United Australia v. Barclays Bank [1941] AC 1 (‘United Australia’) , where Viscount Simon LC emphasized that the there is nothing special about the remedies stated in the statement of claim as leave could always be granted for amendment any time before judgment has been rendered:

[15] Similarly, Lord Atkin emphasized that the relevant step when the plaintiff is estopped from electing a different remedy was when judgment for the remedy has been given:

[16] In the present case, it is obvious that parties have proceeded on the basis that the remedies available to them in the event that they succeeded on their claims, would be damages. The alternative remedy is an account of profits. They have consistently acted on this basis from the beginning where the first statement of claim was filed, where the parties agreed to bifurcate the trial and until the time when the Final Judgment was given. The plaintiffs did not dispute the fact that no mention was made of restitutionary damages throughout these series of events. In the present circumstances and with particular reference to the Final Judgment, I find that the plaintiffs have elected their remedies in so far as the plaintiffs have decided that an assessment of damages will be in the alternative (as opposed to cumulative) to a gains based remedy of an account in profits. The plaintiffs are of course free to elect the specific remedy to satisfy its claim, be it in damages, or in an account of profits. However, to the extent that the plaintiffs have elected the options of alternative remedies available to the plaintiffs in the form of either damages or an account of profits by the time the Final Judgment had been given, I find that the plaintiffs are estopped from raising an additional remedy of restitutionary damages.

[18] Indeed, the plaintiffs’ attempt to bring in the question of the alleged capital investment in Gelpag GmbH (by way of the present application) at the stage of assessment of damages is a blatant attempt to re-litigate before the assessing registrar an issue that has already been decided by the Judge. The plaintiffs asserted in trial that the defendant’s capital investment in Gelpag GmbH came from the substantial proceeds in the Xiamen Project; and the plaintiffs are entitled to such proceeds/capital investment because of the proceeds were obtained contrary to the defendant’s express duty not to participate in other business activities. This has been conclusively dismissed by the Judge in view of the lack of evidence (see ABB Holdings at para [66]):

[19] The plaintiffs’ counsel submitted that there is no question of prejudice as the plaintiffs has the right to amend the statement of claim at any time before the assessment stage to include all aspects of remedies, since the trial in ABB Holdings had only dealt with the question of liability. This was so because the parties have already agreed to bifurcate the dispute. I am unable to accept this submission. The parties’ agreement to bifurcate the trial in December 2008 was made on the basis of the plaintiffs’ statement of claim dated 14 March 2008, which had made no mention of restitutionary damages and where the plaintiffs had sought for damages or an account of profits. The decision to bifurcate may or may not have been different; it is not for this forum to speculate on that. It is undisputed however, that the defendant has been denied the opportunity to consider in full the consequences of bifurcation, having had no knowledge that the plaintiffs would include an additional remedy in restitutionary damages in the event that they have succeeded in their claim against the defendant. In this regard, I add parenthically the observation that although the Privy Council in Tang Man Sit found that there was no election before the stage of assessment of damages had been completed because the defendant had failed to give sufficient disclosure of information for the plaintiff to make an informed election (even though the plaintiff had already enforced a charging order pursuant to a remedy for an account of profits before proceeding to an assessment of damages), the question that faced the Privy Council was whether there had been an election between the remedies ordered by the Court; it did not involve the question of having an additional remedy of restitutionary damages which goes beyond the option of remedies available to the plaintiff as already ordered by the Court.

[20] The plaintiffs’ counsel made an ingenuous argument that the reference to “damages” in the consent order, the Final Judgment and the parties’ agreement to bifurcate the trial had included (as a ‘subset’ of damages, so to speak), restitutionary damages. The plaintiffs are essentially asking for compensatory damages and restitutionary damages. This is but a mere attempt at circumventing the Final Judgment which had ordered an election between alternative remedies of damages and an account of profits. As pointed out by the defendant’s counsel, both parties have appeared before the Judge on 20 July 2009 to clarify the remedies available to the plaintiffs. They had the opportunity to raise the issue of restitutionary damages before the Judge but failed to do so. Given that both parties have made submissions to the Judge on the remedies available to the plaintiff for election, and where the Judge has decided on that basis to award remedies in the alternative, I find that to allow the amendment to have an additional remedy in restitutionary damages would be to give the plaintiffs a second bite at the cherry. In my view, the Court would be condoning an abuse of process if the plaintiffs are allowed to circumvent the Final Judgment with a convenient labelling of ‘damages’ as inclusive of restitutionary damages. (I add parenthically (as this pertains only to the assessing registrar), that there could be an issue of double recovery if both compensatory and restitutionary damages are granted). To the extent stated above, I agree with the submissions made by the defendant’s counsel that the application for leave to amend is an abuse of process.

[21] Indeed, the present situation is analogous to the one in World Wide Fund and another v. World Wrestling Federation Entertainment Inc [2008] 1 WLR 445 (‘World Wide Fund’) where the plaintiffs commenced proceedings against the defendants claiming an injunction to restrain the defendants from using the plaintiffs’ initials. In October 2001, Jacob J gave summary judgment where the injunction was granted, but refused the claimants permission to include a claim for an account of profits. The plaintiffs did not appeal against Jacob J’s decision. Subsequently, the plaintiffs applied successfully to amend its pleadings to include a claim under restitutionary damages. The Court of Appeal decided that the plaintiffs ought to have raised the issue of restitutionary damages before Jacob J at the same time when the plaintiffs had asked for permission to include a claim in an account of profits. The failure to do so, coupled with the subsequent attempt to raise the issue by way of an amendment of its pleadings, amounted to an abuse of process (per Lord Justice Chadwick at para [74]):

[22] In the same vein, I find that the plaintiffs ought to have raised the question of restitutionary damages before the Judge on 20 July 2009 where both parties have clarified the remedies available to the plaintiffs, and where the plaintiffs have brought up the issue of an account of profits before the Judge.

[23] The present decision however, does not purport to assert that an account of profits is the same remedy as that of restitutionary damages. Indeed, the desire to keep the two remedies conceptually distinct is shown when Lord Nicholls said in Attorney General v. Blake [2001] 1 A.C. 268 [House of Lords] at 254 (‘AG v. Blake’):

[24] The irony however, is that this statement shows that the two remedies of restitutionary damages and an account of profits have often been used in the same context, underlying their common attributes where the Court has found it fit to use one of these remedies (by looking at the gain obtained by the wrongdoer) when there is a failure to establish financially measurable loss. In this regard, Lord Nicholls have pertinently observed that (AG v. Blake at 285):

[25] In the English Court of Appeal decision of Experience Hendrix v. PPX Enterprises Inc [2003] 1 All ER (Comm) 830 (‘Hendrix’), the claim was in respect of the grant of licenses in breach of a settlement agreement made in relation to the use of master recordings by Jimi Hendrix. The claimant obtained injunctions to restrain further releases of the recordings; it had claimed in both restitutionary damages and an account of profits. The claimant had however, conceded that it could not show financial loss as a result of the breaches prior to the injunction. The English Court of Appeal found it appropriate to draw a close analogy from the decision of AG v. Blake (where the House of Lords allowed exceptionally for an account of profits to be obtained as a remedy for breach of contract), a decision described by Lord Justice Mance (at para [16]) as marking “a new start in this area of law”. Although Lord Nicholls has decided AG v. Blake on the basis of an award of “account of profits”, the English Court of Appeal in Hendrix observed that the decision of AG v. Blake has opened the door for a bolder approach in awarding restitutionary damages where the claimant was unable to establish any identifiable financial loss (at [34]):

[26] In addition to the above, the English Court of Appeal in Hendrix adopted an analysis similar to the awarding of an account of profits in AG v. Blake, it was found that the defendant had deliberately did what it had contracted not to do, and that the claimant had a legitimate interest in preventing the defendant from profiting from the breach. Nevertheless, there remain some differences between the two remedies. The English Court of Appeal in Hendrix awarded restitutionary damages even though the circumstances were found to be insufficiently ‘exceptional’ to justify an account of profits. Lord Justice Mance described (at para [35]) a claim in restitutionary damages as a “lesser claim” than that of an account of profits, and observed (at para [24]) that Lord Nicholls (in AG v. Blake) did not apply “the same epithet or qualification” of exceptionality to an award of restitutionary damages. On the contrary, the High Court in Cheong Lay Yong v. Muthukumaran s/o Varthan and another [2010] 3 SLR 16 at [58] stated that restitutionary damages are awarded in exceptional cases.

[27] In addition, the Court of Appeal’s reference to “compensation” (see [25] above) is consistent with the observation by the Court of Appeal in World Wide Fund (at para [47]) that restitutionary damages are essentially compensatory in nature (in reliance of Lord Hobhouse’s dissenting judgment in AG v. Blake). These observations must of course be read in light of Lord Nicholls’ observation that (AG v. Blake at p 283):

[28] In addition, there is some suggestion that the object of an award in restitutionary damages is not compensatory (thus inclining it towards a closer position to the remedy of an account of profits), from the Court of Appeal decision of Friis and another v. Casetech Trading Pte Ltd and another [2000] 2 SLR(R) 511 where the decision of Steyn LJ’s observations in Surrey County Council v Bredero Homes Ltd [1993] 3 All ER 705 was endorsed with approval:

[29] Based on the authorities of AG v. Blake and Hendrix, I find that the remedies of restitutionary damages and an account of profits are, from a practical perspective, similar in so far as these are remedies open to the plaintiff where the Court acknowledges the need to find an appropriate and just response to the defendant’s breaches (by looking at the gain obtained by the defendant), in the event where the plaintiff is unable to establish any identifiable financial loss. As observed by the Court of Appeal in World Wide Fund at para [59] (the references to ‘compensation’ are however, reservedly debatable and as yet untested by the House of Lords):

[30] In view of the similar aspect between the two remedies, I find that the plaintiffs’ application for leave to amend is in substance a backdoor approach to have a second bite at the cherry, where the plaintiffs have already submitted before the Judge for an alternative remedy in an account of profits. Allowing the plaintiffs a claim in both general damages and restitutionary damages would contradict the Final Judgment which had ordered for an account of profits to be in the alternative to damages.

[32] The plaintiffs are to file and serve its amended Statement of Claim in relation to the amendments allowed in paragraphs 14(d) and (e) within 7 days of this Judgment. The defendant is granted leave to file and serve its defence (in response to the amendments allowed for in paragraph 14(d) and (e)) within 14 days of service of the amended statement of claim. The plaintiffs are granted liberty to reply within 14 days of service of the amended defence.