Court of Appeal · Decided 18 October 2010

MFM Restaurants Pte Ltd and another v Fish & Co Restaurants Pte Ltd and another appeal

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[2010] SGCA 36Case no. Civil Appeals Nos 169 and 171 of 2009

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Grounds of decision

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Andrew Phang Boon Leong JA (delivering the judgment of the court):
Introduction
[1] The assessment of damages is almost always of the first importance to plaintiffs (including the plaintiff in the present proceedings). This is only natural given that a plaintiff who has been legally wronged would surely want to know how the wrong (or wrongs) is (or are) to be redressed (often, as is the case here, in monetary terms). It has also commonly been said – quite correctly, in our view – that the assessment of damages is not a mechanistic process. To be sure, there are legal rules and principles which guide the court. However, their application is often not an easy process. As we shall see, this is in fact precisely the situation in the present proceedings. There have been clear – and continuing – breaches on the part of the defendants (who are the appellants in both the appeals before us (“the Appellants”)). However, the Appellants have sought – most vigorously, in fact - to convince us that, notwithstanding their blatant breaches of contract (and see below at [13]–[17]), the plaintiff’s (who is the respondent in both appeals (“the Respondent”)) loss is unconnected with such breaches. Indeed, much of the argument before this court was spent on the issue of causation – or, rather, the absence of causation, in so far as the Appellants are concerned.
[2] The Appellants also had a fallback argument: if, indeed, their breaches had caused loss to the Respondent, the Respondent (so the argument ran) was nevertheless the main author of its loss. In essence, the thrust of the Appellants’ argument is that the Respondent was already suffering from a decline in sales in any event and, hence, is not entitled to seek substantial monetary compensation (in the form of damages) from the Appellants. The Appellants say that the Respondent can (at best) claim only a relatively small amount of damages.
[3] There is yet another – albeit more subsidiary – issue. However, even this issue sees the Appellants attempting to argue that damages should be denied to the Respondent. This relates to loss or damage that was allegedly caused to the Respondent after the breaches of contract, viz, the post-breach situation. In particular, the Appellants have sought to argue that the loss in this particular situation is too remote. Although, as just mentioned, this is not one of the main issues in the present appeal, it certainly raises the spectre of a recent House of Lords decision, at least part of which differs (quite radically) in legal orientation from a decision of this court. As the legal principles involved are of the first importance for future cases, and the legal conundrum emanates from the highest appellate court in England, we must deal with it in the present appeals – not least because if, in particular, one of the legal propositions made in the House of Lords decision is correct, then the law which has stood for a century and a half (and which has been endorsed by this court) will change (and rather radically at that).
[4] The result of all this is a curious compendium of both difficult issues of application as well as a difficult issue of law. In short, both particulars and universals have raised rather thorny questions that we must resolve. What began as a deceptively simple set of legal proceedings has metamorphosed into a rather complex mixture of factual and legal conundrums impacting on the issue of justice and fairness not only for the parties to the present appeals but also (in relation to the legal rules and principles centring on remoteness of damage) for future litigants as well.
[5] It is best, in the circumstances, to begin from the beginning – in particular, with the basic factual matrix which constitutes the backdrop against which the various legal issues have arisen.
The factual background
General
[6] The present appeals are against the decision made by the High Court Judge (“the Judge”) with regard to the assessment of damages in Fish & Co Restaurants Pte Ltd v MFM Restaurants Pte Ltd and another [2010] 1 SLR 1104 (“the Judgment”).
[7] The Respondent is Fish & Co Restaurants Pte Ltd, the owner of a chain of seafood restaurants called “Fish & Co”. The original assessment hearing had, in fact, taken place before an Assistant Registrar (“the AR”), whose decision was appealed against by the Respondent and cross-appealed by the Appellants. As we shall see, the Judge allowed the Respondent’s appeal and dismissed the cross-appeal by the Appellants. The first appellant is MFM Restaurants Pte Ltd (“the First Appellant”), the owner of another chain of seafood restaurants called “The Manhattan Fish Market” (“MFM”) and the second appellant is Dickson Low (“Dickson”), a former employee of the Respondent.
[8] As part of his employment contract with the Respondent, Dickson agreed that all confidential information derived during his employment would not be wilfully divulged to outside parties and competitors, and that he would not help to set up restaurants other than for the Respondent during his employment or two years after resigning from the company. Sometime after resigning from the Respondent (around 21 August 2001), Dickson was involved in and helped to set up the First Appellant’s business. The first MFM restaurant was opened in Malaysia in 2002 and subsequently more restaurants were opened in Malaysia. Following these events, on 30 March 2004, the Respondent brought proceedings against Dickson for breaching the non-competition obligations in the contract of employment by using and divulging confidential information. The Respondent alleged that Dickson copied Fish & Co’s concepts for use in the MFM restaurants. Dickson denied the allegations. However, during the course of the trial, the parties settled and recorded a settlement deed on 27 April 2005 (“the Settlement Deed”). The First Appellant and its Malaysian counterparts were also added as parties to the Settlement Deed, although they were not parties to the suit. The Respondent claimed that it required the First Appellant’s inclusion to ensure that both Dickson and the First Appellant were prevented from employing Fish & Co’s concepts. This was especially important as it was found out during the course of trial that the First Appellant was planning to open the first MFM restaurant in Singapore. The relevant sub-clauses in the Settlement Deed for our purposes read as follows:
The four obligations will be referred to herein as “the Pans undertaking”, “the Slogans undertaking”, “the Phrases undertaking” and “the Sauces undertaking”, respectively. The Respondent claimed that the four undertakings were crucial as they reflected the essence of the Fish & Co concept. The Slogans and Phrases undertakings were to take effect from 27 April 2005, while the Sauces undertaking was to take effect from 27 July 2005, with the Pans undertaking taking effect from 27 August 2005.
[9] Subsequently, on 20 May 2005, the First Appellant began operations at Plaza Singapura, which was just 0.28 km away from the Respondent’s Fish & Co Glass House outlet situated at Penang Road. The Respondent alleged that despite the undertakings in the Settlement Deed, the Appellants had almost immediately breached cl 3 of the Settlement Deed by:
(a) using the slogan “One bite and you’re hooked” on its menus (this was one out of the 31 slogans/jingles which the Appellants agreed to refrain from using);
(b) using the phrases “Garlic Lemon Butter”, “Lemon Butter” and “Creamy Garlic Lemon” on its website;
(c) failing to use completely different sauces; and
(d) using serving pans which were similar to the serving pans used by Fish & Co. The Respondent alleged that the black pans used by MFM were similar to the pans used by Fish & Co.
[10] On 20 September 2005, the Respondent brought proceedings against the Appellants for the above breaches. The Respondent claimed an injunction as well as damages pursuant to the alleged breaches of the Settlement Deed. The claim was (as mentioned) premised on the breaches of the Settlement Deed, and not for passing off or breach of confidentiality.
[11] Around 8 November 2005, MFM discontinued the use of the disputed slogan and phrases.
[12] On the first day of trial, viz, 27 November 2006, the Appellants agreed to enter into a consent judgment, with damages to be assessed (“the Consent Judgment”). The Appellants also agreed to the terms of an injunction. The relevant portions of the Consent Judgment read as follows:
As may be observed, the terms of the injunction were based on the undertakings in the Settlement Deed, and as prayed for by the Respondent in its statement of claim. Pursuant to the Consent Judgment, MFM stopped using the pans on 28 December 2006. There were some disputes as to whether the Appellants had complied with the Sauces undertaking by January 2007. However, for the purposes of this suit and the assessment of damages, the Respondent has not claimed damages for any breaches which allegedly occurred after January 2007.
The Appellants’ conduct
[13] Before we proceed further, we would like to note the Appellants’ conduct throughout the breach period. We agree with the Judge’s view that the breaches were “deliberate” and constituted “flagrant contravention of the [Appellants’] undertakings with a view to their own financial gain or reward” (see the Judgment at [37]).
[14] The Respondent alleged that despite the fact that it had sent numerous reminders to the Appellants to remind them of their legal obligations pursuant to the Settlement Deed, the Appellants did not act on the matter. This left it with little choice but to commence legal proceedings against the Appellants on 20 September 2005. Before us, the Appellants took pains to emphasise that the breaches of the undertakings were not deliberate. The Appellants contended that, having been notified by the Respondent through its solicitor’s letter dated 5 July 2005 of the breaches of the Slogans and Phrases undertakings, the Appellants promptly responded and stopped the breaches by the first week of November 2005. We question, however, if it was necessary to take four months for this to be done.
[15] Even if we accept that the Appellants acted promptly with regard to the Slogans and Phrases undertakings, the breaches of the Sauces and Pans undertakings presented quite a different situation. In particular, we find that there was a deliberate attempt by the Appellants to disregard the Settlement Deed. The Appellants contended that, to comply with the Sauces undertaking, MFM varied its sauce, for example, by using margarine instead of butter, and by using freshly squeezed bottled lemon instead of lemon concentrate, as well as by varying the quantities of the various ingredients. The Appellants further contended that the reason for the delay in compliance with the relevant terms of the Settlement Deed was due to the parties’ inability to agree on who to appoint as a neutral third party taste expert. The Respondent claimed that, as a neutral third party could not be agreed upon, this option was no longer pursued upon the commencement of the suit. It is noted that, pursuant to cl 3(xiii) of the Settlement Deed, parties were at liberty to commence legal proceedings in the event that the identity of the neutral third party was not agreed upon. The Respondent also stated that joint attempts to appoint a court expert after the suit commenced likewise failed. In our view, the inability to jointly appoint a neutral third party (and subsequently a court expert) which both parties could agree upon is hardly a satisfactory reason for breaching the Sauces undertaking given that the Appellants could, if they were minded to do so, have easily lengthened the process by not agreeing to any of the experts proposed by the Respondent.
[16] In so far as the Pans undertaking was concerned, the Appellants explained that the Respondent’s Fish & Co outlets in Singapore have ceased to use black pans and had changed to stainless steel pans. Therefore, the Appellants were under the impression that it would be able to retain the use of black pans in its restaurants. In fact, even in their submissions before this court, the Appellants sought to assert that, despite entering into the Consent Judgment, they were not admitting to liability for breaching the Pans undertaking, which we found to be odd given that they had agreed for damages to be assessed and did not refute their liabilities for breaching the other three undertakings. In any case, we find the Appellants’ explanations to be unconvincing. The issue of the pans had already been raised in the earlier proceedings taken out by the Respondent against Dickson for the alleged breach of his employment contract. Part of the reason for the grace period factored into the Settlement Deed was precisely to accord the Appellants adequate time to comply with the agreement. Further, we find that it was not sufficient that the Appellants used different coloured pans, given that what was more significant (and, indeed, that was what the undertakings in the Settlement Deed were targeted at) was the concept of serving food out of a pan. Indeed, it was not necessary for the Appellants to use identical serving pans before they could be in breach of cl 3(i) of the Settlement Deed, so long as the pans themselves were similar.
[17] Further, we note that the Appellants waited till the first day of trial before consenting to judgment (and admitting liability). Considering the totality of the evidence, we find that the Appellants had deliberately ignored their undertakings in the Settlement Deed with the intention of profiteering from the breaches. The Appellants also sought to downplay the significance of the undertakings by contending that they were minor, and did not impact on the minds of the consumers. However, if this was so, we question the Appellants’ decision to contest the suit so vigorously only to concede liability on the first day of trial.
The assessment of damages before the AR
Introduction
[18] Before the AR, the Respondent claimed damages for two time periods. The first was the period between August 2005 and January 2007 (“the Breach Period”), ie, when the breaches occurred. The second was the period thereafter (“the Post-Breach Period”), ie, when the breaches had ceased but its effects continued to result in losses to the Respondent. However, as noted above, the Slogans and Phrases undertakings were complied with by the first week of November 2005 (ie, before January 2007). In the circumstances, therefore, the terms “the Breach Period” and “the Post-Breach Period” are not, strictly speaking, accurate. However, given the way in which the arguments were made as well as for convenience of exposition, we will make reference to these two time periods.
The issue of causation
[19] The Respondent alleged that, as a result of the non-compliances with the Settlement Deed, there was no differentiation between MFM and Fish & Co restaurants, resulting in misrepresentation and confusion in the market. Therefore, Fish & Co’s sales were affected by the Appellants’ breaches. Further, as a result of the non-compliances, MFM had gained an accelerated entry into the market and could therefore gain market share quickly by stealing Fish & Co’s market share and sales, thereby diluting the Respondent’s goodwill in the Fish & Co concept. Essentially, the Respondent relied on empirical evidence that its profits had been reduced since the inception of MFM to demonstrate that the Appellants’ breaches had caused its losses. The Respondent further relied on the English decision of Draper v Trist and Tristbestos Brake Linings, Ld (1939) 56 RPC 429, a case involving passing-off, to argue that the innocent party need not adduce evidence of confusion in order to recover substantial damages.
[20] The Appellants argued that consenting to judgment did not amount to an admission that any damages were payable upon an assessment, and that, therefore, the burden of proof remained on the Respondent to prove its losses. The Appellants alleged that the Respondent had not discharged its burden of proof. First, the Respondent’s Fish & Co restaurants were already making losses before the Breach Period. Second, the Respondent had not adduced evidence, through (for example) a market survey to demonstrate the alleged effects of the Appellants’ breaches. Third, the losses suffered by the Respondent subsequent to the Breach Period (ie, during the Post-Breach Period) were too remote.
The methodologies employed to estimate the Respondent’s loss of profits
[21] Each party also appointed its own expert witness to calculate the damages owed by the Appellants to the Respondent. The expert witness for the Respondent, Mr Tony Samuel (“Mr Samuel”), proposed two measures of calculations, which he termed as Methods A and B, respectively. Before describing the basis of both calculations, it must be noted that Mr Samuel’s quantification of damages was premised on the assumption that the Respondent did in fact suffer losses during the Breach and Post-Breach Periods as a result of the Appellants’ breaches of the Settlement Deed. Mr Samuel’s calculations cannot therefore be employed to determine the causation issue, although, to the extent that a trend of loss in profits can be observed, that would be part of the empirical evidence and therefore add credence to the allegation that the Respondent’s profits were affected by the Appellants’ breaches. For convenience of exposition, the explanation below of Methods A and B will assume that all of the Respondent’s lost profits may be attributed to the Appellants’ breaches. The actual extent of the Respondent’s loss of profits attributable to the Appellants’ breaches will be discussed further later.
(1) Method A
[22] Method A involved a comparison of the sales figures for Fish & Co restaurants affected by the Appellants’ actions with the sales figures of Fish & Co restaurants which were not affected by the same actions. Method A assumed that, but for the Appellants’ actions, the relative performance of both sets of restaurants would have been consistent during the pre-breach period from February 2004 to August 2005 (“the Pre-Breach Period”), as well as the Breach and Post-Breach Periods. First, Mr Samuel assumed that four of the Respondent’s city-based Fish & Co outlets, viz, the outlets at Glass House, Bugis Junction, Centrepoint Shopping Centre (“Centrepoint”) and Suntec City Mall (“the Affected Restaurants”) were affected by the Appellants’ actions and that four of its suburban outlets, viz, Novena Square, Jurong Point Shopping Centre, Tampines Mall and Parkway Parade (“the Unaffected Restaurants”) were not affected. A fifth city outlet at Wheelock Place was not included in the calculations as it only commenced business during the Breach Period. The distances of the Affected Restaurants and Wheelock Place from the First Appellant’s MFM restaurant at Plaza Singapura are as follows:
[24] Employing this methodology, Mr Samuel found that Fish & Co’s loss of profits during the Breach Period amounted to $553,100.12. As for the quantification of post-breach losses, Method A was utilised by multiplying an estimated average loss per month by half the number of months it was assumed that MFM would have benefitted. The reason half the number of months were used in this last mentioned regard was to factor in a tapering decrease in influence of the breaches, ie, that the further removed from the time the breaches occurred, the less their influence on Fish & Co’s sales.
(2) Method B
[26] Employing this methodology, Mr Samuel found that the variable profit margin was 52.38 per cent, excluding rent adjustments. In other words, if, as found by Mr Samuel, MFM’s actual sales during the Breach Period amounted to $3,007,500, this would have translated to $697,400 of lost profits for Fish & Co (with rent adjustments), assuming that 50 per cent of MFM’s revenue was attributable to the breaches and that all the revenue earned by MFM would have been earned by Fish & Co. In so far as the Post-Breach Period was concerned, this was again calculated by multiplying an estimated average loss per month by half the effective number of months it was assumed that MFM would benefit, and Fish & Co would (correspondingly) suffer from the breaches.
(3) Mr Sajjad Ahmad Akhtar’s report
[27] The Appellants’ expert report was presented by Mr Sajjad Ahmad Akhtar (“Mr Akhtar”). He compared the sales for the month for each of the Respondent’s Fish & Co outlets with the corresponding sales for the month in the previous year. He opined that, if the Appellants’ breaches had affected Fish & Co’s sales, a pattern showing a steady growth trend in sales during the Pre-Breach Period, a decline during the Breach Period, followed by a rise after the Breach Period would have been seen. As this was not present, Mr Akhtar concluded that the breaches had no significant financial impact on Fish & Co’s sales performance.
(4) The AR’s decision on methodology
[28] With respect to the issue of causation, the AR found, firstly, that the type of damages sought by the Respondent were not too remote, and were in the reasonable contemplation of the parties as constituting the result of the breaches at the time the Settlement Deed was entered into. Secondly, he found that the only outlet affected by the Appellants’ breaches was the Glass House outlet. This was based on the Respondent’s witnesses’ own evidence that cannibalisation was minimal as each outlet occupied a different market segment and that such factors were considered before the decision was taken to open a new outlet. Thus, the First Appellant’s MFM outlet at Plaza Singapura would only have affected the Respondent’s Fish & Co outlet within the same market segment, viz, the Glass House outlet.
[29] In so far as the question of quantification of damages was concerned, the AR also found that it would be more appropriate to adopt Method A as it centred on the losses to Fish & Co, as opposed to Method B which centred on the profits of MFM. Secondly, taking a commonsense approach, and emphasising, in particular, the significance of Fish & Co’s “Seafood in a Pan” concept but taking into account MFM as genuine competition independent of the breaches, the AR held that it would be just to attribute 60 per cent of the losses caused to the Respondent by the breaches of the Appellants. Thirdly, the Respondent would also be entitled to damages based on a period of 12 months after the breaches had stopped as 12 months was a reasonable time for the public to realise that the breaches had ceased and that MFM restaurants were distinct from Fish & Co restaurants.
[30] In the circumstances, the AR ordered that Method A be utilised, albeit using new parameters (this will be referred to as Method C in this judgment). In other words, Method C employed the methodology in Method A, but changed its assumptions. Under Method C, Glass House would be the only outlet affected, and its sales were to be compared with the other three city-based outlets, viz, the outlets at Bugis Junction, Centrepoint and Suntec City Mall, which were unaffected by the breaches (“the New Unaffected Restaurants”).
(5) Method C
[31] Mr Samuel was of the view that Method C was unsafe. This was because, whereas in his earlier calculations (under Method A), the performance of the (original four) Unaffected Restaurants was fairly consistent, with the new parameters, the performance of one outlet (Centrepoint) was clearly not aligned with that of the (other) New Unaffected Restaurants. He was therefore of the view that the Centrepoint outlet appeared to be affected by events which did not affect the other two outlets and, therefore, its inclusion in the equation would distort the calculation of loss, unless it could be determined whether the unexplained event or events were equally relevant to Glass House. He also observed that the decline in the performances of the Suntec City Mall and Bugis Junction outlets in the five months up to January 2007 needed to be explained, as they contributed substantially to the overall average results of the restaurants during the Breach Period. Therefore, he was of the view that it would be unsafe to use Method C.
[32] Based on Mr Akhtar’s calculations, in eight of the 18 months during the Breach Period, Glass House in fact derived more revenue than the revenue it estimated that it would obtain had there been no breach. Offsetting the gains from the losses, Mr Akhtar was of the opinion that, on the basis that 60 per cent of Fish & Co’s loss of revenue was attributable to MFM, the Respondent should be awarded $14,060.
[33] Mr Samuel, on the other hand, was of the view that Mr Akhtar’s calculations demonstrated precisely why Method C was unsafe, since it would be illogical that in eight of the 18 months, Glass House performed better than it was predicted to have performed without MFM’s presence, given the finding that the Appellants’ breaches had caused loss to Fish & Co.
The AR’s final decision
The appeals against the AR’s decision
[35] The Appellants appealed against the whole of the AR’s decision. Just as they had earlier contended before the AR, the Appellants argued that there was no evidence of loss suffered by the Respondent as a result of their breaches. They further submitted that the Respondent (and the AR) wrongly applied passing-off arguments to the present claim, which was based, instead, on a breach of contract.
[36] The Respondent cross-appealed on the ground that the damages awarded by the AR were too low. It contended that the AR should have applied Method A with the original parameters unchanged; that the proportion of the Respondent’s loss of profits attributable to the Appellants’ breaches should be at least 80 per cent (as opposed to 60 per cent); and that the Post-Breach Period should be increased to between 18 and 24 months (as opposed to 12 months as held by the AR).
The Judge’s decision
[37] The Judge agreed that passing-off principles should not be employed in a breach of contract case. Nevertheless, on the issue of causation, the Judge held that actual loss as a result of the Appellants’ breaches could properly be inferred from the evidence. First, the undertakings in the Settlement Deed were closely related to the business operations of Fish & Co, and, hence, the loss of business was the best evidence of loss. Secondly, the breaches continued for 18 months despite the Respondent’s demands that the Appellants desist. Thirdly, MFM’s performance as a new entrant in the market was exceedingly good. Fourthly, there had been no cannibalisation of Fish & Co’s profits by the opening of its outlets in close proximity to each other. Fifthly, Glass House was the only affected outlet. Sixthly, MFM’s arrival had a negative impact on the Glass House outlet. During the Breach Period, Fish & Co’s average monthly sales were 6.6 per cent below those during the prior 18 month period. Further, Glass House’s sales statistics were significantly underperforming in relation to the industry average, based on the Department of Statistics Catering Trade Index. Seventhly, losses during the Breach and Post-Breach Periods were reasonably contemplated to be the likely consequences of the breaches.
[38] On the issue of quantum, the Judge agreed with Mr Samuel that Method C distorted the methodology of Method A. Therefore, she chose to base her quantification of damages on Method B. She found that the most crucial and relevant information were the sales figures. She agreed that it would be unsafe to award Fish & Co’s loss of profits based on all of MFM’s sales during the Breach Period, but that it would be logical to infer that if the Appellants had not committed the breaches, Fish & Co’s sales would at least be in line with industry’s trend (which was 12 per cent based on the monthly sales percentage year on year change at current prices during that period according to the Department of Statistics Press Releases (see below at [44])). In fact, Glass House’s monthly sales percentage during the Breach Period was -4 per cent. Therefore, there was a 16 per cent gap between Glass House’s sales and the industry average and, for Glass House’s sales to be in line with that industry, its sales would have to be increased by 16 per cent. In the circumstances, she awarded damages based on 16 per cent of MFM’s sales during the Breach Period. As for the Post-Breach Period loss of profits, the Judge held that it was within the reasonable contemplation of the parties that the effect of the Appellants’ breaches would continue after the breaches had stopped. However, the Judge reduced the Post-Breach Period from 12 to 6 months.
[39] Based on the above reasoning, the Judge awarded a total of $269,000 damages to the Respondent. The Appellants appealed against the Judge’s decision in both the Registrar’s Appeals.
The parties’ arguments in the present appeals
General
[40] We now come to the present appeals. The Appellants appealed on the ground that the Judge erred in establishing causation by inferences from the relevant evidence. First, they contended that the fact that Fish & Co was already making losses before the Breach Period shows that its alleged losses during the Breach Period were not caused by MFM. For this proposition, the Appellants highlighted the fact that, although the restaurant trade had improved by 4.6 per cent in 2004 relative to 2003, Glass House’s performance was worse by 5.76 per cent (see [44] below for the 2008 statistics published by the Department of Statistics for the restaurant industry in Singapore (“the 2008 Statistics”)). Therefore, Fish & Co had already been underperforming in relation to the industry average before the breaches, and, in fact, performed better during the Breach Period when its percentage of sales improved from -5.76 per cent to -4 per cent. Secondly, they contended that the fact that losses continued to be experienced by Fish & Co after the breaches had ceased indicated the lack of causation, since there had to be causes other than the Appellants’ breaches that were generating those losses. Thirdly, they contended that the Respondent had not proven its losses during the Breach Period. In particular, there was no independent survey or witnesses called by the Respondent to prove its claim for damages. Therefore, they contended that the Respondent had not discharged its burden of proof.
[41] The Respondent, on the other hand, contended that assessment of damages is not an exact science and that the courts adopt a common sense approach. Therefore, there was no need for market surveys and the Judge had correctly inferred that Fish & Co had suffered losses due to the Appellants’ breaches based on the factors which she had set out. In so far as the allegation that Fish & Co was already making losses before the Breach Period was concerned, the Respondent contended that the Appellants had misread the statistics, and that, in fact, Fish & Co’s management accounts showed that Glass House was reducing its losses during the Pre-Breach Period by 2.69 per cent annually. Thus, if this upward trend continued, Glass House would have performed with almost no losses by January 2006. However, this was derailed with the opening of MFM in May 2005.
[42] In the alternative, the Appellants contended that the Judge had erred in her quantification of damages. The Appellants argued that the AR was correct to use the revised Method A (ie, Method C); that Method B was akin to an account of profits; and that even if Method B was correct, the Judge failed to take into account the fact that, prior to the Breach Period, Fish & Co was already performing below the industry average.
[43] In response to the (alternative) arguments made by the Appellants in the preceding paragraph, the Respondent contended that the Judge had correctly rejected Method C on the basis that the new parameters distorted the calculations; that the Judge correctly applied the percentage of 16 per cent to Method B, which was a loss-based approach and not an account of profits; and that the 2008 Statistics ought not to be admitted into evidence, and, in any event, had been misapplied by the Appellants.
The 2008 Statistics
[44] In so far as the background to the 2008 Statistics was concerned, the Department of Statistics Press Releases for the months from October 2004 to January 2007 were admitted into evidence before the AR during the assessment of damages hearing. These Monthly Press Releases provided information on the monthly average sales performance of the restaurant industry in Singapore, relative to those during the same month in the year before.
[45] Another trade index was published in August 2008, ie, the 2008 Statistics, during the course of the appeals before the High Court which took place over a number of hearings between 15 July 2008 and 18 February 2009. This recorded the performance of the restaurant industry in Singapore based on average sales. For the period prior to August 2007, the percentages were calculated based on changes in annual sales. On 24 February 2009, the Appellants sought to admit this as evidence. The Appellants attempted to rely on it to demonstrate that for the year 2004 relative to 2003 (ie, before the breaches), although the restaurant trade had improved by 4.6 per cent, the performance of Glass House was worse (by -5.76 per cent). The Appellants contended that the reason for the late submission of the 2008 Statistics was because the Respondent’s counsel had informed the Judge (during the hearing on 19 February 2009) that such statistics were not available. What actually transpired, however, is unclear as it was not recorded in the relevant notes of evidence.
[46] The Respondent contended that grave prejudice would be caused to it if the evidence was allowed to be adduced at that late stage. It argued that, as a consequence of the late submission, it did not have the opportunity to respond to it during the trial itself. Further, the Appellants did not file a summons and apply for leave to adduce fresh evidence. Even if they did, the Respondent would have argued that the Appellants had failed to prove that the evidence could not have been obtained with reasonable diligence. The Respondent contended that the onus fell on the Appellants to check if the 2008 Statistics were available if they had wanted to rely on it.
[47] The Judge found that, in order to have an acceptable and meaningful comparison to demonstrate a real decline during the Pre-Breach Period, regard must be given to comparing like periods. However, the Judge felt that this was not possible because Fish & Co’s sales performances were measured in 18 month tranches whereas the 2008 Statistics were based on calendar years. The Judge also took on board the Respondent’s objections to the late submission of fresh evidence. She thus disregarded the 2008 Statistics.
[48] We find that the industry averages provided limited assistance to either party, given the wide disparity in the types of restaurants which were accounted for in these trade statistics. We therefore find that it is not necessary to rely on either the 2008 Statistics or the Monthly Press Releases.
The issue of causation
[49] The difficulty we faced in the present proceedings was establishing the extent to which the Appellants’ breaches caused loss to the Respondent, given the many factors, for example, legitimate competition from Fish & Co’s rivals such as MFM, cannibalisation of sales by other Fish & Co outlets (although this particular factor is somewhat negated by the finding that Glass House served a different market segment from the other Fish & Co outlets), and the quality of food and service – all of which could have affected Fish & Co’s sales apart from the Appellants’ breaches. Further, we agree with the Appellants that, for the purposes of establishing a link between the breaches and the damage, the Appellants’ conduct, the fact that loss of profits was a reasonably foreseeable consequence of the breaches, as well as the fact that MFM made financial gains were not relevant. As noted earlier, we also did not find it safe to rely on industry-wide statistics.
[50] Nevertheless, we accept that MFM’s entrance in the market (which was aided by the Appellants’ breaches) would have caused some loss to Fish & Co. We disagree with the Appellants’ submissions regarding the significance of Fish & Co’s performance during the Pre-Breach Period on the ground that, even if Fish & Co’s performance during the Pre-Breach Period was not optimal, this did not mean that it could not have done better during the Breach Period but for the Appellants’ failure to observe the terms of the Settlement Deed.
[51] Further, given the close proximity between Glass House and the MFM outlet in Plaza Singapura, as well as the similarities between MFM and Fish & Co, it was reasonable that the business attracted by MFM was partly drawn from Fish & Co’s potential clientele. Indeed, before us, counsel for the Appellants accepted that some loss was caused to Fish & Co as a result of the opening of MFM. Although he qualified his opinion by stating that the loss of sales by Fish & Co had nothing to do with the breaches of the Settlement Deed, we find it difficult to distinguish strictly between the Appellants’ breaches of the Settlement Deed and MFM’s entrance in the market as a legitimate competitor, given the fact that the former aided the latter. If the Appellants did not think that it stood to gain from the breaches, it would not have infringed the terms of the Settlement Deed in the first place. Clearly, the inference to be made is that the breaches resulted in a financial benefit to the Appellants. Although the fact that the Appellants made financial gains was irrelevant to establishing the issue of causation, in the context of the present proceedings, where there are two similar rivals in the same market, we find that the financial gains made by one could reasonably be translated as losses to the other. In the circumstances therefore, we find that the Respondent had discharged its burden of proving that the breaches of the Settlement Deed resulted in its losses. The more pertinent legal issue, in our view, is the quantum of damages that ought to be awarded to the Respondent – an issue to which our attention now turns.
The issue of quantification
Some preliminary observations
[52] It should be noted that the present appeals centre on the issue of damages to be awarded in a purely contractual context. No arguments were made in relation to the award of punitive damages or the award of damages pursuant to the principles laid down in the seminal House of Lords decision in Attorney-General v Blake (Jonathan Cape Ltd Third Party) [2001] 1 AC 268 (“Blake”). This is perhaps understandable in light of the fact that both these areas of the law of damages are still – to put it mildly – in a state of flux.
[53] The first, in particular, is especially controversial. Although there is an arguable case, in principle, for the award of punitive damages in contract law (see, for example, Ralph Cunnington, “Should punitive damages be part of the judicial arsenal in contract cases?” (2006) 26 Legal Studies 369 (“Cunnington”) and Pey-Woan Lee, “Contract Damages, Corrective Justice and Punishment” (2007) 70 MLR 887; though cf Solène Rowan, “Reflections on the Introduction of Punitive Damages for Breach of Contract” (2010) 30 OJLS 495), the case law is itself inconclusive (see, for example, Andrew Phang and Pey-Woan Lee, “Restitutionary and Exemplary Damages Revisited” (2003) 19 JCL 1 at pp 21–31 and Cunnington at pp 389-393). This is not surprising in view of the radical as well as draconian nature of punitive damages themselves. The position in Singapore is, not surprisingly, still an open one. In the Singapore High Court decision of CHS CPO GmbH (in bankruptcy) and another v Vikas Goel and others [2005] 3 SLR(R) 202, it was observed thus (at [65]–[66]):
[54] The second is less controversial, but no less problematic. Indeed, Blake itself generated – not surprisingly, perhaps – a learned body of legal literature of a magnitude that has been witnessed only occasionally (in this regard, the account by Prof Graham Virgo in his book, The Principles of the Law of Restitution (Oxford University Press, 2nd Ed, 2006) (“Virgo”), ch 17 furnishes an exceptionally clear and succinct overview of both the relevant case law as well as legal literature). Put very simply, the principles set out in Blake permit the court to award damages to the plaintiff (in a situation relating to the breach of a contract) on the basis of the gains or profits made by the defendant even though the plaintiff could not otherwise be awarded any damages based on traditional contractual principles (for example, because there has been no difference in value of the contractual subject matter and, hence, no justification for the award of expectation loss). Such damages would, however, be awarded only in exceptional cases. This category of damages has sometimes been termed as “restitutionary damages”, although the House in Blake preferred to classify such an award on the basis of an account of profits.
[55] Apart from the various conceptual as well as (as referred to at the end of the preceding paragraph) terminological difficulties, there are (concurrent) practical difficulties as well in so far as the award of damages under the principles set out in Blake are concerned. In Blake, for example, in the leading judgment of Lord Nicholls of Birkenhead, the statement of principle (at 284–285) does not really furnish concrete guidance as to when the power to award such damages will arise. That the award of such damages is (as already noted in the preceding paragraph) exceptional still leaves the (very practical) issue as to the criteria which will enable the court to ascertain whether or not a given fact situation is indeed exceptional. Case law developments since Blake (see, for example the English Court of Appeal decision of Experience Hendrix LLC v PPX Enterprises Inc and another [2003] 1 All ER (Comm) 830 (noted in Pey-Woan Lee, “Responses to A Breach of Contract” [2003] LMCLQ 301 (“Lee”); Martin Graham, “Restitutionary Damages: The Anvil Struck” (2004) 120 LQR 26 (“Graham”); and David Campbell and Philip Wylie, “Ain’t No Telling (Which Circumstances are Exceptional)” (2003) 62 CLJ 605 (“Campbell and Wylie”)) have also suggested a possible alternative approach that is premised not on a restitutionary basis as such but, rather, on a compensatory one (centring on the much discussed decision by Brightman J in the English High Court decision of Wrotham Park Estate Co Ltd v Parkside Homes Ltd and Others [1974] 1 WLR 798 (“Wrotham Park”) (see also Robert J Sharpe and S M Waddams, “Damages for lost opportunity to bargain” (1982) 2 OJLS 290); reference may also be made to the recent Privy Council decision (on appeal from the Court of Appeal of Jersey) of Pell Frischmann Engineering Limited v Bow Valley Iran Limited [2010] BLR 73 (especially at [46]–[54])). However, it would appear that the precise contours of this particular head of compensatory loss (as well as its relationship with the established head of expectation loss) have yet to be worked out fully (see, for example, Virgo (at pp 490–492) as well as Lee; Graham; and Campbell and Wylie). It might well be a difference of degree rather than kind, at least in so far as the former consists in an attempt to quantify compensatory damages by reference to the defendant’s gain (see Lee (at pp 302–303) and, by the same author, “A New Model of Contractual Compensation” [2006] LMCLQ 452 at p 453; cf also Samuel Stoljar, “Restitutionary Relief for Breach of Contract” (1989) 2 JCL 1 at pp 3–4). To the extent, of course, that both heads are coincident, the head of damages will, in substance, be based on orthodox principles of the common law of contract (which centre on expectation loss).
[56] It was probably the case that, in view of the flux demonstrably present in the alternative approaches briefly summarised above, these approaches were not (as already alluded to above at [52]) canvassed by the parties to the present appeals. In the circumstances, we therefore turn, now, to consider the arguments which were in fact canvassed before this court, and which centre on the specific issues relating to both the correct methodology to apply as well as the actual application of that methodology to the facts of the present appeals themselves. We pause to note – parenthetically, however – that the head of compensatory loss mentioned towards the end of the preceding paragraph (centring on Wrotham Park) does bear some affinity to the established head of expectation loss under the law of contract inasmuch as both are compensatory in nature. However, as also noted in the preceding paragraph, the precise contours of the former are still in a state of flux. We also pause to note that even if we proceed on the premise that the quantum of damages to be awarded in the present proceedings is related to a breach of confidence, that breach would, in our view, be founded in an action for breach of contract (see also Virgo (at p 526)). The traditional remedies would take one of two forms, viz, an account of profits or restitutionary damages (see generally Virgo (at pp 527–529)). That having been said, it has also been observed that “[s]ometimes compensatory damages may be awarded for breach of the equitable duty of confidence” (see Virgo (at p 527)). Indeed, the parties proceeded very much – in substance at least – along these (compensatory) lines. This would therefore be an appropriate juncture to turn to the various methodologies concerned (in the context of the award of damages under orthodox principles of the common law of contract). However, before proceeding to do so, we pause to consider briefly a simple – yet fundamental – principle.
The law on certainty of damages
[57] It will be apparent that the principal difficulty which we are faced with in the present appeals is the difficulty of quantifying the Respondent’s losses as a result of the Appellants’ breaches. This is because of the numerous factors which could potentially affect the reasons for MFM’s success, or the reasons for Fish & Co’s decline in sales. Given the difficulties in ascertaining with certainty the extent of the Respondent’s losses, this court can, as we observe below, only do the best that we can (based on the relevant evidence before us). In this regard, the following observations in the decision of this court in Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd and another [2008] 2 SLR(R) 623 (“Robertson Quay”) (at [27]–[28] and [30]–[31]) are instructive:
[58] With these principles in mind, we will now proceed to assess the appropriate quantum of damages awardable to the Respondent as a result of the Appellants’ breaches.
Our decision
[59] Since the finding that Glass House was the only affected Fish & Co outlet was not disputed by the Respondent in the present proceedings, we will not be revisiting that issue; neither will we be revisiting the issue as to whether Method A ought to be utilised as it is clearly inapplicable to the situation that results from this particular finding.
[60] We also agree with the Judge that Method C (which, it will be recalled, was a modified version of Method A) ought not to be utilised. In this regard, we accept the Respondent’s expert evidence that the parameters as set out by the AR give rise to illogical results. In particular, the projected revenue of Glass House was below its actual revenue in eight out of the 18 months, which is inconsistent with the finding that the breaches of the Settlement Deed caused losses to the Respondent. This suggests that the New Unaffected Restaurants are affected by external factors and therefore cannot be relied upon to project the estimated profits of the Glass House outlet. Therefore, based on the figures derived from Method C, we would not know how Glass House would have performed if the Appellants had not breached the Settlement Deed.
[62] Turning to consider Method B itself, unlike Methods A and C, Method B does not involve predicting the Glass House outlet’s sales based on the performance of other Fish & Co outlets, thereby eliminating the problem of external factors affecting the performance of the other Fish & Co outlets. On the other hand, we acknowledge that Method B shares similar difficulties as Methods A and C because it also involves an educated guess as to the impact of other factors affecting the performance of both Fish & Co and MFM, for example, the relative quality of food and services. Further, Method B does not consider to what extent Fish & Co had the capacity to absorb MFM’s sales. Mr Samuel himself was also unable to determine what proportion of MFM’s revenue was attributable to the breaches and simply utilised a range of percentages to calculate a range of loss of profits suffered by Fish & Co (see above at [25]). Therefore, such factors must be taken into account if Method B is employed in the context of the facts of the present appeals. That having been said, and bearing in mind the fact that damages are not ascertained in an abstract vacuum but must necessarily involve considering many other factors that ought not to be taken into account for the purposes of the assessment of damages but are simultaneously present in the context of the entire factual matrix before the court, some educated guesses have to be made – regardless of the precise methodology ultimately adopted by the court. To state this is merely to acknowledge the very real fact that life is far more complex than simple law school hypotheticals and even textbooks would have us believe. However, that has never prevented the courts from awarding what, in their view, were just and fair sums to plaintiffs if the legal rules and principles justified them. Indeed, as we have acknowledged (realistically) above (at [57]), the court will simply do the best that it can, having regard to all the circumstances before it. This is therefore precisely what we will attempt to do in the context of the present proceedings. However (and running slightly ahead of the story), it will be demonstrated that Method B need not be utilised in the context of the present proceedings for reasons which we will now elaborate upon.
[63] In our view, the logical starting-point is to examine the basic premises upon which the Judge made her award. This is of the first importance simply because a correct set of premises will, ceteris paribus, lead to a just and fair assessment of the damages to be awarded. The contrary (and, we would add, undesirable) result would follow from an incorrect set of premises. Returning to the facts of the present proceedings, it is clear, in our view, that the Judge had regard to the following premises. In particular, she was acutely aware of the fact that, of all the Fish & Co outlets, Glass House was the worst in terms of business performance. However, the Judge was equally aware of the fact that sweeping generalisations had to be eschewed. To this end, she examined closely the particular facts surrounding Glass House’s performance during the material periods (viz, the Post-Breach Period and (especially) the Breach Period). In this regard, the Appellants’ argument that Glass House had been facing a situation of declining gross sales during the latter period, whilst literally correct, was, with respect, rather misleading. What the Judge was concerned with were not the absolute figures as such but, rather, the general trend of these gross sales. Looked at in this light, she must have been of the view (at least implicitly) that Glass House had reversed the general trend of declining gross sales prior to the Breach Period. In particular, we note that the Respondent had submitted evidence of such a reversal during the Pre-Breach Period. Instead, during the period between February 2006 and January 2007 (which constituted much of the (actual) Breach Period itself), Fish & Co had suffered further declines.
[64] Having established that Fish & Co had arrested the general trend of declining gross sales, the Judge then proceeded to hold that, in so far as the quantum of positive gross sales which Fish & Co would have made (but for the Appellants’ breaches) were concerned, it was “logical to infer that if the [Appellants] had not committed the breach, [Fish & Co’s] sales would be, at least, in line with the industry’s trend of 12 per cent during the [Breach Period]” [emphasis added] (see the Judgment at [56]). In the circumstances, the Judge held thus (see id):
[65] Although there is great attraction, at first blush, in the approach adopted by the Judge (as briefly described above), we are of the view that there are, with the greatest respect, difficulties with the premises upon which that particular approach rested. This is not surprising for, as we shall see, the available evidence on which to base an award of damages in the present proceedings is far from satisfactory. Not surprisingly, therefore, the Judge could only do the best she could. However, after reflecting carefully on the entire evidence as viewed in its context, we are of the view that the inclusion of the industry’s trend of 12 per cent by the Judge could not be justified on the available evidence. In point of fact, on the Respondent’s own evidence as well as statistics, whilst there was a reversal of the general trend of declining gross sales for Glass House, there is no evidence – one way or the other – that demonstrates (on a balance of probabilities) that Glass House would in fact have achieved that level of monthly sales. As noted above, it is axiomatic that any given award of damages must be based on the requisite evidence (which satisfies, inter alia, the elements of causation as well).
[66] We are also of the view that, whilst it is conceptually possible to base an award of (compensatory) damages in contract law on the profits that have been made by the defendant, this should only be done in exceptional situations. Ideally, though, such an award ought to be based on the plaintiff’s own loss rather than (as the Judge did in adopting Method B) by measuring it by reference to the defendant’s gains or profits. The specific issue that arises immediately from this is whether or not there exists sufficient evidence for this court to ascertain – as best as it can – the plaintiff’s own loss. Only in a situation where this was not possible should the court then have recourse to an award of damages by reference to the defendant’s gains or profits.
[67] Looked at in this light, we are of the view, with respect, that the use of Method B was not necessary as there was, in our view, sufficient evidence that would provide this court with an adequate (and reasoned) basis for ascertaining the plaintiff’s (ie, the Respondent’s) own loss. Let us elaborate.
[68] Based on the Respondent’s own evidence, Glass House had reversed the general trend of declining gross sales (having regard essentially to three data points, viz, the gross sales for the period between February 2003 and January 2004, the period between February 2004 and January 2005, and the period between February 2005 and January 2006), even prior to the Breach Period. More importantly for the purposes of the present appeals, the Respondent submitted that for the period between February 2006 and January 2007, its predicted or projected percentage change in expected gross sales was -0.38 per cent. Whilst it is true that three data points are, from a strict statistical perspective, inadequate for predicting a precise trend, given the relative dearth of information but accepting (as the Judge did) the fact that there was an upward trend in so far as the actual gross sales by Glass House were concerned (an increase of 2.69 percentage points in the annual rate of change in gross sales), we are prepared to accept this predicted or projected percentage change in expected gross sales (which is nevertheless lower than what the Judge accepted (which included the industry’s trend of 12 per cent)). We pause to emphasise, once again, that this court will attempt the best it can, bearing in mind the fact that the assessment of damages is not (in most instances) a precise scientific exercise (see above at [57]). Turning, then, to the period between February 2006 and January 2007, we note that this particular period covers, in fact, much of the Breach Period (two thirds of it, to be precise). The remaining period not covered would comprise the period between August 2005 and January 2006 (a total of six months). Returning, however, to the period between February 2006 and January 2007, it is clear that – based on a predicted or projected percentage change of -0.38 per cent – the predicted or projected gross sales would have totalled $2,803,911.82 (this is based on applying the relevant predicted or projected percentage change (of -0.38 per cent) to the actual gross sales during the preceding period (between February 2005 and January 2006), which totalled $2,814,607.33). Given the fact that the actual gross sales of Glass House for that same period were $2,682,173.27, there is a difference (in gross sales) of $121,738.55 (ie, $2,803,911.82 – $2,682,173.27). However, – and this is a crucial question – what percentage of this difference would have represented Glass House’s profits? In this particular regard, we note that although before us the Appellants challenged the relevance of Method B, they did not challenge Mr Samuel’s calculation that the variable profit margin was 52.38 per cent (see above at [26]). In our view, it would not be inappropriate to apply this same profit margin to arrive at Glass House’s predicted or projected profits which were lost as a result of the Appellants’ breaches. Applying, therefore, a profit margin of 52.38 per cent to the sum of $121,738.55, this would give a figure of $63,766.65 in so far as Glass House’s loss of profits were concerned during this particular period (viz, between February 2006 and January 2007) (ie, $121,738. 55 × 52.38 per cent).
[69] However, the period between February 2006 and January 2007 does not represent the entire Breach Period. What, then, about Glass House’s predicted or projected loss of profits during the remaining period (between August 2005 and January 2006, a total of six months)? It is not unreasonable, in our view, to assume the same rate of profits during this last mentioned period as well. In the circumstances, therefore, the predicted or projected loss of profits between August 2005 and January 2006 (a total period of six months) could be estimated to be half of the predicted or projected loss of profits for the period between February 2006 and January 2007 (a total period of twelve months). This would give us a total of $31,883.33 (ie, $63,766.65 ÷ 2).
[70] To summarise, during the Breach Period, the total loss of predicted or expected profits experienced by Glass House would be $95,649.98 (ie, $63,766.65 + $31,883.33). This amount would, in our view, represent the amount of damages the Respondent would be entitled to in respect of the breaches by the Appellants during the Breach Period.
[71] We turn now to consider the issue of the loss suffered by the Respondent during the Post-Breach Period in general and whether or not such loss was too remote in particular. If, in fact, the loss was not too remote, we would then need to ascertain the requisite quantum of damages to be awarded.
The issue of remoteness
The law on remoteness of damage
Introduction
[72] The law relating to remoteness of damage in the law of contract was hitherto unique inasmuch as it had – with a few refinements over the years – remained as it was for approximately 150 years in both England as well as in Singapore. Indeed, such a situation of relative stability is rarely to be found, especially given the nature and development of the common law in general and the law of contract in particular. The principles of remoteness of damage, which find their seminal formulation in the statement of principle by Alderson B in the celebrated English decision of Hadley v Baxendale (1854) 9 Exch 341; 165 ER 145 (“Hadley”) (at 354-355 and 151, respectively), were (as just mentioned) refined (albeit without any radical changes) over the next 150 years (see generally the decision of this court in Robertson Quay (at [52]-[61]), which also confirmed the applicability of the principles in Hadley in so far as Singapore is concerned). For the purposes of this judgment, all subsequent references to Hadley (and, in particular, the two limbs set out by Alderson B in that decision) will be taken to include all later refinements as explained in Robertson Quay (see generally id).
The Achilleas
[73] However, a mere four months after the decision of this court in Robertson Quay was handed down, the House of Lords handed down its decision in Transfield Shipping Inc v Mercator Shipping Inc [2009] 1 AC 61 (“The Achilleas”). As we shall see, Lord Hoffmann introduced, in the latter case, an apparently new legal criterion to the existing law, viz, whether or not the defendant concerned had assumed responsibility for the loss which had occurred as a result of its breach (and see the important essay (to the same effect) by Adam Kramer, “An Agreement-Centred Approach to Remoteness and Contract Damages” in Comparative Remedies for Breach of Contract (Hart Publishing, 2005) (Nili Cohen & Ewan McKendrick eds) ch 12 at p 249 (“Kramer”); reference may also be made to the case note on The Achilleas by the same author, “The New Test of Remoteness in Contract” (2009) 125 LQR 408 which, not surprisingly perhaps, endorses the approach advocated by Lord Hoffmann in The Achilleas).
[74] This is the first occasion that this court has had to consider the approach advocated by Lord Hoffmann in The Achilleas, although there have been two learned judgments in the Singapore High Court in Chee Peng Kwan and Another v Toh Swee Hwee Thomas and Others [2009] SGHC 141 (“Chee Peng Kwan”) and Thode Gerd Walter v Mintwell Industry Pte Ltd and others [2010] SGHC 33 (“Thode Gerd Walter”), which have, in fact, considered The Achilleas, and which we will have occasion to refer to at appropriate points later in this judgment. Indeed, both these aforementioned judgments noted that this court had not hitherto had the opportunity to consider the approach advocated by Lord Hoffmann in The Achilleas (see Chee Peng Kwan (at [35]) and Thode Gerd Walter (at [71])), and it is therefore appropriate, in our view, to consider this approach in the present proceedings to clarify what the legal position is precisely in the Singapore context. Let us turn now to the facts and holdings in The Achilleas itself.
[75] In The Achilleas, the plaintiff shipowners (“the shipowners”) had chartered their vessel to the defendant charterers (“the charterers”) at a rate of US$16,750 per day. Redelivery of the vessel was scheduled for 2 May 2004. In April 2004, as the market hire rates had risen dramatically, the shipowners fixed a follow-on time charter with another company (“C”) at a rate of US$39,500 per day (with C having the right to cancel the charter if the vessel was not made available by 8 May 2004). As it turned out, the charterer’s final voyage was in fact delayed. By 5 May 2004, the shipowners realised that their vessel would not be returned by 8 May 2004. Unfortunately, the market hire rate at that particular point in time had fallen sharply. In order to persuade C to extend the latest delivery date from 8 May 2004 to 11 May 2004, the shipowners had to agree to a reduced rate of hire of $31,500 per day. Significantly, the charterers had not been put on notice of the existence of the shipowners’ follow-on charter with C at any time prior to delivery of the vessel.
[76] The shipowners claimed damages for breach of contract from the charterers for loss of the difference between the original rate agreed upon between the shipowners and C (of US$39,500 per day) and the reduced rate (of US$31,500 per day) over the period of the follow-on time charter itself (which period comprised 191 days). The total amount of damages claimed, therefore, amounted to US$1,364,584.37.
[77] In contrast, the charterers argued that the shipowners were entitled only to the difference between the market rate and the charter rate for the period during which the latter were deprived of the use of the vessel (which period comprised 9 days). This amounted to only US$158,301.17.
[78] The arbitrators held (by a majority) in favour of the shipowners, finding that the loss fell within the first limb in Hadley. They arrived at this decision notwithstanding the fact that the understanding of the shipping industry or market did not consider such loss (ie, loss based on the difference between the original and reduced rates as argued by the shipowners) to be recoverable, with liability restricted (as the charterers had argued) to the difference between the market rate and the charter rate for the overrun period. The English Court of Appeal affirmed that decision. However, on appeal, the House of Lords held, instead, in favour of the charterers and allowed the appeal. Nonetheless, the specific reasons given by the various law lords differed. It is nevertheless clear that the most significant – and radical – part of the decision lay (as already alluded to above) in the judgment of Lord Hoffmann. The learned law lord was not content with the traditional approach in Hadley. He added (relying on his views in the House of Lords decision of South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 (“South Australia”), which did not, however, deal directly with the issue of remoteness of damage in contract as such) a new legal criterion based on the concept of assumption of responsibility by the defendant. Put simply, if this additional criterion was not satisfied, the loss concerned would be considered to be too remote and, hence, not recoverable by the plaintiff. In Lord Hoffmann’s words (at [12]):
[79] Earlier on in his judgment, though, Lord Hoffmann did frame the issue facing him, as follows (at [9]):

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MFM Restaurants Pte Ltd and another v Fish & Co Restaurants Pte Ltd and another appeal

Grounds of decision

Introduction

The factual background

General

The Appellants’ conduct

The assessment of damages before the AR

Introduction

The issue of causation

The methodologies employed to estimate the Respondent’s loss of profits

(1) Method A

(2) Method B

(3) Mr Sajjad Ahmad Akhtar’s report

(4) The AR’s decision on methodology

(5) Method C

The AR’s final decision

The appeals against the AR’s decision

The Judge’s decision

The parties’ arguments in the present appeals

General

The 2008 Statistics

The issue of causation

The issue of quantification

Some preliminary observations

The law on certainty of damages

Our decision

The issue of remoteness

The law on remoteness of damage

Introduction

The Achilleas