[1997] SGHC 320

In the High Court of the Republic of Singapore

[1997] SGHC 320

DA 40/1996

Between

Teck Tai Hardware (S) Pte Ltd

… Appellant

And

Corten Furniture Pte Ltd

… Respondent

grounds of decision

Civil Procedure — Appeals; Contract — Remedies — Remoteness of damage; Contract — Remedies — Damages; Contract — Remedies — Damages

This judgment is subject to final editorial corrections approved by the court and/or redaction pursuant to the publisher’s duty in compliance with the law, for publication in LawNet and/or the Singapore Law Reports.

Teck Tai Hardware (S) Pte Ltd v Corten Furniture Pte Ltd

[1997] SGHC 320

DA 40/1996
Lai Kew Chai J
01 December 1997

1 LAI KEW CHAI J

2 Cur Adv Vult

3 This appeal arises from a claim for damages by the respondents (buyers) against the appellants (sellers) under a written contract dated 24 April 1992 for the sale of 10,000 sets of front locks at the price of $18,250. Under this contract, the sellers, who had bought them from Italian manufacturers, agreed to deliver the front locks by four equal deliveries of 2,500 front locks each. This appeal is concerned with the last delivery which were faulty and defective.

(n)othing in this Act affects the right of the buyer or the seller to recover special damages in any case where by law special damages may be recoverable [Omitting the irrelevant parts dealing with interest and restitutionary claims, with emphasis added.]

10 The common ground

11 The buyers are manufacturers of office and home furniture, as the sellers well knew. The sellers market hardware items, including locks and hinges.

20 Measure of Damages

21 As liability for the faulty front locks was indisputable, the question is the correct measure of damages payable by the sellers for breach of warranty. Such measure is set out in ss 53 and 54 of the Sale of Goods Act and the two sections are adopted from the UK Sale of Goods Act 1979 s 54.

23 Hadley v Baxendale :

Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally, ie according to the usual course of things, from such breach of contract itself, or such as may be reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of it.

24 Bostock `s case. All parties to a contract know, or are taken at law to know, the `ordinary course of things`. In the sale of goods which are available in the market, the loss, if any, naturally occurring will be the difference between contract price and the market price at the time of the breach.

25 Hadley v Baxendale , if the millers had told the carriers that the mill would be stopped, could not operate and had to wait for the new crank shaft, the carriers could be said to have foreseen the five day loss of profit of 300 (a huge sum then) as the likely result. In fact, of course, in that case, the common carriers did not know that delay would cause that kind of loss.

26 Koufos v C Czarnikow Ltd [1969] 1 AC 350 is authority for the proposition that where there was wrongful delay in the delivery of marketable goods under a contract of carriage of goods by sea the measure of damages was the difference between the price of the goods at their destination when they should have been delivered and the price of the goods when they were in fact delivered. What is more pertinent in this appeal is Lord Reid`s observations at p 385F. Lord Reid, having lucidly analysed Hadley v Baxendale earlier, noted that in cases like Hadley v Baxendale or Czarnikow Ltd which he was considering it was not `enough that in fact the plaintiff`s loss was directly caused by the defendant`s breach of contract. It clearly was so caused in both.` His Lordship then pointed out at p 385F:

The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation. [Emphasis added.]

27 Spence v Duffield (1870) 1 VR(L) 49. In an action claiming damages for delivery of flour inferior to that described as `Duffield`s silk dressed`, the plaintiffs were awarded about 586 as the amount of expense incurred in exporting a portion of the flour to New Zealand. On appeal, the Supreme Court of Victoria, Australia, held that no special damages could be recovered for the transhipment of the flour to a foreign country and the freight paid for its shipment back after rejection unless both parties at the time of the contract had contemplated the flour being exported. Stawell CJ said at pp 52 to 53:

The last ground is, that the damages ought to be reduced by 586 15s 6d, which has been found as the amount of expense incurred in exporting a portion of the flour to New Zealand. There was nothing in the contract, or in the evidence, to show that both parties at the time of the contract, contemplated the flour being exported in this way, although there may be a strong suspicion on the point. It was no doubt purchased at a higher price than that ruling in the markets of Melbourne at the time, and was most probably intended for exportation, though purchased for delivery in Melbourne. But all that is a matter of conjecture, and not the necessary and fair inference to be deduced from the evidence. We therefore think the rule should be made absolute on that ground, and the damages be reduced by 586 15s 6d.

29 Australian Master Builders Co Proprietary Ltd v Pal-Asian Services [1987] 2 MLJ 573 [1987] SLR 346 , the plaintiffs on 22 June 1984 agreed in writing to sell grout to the defendants for $42,750.00. The goods were duly delivered but the defendants made partial payment leaving a balance of $22,799.60. On 20 July 1984 they entered into a second contract for the sale and purchase of another quantity of grout. Unfortunately, the plaintiffs supplied the wrong goods which the defendants shipped to their purchasers in Indonesia. Despite the plaintiffs` offer to pay for all expenses for the return of the wrong goods and to ship the grout as contracted, the defendants refused the offer and cancelled the second contract. The plaintiffs sued for the outstanding price under the first contract and the defendants counterclaimed for damages for breach of the second contract. One of the items claimed by the defendants was the loss of a contract for the sale of heavy duty pallet racks between the defendants and their Indonesian purchasers. That contract was made after the second contract and was later cancelled by Indonesian purchasers because the wrong goods had been shipped under the second contract. At the conclusion of proceedings for summary judgment, damages payable by the plaintiffs were assessed to be $49,313.73. That award included a sum of $30,000 in respect of losses suffered by the defendants as a result of the cancellation of their sale of heavy duty pallet racks. The plaintiffs appealed to the High Court.

31 Eikobina (M) Sdn Bhd v Mensa Mercantile (Far East) Pte Ltd [1994] 1 MLJ 553 . The appellants agreed to sell to the respondents 24 units of heavy construction equipment. After the agreement was entered into, but before delivery of the goods, the respondents sub-sold 15 units to sub-buyers. The appellants failed to deliver and the trial judge awarded damages which included sums for loss of profit on the sub-sale and loss of confidence in the respondents on the part of their customers. On appeal, the Malaysian Supreme Court ruled that the loss of profits in the sub-sale could not be recovered by the respondents against the appellants because the sub-sale was never communicated to the appellants at the time of the contract and could never have been as the contract for the sub-sale was entered into later. The judgment of Peh Swee Chin SCJ, if I may respectfully say so, repays study. At p 564 the learned judge said:

If the first rule of Hadley v Baxendale does not apply, we now examine the circumstances if they could qualify for the second rule; the actual knowledge of special circumstances, viz whether details of such potential loss were made known to the contract breaker before or at the time of the contract so that the contract maker can be said to have taken the risk of such loss into the bargain of the contract

Here, the matter of sub-sales was not communicated to the said vendor at the time of the contract and this is beyond dispute from the evidence for the sub-sales were in fact transacted after the date of contract between the parties herein but before delivery. Thus the specific loss of profit on 15 units of the goods in question sold before delivery and after contract could not be claimed as it was too remote by virtue of both rules in Hadley v Baxendale.

At all material times, the (sellers) well knew that the (buyers) required the said front locks for the purpose aforesaid for sale of the pedestals with the tables manufactured therewith to customers in Singapore as well as overseas for profit. In this respect, I wish to refer to all the relevant correspondences between the (buyers) and the (sellers), all relevant conversations between myself and the (sellers`) representatives and the previous course of dealings between the parties.

Lai Kew Chai J

Christopher Anand Daniel (Allen & Gledhill) for the appellants
Samuel Chacko and Sharanjit Kaur (Manjit, Samuel & Partners) for the respondents