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Pinnacle Law LLC for the Respondent, Wanin Industries Pte Ltd.
'''CONTRACT: REMOTENESS OF DAMAGE: BEVERAGE DISTRIBUTOR ENGAGINGMANUFACTURER TO PRODUCE NEW SPORTS DRINK: MANUFACTURER UNAWARE OF DISTRIBUTOR’S PLAN TO PROMOTE POPULAR DEMAND FOR GENERIC THROUGH AGGRESSIVE ADVERTISING: MANUFACTURER SUPPLYING DEFECTIVE SHIPMENT OF DRINKS IN BREACH OF CONTRACT: ABANDONMENT OF PROMOTION: WHETHER WASTED ADVERTISING EXPENSES CLAIMED BY DISTRIBUTOR TOO REMOTE'''
'''Summary'''
'''Facts'''
The appellant (“OOTB”) and respondent (“WI”) entered into a contract under which WI was to manufacture and supply a generic sports drink to OOTC. The contract was a bare-bones contract, less than a page long and appeared to be nothing more than a routine contract for the supply of modest quantities of a generic sports drink. Aside from payments for the production of a mould and cylindricaldrums, the extent of OOTB’s obligation under the contract was to purchase a minimum of 1,200 cartons of 18 at a price of $10SGD10.30 per carton. This would have generated an income of $12SGD12,360.00. The contract did not contain any particular quality specification or recipe for 18.
Unknown to WI, OOTC planned to spend substantial sums in marketing the drink as “18 for Life” (“18”), a drink targeted at the golfing industry.
In 2008, a shipment of 18 supplied by WI was found to be contaminated by insects. OOTB was required to recall all stock of 18 from the market, and the AgriFood and Veterinary Authority of Singapore issued a consumer advisory informing the public that all stock of 18 had been recalled and warning against consuming 18. As the 18 brand was damaged beyond repair, OOTB abandoned its marketing campaign and ceased to sell 18.
OOTB was granted summary judgment in respect of its claim against WI for breach of the Contract. At the assessment of damages, OOTB claimed damages in the amount of $779SGD779,812.30 which it said had been incurred in reliance upon the Contract and which had been wasted as a result of WI’s breach. The bulk of these expenses were advertising costs.
OOTB’s damages were assessed in the sum of SGD$655,280.70 before the assistant registrar. On appeal to the High Court, the damages were further reduced to $329SGD329,254.30. The reduction was made on the ground that OOTB was unable adequately to prove its loss in respect of parts of the damages claim, specifically, the use of advertising credits that belonged to OOTB which were used to promote 18 (“the ActMedia expenses”) and the redemption of a prize it had won for an advertising campaign for an unrelated line of products (“the Clear Channel expenses”). Accordingly, OOTB was only entitled to nominal damages in respect of these expenses.
OOTB appealed to the Court of Appeal against the Judge’s decision to award nominal damages for the ActMedia expenses and Clear Channel expenses.
'''Judgment'''
1. After examining the principles governing remoteness of damages in contract in Hadley v Baxendale (1854) 156 ER 145*(Fn.1), Victoria Laundry (Windsor) Ld v Newman Industries [1949] 2 KB 528, and the House of Lords decision in The Achilleas [2009] 1 AC 61, the Court of Appeal set out the analytical framework for deciding questions of remoteness of damage, which entailed making the following inquiries:-
(a) First, what are the specific damages that have been claimed?
6.3. Different heads of loss might seem to be of the same type or nature, but turn out to be of different types upon proper analysis. In this regard, the Court pointed to the case of Victoria Laundry (in which loss of profits from the laundry business were regarded as a different type of loss from losses from particularly lucrative dyeing contracts) and The Achilleas (where there were two distinct types of losses – a well-contained, quantifiable loss reflected in the difference in charter rates for the period of delay in redelivery, and an open-ended and unquantifiable loss or risk of the owner having to vary arrangements under a subsequent fixture which the charterer had no knowledge of).
6.4. While the value of a contract – here a minimum of some $12SGD12,360.00 - does not limit the damages that a plaintiff can claim for the defendant’s breach, it would form part of the factual matrix that a court would consider in assessing what would have been reasonably foreseeable by the defendant in all the circumstances at the time the contract was entered into.
7. OOTB’s appeal was dismissed for the following reasons:-
7.1. WI received $12,360.00 revenue from the Contract, but unknown to WI, OOTB had spent in the region of $779SGD779,812.30 on advertising and promoting 18.
7.2. Neither OOTB’s intention to market 18 intensively nor OOTB’s business strategy - which would entail greater risks than might have been faced by the average beverage distributor - were not made known to WI. These facts had a direct bearing on the losses that materialized but, without knowledge of these additional facts, WI could not have foreseen these losses and there was no basis upon which WI could fairly be held liable for them.
(a) Damages damages which may be fairly and reasonably be considered to have arisen naturally/according to the usual course of things from the breach (“the first limb of the rule in Hadley v Baxendale”); or
(b) Damages damages which may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it (“the second limb of the rule in Hadley v Baxendale”).
