Aquarius Corporation v Haribo Asia Pacific Pte Ltd and another appeal

• Jurisdiction: Singapore
• Judge: Woo Bih Li JAD
• Judgment Date: 28 November 2022
• Neutral Citation: [2022] SGHC(A) 39
• Published date: 01 December 2022
• Docket Number: Civil Appeals Nos 1 of 2022 and 2 of 2022
• Plaintiff Counsel: Gregory Vijayendran SC, Devathas Satianathan and Evelyn Chua (Rajah & Tann Singapore LLP)
• Defendant Counsel: Chou Sean Yu, Oh Sheng Loong Frank and Wong Zheng Hui Daryl (WongPartnership LLP)
• Subject Matter: Contract,Breach,Evidence,Admissibility of evidence,Hearsay
• Hearing Date: 14 July 2022
• Court: High Court Appellate Division (Singapore)

Quentin Loh JAD (delivering the judgment of the court): Introduction

This is a case involving cross-appeals by parties against the decision of the High Court Judge (the “Judge”) in Suit No 331 of 2018 (“Suit 331”), in which Haribo Asia Pacific Pte Ltd (“HAP”) sued Aquarius Corporation (“Aquarius”) to recover payment for outstanding invoices, and Aquarius counterclaimed against HAP for breaches of a distributorship agreement (the “2016 DA”). The 2016 DA was entered into between the parties on 23 May 2016 for HAP to supply confectionary products and for Aquarius to distribute the same in South Korea. The cross-appeals pertain only to Aquarius’ counterclaim and not HAP’s claim.

With regard to Aquarius’ counterclaim, the Judge found that HAP was obliged by cl 9.3 of the 2016 DA to deliver seven orders placed by Aquarius between July and December 2016 (the “Orders”) and none of the defences HAP raised applied. In failing to deliver the Orders, HAP’s breach of cl 9.3 was actionable. The Judge allowed Aquarius’ counterclaim in part, finding that HAP was liable to Aquarius for lost profits suffered by the latter until 30 April 2017, but not for Aquarius’ lost profits after 30 April 2017.

Civil Appeal No 1 of 2022 (“CA 1”) is Aquarius’ appeal against the Judge’s decision that it is not entitled to claim for lost profits after 30 April 2017. Civil Appeal No 2 of 2022 (“CA 2”) is HAP’s appeal against the Judge’s decision that it is liable to Aquarius for lost profits until 30 April 2017.

Having considered the respective cases on appeal and having heard counsel, we are of the view that CA 1 should be dismissed. The Judge’s findings that are being appealed against cannot be said to be plainly wrong or against the weight of the evidence. As for CA 2, however, we allow HAP’s appeal as, with respect, the Judge erred in finding that Aquarius had proved the quantum of its alleged lost profits until 30 April 2017. In particular, the Judge failed to consider HAP’s valid objection that Aquarius’ computations of its alleged lost profits have not been established by admissible evidence and Aquarius had therefore failed to prove the quantum of its alleged lost profits until 30 April 2017.

Facts The parties

HAP is a company incorporated in Singapore. It is part of the Haribo Group, a group of companies in the business of manufacturing and selling confectionaries. HAP is responsible for the sale and distribution of the Haribo Group’s products in the Southeast, West and East Asian markets. Nikolay Karpuzov (“Mr Karpuzov”) is a director of HAP and gave evidence on its behalf. On the other hand, Aquarius is a company incorporated in South Korea. It is in the business of distributing food and beverage products in South Korea. Evidence for Aquarius was given by Eric Hahn (“Mr Hahn”), its sole shareholder and until April 2016, its president.

Background to the dispute

The 2016 DA¹ is governed by German law and lies at the heart of the present dispute. In the course of the 2016 DA, at least two issues arose as between the parties. Sometime in August 2016, Aquarius claims to have discovered that HAP’s associate in the Haribo Group, Haribo GmbH & Co KG (“Haribo GmbH”), had been positively supporting and supplying parallel importers from as early as 2012 (the “Parallel Imports Issue”). Shortly after and in response to Aquarius’ requests for assistance for, amongst others, the Parallel Imports Issue, Aquarius claims that HAP deliberately halted product deliveries and cancelled production of goods Aquarius had ordered (the “Product Delivery Issue”). This resulted in the Orders being entirely unfulfilled or, if they were partially fulfilled, delayed (the “Undelivered Portions”).

HAP took the first step to bring their contractual relationship to an end by invoking cl 7.2 of the 2016 DA which states that parties may terminate the contract “with six (6) months’ notice to the end of a calendar month”. HAP gave notice under cl 7.2 (“HAP’s First Termination Notice”) on 25 October 2016,² and given the notice period defined, the last day of the contract would have been 30 April 2017. Aquarius disputed the validity of HAP’s First Termination Notice. On 1 December 2016, Aquarius issued a cure notice to HAP pursuant to cl 7.5 of the 2016 DA (the “Cure Notice”),³ requesting inter alia that HAP remedy certain fundamental breaches of the 2016 DA. On 2 February 2017, HAP, through its lawyers at the time, refuted each of Aquarius’ allegations that HAP had breached the 2016 DA. In light of this response, Aquarius exercised its right under cll 7.3 and 7.5 to terminate the 2016 DA with immediate effect on 3 February 2017 (ie, by issuing its own termination notice (“Aquarius’ Termination Notice”)).⁴ On 9 February 2017, HAP issued a second termination notice primarily on the ground that Aquarius’ Termination Notice was itself a repudiatory breach of the 2016 DA.⁵

For some time thereafter, HAP demanded that Aquarius make payment for outstanding invoices totalling €1,526,224.76 for products delivered. However, its demand was not met and HAP thus brought Suit 331 on 2 April 2018 to recover this outstanding sum with interest. Parties do not appeal against the Judge’s findings on HAP’s claim (see [1] above). Instead, the cross-appeals pertain only to Aquarius’ counterclaim (see [2] above).

Procedural history

In addition to the two factual witnesses (see [5] above), parties called experts to give evidence on: (a) the quantification of the counterclaim; and (b) issues of German law. In relation to (a), James Nicholson (“Mr Nicholson”) and Jenny Teo (“Ms Teo”) respectively gave evidence for HAP and Aquarius. For the purposes of this appeal, we note the following procedural history:

Date	Description of event
26 March 2020	Aquarius filed the Affidavit of Evidence-in Chief (“AEIC”) of Ms Teo.
27 May 2020	HAP filed the AEIC of Mr Nicholson.
5 June 2020	Parties filed their Lead Counsel Statements.
22 June 2020	Parties filed and exchanged the AEICs of their respective factual witnesses, Mr Karpuzov (for HAP) and Mr Hahn (for Aquarius). For Mr Hahn’s AEIC, it first came annexed as a draft in a solicitor’s affidavit on 22 June 2020. Mr Hahn’s affirmed affidavit was filed later on 1 July 2020.
27 June 2020	Parties filed their respective Notice of Objections to the contents of the AEICs. In particular, HAP filed a Notice of Objections to the contents of Ms Teo’s AEIC (“HAP’s Notice of Objections to Ms Teo’s AEIC”).6
30 June 2020	First tranche of the trial from 30 June 2020 to 17 July 2020. The witness conferencing session for Mr Nicholson and Ms Teo was from 16 July 2020 to 17 July 2020.
19 October 2020	Second tranche of the trial on 19 October 2020.
12 July 2021	Third tranche of the trial from 12 to 15 July 2021.

The parties’ cases

Aquarius argues inter alia that the way in which HAP effected the termination on 25 October 2016 was in violation of restrictions imposed by sections 138, 226 and 242 of the Bürgerliches Gesetzbuch (the “BGB”) – the German Civil Code – on the exercise of contractual rights, including termination rights such as that under cl 7.2 of the 2016 DA. Namely, that a contractual right cannot be exercised in a manner which: (i) is contrary to good morals; (ii) amounts to “unlawful chicanery” (ie, effected for no reason other than to cause damage to the other party); or (iii) is objectionable according to the standards of good faith and fair dealing. In particular, Aquarius claims that HAP committed contractual breaches of the 2016 DA when it failed inter alia to assist it in investigating the Parallel Imports Issue. Further, HAP breached cl 9.3 of the 2016 DA, when it delayed or failed to make product deliveries (see [6] above). In response, HAP denies committing any contractual breaches. Instead, HAP submits that HAP’s First Termination Notice was valid.

Flowing from HAP’s purported breaches of its obligations under the 2016 DA, Aquarius claims that it suffered damages (in the form of lost profits). According to Aquarius, had HAP not acted in the way it did, Aquarius would have continued making profits from the distribution of Haribo Group’s products for the remaining period that the 2016 DA could have run (ie, until May 2021). In response, HAP disputes every aspect of Aquarius’ counterclaim. In particular, HAP claims that the quantification of Aquarius’ lost profits is based on incorrect assumptions and unsupported by evidence.

Decision below

On Aquarius’ counterclaim, the Judge found that HAP’s First Termination Notice was legally valid. HAP’s First Termination Notice is not invalidated by the application of any of the three provisions of the BGB (see [7] and [10] above). Aquarius’ claim for lost profits after 30 April 2017 failed.

On HAP’s purported breaches of its obligations under the 2016 DA, the Judge found that HAP was obliged by cl 9.3 to deliver the Orders and none of the defences HAP raised applied (see [2] above). HAP’s breach of cl 9.3 was actionable. The Judge found that Aquarius suffered a loss from HAP’s failure to deliver the Undelivered Portions of the Orders. Had those deliveries been completed in a timely manner, the Judge found that Aquarius would have been able to completely sell the Undelivered Portions of the Orders, and accordingly, ought to be compensated on that basis. The Judge found HAP liable in damages for Aquarius’ lost profits until 30 April 2017 and relied on Ms Teo’s calculations to derive HAP’s liability in damages.

Issues on appeal

In CA 1, Aquarius avers that HAP’s First Termination Notice should have been ruled invalid as the notice was issued in breach of HAP’s duty of good faith owed to Aquarius under s 242 of the BGB.

In CA 2, HAP appeals against the Judge’s finding that it is liable in damages for failing to deliver the Undelivered Portions of the Orders....