Aries Telecoms (M) Bhd v ViewQwest Pte Ltd (Fiberail Sdn Bhd, third party)

• Jurisdiction: Singapore
• Judge: Woo Bih Li J
• Judgment Date: 26 May 2017
• Neutral Citation: [2017] SGHC 124
• Plaintiff Counsel: Troy Yeo (Chye Legal Practice)
• Date: 26 May 2017
• Docket Number: Suit No 860 of 2013 (HC/Summons No 5786 of 2016)
• Hearing Date: 12 January 2017,07 February 2017
• Subject Matter: Damages,Remedies,Contract
• Year: 2017
• Defendant Counsel: John Sze and Nicola Loh (Joseph Tan Jude Benny LLP)
• Court: High Court (Singapore)
• Citation: [2017] SGHC 124
• Published date: 06 December 2017

Woo Bih Li J: Introduction

The main action was a claim by the plaintiff, Aries Telecoms (M) Bhd (“Aries”) against the defendant, ViewQwest Pte Ltd (“ViewQwest”) for conversion arising from ViewQwest’s refusal to return certain information technology equipment to Aries after a letter of demand was sent by Aries to ViewQwest. The equipment was eventually returned before the trial of the action without prejudice to the parties’ rights.

After the trial was part heard over some days, ViewQwest eventually consented on 11 October 2016 to an interlocutory judgment to be granted against it with damages to be assessed. Accordingly, I granted interlocutory judgment in favour of Aries against ViewQwest that same day. I also indicated that it might be appropriate for an application to be made for a preliminary point to be decided as to the nature of the relief which Aries was entitled to.

Eventually Aries filed Summons No 5786 of 2016 (“Summons 5786”) for the determination of a preliminary issue pursuant to O 14 r 12 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”). The preliminary point was whether Aries was entitled to (a) an account of profits made by ViewQwest arising from the conversion of the equipment or (b) an order that ViewQwest disgorge such profits to Aries.

Summons 5786 was heard by me on 12 January 2017 and 7 February 2017. In the course of arguments, Aries also sought to claim, as an alternative, punitive, exemplary or aggravated damages. The hearing continued on the basis that I was to rule also on those damages. On 7 February 2017, I decided that Aries was not entitled to claim an account of profits from ViewQwest nor an order for ViewQwest to disgorge its profits from the use of the equipment. I also decided that Aries was not entitled to punitive, exemplary or aggravated damages. I will refer to this as “the 7 February 2017 Order”. My decision meant that Aries was entitled only to ordinary damages. I then gave directions for the assessment of such damages including the filing of pleadings and affidavits of evidence-in-chief.

However, on 23 February 2017, Aries filed a notice of appeal to the Court of Appeal against the 7 February 2017 Order.

The arguments and the court’s reasons

Aries’ claim for an account of profits from ViewQwest merged into its claim for ViewQwest to disgorge the profits which it had earned from the use of the equipment before the equipment was returned eventually to Aries. Thus, in Aries’ written submissions dated 9 January 2017, Aries asserted that “the thrust of [its] claim lies potentially in the Disgorgement of Profits Claim”.¹

Aries based such a claim on suggestions made by Professor James Edelman (now a judge of the High Court of Australia) in his book Gain-Based Damages: Contract, Tort, Equity and Intellectual Property (Hart Publishing, 2002). In particular, Aries focussed on a suggestion by Mr Edelman that disgorgement of profits was an appropriate relief for wrongs committed deliberately and cynically because the tortfeasor had calculated that his gain would exceed the damage he might be liable for. This was a form of deterrence for tortfeasors where profit was the motive and was appropriate where compensatory damages were not adequate as a deterrence. Such an award would apply even where material gain was not the main motive although Aries’ case rested on profit as ViewQwest’s motive.

However, Aries accepted that in Singapore, it was still unclear whether our courts would grant such a relief. It referred to Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246 (“Strand”) which was discussed by the Court of Appeal in ACES System Development Pte Ltd v Yenty Lily (trading as Access International Services) [2013] 4 SLR 1317 (“ACES”) and submitted that in ACES, the Court of Appeal said, at [54], that this was a rather thorny area of the law of damages and deferred arriving at a conclusive or definitive view as to what the law ought to be.

Yet, as ViewQwest submitted, neither Strand nor ACES involved a claim for disgorgement of profits. As the Court of Appeal took pains to reiterate in ACES at [32], the question of a possible award of damages for the profits gained by the tortfeasor was “not the fact situation in either [Strand] or [ACES]” [emphasis original]. Rather, the question in each case was whether the plaintiff ought to be granted the loss of hire for certain goods detained by the defendant. In ACES, the Court of Appeal was discussing whether damages awarded in such a claim were awarded pursuant to the user principle analysed as an exception to the general compensation principle, or analysed as an alternative and distinct principle in itself. The court referred to the latter as “the Possible Alternative Analysis”. It was this question which the court referred to at [54] as a rather thorny area of the law of damages. At [58], the Court of Appeal also discussed punitive and aggravated damages and again mentioned the thorny nature of this particular area of the law. Although disgorgement of profits was discussed in Strand and in ACES, this was in passing only. No definitive finding was made on the availability of this form of relief as it was not a live issue before either court.

Thus, for example, in Strand, Denning LJ said (at 255) that, “I can imagine cases where an owner might be entitled to the profits made by a wrongdoer by the use of a chattel, but I do not think this is such a case”. Contrast this observation with the view expressed by Somervell LJ in the same case (at 252) when he said, “I think the actual benefit which the defendants have obtained is irrelevant. The damages could not, in my view, be increased by showing that a defendant had made by his use of the chattels much more than the market rate of hire. Equally they cannot be diminished by showing that he had made less”.

Coming back to ACES, the Court of Appeal noted that a claim for disgorgement of profits was different from a claim for damages awarded pursuant to the user principle as adopted by Denning LJ in Strand. Under Denning LJ’s analysis, the user principle would characterise the benefit to the tortfeasor as one of the detention of property without the payment of a fee and the possible award of damages for profits gained by the tortfeasor from the detention of property without the...