Fish & Company Restaurants Pte Ltd v MFM Restaurants Pte Ltd

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judgment Date: 26 November 2009
• Docket Number: Suit No 670 of 2005 (Registrar's Appeals Nos 152 of 2008 and 153 of 2008)
• Date: 26 November 2009

Fish & Co Restaurants Pte Ltd

Plaintiff

and

MFM Restaurants Pte Ltd and another

Defendant

[2009] SGHC 270

Belinda Ang Saw Ean J

Suit No 670 of 2005 (Registrar's Appeals Nos 152 of 2008 and 153 of 2008)

High Court

Damages–Assessment–Breach of undertakings in settlement deed to refrain from using confidential information–Whether substantial damages recoverable without proof of loss–How loss of profits might be proven–Whether plaintiff could recover loss of profits after cessation of breaches

The plaintiff (“Fish & Co”) owned a chain of seafood restaurants. The second defendant (“Dickson”) was formerly the operations manager of Fish & Co. In 2005, Fish & Co sued Dickson for divulging to the first defendant (“MFM”) confidential information on Fish & Co's recipes, cooking tips and kitchen operations. The 2005 suit was discontinued following the conclusion of a settlement deed between Fish & Co, MFM, Dickson, and others. In the settlement deed, MFM and Dickson undertook, inter alia, (a) not to use serving pans identical to those used in Fish & Co restaurants, (b) not to use any slogans or jingles identical to those used by Fish & Co, (c) not to use a specified list of words and phrases, and (d) not to use Fish & Co's lemon butter sauces. Five months after the settlement deed was signed, Fish & Co brought the present suit, alleging that MFM and Dickson continued to be in deliberate breach of their undertakings under the settlement deed. About 14 months after the suit was brought, MFM and Dickson consented to (a) judgment on liability, (b) an injunction order similar to the relevant undertakings in the settlement deed, and (c) damages to be assessed.

The assistant registrar awarded Fish & Co damages of $72,688 with interest to run at 3% per annum from the date of commencement of the present suit. Fish & Co appealed against the quantum of damages. The defendants cross-appealed against the whole of the assistant registrar's decision.

Held, allowing the appeal and dismissing the cross-appeal:

(1) The present case was not one where inferences of damage were presumed in law. In order to recover substantial damages for the defendants' breach of their undertakings under the settlement deed, Fish & Co had to prove that the breaches had caused it to suffer loss: at [26] and [30].

(2) On the facts, Fish & Co had sufficiently established (a) a loss of custom during the period where the defendants were in breach of their undertakings under the settlement deed, and (b) the causal link between the breaches and the loss of custom. However, the extent of the loss was altogether another matter: at [27] and [45].

(3) In deciding the quantum of damages, the approach taken in the American Restatement (3d) of Unfair Competition, Ch 4 45 is instructive. The plaintiff might prove lost profits by identifying specific customers diverted to the defendant. The plaintiff might also prove lost profits through proof of a general decline in sales or a disruption of business growth following the commencement of use by the defendant, although the presence of other market factors that might affect the plaintiff's sales bore on the sufficiency of the plaintiff's proof. If the evidence justified the conclusion that the sales made by the defendant would have instead been made by the plaintiff in the absence of the appropriation, the plaintiff might establish its lost profits by applying its own profit margin to the defendant's sales: at [47].

(4) Having regard to the difference between the industry index and Fish & Co's Glass House outlet's monthly sales percentage year-on-year change at current prices, Fish & Co would be able to recover $230,600 for its losses suffered during the continuance of the defendants' breaches of their undertakings in the settlement deed: at [56] and [57].

(5) Fish & Co would be able to recover damages of $38,400 for its loss of profits after the injunction order, in accordance with the usual principles of causation and remoteness. The cessation of the breaches upon the injunction order did not necessarily mean the end of the losses; in fact, the breaches had a gradual trailing-off effect on Fish & Co's profits. The losses were not too remote, as it would have been reasonably contemplated by the defendants that the plaintiff's loss of custom would continue to run after the defendants' breaches had stopped: at [63], [65] and [68].

Cadbury Schweppes Inc v FBI Foods Ltd [1999] 1 SCR 142 (refd)

Dawson & Mason Ltd v Potter [1986] 1 WLR 1419 (folld)

Draper v Trist and Tristbestos Brake Linings, Ld (1939) 56 RPC 429 (distd)

Ductline Pty Ltd v Arcric Investments Pty Ltd (1995) 32 IPR 419 (distd)

Galoo v Bright Grahame Murray [1994] 1 WLR 1360 (refd)

Gerber Garment Technology Inc v Lectra Systems Ltd [1995] RPC 383 (distd)

Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (folld)

Heron II, The [1969] 1 AC 350 (refd)

Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd [2008] 2 SLR (R) 623; [2008] 2 SLR 623 (folld)

Seager v Copydex (No 2) [1969] 1 WLR 809 (refd)

Victoria Laundry (Windsor) Ld v Newman Industries Ld [1949] 2 KB 528 (refd)

Civil Law Act (Cap 43,1999 Rev Ed) s 12 (1)

Tony Yeo and Rosalynne Asmali (Drew & Napier LLC) for the plaintiff

Daniel John and Marc Wang (Goodwins Law Corporation) for the defendants.

Judgment reserved.

Belinda Ang Saw Ean J

1 The appeal and cross-appeal in this case arose from the assistant registrar's assessment of damages in relation to a consent judgment dated 27 November 2006. Registrar's Appeal No 152 of 2008 (“RA 152/2008”) is the plaintiff's appeal which is against part of the decision of the assistant registrar (“AR”) delivered on 28 January 2008 and 4 April 2008. Registrar's Appeal No 153 of 2008 (“RA 153/2008”) is the defendants' cross-appeal against the whole of the AR's decision.

Background

2 The plaintiff, Fish & Co Restaurants Pte Ltd (formerly known as OB Singapore Operations Pte Ltd), is the owner of a chain of seafood restaurants called “Fish & Co”. The first defendant, MFM Restaurants Pte Ltd (“MFM”) is the owner of seafood restaurants in Singapore called “The Manhattan Fish Market”. The dispute relates to the first MFM restaurant which was opened on 20 May 2005 at Plaza Singapura. The second defendant, Low Theng Yong Dickson (“Dickson”), was a former employee of the plaintiff. Until his resignation, Dickson was the plaintiff's operations manager. On 30 March 2005, the plaintiff commenced Suit No 257 of 2004 (“Suit 257”) against Dickson for taking, using and divulging confidential information represented by, inter alia,the plaintiff's guide to secret recipes, cooking tips and methods including kitchen operations unique to Fish & Co in an apparent attempt to use the confidential information for the establishment of “The Manhattan Fish Market” restaurants in Malaysia. In breach of the non-competition obligation in his contract of employment, Dickson set up and was actively running “The Manhattan Fish Market” chain of restaurants in Malaysia.

3 Suit 257 was eventually discontinued following a settlement of the dispute between the plaintiff and Dickson. Notably, MFM and three Malaysian companies agreed to be parties to the settlement even though they were not named as defendants in Suit 257. The terms of the settlement were recorded in a Settlement Deed dated 27 April 2005 (“the Deed”). Relevant to the present case are four specific undertakings given by the defendants under cl 3 of the Deed:

1. (i) [The defendants] undertake not to use, in the Manhattan Fish Market Restaurants around the world, within a period of four (4) months from the date of this Deed, serving pans identical and/or similar to those serving pans used in Fish & Co Restaurants.

2. (ii) [The defendants] undertake not to use any slogans and/or jingles identical to or confusingly similar to that used by [Fish & Co] in any way whatsoever, including but not limited to the use of such slogans/or jingles in their menus, websites, promotional materials and/or any other materials and/or documents in relation to the Manhattan Fish Market Restaurants.

…

1. (iv) [The defendants] undertake not to use the words and/or phrases more particularly described in Schedule 3, in any combination whatsoever, whether on their own and/or in combination with any word (s) and/or phrase (s), in their menus, websites, promotional materials and/or any other materials and/or documents including but not limited to those used for marketing and/or franchising in relation to the Manhattan Fish Market Restaurants. PROVIDED ALWAYS that [the plaintiff] shall not have exclusive rights to use the individual words 'garlic', 'lemon', 'butter and/or 'sauce'.

2. (v) [The defendants] undertake, within a period of three (3) months from this Deed, to use a completely different garlic lemon butter sauce, sauce used in the dish known as 'Garlic Lemon Mussels', creamy garlic lemon sauce, garlic lemon sauce, garlic butter sauce and lemon butter sauce (collectively known as 'the MFM Sauces') in any or all their dishes in the Manhattan Fish Market Restaurants, or in any manner whatsoever, from the Garlic Lemon Butter Sauce and Lemon Butter Sauce used in Fish & Co Restaurants ('the O.B. Sauces'). The difference between the MFM Sauces and the O.B. Sauces shall be in relation to the taste and ingredients used.

4 Some five months after the Deed was signed, the plaintiff on 20 September 2005 filed Suit 670 of 2005 (“Suit 670”) against MFM as first defendant and Dickson as second defendant for breach of cl 3 of the Deed. The plaintiff alleged that its sales continued to be affected by MFM's deliberate and calculated breach of the cl 3 undertakings. On the first day of trial, 27 November 2006, MFM and Dickson consented to (a) judgment on liability; (b) an injunction order similar to the undertakings in cl 3 (i), (ii), (iv) and (v) of the Deed; and (c) an order for damages to be...