Out of the Box Pte Ltd v Wanin Industries Pte Ltd

JurisdictionSingapore
JudgeChoo Han Teck J
Judgment Date04 May 2012
Neutral Citation[2012] SGHC 95
Date04 May 2012
Docket NumberSuit No 317 of 2009 (Registrar’s Appeal No 326 of 2011 and Registrar’ Appeal No 330 of 2011)
Published date09 April 2013
Plaintiff CounselTham Wei Chern and Ivan Lim (Allen & Gledhill LLP)
Hearing Date17 January 2012
Defendant CounselAqbal Singh s/o Kuldip Singh and Adeline Chong (Pinnacle Law LLC)
CourtHigh Court (Singapore)
Subject Matterremedies,damages,Contract
Choo Han Teck J:

In 2007, Out of the Box Pte Ltd (“the plaintiff”) designed a sports drink known as “18”. In the hope that that “18” would eventually become a global brand, the plaintiff spent more than $700,000 to advertise and promote the brand. Wanin Industries Pte Ltd (“the defendant”) was a manufacturer contracted by the plaintiff to produce “18”. In breach of contract, the defendant supplied defective quantities of “18” which were either of a different colour from what was agreed between the parties or contained foreign particles. Following an advisory warning by the Agri-Food and Veterinary Authority of Singapore, the plaintiff recalled stocks of “18” and subsequently decided to discontinue the brand. At the assessment stage, the plaintiff’s main claim in damages was for its “reliance loss” or various advertising and promotional expenses incurred relying on its manufacturing contract with the defendant. The breakdown of the relevant expenses on appeal is as follows:

Supplier

Amount

Act Media Singapore Pte Ltd (“Act Media”)

$342,658.01

Clear Channel Singapore Pte Ltd (“Clear Channel”)

$74,900

Groovy Pte Ltd (“Groovy”)

$50,000

The Catalyst Agency Pte Ltd (“Catalyst”)

$199,369.87

In an agreement dated 15 December 2006, distinct from that between the plaintiff and defendant, Act Media purchased from the plaintiff the rights to use advertising space at various golf courses (“golf media rights”). Pursuant to the purchase agreement, the plaintiff was entitled to license golf media rights from Act Media, and to set off the fees incurred up to an amount of $600,000 ($600,000 worth of “advertising credits”). In August 2008, the plaintiff negotiated with Act Media to use the balance of the advertising credits ($342,658.01 at the time) for the promotion of “18”. It is pertinent to note that the advertising credits could only be used to obtain services from the relevant agency, were not assignable or transferable, and would have expired if they were unused by the end of 2008 (although the plaintiff could extend the utilization period on showing special circumstances). Moreover, the plaintiff had no other product for which it could have obtained advertising services.

In respect of expenses incurred with Clear Channel, the plaintiff claimed $74,900 for bus-stop advertisements placed in December 2008. The advertisements were paid for, not in cash, but by way of redemption of a prize won in a competition (with the exception of $4,900 incurred as GST which was discharged in cash). Again, the prize was not assignable or transferable and would have expired if it was unused by 31 December 2008.

For both categories of the above expenses, the defendant’s primary objection related to the fact that the advertisements were obtained through the redemption of credits or a prize with no market value. Thus, the defendant alleged that the plaintiff did not suffer pecuniary loss in respect of the advertisements. The defendant’s second argument was that the plaintiff had benefited from the marketing exposure generated by the advertisements. This particular argument can be easily dispensed with. The Assistant Registrar rightly held that any direct benefit accruing to the plaintiff would have been accounted for in the deduction of sales revenue from the claim amount, while any indirect benefit (such as goodwill) would be wasted in light of the discontinuation of the brand.

The Assistant Registrar found that the plaintiff had indeed suffered pecuniary loss. However, he classified the plaintiff’s loss as the loss of the value of the advertising credits and prize respectively, rather than the loss of the advertising services obtained upon their redemption. In his view, advertising services cannot exist in a vacuum and must be attached to or be used for a particular product. Since the plaintiff had no other product for which the advertising services could be used, the Assistant Registrar reasoned that the plaintiff’s loss was in reality the loss of the ability to obtain future advertising services, namely, the loss of the credits/prize. The Assistant Registrar then calculated the “objective value” of the credits and prize. For the Clear Channel prize, he assessed the value as S$49,000 by applying a discount of 30% to the prize due to its fast-approaching expiry date and non-transferability. A lower discount rate of 20% was applied to the Act Media credits, in light of the fact that the expiry date could be extended. In doing so, the Assistant Registrar drew attention to the fact that the plaintiff was no longer distributing “18” or any other product. In his view, this necessarily meant that the plaintiff’s loss was the loss of the advertising credits or prize. I do not agree with this view. I think that it would be wrong to link the plaintiff’s loss with an existing product. That was besides the point as the plaintiff’s lack of a product was directly caused by the defendant’s breach. Once the court awards a monetary substitute for the lost services, it no longer concerns itself with whether the plaintiff would actually use the money to purchase those services (see Ruxley Electronics & Construction Ltd v Forsyth [1996] AC 344).

Instead, the plaintiff’s loss would be more appropriately defined as the loss of the value of the advertising services. While compensation for ‘reliance loss’ usually aims to put the injured party in his pre-contractual position, this shorthand is not useful in this particular case. I am of the view that the fundamental principle of compensation should apply, namely, that the measure of damages should be “that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation” (see Livingstone v Rawyards Coal Co (1880) 5 App Cas 25). Here, the plaintiff’s position sans breach would entail possession of the advertising services, and a product to use them on. Giving effect to the underlying principle of compensation, the plaintiff’s loss was the value of the advertising services it would have retained had the contract been performed. However, having reached this definition, we now face the difficulty of putting a figure to this loss.

Even in a claim for reliance loss, the fundamental principle of compensation requires that damages should put the injured party in the same position as he would have been if not for the breach. The focus is therefore on promised performance. This principle comes from the idea that recovery for reliance loss is an alternative means of protecting the expectation interest of the plaintiff. In A.S. Burrows on Remedies for Torts and Breach of Contract (Oxford University Press, 3rd Ed, 2004) at [70], the author explained the basis of reliance damages as follows:

As the courts will not knowingly award reliance damages which put the claimant into a better position than if the contract had been performed, the best interpretation of the cases awarding reliance damages is that they are concerned to protect the claimant’s expectation interest, albeit in a different way than the expectation is normally protected. That is, one can say that the law accepts an alternative way of putting the claimant into as good a position as if the contract had been performed, because it allows the claimant the benefit of a presumption, rebuttable by the defendant, that the claimant has not made a bad bargain. Hence, where the claimant can prove its reliance expenses, this rebuttable presumption enables it to recover that amount on the ground that if the contract had been performed it would at the very least have made gains to cover those expenses...

On the other hand, it may at first sight appear puzzling why, on this interpretation, the courts are willing to give the claimant the benefit of a rebuttable presumption that it would have recouped its expenses. But it is submitted that this is simply a consequence of the fact that the defendant is a contract-breaker. It is as a result of breach by the defendant that one does not know what the position would have been had the contract been performed. It is therefore only fair and proper that the problems of proving that the claimant would not have recouped its reliance loss should fall on the contract-breaker and not on the innocent claimant.

That approach was followed in Anglia Television v Reed [1972] QB 60(“Anglia Television”) and C.C.C. Films (London) v Impact Quadrant Films [1985] QB 16 (“C.C.C Films”). In the former case, the English Court of Appeal held that recovery of pre-contractual expenditure is permissible if it was within the parties’ contemplation that such expenditure would probably be wasted upon breach. Thus the editors of McGregor on Damages (Sweet & Maxwell, 18th Ed., 2009) at [2-033] remarked:

This presents something of a halfway house between [damages for gains prevented by the breach and expenses rendered futile by the breach], for it does more than put the claimant in his...

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4 cases
  • Liu Shu Ming v Koh Chew Chee
    • Singapore
    • High Court Appellate Division (Singapore)
    • 28 April 2023
    ...[2009] 2 SLR 918 (refd) One Step (Support) Ltd v Morris-Garner [2019] AC 649 (refd) Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2012] 3 SLR 428 (refd) Parabola Investments Ltd v Browallia Cal Ltd [2011] QB 477 (refd) Phosagro Asia Pte Ltd v Piattchanine, Iouri [2016] 5 SLR 1052 (refd......
  • Liu Shu Ming and another v Koh Chew Chee and another matter
    • Singapore
    • High Court Appellate Division (Singapore)
    • 28 April 2023
    ...the CCC Films proposition was correct. Although CCC Films was cited with approval in Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2012] 3 SLR 428 (“Out of the Box”) at [16], this was only to say that a plaintiff should be entitled to recover his wasted expenditure to the extent that s......
  • Out of the Box Pte Ltd v Wanin Industries Pte Ltd
    • Singapore
    • Court of Three Judges (Singapore)
    • 6 February 2013
    ...in respect of the ActMedia expenses and the Clear Channel expenses. The Judge held in Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2012] 3 SLR 428 at [9] that: 9 There was no evidence that the value of the relevant services was commensurate with their “sticker” price. This was because......
  • Out of the Box Pte Ltd v Wanin Industries Pte Ltd
    • Singapore
    • Court of Appeal (Singapore)
    • 6 February 2013
    ...in respect of the ActMedia expenses and the Clear Channel expenses. The Judge held in Out of the Box Pte Ltd v Wanin Industries Pte Ltd [2012] 3 SLR 428 at [9] that: 9 There was no evidence that the value of the relevant services was commensurate with their “sticker” price. This was because......
2 books & journal articles
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2013, December 2013
    • 1 December 2013
    ...Pte Ltd v Wanin Industries Pte Ltd[2011] SGHC 226 (discussed in (2011) 12 SAL Ann Rev 182 at 219–221, paras 11.99–11.104) was reported ([2012] 3 SLR 428) and discussed ((2012) 13 SAL Ann Rev 195 at 234–237, paras 12.126– 12.135) in 2012. On appeal, the assistant registrar's assessment was r......
  • Contract Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2012, December 2012
    • 1 December 2012
    ...SGHC 226 (‘Out of the Box Pte Ltd’) (discussed in (2011) 12 SAL Ann Rev 182 at 219, paras 11.99–11.104) has now been reported: see [2012] 3 SLR 428. On appeal, the bulk of the damages assessed by the assistant registrar was affirmed. However, the assistant registrar's assessment was reverse......

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