Seah Boon Lock and another v Family Food Court

• Jurisdiction: Singapore
• Judgment Date: 16 July 2008
• Date: 16 July 2008
• Docket Number: Civil Appeal No 75 of 2007
• Court: Court of Appeal (Singapore)

Family Food Court (a firm)

Plaintiff

and

Seah Boon Lock and another (trading as Boon Lock Duck and Noodle House)

Defendant

[2008] SGCA 31

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeal No 75 of 2007

Court of Appeal

Agency–Principal–Undisclosed–Whether first respondent acted as agent for undisclosed principal when he entered into licence agreement for use of food stall–Whether substantial damages recoverable by agent for losses suffered only by undisclosed principal and not by agent–Civil Procedure–Parties–Joinder–Power of court to order joinder–Purpose of joinder–Whether undisclosed principal should be made party to proceedings–Order 15 rule 6 (2) (b) Rules of Court (Cap 322, R 5, 2006 Rev Ed)–Contract–Breach–Wrongful repudiation of licence agreement for use of food stall–Exceptions to general rule that plaintiff/promisee could only recover nominal damages for breach of contract where no loss suffered–Whether exceptions available to agent in situation involving undisclosed principal–Undisclosed principal suffering losses due to wrongful repudiation of contract for which undisclosed principal not party to–Whether substantial damages recoverable by agent for losses suffered only by undisclosed principal and not by agent–Damages–Measure of damages–Exceptions to general rule that plaintiff/promisee could only recover nominal damages for breach of contract where no loss suffered–Whether exceptions would apply to avail agent in situation involving undisclosed principal–Whether substantial damages recoverable by agent for losses suffered only by undisclosed principal and not by agent

The appellant, Family Food Court, was an operator of several food courts, including one at Block 642, Choa Chu Kang Street 62, Singapore 689142 (“the Yew Tee Food Court”) and one at 55 Sungei Kadut Street 1, Singapore 729358 (“the Sungei Kadut Canteen”). The respondents were a husband-and-wife team who managed and operated the “Yu Kee” chain of duck rice stalls islandwide. They operated Stall No 10 at the Yew Tee Food Court (“the Yew Tee Stall”) and Stall No 14A at the Sungei Kadut Canteen (“the Sungei Kadut Stall”).

The first respondent sued the appellant for repudiation of a licence agreement entered into between the appellant and the first respondent for the use of the Yew Tee Stall (“the Agreement”). The appellant's position was that it had validly terminated the Agreement pursuant to an oral agreement allegedly entered into between the appellant and the first respondent, whereby the former would grant a licence to the first respondent to operate the Yew Tee Stall provided only that the first respondent took up a concurrent lease of the Sungei Kadut Stall (“the Tie-Up Arrangement”). Since the first respondent had terminated the lease of the Sungei Kadut Stall, the appellant was entitled to terminate the Agreement. In the course of the trial, it transpired that the first respondent might not be the owner of the business at the Yew Tee Stall and he thus applied to join the second respondent as his undisclosed principal. The trial judge (“the Judge”) eventually found that the second respondent was also not the owner of the business, but held that the first respondent could recover damages as an agent for his unidentified, undisclosed principal, having found that the Agreement had been wrongfully repudiated by the appellant as the appellant's case at the trial in relation to the Tie-Up Arrangement was riddled with inconsistencies. The appellant appealed against the Judge's decision.

Held, dismissing the appeal:

(1) Since the case put forth by the appellant was that it was entitled to terminate the Agreement pursuant to the Tie-Up Arrangement, the onus was on the appellant to prove the existence of the latter. The evidence presented by the appellant was not strong enough to show that the Judge was wrong in arriving at his conclusion that the appellant had wrongly repudiated the Agreement. The court was therefore of the view that the parties had not entered into the Tie-Up Arrangement and that the appellant had wrongfully repudiated the Agreement: at [21] and [22].

(2) For the purposes of the respondents' suit, it was not necessary to identify the undisclosed principal as that was immaterial to the question of damages. The first respondent had contracted with the appellant as a “family business unit” in the sense that he had merely been using different names for different entities to carry on the business of his family. The business was really his. The Judge should have found, since there was ample evidence on which he could have done so, that there was no undisclosed principal and that the first respondent had in fact acted for himself when he signed the Agreement. The case should thus have been decided on a simple finding of fact that the first respondent was the only party to the Agreement vis-à-vis the appellant. Such a finding would have made it unnecessary for the Judge to consider the question of whether the first respondent could sue the appellant for damages suffered by an undisclosed and unidentifiable principal: at [23], [25], [26], [27].

(3) Nonetheless, the court considered the legal position had there been an undisclosed principal. The court noted that the English courts have formulated two exceptions (referred to as “the narrow ground” and “the broad ground”, respectively) to the general rule that a plaintiff could only recover nominal damages for a breach of contract where he had suffered no loss (for instance, where the substantial loss was suffered by the third party who was the intended beneficiary of the contract). Both the narrow and broad grounds have been endorsed in the local context in the leading decision of Chia Kok Leong v Prosperland Pte Ltd [2005] 2 SLR (R) 484. The narrow ground allowed a plaintiff to recover substantial damages on behalf of a third party, and it was applicable where it was in the contemplation of the contracting parties that the proprietary interest in the contractual subject matter may be transferred from the plaintiff to the third party after the contract had been entered into and before the defendant's breach occurred. The broad ground allowed the plaintiff to recover substantial damages for his own loss, on the basis that the plaintiff has an interest in the contract being performed and (consequently) his receiving the benefit which he had contracted for (ie, performance interest): at [31], [34], [36], [40], [44], [48], [51], [52].

(4) The narrow ground would not be applicable in an undisclosed principal situation as the very existence of the undisclosed principal would be unknown to the defendant to begin with. It would be impossible for the contracting parties to have contemplated any transfer of the proprietary interest in the contractual subject matter simply because one of the parties (in this case, the appellant) was totally unaware of the existence of the third party. As for the broad ground, there were both arguments for as well as against the application of the broad ground to an undisclosed principal situation, but there was no need to determine conclusively which set of arguments should prevail. The relevant rules of civil procedure would render the potential difficulties vis-à-vis the extent of recovery of damages available to a plaintiff/agent a moot point in most cases in the light of the fact that these rules permitted the court to order the undisclosed principal to be joined as a party to the proceedings if the latter chose not to intervene of its own accord: at [58], [61], [62].

(5) The court had the power to order joinder under O 15 r 6 (2) (b) of the Rules of Court (Cap 322, R 5, 2006 Rev Ed), whether or not the relevant parties had effected joinder under O15 r 4. If the undisclosed principal could not be identified (which was the Judge's finding in the present case), he could not be joined as a co-plaintiff to the plaintiff/agent's action. However, assuming that the undisclosed principal was identifiable on the evidence, in order to do justice between the parties and to avoid a multiplicity of proceedings, the undisclosed principal should be made a party to the proceedings. Once the undisclosed principal had been made a party to the proceedings, the court would simply award to the undisclosed principal itself the full measure of damages that it would be entitled to: at [63].

(6) There was no reason why the undisclosed principal should not simply be joined as a co-plaintiff with the plaintiff/agent. The effect would be that if the plaintiffs (ie,the undisclosed principal and the plaintiff/agent) were successful, they would only be entitled to recover the damages suffered by the undisclosed principal, but, if the defendant/promisor were successful, it would be entitled to costs against both plaintiffs. Further, if the defendant/promisor had a counterclaim against the plaintiffs and succeeded in its counterclaim, it would likewise be entitled to damages against both plaintiffs (assuming, of course, no double-recovery and subject to any other applicable legal limitations such as remoteness of damage and mitigation of loss): at [66].

Abdul Gaffar bin Fathil v Chua Kwang Yong [1994] 2 SLR (R) 99; [1994] 2 SLR 645 (refd)

Albazero, The [1977] AC 774 (refd)

Alexander Corfield v David Grant (1992) 59 BLR 102 (refd)

Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 (refd)

Chia Kok Leong v Prosperland Pte Ltd [2005] 2 SLR (R) 484; [2005] 2 SLR 484 (refd)

Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68 (refd)

Garnac Grain Company Incorporated v H M F Faure & Fairclough Ltd [1966] 1 QB 650 (refd)

GUS Property Management Ltd v Littlewoods Mail Order Stores Ltd (1982) SLT 533 (refd)

Hadley v Baxendale (1854) 9 Exch 341 (refd)

Hongkong & Shanghai Banking Corp v San's Rent A-Car Pte Ltd [1994] 3 SLR (R) 26; [1994] 3 SLR 593 (refd)

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