Remedies I PDF

REMEDIES I Athirah Mohd Anuar (Lecturer) Faculty of Law, UKM Semester 2, 2023/2024 Here is where your presentation begins ...

REMEDIES I Athirah Mohd Anuar (Lecturer) Faculty of Law, UKM Semester 2, 2023/2024 Here is where your presentation begins  Introduction Ubi jus ib remedium : where there is a right, there is a remedy. According to common law, the basic purpose of a remedy for a given contract is to put the contracting parties in a position as if the contract had been completed. So, when one party has performed the obligation, the other party is required to make the payment promised under the contract. Typically, a claim under a contract is a claim for payment for work that has been completed. However, there are also claims for damages. Briefly, remedies under a contract can be divided as follows: Common law remedy Equitable remedy Compensation S.74(1) Specific performance Unascertained Damages S.75 Ascertained Damages Injunction  Compensation ❑ Damages for breach of contract usually aim to provide compensation to the aggrieved party (compensatory in nature). ❑ Damages in a contract are not punitive in nature (Addis v Gramophone Co. Ltd. ). ❑ The basic purpose of damages in contract-based claims is given is restitutio in integrum. ❑ "The basic principle of damages for breach of contract is that the injured party is entitled, as far as money can do it, to be put in the position he would have been in if the contractual...obligation had been properly performed. He is entitled, that is to say, to the benefit of his bargain.” Per Lord Scott in Farley v. Skinner 4 All ER 801. (This principle can be traced back to the case of Robinson v. Harman (1898) 1 Exch 850.)  Compensation ❑ Pollock & Mulla (11th Ed.): “The general principle for the assessment of damages is compensatory, that is, the innocent party is to be placed, as far as money can do, in the same position as if the contract had been performed.” ❑ Tan Sri Khoo Teck Puat & Anor. v Plenitude Holdings Sdn. Bhd. (Fed. Ct.); Arkitek Tenggara Sdn. Bhd. v Mid Valley City Sdn. Bhd. REMEDI COMMON COMPENSATION LAW Unascertained Damages  Unascertained Damages Under this topic of compensation, 2 things need to be examined: ❑ Is the loss caused by the defendant? (remoteness of damage) ❑ If so, how is this loss calculated? (measure of damages) Unascertained Damages Remoteness of Damage  Popular Industries Ltd. v. Eastern Garment Manufacturing Sdn. Bhd. “When a plaintiff claims damages from a defendant, he has to show that the loss in respect of which he claims damages was caused by the defendant’s wrong, and also that the damages are not too remote to be recoverable. The principle of remoteness of damage is a limiting principle policy and the principles applicable in contract and tort are not the same…”  Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd. Pl. bought a boiler from Def. for their laundry business. The boiler was delivered 5 months later than the promised date and Pl. experienced 2 types of losses: The profit they can get during the period of delay; and The dyeing contract they might get from the Ministry of Supply.  Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd. “In cases of breach of contract, the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach. What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach. For this purpose, knowledge ‘possessed’ is of two kinds; one imputed, the other actual.”.  Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd. Everyone, as a reasonable person, is taken to know the ‘ordinary course of things’, what loss is liable to result from a breach and consequently of contract in that ordinary course. This is the subject-matter of the first rule in Hedley v. Baxendale. But to this knowledge, which the contract-breaker is assumed to possess whether he actually possesses it or not, there may have to be added in a particular case knowledge which he actually possesses of special circumstances outside the ‘ordinary course of things’, of such a kind that a breach in those special circumstances would be liable to cause more loss. Such a case attracts the operation of the ‘second rule’ so as to make additional loss also recoverable.” Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd. Knowledge possessed by the party who breaches the contract Imputed knowledge Actual knowledge Knowledge of ordinary Knowledge of special course of things and the circumstances and the likely loss likely loss Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd. Losses claimed: The profits they would have obtained throughout the delay The dyeing contract period they might get from the Ministry of Supply.  Hadley v Baxendale (1854) Plaintiff’s flour mill suffered damage to the crankshaft (a component of their steam engine). Defendants are carriers (carriers) contracted by Plaintiff to take the damaged crankshaft to a crankshaft maker in Greenwich. Due to circumstances, the Defendant delayed in the delivery. This caused Plaintiff’s plant to close longer than expected (if not for Defendant’s delay). Plaintiff brought a claim against Def.  Hadley v Baxendale (1854) “…where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, that is, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.” Per Alderson B (Court of Exchequer)  Hadley v Baxendale (1854) The test given by Baron Alderson in the case of Hadley v Baxendale is divided into two: 1. Losses arising naturally or the usual consequences arising from such breach of contract 2. Losses that do not exist naturally but can reasonably be in the contemplation of the contracting parties to occur as a result of the breach of the contract. Did the plaintiff succeed in his claim? If yes, under which test? If not, why?  Hadley v Baxendale (1854) In Hadley v Baxendale, why did Hadley’s claim fail under the 1st and 2nd tests? 1. Under the 1st test, halting of operations at the factory was not a matter that would naturally arise from the carrier’s delay. This is because the owner of the factory may have spare parts that can be used to continue operating the factory while waiting for the delivery of the crankshaft.  Hadley v Baxendale (1854) In Hadley v Baxendale, why did Hadley’s claim fail under the 1st and 2nd tests? 2. Under the 2nd test, the Plaintiff was aware of the fact that the delay in the delivery of the crankshaft would cause the factory to halt operations, however this was not told to the Defendant. Therefore, the losses suffered because of the cessation of operations is not something that could reasonably be in the minds of BOTH contracting parties.  POSITION IN MALAYSIA Provision referred to: Section 74(1) of the Contracts Act 1950 ❑ According to Ong FJ, in the case of Teoh Kee Keong v. Tambun Mining Co. Ltd., the method in the abovementioned section is the same as that adopted in Hadley v Baxendale.  SOURCE FIRST RULE SECOND RULE t e Imputed knowledge: Actual knowledge: r Victoria Laundry v knowledge of the knowledge of special S m Newman Industries ordinary course of things circumstances and the u i m n and the likely loss likely loss m o a l may reasonably be arising naturally r o Hedley v Baxendale supposed to have been in according to the usual y g (1854) the contemplation of course of things y both parties o f u which the parties knew, s which naturally arose in when they made the e Seksyen 74(1) the usual course of contract, to be likely to d Akta Kontrak 1950 things from the breach result from the breach of it  Application of Hadley v. Baxendale’s First Test Bee Chuan Rubber Factory Sdn. Bhd. v. Loo Sam Moi Resp. claiming the loss suffered as a result of the delay for approximately 4½ years by the Appellant in completing Resp’s house. As a result of this delay, Resp. had to find alternative accommodation at the rate of RM100 per month. ❑ The Federal Court agreed with the award given by the lower court for the award of RM100 per month for the relevant period. Illustration (a) - (h) of the Contracts Act 1950 are illustrative of the application of the first principle of Hadley v Baxendale.  Application of Hadley v. Baxendale’s Second Test Tham Cheow Toh v. Associated Metal Smelters Ltd. 1 MLJ 171 (Fed Ct.) “In our view, this case falls within the second rule which is that the app. would not be liable for payment of damages for loss of profit unless there is evidence before the court that the special object of the furnace had been drawn to their attention and that they contracted on the basis that delay in delivery of the particular furnace which produce a temperature of 2600º F. By their promise to deliver the furnace within 45 days after the confirmation of order, they must be assumed to have appreciated the urgency of the matter. In this way, it is reasonable to think that any delay in delivery of the required furnace would affect the business profits of the respondent.” Illustration (i), (j), (l) & (m) of the Contracts Act 1950 are illustrative of the application of the second principle of Hadley v Baxendale. Application of Hadley v. Baxendale’s First and Second Test Bank Bumiputra Malaysia Bhd. Kuala Terengganu v Mae Perkayuan Sdn. Bhd. & Ors. 2 MLJ 76 (S.Ct)  Reasonable Contemplation How is it measured? Asquith, LJ dalam Victoria Laundry v. Newman Industries In order to make the contract-breaker liable under either rule it is not necessary that he should have actually asked himself what loss is liable to result from a breach… It suffices that, if he had considered the question, he would as a reasonable man have concluded that the loss in question was liable to result… Nor… to make a particular loss recoverable, need it be proved that upon a given state of knowledge the defendant could, as a reasonable man, foresee that a breach must necessarily result in that loss. It is enough if the loss …is a ‘serious possibility; or a ‘real danger’. Contemplation – attentive viewing or consideration; matter for thought; purpose. Foreseeability – ability to see or know beforehand. Chambers Dictionary, 1993.  MEASURE OF DAMAGES There is actually no specific formula in calculating compensation. There are only general guidelines that apply. Chaplin v. Hicks 2 KB 786 (per Moulton LJ) “…I think that, where it is clear there has been an actual loss resulting from the breach of a contract, which it is difficult to estimate in money, it is for the jury to do their best to estimate; it is not necessary that there should be an absolute measure of damages in each case. There are no doubt well-settled rules as to the measure of damages in certain cases, but such accepted rules are only applicable where the breach is one that frequently occurs… In such cases, the court weighs the pros and cons and gives advice…This is especially the case in actions relating to sale of goods of a class for which there is an active and ready market. But in most cases, it may be said that there is no recognised measure of damages, and that the jury must give what they think is adequate solatium under all the circumstances of the case.”  MEASURE OF DAMAGES However, from the cases that have been decided, some guidance seem to have been used as a measure. For example: i. The market price of the goods ordered on the date of delivery Lee Heng & Co. v. Melchers & Co. MLJ 4 “…The only difference appears to be that in the case of non-delivery the buyer has not got the goods and has not paid their contract price; what he has lost is the difference between the market price of the goods and the contract price he would have to pay to get them. If the goods are delivered damaged, he has goods and has paid the contract price; what he has not got is sound goods, and the loss is therefore the difference between the market value of sound goods and the market value of these…damaged goods. Applying this principle as enunciated by Scrutton L.J., I had to find what were the market values of these two brands of shovels at the time of delivery. …I was therefore convinced that the Pl. firm in fact paid $4150 for the shovels they obtained in Singapore. The market value of the goods actually supplied was $3750 for 100 dozens and the market value of the goods which were originally ordered was $4150. The difference in value was $400 for 100 dozens.” ~This principle is applied in Eikobina (M) Sdn. Bhd. v. Mensa Merchantile (Far East) Pte. Ltd. ~  MEASURE OF DAMAGES i. The market price of the goods ordered on the date of delivery Wong Poh Oi v Gertrude Guok 2 MLJ 134 at 137 When it comes to real estate, the price paid for similar properties in the neighborhood can be the best evidence of recent market prices. Lau Khiok Chee v Lau Sia Su (f) SCR 11 at 12 “Where a purchaser is entitled to damages, the measure of damages is normally the difference between the market price and the price which he contracted to pay. Where the vendor has re- sold his property, it has been held that the price at which it has been re-sold is prima facie evidence of the market value.”  MEASURE OF DAMAGES ii. What is taken into account is not the profit expected to be obtained from the sale of the contracted goods. But what is calculated is the difference between the profit earlier and the profit that will be received if the replacement item is purchased at a higher price. If there is no market price, what is taken into account is the difference between the price of the contracted goods and the estimated price to obtain replacement goods. If this is not the case, the damages are the proportion of the total profits lost as a result of the breach. (Lee Sau Kong v. Loew Cheng Chiang MLJ 17) iii. The difference between the price of the contracted goods and the sale price of the goods to other parties (East Asiatic Co. Ltd. v. Othman 2 MLJ 38: the goods contracted for were not accepted and the seller/aggrieved party made a claim)  MEASURE OF DAMAGES iv. In the case of wrongful dismissal, the compensation given is limited to the income that should have been earned if the employee is still working; and for the time period that passed before the employee gets a new job (Fox v. Ek Liong Hin Ltd. MLJ 1) o by Unknown Author is licensed under CC BY-NC  # MITIGATION OF LOSS  MITIGATION OF LOSS ❖ Another matter that the court takes into account is the effort made by the party who suffered a loss to mitigate the difficulties experienced ❖ Anson (2016): “The underlying policy is the desirability of avoiding waste, in this context a loss which could have been avoided by reasonable action. It is often said that the law imposes ‘a duty’ on claimants to mitigate their loss. But this expression is misleading. The claimant cannot itself be sued for failure to comply with this duty; rather the consequence is simply that no damages are given for the avoidable loss.” ❖ Mohamed Dzaiddin, J. dalam Malaysian Rubber Development Corp. Bhd. v. Glove Seal Sdn. Bhd. “Plaintiff is under a duty to take reasonable steps to remedy the hardship arising from the Defendant’s wrongdoing, and he (Plaintiff) will not be compensated for any loss caused by his negligence in taking such steps… The question is what is reasonable or whether Plaintiff has acted reasonably in redressing his hardship in each case is a question of fact and not of law.”  MITIGATION OF LOSS ❖ Explanation Section 74: In estimating the loss or damages arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account. ❖ Kabatasan Timber Extraction v Chong Fah Shing 2 MLJ 6, Fed Ct The Appellant contracted to supply logs to the Respondent. The supply of logs needs to be sent to the location of the sawmill that will be set up by the Respondent. Supplies need to be sent 3 times. The 2nd supply (198 logs) and 4 out of 22 logs of the 3rd supply were not delivered to the Respondent; i.e. these supplies were placed more than 500 feet away from the Respondent's sawmill location. The respondent proceeded to obtain a supply of logs from another supplier. Held: The court referred to Anson's Principles of the English Law of Contract (22nd. Ed) and stated that the law requires each party that suffers a loss to take steps to reduce such loss. In this case, the Respondent does not need to get supplies from other suppliers. They should have taken action to bring the logs from where the logs were left by the Appellant to their factory. So, the compensation that should be given is the cost of this transportation.  MITIGATION OF LOSS ❖ Khoo Than Sui v Chan Chiau Hee : “…[it is a question of fact whether the innocent party] has acted as a reasonable man might have been expected to act, and he is not required to risk his commercial reputation or to embark upon complicated litigation in order to mitigate his loss.” 3 main methods of mitigation of loss: i. The plaintiff cannot be compensated for avoidable losses; ii. If the Plaintiff can avoid the loss, damages cannot be obtained for him; and iii. Money spent on mitigation or attempted mitigation can be recovered. ALL THESE ARE QUESTIONS OF THE FACTS OF THE CASE RE-CAP RE-CAP Thank you