Damages

- Pecuniary compensation obtainable by success in an action for a wrong; the

compensation being in the form of a lump sum which is awarded unconditionally and
is generally, but not necessarily expressed in currency.
Function of damages:
- Compensatory in nature
- Tan Sri Khoo Teck Puat & Anor v Plenitude Holdings Sdn Bhd: The general
principle which constitutes the starting point in the assessment of damages for
breach of contract is to place a party who has sustained a loss by reason of
the breach, so far as money can do it, in the same situation as if the contract
has been performed.
- Ruxley Electronics and Construction Ltd v Forsyth: Damages are designed to
compensate for an established loss and not to provide a gratuitous benefit to
the aggrieved party.

- The burden of proving the damage lies with the plaintiff

- Popular Industries Ltd v Eastern Garment Manufacturing Sdn Bhd: A plaintiff
seeking substantial damages has the burden of proving both the fact and the
amount of damages before he can recover. If he proves neither, the action will
fail or he may be awarded only nominal damages upon proof of breach.
- The plaintiff must prove causation between the defendant’s breach and the
loss suffered.
- Bonham-Carter v Hyde Park Hotel Ltd: It is not enough to write down the
particulars and throw them at the head of the court, saying “that is what I have
lost; I ask you to give me these damages”.
- A plaintiff must prove actual loss suffered.
Principles of Assessment:
Remoteness of damage:
- The function of the principle of remoteness is to control the extent of recovery by the
plaintiff as the defendant cannot be pinned with liability for every single loss suffered.
- It must be determined whether the defendant’s act is the dominant cause of
the plaintiff’s loss.

- The rule in Hadley v Baxendale: Where two parties have made a contract which one
of them has breached, 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
(first limb)
 - 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 (second limb)

- In this case, the plaintiffs’ mill suffered from a crankshaft breakage and the defendants
were hired as carriers to send it to the makers in Greenwich. The defendants were
informed that the object was the broken shaft of a mill. As a result of the delayed
delivery, the plaintiffs’ mill was inoperable for much longer than it would have been
without the delay. The plaintiffs claimed for loss of profits. Held: The losses were too
remote and thus, failed to satisfy the test.
- Under the first limb, the losses suffered by the plaintiff were not the natural
consequence of the defendants’ breach as, from the multitude of cases, mill-
owners generally have a spare shaft.
- Under the second limb, the loss of profits was not within the contemplation
of both parties because the special circumstance of the mill not being able to
restart in the absence of the shaft was not communicated to the defendants.

- The court in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd reformulated the
rule in Hadley v Baxendale with a specific focus on reasonable foreseeability:
- The loss suffered by the plaintiff must be at the time of the contract
reasonably foreseeable as liable to result from the breach of contract. In
determining what was reasonable by the parties, the court must take into
account the knowledge possessed by the parties.
- Knowledge possessed is of two kinds:
- Imputed knowledge: A reasonable person is taken to know the ordinary
course of things and consequently, what loss is liable to result from the
breach (first limb in Hadley v Baxendale)
- Actual knowledge: Where parties actually have knowledge of special
circumstances outside the ordinary course of things (second limb in
Hadley v Baxendale)

- In this case, the plaintiffs bought a new boiler for their laundry and dry cleaning
business from the defendant, but received it 5 months after the contracted
date of delivery. The defendant knew that the plaintiff required the boiler for
their business. The plaintiff claimed for loss of profits during the period of 5
months, and the loss of profit from a highly lucrative dyeing contract with the
Ministry of Supply. Held: The plaintiff was entitled to the loss of profits arising
from the defendant’s delay in delivering the boiler, but was not entitled to the
exceptional loss of profit it could have earned from the dyeing contract with
the Ministry of Supply as it was not reasonably foreseeable that the plaintiff
would suffer such loss.
Sec. 74 of the Contracts Act 1950:
- Sec. 74(1) is a statutory incorporation of the rule in Hadley v Baxendale.
- First limb, ‘naturally arose in the usual course of things’: Similarly worded as
in Hadley v Baxendale for the recovery of loss or damage which naturally arise
in the usual course of things from the breach
- Illustrations (a), (b), (c), (f), (g), (h) to Sec. 74
- Bee Chuan Rubber Factory Sdn Bhd v Loo Sam Moi: The appellants
entered into a contract to sell a piece of land and to build a house
thereon for the respondent. In breach of contract, the appellants
delayed in the completion of the contract. The court awarded damages
to the respondent at $100 for every month from the time delivery was
due on 21st September 1970 until 3rd April 1975 when delivery was
finally given.
- Damages are recoverable for a breach of contract for delay in
the completion of an ordinary dwelling house required for
personal occupation. Such damages which include the
reasonable cost of living elsewhere and storing furniture came
within the first limb of the rule in Hadley v Baxendale.

- Second limb, ‘which the parties knew’: Stricter than the rule in Hadley v
Baxendale as it requires parties to have knowledge of the loss or damage likely
to result from a breach of contract.
- It does not allow damages to be awarded where losses are merely in
the contemplation of both parties as in Hadley v Baxendale.
- Illustrations (i), (j), (l) to Sec. 74
- Tham Cheow Toh v Associated Metal Smelters Ltd: The failure of the
appellant in supplying the furnace at the requisite temperature
constituted a breach of contract for which the court awarded damages
to the respondent for loss of profits. The appellant had already known
they were required to deliver a furnace which could produce a
temperature of 2600°F within 45 days. Thus, it must be assumed that
they appreciated the urgency of the matter and that any delay would
affect the respondent’s business profits.

- Sec. 74(2) reinforces the principle of remoteness in disallowing compensation to be

given for any remote or indirect loss.
- The plaintiff must actually show and prove that the defendant’s breach caused
his loss.
- Illustrations (n) and (p) to Sec. 74
Other illustrations of remoteness of damage:
- Tan Sri Khoo Teck Puat v Plenitude Holdings Sdn Bhd: The appellant had agreed to sell
to the respondent certain land for the purpose of development. The respondent failed
to pay the balance purchase price within the stipulated period and the appellant
terminated the agreement. The respondent initiated action for damages, which
included a loss of profits, for delay in delivering title as a result of wrongful termination
by the appellant. However, in assessing the damages, the Federal Court held that any
price increase in the land should be deducted from the loss of profits, or else it would
put the respondent in a better position than it would have been if the contract had
been performed. Where the value of the land had increased by nearly RM70 million,
the court found that the respondent had in fact suffered no loss by reason of the
breach of the agreement and had not proved its claim for loss of profits. The court
awarded the respondent nominal damages of RM10.

- BBMB v Mae Perkayuan Sdn Bhd: The respondent proposed to develop a few pieces
of land in Dungun, and agricultural lands in Alor Gajah into housing estates. The
appellant agreed to grant an overdraft facility of RM4.5 million to the respondent for
both projects. The appellant knew that the repayment for facility for the Alor Gajah
project would be recovered from the Dungun project’s profit revenue. Before the term
of the overdraft facility ended, the appellant withdrew the overdraft facility and
demanded payment of the money due together with interest. Where the appellant
had breached the bridging loan agreement, the respondent claimed for damages for
both projects. The Supreme Court held:
- The claim for loss of profit in regards to the Dungun project was allowed as the
appellant had known that if the overdraft facility was frozen, the project would
be affected. The court stated that the loss of profits was the natural and
probable result of the breach of agreement (first limb of Sec. 74(1)), and the
appellant knew of the loss the respondent would suffer if they committed
the breach (second limb of Sec. 74(1))
- However, the court did not allow the claim for loss of profit for the Alor Gajah
project which was dependent upon the application of profits expected from
the Dungun project, and was thus, too remote.
Mitigation of loss:
- Explanation to Sec. 74: In estimating the loss or damage 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.
- British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric
Railways Co of London Ltd: The plaintiff has a duty to take all reasonable steps to
mitigate the loss consequent on the breach, and is barred from claiming any part of
the damage which is due to his neglect to take such steps.
- Kabatasan Timber Extraction Co v Chong Fah Shing: The appellants contracted to
supply timber to the respondent, which was to be delivered at the site where the
respondent had erected a saw-mill. Three lots of timber were delivered. The second
lot, instead of being delivered to the mill, was dumped more than 500 feet away from
the mill. The respondent purchased new timber elsewhere in substitution of the
second lot and claimed for the cost of doing so. Held: The respondent had a duty to
take reasonable steps to mitigate its loss. Instead of expending money to purchase
new timber, all that was required of the respondent was to arrange to move the logs
to the saw-mill.

- Three main principles of mitigation:

- A plaintiff will not be able to recover damages for losses which he should have
avoided (avoidable losses)
- Tansa Enterprise Sdn Bhd v Temenang Engineering Sdn Bhd: Where the
defendant breached the contract to supply common bricks, which was
available in the open market at the material time, the plaintiff should
have mitigated his loss by entering into a substitute contract for the
bricks.
- However, the plaintiff must ensure that in mitigating losses, he did not
put his commercial reputation or good public relations at risk, and that
it did not cause them unreasonable expenses or involve them in
complicated litigation.

- If a plaintiff avoids a loss, damages are not recoverable for that loss (avoided
losses)
- British Westinghouse: The appellants sold faulty and inefficient
turbines to the respondents, which the respondents still accepted and
used. After several years, the respondents replaced the turbines, which
proved to be much more efficient than the ones which should have
been supplied by the appellants. The court held that where the
respondents were not obligated to replace the turbines, the efficiency
of the replaced turbines reduced the respondents’ working expenses
such that all loss was extinguished.

- Money spent in mitigating or attempting to mitigate losses is recoverable

- Hoffberger v Ascot International Bloodstock Bureau Ltd: Where the
defendants breached the contract to buy a horse, the plaintiff kept the
horse for an entire year in hopes of selling it at a higher price. However,
after a year, the horse was sold at a much lower price, and thus the
court awarded damages to the plaintiff in having kept the horse for a
year.
Other illustrations of mitigation of loss:
- Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd: The plaintiffs was to
supply to the defendants two million rubber gloves per month from November 1988
to October 1989. The defendant breached the agreement in failing to issue an
irrevocable letter of credit in favour of the plaintiffs. The plaintiffs claimed damages
of approximately RM6.2 million being loss of profits, interest, marketing costs and
losses incurred. The Supreme Court held: In cases involving sale of goods, the innocent
party should act immediately upon the breach, and buy or sell in the market, if there
is an available market. In the absence of an available market, the innocent party is to
act reasonably to mitigate his loss.
- In this case, the plaintiffs continued to manufacture the 24 million gloves
even after the breach had occurred when it should have stopped
manufacturing the gloves the moment it became aware of the breach of
contract, especially as the plaintiffs were aware at the time of the breach that
there was an oversupply of rubber gloves in the market.
- Upon the breach, there was ample time to reconsider the production of gloves,
and the plaintiffs’ management must have realized that the cost of continued
production of the gloves would be much higher than the receipts it would have
gotten from the sale of the gloves when they were ultimately sold (resulting in
further loss).
Date of assessment:
- To help determine the value which the court must assign to properties, monies, or
services in assessing damages.
- Damages are to be assessed at the time of the breach, namely the time when
performance is due.
- Eikobina Sdn Bhd v Mensa Mercantile Pte Ltd: The Supreme Court found that
the High Court erred in assessing damages on the date of trial.
- Exception: Where a plaintiff rightly pursues specific performance and such remedy
cannot be awarded, the court will instead award damages assessed at some date
other than the date of the breach.
- Johnson v Agnew: The general rule that damages are to be assessed at the date
of the breach is not an absolute rule. If following it would give rise to injustice
to a party, the court has the power to fix a different date of assessment that is
appropriate in the circumstances of the case.
Taxation on damages:
- The assessment of damages has to take into account the plaintiff’s liability to pay tax.
- British Transport Commission v Gourley: If the award of damages is for income or loss
of profits, an amount equivalent to the sum of money that the plaintiff would have to
pay by way of income tax for the said sum will have to be deducted, provided that:
- The income or profits on which the claim is based is subject to taxation
- The sum awarded as damages will not be liable to taxation
Types of Losses
Pecuniary loss: All financial and material loss sustained due to a breach.
Reliance interest (wasted expenditure): To put the plaintiff back in the position he would
have been in had he not entered into the contract.
- A plaintiff may claim on the reliance measure:
- When he has not suffered any loss of profits but has incurred expenditure in
reliance of the contract
- When he has suffered a loss of profit, but has difficulty in ascertaining and
proving the amount of profit that he would have obtained if the contract had
been performed

- McRae v Commonwealth Disposals Commission: In an attempt to recover a

shipwrecked oil tanker, where the tanker was not found, the court only granted the
plaintiff damages for the expenses incurred in organising the expedition, and not for
any loss of profit. There was no certainty over the size or value of the tanker and even
if there was such a tanker, it remained uncertain whether or not the tanker’s oil cargo
remained intact.

- A plaintiff may recover expenditure incurred before or after the contract, provided
that the expenditure was reasonably contemplated by both parties.
- Anglia Television Ltd v Reed: The plaintiffs entered into a contract with the
defendant for him to act in a film. When the defendant refused to act, the film
had to be abandoned as no substitute actor could be found as replacement.
The plaintiffs sued for breach of contract and claimed for the expenses
incurred in preparing to shoot the film. Held: The defendant was liable and had
to compensate the plaintiff for its reliance loss.

- When a plaintiff has made a bad bargain, he cannot then seek to claim wasted
expenditure to escape from the consequences of the bad bargain.
- ‘Bad bargain’: When the defendant can prove that the loss is such which the
plaintiff would have suffered even if the defendant had not breached the
contract.
- C & P Haulage v Middleton: The plaintiff obtained a six-month renewable
licence to occupy the defendant’s garage. It was expressly provided in the
contract that any equipment installed in the garage becomes the property of
the garage owner at the expiration of the six-month period. Despite this, the
plaintiff spent money on improving the garage. Ten weeks before the end of
the six-month period, the defendant, in breach of contract, ejected the
plaintiff. The plaintiff brought an action to recover as damages the cost of the
improvements that he had carried out on the garage. The plaintiff’s action
failed as it had not suffered any losses through the breach since the plaintiff
would be in a similar position had the contract been lawfully terminated.
Expectation loss (loss of profit): To put the plaintiff in the position he would have been in had
the contract been performed.
- When parties enter into a contract, the binding promise creates an expectation of
performance. Thus, the breach of such contract entitles the aggrieved party to a
remedy that would fulfil, if not, protect that expectation.
- Income which the aggrieved party expected to obtain out of the contract but
was loss due to the breach.

- Two measures can be adopted in determining the plaintiff’s expectation interest:

- Diminution in value: The difference between what the plaintiff has received
and what he expected to receive
- Cost of cure (reinstatement costs): The cost of putting the plaintiff in the
position he would have been in had the contract been fully performed

- In order to successfully claim for expectation loss, actual loss must be established
through factual evidence and such losses must not be too remote.
- Estate & Forestry Consulting Management v Koperasi Permodalan Melayu Negeri
Johor Bhd.: The plaintiff undertook to develop and plant oil palms on the defendant’s
land. The project was to be completed within 36 months and the defendant agreed to
pay the plaintiff RM40 million upon its completion. Under the agreement the
defendant agreed to provide a security deposit of up to RM25 million to the bank as
security for a loan taken by the plaintiff. Upon contending that the defendant
breached the agreement, the plaintiff claimed the balance of the total development
costs, loss of income and damages for termination of the agreement, whereas the
defendant contended that the plaintiff failed to complete the project to develop and
maintain the oil palm plantation on the defendant’s land in accordance with the
agreement. The defendant claimed that there was delay in the progress of the
development of the plantations and that there was poor performance in developing
the plantations. The High Court found in favour of the defendant and allowed its claim
for loss of potential income and loss of security deposit:
- The loss of potential income is a consequential loss flowing from the plaintiff's
breach. It was anticipated that after the completion and handing-over of the
project development to the defendant, the defendant would take over the
running and management of the oil palm plantations and derive income from
the harvesting of the oil palm fruits. Therefore, it must have been within the
contemplation of the parties when they entered into the agreement that the
defendant would be likely to suffer a loss of income from the harvesting and
sale of the oil palm fruit from the plaintiff’s breach of the agreement.
- The loss of the security deposit of RM13 million is liable to be reimbursed by
the plaintiff under the express provisions of the agreement. Where RM13
million had been utilised by the bank to set off the plaintiff’s debt, the
plaintiff’s liability to reimburse the defendant is contractual and binding on the
plaintiff, thus making the claim recoverable.
- Woon Nyoke Lin v UEP Bhd: In order to succeed in claims for damages for loss of profit,
one must establish the actual loss one would have suffered as a result of the breach,
as a mere speculation, conjecture or projection is insufficient.
- The plaintiff submitted a booking form to rent a kiosk in Subang Parade owned
by the defendants to sell doughnuts, with a deposit of RM500 forwarded to
the defendants. Subsequently, the management requested the plaintiff
change the location of the kiosk. The reason offered was that the location was
not suitable as it was located in the middle of the pedestrian walkway and
would impede the flow of human traffic especially in an emergency, to which
the plaintiff refused. The plaintiff then filed a suit claiming for loss of profits,
as well as the costs and expenses incurred.
- In her claim for loss of profits, the plaintiff supported her claim with a survey
done by a company of professionals in market research. They conducted a
survey near the kiosk and by their “observation method” they arrived at a
finding that there were 411 customers per day, whereby each customer would
purchase 5 doughnuts. However, such results were purely on their own
estimation.
- The court found that a mere observation conducted too close to Christmas
and at a time when the mall was still new and traffic flow was naturally high
does not give a true reflection of profits over a period of 12 months,
particularly where the goods concerned were only doughnuts. Although the
court still awarded the plaintiff loss of profits, the amount was reduced by 50%
from her initial claim.

- Blue Sea Pools Swimming Centre Sdn Bhd v Loo Ah Chew & Sons Sdn Bhd: In this case,
the court found that the plaintiff’s claim in respect of losses of profit for membership
at the swimming centre were not sustainable as they were mere speculations,
conjectures or projections, not supported by evidence adduced from market experts
in a similar service and hospitality industry, establishing such losses on a balance of
probabilities.

- Ban Chuan Trading Co Sdn Bhd v Ng Bak Guan: The parties entered into a three-year
tenancy agreement in which the appellant failed to deliver vacant possession as the
previous tenant refused to vacate the premise. Despite having been informed, the
respondent attempted to pay the monthly rents, which the appellants refused to
accept, and did not take any action to repudiate the agreement. A year later, the
respondent issued a notice to terminate the agreement and claimed from the
appellant loss of profits and money expended for the purchase of furniture and
mannequins in preparation of continuing his business at the new premise. However,
the Court of Appeal found that the respondent was only entitled to the money
expended and not the loss of profits:
- In claiming for loss of profits, the respondent stated that he intended to use
the said premise for his business of selling clothes where he expected his
business profits to increase by 20% because of the location of the said
 premise which was more favourable than the shop that he was occupying.
To support his claim, the respondent tendered the assessments by the Inland
Revenue Department in respect of his income for the years of assessment
1991-1993. However, the assessments should not have been admitted as they
were in respect of the respondent’s personal income and not his income from
his business of selling clothes. Thus, there was no evidence to support the
claim that the respondent's business would increase by 20% if he moved to the
said premise.
- Mere assertion is not evidence, what more when the figure arrived at
was 20%.
- The production of the assessments alone should not be allowed. Other
evidence must be adduced to show that income stated in those
assessments were income from his business of selling clothes.
- There was also no evidence to show that the respondent would carry on the
business of selling clothes there except his declaration of his intention to do
so. The intended use of the premise was not stated in the agreement. Thus,
the appellants should not be penalized for a matter which they had no
knowledge of (too remote)
- The respondent knew soon after signing the agreement that the said premise
were not available due to the fact that the existing tenant refused to move out
and hand over vacant possession. Instead of terminating the agreement
immediately, he waited for a year and then claimed for loss of profits for three
years. The respondent knew that his business of selling clothes was not
affected because he continued to carry on the business in the other outlet. The
respondent could have minimized his losses if he had taken steps to terminate
the agreement as soon as it was made known to him that the premise was not
available. Instead, he waited in order to justify his claims of loss of profits for
three years (failure to mitigate losses)
Election between reliance interest and expectation loss:
- Anglia Television Ltd v Reed: The plaintiff has an election, he can either claim for loss
of profits or for his wasted expenditure.
- It is necessary for a plaintiff to undertake an election between the two heads of
damages. But in the absence of such election, it is up to the court to ascertain or assess
as to which head of damages is more appropriate.
- Blue Sea Pools Swimming Centre Sdn Bhd: The court allowed the plaintiff’s claim for
wasted expenditure incurred in renovation works, but excluded the claim for losses of
profit as “the plaintiff is not entitled to make a claim for both”.
- Ban Chuan Trading Co Sdn Bhd: Where the respondent failed to tender sufficient
evidence to prove his loss of profits, the court held that no election was necessary as
the respondent was only entitled to claim for his wasted expenditure.
- However, in Heller Factoring Sdn Bhd v Metalco Industries Sdn Bhd: The appellants
agreed to sell a machine built according to certain specifications to the respondents
for RM65,000 subject to the lessee’s right (Pembinaan Siap Sdn Bhd) to redeem it
within 14 days. The respondents then obtained the machine and installed it at its
premises for which a concrete foundation had been built. However, the next month,
the appellants came to the respondents’ premises and removed the machine as they
had sold the machine to a third party for RM85,000. The respondents contended that
the appellants had breached the contract as the machine was theirs subject to the
lessee’s right to redeem it, which the lessee did not exercise. The appellants
contended that the purchase by the respondents was subject to no higher prices being
offered. As the respondents refused to increase their price, the machine was sold to
the third party. The respondents brought a claim for RM20,000 being the loss of profit
and an additional sum of RM30,000 as expenses incurred in installing the machine.
- The Court of Appeal in finding in favour of the respondents: The machine was not a
standard item machine that was easily obtainable from the market, but was one that
was built according to particular specifications.
- The true measure of damages is that sum of money which would restore the
respondents to its status before the seizure (the difference in the price at
which they bought the machine and the price at which it was sold to the third
party; loss of profit), together with the expenditure that they had incurred to
put it in proper working order (wasted expenditure).
- Thus, in this case, damages for both, the wasted expenditure and expectation
loss, were awarded.
Non-pecuniary loss:
- Farley v Skinner: Awards of this type should be restrained and modest.
- Non-pecuniary losses may be recoverable if they are within the contemplation of the
parties as likely to have resulted from the breach.
Pain, suffering, loss of amenities and expectation of life:
- Summers v Salford Corp: The tenant was cleaning the window when it broke, causing
injuries to her hand. She sued the landlord for breach of the covenant of fitness for
habitation and was successful in her claim.

- Ruxley Electronics and Construction Ltd v Forsyth: The defendant contracted with the
plaintiffs to build a swimming pool in his garden and a building to enclose it for a price
of £70,178. The contract expressly provided that the maximum depth of the pool
should be 7 ft 6 in. After the work had been completed, the defendant discovered that
the maximum depth was only 6 ft 9 in. The plaintiffs claimed the balance of the price,
and the defendant counterclaimed for breach of contract.
- In regards to the defendant’s claim for loss of amenity, the court held: The
general rule is that in claims for breach of contract, the aggrieved party cannot
recover damages for his injured feelings, subject to the exception when the
object of the contract is to afford pleasure. Where the contract was one “for
the provision of a pleasurable amenity”, the court found that the defendant’s
pleasure was not so great as it would have been if the swimming pool had been
7 ft 6 in deep, and thus, the defendant was awarded damages for loss of
amenity.
Physical inconvenience and discomfort:
- Hobbs and Wife v The London and South Western Railway Company: The court
awarded damages for the physical inconvenience suffered by the plaintiff and his
family who were set down by the defendant railway company at the wrong station
late at night. They had to walk five miles home in the drizzling rain, in the absence of
available transport or accommodation.
- The court emphasised that the award is strictly confined to real, physical
inconvenience, and there can be no award of damages for mere
inconvenience, annoyance or loss of temper.

- Farley v Skinner: The plaintiff employed the defendant, a land surveyor, to inspect a
property in the countryside located 15 miles from an international airport seeking
advice as to whether the property would be seriously affected by aircraft noise. The
defendant breached the contract when he reported that it was unlikely that the house
would be greatly affected. The plaintiff bought the property and incurred expenses in
refurbishing it, but after moving in, he was disturbed by the aircraft noise. Held: Had
the plaintiff known of the noise disruptions, he probably would not have bought the
property. Where the surveyor’s obligation to inspect whether the property was
 affected by the noise formed a vital part of the contract, this deprived the plaintiff
from making an educated choice in the purchase of the property for which he was
granted damages.

- Subramaniam Paramisavam & Ors v Malaysian Airlines System: The plaintiffs’ baggage
was re-weighted when they reached KLIA. It was found to be 60kg in excess of the
permitted weight. They were asked to pay excess baggage charge at the airport. They
spent two hours in the airport due to this problem. They sued the defendant for
damages for mental distress, agony, humiliation, loss of reputation and injured
feelings. The court found that the damages sought, which were not within the
contemplation of the parties, were irrecoverable. However, the court awarded
damages of RM300 for discomfort and inconvenience.
Injury to feelings/mental distress

- Addis v Gramophone Co Ltd: Despite the wrongful dismissal from the plaintiff’s
position as the defendant’s manager and the “harsh and humiliating” manner in which
he was treated, there could be no award of damages for his injured feelings or for the
loss that he may sustain from the dismissal making it more difficult for him to obtain
employment.

- Courts are now more willing and ready to allow such awards, but only in cases where:
- The contract is one to provide enjoyment
- Jarvis v Swans Tours Ltd: The plaintiff was compensated by damages for his
disappointment, distress, annoyance and frustration at not getting as good of
a holiday as had been promised. The plaintiff in his contract with the
defendants did not merely contract for the travel facilities, board and lodging,
but also to enjoy himself.
- Abdul Karim v T & R United Pte Ltd: Where the defendants did not meet up to
their contractual obligations in respect of a tour package offered to the
plaintiff, the plaintiff was granted damages for mental distress,
disappointment and discomfort.
- James Yu v Raffles Hotel Ltd: The court awarded the plaintiff damages for
mental distress and disappointment for the defendants’ failure to prepare
sufficient food for the plaintiff’s wedding reception, which caused the plaintiff
to suffer embarrassment before his guests at the reception.

- The contract is entered into with the aim to prevent further distress
- Heywood v Wellers: Where the contract was entered into to retain the
defendant-solicitor to initiate legal proceedings against a man who had been
molesting the plaintiff and to prevent any further distress, the breach by the
defendant prolonged the plaintiff’s distress, and she was thus, awarded
damages for anxiety and mental distress.
 - The plaintiff’s distress is a direct consequence of physical loss caused by the breach
of contract
- Hayes & Anor v James & Charles Dodd: The plaintiffs bought a yard and a
workshop on the faith of their defendant-solicitor’s advice. The advice was
found to be subsequently untrue and the yard and workshop served no
purpose to the couple. The plaintiffs brought an action against the defendant
for breach of its contractual duty of care. However, the court disallowed
damages for the plaintiffs’ anguish and vexation and stressed that damages
cannot be allowed for anguish and vexation arising out of a breach of a purely
commercial contract.
Loss of reputation
- The court will consider the manner in which society regards the plaintiff, and not the
plaintiff’s injured feelings.
- Four non-exhaustive groups in which damages for loss of reputation have been
awarded:
- The defendant’s breach comprises a refusal to allow an actor’s appearance or
to publish an author’s book
- Mismanagement of advertising which results in loss of business
- Refusal of a bank to honour a cheque, or failure by the bank to supervise the
plaintiff’s business
- The defendant supplies to the plaintiff goods which are not of the quality
sought by the plaintiff’s customers

- Malik v Bank of Credit and Commerce International SA: Long serving employees of the
defendant bank were dismissed upon its liquidation due to its corrupt and dishonest
manner of operation. The plaintiffs claimed damages, alleging that their inability to
obtain alternative employment was due to the shame attached to being former
employees of the defendant bank. Held: The plaintiffs’ contracts of employment
contained an implied term imposing an obligation of mutual trust and confidence
between the parties. Thus, the defendants were under an obligation to act honestly
in its business dealings. Where the plaintiffs had suffered injury to reputation as a
result of the defendants’ breach of the implied term, damages for loss of reputation
was recoverable.

- CCA Holdings Ltd v Palm Resort Bhd: The plaintiffs were managers of the defendants’
club under a technical assistance and managerial agreement. The defendants
terminated the agreement on the ground that the club had not generated profits as
required in the agreement. The plaintiffs alleged that as a consequence of the
termination, they suffered loss of reputation and goodwill which will impact them as
managers of prestigious clubs internationally. However, in considering whether the
damages for loss of credibility and reputation could be awarded, the court held that
the facts of the case did not fall within the exceptional situations where damages for
loss of reputation may be granted.
Types of Damages
General damages and specific damages:
- General damages: Need not be pleaded as the law presumes that such damages
resulted from the infringement of a legal right or duty
- Special damages: Requires the precise amount of pecuniary loss to be specifically
pleaded and for evidence relevant to it to be adduced
Nominal damages:
- A small sum granted when the plaintiff:
- Suffered no actual loss or fails to sufficiently prove such loss
- Sustained actual loss arising not from the defendant’s conduct, but from the
conduct of the plaintiff himself
- The Owners of the Steamship “Mediana” v The Owners, Master, and Crew of the
Lightship “Comet”: Nominal damages affirm that there has been an infraction of a
legal right, and although it does not give the plaintiff rights to any real damages, it
gives the plaintiff the right to a verdict or judgment where his right has been infringed.
- Tan Sri Khoo Teck Puat v Plenitude Holdings Sdn Bhd: Where the court found that the
respondent had in fact suffered no loss by reason of the breach of the agreement and
had not proved its claim for loss of profits, the court awarded the respondent nominal
damages of RM10.
Exemplary/Punitive damages:
- An award of damages to punish a defendant in exceptional situations.
- Rookes v Barnard: The House of Lords established three categories when exemplary
damages may be awarded:
- There has been oppressive, arbitrary or unconstitutional conduct by
government servants
- The defendant’s conduct had been calculated by him to make a profit for
himself which may exceed the compensation payable to the plaintiff
- A statute has expressly authorised it
- Dato’ Abdullah Hishan v Sharma Kumari Shukla: The plaintiff loaned the defendant
money for her to purchase certain shares and the defendant offered to convert to
Islam to marry him. The defendant breached the agreement and the plaintiff sought
exemplary damages, arguing that the defendant had misled the plaintiff into believing
that she would convert to Islam to marry him. Held: This case fell within the second
category set out in Rookes v Barnard as it amounted to behaviour calculated to bring
about a profit. The defendant’s promise to marry had encouraged the plaintiff to give
the loan. The defendant’s profit extended to her desire and aspiration to be called
‘Datin’, as well as her travel expenses and expensive gifts. Thus, the plaintiff was
awarded RM500,000 in exemplary damages.
Aggravated damages:
- Huljich v Hall: Aggravated damages are extra compensation to the plaintiff for injury
to his feelings and dignity caused by the manner in which the defendant acted.
- Dato’ Abdullah Hishan v Sharma Kumari Shukla: Aside from the exemplary damages,
the court also awarded the plaintiff aggravated damages of RM500,000.
Liquidated damages:
- A fixed, contractually agreed sum of money payable by the defaulting party upon a
breach of contract.
- Sec. 75: The amount stated in the contract is to be paid upon breach, whether or not
actual damage or loss is proved to have been caused thereby.
- Common Law terms liquidated damages as a “penalty” as it is actually meant to
terrorise the other party into performing his obligation under the contract.
- Esanda Finance Corp Ltd v Plessnig & Anor: An agreed sum is a penalty if it is
extravagant, exorbitant or unconscionable in relation to the loss likely to be
suffered.
- The sum specified is in a nature of a threat making it too expensive for the
other party to breach the contract.

- Selva Kumar v Thiagarajah: The appellant, in purchasing the respondent’s medical

practice, had paid a total sum of RM96,000 inclusive of a RM12,000 deposit, and
decided to not go through with the agreement, thus refusing to pay the balance
instalments. The respondent sought to forfeit the RM96,000 paid and relied on a
clause in the agreement that if the appellant defaulted, all sums paid to the date of
breach would be forfeited as liquidated damages.
- In considering the phrase “whether or not actual damage or loss is proved to
have been caused thereby” in Sec. 75, the Federal Court established: Although
the phrase is unlimited, a plaintiff claiming for actual loss must still prove the
actual damage for reasonable compensation in accordance with settled
principles in Hadley v Baxendale.
- The phrase only applies in situations where the court finds it difficult to assess
damages for the actual damage where there is no known measure of damages
employable; it will then proceed to award a reasonable sum not exceeding the
amount stipulated in the contract.
- Where damages for actual loss is not too remote and could be assessed by
settled rules, the plaintiff must prove the actual loss suffered. Failure to do so
will result in a refusal by the court to award damages despite the phrase in
Sec. 75.
- Thus, in this case, where the respondent failed to prove actual loss suffered,
he was only entitled to forfeit the deposit of RM12,000. The remaining sum of
RM84,000 was ordered to be refunded to the appellant.
Deposit
- An initial payment made under a contract to show that a person is serious in carrying
out the contract.
- Function of a deposit as explained in Howe v Smith:
- A guarantee for performance
- A deposit made shows that a purchaser is serious, and provides
assurance to the vendor that the purchaser will perform his part of the
contract.
- If the purchaser breaches the contract, the vendor is entitled to forfeit
the deposit.
- If the purchaser performs his part of the contract, the deposit goes towards
part payment of the purchase price.

- Guna Sittampalan v Aik Hua Properties Sdn Bhd: Where money is deposited with
either contracting party on the formation of a contract, it will, prima facie, be
interpreted as a security for performance, and hence, forfeited if the depositor in
breach of the contract fails to perform his side of the bargain.

- Sun Properties Sdn Bhd v Happy Shopping Plaza Sdn Bhd: There was a sale and
purchase agreement for shares of RM10 million and RM1 million was paid as a deposit.
Held: 10% of the purchase price was a normal sum for a deposit. Thus, the sum of RM1
million was a true deposit which, upon the purchaser’s failure to pay the first
instalment on the due date, entitled the vendor to forfeit it.

- An unpaid deposit is also recoverable:

- Morello Sdn Bhd v Jacques (International) Sdn Bhd: When a deposit is forfeited,
it represents damages for a vendor for the loss of his bargain. Thus, a vendor
is entitled to sue for recovery of an unpaid deposit upon termination of the
contract for a breach committed. The fact that there is no provision in the
contract on forfeiture of the deposit does not prohibit the vendor from
obtaining an unpaid deposit.

- A purchaser cannot rely on Secs. 65 & 75 to claim back a deposit.

- Sec. 65 is inapplicable: A deposit is not a benefit received under a contract.
- Sec. 75 is inapplicable: A deposit does not come within the meaning of
liquidated damages.

- Relief against the forfeiture of money as provided in Stockloser v Johnson:

- The courts have an equitable jurisdiction to grant such relief if:
- The sum of money forfeited is disproportionate to the loss suffered
- It is unjust for the vendor to retain the said money
 - K Umar Kandha Rajah v EL Magness: In a sale and purchase agreement for
land, the vendor failed to surrender title to the land and later terminated the
contract and forfeited the deposit of RM5000. The Federal Court granted the
purchaser relief against forfeiture as it would be unjust for the vendor to forfeit
the deposit in light of the vendor’s failure to surrender title to the land within
the agreed time.

- Part payment: An instalment towards the contract price, which unlike deposits, cannot
be forfeited upon a breach of contract.
- The innocent party must return such payment made to the party in breach, but
is entitled to sue for any losses suffered from the breach.

- It is vital to distinguish between part payments and deposits:

- If the parties intended for the payment to be deposit forfeitable upon breach
then it is a deposit.
- If the parties regarded the payment as an instalment towards the final price,
then it is a part payment.
- A reasonable and true deposit would be a sum within the range of 10% of the
purchase price.
- If the parties contracted to pay a deposit later, this would not cause the
payment to lose its character as a deposit.

- Mayson v Clouet: A contract for the sale of land was entered into between a vendor
and purchaser, which provided that a deposit should be paid immediately. Two
instalments of cash were to be paid at certain dates. The contract provided that, in
the event of a breach, the deposit is to be forfeited. The purchaser paid the deposit
and the two instalments, but defaulted in paying the balance of the price. The vendor
rescinded the contract and the purchaser sued to recover the instalments. Held:
Despite the purchaser’s default in complying with his contractual obligations, he was
entitled to recover the instalments paid to the vendor. The contract had clearly
distinguished between the deposit and the instalments, and only provided for the
forfeiture of the deposit.
Specific Performance (Specific Relief Act)
An equitable relief awarded upon the discretion of the court requiring a party to a contract
to fulfil his or her obligations and perform the terms of the contract as agreed.
- A party to a contract cannot obtain an order for specific performance if he himself
breaches his obligation and is not ready and able to perform the contract.
Sec. 11: Situations when a contract may be specifically enforced
- (1)(b): When there is no standard for ascertaining the damage
- Applies to the sale of unique and rare items
- Gan Realty Sdn Bhd v Nicholas: The court granted the plaintiff specific
performance of a sale and purchase agreement of shares as they were not
available in the open market.

- (1)(c): When monetary compensation is an inadequate relief

- Lim Sin Oo v Cheah Tjeng Sion: The court granted the plaintiff specific
performance as pursuant to an agreement to sell his landed property to the
defendant, the plaintiff had terminated three existing tenancies in the building
and paid compensation to the tenants, and also terminated his business
carried out on the premises.

- (2): When there has been a breach to transfer immovable property

- Loo Choo Teng v Cheok Swee Lee: A rebuttable presumption arises in a breach
of a contract to transfer immovable property that money is an inadequate
relief and specific performance should be granted.
- Zaibun Sa Syed Ahmad v Loh Koon Moy: The respondent applied for specific
performance to direct the appellant to transfer the land to him as agreed
under the contract. There was also an oral agreement that the vendor should
pay RM5000 to the purchaser if he breaches the agreement. Held: Liquidation
of damages is not a bar to specific performance. The oral agreement did not
prevent the granting of specific performance.
Sec. 18: Compensation in addition to, or in substitution of, specific performance
- Lee Hoy v Chen Chi: Where the sale and purchase agreement was for 9 acres of land,
but the IDT only stated 5.28 acres, the purchaser applied to rescind the contract based
on misrepresentation. The High Court dismissed the application on the ground that
there was no misrepresentation, but awarded compensation under Sec. 18(3). The
Federal Court, in disagreeing with the High Court, held: Compensation under
Sec. 18(3) can only be awarded where there is a claim for specific performance.
- Quah Ban Poh v Dragon Garden Pte Ltd: The High Court granted the plaintiff’s
application for specific performance of a sale and purchase agreement of a house by
ordering the defendant to surrender the IDT and transfer the house to the plaintiff,
and it also awarded damages for incomplete work and defects under Sec. 18(3).
Sec. 20: Situations where contracts cannot be specifically enforced
- (1)(a): Where monetary compensation is an adequate relief
- In cases of sale of goods, where substitutes are readily available in the open
market, making damages a practical relief.

- (1)(b): Contracts which are detailed or require close supervision as the court cannot
enforce specific performance of its material terms, or contracts which are dependent
on the personal preference of parties.
- Three categories of contracts:
- Contracts for service
- Specific performance is not granted for contracts dependent on
personal volition: contract to marry, contracts of personal relationship
or services.
- Dayang Nurfaizah v Bintang Seni Sdn Bhd: A management agreement
between the plaintiff, a professional recording artist with the
defendant, her personal manager, was a contract to render personal
services which cannot be specifically performed.

- Contracts which are detailed or require close supervision

- Specific performance would not be granted for such contracts, as the
court cannot enforce specific performance of its material terms.
- Lee Sau Kong v Leow Cheng Chiang: An agreement to purchase scrap
iron could not be specifically enforced as there was confusion as to the
whereabouts of the subject matter.

- Construction contracts
- Specific performance is generally not granted for construction
contracts as they contain numerous details and require continuous
supervision.
- However, in Oon Hock Lai v Lee Kok Leong: The defendant agreed to
sell a piece of land and to construct a building thereon for the plaintiff,
which was to be completed in seven months. The plaintiff claimed for
specific performance against the defendant when the defendant
abandoned the construction after completing part of the building. The
High Court allowed specific performance of the agreement as the
plaintiff had sufficiently defined the construction works required by
exhibiting comprehensive building plans for the construction of the
building.

Sec. 21: The jurisdiction to grant specific performance is discretionary, and the court is not
bound to grant such relief merely because it is lawful to do so. But the discretion is not
arbitrary, but sound and reasonable, guided by judicial principles, and capable of correction
by a court of appeal.
Injunctions (Specific Relief Act)
- A coercive remedy in the form of a court order compelling or prohibiting a party to do
a certain act.
Sec. 50: Preventive relief is granted at the discretion of the court by way of injunction.
Temporary injunctions (Sec. 51(1)):
- Injunctions which are to continue until a specified time, or until further order of the
court
- Similarly known under English Law as interlocutory or interim injunctions
- It is to help preserve the status quo of parties pending the trial of the suit

- Principles in granting a temporary injunction as in American Cyanamid Co v Ethicon

Ltd : Whether there is a serious question to be tried, that is, that the claim is not
frivolous and vexatious. If there is a serious question to be tried, the court will
consider whether, based on the balance of convenience, such injunction should be
granted or not.
- Thus, as affirmed in Keet Gerald Francis v Mohd Noor, the court must:
- Assure that there is a serious question to be tried
- Consider where the justice of the case lies, by weighing the harm that the
injunction would produce by its grant against the harm that would result from
its refusal (balance of convenience)
- Not decide on the merits of the case itself
- Lian Keow Bhd v Overseas Credit Finance Bhd: The court is only
concerned with what it has to do in order to protect the rights of the
parties so that no irreparable injury would be caused to either of them.

- Other relevant factors:

- “He who comes to equity must come with clean hands”: A plaintiff is only deserving
of equitable relief if he has not done anything wrong and is prepared to do what is
right and fair.
- Tan Sri Dato’ Tajuddin Ramli v Pengurusan Danaharta Nasional Bhd: The court
refused to grant the plaintiff an injunction where there was already a pre-
existing breach on the part of the plaintiff.

- “Equity aids the vigilant, and not those who sleep on their rights”: An application for
injunctive relief must be made immediately and without delay.
- Alor Janggus Soon Seng Trading Sdn Bhd v Sey Hoe Sdn Bhd: The court will not
grant an interlocutory injunction if the plaintiff, having sufficient notice of the
defendant’s intention to commit the act sought to be restrained, is guilty of
unreasonable delay in applying to the court.
 - Network Pet Products (M) Sdn Bhd v Royal Canin SAS: A contract was entered
into between the plaintiff and the defendant for the supply of pet food
products. The defendant, through a letter, notified the plaintiff of its intention
to not renew the contract, which would take place on the expiration of nine-
months from the date of notice. The plaintiff, clearly aware of this, failed to
initiate and apply for an injunction immediately upon the receipt of notice to
restrain the defendant from distributing its own products. Such failure led the
balance of convenience to be in favour of the defendant, and prevented the
court from granting the plaintiff injunctive relief.
Permanent injunctions (Sec. 51(2))
- Only granted by a decree made at the hearing and upon the merits of the suit.
- The defendant will be permanently imposed of the right or permanently restrained
from committing an act which is contrary to the right of the plaintiff.

Prohibitory injunction
- A remedy in the form of an order of the court that prohibits a party from doing or
continuing to do a particular act.
- It can be granted in the form of a perpetual injunction as under Sec. 52 as the final
settlement of the suit to restrain a party, or a temporary injunction as under Sec. 51(1)
Mandatory injunction (Sec. 53)
- An injunction which orders a party or requires them to do an affirmative act or
mandates a specified course of conduct.
- Sec. 53 empowers the court to award a mandatory injunction in circumstances where
it is necessary to compel the performance of certain acts in order to prevent the
breach of an obligation.

Refusal of injunction under Sec. 54(f): An injunction cannot be granted to prevent the breach
of a contract which cannot be specifically enforced.
- This is applicable in three circumstances:
- Sec. 20(1)(b): Where the particular contract is dependent on the personal
qualification or volition of the parties
- Sec. 20(1)(g): Where the performance of the contract involves a continuous
duty for a period of more than three years
- Where the case concerns an illegal agreement

- Exception under Sec. 55: Where a contract comprises an affirmative agreement to do

a certain act, coupled with a negative agreement not to do a certain act, if the court is
unable to compel specific performance of the affirmative agreement, the court may
grant an injunction to perform the said negative agreement.
- Pertama Cabaret Nite Club Sdn Bhd v Roman Tam (in pari materia with illustration (c)
to Sec. 55): A contract was signed between the parties which provided that the
respondent had to perform in the appellant’s nightclub for a specific number of times
(affirmative agreement). It was inferred from the agreement that the respondent was
prohibited from performing in any other nightclub in Kuala Lumpur during the contract
period (negative agreement). The respondent was in breach of the agreement and the
appellant sought an injunction to restrain him. The application was rejected at the
lower court. However, at the Federal Court, it was held: Where the court is unable to
compel specific performance of the affirmative undertaking, it is not precluded from
granting an injunction under the negative undertaking where the appellant had not
failed to perform the contract so far as it is binding upon him.