[2013] 2SLR SINGAPORE LAW REPORTS 363Out of the Box Pte Ltd v Wanin Industries Pte Ltd[2013] SGCA 15Court of Appeal Civil Appeal No 61 of 2012Sundaresh Menon CJ, Chao Hick Tin JA and Andrew Phang Boon Leong JA17 October 2012; 6 February 2013ContractRemediesRemotenessofdamageBeveragedistributorengagingmanufacturer to produce new sports drink Manufacturer unaware of distributorsplantothrustgenericdrinkintopopulardemandthroughaggressiveadvertisingManufacturersupplyingdefectiveshipmentofdrinksinbreachofcontractWhether wasted advertising expenses claimed by distributor too remoteFactsThe appellant (OOTB) engaged the respondent (WI) to manufacture a newsportsdrinkcalled18forLife(18).ThecontractbetweenOOTBandWI(the Contract) was a bare-bones document that appeared to be nothing morethanaroutinecontractforthesupplyofmodestquantitiesofagenericsportsdrink.Asidefrompaymentsfortheproductionofamouldandcylindricaldrums,theextentofOOTBsobligationundertheContractwastopurchaseat least 1,200 cartons of 18 at a price of $10.30 per carton.UnbeknownsttoWI,OOTBsplanwastothrust18intopopulardemandthrough its own advertising genius. Thus, although virtually nothing was spentondevelopingthedrinkitself,OOTBhadincurredanoutlayintheregionof$779,812.30 on advertising and promoting 18.Sometime in 2008, a shipment of 18 supplied changed colour and was found tobecontaminatedwithinsects.Asaresult,OOTBhadtorecallallstockof18from the market and the 18 brand was damaged beyond repair. OOTB thereforeabandoneditsmarketingcampaignanddiscontinuedtheplannedventurealtogether.OOTBthensuedWIforbreachofcontract,andsummaryjudgmentwasgranted in favour of OOTB with damages to be assessed. The assistant registrar(the AR) assessed OOTBs damages in the sum of $655,280.70. On appeal, theHighCourtjudge(theJudge)reducedtheARsawardto$329,254.30onthebasis that OOTB had not sufficiently proved the quantum of certain losses that itwas claiming for. OOTB appealed against the Judges decision.Held, dismissing the appeal:(1) Therewereatleasttwolimitationsontheextentofacontractbreakersliabilityfordamages.Thefirstwaswherethepartieshadexpresslyagreedtoallocate the risk of certain losses in their contract. The second was where the lawimposedlimitsontheextentofthecontractbreakersliabilitybyrulesthathelpedacourtdecidewhethertheparticulartypeofdamagesclaimedwastooremote and hence irrecoverable: at [12] and [13].[2013] 2 SLR 0363.fmPage 363Friday, May 3, 20135:06 PM364 SINGAPORE LAW REPORTS [2013] 2SLR(2) Cases which in fact concerned the interpretation of a contract in order toidentifythespecificnatureoftheobligationthathadbeenundertakenshouldnotbeconflatedwithcasesthattrulywereconcernedwithquestionsofremoteness.Itdidnothelptoframethequestionofremotenessasoneconcerningthecontractualassumptionofriskorthetrueinterpretationofthecontract: at [29] and [36].(3) Theconventionalprinciplewasthatacontractbreakerwouldbeheldliableforthefullextentofthelossaslongasthetypeorkindoflossthathadoccurred was reasonably foreseeable at the time of the contract, even if its precisedetail or extent were not. But the application of this rule depended greatly on theparticular facts of each case. Different heads of loss might seem to be of the sametypeornatureandyetemergeonaproperanalysisasbeingofquitedifferenttypes. It would be simplistic and ultimately unhelpful to argue that a given headoflosswasnottooremotesimplybecauseitcouldsemanticallybepackagedwithinabroadercategoryoflossthatwasforeseeablebythecontractbreaker:at [41] to [44].(4) Thefollowingframeworkwouldhelpinanalysingquestionsofremotenessofdamage:First,whatwerethespecificdamagesthathadbeenclaimed? Second, what were the facts that would have had a bearing on whetherthesedamageswouldhavebeenwithinthereasonablecontemplationoftheparties had they considered this at the time of the contract? Third, what were thefacts that had been pleaded and proved either to have in fact been known or tobetakentohavebeenknownbythedefendantatthetimeofthecontract?Fourth, what were the circumstances in which those facts were brought home tothedefendant?Finally,inthelightofthedefendantsknowledgeandthecircumstancesinwhichthatknowledgearose,wouldthedamagesinquestionhave been considered by a reasonable person in the situation of the defendant atthetimeofthecontracttobeforeseeableasanotunlikelyconsequenceofthebreach that he should be liable for?: at [47].(5) OOTBsclaimedheadsofdamagesweretooremote.Itsuniquebusinessstrategymeantthatitwasexposedtorisks(intermsofthesortofdamagesitmightincur)whichweredifferentfromwhatmighthavebeenfacedbytheaveragebeveragedistributor.Theparticularfactsthatboreuponthespecificlosses suffered in this case included the scale of OOTBs ambitions for 18 and itsapproachtowardsrealisingtheseambitionslargelythroughadvertisingandpromotion. Neither of these critical facts was brought home to WI: at [52].(6) Withoutknowingtheseadditionalfacts,WIwouldhaveapproachedtheContractonthefootingsimplythatitwasacontracttomanufactureagenericsports drink which would have brought WI a modest sum of at least $12,360 inrevenue. Yet, unbeknownst to WI, OOTB had incurred an outlay in the region of$779,812.30 on advertising and promoting 18. While the value of a contract didnotlimitthedamagesthataplaintiffcould claimforthedefendantsbreach,itformed part of the factual matrix that a court should consider in assessing whatwouldreasonablyhavebeenforeseeabletothedefendantinallthecircumstances at the time the contract was entered into: at [54].[2013] 2 SLR 0363.fmPage 364Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 365Case(s) referred toASM Shipping Ltd of India v TTMI Ltd of England (The Amer Energy) [2009] 1 Lloyds Rep 293 (refd)Classic Maritime Inc v Lion Diversified Holdings Bhd [2010] 1 Lloyds Rep 59 (refd)Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 (folld)Koufos v C Czarnikow Ltd [1969] 1 AC 350 (folld)MFM Restaurants Pte Ltd v Fish & Co Restaurants Pte Ltd [2011] 1 SLR 150 (folld)Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 (refd)Robertson Quay Investment Pte Ltd v Steen Consultants Pte Ltd [2008] 2 SLR(R) 623; [2008] 2 SLR 623 (refd)Satef-Huttenes Albertus SpA v Paloma Tercera Shipping Co SA (The Pegase) [1981] 1 Lloyds Rep 175 (folld)Sunny Metal & Engineering Pte Ltd v Ng Khim Ming Eric [2007] 3 SLR(R) 782; [2007] 3 SLR 782 (refd)Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (The Sylvia) [2010] 2 Lloyds Rep 81 (refd)Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2007] 2 Lloyds Rep 555, CA (refd)Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2009] 1 AC 61, HL (refd)Victoria Laundry (Windsor) Ld v Newman Industries Ld; Coulson & Co Ld (Third Parties) [1949] 2 KB 528 (folld)Kesavan Nair (Genesis Law Corporation) for the appellant; Aqbal Singh (Pinnacle Law LLC) for the respondent.[Editorialnote:Thedecisionfromwhichthisappealaroseisreportedat [2012] 3 SLR 428.]6 February 2013Sundaresh Menon CJ (delivering the grounds of decision of the court):The facts1 Theappellantcompany,OutoftheBoxPteLtd(OOTB)isinthebusiness of marketing and distributing beverages. Sometime in early 2007,OOTBconceptualisedanddevelopedanewsportsdrinkthatitcalled18forLife(18).OOTBappearedtohaveaparticularfocusonmediaservicesinthegolfingindustry.Thismightaccountforthechoiceofthenameforthenewdrink,evokingthenumberofholesplayedinatypicalgame of golf. OOTB had high hopes for their new beverage and seemed tocontemplate that it might emerge as a major brand. Perhaps because of itsbackground in marketing, distribution and media, OOTBs efforts to realiseitsconsiderableambitionsfor18werechannelledintomarketingand[2013] 2 SLR 0363.fmPage 365Friday, May 3, 20135:06 PM366 SINGAPORE LAW REPORTS [2013] 2SLRadvertisingthenewbeverage.Theseeffortsappearnottohavebeenmatchedbyasimilarlevelofindustryintheformulation,designormanufacture of the beverage itself. In fact, OOTB sub-contracted that entireresponsibilitytotherespondentcompany,WaninIndustriesPteLtd(WI).2 ThepartiesenteredintoaContractManufacturingAgreement(theContract)on11June2008.ForallofOOTBsambitionsfor18,theContractwasaremarkablysimpledocument.Itwasalittlemorethanapage in length. Under it, OOTB agreed:(a) to accept the price of $10.50 per carton of 18;(b) to pay a sum of $15,000 for the production of a mould;(c) topay$200percolorforproductionofcylindricaldrumforthe labels;(d) to pay in advance for the quantity ordered; and(e) to order at least one trailer load of 18 and to be responsible forunloading the goods.On its part, WI agreed to supply 18 for at least two years. WI also agreed to[a]cceptthereturnofdefectiveproductbutwithsubstantiateevidence[sic],andtofulfilordersinatimelymanner.Lastly,WIagreedtoofferOOTBaspecialpriceof$10.30percartonforthefirst4,000cartonsordered.3 In short, there was almost no capital investment by OOTB to speak of;nor was there any sign of OOTB establishing any manufacturing capacity inrespect of the beverage. Moreover, aside from the payments to be made forthemouldandtheproductionofthecylindricaldrum,theextentofOOTBs obligation under the Contract was to purchase 1,200 cartons of 18(this being the equivalent of one trailer load) at a price of $10.30 per carton.This translated into a committed outlay on OOTBs part of $12,360.4 Therewas noparticularquality specificationorrecipe.SuchwasthescantnatureoftheContract.TherewascertainlynothingintheContractthat would have given WI any indication or hint of OOTBs grandiose plansandambitionsfor18.Nonetheless,OOTBembarkedonanaggressivemarketing campaign to advertise 18.5 Sometime in 2008, a shipment of 18 supplied by WI changed colour.Oninspection,thebottleddrinkwasalsofoundtobecontaminatedwithinsects.ThiswasadisasterforOOTBsplans.Asaresult,OOTBhadtorecallallstockof18fromthemarket.TheAgri-FoodandVeterinaryAuthorityofSingapore(AVA)alsoissuedaconsumeradvisoryinformingthepublicthatallstockof18hadbeenrecalledandwarningthemagainstconsumingany18.The18brandwas,withoutquestion,[2013] 2 SLR 0363.fmPage 366Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 367damagedbeyondrepair.OOTBthereforeabandoneditsmarketingcampaign and discontinued the planned venture altogether.6 On 22 April 2009, OOTB commenced Suit No 317 of 2009 against WIfor breach of the Contract. On 9 September 2009, the High Court grantedsummary judgment in favour of OOTB and ordered WI to pay damages tobeassessed.WI appealedunsuccessfullyagainst theHighCourts decisiontograntsummaryjudgmentandthematterthenproceededtotheassessment of damages.7 Attheassessmentofdamages,OOTBclaimedreliancedamagesamountingto$779,812.30.ThesewereexpensesthatOOTBsaidithadincurredinrelianceupontheContractandwhichhadbeenwastedasaconsequenceofWIsbreach.ThebulkoftheexpensesclaimedbyOOTBwere advertising costs. The assistantregistrar (the AR) assessed OOTBsdamages in the sum of $655,280.70. The AR made some adjustments to thevalueofthetwolargestcomponentsofOOTBsclaims:firstly,theuseofsome advertising credits that belonged to OOTB and which it had used topromote18(theActMediaexpenses)andsecondly,theredemptionofaprize it had won for an advertising campaign that it had earlier conductedfor an entirely unrelated line of products (the Clear Channel expenses).8 WI appealed and OOTB cross appealed against the ARs decision. TheHighCourtjudge(theJudge)whoheardthetwoRegistrarsAppealsallowed WIs appeal in part and held that OOTB had not adequately provenitslossinrespectoftheActMediaexpensesandtheClearChannelexpenses. The Judge held in Out of the Box Pte Ltd v Wanin Industries PteLtd [2012] 3 SLR 428 at [9] that:Therewasnoevidencethatthevalueoftherelevantserviceswascommensuratewiththeirstickerprice.Thiswasbecausethelattercouldhave an element of arbitrariness depending on the balance of the advertisingcreditsremainingatthetimethattheywereused(which[OOTB]hadtoutilisefullyorelseallowtolapse).Notwithstandingthatuncertainty,itis[OOTBs]responsibilitytoprovidesomemeansofgaugingtheextentofitsloss. [OOTB] must satisfy the court both as to the fact of damage and as to itsamount, or else be awarded nominal damages at most. Furthermore, it is for[OOTB]toprovethattheexpensesclaimedwouldberecoupedonthebalanceofprobabilities.Duetotheill-definednatureof[OOTBs]loss,thecurrentsituationisnotonewhichjustifiestheimpositionoftheburdenon[WI].Takingintoaccount[OOTBs]inabilitytoprovidethenecessaryevidence,IdisallowitsclaimfortheActMediaandClearChannelexpenses.[emphasis added]9 TheJudgeawardedOOTBnominaldamagesof$1,000eachinrelationtotheActMediaexpensesandtheClearChannelexpensesessentially on the basis that OOTB had not sufficiently proved the quantumof the loss. However, the Judge affirmed the other components in the ARsaward of damages. The net result of the appeal was a reduction of the ARs[2013] 2 SLR 0363.fmPage 367Friday, May 3, 20135:06 PM368 SINGAPORE LAW REPORTS [2013] 2SLRaward to $329,254.30. OOTB appealed against the decision of the Judge toawardonlynominaldamagesfortheActMediaexpensesandtheClearChannelexpenses.ThiswasthesoleissuebeforeusasWIdidnotappealagainstthatpartoftheJudgesdecisionaffirmingtheotherheadsofOOTBsclaim.Afterhearingthearguments,wedismissedtheappeal.Wenowgiveourreasonsfordoingso.Inessence,asitbecameevidentinthecourse of the oral arguments, OOTBs claimed heads of damages were tooremote in our judgment.The applicable law10 InPhotoProductionLtdvSecuricorTransportLtd[1980] AC827,LordDiplockexplainedthatforeverybreachofcontractthatsoundsindamages,thecontractbreakersprimaryresponsibilitytoperformthecontractisreplacedbyasecondaryresponsibilitytopaydamages(at 848849):Leavingasidethosecomparativelyrarecasesinwhichthecourtisabletoenforceaprimaryobligationbydecreeingspecificperformanceofit,breachesofprimaryobligationsgiverisetosubstitutedorsecondaryobligations on the part of the party in default, and, in some cases, may entitlethe other party to be relieved from further performanceof his own primaryobligations. Everyfailuretoperformaprimaryobligationisabreachofcontract.Thesecondary obligation on the part of the contract breaker to which it gives rise byimplication of the common law is to pay monetary compensation to the otherparty for the loss sustained by him in consequence of the breach; but, with twoexceptions, the primary obligations of both parties so far as they have not yetbeen fully performed remain unchanged. [emphasis added]11 However,thesecondaryobligationtopaydamagesisnotanunlimited liability. In broad terms, once the threshold of showing that thedamagesarecausallyconnectedtothebreachhasbeencrossed,aprimafacie liabilityto pay damages arises. However, there aresome limits to theextentofsuchprimafacieliability.Causationalonewillnotsuffice,sincemanythingscanbesaidtobecausedbyaparticulareventinthesensethatiftheeventhadnottranspiredthentheendsinquestionmightnothave ensued. Therefore, in any given case causation is a necessary but not asufficient condition for the imposition of liability on the contract breaker.12 There are at least two limitations on the extent of a contract breakersliability for damages. The first is where the parties have expressly agreed toallocatetheriskofcertainlossesintheircontract,forinstancebywayofexclusion or limitation provisions. By such clauses, the parties might agreethat the contract breaker will not be liable at all for certain types of loss orthatitwillnotbeliablebeyondacertainquantumofloss.Buttherearelimits to human foresight. This, coupled with the optimism that frequently[2013] 2 SLR 0363.fmPage 368Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 369accompaniestheconclusionofmanyacontract,meansthatoften,partiesdo not specifically address their minds to the question of damages or moregenerally of remedies at the time they enter into the contract.13 Itthenbecomesnecessarytoexaminewhetherthesecondtypeoflimitation applies: that is where the law imposes limits on the extent of thecontractbreakersliabilitybyrulesthathelpacourtdecidewhethertheparticulartype of damagesclaimed is tooremoteand hence irrecoverable.Therulesastoremotenessofdamageservetoimposeahorizonontheextent of the contract breakers liability. Losses that are within this notionalboundaryareinprinciplerecoverablewhilethosebeyonditarenot.Butalthough this horizon is not illusory, equally it is not a rigid or empiricallypreciseboundary.Rather,likethehorizonofhumanexperience,itsrangedepends on the circumstances. For this purpose, the relevant circumstancesinclude those in which the contract was entered into and what both partiesknew or must be taken to have known about the venture they were about toundertake.Accordingtothesecircumstances,thehorizonmaysometimesextend further than at other times.14 ThosenotionsgoverningremotenessofdamagesincontractwereencapsulatedinAldersonBsfamousdictuminHadleyvBaxendale(1854) 9 Exch 341 (Hadley v Baxendale) at 354:Where two parties have made a contract which one of them has broken, thedamages which the other party ought to receive in respect of such breach ofcontractshouldbesuchasmayfairlyandreasonablybeconsideredeitherarising naturally, i.e., according to the usual course of things, from such breachofcontractitself,orsuchasmayreasonablybesupposedtohavebeeninthecontemplationofbothparties,atthetimetheymadethecontract,astheprobableresultofthebreachofit.Now,ifthespecialcircumstancesunderwhich the contract was actually made were communicated by the plaintiffs tothe defendants, and thus known to both parties, the damages resulting fromthebreachofsuchacontract,whichtheywouldreasonablycontemplate,would be the amount of injury which would ordinarily follow from a breachof contract under these special circumstances so known and communicated.Butifthesespecialcircumstanceswerewhollyunknowntothepartybreaking the contract, he, at the most, could only be supposed to have had inhis contemplation the amount of injury which would arise generally, and inthegreatmultitudeofcasesnotaffectedbyanyspecialcircumstances, fromsuch a breach of contract. For, had the special circumstances been known, thepartiesmighthavespeciallyprovidedforthebreachofcontractbyspecialterms as to the damages in that case; and of this advantage it would be veryunjust to deprive them. [emphasis added]15 TheseprincipleshavecometobereferredtoasthefirstandsecondlimbsoftheruleinHadleyvBaxendale.Thefirstlimbprescribeslimitsfor what are called general damages and the second limb for what are calledspecialdamages.Theuseofthedescriptorsgeneralandspecialinthiscontextisnotparticularlyhelpfulsinceitislikelytobeconfusedwithan[2013] 2 SLR 0363.fmPage 369Friday, May 3, 20135:06 PM370 SINGAPORE LAW REPORTS [2013] 2SLRaltogether different sense in which those terms may be used in conjunctionwithdamages:seetheobservationsofthelearnedauthorsinTheLawofContractinSingapore(AndrewPhangBoonLeonggened)(AcademyPublishing,2012)at paras 22.050-22.052.Buthere,theyaremeanttoconnotethenatureoftheknowledgeofthecircumstancesthatwaspossessedbytheparties,andmorespecifically,bythecontractbreakerwhenheenteredintothecontract.Generaldamagesarethosewhichmaybe seen as flowing naturally from the breach, once regard is had to the sortofknowledgeoftherelevantsurroundingcircumstancesthatthecontractbreakerwouldgenerallybetakentohavehad.Ontheotherhand,specialdamages are damages the liability for which is founded on the fact that thecontractbreakerhadsomespecialoradditionalknowledgeofparticularfactsandcircumstances,andwhichknowledgehastheeffectofextendingthe horizon of recoverable damages beyond the range that would otherwisehave applied.16 AmorerecentrestatementoftheruleinHadleyvBaxendalecanbefoundintheEnglishCourtofAppealdecisionofVictoriaLaundry(Windsor)LdvNewmanIndustriesLd;Coulson&CoLd(ThirdParties)[1949]2 KB 528(VictoriaLaundry),whereinaninfluentialjudgment,Asquith LJ set out six propositions (at 539540):(1.) Itiswellsettledthatthegoverningpurposeofdamagesistoputtheparty whose rights have been violated in the same position, so far as moneycandoso,asifhisrightshadbeenobserved:(Sally Wertheim v. ChicoutimiPulpCompany).Thispurpose,ifrelentlesslypursued,wouldprovidehimwithacompleteindemnityforalllossdefactoresultingfromaparticularbreach,howeverimprobable,howeverunpredictable.This,incontractatleast, is recognized as too harsh a rule. Hence,(2.) Incasesofbreachofcontracttheaggrievedpartyisonlyentitledtorecoversuchpartofthelossactuallyresultingaswasatthetimeofthecontract reasonably foreseeable as liable to result from the breach.(3.) Whatwasatthattimereasonablysoforeseeabledependsontheknowledgethenpossessedbythepartiesor,atallevents,bythepartywholater commits the breach.(4.) For this purpose, knowledge possessed is of two kinds; one imputed,theotheractual.Everyone,asareasonableperson,istakentoknowtheordinary course of things and consequently what loss is liable to result froma breach of contract in that ordinary course. This is the subject matter of thefirstruleinHadleyv.Baxendale.Buttothisknowledge,whichacontract-breakerisassumedtopossesswhetherheactuallypossessesitornot,theremayhavetobeaddedinaparticularcaseknowledgewhichheactuallypossesses, of special circumstances outside the ordinary course of things, ofsuchakindthatabreachinthosespecialcircumstanceswouldbeliabletocause more loss. Such a case attracts the operation of the second rule so as tomake additional loss also recoverable.[2013] 2 SLR 0363.fmPage 370Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 371(5.) In order to make the contract-breaker liable under either rule it is notnecessarythatheshouldactuallyhaveaskedhimselfwhatlossisliabletoresultfromabreach.Ashasoftenbeenpointedout,partiesatthetimeofcontracting contemplate not the breach of the contract, but its performance.Itsufficesthat,ifhehadconsideredthequestion,hewouldasareasonableman have concluded that the loss in question was liable to result (see certainobservationsofLordduParcqintherecentcaseofA/BKarlshamnsOljefabriker v. Monarch Steamship Company Limited.)(6.) Nor,finally,tomakeaparticularlossrecoverable,needitbeprovedthatuponagivenstateofknowledgethedefendantcould,asareasonableman, foresee that a breach must necessarily result in that loss. It is enough ifhe could foresee it was likely so to result. It is indeed enough, to borrow fromthelanguageofLordduParcqinthesamecase,atpage158,iftheloss(orsomefactorwithoutwhichitwouldnothaveoccurred)isaseriouspossibilityorarealdanger.Forshort,wehaveusedthewordliabletoresult.Possiblythecolloquialismonthecardsindicatestheshadeofmeaning with some approach to accuracy.[emphasis added]17 It is evident from the passages cited that one of the key elements thatisinvokedtodeterminethehorizonthatwilllimitthecontractbreakersliabilityisthatofknowledge.UnderthefirstlimboftheruleinHadleyvBaxendale,thelimitisdefinedintermsoftheconsequencesthatarisenaturally according to the usual course of things or flowing from what mayreasonablybesupposedtobeinthecontemplationofbothpartieswhentheycontracted.InVictoriaLaundry,AsquithLJtreatedthisasencompassing actual knowledge of what is liable to ensue upon a breach aswellasimputedknowledge,orthatwhichareasonablepersoninthecontract breakers situation is taken to know.18 ThesecondlimboftheruleinHadleyvBaxendaledealswiththecontractbreakersactualknowledgeofspecialorextraordinaryfactsandcircumstances.Thesearecircumstancesthatthereasonablepersonwouldnot objectively be taken to know but which the contract breaker in questiondoes actually know. The effect of this awareness is to extend the horizon ofthe contract breakers liability to those consequences that are foreseeable asnotunlikelygivenhisknowledgeofthosespecialfactsandcircumstances.InKoufosvCCzarnikowLtd[1969]1 AC 350,LordReidclarifiedthatarmedwiththatknowledge,thelossesmustbeforeseeableasalikelyresult (at 389) or at least as a result that was not unlikely (at 392).19 As observed yetmore recentlyby Rix LJ inTransfield Shipping Inc vMercatorShippingInc(TheAchilleas)[2007]2 Lloyds Rep 555(TheAchilleas(CA))at[88],aftercommentingonthefactsofHadleyvBaxendale ([14] supra):Thecasedemonstrates,inmyjudgment,ashascometobegenerallyrecognised,thattherearenotsomuchtworules,astwomeansbywhicha[2013] 2 SLR 0363.fmPage 371Friday, May 3, 20135:06 PM372 SINGAPORE LAW REPORTS [2013] 2SLRdefendantmaypossesstheknowledgenecessarytomakehisliabilityafairone.Thatknowledgemayeitherarisefromtheusualcourseofthings,orfrom the communication of special circumstances 20 Inreviewingtheauthorities,RixLJinTheAchilleas(CA)drewattentiontothefollowingpassagesfromthejudgmentofRobertGoffJ(as he then was) in Satef-Huttenes Albertus SpA v Paloma Tercera ShippingCo SA (The Pegase) [1981] 1 Lloyds Rep 175 (The Pegase) at 182183:theprincipleinHadleyvBaxendaleisnownolongerstatedintermsoftworules,butratherintermsofasingleprinciplethought[sic]itisrecognized that the application of the principle may depend on the degree oftherelevantknowledgeheldbythedefendantatthetimeofthecontractintheparticularcase.Thisapproachaccordsverymuchtowhatactuallyhappens in practice; the Courts have not been over-ready to pigeon-hole thecasesunderoneorotheroftheso-calledrulesinHadleyvBaxendale,butrathertodecideeachcaseonthebasisoftherelevantknowledgeofthedefendant.Inthelightofthedecidedcases,thetestappearstobe:havethefactsinquestioncometothedefendantsknowledgeinsuchcircumstancesthatareasonable person in the shoes of the defendant would, if he had considered thematter at the time of making the contract, have contemplated that, in the eventof a breach by him, such facts were to be taken into account when consideringhis responsibility for loss suffered by the plaintiff as a result of such breach. Theanswer to that question may vary from case to case, taking into considerationsuch matters as, for example, the nature of the facts in question and how fartheyareunusual,andtheextenttowhichsuchfactsarelikelytomakefulfilmentofthecontractbytheduedatemorecritical,ortorendertheplaintiffs loss heavier in the event of non-fulfilment.Thetwogoverningprinciplestheprincipleofcausationandthelimitingprincipleofremotenessofdamageprovide,intheirdevelopedform,thesolution to most problems of damages. [emphasis added]21 Inthisdictum,RobertGoffJaddedasignificantelementtotheanalysis.Asidefromexaminingwhatknowledgethecontractbreakerhadorshouldbetakentohavehadatthetimeofthecontract,RobertGoffJnotedthatitwasalsoimportanttohaveregardtothecircumstancesinwhich that knowledge had been acquired. We find this a helpful statementofwhatthecourtsaretryingtodowhenassessingwhethertheclaimeddamages are too remote. It contemplates the consideration of:(a) thefactsthatbearonthequestionoftheliabilityforthedamages that subsequently ensue upon the defendants breach;(b) the circumstances in which those facts came to the defendantsknowledge;[2013] 2 SLR 0363.fmPage 372Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 373(c) inthelightofthosecircumstances,theextenttowhichsuchknowledgeshouldbetakenintoaccountwhenassessingthedefendants liability; and(d) having regard to the knowledge that may properly be attributedtothedefendantatthetimeofthecontract,whatwouldhavebeenforeseeable at that time to the reasonable person in his position to bethe not unlikely consequences of his breach.22 TherationalebehindtheprincipleofremotenessofdamageincontractandtheapplicationoftheruleinHadleyvBaxendalewasdiscussed in some detail by this court in Robertson Quay Investment Pte Ltdv Steen Consultants Pte Ltd [2008] 2 SLR(R) 623 (Robertson Quay), whereweaffirmedthecontinuedapplicabilityoftheruleinHadleyvBaxendale(asrestatedinVictoriaLaundry([16]supra))inSingapore.InRobertsonQuay, after an extensive review of the authorities, we observed (at [70]) thatalthoughtheruleinHadleyvBaxendalewasnotwithoutitsdifficulties,ithadservedwellinprovidingaguidingsetofprinciplesforthecourts.Inthat same case (at [70]), we also affirmed our earlier observations in SunnyMetal&EngineeringPteLtdvNgKhimMingEric[2007]3 SLR(R) 782(Sunny Metal) as follows: [T]he concept of remoteness is essentially a necessary limitation imposedbythelawtoprotectthecontract-breakerfrominfinitedamagessincetheconsequencesofanacttheoreticallycanstretchintoinfinity.Thequestionofremotenessisultimatelyaninquiryinwhich[quotingfromSunny Metal at [56]]: legal policy and accepted value judgment must be the final arbiter ofwhat balance to strike between the claim to full reparation for the losssufferedbyaninnocentvictimofanothersculpableconductandtheexcessiveburdenthatwouldbeimposedonhumanactivityifawrongdoerweretobeheldtoanswerforalltheconsequencesofhisdefault. [Court of Appeals emphasis in Sunny Metal]23 It is thus evident that the test for assessing the question of remotenessof damages prescribed in Hadley v Baxendale as it has come to be applied,clarified and understood in subsequent cases has a very respectable vintageandhasenteredthestreamofconsciousnessofmostcommonlawyersinthe sense of being one of the foundational principles learnt as fledgling lawstudents. However, the antiquity of a statement of principle does not assurethat it retains its vitality in the face of changes in the environment and thecontext in which these principles are to be applied.24 Four months after our judgment in Robertson Quay was delivered, theHouseofLordshandeddownitsdecisioninTransfieldShippingIncvMercatorShippingInc(TheAchilleas)[2009]1 AC 61(TheAchilleas(HL)),ontheappealbroughtagainstthedecisionoftheCourtofAppealdelivered by Rix LJ, to which we have already referred (see [19] above). InThe Achilleas(HL),LordHoffmann(withwhomLordHopeofCraighead[2013] 2 SLR 0363.fmPage 373Friday, May 3, 20135:06 PM374 SINGAPORE LAW REPORTS [2013] 2SLRconcurred) departed from the rule in Hadley v Baxendale ([14] supra) andproposed a new test for remoteness of damage which focuses on whether ornot the defendant had assumed the risk of the sort of consequences whichthe plaintiff was seeking recompense for, stating at [21] that:It is generally accepted that a contracting party will be liable for damages forlosses which are unforeseeably large, if loss of that type or kind fell within oneor other of the rules in Hadley v Baxendale: see, for example, Staughton J inTransworldOilLtdvNorthBayShippingCorpn(TheRioClaro)[1987]2 Lloyds Rep 173,175andJacksonvRoyalBankofScotlandplc[2005]1 WLR 377. That is generally an inclusive principle: if losses of that type areforeseeable,damageswillincludecompensationforthoselosses,howeverlarge. But the South Australia and Mulvenna cases show that it may also be anexclusiveprincipleandthatapartymaynotbeliableforforeseeablelossesbecause they are not of the type or kind for which he can be treated as havingassumed responsibility. [emphasis added]25 InTheAchilleas(HL),LordHoffmannsuggestedthatwhenconfronting the issue of remoteness of damage, the rule is to be understoodnot as an external rule of law that is imposed on the parties to every contractin the absence of an express provision to the contrary (in order to limit theextentofrecoverabledamages);ratheritisaquestionofthepartiesintention. As such, the answer to the question whether a particular type ofdamagesisrecoverabledependsnotsomuchonthestraightforwardapplication of the rule in Hadley v Baxendale, but rather on whether it madesenseinthecontextofthecontractanditstermsandinthelightofthecircumstances in which it was entered into to impose the particular liabilityonthedefendant.ToLordHoffmann,thequestionismuchmoreaboutwhether,onatrueconstructionofthecontract,thecontractbreakerhadassumedresponsibilityforthissortofloss.LordHoffmannputitthusinThe Achilleas (HL) at [25][26]:25 Butthequestionofwhetheragiventypeoflossisoneforwhichapartyassumedcontractualresponsibilityinvolvestheinterpretationofthecontractasawholeagainstitscommercialbackground,andthis,likeallquestions of interpretation, is a question of law.26 Theownerssaythatthepartiesareentirelyatlibertytoinsertanexpresstermexcludingconsequentiallossiftheywanttodoso.Somestandardformsofcharterdo.Isupposeitcanbesaidofmanydisputesoverinterpretation,especiallyoverimpliedterms,thatthepartiescouldhaveusedexpress words or at any rate expressed themselves more clearly than they havedone.But,asIhaveindicated,theimplicationofatermasamatterofconstructionofthecontractasawholeinitscommercialcontextandtheimplicationofthelimitsofdamagesliabilityseemtometoinvolvetheapplication of essentially the same techniques of interpretation. In both cases,the court is engaged in construing the agreement to reflect the liabilities whichthe parties may reasonable be expected to have assumed and paid for. [emphasis added][2013] 2 SLR 0363.fmPage 374Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 37526 These passages leave no room for doubt that Lord Hoffmann viewed theproperapproachtothequestionofremotenessofdamageasaquestionofinterpretingthecontract.ThiscourthadtheopportunitytoconsidertheHouseofLordsdecisioninTheAchilleas(HL)initssubsequentdecisioninMFM Restaurants PteLtdvFish &CoRestaurantsPte Ltd[2011]1 SLR 150(MFMRestaurants).Afteronceagainundertakinganextensivereviewofexistingcaselawandacademiccommentaries,werejectedLordHoffmannsnew approach towards remoteness of damage in contract, at least to the extentit deviated from the rule in Hadley v Baxendale, concluding as follows at [140]:Consistent with the analysis set out above, we take this opportunity to confirmthe approach relating to remoteness of damage in the law of contract as set outinthedecisionofthiscourtinRobertsonQuay(whichaffirmedtheprinciples laid down in Hadley [v Baxendale]). We also take this opportunity tostate that the approach advocated by Lord Hoffmann in The Achilleas [(HL)] isnotthelawinSingapore,excepttotheextentthatthelearnedlawlordsrelianceontheconceptofassumptionofresponsibilitybythedefendantisalready incorporated or embodied in both limbs in Hadley [v Baxendale] itself.27 LordHoffmannsapproachhasnotgainedcurrencyintheEnglishcourtseither.InASMShippingLtdofIndiavTTMILtdofEngland(TheAmerEnergy)[2009]1 Lloyds Rep 293at[17],Flaux JrejectedtheviewthattheHouseofLordshadinTheAchilleas(HL)laiddownanewtestdifferentfromtheruleinHadleyvBaxendale;inClassicMaritimeIncvLionDiversifiedHoldingsBerhad[2010]1 Lloyds Rep 59at[71],CookeJstatedthathewouldbehighlysurprisedifTheAchilleas(HL)hadchanged the law on remoteness of damage; and in Sylvia Shipping Co Ltd vProgressBulkCarriersLtd(TheSylvia)[2010]2 Lloyds Rep 81at[40],HamblenJheldthattheruleinHadleyvBaxendaleremainsthegeneraltestofremotenessapplicableinthegreatmajorityofcasesandconfinedLordHoffmannsnewapproachtorelativelyrarecaseswheretheapplicationofthegeneraltestleadsormayleadtoanunquantifiable,unpredictable, uncontrollable or disproportionate liability or where there isclearevidencethatsuchaliabilitywouldbecontrarytomarketunderstanding and expectations.28 Thatbeingsaid,anythingthatLordHoffmannsaysinthesematterscallsforthemostcarefulconsideration.Thepresentcasegivesustheopportunity,havingonceagainreviewedthematter,torestatetheearlierviewsexpressedinMFMRestaurants.Inourview,theanswerultimatelylies not in abandoning the principles laid down in Hadley v Baxendale, butratherindrawingoutandarticulatingsomeofthepremisesinherentinthose principles.29 In our judgment, it is important that cases which in fact concern theinterpretationofacontractinordertoidentifythespecificnatureoftheobligationthathasbeenundertakennotbeconflated,orforthatmatterconfused, with cases that truly are concerned with questions of remoteness.[2013] 2 SLR 0363.fmPage 375Friday, May 3, 20135:06 PM376 SINGAPORE LAW REPORTS [2013] 2SLR30 Thismaybeillustratedusingthefamousexampleofthetaxidriverwhoistoldofhiscustomersneedtogettoaparticulardestinationbyaparticular time in order to make it to a particularly important meeting. Thiswas touched on in MFM Restaurants at [118]:[I]tmightbeappropriatetoconsiderbrieflyanoft-citedhypotheticalexamplewhichhasbeenutilisedtodemonstratetheutilityaswellaspersuasiveness of Lord Hoffmanns approach in The Achilleas [(HL)] Thisistheexampleofataxidriverwho,beforeheorsheacceptsthefare,isinformedbythepassengeraboutacrucialmeetingtowhichthatpassengermustgettoontime.Ifthetaxidriverfails,inbreachofcontract,togetthepassenger to that meeting in a timely manner and, as a result, the passengersuffers an enormous business loss, is the taxi driver liable for that loss? Wewouldaddthat,inanextremesituationsuchasthepresenthypothetical,much would depend on the precise facts in question. This would also include,for example, how the alleged special circumstances were communicated by thecustomer to the taxi driver and what precisely was in fact communicated. Allthiswould,ofcourse,havetobeassessedonanobjectivebasis.Onewouldimaginethat,inanextremesituationsuchasthis,therewouldhavetobeaclearandunequivocalcommunication.Itwouldprobablyhavetakenthefollowing form:Ihavetoarriveattheairportontimeformyflightand,ifImissmyflight, I will lose a business deal worth $200,000. If so, I will truly holdyou responsible for this loss.[emphasis added]31 In MFM Restaurants, we went on to explain at [119] that:Extreme hypothetical situations such as the one just mentioned are useful inlawschoolsastheydeliverthegenerallegalpropositionssoughttobeconveyedtothestudentsconcernedinnouncertainterms.However,whathappensintherealworldisquitedifferent.Evenallowingforthefactthattruthissometimesstrangerthanfiction,onecanhardlyimaginethetaxidriveracceptingresponsibilityonthetermssetoutintheprecedingparagraph. Even if he or she did, this would havein the nature of thingstobeintheformofanexpressassumptionofresponsibilitywhichformspartofthecontractbetweenthepartiesinanyevent.Inotherwords,inanextremehypotheticalsituation,becausethecommunicationofthespecialcircumstanceswouldhavetobesoclearandunequivocal,itwouldfollowthatanyassumptionofresponsibilitywouldhavetobeequallyclearandunequivocal and that it would then simultaneously constitute an express termofthecontractitself.TheresultantsituationwouldbenodifferentfromthepositionthatLordHoffmannisarguinginfavourof.Itis,ofcourse,theoretically possible for there tobean assumptionofresponsibilitywithoutthat assumption forming part of the express terms of the contract as such. Inourview,however,thiswouldbequiteunrealisticasregardmust(asjustmentioned)behadtotheentirecontextofthesituationitself.Indeed,evenfrom a legal standpoint, it would be difficult to imagine that a court would findanimpliedobligationthatthetaxidriverhadundertakentoassumeresponsibilityforthefullextentoftheloss.Evenifthiswereso,wewould[2013] 2 SLR 0363.fmPage 376Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 377imagine that there would also be an implied term to the effect that, absent adeliberateactonthepartofthetaxidrivertoensurethatthepassengerdidnot arrive at the airport on time, the former would be excused from liability.Hence, for example, a delay that was due to a traffic jam would excuse the taxidriverfromliability.[emphasisinoriginalinitalics;emphasisaddedinunderline italics ]32 The hypothetical case of the taxi driver who has been tasked with themission to get his customer to a particular destination by a particular timeisposedtotesttherobustnessoftheconventionaltheorygoverningtheremotenessofdamage.The question posediswhetherthetaxidriverwhofails to meet the time stipulated can be made liable for the loss of profit thatmight otherwise have availed the customer had the taxi driver made it to therequired destination on time.33 ButaswehaveobservedinMFMRestaurantsandaswehaveobservedhereat[29]above,thequestionmaynotinthefirstinstancebetruly concerned with remoteness at all. Rather, the first question is whetheras a matter of that contract, the taxi driver had agreed not only to transporthis customer to the desired destination, but also to do so by a specific timeand for a specific purpose. Put another way, the hypothetical throws up thesignificance of first analysing the question of whether the taxi driver wouldbe liable in these exceptional circumstances as a matter of the constructionof the contract because that, rather than the question of remoteness, is thetrue nature of the issue that is presented. In other words, we are concernedherewithascertainingthecontractualtermsundertakenbythetaxidriver(as opposed to whether the damages sought as a result of a breach of thoseterms are too remote).34 For instance, if a taxi driver knew that there was a time limit and evenknew why the customer was constrained by the time limit, and then decidedto ask for a much higher fare, then as a matter of the interpretation of thecontract,it mightbe concluded that inseekingthe enhancedfare,the taxidriver had undertaken a contractual obligation to reach the destination by aspecifiedtime.Conversely,ifthesametaxidriverhadchargednothingmore than the metered fare, and nothing else was said between the parties,thenitmaywellbethattheoppositeconclusionwouldbereachedasamatterofinterpretingthatcontract.Butassumingthatthetaxidriverdidundertaketheextendedobligationtogethiscustomertothespecifieddestinationbyaspecifiedtimeandthenfailedtocomplywiththatobligation,thequestionofwhatdamageshewouldbeliableforinthatscenario must nonetheless be assessed, and in our view this would fall to bedone by reference to the rules as to remoteness of damage.35 Inourjudgment,itbearsreiteratingthattheremustbeconceptualclarityindifferentiatingbetweeninterpretingacontracttoestablishthenature of the specific obligation that has been imposed on a party, and the[2013] 2 SLR 0363.fmPage 377Friday, May 3, 20135:06 PM378 SINGAPORE LAW REPORTS [2013] 2SLRaltogether separate question of what damages the breaker of that obligationwill be liable for.36 When one turns to examine the question of remoteness, in our view,itsimplydoesnothelptoframethequestionasoneconcerningthecontractualassumptionofriskorthetrueinterpretationofthecontractbecause that is an altogether separate inquiry which generally does not beardirectlyonthequestionofremoteness(excepttotheextentthatitmightconstituteafactorwhichistobetakenintoconsiderationinascertainingwhetherespeciallypursuanttothesecondlimboftheruleinHadleyvBaxendale([14]supra)thedamageisindeedtooremotebasedontherelevant facts).37 Ashasbeenalludedtointheprecedingparagraph,thereisasubstantialdegreeoffactsensitivitythatisnecessarilyembeddedwithintheanalysisofwhethertheclaimeddamagesaretooremote.Havingidentified the particular type of losses that have materialised and for whichdamagesarebeingclaimed,itisthennecessarytoassessthequestionofremotenessbyreferencetothefactualmatrixinwhichthepartiesweresituated at the time they entered into the contract.This isthesame pointmadebyRobertGoffJinThePegase([20]supra)towhichwehavereferredat[20][21]above.RobertGoffJthoughtitrelevanttohaveregardtothenatureofthefactswhichthecontractbreakerhadactualorimputed knowledge of as well as the circumstances in which they came tohisknowledge.Aswehavenotedabove,weagreewiththisbecausebothconsiderationsarecriticaltosheddinglightonthecentralquestionofwhether in all the circumstances it is just that the contract breaker shouldbeheldliableforthelossesthathaveinfactmaterialised.Theanswertothis depends on the facts that are known to the contract breaker and thatmaybetakenintoaccountwhenassessingwhatoughttohavebeenreasonably foreseeable to him at the time of the contract.38 Byfocusingonthespecificfactsofthecase,acourtcantakeintoaccounttheconcernsthathavebeenraisedbyLordHoffmannwithintheconventional analysis laid down in Hadley v Baxendale and the subsequentlineofcaseswehavereferredtowithouthavingtoembracetheapproachLordHoffmannespousedinTheAchilleas(HL)([24]supra).Inthatcase,the defendant charterer was nine days late in delivering the ship back to theplaintiffowner.Theownerhadalreadyagreedtohiretheshiptoanotherchartererbyacertaindate,failingwhichthelatterwasentitledtocancel.Because of the defendants late delivery, the owner was forced to procure anextension of the cancellation date of the subsequent charter in return for areduced rate of hire. In the process, the owner suffered severe losses becausethemarketrateforthehireofthevesselhadfalleninanunusuallyrapidanddrasticmanner.Writingextra-judicially,LordHoffmannhasarguedthat the foreseeability test in Hadley v Baxendale would not have permittedthe court in The Achilleas (HL) to give due consideration to the fact that (a)[2013] 2 SLR 0363.fmPage 378Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 379thelosssufferedbytheownerwaspotentiallyextensiveandcouldnotbequantifiedbythepartiesatthetimeofcontracting,and(b)thecommonassumption in the trade was that liability of a charterer for late delivery of aship was limited to the difference between the market rate and the charterratefortheperiodoftheoverrun(seeLordHoffmann,TheAchilleas:Custom and Practice or Foreseeability? (2010) 14 Edin LR 47 at 59).39 Butwedonotseewhythesefactscannotbeanalysedwithintheconventional Hadley v Baxendale framework. The common assumption inthetradeastoalatecharterersliabilityisarelevantconsiderationinascertainingwhat,inthecharterersreasonablecontemplationatthetimeof the contract, would be the losses flowing from late delivery of the vesselintheusualcourseofthings.Itwouldbejusttovisitsuchconsequencesupon the charterer if he broke the contract. Contrariwise without any otherknowledge,itwouldnotordinarilybejusttoimposeothertypesoflossesuponthecontract-breakingcharterer.AsLordRodgerofEarlsferrynotedin The Achilleas (HL) (at [60]), on the facts such volatile market conditionswere highly unusual and at the time of the contract the charterer could notreasonablyhaveforeseentheconsequences,whichintheeventbefelltheowner.Thus,thedamagesclaimedwerefoundtobetooremoteunderastraightforward application of the rule in Hadley v Baxendale. Lord Rodgeralso observed (at [58] and [60]) that the result might conceivably have beendifferent if the charterer had specific knowledge of particular facts that boreon the type of losses that materialised in that case.40 ItmightseemsomewhatdisquietingthattheHouseofLordsinTheAchilleas(HL)werereversingtheconcurrentconclusionsofthetwoarbitrators who had been in the majority and of four extremely experiencedand highly respected commercial judges in the High Court and the Court ofAppeal.Moreover,althoughitwasaunanimousdecisionintheHouse,BaronessHaleofRichmond,atleast,concurredonlywithstrongreservations (see The Achilleas (HL) at [93]).41 The root of the difference between the two groups of judges in fact layin the application of the conventional principle that a contract breaker willbe held liable for the full extent of the loss as long as the type or kind of lossthat has occurred was reasonably foreseeable at the time the contract, evenifitsprecisedetailorextentwerenot:seeChittyonContractsvol 1(HG Bealegen ed)(Sweet&Maxwell,31stEd,2012)at para 26-113.Theowners in The Achilleas (HL) had claimed damages for late delivery of thevessel, and these were quantified on one of two alternative bases:(a) Thedifferencebetweentherateatwhichthevesselhadoriginallybeencharteredtoanotherchartererunderafollowingfixtureandtherevisedratethatwasfixedinreturnforthenewchartereragreeingtoextendthecancellationdateowingtotheownersinabilitytodeliverthevesselontime.Thiswasassessedfor[2013] 2 SLR 0363.fmPage 379Friday, May 3, 20135:06 PM380 SINGAPORE LAW REPORTS [2013] 2SLRthefulldurationofthefollowingfixtureandwasquantifiedat US$1,364,587.37.(b) Thedifferencebetweenthecharterrateunderthedefendantscharter and the market rate for the nine days by which the defendanthaddelayedredeliveryofthevessel.ThiswasquantifiedatjustUS$158,301.17.Themajorityarbitratorsheldfortheownersontheformerbasisontheground that it was a not unlikely consequence of the charterers late deliveryof the vessel that the owner would suffer such a type of loss from having torenegotiate the terms of the following fixture. This was essentially the sameviewtakenintheHighCourtandintheCourtofAppeal.Theminorityarbitratorinhisdissentconsideredthatthiswasnotcorrectbecausealthough it was not unlikely that the owner might have to vary the terms ofthe following fixture, the general understanding in the industry was that thelosses for which a defaulting charterer would be liable would be limited tothe difference between the charter rate and the market rate for the durationof the delay. The majority accepted that this was the market understandingbut considered it irrelevant as a matter of law.42 Although it may have appeared at first blush that the loss suffered bythe owner was the same namely, the owners loss of revenue incurred byreasonofthelatedeliveryinfactthereweretwodistincttypesoflossesthat were at play. One was the well-contained, quantifiable loss reflected inthe difference in the charter rates for the duration of the overrun; the otherwas the open-ended and unquantifiable loss (and indeed risk) of the ownerhavingtovarythearrangementsunderafollowingfixture,noneofthedetails of which the charterer had any knowledge of. Lord Rodger explainedthatheconsideredthelatterwasnotrecoverablebecauseofextremeandvolatilemarketconditionsthatwereunknownandunforeseeabletothecharterer at the time of the contract. He put it thus (at [60]):Returning to the present case, I am satisfied that, when they entered into theaddenduminSeptember2003,neitherpartywouldreasonablyhavecontemplated that an overrun of nine days would in the ordinary course ofthings cause the owners the kind of loss for which they claim damages. Itoccurredinthiscaseonlybecauseoftheextremelyvolatilemarketconditionswhichproducedboththeownersinitial(particularlylucrative)transaction,withathirdparty,andthesubsequentpressureontheownerstoacceptalowerrateforthatfixture.BackinSeptember2003,thislosscould not have been reasonably foreseen as being likely to arise of the delayinquestion.Itwasaccordingly,tooremotetogiverisetoaclaimfordamages for breach of contract.43 LordWalkerofGestingthorpecametoessentiallythesameviewthough he first observed (at [84]) that it was too crude a test and anerroroflawtoadopt,asthemajorityarbitratorshaddone,thesimpleyardstickofwhetherthetypeoflossclaimedwasforeseeable.Lord[2013] 2 SLR 0363.fmPage 380Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 381Walkersfurtherobservationsat[82],[83]and[86]meritsettingoutatsome length:82 Thereseemstobeagapinreasoningbetweenthebarefactofmissing a fixture (an eventuality which would not in a rising market, occasionanyfinancialloss)andtheveryheavyfinanciallossforwhichtheownersclaimed(andrecovered)damagesinthiscase.Amuchcloserauthoritywould have been the Victoria Laundry case in which the Court of Appealdeclinedtoawarddamagesforthelossofunusuallyprofitabledyeingcontracts, but indicated that recovery of some loss of profit on such contractswould be possible The loss of unusually profitable contracts, unknown tothe vendor of specialised equipment at the time of the sale contract, will oftenbe a serious possibility or real danger; but it was held not to be within thereasonable contemplation of the parties to the sale contract.83 Sointhiscase,itwasopentothearbitratorstoconcludethatfortheowners to miss a fixture was a not unlikely result of the delay, but it did notfollowfrom that thecharterers were liable for anexceptionally large losswhen the market fell suddenly and sharply 86 [I]t was contrary to the principle stated in the Victoria Laundry case,and reaffirmed in The Heron II [Koufos v C Czarnikow Ltd [1969] 1 AC 350],tosupposethatthepartieswerecontractingonthebasisthatthechartererswouldbeliableforanyloss,howeverlarge,occasionedbyadelayinre-delivery,incircumstanceswherethecharterershadnoknowledgeof,orcontrol over, the new fixture entered into by the new owners.44 The foregoing analysis simply highlights that the application of theserulesastotheremotenessofdamageincontractdependsgreatlyontheparticular facts of each case. Different heads of loss may seem tobe of thesame type or nature and yet emerge on a proper analysis as being of quitedifferent types. It would be simplistic and ultimately unhelpful to argue thata given head of loss is not too remote simply because it could semanticallybepackagedwithinabroadercategoryoflossthatwasforeseeablebythecontract breaker. To take the case at hand, while the type of loss here maybecharacterisedaswastedadvertisingexpenses,itwouldbewrongtoignore the special facts that pertain to the type and scale of the advertisingcosts that were incurred here.45 This very issue arose in Victoria Laundry ([16] supra) as noted in theobservations of Lord Walker that have just been set out. In that case, whenthe defendant boilermaker was late in delivering the boiler that the plaintiffhad ordered, the plaintiff suffered the loss of some contracts as a result. ButasobservedbyLordHoffmanninTheAchilleas(HL)([24]supraat[22]),theCourtofAppealinVictoriaLaundrydidnotregardlossofprofitsfromthelaundrybusinessasasingletypeofloss.Theydistinguishedlossesfromparticularlylucrativedyeingcontractsasadifferenttypeoflosswhichwouldonlyberecoverableifthedefendanthadsufficientknowledge of them .[2013] 2 SLR 0363.fmPage 381Friday, May 3, 20135:06 PM382 SINGAPORE LAW REPORTS [2013] 2SLR46 Whileweagreewiththis,itdoesnotleadinevitablytoLordHoffmanns conclusion that this is so as a matter of the interpretation of thecontract, nor indeed that questions of remoteness are to be resolved in thatway. In our judgment, it is important in each case to segregate the questionoftheinterpretationofthecontractfromthequestionofremoteness.Totake the facts of this case, it simply does not aid the process to characterisetheissueintermsofwhether,asamatteroftheinterpretationoftheContract,WIhadundertakenanobligationtopaytheextensivewastedadvertisingcostsbywayofdamagesintheeventitfailedtoperformitsprimaryobligationtodelivertherequiredquantitiesof18inasuitablequality. Barring cases where the parties have agreed to liquidated damagesas the remedy for a breach, the secondary obligation to pay damages upon abreachisageneraloneanditisamatterofapplyingtherulesonremotenessashavebeendevelopedinthecasestoascertainwhetherthecontractbreakershouldbeheldliabletopaytheparticulardamagesclaimed. This, as we have seen, turns on whether the contract breaker hadsuch knowledge of the facts that bore upon that risk as to render it just thathe be held liable to pay such damages.47 Astraightforwardanalyticalframeworkforquestionsofremotenessofdamagewouldhelpascertaininmostcasestheextenttowhich the defendant can fairly be held liable for losses that are causallyconnectedtohisbreach.Suchaframeworkwouldengenderthefollowing inquiries:(a) First, what are the specific damages that have been claimed?(b) Second,whatarethefactsthatwouldhavehadabearingonwhetherthesedamageswouldhavebeenwithinthereasonablecontemplationofthepartieshadtheyconsideredthisatthetimeofthe contract?(c) Third,whatarethefactsthathavebeenpleadedandprovedeither to have in fact been known or to be taken to have been knownby the defendant at the time of the contract?(d) Fourth,whatarethecircumstancesinwhichthosefactswerebrought home to the defendant?(e) Finally,inthelightofthedefendantsknowledgeandthecircumstances in which that knowledge arose, would the damages inquestion have been considered by a reasonable person in the situationof the defendant at the time of the contract to be foreseeable as a notunlikely consequence that he should be liable for?48 Withtheselegalprinciplesinmind,wenowturntothefactsofthecase at hand.[2013] 2 SLR 0363.fmPage 382Friday, May 3, 20135:06 PM[2013] 2SLR Out of the Box Pte Ltd v Wanin Industries Pte Ltd 383Application of the law to the facts49 ThespecifictypeofdamagesclaimedherewasthewastageoftheextensiveadvertisingcostsandexpensesthatOOTBhadincurredinitsefforttopromote18andtomakeitamightybrand.Itbearsemphasisingthatvirtuallynothingwasspentondevelopingthedrinkitself.Therewasnosecretrecipeorspecialingredient.OOTBsplanwasnotfor18toacquire a following because of its particular taste or quality. Rather, OOTBsplan was to take a generic drink and thrust it into popular demand throughits own advertising genius.50 As a further example of the unusual nature of OOTBs plans, we weretold in the course of the oral arguments that OOTB had at one point eventriedtoengagethefamousgolferTigerWoodstobeabrandambassadorfor 18, but failed to do so because Mr Woods was not willing or available toaccepttheengagement.Havingregardtotheextremelymodestnatureoftheinvestmenttothemanufactureofthedrink,thiswouldhavebeennothing short of exorbitant had the engagement in fact materialised.51 Aswehavenotedat[4]above,theContractwasabare-bonesdocument that appeared to be nothing more than a routine contract for thesupply of modest quantities of a generic sports drink. There was nothing intheContractwhichsuggestedthatthepartieshadtogetherappliedtheirminds to the sort of advertising efforts or strategy that OOTB was planningto launch.52 OOTBsuniquebusinessstrategymeantthatitwasexposedtorisks(intermsofthesortofdamagesitmightincur)whicharedifferentfromwhatmighthavebeenfacedbytheaveragebeveragedistributor.Theparticular facts that would bear upon the specific losses suffered in this caseincludethescaleofOOTBsambitionsfor18anditsapproachtowardsrealisingtheseambitionslargelythroughadvertisingandpromotion.Neither of these critical facts was brought home to WI.53 While WI would be taken to have known that the launch of any newproductwouldlikelybeaccompaniedbysomemeasureofadvertisingexpenses and effort, it was not privy to OOTBs grand plans for 18 and itsunusual endeavour to try to create a silk purse out of a sows ear by meansof advertising and brand promotion alone.54 Without knowing these additionalfacts, WI wouldhaveapproachedthecontractonthefootingsimplythatitwastomanufactureagenericsportsdrinkandthatOOTBhadagreedtoorderatleast1,200cartonsofthatdrinkatapriceof$10.30forthefirst4,000cartons(and$10.50thereafter).ThiswouldhavebroughtWIamodestsumof$12,360inrevenue.Yet,unbeknownsttoWI,OOTBhadincurredanoutlayintheregion of $779,812.30 on advertising and promoting 18. While the value ofacontractdoesnotlimitthedamagesthataplaintiffcanclaimforthedefendantsbreach,itformspartofthefactualmatrixthatacourtshould[2013] 2 SLR 0363.fmPage 383Friday, May 3, 20135:06 PM384 SINGAPORE LAW REPORTS [2013] 2SLRconsiderinassessingwhatwouldreasonablyhavebeenforeseeabletothedefendant in all the circumstances at the time the contract was entered into.55 These additional facts, which WI was not aware of at all, bore directlyon the losses that have materialised. Without knowledge of these additionalfacts,WIcouldnotpossiblyhaveforeseentheselossesandtherewasnobasis upon which WI could fairly be held liable for these losses. In short, wefind that WI simply could not have contemplated that on a contract of thissort,itwouldbeliableforsuchopen-endedlossesaswereincurredbyOOTB.Conclusion56 Forthesereasons,wedismissedOOTBsappeal.AsnoappealwasfiledbyWIagainsttheotherspartsoftheJudgesdecision,wedidnotdisturbthem.Intheevent,wethoughtitfairtoawardWIonlythedisbursements it incurred for the appeal because we found for it not on thegrounds that had been advanced before us.Reported by Daniel Gaw and Lim Sing Yong.[2013] 2 SLR 0363.fmPage 384Friday, May 3, 20135:06 PM