Introduction

He who asserts must prove. This maxim, while seemingly straightforward, can sometimes trip up unwary litigants. A case in point is the recent decision issued by the Appellate Division of the Singapore High Court (AD) in Liu Shu Ming v Koh Chew Chee [2023] SGHC(A) 15 (LSM), which considered the maxim in the context of a claim for breach of contract and the basis on which reliance damages may be awarded. We discuss the decision of LSM and examine the importance of adducing all necessary evidence to support one’s case, whether it is to establish the existence of a contractual term that was allegedly breached, the right to terminate the contract, the validity of any purported act of termination, and/or the measure of damages flowing from the breach.

Background

The appellants ran a business in the Philippines providing short-term accommodation to travellers. They approached the respondent (Ms Koh) who invested almost S$1.5 million (the Investment Sum) in their business. The investment was effected by an agreement by which Ms Koh would buy five condominium units (Units) from the appellants and another agreement under which the appellants would rent the Units from Ms Koh at a rate amounting to about 6-7% of the annual return on the purchase price for an initial period of three years (Leaseback Agreement) (collectively, the Contracts). Further, Ms Koh claimed that the appellants agreed to protect her Investment Sum by offering to repurchase the Units at the original purchase price if their market price fell at the end of the leaseback period (the Alleged Buyback Term), even though it was not contained in the Contracts.

In late 2019, the appellants started falling behind on the rental payments. Ms Koh also discovered that the Units were encumbered. Subsequently, Ms Koh purported to terminate the Contracts on 27 December 2019. She also filed a lawsuit against the appellants in February 2020 for (among other things) damages for breach of the Contracts based on the appellants’ failure to transfer title to the Units and their non-payment of rent.

The trial judge (Judge) decided the matter substantially in Ms Koh’s favour, after finding a breach of the Contracts by the appellants that allowed Ms Koh to terminate the same. However, the Judge did not grant her claim for expectation damages (i.e., damages to put her in the position as if the contract in question had been performed), as she was unable to prove the Alleged Buyback Term. Further, she failed to adduce clear evidence to establish when title in the Units ought to have been transferred, or the market value of the Units, without which the Judge was unable to properly assess her claim for expectation loss. Nevertheless, the appellants were held liable to pay reliance damages (i.e., essentially the money which Ms Koh had expended on the Contracts). On that basis, Ms Koh was allowed to recover her Investment Sum and other wasted costs that she incurred to set up the nominee company to receive the transfer of the title, less the sums she received as rental payments under the Leaseback Agreement. However, Ms Koh was to face a further setback on appeal, when even the award for reliance damages came under challenge.

Decision of the Appellate Division of the High Court

The appellants breached the Contracts

On appeal, the AD upheld the Judge’s decision on the issue of breach; notably, the appellants had conceded in the hearing below that they were obliged to transfer the title once Ms Koh had informed them of her choice of nominee. As Ms Koh had done so on 25 August 2018, the AD held that the appellants were obliged to make the transfer within a reasonable time of 6 to 12 months from that date (as previously indicated by the appellants to Ms Koh). Since the appellants failed to do so, they were found in breach of the Contracts.

Ms Koh did not validly terminate the Contracts

However, given how Ms Koh had advanced her case, the AD found that she did not validly terminate the Contracts. The AD explained their reasoning as follows:

1. First, while Ms Koh purported to accept the appellants’ serious breach of the Contracts and sought to terminate the same by way of her former solicitor’s letter dated 27 December 2019 (Letter), she did not specify which act of the appellants amounted to a repudiation of the Contracts.
2. Second, as regards her reliance on the appellants’ non-payment of rent, Ms Koh had pleaded it as an alternative basis to terminate the Leaseback Agreement only (and not the Contracts).
3. Third, Ms Koh did not plead the breach of a condition by the appellants which entitled her to terminate the Contracts (i.e., the basis on which the Judge had ruled in her favour in the hearing below).
4. Lastly, and in any event, the Letter did not purport to terminate the Contracts, which appeared to have been wrongly assumed in Ms Koh’s favour in the hearing below. The Letter was only a demand for payment followed by a threat of legal proceedings. A subsequent email sent by Ms Koh’s new solicitors also did not assist her, as it had wrongly assumed the effect of the Letter.

Ms Koh was entitled to specific performance of the Contracts and not damages

Having not terminated the Contracts, the AD held that Ms Koh was not entitled to claim damages on that basis. Accordingly, the AD set aside the Judge’s award of reliance damages.

However, Ms Koh was not completely without recourse. Since the Contracts were alive, she was entitled to seek specific performance of the Contracts. Thus, the appellants were ordered to transfer title (free of any encumbrance) and give possession of the Units to Ms Koh’s nominee.

The AD’s observations on reliance damages

Given its decision to set aside the Judge’s award of damages, there was no need for the AD to engage the issue of whether damages should have been assessed on the reliance basis. Nevertheless, the AD provided some guiding principles for future litigants:

1. First, expectation damages are ordinarily the damages that a plaintiff would be entitled to claim for contractual breaches.
2. Second, it is not open to a claimant to claim reliance damages simply because he or she chooses not to adduce evidence of expectation damages. Neither is there a wide discretion for the Court to grant reliance damages in every case even when such damages are not pleaded.
3. Third, while the impossibility of proving expectation damages is not a prerequisite to claiming reliance damages, the AD nevertheless observed that such a relief is usually available if it is impossible, or at least extremely difficult, for the claimant to prove expectation damages in the usual way or if the contract was not for profit.
4. Lastly, the AD deliberately left open the issue of whether claims for expectation and reliance damages may be made, if both are being pursued as alternatives. Assuming it is permissible to do so, the AD opined that a claimant should give notice of a claim for reliance damages as soon as possible for the defendants to take such steps as they deem fit.

Commentary

The case of LSM exemplifies the importance of giving careful consideration to all the surrounding issues and required evidence for establishing or defending a claim for breach of contract.

To begin with, it is important to consider whether there is a contractual breach. For example, while one may wish to pursue a claim against the other party for failing to perform an obligation under the contract, there could be a lawful excuse for the other’s non-performance. Further, the obligation may not even exist in the first place, much like the Alleged Buyback Term in the present case.

Also, not every breach of contract gives rise to a right of termination. The remedies may differ based on the relevant terms in the contract and/or the nature of the term that was breached. Oftentimes, it is prudent for an innocent party facing a breach of contract to seek legal input on the available remedies to make an informed decision and to avoid any missteps (such as losing one’s rights through an inadvertent waiver and/or terminating a contract on an erroneous or mistaken basis).

Ultimately, litigants must also heed the “salutary reminder” of what the AD in LSM described as “one of the golden rules of litigation”: he who asserts must prove. In LSM, Ms Koh’s failure to prove that she had in fact terminated the Contracts meant that she was not entitled to her claim in damages and recovery of her Investment Sum. While she could still seek specific performance of the Contracts based on the facts of that case, this was not her remedy of choice. Further, specific performance may not be available in other situations. Given the observations made by the AD in LSM, an innocent party’s failure to substantiate a claim for damages could well result in nothing more than an award of only nominal damages.

All was not lost for Ms Koh, who would finally own her Units. However, her claim for damages fell through, as the evidential gaps in her case remained unplugged.

The devil is sometimes in the details. Just as small shifts in the direction of a ship’s rudder have a profound effect on her course, the trajectory of litigation too can turn on seemingly insignificant matters. Questions of proof, though sometimes overlooked, remain central in the conduct of cases. We hence strive to keep these in view as we assist our clients in navigating the complexities of litigation.