In a recent landmark case, the Singapore High Court for the first time ordered punitive damages for a breach of contract under Singapore laws. Beware for Singapore Contract Drafting!!

Punitive damages awarded for breach of contract

Rajah & Tann Singapore LLP

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Singapore December 7 2015

Introduction
Ordinarily, damages for breach of contract are compensatory in nature. However, certain jurisdictions have recognised the concept of punitive damages for breach of contract, where the breach is so oppressive that additional damages are awarded as a form of „punishment‟. In the recent case of Airtrust (Hong Kong) Ltd v PH Hydraulics & Engineering Pte Ltd [2015] SGHC 307, the Singapore High Court confirmed that punitive damages are in fact available for breach of contract in Singapore law.
The Plaintiff in this matter was successfully represented by Tan Chuan Thye S.C., Avinash Pradhan and Alyssa Leong of Rajah & Tann Singapore LLP.

Punitive Damages
The Plaintiff had purchased a 300 tonne reel drive unit (“RDU”) from the Defendant for offshore use. However, there was a major failure of the RDU, and after considering evidence from the expert witnesses, the High Court found that the RDU suffered from major manufacturing and design defects at the time of delivery.

On existing case law, there would have only been an award of compensatory damages, which are geared towards compensating the Plaintiff for the losses incurred as a result of the Defendant‟s breach of contract. However, due to the severity of the breach, the Plaintiff further sought punitive damages against the Defendant.

The High Court granted the Plaintiff‟s application. While a previous Court of Appeal had remained open to the possibility of punitive damages for breach of contract, this is the first instance in which a Singapore court has actually made such an award.
It should be noted that punitive damages are only awarded in exceptional cases for „malicious, oppressive and high-handed‟ misconduct that represents a marked departure from ordinary standards of decent behaviour. Punitive damages are aimed at imposing a form of retribution on the defendant, deterring similar misconduct, and to mark the community‟s denunciation of such behaviour. If compensatory damages are insufficient to achieve these objectives, punitive damages may be imposed.

On the facts of the case, the High Court found that the Defendant‟s overall conduct was sufficiently reprehensible and outrageous to warrant punitive damages.

1. The Defendant had copied an untested RDU design, and had modified it for the Plaintiff‟s requirements without comprehensive engineering calculations.
2. The Defendant was aware of the RDU‟s structural failing, but had fraudulently misled the certification agency by falsifying its structural submissions so as to make the design pass.
3. The Defendant installed defective and substandard parts without checking on their quality.

​The Defendant‟s blatant disregard of its contractual obligation to design and construct an RDU that was satisfactory in quality and fit for its purpose, and its fraudulent and deliberate misconduct led to the High Court ordering that punitive damages be assessed.


Concluding Words
This decision marks a significant step in the development of Singapore contract law. It is a recognition of the need, in certain cases, for punitive damages to deal with exceptional breaches of contract.

The question of what quantum of damages is sufficient for punitive damages is new in the Singapore context. The legal community will be eagerly watching the assessment of damages in this matter to see what factors and guidelines and considered by the court.

Rajah & Tann Asia LLP - Tan Chuan Thye S.C and Avinash Vinayak Pradhan