Britestone v Smith: Breach of Contract & Damages for Defective Capacitors

In Britestone Pte Ltd v Smith & Associates Far East, Ltd, the Court of Appeal of Singapore heard an appeal regarding a breach of contract claim. Britestone, a sourcing company, was sued by Smith, a distributor, for supplying defective capacitors. Smith resold these capacitors to Celestica Thailand Ltd (CTL), which then installed them onto printed circuit boards for EMC Corporation. When the capacitors were found to be counterfeit, CTL incurred expenses and claimed damages from Smith, who then settled with CTL for US$300,000. Smith sought to recover this amount from Britestone. The court considered whether the damages claimed by Smith were too remote and whether the settlement reached with CTL was reasonable. The Court of Appeal dismissed the appeal, finding that the damages were not too remote and the settlement was reasonable.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

Appeal dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Britestone sued Smith for breach of contract over defective capacitors. The court addressed remoteness of damages and reasonableness of settlement.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Britestone Pte LtdAppellantCorporationAppeal DismissedLost
Smith & Associates Far East, LtdRespondentCorporationJudgment for RespondentWon

3. Judges

Judge NameTitleDelivered Judgment
Chan Sek KeongChief JusticeNo
Andrew Phang Boon LeongJustice of the Court of AppealNo
V K RajahJustice of the Court of AppealYes

4. Counsels

Counsel NameOrganization
Sham Chee KeatRamdas & Wong
Andy LeckWong & Leow LLC
Li Yuen TingWong & Leow LLC

4. Facts

  1. Britestone supplied capacitors to Smith & Associates.
  2. Smith & Associates resold the capacitors to Celestica Thailand Ltd (CTL).
  3. CTL installed the capacitors onto printed circuit boards for EMC Corporation.
  4. The capacitors were discovered to be counterfeit.
  5. EMC claimed damages from CTL for expenses incurred in purging the counterfeit capacitors.
  6. CTL claimed the same amount from Smith & Associates.
  7. Smith & Associates settled with CTL for US$300,000.
  8. Smith & Associates sought to recover the settlement sum from Britestone.

5. Formal Citations

  1. Britestone Pte Ltd v Smith & Associates Far East, Ltd, CA 144/2006, [2007] SGCA 47

6. Timeline

DateEvent
Respondent purchased capacitors from the appellant.
Appellant delivered the capacitors to the respondent in Hong Kong.
CTL discovered that the capacitors supplied by the respondent were counterfeit.
Respondent and CTL reached a settlement.
Respondent sent letters to the appellant seeking payment of the settlement sum of US$300,000.
Respondent paid CTL the sum of US$150,000 by way of a wire transfer.
Respondent paid CTL a further US$150,000 by way of a credit memo.
Respondent’s solicitors sent a letter to the appellant to demand payment of US$309,776.
Appellant’s solicitors responded to the respondent’s solicitors stating that the appellant would not accede to the respondent’s demand.
Respondent’s solicitors replied to the appellant’s solicitors and furnished the appellant with several documents.
Appellant’s solicitors wrote to the respondent’s solicitors denying the allegations that the capacitors which the appellant had supplied were counterfeit.
Respondent’s solicitors wrote to the appellant’s solicitors asserting that the respondent’s efforts in achieving an amicable settlement for the parties’ mutual benefit were not being satisfactorily addressed.
Respondent commenced proceedings against the appellant.
Both parties agreed to a consent judgment by which the appellant admitted liability for the damage caused, leaving the issue of quantum to be assessed by the court.
Decision Date

7. Legal Issues

  1. Breach of Contract
    • Outcome: The court found that the appellant breached an implied condition of the contract.
    • Category: Substantive
  2. Remoteness of Damages
    • Outcome: The court held that the damages claimed by the respondent were not too remote.
    • Category: Substantive
  3. Reasonableness of Settlement
    • Outcome: The court found that the settlement reached between the respondent and CTL was reasonable and could be relied on as reflecting the actual loss suffered by the respondent.
    • Category: Substantive

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Electronics

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty LimitedHigh CourtYes(1998) 193 CLR 603AustraliaCited for the broad philosophy supporting downstream settlements and the balance between upholding settlements and assessing their reasonableness.
Smith & Associates Far East, Ltd v Britestone Pte LtdHigh CourtYes[2006] SGHC 186SingaporeRefers to the assistant registrar’s grounds of decision on the issue of remoteness and the reasonableness of the settlement.
Smith & Associates Far East Ltd v Britestone Pte LtdHigh CourtYes[2007] 1 SLR 958SingaporeRefers to the judge's decision on the registrar's appeal, addressing remoteness and reasonableness of the settlement sum.
Monarch Steamship Co, Limited v Karlshamns Oljefabriker (A/B)House of LordsYes[1949] AC 196United KingdomCited for the principle that reasonable businessmen understand the ordinary practices and exigencies of each other's trade or business.
Browne v DunnN/AYes(1893) 6 R 67N/ACited for the proposition that matters upon which it is proposed to contradict the evidence-in-chief given by the witness must normally be put to him.
Arts Niche Cyber Distribution Pte Ltd v PPN/AYes[1999] 4 SLR 111SingaporeCited for the proposition that matters upon which it is proposed to contradict the evidence-in-chief given by the witness must normally be put to him.
Bence Graphics International Ltd v Fasson UK LtdCourt of AppealYes[1998] QB 87United KingdomCited to support the argument that the appellant was aware of the respondent’s intention to use the capacitors in the particular manner in which they had actually been used.
Biggin & Co Ld v Permanite LdN/AYes[1951] 1 KB 422N/ACited for the principle that if a subsale is within the contemplation of the parties, the damages must be assessed by reference to it.
Biggin & Co Ld v Permanite LdCourt of AppealYes[1951] 2 KB 314United KingdomCited as a formidably unfavourable authority against the appellant on the reasonableness issue. The court disagreed with Devlin J that the evidence of the settlement between the plaintiff and the Dutch government was irrelevant because the making of the settlement had been a voluntary act by the plaintiff.
Brown Noel Trading Pte Ltd v Donald & McArthy Pte LtdN/AYes[1997] 1 SLR 1SingaporeCited to show that the English Court of Appeal decision of Biggin & Co (CA) had been earlier adopted by this court.
White Industries Qld Pty Ltd v Hennessey Glass & Aluminium Systems Pty LtdCourt of AppealYes[1999] 1 Qd R 210AustraliaCited to water down the standing of the English Court of Appeal decision of Biggin & Co (CA).
C A & M E C Mcinally Nominees Pty Ltd v HTW Valuers (Brisbane) Pty LtdSupreme Court of QueenslandYes(2001) 188 ALR 439AustraliaCited to show that an insured seeking damages from an insurer for breach of its promise to grant indemnity must prove what loss it has suffered by reason of the breach.
Wong v HutchisonSupreme Court of New South WalesYes68 WN (NSW) 55AustraliaCited to show that a trader who failed to deliver goods to his buyer was held liable to the buyer for damages which the latter settled with the sub-buyer.
BP plc v Aon LtdQueen’s Bench Division (Commercial Court)Yes[2006] 1 All ER (Comm) 789United KingdomCited to show that in determining whether a settlement is reasonable such that it can be relied upon to evidence the actual loss suffered, the courts should have regard to the fact that most settlement agreements are entered into on the basis of responsible legal advice.
Mander v Commercial Union Assurance Co plcN/AYes[1998] Lloyd's Rep IR 93N/ACited to show that the evaluation of the reasonableness of a settlement should not involve the court in arriving at a conclusive judgment on the merits of substantial issues which were contentious in the settled litigation.
Onderlinge Verzekering Maatshcappij “Tegen Zeegevaar” v Hogg Robinson & Gardner Mountain Reinsurance LtdQueen’s Bench Division (Commercial Court)YesN/AUnited KingdomCited to show that the fact that a settlement was concluded on this basis comes as no surprise, and in dealing with the present indemnity proceedings I am entitled on the principles of [Biggin v Co (CA)] to have regard to the fact that that settlement agreement was entered into on the basis of responsible legal advice.
Bodycote HIP Ltd v Vanguard Engineering LtdQueen’s Bench Division (Technology and Construction Court)YesN/AUnited KingdomCited to show that Vanguard are entitled to rely on their settlement to determine the quantum of damages recoverable: see [Biggin & Co (CA)].
P & O Developments Ltd v Guy’s and St Thomas’ National Health Service TrustQueen’s Bench Division (Technology and Construction Court)Yes(1998) 62 Con LR 38United KingdomCited to show that a settlement between A and B, however reasonable it may be from the point of view of A and B, cannot determine C’s liability to B.
Fletcher & Stewart v Peter Jay & PartnersCourt of AppealYes(1976) 17 BLR 38United KingdomCited to show that a defendant cannot impose liability on a third party by settling a plaintiff's claim against him, where the obligations of the defendant to the plaintiff are the same as those of the third party to the defendant.
Hop Fat Garments Factory Limited v Siber Hegner and Company (HK) LimitedSupreme Court of Hong KongYes[1987] HKCU 93Hong KongCited to show that the approach in Biggin & Co (CA) has been followed in Hong Kong.
Atico International (HK) Ltd v Sparko (Far East) LtdHong Kong Court of First InstanceYes[2006] HKCU 1915Hong KongCited to show that if the plaintiff reasonably settled [the third party’s] claim out of court, it may recover as damages from the defendant a reasonable amount paid under the settlement.
Matsumoto Shipyards Limited v Forward Machine Shop LtdBritish Columbia Supreme CourtYes(1984) 25 ACWS (2d) 114CanadaCited to show that when a settlement of differences is reached under legal advice, it is prima facie taken to be reasonable.
Westcoast Transmission Company Limited v Cullen Detroit Diesel Allison LtdBritish Columbia Supreme CourtYes(1986) 39 ACWS (2d) 267CanadaCited to show that the Court of Appeal acknowledged that proof of all the facts in a ... complex case might be long and costly (as here) but without proving every detail if the whole of the evidence showed to the judge that the sum paid was a reasonable one and was “in the neighbourhood” of what would likely have been awarded as damages, then the settlement itself was the proper sum.
Westcoast Transmission Co Ltd v Cullen Detroit Diesel Allison LtdBritish Columbia Court of AppealYes(1990) 70 DLR (4th) 503CanadaCited to show that the appeal against the decision in Westcoast Transmission Company Limited v Cullen Detroit Diesel Allison Ltd was dismissed.
Rivtow Straits Limited v B C Marine Shipbuilders LimitedBritish Columbia Supreme CourtYes[1978] 2 ACWS 370CanadaCited to show that the onus rests upon Rivtow to show that its defence was a reasonable one, and the issue is one of fact to be decided by this court.
Fisher v Val de TraversN/AYes(1875-76) LR 1 CPD 511N/ACited to show that the circumstances here were very similar to those which existed in the case of Fisher v. Val de Travers.
E & J Glasgow Limited v UGC Estates LimitedN/AYes[2005] CSOH 63N/ACited to show that there are plainly a variety of methods whereby a settlement of a third party claim may come about.
Seven Seas Properties Ltd v Al-Essa (No 2)English High CourtYes[1993] 1 WLR 1083United KingdomCited to show that it is neither pleaded nor proved that the settlement was a reasonable one to enter into.
Holland Hannen & Cubitts (Northern) Ltd v Welsh Health Technical Services OrganisationEnglish Court of AppealYes(1985) 35 BLR 1United KingdomCited to show that when making the compromise, [the] parties to it took into consideration any extraneous matters such as lack of insurance cover or liquidity problems.
Hadley v BaxendaleN/AYes(1854) 9 Exch 341N/ACited to show that the reasonable settlement of claims may be a matter which parties may be held to have had in reasonable contemplation under the second rule in Hadley v Baxendale.
Pinnock Brothers v Lewis and Peat, LimitedN/AYes[1923] 1 KB 690N/ACited to show that it was within the contemplation of the parties that this copra cake should used … for cattle food and nothing else.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Sale of Goods Act (Cap 393, 1999 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Capacitors
  • Counterfeit
  • Printed Circuit Boards
  • Purging Exercise
  • Settlement
  • Remoteness of Damages
  • Reasonable Settlement
  • Downstream Settlements
  • Electronic Components

15.2 Keywords

  • breach of contract
  • damages
  • capacitors
  • settlement
  • commercial transaction
  • sale of goods

17. Areas of Law

Area NameRelevance Score
Breach of Contract90
Contract Law90
Damages80
Commercial Law70
Sale of Goods70
Commercial Disputes60
Performance of Contract50

16. Subjects

  • Commercial Transactions
  • Breach of Contract
  • Damages