Holland Leedon v Metalform: Breach of Warranty & Damages Calculation

Holland Leedon Pte Ltd (in liquidation) ("HL") appealed against an arbitrator's decision in favor of Metalform Asia Pte Ltd ("MA") regarding a dispute arising from the sale and purchase of HL's business to MA. MA claimed damages for breach of warranties under a sale and purchase agreement. The High Court of Singapore dismissed the appeal, finding that the completion statement did not preclude MA's claim for expectation loss based on diminution in value, and the arbitrator did not err in not rejecting MA's formula for calculating damages.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Appeal dismissed with costs.

1.3 Case Type

Civil

1.4 Judgment Type

Written Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Appeal concerning breach of warranty in a sale and purchase agreement. The court addressed the calculation of damages and the effect of a completion statement.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Holland Leedon Pte Ltd (in liquidation)AppellantCorporationAppeal DismissedLost
Metalform Asia Pte LtdRespondentCorporationAppeal DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Belinda Ang Saw EanJudgeYes

4. Counsels

Counsel NameOrganization
Lee Eng BengRajah & Tann LLP
Sim Kwan KiatRajah & Tann LLP
Low Poh LingRajah & Tann LLP
Farrah SalamRajah & Tann LLP
Chew Kei-JinTan Rajah & Cheah
Moiz Haider SithawallaTan Rajah & Cheah
Chelva Retnam RajahTan Rajah & Cheah

4. Facts

  1. Holland Leedon sold its business to Metalform Asia for approximately US$264 million.
  2. Metalform Asia claimed that Holland Leedon breached warranties related to its business operations.
  3. Metalform Asia quantified its warranty claims at S$30,993,960.18.
  4. Holland Leedon sought summary determination of issues related to the completion statement and warranty obligations.
  5. The arbitrator ruled in favor of Metalform Asia on all three issues.
  6. The completion statement was not challenged for fraud or manifest error.
  7. There was no warranty given on the valuation of the business.

5. Formal Citations

  1. Holland Leedon Pte Ltd (in liquidation) v Metalform Asia Pte Ltd, Originating Summons No 1679 of 2007, [2012] SGHC 90

6. Timeline

DateEvent
Sale and purchase agreement signed
Sale and purchase agreement amended
Acquisition completed under the sale and purchase agreement
Arbitration commenced
Holland Leedon applied for summary determination of three issues to the Arbitrator
Arbitrator's Decision on Summary Determination of Issues issued
Holland Leedon applied for leave to appeal against the Decision
Leave to appeal granted
Metalform Asia sought leave to appeal against the 2010 September Order
Metalform Asia’s application dismissed
Judgment reserved

7. Legal Issues

  1. Breach of Warranty
    • Outcome: The court found that the completion statement did not preclude MA's claim for expectation loss based on diminution in value.
    • Category: Substantive
    • Sub-Issues:
      • Failure to comply with customer requirements
      • Inaccurate financial performance
      • Incorrect EBITDA
  2. Damages Calculation
    • Outcome: The court found that the arbitrator did not err in not rejecting MA's formula for calculating damages.
    • Category: Substantive
    • Sub-Issues:
      • Diminution in value
      • Cost of cure
      • Recurring costs
      • EBITDA multiplier
  3. Interpretation of Contractual Clauses
    • Outcome: The court interpreted the contractual clauses to determine the scope of the completion statement and the remedies available for breach of warranty.
    • Category: Substantive
    • Sub-Issues:
      • Final and binding nature of completion statement
      • Exclusion of remedies
      • Warranty on EBITDA

8. Remedies Sought

  1. Monetary Damages

9. Cause of Actions

  • Breach of Contract
  • Breach of Warranty

10. Practice Areas

  • Commercial Litigation
  • Arbitration

11. Industries

  • Manufacturing

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Singapore Telecommunications Ltd v Starhub Cable Vision LtdCourt of AppealYes[2006] 2 SLR(R) 195SingaporeCited for the general rule that clear words are required in a contract to exclude or restrict remedies.
Dixons Group plc v Murray-Obodynski and othersEnglish Court of AppealYes[2000] 1 BCLC 1England and WalesCited to illustrate the principle that clear words in the contract are needed to exclude or restrict remedies.
Thomas Witter Ltd v TBP Industries LtdHigh CourtYes[1996] 2 All ER 573England and WalesCited to illustrate the principle that clear words in the contract are needed to exclude or restrict remedies.
EXAPL Limited v Pact Group (NZ) LimitedHigh CourtYes[2011] NZHC 1815New ZealandCited for observations on the purpose of a completion statement.
Devji Gorecia, Mukta Gorecia, AG Property Investments Ltd v Zahir Somani, Hanif Somani, Pearl Hotel Holdings Limited, Pearl Hotels (Gatwick) Limited, Gatwick Worth Hotel LimitedHigh Court of JusticeYes[2008] EWHC 2970 (QB)England and WalesCited to demonstrate that the time to adduce evidence of values is at the trial of the merits.
Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd (formerly STC Submarine Systems Ltd)Court of AppealNo[1999] 2 Lloyd Rep 423England and WalesCited regarding the assessment of damages by applying a price/earnings ratio.
Club Hotels Operations Pty Limited v CHG Australia Pty LimitedSupreme Court of New South WalesNo[2005] NSWSC 998AustraliaCited regarding the basis for determining the price for hotel businesses.
Lion Nathan Ltd v CC Bottlers LtdPrivy CouncilYes[1996] 1 WLR 1438United KingdomCited as an illustration of finding an appropriate measure of damages where the warranty is not as to whether the company had a specified level of profits but whether reasonable care has been exercised in producing a profit forecast.
Yip Holdings Pte Ltd v Asia Link Marine Industries Pte LtdCourt of AppealYes[2012] 1 SLR 131SingaporeCited for the principle that the fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages.
Robertson Quay Investment Pte Ltd v Steen Consultants Pte LtdCourt of AppealYes[2008] 2 SLR(R) 623SingaporeCited for the principle that the fact that damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Arbitration Act (Cap 10 Rev Ed 2002), s 49Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Sale and purchase agreement
  • Warranty
  • Completion statement
  • EBITDA
  • Diminution in value
  • Recurring costs
  • Purchase consideration
  • Loss of bargain
  • Cost of cure
  • Multiplier

15.2 Keywords

  • breach of warranty
  • damages
  • completion statement
  • EBITDA
  • sale and purchase agreement
  • arbitration
  • Singapore

17. Areas of Law

Area NameRelevance Score
Contract Law75
Breach of Contract75
Arbitration60
Commercial Disputes60
Damages Assessment60
Damages60
Interpretation of contractual terms50
Corporate Law40
Company Law40
Shareholders Agreement40
Performance of Contract30
Restructuring and Insolvency30
Summary Judgement30
Insolvency Law30
Misrepresentation25

16. Subjects

  • Contract Law
  • Commercial Law
  • Arbitration