19 October 2020
Kiri Industries Limited and another v DyStar Global Holdings (Singapore) Pte Ltd  SGCA 05
Decision of the Court of Appeal (delivered by Sir Bernard Rix IJ):
Outcome: CoA allows in part the appeal against the Singapore International Commercial Court’s decision on the quantum of damages to be awarded for breach of non-competition and non-solicitation obligations in a joint venture between two dye manufacturers.
Pertinent and significant points of the judgment
1 This was an appeal against the assessment of damages by the Singapore International Commercial Court, following a trial on liability in which the appellants, Kiri and Manish, were found to have breached their contractual obligations by soliciting business from three customers away from the respondent, DyStar.
The material facts
2 DyStar is the joint venture company formed by Kiri and another dye manufacturer. Under the joint venture agreement (“the SSSA”), Kiri had agreed to non-competition and non-solicitation obligations. In the bifurcated trial on liability and the subsequent appeal, the court held that Kiri had breached those obligations in respect of three customers in total – FOTL, Brandix and Hayleys. The parties then proceeded to the assessment of damages against Kiri and Manish in respect of those three customers, and this was the subject of the judgment below in DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd  3 SLR 42 (“the assessment judgment”). Following the assessment judgment, the trial court also released a further decision on the award of costs to DyStar in DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd and others  4 SLR 28 (“the costs judgment”).
3 In this appeal, Kiri and Manish appealed against the trial court’s findings on damages in relation to Hayleys only. The trial court had found that Kiri’s competition caused loss of sales to DyStar from 2012–2018, and assessed that loss to be equivalent to DyStar’s sales in 2009 discounted by 25%. Kiri and Manish appealed primarily on the basis that there was no causation of loss at all, so that damages should be merely nominal. Kiri and Manish also submitted that the choice of 2009 as the base line year was arbitrary, and that the trial court’s discount of 25% on the 2009 figures was also arbitrary, unreasoned and out of line with the general statistics. Nonetheless, Kiri and Manish themselves did not advance any particular fall-back position on what the better base line should be.
The court’s decision
4 The Court began by setting out the figures showing Kiri’s and DyStar’s sale of their respective dyes to Hayleys over the relevant periods, and making certain observations about those figures.
5 First, DyStar’s sales to Hayleys were in continuous and steep decline from 2007 to 2011, over five years prior to Kiri’s entry on the scene. Secondly, Kiri’s sales began in 2012, tailed off significantly in 2017 and had all but gone in 2018, which was said to be for reasons connected with the commencement of the present litigation: at  and .
6 Thirdly, in 2013–2016, DyStar suffered an almost complete collapse in sales to Hayleys, followed by a recovery in 2017 and 2018 as Kiri’s sales to Hayleys faded and ended. These considerations prima facie gave force to DyStar’s complaint, and the trial court’s finding, that Kiri’s competition caused loss of sales to DyStar. Thus DyStar’s sales fell as that competition intensified, and then rose again as that competition waned and ceased: at  and .
7 Finally, however, Kiri’s sale figures were somewhat disconnected with DyStar’s. Kiri’s great success in 2013–2016 was out of all comparison with DyStar’s previous sales in 2009–2011, and its subsequent sales in 2017–2018. This lent force to Kiri’s submission and the trial court’s acceptance that Kiri’s success was at least partly driven by selling lower quality products at lower prices in competition with other third party sellers in that market segment, rather than DyStar (who sold only high quality dyes): at .
8 Against the above background, the Court did not accept Kiri and Manish’s submission that there was no connection between Kiri’s sales and DyStar’s sales because Kiri was only selling into a different, lower quality market rather than being in competition with DyStar. The trial court had found that, whatever Hayleys’s interest in lower quality dyes, its continued interest in higher quality dyes was shown by the fact that it obtained assurances from Kiri that its Kirazol dyes were “identical plug-ins” and of high quality. The Court of Appeal agreed with the trial court’s finding, noting in particular that DyStar’s collapse in sales from 2013 – 2016 and its subsequent recovery in 2017–2018 strongly supported the conclusion that Kiri’s competition had some causal effect on the loss of DyStar’s sales: at –.
9 The question was, however, on the assessment of that loss. This was always a difficult question as it involved a counterfactual, hypothetical situation. The law did not require anything approaching certainty or precision in such matters. The assessment of quantum by a trial court would not be rejected or changed by an appellate court in the absence of substantial grounds and a significant difference in outcome, or unless it was clear that the trial court had gone seriously wrong or substantially astray, or had erred in or lacked sufficient rationality: at –.
10 The trial court had to form a view as to what level of sales of high quality dyes DyStar would have continued to maintain, in the absence of Kiri’s competition, to a buyer who was interested in both dyes of higher quality and dyes of lower cost at the expense of quality. The trial court adopted DyStar’s suggestion to use 2009’s sales as a base year to measure DyStar’s sales in the absence of Kiri’s competition over 2012–2018. However, the trial court did not accept DyStar’s suggestion that the 2009 level of sales would have been maintained or increased, and preferred instead a discount of 25% on the 2009 sales without explaining further: at –.
11 The Court of Appeal accepted the trial court’s rejection of DyStar’s case that its losses should be measured at 100% to 120% of its 2009 sales. However, the Court had difficulty with the trial court’s assessment of the discount of 25% to be applied to DyStar’s 2009 sales. An average discount of 25% over the years 2012 to 2018 appeared to be too generous to DyStar, especially considering that DyStar’s actual sales in 2018 after the elimination of Kiri’s competition was a mere fraction of its 2009 sales levels: at .
12 The discount of 25% could be tested against the sales figures from three data points: the first year of Kiri’s competition (2012), the first year after the competition had ceased (2018), and the year immediately before Kiri’s competition started (2011). On an average of the three years, it appeared that the average base line sales achieved by DyStar was the equivalent of the 2009 sales with a discount of 53%. As the year 2011 came close to reflecting this state of affairs as well as being the year immediately before Kiri’s competition started, the Court concluded that 2011 rather than 2009 was the best year to use as a base line, with an appropriate allowance in favour of DyStar on the assumption that its uncharacteristically poor sales (in one category of dye) to Hayleys in 2011 may well have been influenced by other factors such as Hayleys’s own poor financial performance in that year: at –.
13 The Court granted the parties liberty to make submissions on costs, although it was provisionally of the view that Kiri should obtain 50% of the costs of its appeal, having failed on causation but succeeded on quantum. The Court was also provisionally of the view that there was no need to disturb the award of costs below in favour of DyStar: at .
This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.
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