Azmi CJ (Malaya):

I have had the opportunity of reading the judgement of Mr. Justice Ong Hock Thye, and I agree with what is stated in the judgement. I would therefore allow the appeal and give judgement in favour of the appellant for the amount stated in the judgement with costs here and in the Court below.

JUDGMENT

Ong Hock Thye FJ:

This appeal is raised because the appellant is dissatisfied with the amount of damages awarded him by the High Court at Ipoh in an action for breach of contract against the respondents.

The learned Judge held that there had been a breach: against his judgment on this point there has been no appeal. The only issue before us, therefore, is whether the judgment is right as to the principles applied in the assessment of damages.

Section 74(1) of the Contracts (Malay States) Ordinance, 1950, is the statutory enunciation of the rule in Hadley v. Baxendale [1854], 9 Exch 341. This section reads:

When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

The rule lays down the main principles as follows:

Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered as either arising naturally, i.e. according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

In more compendious terms the rule has been restated by Asquith LJ in Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 KB 528, 539 in a passage which I shall quote in full:

(1)It is well settled that the governing purpose of damages is to put the party whose rights have been violated in the same position so far as money can do so, as if his rights had been observed: (Sally Wertheim v. Chicoutimi Pulp Co. [1911] AC 301) This purpose, if relentlessly pursued, would provide him with a complete indemnity for all loss de facto resulting from a particular breach, however improbable, however unpredictable. This, in contract at least, is recognized as too harsh a rule. Hence,

(2)In cases of breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of the contract reasonably foreseeable as liable to result from the breach.

(3)What was at that time reasonably so foreseeable depends on the knowledge then possessed by the parties or, at all events, by the party who later commits the breach.

(4)For this purpose, knowledge 'possessed' is of two kinds; one imputed, the other actual. Everyone, as a reasonable person, is taken to know the 'ordinary course of things' and consequently what loss is liable to result from a breach of contract in that ordinary course. This is the subject matter of the 'first rule' in Hadley v. Baxendale, supra. But to this knowledge, which a contract-breaker is assumed to possess whether he actually possesses it or not, there may have to be added in a particular case knowledge which he actually possesses, of special circumstances outside the 'ordinary course of things,' of such a kind that a breach in those special circumstances would be liable to cause more loss. Such a case attracts the operation of the 'second rule' so as to make additional loss also recoverable.

(5)In order to make the contract-breaker liable under either rule it is not necessary that he should actually have asked himself what loss is liable to result from a breach. As has often been pointed out, parties at the time of cont