Mohamed Dzaiddin bin Haji Abdullah SCJ:

This is an appeal by the second defendant, now the appellant, against the decision of the High Court Kuala Lumpur given on 11 May 1993 on the award of damages in respect of a breach of contract for the supply and sale of ambidextrous non-sterile latex examination gloves. By a written agreement dated 1 August 1988 (the said agreement) made between the plaintiff and the second defendant as agent for the first defendant, it was agreed that the plaintiff would supply to the first defendant two million pieces of rubber gloves per month commencing from November 1988 to October 1989 for a total purchase price of US$1,848,000. The breach of contract was the failure of the first defendant to issue an irrevocable letter of credit in favour of the plaintiff thirty days before the date of the first shipment of the goods which was to have been on or before 31 October 1988.

As a result of the breach on the part of the first defendant to issue the letter of credit, the plaintiff instituted an action against both defendants on 16 August 1989 claiming damages for a total sum of RM6,155,159 being loss of profits, interest, marketing costs and losses incurred for its 1st and 2nd production lines. On 10 July 1990, the Registrar granted summary judgment on the issue of liability only against the second defendant and an appeal therefrom to the Judge in chambers was dismissed on 28 August 1990. On 5 December 1990, the Supreme Court affirmed the decision of the High Court. In the meanwhile, the Registrar proceeded to hear evidence on the assessment of damages. The hearing concluded on 16 November 1991 without the Registrar delivering any decision as she had resigned from service. The matter was then taken over by the High Court Judge, who on 11 May 1993 awarded the plaintiff damages in the sum of RM3,102,926.95 for loss of profits and RM108,434.23 for marketing costs including interest at 8% p.a. on the total amount from 5 September 1989 until payment, and costs. It is against the assessment of the above heads of damage that this appeal lies.

RM3,102,926.95 for loss of profits

The learned Judge awarded the sum of RM3,102,926.95 for loss of profits based on the plaintiff's proposition that as there was no available market for the gloves, the measure of damage was the difference between the contract price and the value of the gloves to the plaintiff at the time of the breach, which value was based on the price at which the gloves were eventually sold. According to the plaintiff, the amount which it would have received under the said agreement was RM4,904,264.80. However, as a result of the breach, the plaintiff had to sell the 24 million gloves for RM1,801,337.85, thereby incurring a loss of RM3,102,926.95. In accepting the above formula, his Lordship concluded in his grounds of judgment as follows (p. 24 A.R.):

When a buyer fails or refuses to perform his obligations under a contract for the sale of goods, the seller is ordinarily entitled to the difference between the contract price and the price at which the goods could be sold in an available market, if any. If there is no available market, then the measure of damages would be the full estimated loss of profit resulting from the breach of the contract:Lee Heng & Co. v. Melchers & Co. [1963] MLJ 47; Lee Sau Kong V. Leow Cheng Chiang ; Harlow and Jones v. Panex (International) [1967] 2 Ll R. 509. (Emphasis added).

It appears that in coming to his decision on the sum of RM3,102,926.95 being the plaintiff's loss of profits, the learned Judge rejected the second defendant's proposition that the computation should be by reference to the difference between the contract price and the cost of the manufacture of the gloves, the cost of manufacture after the breach being in excess of the resale price. The learned Judge found that the second defendant's proposition was founded on a wrong assumption that the plaintiff was obliged under the said agreement to m