LOSS OF REPUTATION Loss of reputation is one form of non-pecuniary loss under the law of contract.

It deals with societys perception and feelings towards the claimant. Nevertheless, a claimant complaining of loss of reputation is generally not only concerned with the loss of reputation itself, but also the pecuniary loss flowing from it. Addis v Gramophone Co Ltd1 is the leading authority that damages are irrecoverable for loss of reputation and any pecuniary loss flowing from it. Subsequently, cases have continued to deny recovery for the former, but allowed recovery for the latter, for certain types of cases. The first type is where the breach causes the claimant to suffer a loss of income flowing from the loss of chance to enhance his reputation, including the refusal to allow an actors appearance2 and to publish an authors book.3 The second type is where the contractual breach causes a mismanagement of advertising.4 The third type is where a bank refuses to honour the claimant traders cheque.5 And the last type is where the defendant supplies goods below the standard required of the claimants customers.6 In the leading modern case of Malik v Bank of Credit and Commercial International SA, the House of Lords explained and distinguished Addiss case. In Maliks case, the applicant was an employee of the defendant which carried out a bank business on a fraudulent manner. In 1991, he was terminated from his employment on the grounds of redundancy. He had a difficulty to obtain employment in the financial services industry because of the stigma attaching to him as a former employee of the defendant. He initiated an action to recover damages for loss of reputation but was rejected. He then made an appeal at the House of Lords. Lord Nicholls held that in reference to Addis v Grammaphone, the court opined that, There are very few dismissals, at least where the ground is misconduct or incompetence, where the employee could not allege that his job prospects had suffered as a result of dismissal.

1 2

[1909] AC 488. See Marbe v George Edwardes (Daleys Theatre) Ltd [1928] 1 KB 269. 3 See Tolnay v Criterion Film Productions Ltd [1936] 2 All ER 1625. 4 See Aerial Advertising Co v Batchelors Peas Ltd [1938] 1 KB 269 5 See Rolin v Steward (1854) 14 CB 595 6 See GKN Centrax Gears Ltd. v Matbro Ltd [1976] 2 Lloyds Rep 555.

In any similar cases as Addis v Grammaphone, if claims are to be allowed, it would place major burdens on employers. Thus, if this case is to be reversed this ought to be done by legislation, not by courts. Here, the applicant was dismissed on the grounds of redundancy. There was no issue of misconduct. There was an implied obligation on the defendant not to carry on a corrupt business. It was reasonably foreseeable that in consequence of the defendants corruption, there was a serious possibility that an employees future employment prospects were handicapped. There was a breach of contract which gave rise to financial loss which on ordinary principles would be recoverable as damages for breach of contract. Thus the appeal was allowed. In Haron bin Mundir v Singapore Amateur Athletic Association7 the plaintiff, a well known amateur athlete was an undisputed champion for the 100, 200, and 400 metre track events. The defendants are an amateur athletic association. In 1989, the plaintiff who had been sent to Japan for training had returned prematurely. Because of this, he was alleged of committing misbehaviour. Upon recommendations by the high committee and the power of the defendant, the plaintiff was suspended from active competition for two years. Selvam JC made a reference to the case of Florence Bailes v Ng Jit Leng. In that case, the plaintiff was a member of a club in Penang where the defendant was the president of the club. She brought an action against the defendant on the basis that she suffered loss of reputation due to the suspension from being the member of the club. Ajaib Singh J decided that there was nothing in law to preclude the awarding of general damages in such cases. In distinguishing the mentioned case, Selvam JC held that these are unquestionably recognized heads of damage in the regime of law of torts. However, in the realm of the law of contract, such damages may only be awarded in cases of breach of contract. The court refused the claim of damages for loss of reputation. It was held that the test of remoteness in law of contract is different from the law of torts. A pure breach contract cannot convert into a tort in order to recover damages. The law does not justify an award of general damages as claimed by the plaintiff and he was not entitled to them. In the case of CCA Holdings LTD v Palm Resort Bhd8 the plaintiffs are managers of the defendants club known as Palm Resort Golf and Country Club under a technical assistance and
7

[1992] 1 SLR 18 [1998] 4 MLJ 143

managerial agreement for ten years in 1993. In 1998, the defendant gave to the plaintiffs a one month notice in writing to terminate the agreement on the ground that the club had not generated profit as required in the agreement. Plaintiffs claimed that such manner of termination of their services would have adverse impact on their goodwill and reputation as managers of prestigious clubs internationally. Damages for loss of reputation or credibility will not be as a general rule awarded for breach of contract. They cited the case of Addis v Grammaphone and Haron bin Mundir v Singapore Amateur Athletic Association. In reference to Section 74 (1) and (2) of the Contract Act 1950, if the damage is too remote, then it would not be granted. In the case of CCA Holding, James Fong J stated that It is now an issue whether the plaintiffs losses fall within the exception provided. They are not bankers, not actors, and not those in the literary field. Their business and duty were not to attract publicity for themselves. They engaged as professionals to operate the club and not to sell themselves. Undoubtedly, if they are successful they will gain reputation. But this is consequential thus it does not falls within the exceptions set out in decided cases. Therefore, the plaintiffs claim cannot be recovered for breach of contract. Only if the defendants are found responsible for the breach of the agreement, the plaintiffs will be allowed in their claim by virtue of Section 74 of the Contracts Act. In the case of Subramaniam Paramasivam & 2 Ors v Malaysian Airlines System Bhd9, the first plantiff is a practising lawyer, the head of the youth wing of Malaysian Indian Congress (MIC), the MICs Chief of Information for the State of Perak, and held chairmanship of two private registered companies. The plaintiffs were passengers of MH 181 from Madras to Kuala Lumpur. Upon arrival in Kuala Lumpur, the defendants officer insisted the plaintiffs luggage be reweighed. Their baggage was found to be in excess of the permitted weight and they were requested to pay RM618, the additional fee for the excess baggage. During this two-hour incident, the first plaintiff had many supporters waiting for him at the airport. The plaintiffs claimed that they suffered non-pecuniary loss on account of physical inconvenience, mental distress, agony and humiliation they had undergone. The first plaintiff and his wife, the second plaintiff also claimed for loss of reputation and injured feelings.

[2002] 1 MLJ 45

It was held by Kwang Hee Gee J, any assessment of damage must necessarily begin with the principle which is a consideration of remoteness of damage from a breach of contract or tort. As for the law of contract, provided in S74 of the Contract Act 1950, the damage suffered must arise in the usual course of things from the breach and it must not be too remote. In reference to the case of Haron bin Mundir v Singapore Amateur Athletic Association, contracts are concerned with commercial matters and that the obligations of the parties involve mainly the fulfilment of the contract. Here, the loss of reputation cannot be regarded as matters that arose in the natural course of events or within the contemplation of the contracting parties when they entered into contract. The contract of the parties in this case was clearly of a nature that affected the personal, social and family of the plaintiffs. But it was an issue whether by having baggage reweighed, the plaintiff would in the natural course of things have suffered the non pecuniary loss. It was unbelievable and ought not to have been accepted as proof that the first plaintiffs have suffered loss of reputation. Thus the court granted damages RM300 for the discomfort and inconvenience for a short duration of only two hours. In the recent case of Sindora Furniture Sdn Bhd V. Top - Range Product (M) Sdn Bhd10 the plaintiff claimed that, it has performed its obligations when it delivered the Manhattan and Alaska bedroom sets to the defendant and the defendant has taken delivery and taken possession of the goods. After taking delivery of the bedroom sets the defendant retained the goods without intimating to the plaintiff that it has rejected them. In fact the defendant subsequently exported the bedroom sets to its customers overseas. Thus, in relation to the bedroom sets the defendant has acted in a manner which is inconsistent with the ownership of the plaintiff. It is the plaintiff's contention that the defendant is liable to pay the purchase price as they have accepted for the bedroom sets. The defendant contends that the bedroom sets in question were defective, not of merchantable quality and not according to the specifications set by the defendant. The defendant received complaints from its overseas customers that the bedroom sets had cracks and were not of merchantable quality. As the bedroom sets were not according to the defendant's specifications and satisfaction the defendant is entitled to refuse payment of the purchase and the defendant's counterclaim is for the following heads of damages:
10

[2010] 1 LNS 881

(i) (ii) (iii) (iv) (v) (vi) (vii)

loss of productivity detention charges haulage charges compensation paid to Anteak Style Furniture transport charges/accommodation loss of business loss of reputation

... ... ... ... ... ... ...

RM20,000.00 RM23,520.00 RM4,722.00 RM12,160.00 RM5,000.00 RM54,720.00 RM172,800,00

Vernon Ong Lam Kiat J held that, the defendants last item of claim (vii) is for loss of reputation, as a general rule damages for loss of reputation will not be awarded for breach of contract as in the case Subramaniam Paramasivam & Ors v Malaysian Airlines System Bhd [2002] 1 CLJ 230 where Kang Hwee Gee J cited a passage by Selvam JC in Haron bin Mundir v SAAA. The judge stated that what we have here is a principally commercial transaction between two commercial entities. As with contracts of this nature non-pecuniary loss such as frustration, mental distress, loss of reputation and injured feelings suffered by a party as a result of the breach are not generally regarded as matters that arose in the natural course of event or which were within the contemplation of the parties when they entered into the contract. In the circumstances the claim for loss of reputation is remote and not recoverable.