06:10 AM Cai Jianye Edwin (Senior Associate, DennisMathiew)

    Of “Relevant Markets” and “Windfalls” – The Court of Appeal’s decision in Marco Polo Shipping Company Pte Ltd v Fairmacs Shipping & Transport Services Pte Ltd [2015] SGCA 44



    It is settled law in Singapore that the first port of call for the Courts in assessing damages for the tort of conversion is the market value of the goods, it being the simplest and most convenient way of calculating the value of the goods: see Chartered Electronics Industries Pte Ltd v Comtech IT Pte Ltd [1998] 2 SLR(R) 1010 (“Chartered Electronics”) (at [17]). This legal principle has its origins in the English Court of Appeal decision of J & E Hall, Ltd v Barclay [1937] 3 All ER 620 (“Hall v Barclay”) at 623. It also follows that, in order to determine the market value, a claimant will have to first establish the relevant market from which to derive the market value.

    What happens then in a situation where the Court is confronted with a claimant that is seeking to rely on a market further down the supply chain? The Court of Appeal’s decision in Marco Polo Shipping Company Pte Ltd v Fairmacs Shipping & Transport Services Pte Ltd [2015] SGCA 44 (“Marco Polo”) provides a welcome clarification on this issue (at [32]) in that the market to be relied upon must be a “relevant market” and a claimant should never be allowed to simply rely on “some other market out there” – typically somewhere much further down the supply chain, wherein goods are traded at a vastly more expensive rate.

    Background Facts

    In Marco Polo, the Appellant ship owners had been found liable for converting the Respondent’s cargo, namely 4,300 MTS of river sand (the “Cargo”).

    The Respondents sought to use evidence provided by a related company of the Respondents (ie the trading arm of the group) to fix the market value of the Cargo and to prove that damages should be assessed at US$201,455 .This was set out in a table consisting of alleged sales by the related company to third parties in Port Blair, India (where the Cargo was supposed to have been delivered to the Respondents but never arrived). The Respondents essentially took the average of the sale prices as set out in the table, which comes up to US$46.85 per MT and multiplied it by 4,300 to arrive at US$201,455. It is noteworthy that the sale prices contained in the table were based on sales of river sand of no more than 7MT per sale.

    The Assistant Registrar at the hearing for the assessment of damages was not persuaded by the Respondent’s evidence and assessed damages at US$62,950 instead, being the amount that the Respondent had actually paid for the river sand sale (at [12]).

    It is settled law in Singapore that:-

    (i) If there is no market for the goods converted, the measure of damages would be the cost of replacement - The "Endurance 1" [1999] 1 SLR 661 (at [34]); and

    (ii) Where the market price cannot be determined, the value of the goods can be determined, instead, by the cost of replacement, which is typically the price at which the goods were bought - Chartered Electronics (at [18]).

    The Respondents appealed to the High Court Judge in chambers (the “Judge”). The appeal was allowed and the damages award was increased to US$141,226 (at [14]). The Judge’s decision was reported as Fairmacs Shipping & Transport Services Pte Ltd v Harikutai Engineering Pte Ltd and another [2015] 1 SLR 904.

    As can be seen, the Judge did not award entire sum of US$201,455 sought by the Respondents. The Judge allowed a 15% reduction to account for the customs (5%) and landing costs (10%) that the Respondent would have had to pay had the cargo arrived at Port Blair (at [14]). Thereafter, she subtracted US$30,000 from the figure derived above to account for the freight that would have been paid by the Respondent had the cargo been delivered (at [14]).

    The fundamental reason behind the Judge’s decision to allow the appeal was her finding that the Respondent’s evidence supported the existence of a market for river sand at Port Blair at the relevant time (at [16]). The Judge also found that the evidence provided by the Respondents supported the proposition that the market value of river sand in Port Blair in the first week of October 2011 was US$46.85 per MT (at [17]).

    The Appellants appealed to the Court of Appeal: the appeal was allowed and the Assistant Registrar’s award of US$62,950 was restored.

    The Court of Appeal’s Judgment

    Although the Court of Appeal in Marco Polo held (at [38]) that the inadequate evidence provided by the Respondents to prove the existence of a market was sufficient on its own for them to allow the appeal – a finding that was a diametrical opposite to that of the Judge – the Court went on to consider (at [38]) whether the Respondents’ evidence, on the assumption that it was good evidence, established a “relevant market”.

    As mentioned in the introduction above, the Court of Appeal held (at [32]) that the market to be relied upon must be a relevant market and a claimant should never be allowed to rely simply on “some other market out there”. By relevant market, it is meant that the claimant must show that it is a participant of, typically a seller, in that market (at [32]). The reasoning behind the requirement is simple and founded on the well-established principle that damages to be awarded are meant to be compensatory in nature (at [32]). In the earlier Court of Appeal decision of Chartered Electronics, it was held (at [17]) that “[t]he fundamental rule in the assessment of damages is that the plaintiff cannot recover more than the loss actually sustained by him” (emphasis added). In other words, the claimant should not obtain a windfall (at [27] and [42]).

    It is implicit in the Court of Appeal’s reasoning (at [32]) that a windfall would most likely occur if an irrelevant market is relied upon to derived the market value. A market further downstream the business chain is especially likely to be an irrelevant market because the claimant would never be able to fetch that sort of price were it to sell the goods in the course of its business.

    The Court of Appeal explained (at [32]) that in a typical supply chain similar to the facts at hand, entities further up the supply chain simply source for the goods in bulk and transport them to those lower down the supply chain. The latter then leverage on their extensive networks of clients – clients presumably located where the goods are harder to come by – and sell to these clients at a significantly marked-up price. The overall supply chain in this instance described by the Court of Appeal (at [40]) is as follows:-

    “Original seller – The Respondent – The Related Company – Eventual customer”

    On the facts of the case, the Court of Appeal held (at [39]) that the market sought to be relied upon by the Respondents ie. prices based on alleged sales of river sand, by a related company of the Respondents further down the supply chain to third parties in Port Blair, India, was an “irrelevant market”. This is because (i) the Respondent could never have sold the 4,300MT of river sand converted at the price of US$46.85 per MT; and (ii) such compensation, if awarded, would, in these circumstances, surely have resulted a windfall (at [32]).

    The relevant market in this case was the one connecting those in the position of the Respondent to those in the position of the related company. However, not only had no prices been disclosed in relation to transactions in this particular market, there was no evidence at all that such a market even existed (at [41]).


    It would not be difficult to envisage a situation where an entity could be operating as both a buyer and a seller within the same level in a supply chain. For example, a bunker trader (“Bunker Trader A”), as opposed to an end supplier, might on-sell bunkers to another bunker trader (“Bunker Trader B”), who then on-sells it to a vessel owner or charterer as the case may be. In a separate and different transaction, the roles may be reversed in that Bunker Trader B may be selling bunkers to Bunker Trader A instead. Of course, when Bunker Trader B is acting as a seller, he would have to mark up the price in order to obtain a profit from the margins.

    Assuming that a claimant could prima facie establish a relevant market, should the market value be equated as the buying price or the selling price? This question is of course premised on the assumption that a plaintiff is not claiming consequential losses (such as loss of profits). In this connection, Greer LJ’s judgment (at 623) in Hall v Barclay is instructive: “where you are dealing with goods which can be readily bought in the market, a man whose rights have been interfered with is never entitled to more than what he would have to pay to buy a similar article in the market” (emphasis added).

    In the more recent case of Fairfax Gerrard Holdings Ltd v Capital Bank Plc [2007] 1 Lloyd’s Rep 171, Mr Justice Mackie QC observed (at [35]) that “[m]arket value generally means the costs of buying a replacement not what a sale would have yielded”.

    Elsewhere in the Commonwealth, the Supreme Court of Victoria Appeal held in Furness v Adrium Industries Pty Ltd [1996] 1 VR 668 (“Furness”) that the market value ought to be the value at which the plaintiff can buy the replacement goods from the market (the “purchase price”). Ormiston J said (at 683) that “[n]otwithstanding the paucity of reported cases I am convinced that a wholesaler's loss is ordinarily to be assessed by reference to the cost of replacement at the date of conversion” and “it was not correct for the trial judge to select as the appropriate basis for calculating damages the prices at which the respondent might have sold the goods”.

    Ormiston J went on to provide an illustration (at 684), citing from S M Waddams, Law of Damages (2nd edn, 1991) at paras 1.560 and 1.570):

    “[w]here the plaintiff manufactures at a cost of $1 goods that can be sold for $10 or where the plaintiff buys for $1 goods that can be re-sold for $10, the question arises of the proper measure of damages where the goods are lost or destroyed to the defendant's wrong. The question is not answered by saying that the plaintiff recovers the value of the goods, without a consideration of how value is to be determined. The basic principle of damage assessment, that the plaintiff should be put in as good position as would have been occupied if the wrong had not been done, appears to suggest measurement of damages in the examples given by the cost to the plaintiff of replacement. Suppose the case of a retailer who buys china vases for $1 and sells them for $10. If a customer carelessly knocks a vase off the shelf and destroys it, the retailer appears to be fully compensated by damages of $1 plus any associated costs of ordering and replacement. Assuming that there was sufficient stock to meet customers' demands, the retailer has not lost a sale. The customer has not promised to buy the vase, and it seems consequently that the retailer would be overcompensated by the award of $10”, succinctly encapsulates his reasoning in Furness.”

    In the English decision of Sonicare International Ltd v East Anglia Freight Terminal Ltd and Others and Neptune Orient Lines Ltd [1997] 2 Lloyd's Rep 48 (“Sonicare”), a similar approach was taken (at 55 and 56), where the court awarded the replacement cost of the cargo, the value of which the Court equated to the price at which the plaintiffs bought the cargo (ie. the buying price). In doing so, the Court rejected the plaintiff’s attempts to rely on the wholesale price at which they would have resold the goods (ie. the selling price).

    Mr Justice Hallgarten QC held (at 56) that an award based on the price at which the plaintiffs would have resold the goods would be false compensation as there were no lost sales and would have given the plaintiffs an uncovenanted windfall.

    Although Sonicare was a case of negligence, it is still highly relevant to assessing damages in the context of the tort of conversion. This is due to the holding of the Privy Council in The "Jag Shakti" [1985-1986] SLR(R) 448 that the proper measure in law of the damages recoverable is the same whether in conversion or negligence (at [13]).

    The common theme running through Furness and Sonicare is that a reliance on the price at which the claimants would have sold the goods in question, would usually result in the claimant being overcompensated ie. obtaining a windfall.

    This issue was not squarely addressed by the Court of Appeal in Marco Polo given that their reason for equating the market value to the replacement value appears to be down to the dearth of evidence in relation to the sale price (at [46] and [47]). This issue thus remains open, as far as Singapore jurisprudence is concerned. However given the foundation of the Court of Appeal’s judgment rests upon the “no windfall” principle, it is submitted that as a general rule the Singapore courts should equate market value to the value at which the plaintiff could have bought the goods and not the value at which the plaintiff would have sold the goods.

    Of course, another way to frame the question would be “whether the court ought to look to the market in which the respondent purchased the goods or the market in which it proposed to sell them” (as per Ormiston J in Furness (at 679)). In other words, is the relevant market the market from which the claimant bought the goods in question or the market in which he proposes to sell them? This author humbly submits that the end result should the same in that the Court should look to the market in which the respondent purchased the goods as being the relevant market.

    * This blog entry may be cited as Cai Jianye Edwin, “Of “Relevant Markets” and “Windfalls” – The Court of Appeal’s decision in Marco Polo Shipping Company Pte Ltd v Fairmacs Shipping & Transport Services Pte Ltd [2015] SGCA 44”, Singapore Law Blog (25 October 2015) (

    ** A PDF version of this entry may be downloaded here

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