[2009] 3SLR(R) SINGAPORE LAW REPORTS (REISSUE) 883Sports Connection Pte Ltd v Deuter Sports GmbH[2009] SGCA 22Court of Appeal Civil Appeal No 114 of 2008Chao Hick Tin JA, Andrew Phang Boon Leong JA and V K Rajah JA14 January; 1 June 2009Contract Breach Breach of non-competition clause Non-competition clausewasnotaconditionWhetherbreachwassufficientlyserioussoastopermitinnocent party to terminate contractContract Remedies Damages Award and calculation of damages when bothparties were in breachFactsTheAppellantwastheexclusivedistributorofDeuterproductsfrom1992to27 January2005.Duringthisperiod,boththeAppellantandtheRespondententeredintoanumberofwrittenagreements,oneofwhichwasaletterofagreement dated 28 November 2002 (the Distributorship Agreement).In the Distributorship Agreement, both parties, for the first time, agreed upon anon-competition clause which stated that [p]roducts which are in competitionwith Deuter range of products may not be sold by [the Appellant] without priorwrittenconsentfrom[theRespondent](theNon-CompetitionClause).TheHigh Court accepted that there was an understanding between the parties thattheNon-CompetitionClausewouldnotbeactivatedaslongastheAppellantpurchasedUS$1mworthofDeuterproductsannually(thePurchaseTarget).This understanding was not in dispute between the parties.The Appellant failed to meet the Purchase Target for 2004, and the RespondentconsequentlyactivatedtheNon-CompetitionClause.On27January2005,theRespondentterminatedtheDistributorshipAgreementon,interalia,thegroundthattheAppellanthadsoldcompetingproductswithoutobtainingtheRespondentswrittenconsent.TheHighCourtheldthattheAppellanthadbreachedtheNon-CompetitionClause,andthatthebreachindeedentitledthe RespondenttoterminatetheDistributorshipAgreement.TheAppellantaccepted that it had breached the Non-Competition Clause, but appealed againstthe High Courts decision by contending that the Appellants breach was not soserious as to entitle the Respondent to terminate the Distributorship Agreement.Held, allowing the appeal:(1) In ascertaining whether or not a particular term was a condition, the focusshouldbecentredonascertainingtheintentionofthecontractingpartiesthemselvesbyconstruingtheactualcontractitself(includingthecontractualtermconcerned)inthelightofthesurroundingcircumstancesasawhole.Onthetotalityoftheevidence,theNon-CompetitionClausewasnotacondition:at [67] and [68].paginator.bookPage 883Monday, December 14, 200910:36 AM884 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)(2) Inthefinalanalysis,theactualdecisionastowhetherornotthebreachconcernedwassufficientlyserioussoastopermittheinnocentpartytoterminate the contract was largely dependent on the precise factual matrix of thecaseitself.Thefocushadtobeondeterminingwhatexactlyconstitutedthebenefit that it was intended the innocent party should obtain from the contractand then examining very closely the actual consequences which had occurred asa resultofthebreachatthetimeatwhichtheinnocentpartypurportedtoterminatethecontractinordertoascertainwhethertheinnocentpartywas,infact,deprivedofsubstantiallythewholebenefitofthecontractthatitwasintended that the innocent party should obtain: at [62] and [64].(3) Inaccordancewiththeapproachsetoutat(2)above,theactualconsequenceswhichresultedfromthebreachoftheNon-CompetitionClausewerethat,first,theamountofpurchasesbytheAppellantdroppedfromoverUS$1 m to US$788,031.45, and, secondly, the objectives of market penetrationand high quality brand positioning might possibly have been compromised. Inso far as both consequences were concerned, the Respondent was not deprivedofsubstantiallythewholebenefitwhichitwastheintentionofthepartiesthattheRespondentshouldobtainundertheDistributorshipAgreement.Consequently, the non-compliance by the Appellant with the Non-CompetitionClausedidnotentitletheRespondenttoterminatetheDistributorshipAgreement: at [77], [78] and [88].(4) AstheRespondentwasnotentitledtoterminateitscontractwiththeAppellant,itwasitselfinbreachofcontract.TheAppellantwasthereforeentitled to damages which flowed from the breach with respect to the unexpiredperiodoftheDistributorshipAgreement.Likewise,astheAppellantwasinbreach of the Non-Competition Clause, the Respondent was entitled to damageswhichflowedfromthatbreachandwhichconsistedinthelossofprofitsresultingfromtheAppellantsfailuretomeetthePurchaseTargetfortheyear2004: at [91].[Observation: The approach adopted in RDC Concrete Pte Ltd v Sato Kogyo (S)Pte Ltd [2007] 4 SLR(R) 413 (RDC Concrete) was the only one which permittedtheHongkongFirapproachtobeaccommodatedinanymeaningfulsensewithoutsimultaneouslygoingtotheotherextremeofcompletelyeffacingthecondition-warrantyapproach.TheapproachinRDCConcretewasreaffirmed,subjecttotheextremelylimitedexceptionthat,wherethetermitselfstatedexpressly (as well as clearly and unambiguously) that any breach of it, regardlessoftheseriousnessoftheconsequencesthatfollowedfromthatbreach,wouldnever entitle the innocent party to terminate the contract, then the court wouldgiveeffecttothisparticulartypeofterm(viz,awarrantyexpresslyintendedbythe parties): at [36] and [57].However, a warranty expressly intended by the parties was likely to be rare (orat least uncommon) in practice simply because most parties would be concernedabout whether or not they would be legally justified in terminating the contractin the event of a breach of the term concerned: at [32] and [33].]Case(s) referred to968703 Ontario Ltd v Vernon (2002) 58 OR (3d) 215 (refd)paginator.bookPage 884Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 885Afovos Shipping Co SA v Romano Pagnan and Pietro Pagnan [1983] 1 WLR 195 (refd)Bunge Corporation, New York v Tradax Export SA, Panama [1981] 1 WLR 711 (refd)Childrens Media Ltd v Singapore Tourism Board [2009] 1 SLR(R) 524; [2009] 1 SLR 524 (refd)Creatiles Building Materials Co Ltd v Tos Universe Construction Co Ltd [2003] 2 HKLRD 309 (refd)Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361 (refd)Dow Chemical of Canada Limited v R V Industries Ltd (1979) 9 Alta LR (2d) 129 (refd)Field v Zien (1963) 42 DLR (2d) 708 (refd)Financings Ltd v Baldock [1963] 2 QB 104 (refd)First City Capital Ltd v Petrosar Ltd (1987) 61 OR (2d) 193 (refd)First City Trust Co v Triple Five Corp Ltd (1989) 57 DLR (4th) 554 (refd)Hewitt v Debus (2004) 59 NSWLR 617 (refd)Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (refd)Honner v Ashton (1979) 1 BPR 9478 (refd)Jackson v The Union Marine Insurance Company, Limited (1874) LR 10 CP 125 (refd)Jorian Properties Ltd v Zellenrath (1984) 46 OR (2d) 775 (refd)Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115 (refd)Krawchuk v Ulrychova [1996] 8 WWR 183 (refd)L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 (refd)Lehndorff Canadian Pension Properties Ltd v Davis Management Ltd (1989) 59 DLR (4th) 1 (refd)Leung Yee v Ng Yiu Ming [2001] 1 HKC 342 (refd)Lombard North Central Plc v Butterworth [1987] QB 527 (refd)M&J Polymers Ltd v Imerys Minerals Ltd [2008] 1 Lloyds Rep 541 (refd)Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR(R) 663; [2008] 1 SLR 663 (folld)Mariner International Hotels Ltd v Atlas Ltd (2007) 10 HKCFAR 1 (refd)Okachi (Hong Kong) Co Ltd v Nominee (Holding) Ltd [2005] 4 HKLRD 447 (refd)Okachi (Hong Kong) Co Ltd v Nominee (Holding) Ltd [2007] 1 HKLRD 55 (refd)Ramrod Investments Ltd v Matsumoto Shipyards Limited (1990) 47 BCLR (2d) 86 (refd)RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR(R) 413; [2007] 4 SLR 413 (folld)Rice v Great Yarmouth Borough Council [2003] TCLR 1 (refd)Samsung Hong Kong Ltd v Keen Time Trading Ltd [1998] 2 HKLRD 341 (refd)Samsung Hong Kong Ltd v Keen Time Trading Ltd [1999] 2 HKC 447 (refd)paginator.bookPage 885Monday, December 14, 200910:36 AM886 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)Secretary for Justice v Yus Tin Sing Enterprises Co Ltd [2008] HKCU 1391; [2008] HKCFI 768 (refd)Shevill v The Builders Licensing Board (1982) 149 CLR 620 (refd)Singapore Tourism Board v Childrens Media Ltd [2008] 3 SLR(R) 981; [2008] 3 SLR 981 (refd)Stocznia Gdynia SA v Gearbulk Holdings Ltd [2009] 1 Lloyds Rep 461 (refd)Suisse Atlantique Socit dArmement SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 (refd)Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003 (refd)Wallis, Son & Wells v Pratt & Haynes [1911] AC 394 (refd)Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029; [2008] 3 SLR 1029 (refd)Francis Xavier SC, M Reza, Tang Hui Jing (Rajah & Tann LLP), Shahiran Ibrahim (Samuel Seow Law Corporation) for the appellant; Aqbal Singh, Josephine Chong (UniLegal LLC) respondent.[Editorialnote:ThiswasanappealfromthedecisionoftheHighCourtin[2008] SGHC 109.]1 June 2009 Judgment reserved.Andrew Phang Boon Leong JA (delivering the judgment of the court):Introduction1 This is an appeal against the decision of the trial judge (the Judge) inSuit No 280 of 2005(see Sports Connection Pte Ltd v Deuter Sports GmbH[2008]SGHC109(theGD)).Inhisdecision,theJudgedismissedtheclaimofSportsConnectionPrivateLimited(theAppellant)againstDeuterSportsGmbH(theRespondent)forwrongfulterminationofa letterofagreementdated28 November2002(theDistributorshipAgreement).TheJudgealsograntedinterlocutoryjudgmentinfavourof theRespondentwithrespecttoitscounterclaimforbreachoftheDistributorship Agreement, with damages to be assessed.The parties2 TheAppellantisaSingaporecompanythatengagesintheimport,export, retail and wholesale of both local and foreign brands of backpacks aswell as other outdoor, camping and athletic products. The Respondent is awell-known German-registered company that engages in the manufacture,exportandsaleofbackpacksandoutdoorproductsundertheDeutertrade mark. From 1992 to 27 January 2005, the Appellant was the exclusivedistributorofDeuterproductsinSingapore,aswellasothercountriesinpaginator.bookPage 886Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 887theregion.Duringthisperiod,boththeAppellantandtheRespondententered into a number of written agreements.Background facts3 Inaletterofintentdated25 May1995(the1995Letter),theRespondentexpresseditsintentiontousetheAppellantasitssoledistributorofDeuterbackpackproductsinSingaporeandMalaysiaforthree years. The 1995 Letter also stipulated that it should be the intent of[the Appellant] to place all orders directly with [the Respondent], advertiseand promote Deuter packs and place preseason orders.4 ThepartiesenteredintoanotheragreementinDecember1999(the1999 Agreement), which gave the Appellant exclusive rights to distributeDeuterproductsinBrunei,IndonesiaandThailandforaperiodofthreeyears, beginning on 1 January 2000 and ending on 31 December 2002. The1999 Agreement also stated:Duringthistime[theAppellant]shallmakeeveryefforttopromoteandselltheDeuterproductstoachievemarketpenetrationandhighqualitybrandpositioning.Eachyear(ormoreoftenifappropriate)bothpartiesagreetoanannualmeetingtodiscusstheprogressandbusiness strategies in these markets.An addendum to the 1999 Agreement (the 1999 Agreement Addendum)wasenteredintoon29 March2001toexpandtheAppellantsexclusivedistributorshipofDeuterproductstoSingapore,East/WestMalaysia,Thailand and Brunei. In the 1999 Agreement Addendum, the Respondentalso agreed to the following:[TheRespondent]agreesnottodirectlyorindirectlyexecuteanyconflictingbusinesswiththecurrentstaffof[theAppellant]duringtheiremploymentorwithinaperiodoftwo(2)yearsaftertheiremployment.5 Thepartiesenteredintoanotheragreementon28 November2002,ie, theDistributorshipAgreement(see[1]above).PursuanttotheDistributorshipAgreement,theAppellantwasgivenexclusiverightstodistributeDeuterproductsinSingapore,East/WestMalaysia,Brunei,ThailandandIndonesiaforaperiodofthreeyears,endingon31 December 2005. Both parties also, for the first time, agreed upon a non-competition clause which stated that [p]roducts which are in competitionwith Deuter range of products may not be sold by [the Appellant] withoutpriorwrittenconsentfrom[theRespondent](theNon-CompetitionClause).TheJudgeacceptedthattherewasanunderstandingbetweenthepartiesthattheNon-CompetitionClauseintheDistributorshipAgreementwouldnotbeactivatediftheAppellantpurchasedUS$1mworthofDeuterproductsannually(thePurchaseTarget).Thispaginator.bookPage 887Monday, December 14, 200910:36 AM888 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)understanding is not in dispute between the parties for the purposes of thepresent appeal.6 For the sake of completeness, and because this is a crucial document,we set out the body of the Distributorship Agreement in full:BeginningJanuary1st,2003,andforthenextthreeyearsweherebyagreetogive[theAppellant]theexclusiverightstodistributeDeuterproductsinSingapore,East/WestMalaysia,Brunei,ThailandandIndonesia.Duringthistime[theAppellant]shallmakeeveryefforttopromoteandselltheDeuterproductstoachievemarketpenetrationandhighqualitybrandpositioning.Eachyear(ormoreoftenifappropriate)bothpartiesagreetoanannualmeetingtodiscusstheprogressandbusiness strategies in these markets.ProductswhichareincompetitionwithDeuterrangeofproductsmaynotbesoldby[theAppellant]withoutpriorwrittenconsentfrom[theRespondent].[TheRespondent]agreesnottodirectlyorindirectlyexecuteanyconflictingbusinesswiththecurrentstaffof[theAppellant]duringtheiremploymentorwithinaperiodoftwo(2)yearsaftertheiremployment termination.ThisagreementcontinuesuntilDecember31st,2005andcanberenewed, with signed confirmation, for continuous distribution rightsnolaterthanonemonthpriortothisdate.Thisagreementcanbeterminated by consent of both parties or if there is an essential changein the running of or financial situation of one of the businesses, whichhastheeffectofinfluencingtheresultswhichtheotherpartycouldlegitimately expect from the execution of this agreement.Itistheintentionofbothpartiestoworktogetherforthenextthreeyears towards a mutually beneficial business relationship.[emphasis added]7 TherelationshipbetweentheAppellantandtheRespondentcontinuedpursuanttotheDistributorshipAgreementuntil2004,whencracks(unfortunately)begantodevelopinit.Ontheevidence,therewere threemainreasonswhytherelationshipstartedtosour.First,theRespondentviewed the Appellantsdiscountingof Deuter products over aperiodoftimeasexcessive.Second,theRespondentwasunhappythatthere had been a reduction of the Appellants wholesale business from 500retailersaccountsto50 retailersaccounts.Finally,theRespondenttookissue with the Appellants sale of competing products in its retail stores.8 Consequently,therewasalengthyexchangeofe-mailsbetweenMr TerryYee(Mr Yee),theAppellantsmanagingdirector,andMr WilliamHartrampf(Mr Hartrampf),theRespondentsexportmanager,between18 November2004and20 January2005.Bothpartiespaginator.bookPage 888Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 889endeavouredtosettletheirdifferences,and,subsequently,on17 January2005, an amendment to the Distributorship Agreement (the AmendmentAgreement), which was agreed to take effect from 28 November 2002, wasentered into. Pursuant to the Amendment Agreement, the Appellant agreednot to publicly advertise any discount on Deuter products and that [a]nypublicadvertisementtodiscountDeuterproductscanbemadeonlyafterreceiving prior written consent from [the Respondent].9 Inthisregard,Mr Hartrampfconfirmedduringcross-examinationthat the Amendment Agreement had indeed resolved the disputes betweenthe parties relating to the discounting of Deuter products and the reductionin the number of retailers accounts. It is, therefore, common ground (and,in fact, undisputed) that these two issues cannot be used by the RespondentasgroundsfortheterminationoftheDistributorshipAgreement.Indeed,theJudgeheldthatthediscountingofDeuterproductsbytheAppellantpriortotheAmendmentAgreementcouldnothavebeenabreachoftheDistributorshipAgreement.TheJudgefurtherheldthattheRespondentcouldnotrelyonthediscountingissuetoterminatetheDistributorshipAgreementastheAmendmentAgreementhadsettledandresolvedtheparties differences pertaining to this particular issue. Indeed, we are of theviewthattheevidencefullysupportstheJudgesfindingswithregardtoboth these issues.10 Accordingly,andthisisnotdisputedbythepartiesinthepresentappeal,thesoleremaininggroundwhichtheRespondentcanrelyoninorder to terminate the Distributorship Agreement is the Appellants sale ofcompetingproductsinitsretailoutletsinbreach of the Non-CompetitionClause(see[5]above).Thatsaid,thefollowingare,infact,themoresignificante-mailswhichwereexchangedbetweenthepartiesontheremaining issue relating to the sale of competing products.(a) E-mailfromMr HartrampftoMr Yee,dated11 December2004:Dear Terry [ie, Mr Yee],Paragraph 3 of [the Distributorship Agreement] says: Productswhich are in competition with Deuter range of products may notbesoldby[theAppellant]withoutpriorwrittenconsentfrom[the Respondent]. We have never given you written consent tosell competing products.For many years you have achieved nearly U$1.0 million in annualpurchases.Thisyear(2004)yourcurrentpurchasespluspendingshipmentsamounttoU$750,000.InyourDec.3rde-mailyouproposefor2005anotherdropto$500,000.Oneofthereasonsmustbebecauseyouarecarryingsomanycompetingproductsfrom the above mentioned brands.Wehavehydrationpacks,bigsizedpackslike50,60,70,80Lpacks,accessories,ladiesbagsandtrolleybags.(SeeDeuterpaginator.bookPage 889Monday, December 14, 200910:36 AM890 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)catalog).Please,confirmwithafixeddatewhenyou[will]stopsellingthecompetingproductsfrom:Osprey,EagleCreek,Camelbak,HighSierra,CerroTorre,OutdoorProducts,Vertikal, Urban Equipment and Overland.Regards, Bill [ie, Mr Hartrampf][emphasis added, underlined emphasis in original](b) E-mailfromMr YeetoMr Hartrampf,dated16 December2004:Dear Bill,Idontdeny,whatyouallegedhere.ItismoretrueinMartinsdayscomparedtonow,sinceIdontpractiseduplicationofgoods.CanyouspareEagleCreekandHighSierra,onceIconfirmdroppingOspreyandCamelBak?Ihopeso,sincethereisnoU$500,000intention,asconcurredearlier.ThisU$500,000wasbrieflymentionedwhenyouinsistedonzerodiscountsforDeuter[products].Iforsee[sic]seriousdropinDeuterspurchase [sic] if I maintain your prices without any discounts.AsforCerroTorre,Vertikal,UrbanEquipandOverland,theyarenonissues,asCerroTorrewasstoppedmonthsago,andVertikal,UrbanEquipandOverlandaremainlycheaptents,cheaptropicalsleepingbagsandfoorwears,thatwewholesaledto hyper stores in large quantities for local applications / usages.ThereasonformydisinterestinDeuterstrolleybags,istheydont compete well in terms of quality and price. As for Deutershydration bags, Israel made [sic] bladders and the high prices [it]isjustimpossibletobesuccessful(westillhavelastyearshydration bags in our 3 countries [sic] stores).Iamglad,youvehementlydisapproveU$500,000purchasefor05,asthatwasnevermyintention,eventhoughIbrieflymentionedit.ThiswillnothappenonceI[get]thenewPOS[point of sales system] up, which isbeing applied since Dec 01,aswewillbeabletoordermoreaccurately,whichwasdemonstratedtoyou,wearelackingthefastersellingDeuteritems.Withbetterfinancialcontrol,andourconcurrencetostoppingDeuters40%discountsinourstoresandourU$1.1 millionpurchases, lets put this episodebehind us, as we move onwith05.Attach[ed]pleaseseewhatthestoresupervisorwantedforimmediate delivery and whats for 4 months deliveries / forecastin 05.Regards,Terry Yee[emphasis added]paginator.bookPage 890Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 891(c) E-mail from Mr Hartrampf to Mr Yee, dated 21 January 2005:Dear Terry,Willyoustopsellingthecompetingproducts(to[theRespondent])oftheinternationalandprivatelabelbrandsyou are carrying?Please, answer yes or no.Regards, Bill[emphasis added](d) E-mail from Mr Hartrampf to Mr Yee, dated 27 January 2005:Dear Terry,Wemusthaveyourclearanswertothisquestion.Wecannotaccept any new orders or ship anything until this issue is clear.Regards, Bill(e) E-mail from Mr Yee to Mr Hartrampf, dated 27 January 2005:Dear Bill,Irefertoyoure-mails.Iregrettonotethatyouseemtonotunderstand my stance in this matter and that I would not be ableto simply give you a yes or no to the question you raised in youre-mail dated 21 Jan 2005. This is simply because I do not considermylocalandforeignbrandsinexistenceformorethan10 yearsand with [the Respondent]s knowledge as competing at all. I trulybelievethateven[theRespondent]throughouttheyearsneverconsideredthesebrandsorproductsascompetingproductsuntilthe matter was raised for some inexplicable reasons only recentlyandafterthirteen(13)yearsofbusinessanddespitefullknowledgeofthembeingmarketted[sic]bymeinSingapore&MalaysiaandThailand.Howdoyouexpectmetogiveyouasimple yes or no?However,ifyoustillrequiremetogiveupthesebrandswhichyouonlynow(andmorethan13 yearslateandwithfullknowledge of [their] existence) allege as competing then I haveno alternative but [to] say that my only answer to your questionis a No. I would emphasize that I only say it because you dontseemtowant[to]acceptanyexplanationorreasonsbutareinsistingonsuchananswerandatthesametimenotreleasing[sic] the goods which [are] overdue for more than 1 month.I regret to note [the Respondent]s stance in this matter which ImustadmitIfindveryunreasonableandinexplicable.Iwouldhowever,emphasizethat[theAppellant]do[es]notinanywayintendbymyanswertoinanyway[sic]affect[theDistributorship Agreement] we have with [the Respondent] andtarnish the good rapport we have with [the Respondent] for thepaginator.bookPage 891Monday, December 14, 200910:36 AM892 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)last13 years.Weintendtocontinueandcarryonwithinexpanding with [sic] the relationship with [the Respondent] forposterity and work towards an amicable resolution of this ratherunhappy state which is raised abruptly.PleasenoteandIdoemphasizethatIdonotthinkthatthereisany issue as to competing product for these brands and product(bothlocalandforeign)havebeenmarketted[sic]by[theAppellant]alongwithDeuter[products]inallmy18/19retailshops and to my wholesalers in Singapore, Malaysia and Thailandand [the Respondent] is fully aware of the same throughout. I amamazed that my practise [sic] which you are fully aware of all of asuddenbecome[s]anissueascompetingbrandsandinexplicably [sic].Last but not least I urge [the Respondent] to consider having thematterresolvedamicablyandnottoletthismatterescalateinto unnecessarylitigation,YouknowthatIhavealwayshad[theRespondents]interestatheartthroughoutthe13 yearsofbusinessandmadeDeuterapremierbrandinSingapore,MalaysiaandThailanddespitethelocalandforeignbrandswhich you now issue [sic] being sold together.Itrustthatmyreplywillresolvethematterandpleaseletmeknow what we could do to resolve any impasse in this matter.[emphasis added]11 UponreceivingMr Yeese-maildated27 January2005,theRespondentissued,ontheverysameday,anoticeoftermination(theTerminationNotice)andterminatedtheDistributorshipAgreementonthe following four grounds:(a) thereductionoftheAppellantswholesalebusinessfrom500 retailers accounts to 50 retailers accounts;(b) theAppellantsexcessivediscountingofDeuterproductsoveran extended period of time;(c) thesaleofcompetingproductswithoutobtainingtheRespondents written consent; and(d) anessentialchangeintherunningoftheAppellantsbusinessandfinancialsituationhadoccurred,andthishadtheeffectofinfluencingtheresultswhichtheRespondentcouldlegitimatelyexpect.12 As already noted at [9] above, in view of the fact that the AmendmentAgreementhadconclusivelyresolvedtheexcessivediscountingandreduction of wholesale accounts issues, the Judge held that the first, secondand fourth grounds could not be relied upon by the Respondent in order toterminatetheDistributorshipAgreement.TheRespondenthasacceptedpaginator.bookPage 892Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 893that finding, and the only ground left for the purposes of this appeal is thethird one the breach of the Non-Competition Clause.13 An elaboration of the third ground can be found in the TerminationNotice itself, which states:Afurtherintentionofthe[theDistributorshipAgreement]isthatwegiveyouexclusivityforyourterritoriesandyouinreturnwillgiveusexclusivity regarding our products. However, in your email dated 27thJanuary 2005, you informed us that you have sold competing productsfor some time without our written consent, and that you will continuetosellcompetingproductsnowandinthefuture.Youhavefailedtoundertake to us to-date that you will definitely cease selling competingproducts. That is not acceptable to us.InresponsetotheTerminationNotice,theAppellantsthensolicitors,M/s Netto&MaginLLC,on21 March2005,wrotetotheRespondenttoinformitthattheAppellantdidnotaccept[the]wrongfulrepudiationandelectedtoaffirmthe[DistributorshipAgreement]andshalllooktowards[theRespondent]forfulldamagesandlossofprofitsfor[the]wrongful repudiation.14 Finally,on27 April2005,theAppellantcommencedlegalproceedingsagainsttheRespondent,claimingdamagesfortheRespondents wrongful termination of the Distributorship Agreement.Findings of the trial court15 ThefirstissuewhichtheJudgeaddressedwasoneofexcessivediscounting.TheRespondentscomplaintwasthattheAppellantsexcessivediscountingofDeuterproductsoveranextendedperiodoftimewas contrary to its obligation to position Deuter as a high quality brand.Inthisregard,theJudgeobservedthattheAmendmentAgreementhadput to rest the parties differing views over the matter (at [11] of the GD).In addition, the Judge observed that it was patently clear to both the partiesthat the Amendment [Agreement] was limited only to the discounting andretailer issues (at [23]). As mentioned earlier (see [9] above), it is commongroundandundisputedthatboththediscountingandretailerissuescannot beusedbytheRespondentasgroundsfortheterminationoftheDistributorshipAgreement.Quiterightly,theRespondenthasnotcontestedbothissuesduringtheappeal,andthereisthereforenoneedtoconsider these issues further.16 Asmentionedat[5]above,theJudgeacceptedthattherewasanunderstanding between the Appellant and the Respondent that the Non-Competition Clause would not be activated as long as the Appellant met thePurchase Target (see the GD at [13]). Further, the Judge also held (see [12]above) that the only ground which the Respondent could rely on in order toterminatetheDistributorshipAgreementwasthebreachoftheNon-paginator.bookPage 893Monday, December 14, 200910:36 AM894 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)CompetitionClause.Inthisregard,theJudgefoundthatthePurchaseTargetwasnotmetfortheyear2004(seetheGDat[17])andthat,therefore, the Non-Competition Clause was activated. The Judge also heldthattheRespondentenforcedtheNon-CompetitionClauseandthattheAppellantsrefusaltocomplywiththeclauseconstitutedabreachoftheDistributorship Agreement (at [24] of the GD). In so far as the Appellantsallegation that the parties act of entering into the Amendment AgreementconstitutedawaiveroftheAppellantsobligationsundertheNon-CompetitionClausewasconcerned,theJudge(afterconsideringthecorrespondence between the Appellant and the Respondent in some detail)held(at[24]oftheGD)thatitdidnot.TheAppellanthasnotdisputedthesefindings.Inanyevent,itbearsemphasisingthat,inourview,thesefindings cannot be impugned on the evidence.17 HavingestablishedthattheAppellanthadbreachedtheNon-CompetitionClause,theJudgeaddressedthesecondissue,whichiswhether the breach was one that would entitle the Respondent to terminatetheDistributorshipAgreement.Inthisregard,theJudgereferredtotheHighCourtdecisionofSingaporeTourismBoardvChildrensMediaLtd[2008]3 SLR(R)981(recentlyaffirmedbythiscourtinChildrensMediaLtd v Singapore Tourism Board [2009] 1 SLR(R) 524), where Lai Siu Chiu Jstated (at [32]):Toconstituterepudiation,thethreatenedbreachmustbesuchastodeprive the injured party of a substantial part of the benefit to which heisentitledunderthecontract.Theapplicabletestiswhethertheconsequences of the breach are such that it will be unfair to the injuredparty to hold it to the contract and leave it to its remedy in damages asand when a breach occurred (Highness Electrical Engineering Pte Ltd vSigma Cable Co (Pte) Ltd [2006] 3 SLR(R) 640 at [8][11]).Further,theJudgenotedthefollowingobservationsintheEnglishCourtof AppealdecisionofDecro-WallInternationalSAvPractitionersinMarketing Ltd [1971] 1 WLR 361 where Buckley LJ stated (at 379380):Each party to an agreement is entitled to performance of the contractaccordingtoitstermsineveryparticular,andanybreach,howeverslight,whichcausesdamagetotheotherpartywillaffordacauseofactionfordamages;butnoteverybreach,evenifitscontinuanceisthreatened throughout the contract or the remainder of its subsistence,will amount to a repudiation. To constitute repudiation, the threatenedbreach must be such as to deprive the injured party of a substantial partof the benefit to which he is entitled under the contract.18 TheJudgehighlightedthefollowingaspectsoftherelationshipbetweentheAppellantandtheRespondentinarrivingattheconclusionthat the Appellants unequivocal refusal to cease selling competing productshad deprived the Respondent of a substantial part of the benefit to which itwas otherwise entitled. First, the Appellant was the exclusive distributor forpaginator.bookPage 894Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 895theRespondent.Secondly,thepurposeoftheNon-CompetitionClause(which would be triggered by the inability to meet the Purchase Target) wastoensurethattheAppellantwouldlookaftertheinterestsoftheRespondent. In particular, the interests sought to be protected by the Non-CompetitionClauseincludedmarketpenetrationandbrandbuildingobjectives (reference may, in this regard, be made to the second paragraphoftheDistributorshipAgreement,reproducedaboveat[6]).Toelaborate,the Judge found (at [27] of the GD) that:[T]hepurposeofthe[N]on-[C]ompetition[C]lause(alongwiththeUS$1munderstanding)wastoensurethatthe[Appellant]wouldcontinue to look after the interests of the [Respondent] (having regardtotheformersotherconflictingbrandsandinterests).Thisisespecially so as the [Appellant] acted as an exclusive distributor for the[Respondent].Further,theJudgewasoftheviewthattheNon-CompetitionClausewasclosely allied to the objectives of market penetration and brand building(see the GD at [28]).Issues on appeal19 In its written submissions to this court, the Appellant contended thatthe Respondent had wrongfully terminated the Distributorship Agreementas:(a) TheAppellanthadmetthePurchaseTargetfor2004andtheRespondent was accordingly not entitled to prospectively activate theNon-Competition Clause in the Distributorship Agreement.(b) Alternatively,eveniftheNon-CompetitionClausehadbeenactivatedfor2005,theAppellantsnon-compliancewiththisclausewasnotsoseriousastoentitletheRespondenttoterminatetheDistributorship Agreement.20 However, during oral submissions to this court, the Appellant did notpursue its first submission relating to the Purchase Target. The Appellant,inotherwords,decidedtoproceedonlywiththesecond(alternative)submission,namely,thattheAppellantscontinuedsaleofcompetingproductsdidnotamounttoabreachentitlingtheRespondenttoprematurely bring the Distributorship Agreement to an end.21 There are two consequences flowing from the Appellants decision toproceedwiththisappealonthebasisthattheAppellanthadnotmetthePurchaseTargetfor2004.First,weneednotdiscusstheargumentsthatweremadeinrelationtotheAppellantsfirstsubmission.Secondly,itbecameunnecessaryfortheAppellanttoproceedwithitsapplicationtoamend its pleadings to accommodate the Judges express finding that therewasanunderstandingbetweenthepartiesthattheNon-Competitionpaginator.bookPage 895Monday, December 14, 200910:36 AM896 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)Clause in the Distributorship Agreement would be inactive if the Appellantmet the Purchase Target for 2004.22 Hence,theonlyissuebeforeuswaswhetherornottheAppellantscontinuedsaleofcompetingproductsincontraventionoftheNon-Competition Clause constituted a breach which entitled the Respondent toterminate the Distributorship Agreement. Before proceeding to address thisissue, it would be apposite to consider the applicable principles of law first.The applicable principles of lawWhen is the innocent party entitled to terminate the contract?The principles set out in RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd23 Itisaxiomaticthatnoteverybreachofcontractwillentitletheinnocent party to terminate the contract concerned. As this court put it inRDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR(R) 413 (RDCConcrete) at [90]:[I]t is important to note, at the outset, that, in the event of a breach ofcontract,thereisnoautomaticlegalrightconferredontheinnocentparty to the contract (viz, the party who is not in breach of contract) toelect to treat the contract as discharged (ie, to terminate the contract).[emphasis in original]24 Indeed, RDC Concrete dealt with the applicable principles as to whentheinnocentpartywouldbeentitledtoterminatethecontractinsomedetail(seegenerallyat[89][113]ofRDCConcrete).AnextremelybriefsummaryofthoseprincipleswasinfactsetoutbythiscourtinitssubsequentdecisioninManFinancial(S)PteLtdvWongBarkChuanDavid [2008] 1 SLR(R) 663 (Man Financial), as follows (at [153][158]):153 AsstatedinRDCConcrete,therearefoursituationswhichentitle the innocent party ... to elect to treat the contract as dischargedas a result of the other partys ... breach.154 The first (Situation 1) is where the contractual term in questionclearlyandunambiguouslystatesthat,shouldaneventorcertaineventsoccur,theinnocentpartywouldbeentitledtoterminatethecontract (see RDC Concrete at [91]).155 Thesecond(Situation 2)iswherethepartyinbreachofcontract (the guilty party), by its words or conduct, simply renouncesthe contract inasmuch as it clearly conveys to the innocent party that itwillnotperformitscontractualobligationsatall(seeRDCConcreteat [93]).156 Thethird(Situation 3(a))iswherethetermbreached...isacondition of the contract. Under what has been termed the condition-warrantyapproach,theinnocentpartyisentitledtoterminatethecontract if the term which is breached is a condition (as opposed to apaginator.bookPage 896Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 897warranty): see RDC Concrete at [97]. The focus here, unlike that in thenextsituationdiscussedbelow,isnotsomuchonthe(actual)consequencesofthebreach,but,rather,onthenatureofthetermbreached.157 Thefourth(Situation 3(b))iswherethebreachofatermdeprives the innocent party of substantially the whole benefit which itwasintendedtoobtainfromthecontract(seeRDCConcreteat[99]).(This approach is also commonly termed the Hongkong Fir approachaftertheleadingEnglishCourtofAppealdecisionofHongkongFirShippingCoLtdvKawasakiKisenKaishaLtd[1962]2 QB26;seeespecially id at 70.) The focus here, unlike that in Situation 3(a), is notso much on the nature of the term breached, but, rather, on the natureand consequences of the breach.158 BecauseofthedifferentperspectivesadoptedinSituation 3(a)andSituation 3(b),respectively(asbrieflynotedabove),whichdifferencesmight,dependingontheprecisefactualmatrix,yielddifferentresultswhenappliedtothefactsituation,thiscourtinRDCConcreteconcludedthat,asbetweenboththeaforementionedsituations,theapproachinSituation 3(a)shouldbeappliedfirst,asfollows (id at [112]):Ifthetermisacondition,thentheinnocentpartywouldbeentitledtoterminatethecontract.However,ifthetermisawarranty(insteadofacondition),thenthecourtshouldneverthelessproceedtoapplytheapproachinSituation 3(b)(viz, the Hongkong Fir approach). [emphasis in original][emphasis in original]25 Bywayofsomefurtherelaboration,theconceptofaconditionaswellastheconceptofawarranty(pursuanttothecondition-warrantyapproach)havebothbeendescribedinRDCConcrete,asfollows(at [97][98]):97 Inthesecondsituation(Situation 3(a))[viz,thecondition-warranty approach; see also [24] above], the focus is on the nature ofthetermbreachedand,inparticular,whethertheintentionofthepartiestothecontractwastodesignatethattermasonethatissoimportant that any breach, regardless of the actual consequences of suchabreach,wouldentitletheinnocentpartytoterminatethecontract(thisis,however,nottosaythattheconsequencesofbreachareirrelevantinasmuchasthepartieshave,exhypothesi,envisaged,inadvance,andhypothetically,seriousconsequencesthatcouldensueintheeventofthebreachofthatparticularterm).Intraditionallegalterminology, such a term would be termed a condition.98 If,however,theintentionofthepartiestothecontractwastodesignatethattermasonethatisnotsoimportantsothatnobreachwill ever entitle the innocent party to terminate the contract (even if theactual consequences of such a breach are extremely serious), then suchatermwouldbetermedawarranty(seealso,andinamoregeneralpaginator.bookPage 897Monday, December 14, 200910:36 AM898 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)vein, the classic exposition by Bowen LJ (as he then was) in the leadingEnglish Court of Appeal decision of Bentsen v Taylor, Sons & Co [1893]2 QB 274at281).Thiscondition-warrantyapproachis infact(insofar as the sale of goods context is concerned) enshrined within the Saleof Goods Act (Cap 393, 1994 Rev Ed). It should be mentioned, at thisjuncture,thattheinnocentpartywouldneverthelessbeentitledtoall the damages that it can establish in law.[emphasis in original]26 The Hongkong Fir approach, on the other hand, has been described(also in RDC Concrete at [99]), as follows:In the third situation (Situation 3(b)), the focus is not (as in the second(Situation 3(a) above)) on the nature of the term breached (ie, whetheritisaconditionorawarranty)but,rather,onthenatureandconsequences of the breach. In particular, where the breach in questionwill give rise to an event which will deprive the party not in default [viz,theinnocentparty]ofsubstantiallythewholebenefitwhichitwasintendedthatheshouldobtainfromthecontract[emphasisadded],then the innocent party is entitled to terminate the contract. The wordsjust quoted are fromtheoft-citedjudgment of Diplock LJ(as hethenwas) in the seminal English Court of Appeal decision of Hongkong FirShippingCoLtdvKawasakiKisenKaishaLtd[1962]2 QB26at70(HongkongFir).Notsurprisingly,perhaps,thisapproachhasbeentermed the Hongkong Fir approach. It is an approach under which theinnocentpartyisentitledtoterminatethecontractifthenatureandconsequencesofthebreacharesoseriousastogototherootofthecontract (see the House of Lords decision of Suisse Atlantique SocitdArmementMaritimeSAvNVRotterdamscheKolenCentrale[1967]1 AC361at422,perLord Upjohn)andconstitutesafundamentalbreachofcontract(seealsoperLord DiplockintheHouseofLordsdecision of Photo Production Ltd v Securicor Transport Ltd [1980] AC827at849,wherethelearnedlawlordalsoreferredtotheconceptoftheconditioninthesensereferredtoinSituation 3(a)above).[emphasis in original]A critique of RDC Concrete(1) The critique27 TwolearnedcommentariesrelatingtoRDCConcretehavebeenpublishedsincethatdecisionwasreleased(seeJ WCarter,IntermediateTermsArriveinAustraliaandSingapore(2008)24 JCL226(CartersCritique) and Goh Yihan, Towards a Consistent Approach in Breach andTerminationofContractatCommonLaw:RDCConcretePteLtdvSatoKogyo (S) Pte Ltd (2008) 24 JCL 251 (Gohs Critique)). The latter article,asitstitlesuggests,focuseswhollyonRDCConcrete,whereastheformeralso considers the recent (and significant) High Court of Australia decisionof Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007)233 CLR115(Koompahtoo)(whichdecisionisalsonotedinKanagapaginator.bookPage 898Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 899DharmanandaandAnthonyPapamatheos,TerminationandtheThirdTerm:DischargeandRepudiation(2008)124 LQR373aswellasinP G Turner,TheHongkongFirDocksinAustralia[2008]LMCLQ432(Turner on Hongkong Fir)). It might be observed, parenthetically, that themajorityofthejudgesinKoompahtoo(Gleeson CJ,Gummow J,Heydon JandCrennan J)didnot(inajointjudgment)resttheirdecisiononthegroundthatthetermsconcernedcomprisedconditions(seeKoompahtooat 140and147),butheld,instead,thatpursuanttotheHongkongFirapproach,thebreacheshadbeenseriousenoughtoentitletheinnocentparty to terminate the contract. (This was in contrast to the view of Kirby J,who, whilst arriving at the same result as the majority, was nevertheless ofthe view that the Hongkong Fir approach ought not to be part of Australianlaw a somewhat controversial view which, however, is not relevant for ourpresent purposes and which, in any event, does not (in our view) representSingapore law).28 AcommonpointofcritiqueofRDCConcreteinbothCartersCritique and Gohs Critique centres on the failure in that case to exclude theHongkong Fir approach where the parties have in fact agreed that the termbreached is a warranty. In other words, the argument is that where partiesare found to have intended (presumably, either expressly or as a matter ofconstruction) a term to be a warranty (hereinafter a warranty intended bytheparties),theirintentionshouldbegiveneffecttoandthetermconcernedshouldbeconferredthelegaleffectofawarranty(pursuanttothecondition-warrantyapproach)(referencemayalsobemadetoDonalNolan,HongkongFirShippingCoLtdvKawasakiKisenKaishaLtd,TheHongkongFir(1961)inch 9ofLandmarkCasesintheLawofContract(HartPublishing,2008)(CharlesMitchell&PaulMitchellgeneds),(NolanonHongkongFir)atpp 293294).Thisparticularcritiqueisnotunpersuasivebut,aswillbeseen(aswellaselaborateduponshortly),theapproachtakeninRDC Concreteisinfactpremisedonthepreferenceforanoutcomearrivedatquiteindependentlyofthepartiesintention(insituationswherethetermconcernedisnotaconditionpursuanttothecondition-warrantyapproach).Inthisrespect,therefore,thisparticularcritiqueproceedsonanentirelydifferentbasisaltogether.Thekeyto answeringthecritiqueobviouslyliesinthecontinuedvalidityoftheconceptofawarrantyintendedbytheparties(pursuanttothecondition-warrantyapproach).Letusnowelaborateonthisparticularcategoryofterm.(2) The legal effect of a warranty intended by the parties(A) A MATTER OF OBJECTIVE CONSTRUCTION AND TWO SITUATIONS29 As a preliminary point, we would also observe that the mere fact thatthepartieshavedesignatedaparticulartermasawarranty(withoutmore) may not necessarily be dispositive of the matter. For example, in thepaginator.bookPage 899Monday, December 14, 200910:36 AM900 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)HouseofLordsdecisionofL Schuler AGvWickmanMachineToolSalesLtd [1974]AC235(Schuler),itwasheldbythemajorityoftheHousethat,despitethefactthatthepartiesconcernedhadexpresslyutilisedtheword condition, the word was utilised merely in a lay sense, and not as alegaltermofart.However,inManFinancial,wedidexpresstheview(reproduced below at [59]) to the effect that the majority in Schuler were, insubstanceandeffect,applyingtheHongkongFirapproach(asopposedtothe condition-warranty approach). Whilst that is one interpretation of thedecisioninSchuler,itneverthelessdoesnotdetractfromthegeneralprinciple just noted to the effect that the facts and context may cast doubton whether or not the parties intended, even in the situation where there isanexpressuseofthewordwarranty,thetermtobeawarrantyinthemanner utilisedunderthecondition-warrantyapproach.In summary,thematter is one of objectively construing the contract concerned.30 Theobjectiveconstructionofthecontractconcernedleadstothepossibilitythatatermcanbeawarranty(asdefinedunderthecondition-warranty approach) in at least two possible situations.31 The first situation is where the court finds that the term concerned isnot a condition pursuant to the condition-warranty approach. If so, such aterm must, ex hypothesi, be a warranty pursuant to that same approach. Weassumethat,insuchasituation,thepartieshavenotexpresslystatedthatthe term concerned is a warranty. We would characterise such a term as awarrantyimpliedlyintendedbytheparties.Secondly,atermcanbeawarranty in a situation where the parties concerned expressly intend it to bea warranty (hereinafter a warranty expressly intended by the parties).(B) A WARRANTY EXPRESSLY INTENDED BY THE PARTIES LIKELY TO BE RARE OR AT LEAST UNCOMMON32 In our view, a warranty expressly intended by the parties is, however,likely to be rare (or at least uncommon) in practice. For this reason, we areof the view that the critique in the articles (above at [27]) is, in the main, oftheoretical interest and should not (in the nature of things) raise matters ofsignificanceinpractice(cfalsoCartersCritique([27]supra)at247andNolan on Hongkong Fir ([28] supra) at p 294).33 Indeed, such a situation is likely to be rare (or at least uncommon) ifwe assume (as we must) that the concept of the warranty is that which isembodied within the condition-warranty approach (as to which, see aboveat [25]). Put simply, a term is a warranty in the sense just mentioned if anybreach of it would never entitle the innocent party to terminate the contract,eveniftheconsequencesofthebreachweresoseriousastodeprivetheinnocentpartyofsubstantiallythewholebenefitofthecontractwhichitwasintendedthattheinnocentpartyshouldhave.Suchasituation(asalreadyalludedtoabove)willberare(oratleastuncommon)simplybecause most parties would be concerned about whether or not they wouldpaginator.bookPage 900Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 901be legally justified in terminating the contract in the event of a breach of thetermconcerned.However,thathavingbeensaid,wecannotruleoutthepossibilitythatpartiesmightneverthelessbeconcernedtoensurethatthecontractcontinuesinspiteofthebreachofatermtherein(bywayofawarranty expressly intended by the parties). Nevertheless, such a situation it is important to reiterate is likely (in the nature of things) to be rare (oratleastuncommon).Letusnowproceedtoconsiderthatsituationingeneralandtheapplicablelegaltestinparticular.However,beforeproceeding to do so, it would be appropriate, in our view, to consider, first,the situation where a warranty is, instead, impliedly intended by the parties.(C) A WARRANTY IMPLIEDLY INTENDED BY THE PARTIES34 Turning,first,tothesituationwherethepartiesdidnotexpresslydesignate the term concerned as a warranty, it is our view that, if the courtfindsthatthepartiesdidnotintendaparticulartermtobeacondition(pursuant to the condition-warranty approach), it would necessarily followthat the parties must have intended that term to be a warranty instead. Atthis juncture, we are back full circle, as it were to the condition-warrantyapproachinitspurestform.Moreimportantly,theresultofsuchanapproachisthatthereisnoscopewhatsoeverforanyapplicationoftheHongkong Fir approach at least in cases where the factual matrix is suchthattheapplicationofbothapproacheswouldyielddifferentresults.Thiswouldbethecase,forexample,wherethetermwhichisbreachedisclassified as a warranty under thecondition-warranty approach but wheretheconsequencesofthebreacharesoseriousastodeprivetheinnocentpartyofsubstantiallythewholebenefitthatitwasintendedthattheinnocentpartyshouldhave.Anotherobviousexamplewouldbewherethe term which is breached is classified as a condition under the condition-warrantyapproachbutwheretheconsequencesofthebreacharenotsoseriousastodeprivetheinnocentpartyofsubstantiallythewholebenefitthat it was intended that the innocent party should have (reference may alsobe made to RDC Concrete ([23] supra) at [102][103]).35 Insummary,therefore,thereis,inourview,onlyoneoftwoconclusions possible if one were to apply the condition-warranty approach:the term concerned is either a condition or a warranty. There is no middleground. Further, it cannot be argued that the court is unable to objectivelyascertain the parties intention as to whether a term is to be a condition orwarranty in its legal sense. We indicated in RDC Concrete that, in so far asSingaporelawisconcerned,thecourtwouldgiveeffecttothepartiesintention where they have very clearly and unambiguously indicated that aterm is to have the effect of a condition (ie, Situation 1; see [24] above) orwhere the court concludes that that term is a condition, having applied thecondition-warranty approach (pursuant to Situation 3(a); see [24] above).paginator.bookPage 901Monday, December 14, 200910:36 AM902 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)36 If the condition-warranty approach is treated as admitting of only oneof two possibilities, ie, that a term is either a condition or a warranty, then(asalreadynotedabove)thereislogicallynoplacefortheHongkongFirapproach. We are of the view, therefore, that the approach adopted in RDCConcreteistheonlyonewhichpermitstheHongkongFirapproachtobeaccommodatedinanymeaningfulsensewithoutsimultaneouslygoingtotheotherextremeofcompletelyeffacing(insubstanceatleast)thecondition-warrantyapproach.Indeed,inthislast-mentionedregard,theverynatureofanintermediatetermissuchthatgivingprecedencetotheHongkong Fir approach would invariably result in the court looking only attheconsequencesofthebreachsincevirtuallyeverytermwouldbeanintermediate term, simply because it could almost always be argued that thebreach of any term could result in either serious or trivial consequences. Inourview,thisisnotdesirable.Returningtothecentralpointmadeattheoutset of this paragraph, legal space must be made for the application oftheHongkongFirapproach,whichitselfembodiesitsownconceptionoffairness (see also the analysis of F MB Reynolds, Warranty, Condition andFundamentalTerm(1963)79 LQR534(whereitisarguedthatthefocusshouldbeonthenatureofthebreach,ratherthanthenatureofthetermbroken);Prof Treitelsinaugurallecturedeliveredon7 March1980beforethe University of Oxford in G HTreitel, Doctrine and Discretion in the Lawof Contract (Clarendon Press, 1981) at p 6 (where it is pointed out that thelawrelatingtodischargeforbreachwasfocused,originally,ontheseriousness of the breach although it later developed to focus on the natureoftheterm(pursuanttothecondition-warrantyapproach);andNolanonHongkongFir([28]supra)atpp 270276aswellasp 294).Statedsimply,thefairnessinthisregardwouldlieinavoidingthepotentiallygraveinjusticewhichcouldbeoccasionedtotheinnocentpartywhocouldpotentiallysuffertheseriousconsequencesofthebreachbutisunabletoterminatethecontractbecausethetermisgiventhelegalstatusofawarranty (pursuant to the condition-warranty approach).37 Theconceptionoffairnessreferredtointheprecedingparagraphmust,bydefinitionandlogic,beanobjectiveone.However,ithasbeenargued by Goh that the court would, pursuant to the approach adopted inRDC Concrete and (in particular) by insisting on applying the Hongkong Firapproachasageneralrule,bewantingtodojusticeonitsownterms(seeGohsCritique([27]supraat267)).Indeed,theauthorproceedstoelaborate thus (ibid):Inthepresentcontext,thismeansthateveniftheoutcomeissufficientlyseriousfromanobjectivepointofview,thisshouldnotdetractfromthepartiesintentionsthatnoterminationispossible,ifthis is decipherable from the contract.38 Inourview,itisclearthat,comparedtothecondition-warrantyapproach,theHongkongFirapproachembodiesasomewhatdifferentpaginator.bookPage 902Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 903conceptionoftheconceptoffairness.However,thisdoesnot,ipsofacto,render this particular conception an arbitrary one. We do not (in fairness tothelearnedauthor)assumehimtobearguingthattheHongkongFirapproachembodies(and/orleadsto)arbitrariness(see,inparticular,hisreference to an objective point of view in the quotation above).39 Indeed,itisalsoappositetonote,atthisjuncture,thatDiplock LJsanalysis in the English Court of Appeal decision of Hongkong Fir ShippingCoLtdvKawasakiKisenKaishaLtd[1962]2 QB26(HongkongFir)(whichistherootsourceoftheHongkongFirapproach(seealsoaboveat [26]))hasreceivedthehighestpraise.IntheleadingHouseofLordsdecisionofBungeCorporation,NewYorkvTradaxExportSA,Panama[1981]1 WLR711,Lord Wilberforcereferredtoit(at714)asaseminaljudgmentwhilstLord Roskillexpressedtheview(at725)thatthejudgmentofDiplock L.J.intheHongkongFircaseis,ifImayrespectfullysay so, a landmark in the development of one part of our law of contract inthe latter part of this century.40 Itisalsoappositetonotethat,tothebestofourknowledge,allthemajorCommonwealthjurisdictionshaveendorsedtheHongkongFirapproach(theseincludeAustralia(see,forexample,Koompahtoo([27]supra);Canada(see,forexample,theAlbertaSupremeCourtdecisionofDow Chemical of Canada Limited v R V Industries Ltd (1979) 9 Alta LR (2d)129;theOntarioCourtofAppealdecisionofJorianPropertiesLtdvZellenrath(1984)46 OR (2d)775;theOntarioHighCourtofJusticedecision of First City Capital Ltd v Petrosar Ltd (1987) 61 OR (2d) 193; theBritish Columbia Court of Appeal decision of Lehndorff Canadian PensionProperties Ltd v Davis Management Ltd (1989) 59 DLR (4th) 1; the AlbertaCourt of Appeal decision of First City Trust Co v Triple Five Corp Ltd (1989)57 DLR (4th)554;theBritishColumbiaCourtofAppealdecisionofRamrodInvestmentsLtdvMatsumotoShipyardsLimited(1990)47 BCLR (2d) 86; and the Alberta Provincial Court decision of Krawchuk vUlrychova[1996]8 WWR183(andcftheSupremeCourtofCanadadecision of Field v Zien (1963) 42 DLR (2d) 708 as well as the Ontario CourtofAppealdecisionof968703 OntarioLtdvVernon(2002)58 OR(3d) 215));andHongKong(see,forexample,theHongKongCourtofFinal Appeal decision of Mariner International Hotels Ltd v Atlas Ltd (2007)10 HKCFAR1;theHongKongCourtofAppealdecisionsofLeungYeevNgYiuMing[2001]1 HKC342andCreatilesBuildingMaterialsCoLtdvTosUniverseConstructionCoLtd[2003]2 HKLRD309;theHongKongCourtofFirstInstancedecisionsof SamsungHongKongLtdvKeenTimeTradingLtd[1998]2 HKLRD341(affirmedintheHongKongCourtofAppealdecisionofSamsungHongKongLtdvKeenTimeTradingLtd[1999]2 HKC447),Okachi(HongKong)CoLtdvNominee(Holding)Ltd[2005] 4 HKLRD 447 (affirmed in the Hong Kong Court of Appeal decisionofOkachi(HongKong)Co LtdvNominee (Holding) Ltd[2007]1 HKLRDpaginator.bookPage 903Monday, December 14, 200910:36 AM904 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)55)andSecretaryforJusticevYusTinSingEnterprisesCoLtd[2008]HKCU 1391; [2008] HKCFI 768; as well as Stephen Hall, Law of Contract inHong Kong Cases and Commentary (LexisNexis, 2nd Ed, 2008) at ch 10).41 Unfortunately(and,again,tothebestofourknowledge),noneofthesedecisionsactuallydeals(expresslyatleast)withthepreciserelationshipbetweenthecondition-warrantyapproachandtheHongkongFir approach. We attempted to do so in RDC Concrete ([23] supra) and noware attempting to deal with at least one remaining issue that has arisen fromthe critique in the articles cited earlier (at [27] above).42 It is appropriate, at this juncture, to consider the powerful argumentprofferedinGohsCritique([27]supra)totheeffectthattheapproachadoptedbythiscourtinRDCConcretedoesnotgivefulleffecttotheintentionsofthepartiesinasmuchasifthepartiesintentionwasthattheterm breached was to be a warranty, then the court ought to give effect tothat intention. However, to do this would be to return fully to the condition-warranty approach and (more importantly) to leave no scope for applicationof the Hongkong Fir approach, which (as we have already explained above)isundesirable.ItistruethattheauthordoesarguethattheHongkongFirapproachcanstillapplywherethepartiesintentionisnotobjectivelyascertainable.However,whilsttheoreticallyattractive,suchanargumentdoesnot,withrespect,recognise(aswementionedaboveat[35];seealsobelow at [44]) the fact that in a situation where the term concerned has beenascertained by the court to be a condition, the intention of the parties has, exhypothesi, been ascertained. Indeed, it is difficult to envisage or even imagineasituationwheretheintentionofthepartiescannotbeobjectivelyascertained by the court. Goh is, however, correct in arguing that the courthas, on the approach adopted in RDC Concrete, gone further and imputed(albeitnot,asweexplainbelow,asanirrebuttablepresumption)anintentiontothepartiesinneverthelessproceedingtoapplytheHongkongFirapproachinasituation(itisimportanttoemphasise)wherethecourthasdecidedthatthetermwasnotintendedbythepartiestobeacondition; as the author put it (see Gohs Critique at 264):The court [in RDC Concrete] evidently saw that even if the parties hadintendedatermtobeawarranty,thatoughtstilltobesubjecttotheHongkongFirapproach.Suchanapproachwouldnotbeinlinewithany conceptual basis other than the courts (important, it must be said)desire to do justice. [emphasis added]43 However,aswehavealreadypointedoutabove,ifthecourtdecidesthatthepartiesdidnotintendthetermconcernedtobeacondition,itwould necessarily follow (if Carters Critique and Gohs Critique as well astheir proposed approach are accepted) that the parties must have intendedthat term to be a warranty. If so, as also pointed out above, this would leavenoscopewhatsoeverfortheapplicationoftheHongkongFirapproach.In ourview,itisdifficult(perhapsevenimpossible)toeffectaperfectpaginator.bookPage 904Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 905integration between both these approaches. That is why this court, in RDCConcrete, observed thus with regard to the effective fate of the warranty,as follows (at [107][108]):107 If,however,thetermbreachedisawarranty,weareoftheview that the innocent party is not thereby prevented from terminatingthecontract(asitwouldhavebeenentitledsotodoifthecondition-warrantyapproachoperatedalone).Considerationsoffairnessdemand, in our view, that the consequences of the breach should also beexamined by the court, even if the term breached is only a warranty (asopposedtoacondition).Therewould,ofcourse,benoneedforthecourt to examine the consequences of the breach if the term breachedwas a condition since, ex hypothesi, the breach of a condition would (aswe have just stated) entitle the innocent party to terminate the contractinthefirstinstance.Hence,itisonlyinasituationwherethetermbreached would otherwise constitute a warranty that the court would,asaquestionoffairness,gofurtherandexaminetheconsequencesofthe breach as well. In the result, if the consequences of the breach aresuch as to deprive the innocent party of substantially the whole benefitthatitwasintendedthattheinnocentpartyshouldobtainfromthecontract,thentheinnocentpartywouldbeentitledtoterminatethecontract,notwithstandingthatitonlyconstitutesawarranty.If,however, the consequences of the breach are only very trivial, then theinnocent party would not be entitled to terminate the contract.108 It is true that the approach adopted in the preceding paragraphwould,ineffect,resultintheconceptofthewarranty,asweknowit,being effectively effaced since there would virtually never be a situationinwhichtherewouldbeaterm,thebreachofwhichwouldalwaysresult inonly trivial consequences. In other words, if atermwas notacondition under the condition-warranty approach, it would necessarilybecomeanintermediateterm,subjecttotheHongkongFirapproach(see, in this regard, the perceptive observations by Robert Goff J (as hethenwas)intheEnglishHighCourtdecisionofTheYmnos[1982]2 Lloyds Rep 574at583).Inotherwords,thetraditionalthree-foldclassificationofcontractualterms(comprisingconditions,warrantiesandintermediateterms,respectively)wouldbeamerelytheoreticalone only. However, the concept of the intermediate term was itself onlyfully developed many years after the condition-warranty approach (inHongkongFir).Further,andmoreimportantly(fromapracticalperspective),itshouldalsobeobservedthatthespiritbehindtheconceptofthewarrantywouldstillremaininappropriatefactsituationsinasmuchastheinnocentpartywouldnotbeentitledtoterminate the contract if the consequences of the breach were found tobe trivial (although it would, as we shall see, be entitled to damages thatitcouldestablishatlaw).Asimportantly,thislast-mentionedresult,viz,therighttoclaimdamages,ispreciselythatwhichwouldhaveobtained,inanyevent,hadthecourtfoundthatthetermconcernedwas a warranty under the condition-warranty approach.[emphasis in original]paginator.bookPage 905Monday, December 14, 200910:36 AM906 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)44 Asalreadymentioned(aboveat[42]),Gohiscorrectinpointingout thatthecourtis,ineffect,applyingtheHongkongFirapproachasimputed to the parties as a general rule (provided that it has decided thatthetermisnotacondition),althoughitisimportanttonotethatthisgeneralruleissubjecttoalimitedexception(seebelowat[48][50]and[57]).Incontrast,thelearnedauthorargues,ontheotherhand,thattheHongkongFirapproachoughttobeappliedasafallbackrule[emphasisadded] instead (see Gohs Critique, especially at 261). However, as we havealready emphasised a number of times during the course of this judgment,the approach adopted by Goh would not, with respect, be practically viableinasmuch as there would be virtually no situation where the court could (onhisapproach)turntotheHongkongFirapproachbywayofafallbackposition.Itisimportanttoreiteratetheimportantpointthatthecourtwouldnecessarily(frombothpracticalaswellastheoreticalperspectives)have ascertained that the parties intended the term concerned to be either aconditionorawarranty.Toelaborate,ifthecourtdecidesthatthepartiesintended the term concerned to be a condition, that is an end to the matter(evenundertheapproachadoptedinRDCConcrete)inasmuchastheinnocentpartyisentitledtoterminatethecontract.If,however,thecourtdecidesthatthepartiesdidnotintendthetermtobeacondition,itmustnecessarilyfollow(leavingasidetheHongkongFirapproachforthemoment)thatthepartiesmusthaveintendedthetermtobeawarrantyinstead. Put simply, either the parties intended the term concerned to be animportantone(inwhichcaseitwouldbeacondition)ortheydidnot(inwhichcaseitwouldbeawarranty).Ifso,thenthereisnoneed(orevenjustification)forthecourttogoanyfurtherandapplytheHongkongFirapproach; that particular approach has, in effect, become moribund.45 However, might it be also argued that there could be situations wherewhilst the parties did not intend the term to be a condition, they might haveintended that the term be an intermediate one instead of a warranty? Whilsttheoreticallyattractive,suchanargumentfails,inourview,totakeintoaccount the fact (noted above at [36]) that an intermediate term will, by itsverynature,alwaystendtocovertheentirefield,sotospeak(seealsoaboveat[43]).Moreimportantly,thisresultstems,inthefinalanalysis,from the conceptual incompatibility of the condition-warranty approach onthe one hand and the Hongkong Fir approach on the other. It is true that, onapracticallevel,bothapproachesoftenyieldthesameresult.However,aswehavealreadypointedout(aboveat[34]),certainfactsituationscould alsoyieldradicallydifferentresultswhicharearrivedatasaresultof theconceptualincompatibilityjustmentioned.Putsimply,thecondition-warrantyapproachentailslookingatthenatureofthetermconcerned whereas the Hongkong Fir approach entails looking at the actualconsequencesofthebreachinstead(seealsoRDCConcrete([23]supra)at [99],reproducedaboveat[26]).Thisisanimportantpointbecauseitmeansthat,onboththeoreticalaswellaspracticallevels,acourtmustpaginator.bookPage 906Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 907necessarily commence with the application of either the condition-warrantyapproach or the Hongkong Fir approach.46 Indeed,inRDCConcrete,thiscourtcommencedwiththecondition-warrantyapproach(pursuanttoSituation 3(a)).Thisbeingthe case,thenthe concept of the intermediate term, which is the quintessential productoftheHongkongFirapproach,onlyoperateslater(pursuanttoSituation 3(b)).Suchanapproachis,inourview,botheminentlyjustandfairaswellaspractical.Asalreadymentioned(at[36]above),theapplication of the Hongkong Fir approach right at the outset would leave nolegalspaceforapplicationofthecondition-warrantyapproach.Ontheotherhand,aswehaveexplainedinsomedetailabove,applicationofthecondition-warranty approach must nevertheless also leave legal space forapplication of the Hongkong Fir approach. Most importantly, the approachadopted(pursuanttoSituation 3(a)andSituation 3(b)inRDCConcrete,and in that particular order of priority) achieves, in our view, a just and fairoutcome, balancing both approaches in the process.47 It is, however, important, at this juncture, to note (indeed, emphasise)thattheintermediatetermisnottherebywithoutlegalsignificance:Thecombinedlegaleffectasaresultoftheapplicationof,first,Situation 3(a)andthenSituation 3(b)isthatifatermisnotaconditionunderthecondition-warrantyapproach(Situation 3(a)), the court willthen considerwhethertheinnocentpartyisneverthelesslegallyjustifiedinterminatingthecontractundertheHongkongFirapproach(Situation 3(b));inotherwords,ifthetermisnotacondition,itispresumedtobeanintermediateterminstead.Inthisregard,theconceptofthewarrantyhasbeeneffectivelyeffaced(seealsoaboveat[43]).Theissuethatnowarisesiswhetherornotthateffacementis(oroughttobe)atotalone.If,inotherwords, a term is not a condition (pursuant to Situation 3(a)), is it (at least insubstanceandeffect)irrebuttablypresumedtobeanintermediateterm(pursuanttoSituation 3(b))?Or,coulditbeargued,onthecontrary,thatthepresumptionjustmentionedisrebuttable?Inparticular,coulditbearguedthat,wherethepartiesexpresslydesignatethetermconcernedasawarrantyinclearandunambiguousterms(viz,awarrantyexpresslyintendedbytheparties),thepresumptionistherebyrebutted?Thisisanimportant issue to which our attention must now turn.(D) A WARRANTY EXPRESSLY INTENDED BY THE PARTIES48 Althoughweobservedearlierinthisjudgment(aboveat[32][33])that a situation in which the parties expressly agree a term to be a warrantyislikelytobeinpracticerare(oratleastuncommon),wewouldnotcategoricallyholdthatthepartiescanneveragreethataparticulartermshouldhavethelegaleffectofawarrantyinthesensethewordisunderstoodandutilisedpursuanttothecondition-warrantyapproach(cfalsotheEnglishHighCourtdecisionofM& J PolymersLtdvImeryspaginator.bookPage 907Monday, December 14, 200910:36 AM908 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)MineralsLtd[2008]1 LloydsRep541at547).Inthisregard,weareenvisagingapossiblesituationwherethepartiesstatethisnotonlyclearlybut alsoinnouncertain terms inotherwords,theparties,expresslystatethat any breach of a particular term, no matter how serious and regardless oftheconsequencesofthebreach,wouldneverentitletheinnocentpartytoterminatethecontract(thisis,infact,thereverseormirrorimageofSituation1(astowhich,seebelow at [51])).Asopposedtosimplystatingexpressly,withoutmore,thatthetermconcernedisawarranty,suchastipulationbythepartiesdoes,innouncertainterms,infactconveytheirintentionthatatermistobeawarranty,asthatisdefinedunderthecondition-warrantyapproach.ThepotentialdifficultiesintroducedbySchuler([29]supra)wheretherewassomeambiguityastotheobjectivemeaning of a term would therefore not arise in such a situation.49 Itissignificanttonote,attheoutset,thatDiplock LJhimselfinHongkong Fir ([39] supra) acknowledged (at 70) that:[T]here may be other simple contractual undertakings of which it canbepredicatedthatnobreachcangiverisetoaneventwhichwilldeprive the party not in default of substantially the whole benefit whichitwasintendedthatheshouldobtainfromthecontract;andsuchastipulation, unless the parties have agreed that breach of it shall entitlethenon-defaultingpartytotreatthecontractasrepudiated,isawarranty. [emphasis in original]The type of term described in the preceding paragraph would, in fact, be ofthe nature described by Diplock LJ in the above quotation. Indeed, it is alsosignificant to note that the learned judge also acknowledged (ibid) that whatwehavedescribedastheHongkongFirapproachwassubjecttoexpressprovisioninthecontract(whichwould,again,includethetypeoftermdescribed in the preceding paragraph).50 Wehavealsoraised(aboveat[45][47])theissueastowhetherapresumption that a term is an intermediate term (under Situation 3(b)) is anirrebuttable one that is writ in stone. We are of the view that the answer tothis particular issue must be in the negative. Consistently with Diplock LJsviews, which were noted in the preceding paragraph, it must surely be opentothepartiestoexpresslyagree(inclearandunambiguouslanguage)thatthetermconcernedcannevergiverisetoalegalrighttoterminatethecontract, regardless of the consequences of the breach of that particular term(viz,toagreetoawarrantyexpresslyintendedbytheparties).Suchanagreementwould,inourview,clearlyrebutthe(initial)presumptionthatthetermisanintermediateterm.Wealsonotethatsuchatermis(aswehave observed above (at [32][33])) likely to be rare (or at least uncommon)to begin with. We would add that, in such circumstances, the conception offairnessembodiedintheidealofthesanctityofcontractshouldbegiveneffect to (indeed, priority) in this particular situation.paginator.bookPage 908Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 90951 Asimilarapproach(whichalso,infact,embodiestheidealofthesanctity of the contract) is to be found in Situation 1. One issue that arisesinrelationtoSituation 1iswhetheritcouldbesaidthatSituation 1andSituation 3(a)are,ineffect,thesameatleastinsofarastheissueofterminationisconcerned.Situation 1itselfwas,infact,describedinRDCConcrete ([23] supra) in the following terms (at [91]):Thefirstbroadcategory(Situation 1)dealswiththesituationwherethecontractclearlyandunambiguouslystatesthat,intheeventofacertain event or events occurring, the innocent party will be entitled toterminatethecontract.Aclearexampleofthisis,infact,cl 8ofthePlaintiffsletterofintentinthepresentappeal...Hence,theothersituationsarenotdirectlyapplicableinthepresentappeal.However,for the sake of completeness and, more importantly, because this entirearea is, as already mentioned, one of the more significant (yet complex)areas of the law of contract and there is little by way of clarification inthelocalcaselaw,wesetoutbrieflytheremainingsituationsaswell.[emphasis in original](Reference may also be made, in this regard, to Man Financial ([24] supra)at [154].)52 Itisimportant,atthispoint,toreiteratethatSituation 1relatestoasituationwherethereisaclearandunambiguousstatementthat,intheeventofabreachand/oracertaineventoreventsoccurring,theinnocentpartywillbeentitledtoterminatethecontract.Muchwill,ofcourse,dependonthepreciselanguageaswellasthecontextconcerned(cf,forexample,therecentEnglishCourtofAppealdecisionofRicevGreatYarmouth Borough Council [2003] TCLR 1 (critiqued by Simon Whittaker,TerminationClausesinch 13ofContractTerms(OxfordUniversityPress,2007)(AndrewBurrows&EdwinPeeleds)atpp 277283)andtheNewSouthWalesCourtofAppealdecisionofHewittvDebus(2004)59 NSWLR617(Hewitt)withtheNewSouthWalesCourtofAppealdecisionofHonnervAshton(1979)1 BPR9478(Honner)(whichMeagher JA, who dissented in Hewitt, in fact followed)).53 Turning to Situation 1 proper, its basis is founded on giving effect tothepartiesintentionbywayofaterminationclausethatmaynotnecessarilyinvolveabreachofcontractbutneverthelesshasthelegaleffect(in substance) of a condition (pursuant to the condition-warranty approach)(seealsoperLord DiplockintheHouseofLordsdecisionofAfovosShippingCoSAvRomanoPagnanandPietroPagnan[1983]1 WLR195at 203(AfovosShipping);thoughcfperGlass JAinHonner(at9483);referencemayalsobemadetoJ WCarter,TerminationClauses(1990)3 JCL90at104105(CarteronTerminationClauses)aswellastotherecent English Court of Appeal decision of Stocznia Gdynia SA v GearbulkHoldings Ltd [2009] 1 Lloyds Rep 461 (Stocznia Gdynia SA) (where it washeld(itappearsasamatterofconstruction)thattheterminationclausepaginator.bookPage 909Monday, December 14, 200910:36 AM910 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)concerned furnishedthe sameright,asthat contained under the commonlaw, to treat the contract as discharged)).54 Situation 3(a), on the other hand, relates to the breach of a conditionproper(pursuanttothecondition-warrantyapproach).Viewedinthislight,Situation 1inRDCConcretemight(andthisisaveryimportantpoint)beregarded(havingregardtotheprecedingparagraph)asamoreexplicitwayofcharacterising(fromtheperspectiveoflegaleffect)asituationthatfalls(insubstance)withinthepurviewofSituation 3(a).Putsimply,thereisnodifference(insubstance)betweenSituation 1andSituation 3(a).55 Itshould,however,benoted,atthisjuncture,thatwhilstSituation 1entails(insubstance)thesamelegaleffectasacondition(pursuanttothecondition-warranty approach), this is only with regard to the termination ofthe contract. However, this does not necessarily mean that, from a remedialperspective,theinnocentpartyisalsoentitledtothefullmeasureofdamages if there has, in fact, been no breach which would have entitled it toterminatethecontractatcommonlaw(seetheEnglishCourtofAppealdecision of Financings Ltd v Baldock [1963] 2 QB 104 (Financings) as wellastheHighCourtofAustraliadecisionofShevillvThe BuildersLicensingBoard (1982) 149 CLR 620; but cf Afovos Shipping and (more importantly)theEnglishCourtofAppealdecisionofLombardNorthCentralPlcvButterworth[1987]QB527(Lombard)(whichdemonstratesthattheeffect of Financings could be avoided by appropriate drafting and which isnotedinG HTreitel,DamagesonRescissionforBreachofContract[1987]LMCLQ143aswellHughBeale,PenaltiesinTerminationProvisions(1988)104 LQR355);referencemayalsobemadetoStoczniaGdynia SA as well as Carter on Termination Clauses ([53] supra) and BrianR Opeskin,DamagesforBreachofContractTerminatedUnderExpressTerms (1990) 106 LQR 293); indeed, even if the contract itself stipulates thedamagesrecoverable,thetermconcernedmightstillbeunenforceableasconstituting a penalty clause (see, for example, Financings and Lombard).56 Therearealsofurtherissuesraisedwithrespecttopossiblelegalmechanisms for the control of termination clauses pursuant to Situation 1(aswellaswithrespecttonon-terminationclausesunderthemirrororreverseimageofSituation 1,whichwehavetermedwarrantiesexpresslyintendedbytheparties),whichneednot,however,concernusinthepresent judgment (and see generally Whittaker ([52] supra) as well as Beale([55] supra)).(3) Conclusion57 WewouldthereforereaffirmtheapproachlaiddowninRDCConcreteforthereasonssetoutabove,subjecttotheextremelylimitedexceptionthat,wherethetermitselfstatesexpressly(aswellasclearlyandunambiguously)thatanybreachofit,regardlessoftheseriousnessofthepaginator.bookPage 910Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 911consequencesthatfollowfromthatbreach,willneverentitletheinnocentpartytoterminatethecontract,thenthecourtwillgiveeffecttothisparticular type of term (viz, a warranty expressly intended by the parties). Itbearsnotingthatthespecificreasonsforthisparticularexception(seeaboveat[48][50])aswellasthefactthatsuchatermmaybesubjecttocontrolviapossiblelegalmechanisms(seeaboveat[56])have,infact,already been set out above.58 Weturnnowtoacomplementarysetofapplicableprinciplesthatisequallyimportantforthepurposesofthepresentappeal,viz,therelevantfactorsinascertainingwhetherornotagivencontractualtermisacondition.The condition-warranty approach relevant factors in ascertaining whether a given contractual term is a condition59 This court, in Man Financial ([24] supra) set out, in some detail, therelevantfactorswhichacourtshouldconsiderinascertainingwhetherornot a given contractual term is a condition, bearing in mind that there is, inthe final analysis, no magical formula as such. In the circumstances, we cando no better than to set out, in extenso, the relevant part of that judgment,as follows (at [160][174]):(a) Introduction160 Itisimportanttonoteattheoutsetthatthereisnomagicalformula (comprising a certain fixed number of factors or criteria) thatwouldenableacourttoascertainwhetherornotagivencontractualtermisacondition.Thisisnotunexpected,giventheverynatureofthe inquiryitself(whichwouldincludeacountlessnumberofpermutationsandvariations,dependingontherespectivefactualmatricesand,moreimportantly,theintentionsoftherespectivecontractingpartiesthemselves).However,asisinherentwithintheverynatureofcommonlawdevelopment,certainfactorsthatmight(depending,asjustmentioned,ontheprecisefactualmatrixconcerned) assist the court in this regard have been developed.161 Atbottom,thefocusisonascertainingtheintentionofthecontractingpartiesthemselvesbyconstruingtheactualcontractitself(includingthecontractualtermconcerned)inthelightofthesurrounding circumstances as a whole (see the classic exposition on thispointbyBowen LJ(ashethenwas)intheoft-citedEnglishCourtofAppeal decision of Bentson v Taylor, Sons & Co (No 2) [1893] 2 QB 274at 281).(b) Thefirstfactor:Whereastatuteclassifiesaspecificcontractualterm as a condition162 The first of the established factors mentioned above (at [160]) isveryspecific:Whereastatute(or,moreoften,aparticularprovisionpaginator.bookPage 911Monday, December 14, 200910:36 AM912 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)withinastatute)classifiesaspecificcontractualtermasacondition,then that term will, of course, be a condition.163 The paradigm model is the Sale of Goods Act 1979 (c 54) (UK)(the UK Act), which is applicable in Singapore by virtue of the AELA[Application of English Law Act (Cap 7A, 1994 Rev Ed)] ( see s 4(1)read with Pt II of the First Schedule to the AELA). Indeed, the UK ActhasbeenreprintedinthelocalcontextastheSaleofGoodsAct(Cap 393, 1994 Rev Ed). This last-mentioned Act is, in fact, the classicstatutoryembodimentofthecondition-warrantyapproachinasmuchasit classifies variouscontractual termsasconditionsandwarranties,respectively.164 However,asalludedtoabove(at[162]),thisisaveryspecificfactor and would not cover any contractual terms that fall outside theparticular ambit of the statute (or statutory provision) concerned.(c) Thesecondfactor:Wherethecontractualtermitselfexpresslystates that it is a condition165 Thesecondfactorisanostensiblyobviousone:Wherethecontractual term itself expressly states that it is a condition, then thatterm would generally be held by this court to be a condition.166 However,wehaveaddedthewordostensiblybecause,eveninwhatappeartobeveryclear-cutsituations,thereiscaselawthatsuggeststhattheexpressuseofthewordconditionmight(onoccasion, at least) be insufficient to render that term a condition in law.In this regard, the House of Lords decision of L Schuler AG v WickmanMachineToolSalesLtd[1974]AC235(Schuler)comesreadilytomind.Inthatcase,themajorityoftheHouseheldthat,althoughthewordconditionwasexpresslyutilised,thatwordwasbeingutilisednot as a term of legal art, but, rather, in a lay sense.167 At first blush, the approach adopted by the majority in Schuler isnotawhollyuntenableone.Afterall,itistruethatthesameword(here,condition)cantakeondifferentmeaningsdependingonthecontextinwhichitisused.Withrespect,however,acloseanalysisofthe reasoning of the majority in Schuler demonstrates a preoccupationwith the consequences of the breach of contract in that case, rather thanafocus(inaccordancewiththecondition-warrantyapproachinSituation 3(a))onthenatureofthetermbreached.Indeed,thereisareference by Lord Kilbrandon (who was one of the majority judges) tothe grotesque consequences (id at 272) of holding the term breachedto be a condition in the strict legal sense of the word.168 It is our view that the majority of the House in Schuler were, insubstanceandeffect,applyingtheHongkongFirapproachinstead(which,itwillberecalled,fallsunderSituation 3(b)and,moreimportantly, relates to the actual nature and consequences of the breachinstead). Indeed, there is a very powerful (and, in our view, persuasive)dissentingjudgmentbyLord Wilberforce(seeSchulerat262263),who warned against rewriting, in effect, what was the clear intention ofthe contracting parties that the term concerned be a condition in thepaginator.bookPage 912Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 913strictlegalsenseoftheword(inaccordancewiththesubstanceandspirit of the condition-warranty approach under Situation 3(a)).169 Indeed,itmightwellhavebeenthefactsituationinSchulerwhichpromptedthemajorityoftheHousetoadoptwhatwas,insubstanceandeffect,theHongkongFirapproachinstead.Withrespect, however,theintentionoftheparties(pursuanttothecondition-warrantyapproach)oughttotakeprecedencefor,aswepointedoutinRDCConcreteat[100],althoughtheHongkongFirapproach is conventionally associated with a sense of fairness (in that itallows termination of a contract only if the nature and consequences ofthebreacharesoseriousastodeprivetheinnocentpartyofsubstantiallythewholeofthebenefitofthecontractwhichitwasintended to obtain from the contract), it is equally true that a sense offairness(albeitfromadifferentperspective)alsofeatureswhenthecondition-warrantyapproachisappliedinasmuchasitisfairtoholdthe contracting parties to their original bargain.170 WealsoobservedinRDCConcrete(especiallyat[110])thatgeneralHouseofLordsdecisionsafterSchulerinfactsupportedtheapproach that we adopted in that case (in particular, our stance that thecondition-warranty approach in Situation 3(a) should take precedenceover the Hongkong Fir approach in Situation 3(b) in so far as it oughtto be ascertained, first, whether or not the contractual term concernedisacondition):see,forexample,BungeCorporation,NewYorkvTradaxExportSA,Panama[1981]1WLR711(Bunge)andTorvaldKlaveness A/S v Arni Maritime Corporation [1994] 1 WLR 1465.(d) The third factor: The availability of a prior precedent171 The third factor is whether a prior precedent is available. An oft-cited illustration in this regard is the English Court of Appeal decisionof Maredelanto Compania Naviera SA v Bergbau-Handel GmbH [1971]1 QB164(TheMihalisAngelos),wherethecourtheld(at194,199200and205206)thatanexpectedreadinessclausewasacondition on the ground, inter alia, that the same conclusion had beenreachedinbyitsownpreviousdecision(inFinnishGovernmentvH Ford & Co, Ltd (1921) 6 Ll L Rep 188).172 Withrespect,relianceonapriorprecedent,whilstconvenientwhenviewedfromapracticalperspective,doesnotreallyaddresstheissue of principle inasmuch as there would, in our view, still need to bean inquiry as to whether or not the analysis and reasoning in the priorprecedentpassedmusterinprinciple.Indeed,thiscourtis,incertainexceptionalcircumstances,permitted(asthefinalappellatecourt)todepart from its own prior decisions pursuant to the criteria set out inthiscourtsPracticeStatement(JudicialPrecedent)[1994]2SLR689.Thiscourtis,afortiori,freenottofollowpriorEnglish(orotherforeign)decisionsif[it]findstheanalysisandreasoningthereinunpersuasive,orifthepriorforeigndecisioninquestionisnot applicabletothecircumstancesofSingapore(see,inthislast-mentionedregard,s 3(2)oftheAELA...);alternatively,thepriorpaginator.bookPage 913Monday, December 14, 200910:36 AM914 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)foreigndecisionconcernedcanbesubjecttothenecessarymodifications,ifsorequiredbythecircumstancesofSingapore(see,again, s 3(2) of the AELA).(e) The fourth factor: Mercantile transactions173 The fourth factor centres on the importance placed on certaintyandpredictabilityinthecontextofmercantiletransactions.Caselawsuggeststhatcourtsaremorelikelytoclassifycontractualtermsasconditionsinthisparticularcontext,especiallywheretheyrelatetotiming (see, for example, Bunge and The Mihalis Angelos).(f) Summaryoftherelevantfactorsunderthecondition-warrantyapproach174 Theaforementionedfactorsareimportant.But,theyarenotexhaustive and, to use a familiar phrase (albeit in a somewhat differentcontext), the categories of factors are not closed. The actual decision astowhetherornotacontractualtermisaconditionwould,indeed,depend very much on the particular factual matrix before the court. Italsobearsrepeatingthatthereisnomagicalformula.Inthefinalanalysis,thefocusisonascertainingtheintentionofthecontractingpartiesthemselvesbyconstruingtheactualcontractitself(includingthe contractualtermconcerned)inthelightofthesurroundingcircumstances as a whole (see also [161] above).[emphasis in original]60 We now turn our attention to the final set of applicable principles thatisrelevantforthepresentappeal(andwhichhasnot,apparently,beencanvassedinpreviouslocaldecisions),viz,therelevantfactorsinascertainingwhether or not thebreach is sufficiently serious such that theinnocentpartyisentitledtoterminatethecontractpursuanttotheHongkong Fir approach.Relevant factors in ascertaining whether there was substantial deprivation of benefit (pursuant to the Hongkong Fir approach)61 Inascertaininghowseriousthebreachmustbebeforetheinnocentparty is entitled to terminatethe contract,various formulations have beensuggestedinthecaselaw.Examplesofsuchformulations(whichrelatetoboththecondition-warrantyapproachandtheHongkongFirapproach,bearing in mind that the former deals with hypothetical consequences andthelatterwithactualconsequencesthatoccuruponabreachofcontract)includethefollowing:fundamentalbreach(seegenerallytheHouseof LordsdecisionofSuisseAtlantiqueSocitdArmementSAvNVRotterdamscheKolenCentrale[1967]1 AC361(SuisseAtlantique));breachgoingtotherootofthecontract(seealsogenerallySuisseAtlantique and Koompahtoo ([27] supra) (see below at [63])); breaches thatgosodirectlytothesubstanceofthecontract(seetheEnglishCourtofAppeal decision of Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003at 1012 (affirmed, Wallis, Son & Wells v Pratt & Haynes [1911] AC 394));paginator.bookPage 914Monday, December 14, 200910:36 AM[2009] 3SLR(R) Sports Connection Pte Ltd v Deuter Sports GmbH 915andfrustratethecommercialpurposeoftheventure(whichistheterminologycommonlyattributedtotheEnglishCourtofExchequerChamberdecisionofJacksonvTheUnionMarineInsuranceCompany,Limited(1874)LR 10 CP 125,althoughthecaseitselfdoesnotusethisprecise wording). In our view, it would appear, with respect, that there is noreal difference (in substance) amongst this as well as the other formulations(althoughtheyareobviouslyphrased,linguisticallyspeaking,indifferentways). What is difficult is ascertaining whether or not the consequences ofthe breach are sufficiently serious based on the precise facts concerned.62 Inourview,thefocusmustbeontheformulationlaiddownbyDiplock LJinHongkongFir([39] supra)itself:Theinnocentpartymustestablishdeprivationofsubstantiallythewholebenefitwhichitwastheintention of the parties as expressed in the contract that he should obtain astheconsideration(seeHongkongFir(at66))fortheperformanceoftheinnocentpartysownobligations.Atbottom,thefocusisondeterminingwhatexactlyconstitutedthebenefitthatitwasintendedtheinnocentparty shouldobtainfromthecontract(which,lookedatinonesense,is a questionofconstruction,butnotinthesenseutilisedinthecontext of ascertainingwhetheratermisaconditionpursuanttothecondition-warrantyapproach(cfalsoKoompahtoo(especiallyat[55],reproducedbelowat[63])aswellasTurneronHongkong Fir([27] supra)at 435436, although Turner was probably referring to construction in thelattersensejustmentioned)),andthenexaminingverycloselytheactualconsequenceswhichhaveoccurredasaresultofthebreachatthetimeatwhichtheinnocentpartypurportedtoterminatethecontractinordertoascertainwhethertheinnocentpartywas,infact,deprivedofsubstantiallythe whole benefit of the contract that it was intended that the innocent partyshould obtain. We would emphasise here that regard should be had only tothe actual consequences and events resulting from the breach.63 The broad approach mentioned in the preceding paragraph is broadlyconsistent with that adopted by the majority of the court in the High CourtofAustraliadecisionofKoompahtoo(whichalsocontainssomehelpfulfactors(particularlyat[54])which,however,cannot(inthenatureoftheinquiry)beexhaustive,letaloneconclusive).Inthatcase,themajorityofthecourt(comprisingGleeson CJ,Gummow J,Heydon JandCrennan J)observed thus (at [54][56]):We add that recognition that, at the time a contract is entered into, itmaynotbepossibletosaythatanybreachofaparticulartermwillentitle the other party to terminate, but that some breaches of the termmaybeseriousenoughtohavethatconsequence,wastakenupinAnkar [Ankar Pty Ltd v National Westminster Finance (Australia) Ltd(1987) 162 CLR 549]. Breaches of this kind are sometimes described asgoingtotherootofthecontract,aconclusorydescriptionthattakesaccount of the nature of the contract and the relationship it creates, thenatureoftheterm,thekindanddegreeofthebreach,andthepaginator.bookPage 915Monday, December 14, 200910:36 AM916 SINGAPORE LAW REPORTS (REISSUE) [2009] 3SLR(R)consequencesofthebreachfortheotherparty.Sincethecorollaryofaconclusionthatthereisnorightofterminationislikelytobethattheparty not in default is left to rely upon a right to damages, the adequacyof damages as a remedy may be a material factor in deciding whether thebreach goes to the root of the contract.A judgment that a breach of a term goes to the root of a contract, being,tousethelanguageofBuckley LJinDecro-WallInternationalSAvPractitioners inMarketingLtd[[1971]1 WLR361at380],suchastodeprive the injured party of a substantial part of the benefit to which heis entitled under the contract, rests primarily upon a construction of thecontract.Buckley LJattachedimportancetotheconsequencesofthebreach and the fairness of holding an injured party to the contract andleavinghimtohisremedyindamages.These, however,arematters tobeconsideredafterconstruingtheagreementthepartieshavemade.Ajudgmentastotheseriousnessofthebreach,andtheadequacyofdamages as a remedy, is made after considering the benefit to which theinjured party is entitled under the contract.Aquestionastocontractualintention,consideredinthelightofthelanguageofthecontract,thecircumstancesinwhichthepartieshavecontracted and their common contemplation as to future performance,isdifferentfromaquestionastotheintentionevincedbyoneofthepartiesatthetimeofbreach,suchasarisesincasesofallegedrenunciation.Thatdifferenceisexemplifiedbythewayinwhichthemajority in the Court of Appeal dealt with the decision of the primaryjudge in this case.[emphasis added]GeneralreferencemayalsobemadetoJ WCarter,BreachofContract(The L