Conflict of Laws: Quantification of Damages Governed by Law of the Court

ThisĀ Federal Court decision datedĀ  16 March 2015 involved the USD25 million judgment obtained by the Singapore company, Scandinavian Bunker, against MISC.

An interesting conflict of laws issue arose in this case. The governing law of the contract was English law while the suit was filed in the Malaysian Courts (there was an exclusive jurisdiction of Malaysian Courts clause). The question was which law should govern the quantification of damages? Would it be the governing law of the contract (English law) or the lex fori (i.e. the law of the court) (Malaysian law)?

Instinctively, one might think that the law governing the quantification of damages would follow the governing law of the contract.

However, the Federal Court, looking at the English position, held that the lex fori would be the law governing the quantification of damages. Nonetheless, in this case, whether it was English law on Sale of Goods or Malaysian law on Sale of Goods did not make a significant difference.

This Federal Court decision may have a significant impact when a party attempts to rely on a liquidated damages clause in a contract. If the contract has a foreign governing law but the legal proceedings are brought in the Malaysian Courts, then the damages sought under the liquidated damages clause may be subject to Malaysian law. The cases like Selva Kumar and Johor Coastal would apply and where actual loss may still have to be proven.