“Can you prove the actual losses suffered by the company?”

That was my first question to our Company-client intending to file an action for damages against their employee for breach of duties and negligence.

In every claim for damages, there are always two folds to satisfy i.e. liability and quantum. When liability is established, loss must be proven for the Courts to decide on the quantum of the damages.   Proving liability relates to a fault finding process through fact and law to determine whether the Defendant is legally responsible for the loss and damage suffered. The second fold, being quantum, is a finding of how much compensation or monetary damages should be awarded to the Plaintiff. In this regard, a Plaintiff will need to show to the Court the extent of loss and damage suffered, whether tangible or not, pursuant to the Defendant’s conduct.

Let’s take this as an example: The Company claims it had suffered damages from the employee’s conduct in unlawfully using confidential information of the Company to enter into contracts with other competitors for his own gain. The Company must be able to show damages suffered – for example:  loss of business directly linked to the employee’s conduct,  which could be supported by things like correspondence from customers cancelling orders etc. Just because a Defendant is found liable does not mean that the Plaintiff will be awarded significant damages. A Plaintiff who cannot show actual loss may only be awarded nominal damages, or in some cases, no damages at all, even though the Defendant clearly did something wrong or illegal.

The importance in proving damages is highlighted in the recent case of Might Meteor Advanced Manufacturing Sdn. Bhd. v Mahasuria Binti Idris & 2 Ors [BA-22NCVC-2-01/2017]. Here, the Plaintiff claimed that the Defendants acted in conflict of interest which resulted in improper accounting that caused, amongst others, Payment Vouchers to go missing and failing to maintain proper accounts. The damages claimed was over RM3.9 million against the 1st Defendant, RM900,000.00 against the 2nd Defendant, and RM1.8 million against the 3rd Defendant.

The Court found all the Defendants liable for conflict of interest in contravention of their employment agreement as they had appointed staff, relatives or spouse and friends of the staff to provide training services for the Company.

However, what was interesting is that the Court, despite ruling that the Defendants had placed themselves in a position of conflict and had breached their employment agreement, rejected the Plaintiff’s claim for damages. The  Court held that the Plaintiff was not entitled to any of the damages sought as the Plaintiff was unable to prove actual loss suffered by the Company, or that the Defendants had received payments, profit, benefits or privileges by being in a position of conflict with the Company:

Having said the above I am unable find any cogent evidence in proving the extent of damages suffered attributed to the Defendant’s with regards to the payment to various companies and the loss of payments vouchers. Therefore, bearing the foregoing in mind, I find that the Plaintiff had failed to prove both the facts and the quantum of damage as against the 1st, 2nd and 3rd Defendants.

For example, in the case of the 3rd Defendant, the Plaintiff claimed damages in the sum of approximately RM1.8 million because this was the total value of the payments made in the payment vouchers that went missing. However, there was no proof that the 3rd Defendant benefited personally from the missing payment vouchers, or that the payments in those payment vouchers were unlawful transactions which were not approved by the company. The Court found that the Plaintiff cannot base a claim on a “mere assumption” or even “strong possibility” that such payment vouchers were for unlawful transactions just because the vouchers were missing.

The Court also went on to hold that in absence of other evidence, to grant damages of such an amount to the Plaintiff  would amount to unjust enrichment to the Plaintiff, as the Plaintiff had already dismissed the Defendants for breaching their employment agreements.

Key Takeaway

Prospective litigants must understand that there is a difference between establishing liability, and being awarded damages. Litigants should be mindful that it is inappropriate to claim a “random” large amount of damages against a Defendant if there is no basis for doing so. The quantum of the damages awarded will rely heavily on whether there is actual loss and damage. Damages must be proven with real or factual evidence as opposed to mere particulars, summaries, estimations, or general conclusions. In sustaining a healthy claim for damages, proper paper trails and documentary evidence should be recorded comprehensively pursuant to the spirit of “he who asserts must prove”.

Otherwise, a judgment on liability alone with nominal or no damages awarded may be a Pyrrhic victory, given the costs and time that may be incurred by a litigant in pursuing a legal action. In the Might Meteor case above, as the Court did not allow the Plaintiff’s claim for damages against the Defendants, the Court ordered the Plaintiff to pay RM15,000.00 in costs to each Defendant. In other words, after a lengthy trial, it was the Plaintiff who had to pay a monetary sum to the Defendants as costs, even though the Court found that the Defendants had acted in conflict of interest and in breach of their employment agreements.

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About the author: Zi-Han Lim is an associate in the dispute resolution practice group at Donovan & Ho. He is experienced in dispute resolution, focusing on employment and industrial relations, administrative law and commercial litigation. 

Donovan & Ho is a law firm in Kuala Lumpur, Malaysia. Our practice areas include employment law, dispute resolution (litigation and arbitration), corporate and tax advisory, family law and real estate/conveyancing. Have a query? Contact us.

 

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