had seen

If you asking about the tense of 'had seen', using the past perfect simple is correct if the time when she had told him the bad news was further in the past than a later event, also described. The first sentence is not relevant.

Past perfect simple is formed by combining the simple past form of to have with the simple past form of the main verb: We had shouted. She had seen.

Past perfect simple is used for describing secluded events that have occurred before something else followed. The event that is closer to the present is given in simple past tense:

After we had visited* our relatives in New York, we flew** back to Toronto.

After she had seen* how upset he looked, she did not want** to upset him again.

* past perfect simple

** simple past

Thanks, Contrex.

To make sure that I understand your explanation correctly, can I conclude that "She had seen how upset he looked when she told him the bad news" is not correct because "she told him the sad news" should have happened first?

I do not think that you understood my explanation correctly.

I intended to convey that the tense of the verb "had seen" is correct. That is what you asked. However the reason has nothing to do with the first sentence, which is what you also asked.

Is 'had seen' correct?

Yes.

If so, am I right to say that it is because of the first sentence?

It is not because of the first sentence.

This is the first sentence