Liquidated Damages On Work Never Completed

The English Court of Appeal recently considered what should happen when a contractor, through its own fault, never delivers any completed work, despite having contracted to do so by a particular date. In Triple Point Technology, Inc v PTT Public Company Ltd [2019] EWCA Civ 230, 5th March 2019, the Court of Appeal had to choose between three different approaches set out in previous case law, but in which consistency seemed notoriously absent.

A software solution?

PTT, a commodities trader based in Thailand, entered into a bespoke contact to procure a software system from Triple Point, a software systems supplier. The contract included milestone payments and specific dates for payment.

Work under the contract was delayed and Triple Point sought payment according to the contractual dates set out in the contract, even in respect of work it had not delivered. PTT refused payment whereupon Triple Point suspended work and PTT purported to terminate the contract.

The contract required Triple Point to pay "the penalty at the rate of 0.1% of undelivered work per day of delay from the due date for delivery up to the date PTT accepts such work". The issue before the Court was whether Triple Point could claim liquidated damages for delay in circumstances in which PTT never accepted the work because (with the exception of the first two stages), it had never delivered any.

The Technology and Construction Court Judge (Jefford J) found that Triple Point had failed to properly perform its contractual duties, had breached its contractual duty to exercise skill and care and that it was entitled to no further payment.

In respect of PTT's counterclaim, Jefford J awarded PTT liquidated damages of US$154,662 in respect of delay to the first two stages and US$3,304,616 for the remainder. She also awarded PTT US$1,038,000, being its costs of procuring an alternative system and wasted costs, pursuant to a clause in the contract that appeared to limit the damages that could be recovered to the sum Triple Point had received in the provision of the services. Both parties appealed.

Penalty? What penalty?

Despite the use of the term "penalty" in the liquidated damages clause, the Court of Appeal took the opportunity to give a reminder that words do not always mean what they say. Triple Point relied upon Cavendish Square Holdings BV v Makdessi [2015] UKSC 67, [2016] AC 1172, and in particular the judgment of Lord Neuberger PSC, to suggest that the clause imposed a...