Liquidated Damages ' Post-Termination And Gaymark

• Law Firm: Chancery Law Corporation
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Compliance, Corporate and Company Law, Trials & Appeals & Compensation, Construction & Planning
• Author: Mr Tian Luh Tan and Yap Xuan Wei
• Published date: 03 January 2023

In Diamond Glass Enterprise Pte Ltd v Zhong Kai Construction Co Pte Ltd and another appeal [2022] SGHC(A) 44, the Appellate Division of the High Court had the opportunity to address, among others, the position of the law on liquidated damages in Singapore. In this article, we set out two key points of the decision in respect of the same.

This decision concerns two cross-appeals arising out of the decision of the High Court judge (the "Judge") in Zhong Kai Construction Co Pte Ltd v Diamond Glass Enterprise Pte Ltd [2021] SGHC 277 (the "Judgment") (at [1]).

In the interests of brevity, we will not reiterate the facts, and will focus on the findings of the Appellate Division of the High Court on the sub-issue of liquidated damages ("LD"), as one of the main issues before the Court was whether the LD awarded to ZK was correctly ascertained (at [38(a)]).

No LD post-termination. In considering ZK's claims for LD, one sub-issue was whether ZK should have been awarded LD post-termination of the Subcontract (at [50] - [63]).

The Court agreed with the finding of the Judge that DG's wrongful termination was a repudiatory breach on DG's part (at [55]), which ZK accepted on 30 June 2018 by informing DG that it would need to engage third parties to complete the remaining works (at [56]).

However, was the Judge right in awarding LD post-termination (i.e., from 1 July 2018 to 30 September 2018 (both dates inclusive))?

The Court, agreeing with LW Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2011] 4 SLR 477 ("LW Infrastructure") and Triple Point Technology Inc v PTT Public Co Ltd [2021] AC 1148 ("Triple Point"), held that ZK was not entitled in law to claim LD after termination of the Subcontract (at [57] - [62]).

"62 We agree with the above authorities, which were unfortunately not raised before the Judge below. They support the proposition that LD do not accrue after the termination of a contract, in the absence of special provision. On first principles, this must be the case since the primary obligations of a contract come to an end upon termination: see Triple Point at [79]. We therefore endorse the High Court's decision in LW Infrastructure on this point."

While this may seem to be a settled point of law, this holding by the Court is a welcomed confirmation of the general position in Singapore.

In this regard, we emphasize that this represents the general position. It is possible that, depending on the wording of the specific contract in question...