Supreme Court
restores the normal rules for Liquidated Damages
Triple Point Technology vs PTT. BLM (2021) 556, UK Supreme Court
Facts
PTT was a commodity trader and Triple Point was a software designer. In February 2013 PTT contracted to pay
Triple Point $6,900,000 to design and supply a sophisticated software program to support its commodity
trading business. The contract provided for liquidated damages of 0.1% of the value of unusable or
undelivered works from the due date to completion.
The parties fell out over payments and performance, then in March 2015 PTT terminated the contract with
Triple Point for non-performance. Triple Point sued for outstanding payments,and PTT counterclaimed for (1)
Liquidated Damages (“LD’s”) for delay to the date of termination and (2) general damages from that date for
the extra cost of getting the work completed by others.
Court rulings
The High Court ruled that PTT were right to terminate, and awarded LD’s from contractual completion dates to
termination, and general damages for cost to complete thereafter.
The Court of Appeal however ruled that on the wording of the Contract, LD’s were only due on items or stages
of work that had been finished as at termination. Anything incomplete was not covered by the LD’s provision.
The UK Supreme Court over-ruled the CA, saying it was “inconsistent with commercial reality”. PTT
was awarded LD’s on all work that was late, up to the date of termination, and damages for the cost to
complete thereafter.
Comment
This is a very welcome decision which has restored how we all understood Liquidated Damages clauses to work,
i.e. that LD’s apply from the contractual completion date to termination, and general damages for
cost-to-complete apply thereafter.
At paragraph 35 of her judgment, Lady Arden in the UKSC robustly dismissed the Court of Appeal’s ruling as
inconsistent with commercial reality and with the accepted function of LD’s. She noted rightly that parties
agree a liquidated damages clause so as to provide a remedy that is predictable and certain for a particular
event (here, as often, that event is a delay in completion). The employer does not then have to quantify its
loss, which may be difficult and time-consuming for it to do.
She insisted that when interpreting what parties meant by their contracts, they must be taken to know the
general law, namely that the accrual of liquidated damages comes to an end on termination of the
contract. After that event, the parties’ contract is at an end and the parties must seek damages for
breach of contract under the general law. Consequently, parties do not have to provide specifically
in their negotiations for the effect of the termination of their contract. They can take that consequence as
read.
