Triple Point Technology, Inc v PTT Public Company Ltd

Unless the contract clearly provides otherwise, a liquidated damages clause for delay applies to delay accrued before termination, even though the contractor never completes the work and the employer never accepts it. Termination stops further accrual but does not extinguish accrued liability. Such clauses must be construed through ordinary principles of contractual interpretation and in light of their purpose of providing certainty.

Where a limitation clause concerns contractual liability, an exception for liability resulting from negligence ordinarily includes negligent breach of a contractual duty of care. A separate provision preserving liquidated damages as a specific remedy does not necessarily exclude them from a global liability cap. Their recoverability under the cap remains subject to any applicable carve-out.

PTT contracted with Triple Point to design and implement a customised commodity trading and risk management software system. Triple Point completed only part of the work, substantially late, and stopped performance before PTT terminated the contract. Triple Point brought proceedings for unpaid fees, while PTT counterclaimed for liquidated damages, wasted expenditure and the cost of obtaining a replacement system.

Jefford J dismissed Triple Point’s claims and awarded damages to PTT: [2017] EWHC 2178 (TCC). The Court of Appeal held that liquidated damages were available only for work which Triple Point had eventually completed and PTT had accepted. It also held that all damages were capped and that the negligence carve-out did not cover negligent breach of contract: [2019] EWCA Civ 230; [2019] 1 WLR 3549.

The Supreme Court considered whether liquidated damages accrued for uncompleted work until termination, whether contractual negligence fell within the carve-out, and whether liquidated damages were included in the global cap.

Appeal allowed in part. The court unanimously allowed PTT’s appeal on the availability of liquidated damages and unanimously dismissed its appeal on whether those damages were within the global cap. By a majority of three to two, it allowed the appeal concerning the negligence carve-out.

1. Liquidated damages. Per Lady Arden, Lord Leggatt and Lord Burrows, with Lord Sales and Lord Hodge agreeing on this issue, a liquidated damages clause ordinarily applies to delay occurring before termination even where the contractor never completes the work. Termination operates prospectively. It stops further accrual but does not remove liability already accrued. The words making damages payable until PTT accepted the work identified an end date; they did not make acceptance a condition of liability. The contrary interpretation undermined the commercial purposes of certainty, simplicity and risk allocation. British Glanzstoff Manufacturing Co Ltd v General Accident, Fire and Life Assurance Corpn Ltd [1913] AC 143 concerned the construction of its particular contract and established no special rule governing liquidated damages clauses.
2. Negligence carve-out. Per Lady Arden, Lord Leggatt and Lord Burrows, the exception for liability resulting from negligence bore its ordinary legal meaning and included negligent breach of a contractual duty of care. Article 12.3 addressed contractual liability, so construing negligence as an independent tort outside the contract was incoherent. The cap retained substantial operation because the contract also imposed strict obligations of result. Lord Leggatt additionally reasoned that clear language is required to remove or restrict valuable rights which ordinarily arise by law.
3. Partial dissent. Lord Sales, with whom Lord Hodge agreed, would have confined negligence to freestanding tortious liability. They considered that the majority’s construction substantially nullified the limitation applicable to Triple Point’s core duty of reasonable care and skill.
4. Global cap. The court unanimously held that liquidated damages fell within the global cap. The exception preserving specific remedies in the third sentence of article 12.3 qualified the prescribed form of remedy, not the separate global cap in the second sentence. Nevertheless, the damages arose from Triple Point’s negligent contractual performance and therefore fell within the majority’s construction of the negligence carve-out.

PTT was entitled to recover the damages assessed at trial, totalling US$14,664,035.18, without limitation under the cap.

1. United Kingdom Supreme Court: In [2021] UKSC 29, allowed PTT’s appeal on the availability of liquidated damages and the scope of the negligence carve-out, but dismissed its appeal on whether liquidated damages came within the global cap. PTT was entitled to recover the damages assessed at trial without limitation.
2. Court of Appeal: In [2019] EWCA Civ 230; [2019] 1 WLR 3549, held that liquidated damages were recoverable only for work completed late and accepted by PTT. It also held that liquidated and general damages were subject to the cap, and that the negligence exception applied only to freestanding torts or deliberate wrongdoing.
3. Technology and Construction Court: In [2017] EWHC 2178 (TCC), Jefford J dismissed Triple Point’s claims and held it liable to PTT. She treated wasted costs and replacement-system losses as capped, but held that liquidated damages were outside the cap.