Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29

Triple Point contracted with PTT to design and install commodity trading software. Triple Point failed to complete the work on time and PTT terminated the contract. The Supreme Court clarified that liquidated damages clauses apply to delay up to termination regardless of whether work is completed, and that 'negligence' in liability caps includes contractual negligence.

Facts

PTT Public Company Ltd (PTT), a Thai company, entered into a software contract (the CTRM Contract) with Triple Point Technology, Inc (Triple Point) for the design, installation, maintenance and licensing of software to assist PTT in commodity trading. The contract was governed by English law. Triple Point was to customise its proprietary software to PTT’s requirements, with payment structured around milestones.

Triple Point significantly delayed performance of the contract and failed to complete most of the agreed work. Triple Point refused to continue performance without additional payments which PTT refused to make. PTT terminated the contract on 23 March 2015 due to Triple Point’s breaches. PTT claimed liquidated damages for delay under article 5.3 of the contract, as well as general damages for wasted costs and termination losses.

Issues

Three principal issues arose on appeal:

Issue 1: Availability of Liquidated Damages

Whether PTT was entitled to liquidated damages for delay in respect of work which Triple Point never completed before termination.

Issue 2: Cap Carve-out for Negligence

Whether the exception from the liability cap in article 12.3 for ‘negligence’ applied only to independent torts or also to negligent breach of contractual duties.

Issue 3: Capping of Liquidated Damages

Whether liquidated damages fell within the overall liability cap imposed by article 12.3.

Judgment

Issue 1

The Supreme Court unanimously allowed PTT’s appeal on this issue. Lady Arden (with whom Lord Leggatt and Lord Burrows agreed) held that the Court of Appeal erred in relying on the House of Lords decision in British Glanzstoff Manufacturing Co Ltd v General Accident, Fire and Life Assurance Corpn Ltd [1913] AC 143. Lady Arden stated:

“The difficulty about this approach is that it is inconsistent with commercial reality and the accepted function of liquidated damages. Parties agree a liquidated damages clause so as to provide a remedy that is predictable and certain for a particular event.”

Lord Leggatt added:

“I conclude that it is ordinarily to be expected that, unless the clause clearly provides otherwise, a liquidated damages clause will apply to any period of delay in completing the work up to, but not beyond, the date of termination of the contract.”

The Court held that making liquidated damages conditional on the contractor completing the work would create perverse incentives for contractors to abandon contracts to avoid liability.

Issue 2

By a majority (Lady Arden, Lord Leggatt and Lord Burrows; Lord Hodge and Lord Sales dissenting), the Court allowed PTT’s appeal. The majority held that ‘negligence’ in the cap carve-out should bear its ordinary legal meaning, encompassing negligent breach of contractual duties. Lady Arden reasoned:

“The word ‘negligence’ has an accepted meaning in English law… It covers both the separate tort of failing to use due care and also breach of a contractual provision to exercise skill and care.”

Lord Leggatt noted that article 12.3 dealt only with liability under the contract, making it nonsensical to interpret ‘negligence’ as referring to independent torts outside the contract’s scope.

Lord Sales (with whom Lord Hodge agreed) dissented, holding that interpreting ‘negligence’ to include contractual negligence would effectively nullify the limitation of liability provision.

Issue 3

The Court unanimously dismissed PTT’s appeal on this issue, holding that liquidated damages were subject to the overall cap in article 12.3. Lady Arden agreed with the Court of Appeal that the second and third sentences of article 12.3 served separate functions, with the exception for specific remedies in the third sentence not extending to the global cap in the second sentence.

Implications

This case provides important clarification on the operation of liquidated damages clauses in construction and engineering contracts. It confirms that:

• Liquidated damages accrue up to termination regardless of whether the contractor completes the work
• The word ‘negligence’ in liability cap carve-outs should generally be given its ordinary legal meaning including contractual negligence
• Courts should not interpret liquidated damages clauses in ways that create incentives for contractors to abandon contracts

The decision reinforces the commercial purpose of liquidated damages clauses in providing certainty and predictability for both parties regarding the consequences of delay.

Verdict: Appeal allowed in part. PTT was entitled to liquidated damages of US$3,459,278.40 for delays up to termination. The cap carve-out for negligence applied to negligent breach of contract (majority decision). Liquidated damages were subject to the overall liability cap. PTT was entitled to recover total damages of US$14,664,035.18 without limitation of liability.

Source: Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29