Court of Appeal's Look North for a Solution Goes South: Liquidated Damages and Termination in Triple Point Technology v PTT

Document Cited in Related
Author
DOI10.3366/elr.2019.0575
Published date01 September 2019
Date01 September 2019
Pages395-401

In Triple Point Technology, Inc v PTT Public Company Limited,1 the Court of Appeal considered whether entitlement to liquidated damages for delay would survive termination of the contract before completion of works. Sir Rupert Jackson gave the only reasoned judgment of a unanimous court. The decision departs from what had been the more common practice of awarding liquidated damages to the date of contractual termination and also departs from the less common practice of awarding liquidated damages to the date of completion by a step-in contractor. Sir Rupert held that the liquidated damages clause did not apply to delayed work that the original contractor did not complete.2

Sir Rupert followed the secondary reasoning of a 1913 House of Lords decision on appeal from the Inner House: Glanzstoff.3 This note summarises the decisions in Glanzstoff and Triple Point in turn, before arguing that Glanzstoff ought to have been distinguished in Triple Point because the former was decided on the basis of its own particular contractual context, the secondary reasoning was unnecessary and expressed in terms wider than it needed to be, and because following it generally creates practical problems. This note concludes that the decision in Triple Point is to be regretted.

The decision in <italic>Glanzstoff</italic>

In Glanzstoff, the pursuer was an employer who sought liquidated damages for delay by the contractor in the completion of a construction project. Completion was to occur by 31 January 1910. The contractor became bankrupt on 20 August 1909 and suspended works. The pursuer engaged another contractor to complete the works in accordance with its step-in rights under clause twenty-six of the original contract. The new contractor was to complete the works by 31 December 1909 under a contract without provision for liquidated damages for delay, but did not complete until after the original completion date. The pursuer sought to recover liquidated damages for delay from the defender, who had issued a guarantee bond in respect of the original contractor's performance.

Clause twenty-four of the construction contract provided:

If the contractor fail to complete the works by the date named in clause 23, … and the architect shall certify in writing that the works could reasonably have been completed by the said date … the contractor shall pay or allow to the employer [weekly liquidated damages] for every week beyond the said date… during which the works shall remain unfinished.4

Clause twenty-five provided a mechanism for the architect to certify extensions of time. Clause twenty-six provided a procedure, described by both reasoned judgments in the House of Lords as “a complete code”,5 allowing the employer, on certain defaults by the contractor, to take possession of the site and complete the work itself or through another contractor, with the architect to certify the losses consequent on the default.6 The employer in fact exercised its step-in rights under clause twenty-six, but sought to recover from the guarantor liquidated damages under clause twenty-four.7

Lord Haldane LC, giving the majority judgment in the House of Lords, described clause twenty-six as “an enclave in the contract by itself providing for a special remedy” and stated that clause twenty-four provided for the general remedy of liquidated damages.8 The Lord Chancellor concluded that the liquidated damages provision at clause twenty-four did not apply for two reasons:

…first of all, that it is altogether inapt to the provisions made by clause 26, which provide a complete code of...

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