Triple Point Technology, Inc. v PTT Public Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lady Arden,Lord Leggatt,Lord Burrows,Lord Sales,Lord Hodge |
| Judgment Date | 16 July 2021 |
| Neutral Citation | [2021] UKSC 29 |
| Court | Supreme Court |
Lord Hodge, Deputy President
Lady Arden
Lord Sales
Lord Leggatt
Lord Burrows
Appellant
James Howells QC
Nicholas Maciolek
(Instructed by Watson Farley & Williams LLP)
Respondent
Paul Darling QC
Andrew Stafford QC
Nathaniel Barber
(Instructed by Kobre & Kim (UK) LLP (London))
Heard on 12 November 2020
( with whom Lord Leggatt and Lord Burrows agree)
This is an appeal concerning a software contract which provides for the implementation and provision of a software-based business system. The appeal raises general issues about a provision for liquidated damages and specific issues about the limitation of remedies under this contract.
The software contract (“the CTRM Contract”), dated 8 February 2013, was made between the appellant, PTT Public Company Ltd (“PTT”) and Triple Point Technology, Inc (“Triple Point”) for the design, installation (by data transmission), maintenance and licencing of software to assist PTT to carry on its business in commodity trading. Triple Point had to customise its proprietary software for commodity trading and risk management to the needs of PTT, and it was remunerated by reference to “milestones” set by the contract at which specified work had been done and steps completed. Triple Point also agreed to enter into maintenance, upgrade, replacement, online support and staff training obligations. It further agreed to enter into a perpetual licence. The terms of the Perpetual License Agreement (“PLA”), which formed part of the CTRM Contract, which was based on Triple Point's standard form licence agreement and contained various warranties as to the quality of the software, were annexed to the main part of the CTRM Contract (“the Main Part”). There were provisions for checking that the software provided conformed to specification, ie achieved the agreed “functionality” or the purposes and range of functions that it was designed to perform: it is obvious that this was an important part of the CTRM Contract and that software defects could cause enormous financial and other harm to PTT.
The CTRM Contract was not, therefore, simply a standard-form contract but was tailored to the requirements of this particular project. The governing law was English law. The provisions of the Main Part provided that, in the event of inconsistency between the PLA or other annexed parts, and the Main Part, the terms of the Main Part were to prevail (article 29).
The parties agreed substantial limitations on the remedies available in the event of delay and so on. Liquidated damages were available for delay (article 5.3 of the Main Part). There was a non-financial remedy for certain other breaches of contract in that in specified circumstances Triple Point had an opportunity to cure the defect. If it failed to do so, damages were payable but were limited to the fees paid for the relevant work (article 12.3 of the Main Part).
The principal issue (“the availability of liquidated damages issue”) on this appeal is whether PTT is entitled under the CTRM Contract to liquidated damages for delay in respect of work which had not been completed before the contract was terminated. The second and third issues arise from article 12.3 of the Main Part which imposes a limit or “cap” on the amount of damages which PTT could claim for Triple Point's breach of contract. Thus the second issue (“the cap carve-out for negligence issue”) is whether an exception from the cap in article 12.3 for negligence removes from the cap losses caused by Triple Point's negligent breach of contract or only losses for the commission of some independent tort. The third issue (“capping of liquidated damages issue”) is whether liquidated damages fell within the cap on Triple Point's liability imposed by article 12.3.
In my judgment, for the reasons explained in this judgment, the Court of Appeal fell into error on Issue 1 in its approach to the liquidated damages clause, which failed to take account in the process of interpretation of the legal incidents and function of such clauses, and on Issue 2 in relation to the interpretation of the cap carve-out for negligence. However, on Issue 3, I conclude that the Court of Appeal was right to hold that (subject to the cap carve-out for negligence) liquidated damages fall within the cap.
By the CTRM Contract, PTT, a Thai company, contracted with Triple Point for the provision of a software system which would facilitate its trading in certain commodities and manage their purchase, including their delivery and so on. Triple Point had standard terms, but it agreed to supplement these by customised terms, which were to have priority over its standard terms.
The CTRM Contract was negotiated over a period of some six to seven months in 2012 and 2013 and the functional specifications for the software system to be supplied by Triple Point were ultimately recorded in the Terms of Reference and clarifications incorporated as annexes to the CTRM Contract. At the time the parties entered into the CTRM Contract, they had agreed the Contract Price for the Phase 1 Services, including business consultancy, design, configuration and implementation services, software licenses and year one software maintenance services, to be $6,920,000. The CTRM Contract was subsequently varied by the addition of two further order forms, with which this appeal is not directly concerned.
We are told that the CTRM Contract followed a structure used for software contracts which involve the implementation and provision of software-based business systems. There was no supply of hardware involved and no physical construction work. What Triple Point agreed to do was to design, implement, support and maintain an IT system which was to be built based upon configurable packages of Triple Point proprietary software marketed for use in businesses focussed upon trading in petrochemicals and other commodities markets.
In article 1.2 of the Main Part, “Services” were defined in wide terms to include almost anything done by Triple Point under the CTRM Contract:
“all activities rendered by CONTRACTOR to PTT in connection with the Project.”
Article 5 of the Main Part provided for Triple Point to perform the Services in accordance with the Project Plan (which set out the timetable for performance) and to pay damages for delay:
“ARTICLE 5. SCHEDULE OF SERVICES
1. The Services to be performed by the CONTRACTOR shall be in conformance with the Schedule for the Services (‘Project Plan’) as proposed by the CONTRACTOR and accepted by PTT.
2. The CONTRACTOR shall use its best effort and professional abilities to complete Phase 1 of the Project within 460 calendar days after the Effective Date. If however such date is not attainable due to a delay out of the control of the CONTRACTOR, the CONTRACTOR shall continue to perform the Services for the time necessary to complete the project. This extension will require written approval from PTT. (Para numbers added)
3. If CONTRACTOR fails to deliver work within the time specified and the delay has not been introduced by PTT, CONTRACTOR shall be liable to pay the penalty at the rate of 0.1% (zero point one percent) of undelivered work per day of delay from the due date for delivery up to the date PTT accepts such work, provided, however, that if undelivered work has to be used in combination with or as an essential component for the work already accepted by PTT, the penalty shall be calculated in full on the cost of the combination.” (Para numbers added)
Article 12 of the Main Part provided for Triple Point to use reasonable care and skill, and limits on its liability (by way of a “cap”) and restrictions on PTT's remedies:
“ARTICLE 12. LIABILITY AND RESPONSIBILITY
12.1 CONTRACTOR shall exercise all reasonable skill, care and diligence and efficiency in the performance of the Services under the Contract and carry out all his responsibilities in accordance with recognized international professional standards. […]
12.3 CONTRACTOR shall be liable to PTT for any damage suffered by PTT as a consequence of CONTRACTOR's breach of contract, including software defects or inability to perform ‘Fully Complies’ or ‘Partially Complies’ functionalities as illustrated in Section 24 of Part III Project and Services. The total liability of CONTRACTOR to PTT under the Contract shall be limited to the Contract Price received by CONTRACTOR with respect to the services or deliverables involved under this Contract. Except for the specific remedies expressly identified as such in this Contract, PTT's exclusive remedy for any claim arising out of this Contract will be for CONTRACTOR, upon written notice, to use best endeavor to cure the breach at its expense, or failing that, to return the fees paid to CONTRACTOR for the Services or Deliverables related to the breach. This limitation of liability shall not apply to CONTRACTOR's liability resulting from fraud, negligence, gross negligence or wilful misconduct of CONTRACTOR or any of its officers, employees or agents.”
Article 13 of the Main Part provided:
“ARTICLE 13. INDEMNITY
13.1 Each party shall indemnify, protect, defend and hold harmless the other party, its affiliates and their respective directors, officers, agents and employees from and against all losses, damages, liabilities and claims, including legal expenses, arising out of or relating to the performance or obligation of CONTRACTOR under this Contract, provided that such losses, damages, liabilities and claims shall occur as a consequence of the errors, omissions,...
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