Lloyd's Maritime and Commercial Law Quarterly
THE PROPER SCOPE OF LIQUIDATED DAMAGES CLAUSES
Michael Davie*
This paper considers the Court of Appeal’s decision in Triple Point Technology Inc v PTT Public Co Ltd, from which permission to appeal to the Supreme Court has been granted. It considers whether the Court of Appeal was right to treat the House of Lords’ decision in the Scottish appeal of Glanzstoff as providing a template for the scope of liquidated damage clauses and concludes it was not. It is submitted that the Scottish decision of Cameron-Head v Cameron & Co provides persuasive grounds for not following Glanzstoff. It is suggested that the search for an appropriate solution to the liquidated damages/termination issue is best approached by seeking to further the purposes behind liquidated damages clauses in order to protect the interests of the non-defaulting party but in a measured way that is subject to restraint that prevents the exorbitant and disproportionate application of liquidated damages clauses to the period post-termination which risks unfairness to the defaulting party. It is suggested such an approach favours limiting the scope of liquidated damages clauses to the date of contractual termination and is contrary to the approach favoured by the Court of Appeal in Triple Point and the House of Lords in Glanzstoff of liquidated damages clauses not applying where the contractor fails to complete and is contrary to the approach favoured by recent first instance decisions of liquidated damages clauses continuing to apply until a second contractor achieves completion.
I. INTRODUCTION
In Triple Point Technology Inc v PTT Public Co Ltd,1 Sir Rupert Jackson, giving the judgment of a unanimous Court of Appeal,2 canvassed three approaches that have emerged to clauses providing liquidated damages for delay in cases where a contractor fails to complete and the works are completed by a second contractor:3
- (i) The clause does not apply. This shall be called here the Glanzstoff Solution, after the case where this approach originated.
* QC, 4 Pump Court, Temple. Thanks to Neil Dowers and the anonymous referees for their comments.
1. [2019] EWCA Civ 230; [2019] BLR 271; [2019] 1 WLR 3549 (hereafter “Triple Point”).
2. The court also comprised Lewison LJ and Floyd LJ.
3. Triple Point, [106].
The proper scope of liquidated damages clauses
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