In law, termination does not take away a plaintiff’s right to claim Liquidated and Ascertained Damages (“LAD”) accrued in respect of pre-termination delay unless expressly stated in the contract. That is, in the absence of express contractual provisions, termination does not relieve a contractor’s liability for LAD accrued in respect of pre-termination delay.
In PWC Bina Sdn Bhd v Ideal City Development Sdn Bhd [2022] MLJU 519 (“PWC Bina”), the contract provided for LAD between the period from the extended completion date and the date of practical completion. The plaintiff argued that the arbitrator had wrongfully re-written the contract by allowing the defendant to claim LAD for the period between the extended completion date to the date of termination of the contract and therefore, the arbitral award ought to be set aside.
Lim Chong Foong J (as he then was) held that the arbitrator was not plainly wrong:
“It is common ground that the Plaintiff’s proposition is indisputable in a typical completed contract. However, this is a terminated contract mid-stream before completion is achieved. In the circumstances, I am of the view that the Arbitrator’s finding is not plainly wrong and unacceptable. A similar result has been achieved in the recent English Supreme Court case of Triple Point Technology Inc v PTT Public Company Limited [2021] UKSC 29 akin to the circumstances here where the contractual provisions did not expressly provide for a terminated contract scenario.”
In Triple Point Technology Inc v PTT Public Company Limited [2021] UKSC 29 (“Triple Point v. PTT”), PTT entered into a software contract with Triple Point whereby Triple Point was to provide and install certain software for PTT. Article 5.3 of the contract stipulates that:
“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…”
A dispute occurred between the parties and PTT terminated Triple Point before the project was completed. Triple Point sued PTT at the TECHNOLOGY AND CONSTRUCTION COURT (“TCC”) for unpaid invoices. PTT counterclaimed for breach of contract and LAD. TCC allowed PTT’s claim for LAD.
At the UK Court of Appeal (COA), TCC’s decision on the LAD. The COA held that although Triple Point did not complete the project on time, PTT was not entitled to claim LAD because PTT did not “accept” the (uncompleted) work as per Article 3.5.
The UK Supreme Court (SC) reversed COA’s decision and held that PTT was contractually entitled to claim LAD for pre-termination delay irrespective of whether PTT had accepted the unfinished work, and that this accrued right to LAD cannot be taken away unless expressly provided for in the contract. According to the SC, termination does not take away the accrued rights unless the contract expressly stipulates so. SC further added that the COA’s interpretation of Article 5.3 LAD is only claimable if the incomplete work were “accepted” by PTT) is inconsistent with commercial reality and the accepted function of LAD.
According to the SC, whether an employer is contractually entitled to claim LAD for pre-termination delay is a matter of construction of the contract as opposed to a matter of principle. The SC stated that a contractor can still be held liable for liquidated and ascertained damages (“LAD”) even if the contract was terminated (prior to the completion of the project).
