Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29 (16 July 2021)
Citation:Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29 (16 July 2021).
Subjects invoked: 46. 'Services general'.15. 'Contract'.
Rule of thumb:Can a contract dispute worth millions of pounds come down to a simple contract interpretation exercise? Yes, if there are no Acts, Regulations, or common law which applies to the dispute, and there are contract terms which relate to it, then it is just a simple contract interpretation exercise. Many contract disputes just come down to an ordinary interpretation of the clauses in the contract. This case involving a very high-profile litigation worth multi-million dollars is a perfect example of standard clauses in a detailed contract just being given the interpretation of them which ordinary business people would understand them to mean, with little extensive legal research & intricate legal submissions required to win the case.
Background facts:
This case invoked the subjects of contract and services general, especially the principle of contract interpretation.
The material facts of this case were that PTT were an oil and gas conglomerate. PTT agreed a long and complex contract for Triple Point, a software company, to install and implement trading software on their computers. PTT were looking for Triple Point to help them make the jump to effective new software being implemented by their staff. PTT were a conglomerate from Thailand. PTT worked primarily in digging up oil and gas, they had a chain of coffee shops, and they also did investment trading on the oil and gas sector. PTT were very knowledgeable about this oil & gas sector and able to decipher pretty quickly when listed companies in their sector announced news which affect whether they were likely to excel or not, and naturally correspondingly put their share price up or down.
Triple Point Technology were an American software company who provided investment software and then implemented this (implementation involved dealing with software teething problems on different hardware systems and training of users) – specifically trading software with a risk management system. PTT wanted this so that investors in their organisation could purchases shares in other listed companies in the oil sector who they expected to be profitable in an effective way. PTT decided that they needed to update their trading software to more modern software - in early 2013, around February 2013, PTT agreed this contract for Triple Point to install and implement this improved investment software for them, at a cost of around $6.9 million dollars. Around 10 months later, a dispute arose between Triple Point and PTT in early December 2013. Triple Point wanted payment of money for work they had done in ‘stage 1’ of milestone 1, before starting ‘stage 2’ of milestone 1. PTT stated that they were only paying once all the stages in milestone 1 were finished, so there was gridlock. No resolution to this contract dispute could be reached. PTT refused to pay Triple Point the money they were looking for before all stages of milestone 1 had been finished. There was an impasse and gridlock. Triple Point officially suspended all work on the job in April 2014. In March 2015, PTT terminated the contract and sought to find a new company who could install and implement trading software on their computers. In April 2015 PTT then got another software company to install and implement trading software for them. Several months after this PTT eventually got new modern trading software installed and implemented in their organisation by another software company.
In February 2015, Triple Point sued PTT looking for all the money they were owed for doing stage 1 of milestone 1 as well as their expenses incurred. PTT counter sued Triple Point for several breaches of the contract they agreed, namely breach of 1) the milestone clause, 2) the negligence clause, and 3) the liquidated damages clause, which they argued caused them $13m in damages. Both parties proceeded to interpret different terms of the contract which they argued applied.
Judgment:
The Court upheld the arguments of PTT and rejected those of Triple Point. The Court affirmed that this was in general based upon interpreting the contract giving the words their plain and ordinary meaning as understood by businesspeople. The Court firstly accepted that the negligence clause was breached as Triple Point had not actually got the software working properly to a smooth, efficient and functional level. This meant that Triple Point were in breach of the negligence clause for the sub-standard initial work they had done. The Court affirmed that Triple Point were also in breach of the ‘milestone clause’. The Court affirmed that ‘milestone clauses’ mean that people are only due to be paid once they have completed the milestone, and they are not due to be paid for completing different stages within each milestone. The Court also upheld that the liquidated late damages clause was invoked. The Court affirmed that the period for the liquidated late damages ran until March 2015 when PTT actually terminated the contract. They clarified that the liquidated damages clause did not run for the extended period until the time when PTT got someone else to install and implement the software for them. This meant that Triple Point had to pay PTT $3 million in late damages payments. The Court further upheld that Triple Point left PTT without modern trading software and PTT had to buy this at a cost of $10 million. The Court therefore held that Triple Point had to pay PTT $13 million in damages. All in all, the Court held that Triple Point breached the negligence clause, breached the milestone clause, and were liable for late payment damages to PTT. The Court in this case broadly affirmed various points about the interpretation of clauses in commercial contracts. Firstly, it confirmed that if people do work which is sub-standard, then this will lead to a ‘negligence clause’ being breached. Secondly, it confirmed that ‘milestone clauses’ mean that contractors do not get paid up front, and instead get paid once stage ‘milestones’ of their work is complete. Thirdly, it confirmed that ‘late damages’ clauses run until the contract is terminated, and do not run until the point when a replacement contractor has finished the work – whenever a contract is running late due to a legal dispute which seems complex it is usually a good idea to terminate the contract in other words.
Ratio-decidendi:
‘95. Accordingly, I would reject Triple Point’s contention that it is not liable under article 5.3 to pay liquidated damages for the periods of delay which occurred between the due dates for delivery of work and the termination of the contract (none of which on the judge’s findings were introduced by PTT). It follows that - subject to the issues about the correct interpretation of article 12.3 of the CTRM Contract to which I am about to turn - PTT is entitled to recover liquidated damages under article 5.3 in the amount of US$3,459,278.40 assessed by the judge… 108. The modern view is accordingly to recognise that commercial parties are free to make their own bargains and allocate risks as they think fit, and that the task of the court is to interpret the words used fairly applying the ordinary methods of contractual interpretation. It also remains necessary, however, to recognise that a vital part of the setting in which parties contract is a framework of rights and obligations established by the common law (and often now codified in statute). These comprise duties imposed by the law of tort and also norms of commerce which have come to be recognised as ordinary incidents of particular types of contract or relationship and which often take the form of terms implied in the contract by law. Although its strength will vary according to the circumstances of the case, the court in construing the contract starts from the assumption that in the absence of clear words the parties did not intend the contract to derogate from these normal rights and obligations… 113. In the present case it was likewise an obligation implied by law in the CTRM Contract … that Triple Point should carry out those services with reasonable care and skill. The parties have not sought to exclude that obligation from arising. Indeed, they have positively reinforced it by article 12.1. … On the judge’s findings, negligence of Triple Point in the performance of the Services gave rise prima facie to a liability to pay damages to PTT in a sum of US$14,664,035.18. This amount comprises the cost of procuring an alternative system quantified at US$10,574,756.78, wasted costs of US$630,000 and the liquidated damages for delay of US$3,459,278.40 referred to at para 95 above. If, however, the limitation of liability contained in article 12.3 applies to negligence in the performance of the Services, the total liability of Triple Point is limited to the sum of US$1,038,000. Hence declining to interpret the term “negligence” in sentence 4 as bearing its ordinary legal meaning would involve a substantial departure from the obligations implied by law in a contract of the present kind.’ Lord Leggatt ratio decidendi 95-108, ‘In my judgment the cap carve-out in the final sentence of article 12.3 for all the reasons given above should be given its natural and ordinary meaning of removing from the cap all damages for negligence on Triple Point’s part, including damages for negligent breach of contract… The modern view is accordingly to recognise that commercial parties are free to make their own bargains and allocate risks as they think fit, and that the task of the court is to interpret the words used fairly applying the ordinary methods of contractual interpretation’, Lady Arden at 68 & Lord Leggatt at 108
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.