If It Isn’t Broken, Don’t Fix It

The test for whether liquidated damages is unenforceable as a penalty remains as set out in the 1915 case of Dunlop Pneumatic Tyre v New Garage and Motor Co [1915] AC 79. In Denka Avantech Pte Ltd v Seraya Energy Pte Ltd [2020] SGCA 119, the Singapore Court of Appeal declined to apply the concept of “legitimate interest” introduced in the UK Supreme Court case of Cavendish Square Holding v Makdessi [2016] AC 1172. It also limited the penalties rule to only cases involving compensation for breach of contract, as opposed to where sums may be payable under a contract without any breach. In this, it declined to follow the extension to non-breach situations as set out in the Australian decision of Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205.