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COMMON LAW AND PRECEDENT: DENKA V SERAYA (SINGAPORE) [with collocation exercise] B1/B2

[The following text is about a recent (December 2020) case in Singapore dealing with 'liquidated damages clauses' in contracts. Very soon, we will post an entry in our 'Commercial Contract Vocabulary' series on 'Liquidated Damages' which should explain what liquidated damages are more clearly. Items in bold are explained in a glossary at the end of the text. And, there is a collocation exercise, based on the text, below.]


In our January 2021 series of web workshops, one of our topics was ‘Common Law and Judicial Precedent’. One of the issues we looked at was the fact that there are several common law systems around the world, including countries such as Australia, India, Canada, Ireland, and New Zealand.


One feature we looked at was that just because countries (or states within a country) have a common law system does not mean that the laws are the same in all those countries. For example, just because a senior court in England – such as the Supreme Court or the Court of Appeal – has set a precedent does not mean that this precedent must be followed in all other common law jurisdictions (or any of them).


There is a recent example of this from another common law jurisdiction, Singapore. On the 15th December 2020, the Singapore Court of Appeal handed down a decision in the case of Denka Advantech Pte Ltd v Seraya Energy Pte Ltd [2020] SGCA 119 (Denka). The case concerned some electricity retail agreements. These agreements contained a liquidated damages clause. One of the arguments advanced by Denka was that Seraya was not entitled to liquidated damages because they were unenforceable penalty clauses.


Under English common law, the test for whether a liquidated damages clause was a penalty – and therefore unenforceable – was changed by the Supreme Court of the UK in 2015, in the leading case of Cavendish Square Holding v El Makdessi [2015] UKSC 67 (El Makdessi). For 100 years, the test had been the one set out in the case of Dunlop Pneumatic Tyre Company v New Garage [1915] AC 79 (Dunlop)


In Denka, the Singapore Court of Appeal decided not to follow the precedent set in El Makdessi, and affirmed that the rule against penalties in Singapore would remain the one set out in Dunlop. The case therefore is a clear example that one common law jurisdiction is not bound to follow precedents set in other common law jurisdictions, even if they are landmark decisions of the Supreme Court of the UK and leading cases! This means that you, as a lawyer, cannot assume that because a precedent is established in one common law country, it will be followed in another. You need to check very carefully the law that currently applies in each common law country.



Glossary


a liquidated damages clause – A liquidated damages clause is a clause – or provision – in a contract which requires a party who is in breach of contract to pay a pre-determined amount of financial compensation to the other party for the breach.


penalty clauses – A clause in a contract will be a ‘penalty clause’ if it tries to impose an excessive amount of money which must be paid by one party to a contract to the other party if, for example, the contract is breached. In other words, the amount of money that must be paid is not related to how serious the breach is. Generally, under English law, penalty clauses are unenforceable.


leading case – A leading case is an important judicial decision by a senior court, such as the Supreme Court of the United Kingdom, that settles the law on a particular legal issue because, for example, it was previously unclear. Lower courts must then ‘follow’ and apply the leading case in similar cases in the future.


landmark decisions – Landmark decisions establish a new precedent or significant new legal principle. [One ‘landmark decision’ which students on the Introduction to the English Law of Negligence’ workshop in January 2021 may remember is Donoghue v Stevenson (1932)].





COLLOCATIONS EXERCISE


Collocations are very important in legal English. A collocation is a word or phrase that goes with another word or phrase in a way that sounds correct to a native speaker/listener. One example of ‘good collocation’ is ‘to take a photograph’ (the verb ‘to take’ goes naturally with ‘a photograph’ to create a meaning that is understood naturally by native speakers; unlike, for example, ‘to make a photograph’).

The text above contains many ‘legal English’ collocations. How many can you find which ‘collocate’ a verb with a noun? Some possible collocations are given, below. If yours aren’t there, don’t worry – it doesn’t necessarily mean they are wrong!). And, can you work out what they mean?










SUGGESTED COLLOCATIONS






· to set a precedent – to establish something that will be used as an example or rule in the future. [You could also say ‘to establish a precedent]

· to hand down a decision – this means to deliver the judgment or decision of a court on a particular matter or issue. [You could also say ‘to give a decision’]

· to contain a liquidated damages clause

· to advance an argument – This means ‘to make or present an argument’ to someone, such as a judge.

· to be entitled to liquidated damages – ‘To be entitled to something’ means you have been given the right to something (for example, because of a law or a contractual agreement), such as a benefit.

· to set out a test – This means to say something expressly and clearly. (You could also say ‘to establish a test’ or ‘to lay down a test’)

· to follow a precedent – This means, to apply a legal principle that has already been established to your own case.

· to affirm a rule – This means to confirm that an established rule or principle is valid and applies (for example, in your case)


© Cambridge Legal English Academy 2021

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