State of Tasmania v Leighton Constructions Pty Ltd [2005] TASSC 133

March 13, 2018 casesummaries

Facts

Leighton Construction entered into a contract with the State of Tasmania to build a new stretch of highway. The estimated cost of the contract was $30,000,000
There was a liquidated damages clause in the contract which made Leighton liable for $8,000 for each day it was over the deadline.
Leighton was significantly over the deadline, and when Tasmania tried to enforce the LD clause, they sued, saying it was actually a penalty clause.

Held

It was a penalty clause (at first instance) but it was NOT a penalty clause at second instance in the supreme court.
It was not a penalty clause because it was not an “exorbitant”, “unconscionable” etc
It was comparable to the actual costs which is a key fact
Aside from the actual cost of hire, you have to look at other factors like how much it costs for the state to keep the roads open (‘notional interest’)
Public utility is also a consideration

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