In what looks like the ongoing saga of the Arrow liquidation, yesterday the High Court in Wellington effectively confirmed that demand could be made under a bond, against the owner's assessment of the likely losses arising from Arrow's failure to complete the development of a property for the Chow brothers at 89 Courtenay Place in Wellington.
Musings of a busy mind
Most will recall Ruxley, the case of the shallow swimming pool. The contract called for a diving depth of 7.5 feet, and it was delivered with only 6 feet in depth. The House of Lords held there was no loss in value from what was contracted for and the cost of rectification was out of all proportion to any damage suffered.
The Court of Appeal of England and Wales has had cause to consider the delivery of student accommodation with rooms significantly smaller than was contracted for.
It has become a truism that liquidated damages are enforceable, and will not offend the rule against penalties, if they represent a genuine pre-estimate of loss undertaken at the time the contract is entered into.
That position was modified significantly last month by the Court of Appeal.