NK NSW Recoveries Pty Ltd v First Debenture Project No. 5 Pty Ltd [2017] NSWDC 163

NK NSW Recoveries Pty Ltd v First Debenture Project No. 5 Pty Ltd [2017] NSWDC 163

The 48% per annum compounding interest clause was void and unenforceable as a penalty because it was extravagant and unconscionable, bearing no reasonable relation to any loss or risk, but the loan and guarantee were otherwise valid and enforceable. Judgment is therefore for the principal sum and interest awarded under s 100 Civil Procedure Act 2005 (NSW).

Parties
First Plaintiff: NK NSW Recoveries Pty Ltd; Second Plaintiff: Ghassan Dib; First Defendant: First Debenture Project No. 5 Pty Ltd; Second Defendant: James Photios
Jurisdiction
Australia
Judgment Date
04 July 2017
Procedural Posture
Civil / Principal Judgment After Trial
Outcome
First plaintiff's claim dismissed; second plaintiff obtains judgment against second defendant for $75,000 plus interest; orders as to costs and procedure for calculation; no stay granted.
Legal Topics
Guarantee, Penalty Clauses, Interest Rates, Unconscionable Conduct, Contracts Review Act, Costs, Interpleader
Contract Law Civil Procedure Guarantee Penalty Clauses Interest Rates Unconscionable Conduct Contracts Review Act Costs +1 more

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Parties

NK NSW Recoveries Pty Ltd

First Plaintiff

Ghassan Dib

Second Plaintiff

First Debenture Project No. 5 Pty Ltd

First Defendant

James Photios

Second Defendant

Procedural Posture

Civil / Principal Judgment After Trial

Legal Issues

  1. 1 Was the $75,000 advanced a loan or repayment of monies previously owed?
  2. 2 Is the loan contract, or its interest provision, void for uncertainty or unenforceable as unconscionable under the Contracts Review Act 1980 (NSW)?
  3. 3 Is the contractual interest of 48% per annum compounding monthly void as a penalty?

Ratio Decidendi

The 48% per annum compounding interest clause was void and unenforceable as a penalty because it was extravagant and unconscionable, bearing no reasonable relation to any loss or risk, but the loan and guarantee were otherwise valid and enforceable. Judgment is therefore for the principal sum and interest awarded under s 100 Civil Procedure Act 2005 (NSW).

Court Disposition

First plaintiff's claim dismissed; second plaintiff obtains judgment against second defendant for $75,000 plus interest; orders as to costs and procedure for calculation; no stay granted.

Orders

  • First plaintiff's claim against the defendants dismissed.
  • Judgment for the second plaintiff against the second defendant for $75,000 plus interest from 1 March 2013 pursuant to s 100 Civil Procedure Act 2005 (NSW).