Katherine Pty Limited v The CCD Group Pty Ltd [2008] NSWSC 131

Katherine Pty Limited v The CCD Group Pty Ltd [2008] NSWSC 131

The contractual rate of interest (9% per month compounding) was found to be extravagant, unconscionable, and out of all proportion to foreseeable loss (maximum evidence-supported loss being defendant bank overdraft rates of 16.5% per annum vs contractual rate equivalent to ~180% per annum). Enforcement of the adjudication/judgment to include this penalty was unconscionable under ss51AA of the Trade Practices Act 1974; hence, relief was warranted to prevent enforcement to the extent of the penal interest.

Parties
First Plaintiff: Katherine Pty Ltd; Second Plaintiff: Seduce Group Australia Pty Ltd; First Defendant: The CCD Group Pty Ltd; Second Defendant: Ian Hillman
Jurisdiction
Australia
Judgment Date
18 February 2008
Procedural Posture
Application for Relief Regarding Adjudication Determination Under Construction Contracts / Post Judgment, Application for Stay or Restraint of Enforcement
Outcome
Relief granted in part; enforcement of the judgment or determination is restrained to exclude penalty interest; only standard (overdraft) interest permitted; proceedings stood over for orders and costs directions.
Legal Topics
Security of Payment, Unconscionable Conduct, Penalties, Interest Rates, Construction Contracts
Building and Construction Law Equity Commercial Law Security of Payment Unconscionable Conduct Penalties Interest Rates Construction Contracts

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Parties

Katherine Pty Ltd

First Plaintiff

Seduce Group Australia Pty Ltd

Second Plaintiff

The CCD Group Pty Ltd

First Defendant

Ian Hillman

Second Defendant

Procedural Posture

Application for Relief Regarding Adjudication Determination Under Construction Contracts / Post Judgment, Application for Stay or Restraint of Enforcement

Legal Issues

  1. 1 Whether a contractual interest rate of 9% per month compounding is a penalty and therefore unenforceable
  2. 2 Whether enforcement of an adjudication determination/judgment including the contractual penalty interest is unconscionable under ss51AA or 51AC of the Trade Practices Act 1974
  3. 3 What relief is appropriate if penalty and unconscionability are established

Ratio Decidendi

The contractual rate of interest (9% per month compounding) was found to be extravagant, unconscionable, and out of all proportion to foreseeable loss (maximum evidence-supported loss being defendant bank overdraft rates of 16.5% per annum vs contractual rate equivalent to ~180% per annum). Enforcement of the adjudication/judgment to include this penalty was unconscionable under ss51AA of the Trade Practices Act 1974; hence, relief was warranted to prevent enforcement to the extent of the penal interest.

Court Disposition

Relief granted in part; enforcement of the judgment or determination is restrained to exclude penalty interest; only standard (overdraft) interest permitted; proceedings stood over for orders and costs directions.

Orders

  • Proceedings stood over to 9.30am on Wednesday 20 February 2008.
  • Parties to bring in short minutes of order reflecting judgment.