B. & G. Properties Pty Limited v Fayad [2021] NSWSC 1382

B. & G. Properties Pty Limited v Fayad [2021] NSWSC 1382

Clause 4 of the Deed of Agreement, correctly construed, requires payment of default interest at 30% per annum on all amounts (principal and unpaid interest) outstanding after default until payment. The clause is not unenforceable as a penalty, as the increase from the contractual rate is not out of all proportion to the lender's potential loss following default and serves a compensatory function.

Parties
Plaintiff: B. & G. Properties Pty Limited; Defendant: Sam Fayad
Jurisdiction
Australia
Judgment Date
01 November 2021
Procedural Posture
Commercial List Equity / Principal Judgment After Hearing on Liability and Enforceability of Contractual Clauses
Outcome
Judgment for the plaintiff; orders to be finalised upon receipt of proposed short minutes from the parties; costs reserved.
Legal Topics
Default Interest, Penalty Clauses, Guarantee and Indemnity, Construction of Contracts
Contract Law Equity Guarantee Law Default Interest Penalty Clauses Guarantee and Indemnity Construction of Contracts

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Parties

B. & G. Properties Pty Limited

Plaintiff

Sam Fayad

Defendant

Procedural Posture

Commercial List Equity / Principal Judgment After Hearing on Liability and Enforceability of Contractual Clauses

Legal Issues

  1. 1 Proper construction of clause 4 of the Deed of Agreement relating to default interest
  2. 2 Whether clause 4 is unenforceable as a penalty under Australian law

Ratio Decidendi

Clause 4 of the Deed of Agreement, correctly construed, requires payment of default interest at 30% per annum on all amounts (principal and unpaid interest) outstanding after default until payment. The clause is not unenforceable as a penalty, as the increase from the contractual rate is not out of all proportion to the lender's potential loss following default and serves a compensatory function.

Court Disposition

Judgment for the plaintiff; orders to be finalised upon receipt of proposed short minutes from the parties; costs reserved.

Orders

  • Within 14 days, parties to submit short minutes of order to give effect to reasons for judgment.
  • If parties do not agree on short minutes of order or costs, within a further seven days each party to provide to Associate the short minutes and written submissions (max three pages).