Sayde Developments Pty Limited v Arab Bank Australia Limited [2016] NSWDC 76

Sayde Developments Pty Limited v Arab Bank Australia Limited [2016] NSWDC 76

Clause 26.1, as incorporated in the 2008, 2010 and 2011 facilities, required default interest at an additional 2% on the whole principal outstanding when monthly interest payments were late, even though the defaults were not major defaults. The court accepted the plaintiff's expert evidence that the ordinary costs of monitoring and managing such minor defaults were part of the bank's normal business and pricing, and found no evidence that the 2% uplift on the whole loan was a genuine pre-estimate of the bank's loss from late payment. Compared with the greatest conceivable loss from the relevant breach, the clause produced an extravagant and unconscionable result and was a penalty; the...

Jurisdiction
Australia
Judgment Date
13 May 2016
Procedural Posture
Civil Banking and Contract Claim for Declaration and Restitution of Default Interest Alleged to Be a Penalty / Principal Judgment After Hearing
Outcome
Verdict and judgment for the plaintiff.
Legal Topics
['default Interest' 'penalty Doctrine' 'commercial Loan Facility' 'monies Had and Received' 'express Contractual Terms']
['banking Law' 'contract Law' 'restitution'] ['default Interest' 'penalty Doctrine' 'commercial Loan Facility' 'monies Had and Received' 'express Contractual Terms']

Case Brief

Summary, issues, holding and outcome

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Procedural Posture

Civil Banking and Contract Claim for Declaration and Restitution of Default Interest Alleged to Be a Penalty / Principal Judgment After Hearing

Legal Issues

  1. 1 ["Whether default interest charged under the plaintiff's commercial facilities with the defendant constituted a penalty and was refundable." 'Whether, in the alternative, a 5 December 2007 letter was incorporated as an express term limiting when penalty interest could be charged.']

Ratio Decidendi

Clause 26.1, as incorporated in the 2008, 2010 and 2011 facilities, required default interest at an additional 2% on the whole principal outstanding when monthly interest payments were late, even though the defaults were not major defaults. The court accepted the plaintiff's expert evidence that the ordinary costs of monitoring and managing such minor defaults were part of the bank's normal business and pricing, and found no evidence that the 2% uplift on the whole loan was a genuine pre-estimate of the bank's loss from late payment. Compared with the greatest conceivable loss from the relevant breach, the clause produced an extravagant and unconscionable result and was a penalty; the...

Court Disposition

Verdict and judgment for the plaintiff.

Orders

  • ['Verdict and judgment for the plaintiff against the defendant in the sum of $352,302.00.' "The defendant to pay 90% of the plaintiff's costs of the proceedings." 'The defendant to have a stay of proceedings for 28 days from 13 May 2016.']