CMC Group Plc & Ors v Zhang [2006] EWCA Civ 408 (14 March 2006)

CMC Group Plc & Ors v Zhang [2006] EWCA Civ 408 (14 March 2006)

The US$40,000 repayment provision in the settlement agreement is a penalty because it is a lump sum payable for any breach, regardless of seriousness, and is not a genuine pre-estimate of loss. It is therefore unenforceable.

Citation
[2006] EWCA Civ 408
Parties
Claimant/respondent: CMC Group PLC & Ors; Defendant/appellant: Michael Zhang
Jurisdiction
England and Wales
Judgment Date
14 March 2006
Procedural Posture
Civil Appeal / Appeal From High Court (queen's Bench Division, Master Eyre) to Court of Appeal
Outcome
appeal allowed
Legal Topics
Penalty Clauses, Liquidated Damages, Compromise Agreements, Default Judgment, Damages Assessment
Contract Law Civil Procedure Penalty Clauses Liquidated Damages Compromise Agreements Default Judgment Damages Assessment

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 4 Authorities cited 6 Party arguments 2 Amounts and remedies 4
Sign in to unlock

Parties

CMC Group PLC & Ors

Claimant/respondent

Michael Zhang

Defendant/appellant

Procedural Posture

Civil Appeal / Appeal From High Court (queen's Bench Division, Master Eyre) to Court of Appeal

Legal Issues

  1. 1 Whether the provision in the settlement agreement requiring repayment of US$40,000 upon breach is a penalty clause and thus unenforceable
  2. 2 Whether the penalty argument could be raised on appeal after default judgment

Ratio Decidendi

The US$40,000 repayment provision in the settlement agreement is a penalty because it is a lump sum payable for any breach, regardless of seriousness, and is not a genuine pre-estimate of loss. It is therefore unenforceable.

Court Disposition

appeal allowed

Orders

  • Judgment for US$40,000 set aside as unenforceable penalty
  • Leave to appeal granted