New Zealand Case Law: Decisions & Judgments

Topic

Penalty clauses

Legal area

Court

20 Jul 2022

PROPERTY SALES DIRECT LTD v HAWKEN LANE DEVELOPMENT LP [2022] NZHC 1735

Citation

(2022)23 NZCPR 440
Court

High Court

PSDL's claims dismissed: the deposits were not penal and no relief against forfeiture was available; PSDL elected to continue with the Lot 22 arrangement and could not rely on the sunset clause so Lot 22 deposit was not recoverable; the caveat was lodged without reasonable cause and PSDL is liable under s148 LTA for losses caused by the caveat; judgment awarded to Hawken in the aggregate amount stated.
18 Apr 2019

127 HOBSON STREET LTD v HONEY BEES PRESCHOOL LTD [2019] NZCA 122

Citation

[2019] 2 NZLR 790
Court

Court of Appeal

Court construed clause 2 as indemnity running only to the expiry of the initial lease term; the indemnity was not an unenforceable penalty because it protected legitimate commercial interests (tenant's significant fit-out investment, practical need for access and risk allocation where landlord controlled installation), parties were commercially astute and the burden on promisor was not out of all proportion to the interest protected; specific performance and declaratory relief were appropriate.
19 Oct 2015

TORCHLIGHT FUND NO.1 LP (IN RECEIVERSHIP) v JOHNSTONE & ORS [2015] NZHC 2559

Citation

[2015] NZHC 2559
Court

High Court

The Late Payment fee was imposed in terrorem and constituted a collateral penal stipulation that was extravagant and out of proportion to the loss likely to be caused by late repayment (limited to lender's cost of funds/interest exposure), therefore the clause was an unenforceable penalty; accordingly late payment charges were struck down but the primary facility fee and contractual interest and receivers' costs under the indemnity were recoverable.
11 Jul 2012

ROBERT ARTHUR BELL V BDO SPICERS MANAWATU LIMITED HC WN CIV-2012-485-166

Citation

openlaw-185179f8_e616_449c_8412_4ebedbbe8f2d.pdf
Court

High Court

The court held that the parties, by their post-settlement conduct, mutually waived the contractual requirement that additional services be agreed in writing, creating an enforceable oral agreement for the additional work; therefore appellant was liable for the disputed invoices subject to admitted credits; however the contractual interest provision of 2% per month compounded was penal and was reduced to a fair rate of 15% per annum and respondent directed to recalculate interest and file corrected figures before sealing.
25 Jun 2009

THE DOCKS LIMITED V LIU HC AK CIV-2008-404-1435

Citation

openlaw-1f77f316_865f_42da_b516_87b97f6d063f.pdf
Court

High Court

The contractual interest provision was not a penalty: it was a bona fide pre-estimate of loss when judged against evidence of the plaintiff's actual high-cost financing (27.1%) and attendant financing costs; the underwrite fee was a genuine, proved loss paid to a third party and recoverable; accordingly judgment for the plaintiff in the sum claimed was entered.
11 Mar 2004

AMALTAL CORPORATION LIMITED V MARUHA (NZ) CORPORATION LIMITED CA CA11/03

Citation

openlaw-735c31e0_71e8_4a37_a304_8c239d72c38a.pdf
Court

Court of Appeal

The rule against penalty clauses is an equitable remedy against oppression and does not amount to the "public policy of New Zealand" within Article 34(2)(b)(ii); accordingly the High Court had no basis under Article 34 to set aside the award on that ground and must respect the arbitrator's finding that the clauses were not penal; appeal dismissed.

New Zealand Case Law

PROPERTY SALES DIRECT LTD v HAWKEN LANE DEVELOPMENT LP [2022] NZHC 1735

127 HOBSON STREET LTD v HONEY BEES PRESCHOOL LTD [2019] NZCA 122

TORCHLIGHT FUND NO.1 LP (IN RECEIVERSHIP) v JOHNSTONE & ORS [2015] NZHC 2559

ROBERT ARTHUR BELL V BDO SPICERS MANAWATU LIMITED HC WN CIV-2012-485-166

THE DOCKS LIMITED V LIU HC AK CIV-2008-404-1435

AMALTAL CORPORATION LIMITED V MARUHA (NZ) CORPORATION LIMITED CA CA11/03