Integral Home Loans Pty Ltd & Anor v Interstar Wholesale Finance Pty Ltd & Anor [2007] NSWSC 406

Reported Decision : (2007) Aust Contract Reports 90-261

New South Wales Supreme Court

CITATION : Integral Home Loans Pty Ltd & Anor v Interstar Wholesale Finance Pty Ltd & Anor [2007] NSWSC 406

HEARING DATE(S) : 22-23 February 2007

JUDGMENT DATE : 27 April 2007

JURISDICTION : Equity Division

JUDGMENT OF : Brereton J

DECISION : The right to trailer commission in respect of settled loans was an "accrued right". The doctrine of penalties extends to forfeiture or retention of property other than money, including an entitlement to remuneration already earnt under the contract. The doctrine extends to payments conditioned upon termination for an "event of default" which is not a breach of contract but is within the domain of the party that commits or suffers the event. The relevant clause is a penalty and the plaintiff is entitled to trailer commission notwithstanding termination of the agreement.

CATCHWORDS : EQUITY – Penalties and forfeiture – penalties – where loan origination and management agreement contains promise by originator to act honestly and not engage in deceptive conduct, and provision for termination by manager for various events of default, including failure to rectify a breach of contract or engaging in deceptive or fraudulent activity or an insolvency event or a change of control – where contract provides that upon termination for insolvency or fraud (but not otherwise) originator has no further right to trailer commission – whether right to trailer commission is an accrued right – whether doctrine of penalties limited to obligations to pay agreed sum of money or extends to provisions forfeiting entitlement to receive accrued remuneration – whether doctrine limited to payments conditioned on breach or extends to events of default not being breaches but within payer's domain.