Nicoletti v Panagiotopoulos [2017] NSWSC 501

Supreme Court New South Wales

Medium Neutral Citation: Nicoletti v Panagiotopoulos [2017] NSWSC 501 Hearing dates: 24 April 2017 Decision date: 24 April 2017 Jurisdiction: Common Law Before: McCallum J Decision: Application for default judgment adjourned; plaintiff to notify defendant of future listing and to provide him with a copy of these reasons Catchwords: PROCEDURE – application for default judgment – action to enforce guarantee – claim for $334,000 "plus interest" – where interest claimed at default rate of 8.75 per cent per month, compounded – total claim exceeding $9 million – appropriateness of entering default judgment where Court entertains concern as to whether the default interest rate amounts to a penalty Cases Cited: Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71 Category: Procedural and other rulings Parties: Teresa Nicoletti (plaintiff) Vasilios Panagiotopoulos (defendant) Representation: Counsel: Plaintiff self-represented No appearance by the defendant

Solicitors: Mills Oakley (plaintiff) File Number(s): 2016/189881

Judgment 1. HER HONOUR: These are proceedings for enforcement of a guarantee. The proceedings were commenced by statement of claim filed on 22 June 2016. The defendant, Mr Panagiotopoulos, did not file a defence and, on 10 October 2016, the plaintiff filed a notice of motion seeking default judgment for a liquidated claim. 2. The amount claimed in the statement of claim is $334,000 "plus interest". The agreement sought to be enforced provided for a default interest rate of 8.75 per cent per month, compounded. The plaintiff contends that payment of the debt claimed was due on 23 July 2014. Interest calculated on the debt from that date accordingly well exceeds the amount of the debt. The amount claimed in the application for default judgment is $9,437,951.28. 3. In response to the plaintiff's notice of motion seeking default judgment, the Registry raised a number of requisitions, all of which have been answered by the plaintiff. The Registrar nonetheless saw fit, in light of the amount claimed, to have the proceedings listed before the Duty Judge. It is in that capacity that the matter comes before me this morning. 4. It can be seen at a glance that it is at least arguable that the default interest rate under the contract amounts to a penalty. The relevant principles are stated in the decision of the High Court in Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71. The Court said (at [10]): "The law of penalties, in its standard application, is attracted where a contract stipulates that on breach the contract-breaker will pay an agreed sum which exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused by the breach". 1. After noting that the law of contract "normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships", the Court said (at [32]): Exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. That is why the law on penalties is, and is expressed to be, an exception from the general rule. It is why it is expressed in exceptional language. It explains why the propounded penalty must be judged "extravagant and unconscionable in amount". It is not enough that it should be lacking in proportion. It must be "out of all proportion". 1. Acknowledging that high bar, in my view it is at least arguable on the defendant's part that the default interest rate in the present case is out of all proportion to an amount genuinely pre-estimating damages for failure to repay the debt on time. 2. The difficulty, however, is that the defendant, according to what I have been told this morning by the plaintiff, simply refuses to engage in the proceedings. He was served personally with the statement of claim and, as already noted, has not filed a defence. Further, Ms Nicoletti informs me that, prior to the commencement of the proceedings, he communicated a blanket unwillingness to engage with the plaintiff's claim. 3. It is difficult to determine what fairness requires in the circumstances. Prima facie, the plaintiff is entitled to default judgment in the amount claimed. However, having regard to the quantum of the claim and the concerns I have expressed, I consider it appropriate to take additional steps beyond those which would ordinarily be required on an application for default judgment to endeavour to bring home to the defendant the importance of defending the proceedings. 4. To that end, I propose to direct the plaintiff to write to the defendant by letter to be served personally on him to inform him that the proceedings will be stood over today to 15 May 2017. The letter should inform the defendant of the Court's indication that it would be in his interests to obtain legal advice about these proceedings. The letter should also enclose a copy of these reasons. 5. For those reasons, I make the following orders: 1. Direct the plaintiff to write to the defendant in the terms identified in this judgment. 2. Stand the proceedings over to 15 May 2017 before me at 9.30am.