Supreme Court New South Wales Medium Neutral Citation: Playup Australia Pty Ltd v Kay [2019] NSWSC 771 Hearing dates: 3 - 5 June 2019; further written submissions 12 June and 21 June 2019 Decision date: 25 June 2019 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Clause 4.3(b) of the Share Sale and Purchase Agreement of 23 March 2018 not engaged; plaintiff entitled to declaratory relief to that effect Catchwords: CONTRACTS – construction and interpretation – share sale agreement – whether the purchaser's obligation to make deferred payments dependent on seller's obligation to ensure adjustments made on completion – where parties agreed time was of the essence in relation to the purchaser's obligation to make the deferred payments – whether parties agreed that the "Date of Completion" was a different date to "Completion" – whether seller no longer bound by restraints and warranties in the agreement EQUITY – equitable remedies – relief against penalties – clause in share sale agreement provided that restraints and warranties made by defendant are void if payment not made within seven days of due date – whether that clause is a penalty and unenforceable EQUITY – equitable remedies – relief against forfeiture – non-proprietary rights in the form of restraints and warranties conferred by agreement – whether purchaser should have relief against forfeiture of those rights Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170; [1986] HCA 63 Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30 Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328 Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd [2017] NSWCA 99 Burton v Palmer [1980] 2 NSWLR 878 Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015] 3 WLR 1373; [2015] UKSC 67 Clydebank Engineering & Shipbuilding Company Ltd v Castaneda [1905] AC 6 Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 Grocon Constructions (QLD) Pty Ltd v Juniper Developer (No 2) Pty Ltd [2015] QCA 291 Hillam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196 Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 Newcombe v Newcombe (1934) 34 SR (NSW) 446 Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; [2016] HCA 28 Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71 Tito v Waddell (No 2) [1977] 2 WLR 496; [1977] Ch 106 Texts Cited: J D Heydon, Heydon on Contract (2019, Thomson Reuters) J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) J W Carter, Carter on Contract (2014, LexisNexis) Category: Principal judgment Parties: Playup Australia Pty Limited (Plaintiff) Ryan Kay (Defendant) Representation: Counsel: N J Kidd SC with E A Walker (Plaintiff) M K Condon SC (Defendant) Solicitors: Yates Beaggi Lawyers (Plaintiff) Price & Company (Defendant) File Number(s): SC 2018/290218 Judgment 1. By March 2018 the defendant, Mr Ryan Kay had worked in the online gambling industry for approximately 15 years. He was then the sole shareholder of the company then known as Bestbet.com.au Pty Ltd. Bestbet conducted an online gambling business. 2. On 23 March 2018 Mr Kay entered a Share Sale and Purchase Agreement with the plaintiff, Playup Australia Pty Limited, by which he agreed to sell his shareholding in Bestbet to Playup for $1.6 million. 3. The $1.6 million was to be paid by way of $1 million on exchange, "nil" on completion (subject to any "adjustment": see below) and the balance of $600,000 by 24 monthly instalments of $25,000 commencing on the "monthly anniversary" of the "Completion Date". These instalments were described in the Agreement as the "Deferred Payment". 4. Clause 4.3 of the Agreement provided that if any Deferred Payment was not paid within seven days of its due date, time being of the essence, then: 1. the restraints imposed on Mr Kay by the Agreement to not compete with Bestbet, solicit any employee or approach any customer of Bestbet ("the Restraints") were "immediately void ab initio"; 2. the warranties given by Mr Kay in the Agreement as to the financial position of Bestbet and otherwise as set out in Schedule 3 of the Agreement ("the Warranties"), were "immediately void ab initio"; and 3. the Deferred Payment became immediately "due and payable". 1. There is a dispute as to if and when "Completion" took place for the purposes of the Agreement. For the reasons I set out below, I find it took place on 7 June 2018. 2. Although the Agreement provided that any "adjustment" to the purchase price was to be made on Completion, the parties proceeded to Completion without any adjustment being made. 3. It is now common ground that the necessary adjustment was $10,707.32 in favour of Playup. 4. Mr Kay agreed to that adjustment on 16 July 2018; that is, after Completion. 5. None of the Deferred Payments having then been made, on 8 August 2018 Mr Kay, without notice, served a creditor's statutory demand under s 459E(2)(e) of the Corporations Act 2001 (Cth) on Playup claiming $589,292.68, being the total $600,000 Deferred Payment less the adjustment of $10,707.32 Mr Kay agreed to on 16 July 2018. 6. Playup then made a number of further Deferred Payments but did not seek to have Mr Kay's statutory demand set aside. 7. On 10 September 2018 Mr Kay commenced winding up proceedings ("the Winding Up Proceedings") against Playup based on Playup's failure to pay the amount in the statutory demand. 8. On 11 October 2018 Playup, under protest, paid Mr Kay the balance of the Deferred Payment, $520,050.44, in order to procure Mr Kay's agreement to discontinue the Winding Up Proceedings. 9. Playup contends that: 1. on the proper construction of the Agreement, its obligation to make the Deferred Payment was dependent on Mr Kay's agreement to the appropriate adjustment to be made to the purchase price; 2. as that did not occur until 16 July 2018, its obligation to make the Deferred Payment only arose on the "monthly anniversary" of that date and was subject to an entitlement to set off the agreed adjustment; and 3. it subsequently made the Deferred Payments in a timely manner so that cl 4.3(b) was not engaged. 1. Alternatively, Playup contends that cl 4.3(b) is void as a penalty or that Playup ought be granted relief against forfeiture of the benefits obtained by cl 4.3(b). 2. Playup seeks declaratory relief to this effect. Decision 1. On the proper construction of the Agreement, Playup's obligation to make the Deferred Payment was dependent on Mr Kay agreeing an appropriate adjustment. 2. Clause 4.3(b) was therefore not engaged. 3. Although, in light of my conclusions at [16] and [17], these issues do not arise: 1. clause 4.3(b) is not void as a penalty; and 2. assuming that relief against forfeiture was available to restrain Mr Kay from exercising his contractual rights under cl 4.3(b), as a matter discretion I would have refused to grant it. The terms of the Agreement 1. Clause 5.1 of the Agreement provided that: "Completion will take place on the Completion Date, at such time and place as the Buyer and the Seller may agree." 1. "Completion" was defined to mean: "…completion of the sale and purchase of the [shares in Bestbet] in accordance with this agreement." 1. "Completion Date" was defined to mean: "[A] date being two (2) business days after the Buyer has received from the Northern Territory Racing Commission 'NTRC') regulatory approval in writing to operate the Company's Business under the Buyer's existing NTRC bookmaker's licence, or such other date as the parties agree in writing PROVIDED THAT the Completion Date shall not be a date any later than 90 days from the date hereof and in this regard time shall be of the essence." (Emphasis in original.) 1. Clause 4 dealt with "Consideration". Subclauses 4.2 and 4.3 provided: "4.2 In consideration of the Seller entering into this Agreement, on execution of this agreement, the Buyer shall pay to the Seller a [sic] unconditionally non-refundable payment of one million dollars ($1,000,000); and 4.3 On Completion the Buyer must pay to the Seller, or as the Seller otherwise directs the balance Completion Amount of $nil in Immediately Available Funds, subject to any Adjustment. Deferred Payment (a) The Deferred Payment shall be paid by way of equal monthly instalments of $25,000 per calendar month, for a period of 24 months, the first payment to be made on the first monthly anniversary of the Completion Date, and thereafter each month on the monthly anniversary until the full deferred payment amount has been paid. (b) In the event that any Deferred Payment monthly payment due and payable by the Buyer to the Seller is not paid within seven (7) days of its due date, and in this regard time shall be of the essence, then: (i) All and any restraints of whatsoever nature otherwise imposed herein on the Seller or any Key Employee herein, are immediately void ab initio; and (ii) All and any warranties of whatsoever nature otherwise provided herein by the Seller or any Key Employee herein, are immediately void ab initio; and (iii) All outstanding and unpaid monthly payments of the Deferred Payment shall be due and payable by the Buyer immediately, and recoverable by the Seller immediately". 1. Clause 5 dealt with "Completion" and provided, in addition to cl 5.1: "5 COMPLETION … Obligations at Completion 5.2 The Seller and the Buyer must each fulfil their obligations at Completion as set out in Schedule 9. Interdependence 5.3 The obligations of the parties at Completion are interdependent. All actions at Completion will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments have been made." 1. Clause 4.3 referred to the possibility of there being an "Adjustment" to the amount payable by Playup to Mr Kay on completion. 2. "Adjustment" was defined in cl 6.11 as follows: "It is agreed, that if the money for any liabilities of the Company and the Business and the Player Funds (and any other matter contemplated under this agreement) are not in the Company's bank account on Completion, the amount attributed to such matters will be adjusted on Completion, from the Completion Amount." 1. The possibility of there being an adjustment on completion was also referred to in cll 6.3 and 6.7 which provided: "6.3 On Completion, the Seller must ensure that all money accrued up to the Completion Date, but not paid, in respect to liabilities (including but not limited to payments to creditors; client funds balance, statutory liabilities, GST, PAYG, payroll tax) will be adjusted on the Completion Date. … 6.7 Without limiting any other provision of this agreement, the Seller will ensure that, by Completion, the Company will have settled all outstanding liability for employee entitlements, unpaid wages, salary, remuneration, superannuation contributions, compensation and benefits; redundancy or termination payments and all other outstanding employee entitlements of any nature (if any) by either direct payment to the particular Employee on or before Completion or by adjustment to the Completion Amount." The negotiation of cl 4.3 1. Documentary evidence of the negotiations concerning the form of cl 4.3 of the Agreement was received into evidence without objection. Those documents were in the Court Book. 2. In addition, over the objection of Mr Kidd SC, who appeared with Mr Walker for Playup, I allowed evidence given by Mr Kay of three conversations between Mr Kay and Mr Daniel Simic, the Chief Executive Officer of Playup. Mr Simic did not dispute two of the conversations. He denied the third. In view of the conclusions to which I have come, I do not need to resolve that dispute. 3. I allowed that evidence only in relation to the issues of whether cl 4.3 is a penalty and whether Playup should be granted relief against forfeiture of the benefits obtained by cl 4.3(b). 4. In Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 at 508, Cole J held that evidence of negotiations of a clause said to be a penalty: "…is admissible to establish the circumstances in which the parties came to agree to the clause, at least for the purpose of negating any attack upon the clause based upon an intention of the parties not to draft a clause constituting a genuine pre-estimate, or to draft a clause in disregard of whether it was a pre-estimate or not." 1. His Honour also said: "Whether a burden [of a clause said to be a penalty] is unconscionable may well depend upon the circumstances of the parties at the date of the contract, their perceptions at that time regarding their respective positions should breach of contract occur at a later and perhaps distant time, the equality or inequality of bargaining position at the date of contract, and the willingness or unwillingness of a party to accept an imprecise or in some respects ill defined obligation to pay damages as the price of obtaining what presumably was regarded as a profitable contract. The relationships between the parties at the time of contract concerning the proposed clause and its imposition touch upon these matters, as does the question of their understanding of the likely imposition generated by the clause. In my view these matters, and thus evidence relating to them, are admissible in order that the court may weigh any question of unconscionability, quite apart from an empirical examination of whether damage under the clause is excessive." (At 509-510.) 1. His Honour later referred to the observations of Mason and Wilson JJ in AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 193-194; [1986] HCA 63 and concluded: "Their Honours distinguish as a basis for striking down a clause circumstances which may render it unconscionable to enforce the clause, as well as a clause which may be oppressive in consequence of its monetary impositions indicating that it is not of a compensatory nature. That must, in my view, render admissible evidence concerning the circumstances in which the clause came into existence, and the parties' understanding of its intent in order to rebut any attack upon the basis that the clause was agreed in circumstances and in a relationship between the parties rendering its enforcement unconscionable." (At 511.) 1. In his recently published work, Mr Heydon QC expressed doubt as to the correctness of Cole J's observations: J D Heydon, Heydon on Contract (2019, Thomson Reuters) at [26.1170]. 2. However the learned author did not refer to the observations of Allsop CJ in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [255], where his Honour said, when considering a provision impugned as a penalty: "The views of the parties may well not conclude the enquiry, but, as in Clydebank [Engineering & Shipbuilding Company Ltd v Castaneda [1905] AC 6], with the correspondence between the parties, as in Multiplex, with the pre-contractual discussion of the parties, and as in Dunlop [Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79], with Mr Beasley's evidence of the purpose of the clause, the approach and purposes of the parties may be of some assistance in understanding both what was intended and whether it has a legitimate commercial justification." 1. His Honour's observations were not criticised by the High Court in the appeal from the decision of the Full Court of the Federal Court: Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525; [2016] HCA 28. I will discuss the High Court's decision in Paciocco further below. 2. In a judgment delivered before publication of the decision of the High Court in Paciocco the Full Court of the Queensland Court of Appeal cited Allsop CJ's observations with evident approval: Grocon Constructions (QLD) Pty Ltd v Juniper Developer (No 2) Pty Ltd [2015] QCA 291 at [132] (McMeekin J with whom Holmes CJ and Atkinson J agreed). 3. My conclusion was that those authorities justified reception of the conversations into evidence. 4. On 9 March 2018 Playup's then solicitor, Ms Sharon Robson, sent Mr Kay's solicitor, Mr Anthony Price, a draft version of the Agreement which provided that the Deferred Payment be payable by monthly instalments for 24 months "commencing on the first monthly anniversary of the Completion Date". The draft provided for no consequences for untimely payment. 5. On 16 March 2018 Mr Price proposed cll 4.2 and 4.3 in terms very similar to those finally agreed, save that there was no provision for a period of grace. 6. Ms Robson replied on 19 March 2018 saying that Playup "cannot agree to this clause" and "requires 7 days following the payment date in which to pay before accruing any interest" and proposed that interest accrue on late payment at 2% above the Reserve Bank Cash Rate. 7. Mr Kay said that at around that time he and Mr Simic had conversations in which Mr Simic said words to the effect: "I really need to you to give us a period of grace, just in case there's a problem with the bank processing payment. I don't think we'll ever need it as we'll always pay on time, but just in case there's a problem with the bank." And that he, Mr Kay, responded by saying words to the effect: "No, we want to be sure that you will pay on time. … If we are paid on time then there is no issue. That condition has to be in the contract". 1. Mr Simic did not dispute these conversations. 2. On 20 March 2018 Ms Robson reported to Mr Simic that she had spoken to Mr Price who had said that Mr Kay: "…indicated this was a deal breaker. [Mr Kay] doubts capacity to pay". 1. Later on 20 March 2018 Mr Simic wrote directly to Mr Kay stating: "[W]hat if the bank delays the transfer or other issues like that. Things outside our control. Put it back to 3 days if that suits. Their [sic] needs to be something just in case". 1. On 21 March 2018 Mr Prashant Arora, the Chief Financial Officer of Playup, sent an email to Mr Simic and others at Playup saying that he had "just had a comprehensive discussion" with Mr Kay and that "[Mr Kay] is happy to add a 7 days grace period for monthly deferred payment". 2. On 23 March 2018 the parties executed the Agreement which included cl 4.3 in the form that I have set out above. 3. The form of cl 4.3 was thus the subject of focussed negotiation. Mr Kay's position was that its inclusion in the Agreement was a "deal breaker". It was, in effect, the price Playup had to pay if it wished to purchase Mr Kay's shareholding in Bestbet. The events leading to Completion 1. On 18 May 2018 the NTRC gave approval to Playup to operate Bestbet's business under Playup's existing NTRC bookmaker's licence. 2. As I have mentioned, the Agreement defined "Completion Date" as being two business days after the NTRC approval "or such other date as the parties agree in writing". 3. The date two business days after 18 May 2018 was 22 May 2018. 4. On 22 May 2018, Ms Robson wrote to Mr Price: "I am instructed that completion should be deemed to occur today. On execution [of the 'original transfer documents' that had been the subject of previous correspondence between Ms Robson and Mr Price], can you please ensure that today's date is reflected". 1. I will return to this communication when considering whether the parties agreed that the "Completion Date" was to be taken to be 22 May 2018. 2. On 24 May 2018 Mr Kay wrote to Mr Arora about a number of matters and concluded: "I will then get together all of the items today for completion". (Emphasis added.) 1. On 25 May 2018, Mr Kay again wrote to Mr Arora about "the March 23rd financials" of Bestbet and concluded: "They need to be agreed so we can lodge and then we can compete [sic: complete]". (Emphasis added.) 1. On 28 May 2018 Mr Kay sent a further email to Mr Arora attaching a trial balance for Bestbet and concluding: "Once agreed, we can complete." (Emphasis added.) 1. On 29 May 2018 Mr Arora sent Mr Kay a "list of payments made in April or May for the bills accrued before 23rd March". 2. The attached list showed 10 payments made by Bestbet to creditors since 23 March 2018 which in part related to liabilities incurred by Bestbet prior to 23 March 2018. The amount of those payments attributable to liabilities incurred prior to 23 March 2018 was $11,778.05 inclusive of GST or $10,707.32 excluding GST. 3. In effect, Mr Arora was suggesting to Mr Kay that there should be an adjustment to the purchase price in Playup's favour for this amount. The adjustment Mr Arora suggested on 29 May 2018 was the GST inclusive figure of $11,778.05. The adjustment to which Mr Kay agreed on 16 July 2018 was the GST exclusive figure of $10,707.32. 4. On 30 May 2018 Mr Kay wrote to Mr Arora: "I'm running through the post [M]arch 23rd items today so hopefully we can do after I agree those". (Emphasis added.) 1. On 1 June 2018 Mr Price wrote to Ms Robson referring to a number of matters and concluding: "Once the numbers/financials are finalised, then the other matters can also be finalised." 1. On 5 June 2018 Ms Robson replied: "Can you urgently confirm whether the items can be collected from your office, so we settle this matter please." (Emphasis added.) 1. On 6 June 2018 Mr Simic wrote to Mr Kay raising a number of matters and concluding: "Can we just stick to what we signed and complete in morning. The contract is already in breach and should have completed last week". (Emphasis added.) 1. On 7 June 2018, without notice, Mr Kay delivered to Playup: 1. an executed "Restraint Deed" (required by cl 9.4 of the Agreement); 2. an executed "Form of Transfer" of Mr Kay's shares in Bestbet dated 24 May 2018; 3. a further "Australian Share Transfer Form" in respect of Mr Kay's shares in Bestbet dated "blank/05/2018"; and 4. Mr Kay's resignation as a director and secretary of Bestbet dated 21 May 2018. 1. These were the critical documents that Mr Kay was obliged to deliver at Completion. 2. However, Mr Kay was also obliged to deliver at completion an "updated debtor list to the date of Completion". Such a list was never provided. 3. On 7 June 2018 Mr Arora sent an email to Mr Simic and Ms Robson informing them that: "[Mr Kay] dropped the completion docs for Bestbet…just then". (Emphasis added.) 1. On the same day Mr Price sent Ms Robson a copies of the documents referred to at [63] above "by way of final settlement in this matter" (emphasis added). 2. Mr Price concluded his letter: "Could you please have your client lodge the Form 484 with ASIC as soon as possible. We are instructed that this now completes settlement in this matter". (Emphasis added.) 1. Ms Robson did not respond to this letter. 2. The parties thereafter acted as if "Completion" had taken place. Events after Completion 1. On 15 June 2018 Playup's accountant sent Mr Arora a Corporations Act Form 484 "Change to Company to Details" which specified 22 May 2018 as the date when Mr Kay ceased to be, and the date on which Mr Simic was appointed as, director and secretary of Bestbet. 2. On the same day Mr Simic signed that document as director of Bestbet. 3. In due course that document was lodged with the Australian Securities and Investments Commission (ASIC). An ASIC search conducted on 14 September 2018 records Mr Simic's appointment and Mr Kay's cessation as the director and secretary of Bestbet as occurring on 22 May 2018. 4. On 22 June 2018 Mr Arora wrote to Mr Kay: "Just wanted to check with you that I heard back from your [sic] regarding the accounts paid from [Bestbet] post 23rd of March. Were you happy with what Chris [Murrow] sent?" 1. Mr Arora's reference to "what Chris [Murrow] sent" was a reference to the list of payments that Mr Arora had sent Mr Kay on 29 May 2018 which, in effect, proposed an adjustment of the purchase price in favour of Playup of $11,778.05 (see [56]-[58] above). 2. Having received no reply, Mr Arora wrote a further email to Mr Kay on 26 June 2018: "Can you please advise if you are happy with all the above expenses so I can make an adjustment in the payment due to yourself… Also are able to give me the bank details for yourself…so I can start the deferred payments." 1. On 3 July 2018 Mr Price sent Ms Robson Mr Kay's bank details. 2. On 5 July 2018 Mr Arora sent a further email to Mr Kay: "I got the bank details for your deferred payments recently but never received anything in regards to the payments made by the company post execution. So I can work out the deferred payment schedule can you please confirm if you are ok with all the payments above?" 1. Mr Kay replied on 16 July 2018: "I have looked at the settlement adjustment reconciliation for Bestbet. My only comment is that the figure of $11,778.05 includes GST. Bestbet should have already received an input tax credit in its March 2018 BAS for the GST component of this figure, being $1,070.73. Therefore, I think the calculations correctly should be done on an ex-GST basis, given that Bestbet gets the GST back. The correct amount to be adjusted at settlement on 22 May 2018 was $10,707.32." 1. By this email, Mr Kay was, in effect, accepting the correctness of the adjustment Mr Arora proposed by his 29 May 2018 email save that the adjustment should be exclusive of GST and thus be $10,707.32 rather than $11,778.05. 2. Mr Arora agreed that the relevant adjustment should be exclusive of GST. In an affidavit Mr Arora swore in the Winding Up Proceedings, Mr Arora described Mr Kay's 16 July 2018 email as "an agreed adjustment of $10,707.32". 3. Nonetheless Mr Arora did nothing to progress the matter. 4. On 10 August 2018, without notice, Mr Kay served on Playup a statutory demand pursuant to s 459E(2)(e) of the Corporations Act which, as I have set out above, claimed an amount of $589,292.68, being the $600,000 Deferred Payment less the by now agreed adjustment of $10,707.32. 5. Mr Arora responded with an email to Mr Kay on 10 August 2018: "I wasn't expecting a stat demand. Just a phone call would have been enough to resolve this, I got tied up with a few things in the last couple of weeks so didn't get to it. Nevertheless, please see attached payment schedule for…Best Bet. I will start the payment of this on Monday [13 August 2018] for BestBet, can you please have a look into this and let me know if there are any issues. Please call me if you think any information is incorrect." 1. The "Payment Schedule" set forth an "Opening Balance" for the Deferred Payment of $600,000 from which was subtracted $30,717.76 for "Reduction on Deferred Payments". 2. That reduction was calculated by reference to, amongst other things, the agreed figure of $10,707.32 together with other deductions which, before me, were not pressed as being warranted. 3. The Payment Schedule then set out a schedule of payments commencing monthly from 28 June 2018 and provided for: 1. "No Payment" on 28 June 2018, evidently because the $30,717.76 proposed adjustment more than set off the first Deferred Payment of $25,000; 2. a payment of $19,242.24 on 28 July 2018, being the difference between $25,000 and the balance of the $30,717.76; and 3. payments of $25,000 on 28 August 2018 and the 28th of the following months up to and including May 2020. 1. Mr Arora thus proposed 28 June 2018 as the date due of the first Deferred Payment. Neither party now suggests that 28 June 2018 was the "monthly anniversary" of a relevant date. Mr Arora said in cross-examination that he was "confused about the date" and that he "didn't know what date to put". There is no suggestion in the evidence that Mr Arora thought to seek the advice of Ms Robson, or anyone else, about this. 2. On 13 August 2018 Mr Arora caused Playup to pay to Mr Kay $19,242.24. 3. On 28 August 2018 Mr Arora caused Playup to pay Mr Kay a further $25,000. 4. On 10 September 2018 Mr Kay commenced the Winding Up Proceedings. 5. On or around 13 September 2018, Playup retained Yates Beaggi Lawyers to act for it in lieu of Ms Robson. 6. On 13 September 2018 Mr Farshad Amirbeaggi from that firm wrote to Mr Price stating, amongst other things: "On 23 March 2018, the parties entered into a Share Sale and Purchase Agreement…for the purchase of shares…by PlayUp in Bestbet.com.au Pty Ltd… It was a term of the Agreement that PlayUp would pay to Ryan Kay the sum of $1,600,000, with $1,000,000 payable upon completion of the Agreement, being 22 May 2018, and $600,000…in equal monthly instalments of $25,000…for a period of 24 months. The first payment was due the first month after the Completion Date, and repeated until the whole of the $600,000 is paid. As a consequence of the terms of the Agreement, and the manner in which it was completed, the amount of the Deferred Payment required adjustment in circumstances where PlayUp incurred or continues to incur liability on behalf of Best Bet. The first instalment due on 22 June 2018, was paid by way of adjustment totalling $30,717.76. As such, no actual payment was required by PlayUp. The second instalment due on 22 July 2018, was not paid on time due to an administrative error within the offices of PlayUp. Notwithstanding the slippage, the second instalment payment was also affected by a need for adjustment against accrual of liabilities incurred on behalf of Best Bet. That was revealed by the content of the email from Prashant Arora to your client on 10 August 2018, at 2:52pm and even in further email exchanges as recently as yesterday." (Emphasis added.) 1. It thus appears that Mr Amirbeaggi's instructions were that the "Completion Date" was 22 May 2018; hence his conclusion that the first Deferred Payment was due on 22 June 2018 albeit, he said, subject to adjustment to nil. 2. On 24 September 2018 Mr Arora caused Playup to make a further payment of $25,000 to Mr Kay. 3. Finally, as I have mentioned at [12] above, on 11 October 2018 Playup paid Mr Kay the balance of the Deferred Payments of $520,050.44. This payment was made under protest and to procure the dismissal of the Winding Up Proceedings. 4. In the meantime, in the Winding Up Proceedings: 1. on 9 October 2018 Mr Arora swore an affidavit stating that a related transaction involving Mr Kay's father, which was documented in the same terms as the Agreement, "completed on 22 May 2018" and "the first instalment of [the Deferred Payment] fell due on 22 June 2018" (and Mr Arora agreed in cross-examination that he had the same understanding in relation to the Agreement); 2. on 16 October 2018, Mr Simic swore an affidavit stating that the Agreement "completed on 22 May 2018"; and 3. on 19 October 2018 counsel then appearing for Playup (not Mr Kidd or Mr Walker) informed Ball J that "completion took place on 22 May 2018 and there is no issue with that". Did Completion occur, and if so, when? 1. As I have set out at [20] and [21] above, the Agreement separately defined "Completion" and "Completion Date". 2. The definition of "Completion" described an event (the "completion of the sale and purchase" of the shares in Bestbet in accordance with the Agreement) whereas the definition of "Completion Date" (two business days after NTRC approval or such other date as the parties agreed in writing) referred to a moment in time, a date, on which the event of "Completion" would occur. 3. By cl 5.1, and unsurprisingly, the Agreement provided that "Completion will take place on the Completion Date". 4. As I have set out at [51] above, on 22 May 2018, Ms Robson wrote to Mr Price stating that she was instructed that "completion should be deemed to occur today" and asked Mr Price to "please ensure that today's date is reflected". 5. Mr Condon suggested to Mr Simic that he gave Ms Robson those instructions. Initially, Mr Simic said he could not recall whether this was so, but then said completion "was supposed to be deemed to occur on" 22 May 2018. 6. It is not clear why Mr Simic wanted this result. It may be this was because of an apprehension as to the significance of the approval given by the NTRC on 18 May 2018 to Playup to conduct the Bestbet business under Playup's existing NTRC bookmaker's licence. 7. Both parties later executed documents that specified 21 or 22 May 2018 as key dates. Thus: 1. the Restraint Deed executed by Mr Kay pursuant to his obligations under the Agreement, and delivered on 7 June 2018, recited that: "Completion Date means the completion date of the Share Sale Agreement, which occurred on 21 May 2018." 1. Mr Kay's letter of resignation as director and secretary of Bestbet was dated 21 May 2018 (see [63(d)] above); and 2. Mr Simic certified as correct the statement in the Form 484 that he signed on 15 June 2018 that Mr Kay ceased to be, and that he became, director and secretary of Bestbet on 22 May 2018. 1. Further: 1. on 13 September 2018 Mr Amirbeaggi stated in his letter to Mr Price, presumably on instructions from Mr Simic, that "completion of the agreement" occurred on 22 May 2018; and 2. the statements I have set out at [97] were made in affidavits in the Winding Up Proceedings to the effect that the transaction completed on 22 May 2018. 1. As these documents show, the parties appear to have elided the concepts of "Completion Date" and "Completion". 2. Despite the reference in these documents to 21 and 22 May 2018 as being the "Completion Date" or the date on which "Completion" took place, I think it clear that, in fact, "Completion" itself did not occur prior to 7 June 2018 and was accepted to have occurred on that day. 3. After 22 May 2018 there were numerous prospective references in the parties' correspondence to "completion". Thus: 1. on 24 May 2018 Mr Kay wrote to Mr Arora about getting "together all of the items today for completion" (see [53] above); 2. on 25 May 2018 Mr Kay wrote to Mr Arora speaking of the need to agree "the March 23rd financials" so that "we can lodge and then we can complete" (see [54] above); 3. on 28 May 2018 Mr Kay wrote to Mr Arora referring to attached financial statements and saying "once agreed, we can complete" (see [55] above); 4. on 30 May 2018 Mr Kay wrote to Mr Arora saying he was "running through" various items so "we can do" (that is, I would infer, complete) "after I agree those" (see [59] above); 5. on 5 June 2018 Ms Robson wrote to Mr Price confirming whether "the items can be collected from your office, so we settle this matter please" (see [61] above); 6. on 6 June 2018 Mr Simic wrote to Mr Kay "can we just stick to what we signed and complete in morning" (see [62] above); 7. on 7 June 2018 after Mr Kay delivered the executed Restraint Deed, Transfer and other documents to Playup, Mr Arora wrote to Mr Simic stating "Ryan [Kay] dropped the completion docs for Bestbet…just then" (see [66] above); and 8. on 7 June 2018 Mr Price wrote to Ms Robson enclosing various executed documents "by way of final settlement in this matter" and concluding "we are instructed that this now completes settlement in this matter" (see [67] and [68] above). 1. From that point forward, Ms Robson did not contest that completion had then taken place and the parties directed their attention to the Deferred Payment. 2. It is true, as Mr Kidd pointed out, that as at 7 June 2018 Mr Kay had not complied with his obligations under cl 6.3 to "ensure that all money accrued up to the Completion Date, but not paid, in respect of liabilities…will be adjusted on the Completion Date" nor his obligation under the Agreement to deliver an "updated debtor list to the date of Completion". 3. Nonetheless, I think it clear the parties regarded the transaction as having "Completed" on 7 June 2018 and thereafter conducted themselves accordingly. 4. Further, I think the better view of the exchange of correspondence between the parties between 22 May 2018 and 7 June 2018 constitutes "an agreement in writing" between them, for the purposes of the definition of "Completion Date" (see [21] above) that the "Completion Date" would be the day when "Completion" actually took place: 7 June 2018. Were the parties' obligations interdependent? 1. The question is whether Playup's obligation to make the Deferred Payment was dependent on Mr Kay performing his obligations under cll 5.2, 6.3 and 6.11 of the Agreement. 2. The relevant principles were discussed by Leeming JA, with whom Basten and Ward JJA agreed in Hillam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196 at [93]-[109]. 3. At [93] his Honour said: "The question is one of construction. 'Whether obligations are dependent or independent depends upon the intention of the parties': Burton v Palmer [1980] 2 NSWLR 878 at 895. In Tito v Waddell (No 2) [[1977] 2 WLR 496;] [1977] Ch 106 at 297, Megarry V-C said: 'If an instrument grants rights and also imposes obligations, the court must ascertain whether upon the true construction of the instrument it has granted merely qualified or conditional rights, the qualification or condition being the due observance of the obligations, or whether it has granted unqualified rights and imposed independent obligations. In construing the instrument, the more closely the obligations are linked to the rights, the easier it will be to construe the instrument as granting merely qualified rights. The question always must be one of the intention of the parties as gathered from the instrument as a whole'." 1. Leeming JA then cited with approval the observations of Prof Carter in, Carter on Contract (2014, LexisNexis) at [29-040], including the following: "However, the approach today is to construe most obligations as dependent on prior or contemporaneous performance by the other party. Clear words are therefore necessary before a relation of independency will be found." 1. Leeming JA then referred to the observations of Jordan CJ in Newcombe v Newcombe (1934) 34 SR (NSW) 446 at 450-451: "An implication of intention that the performance of one covenant shall be conditional on the performance of the other arises where the nature of the covenants is such that any breach of either of them would necessarily be regarded by reasonable men [or women] as absolving the other party from performing his [or her] covenant. … But the question is in every case one of intention." (Citations omitted.) 1. Leeming JA concluded at [107]: "Further, the modern approach favours a construction whereby most obligations are construed to be dependent. To the extent that clear words are required to discern a relation of independency, I do not consider such words to be found in [the agreement then under consideration]." 1. As Mr Kidd submitted, there was a connection between Playup's obligation to make the Deferred Payment and Mr Kay's obligation to ensure that adjustments were made at Completion and to deliver the material referred to in Schedule 9. Thus: 1. Mr Kay was obliged by cl 6.3 to ensure that on Completion the adjustments be effected on the Completion Date and by cl 5.2 to fulfil his Schedule 9 obligations at Completion; and 2. Playup was obliged by cl 4.3 to make the Deferred Payments on the "monthly anniversary" of the Completion Date; and 3. each of these obligations related to payment of the purchase price. 1. The parties were also conscious of the potential interdependence of provisions in the Agreement. Thus they agreed in cl 5.3 that: "The obligations of the parties at Completion are interdependent. All actions at Completion will be deemed to take place simultaneously and no delivery payment will be deemed to have been made until all deliveries and payments have been made" 1. The obligation of Playup under cl 4.3 was not an obligation "at Completion". It was an obligation which arose on the "monthly anniversary" of the Completion Date. 2. But Mr Kay's obligation under cl 6.3 to ensure that appropriate adjustments were made was one "at Completion". 3. The question is whether Playup's Deferred Payment obligation was dependent on Mr Kay's fulfilment of that obligation, notwithstanding the fact that, unlike in cl 5.3, the parties did not in cl 4.3 direct attention in terms to that question. 4. Debate before me focussed on the significance of the provision in cl 4.3(b) that time would be of the essence of Playup's obligation to make the Deferred Payment within seven days of their due date. 5. The question is: did the inclusion of those words have the effect of making Playup's obligation to make the Deferred Payment independent of Mr Kay's obligation to ensure the appropriate adjustment of the purchase price? 6. The conclusion to which I have come is that it did not. 7. It seems to me to be unlikely that the parties intended that, if Completion took place without Mr Kay ensuring that a necessary adjustment be made to the purchase price on Completion, Playup would nonetheless be obliged to start making the Deferred Payment on the "monthly anniversary" of the Completion Date. 8. What, in those circumstances, would the parties contemplate that Playup do? Start paying $25,000 until such time as Mr Kay got around to ensuring, belatedly and in breach of his obligations under cl 6.3, that the adjustment be made? Take the gamble that its calculation of the necessary adjustment would be agreed by Mr Kay to be correct, deduct that amount from whatever number of Deferred Payment instalments was necessary and start making Deferred Payments once adjustment to the purchase price was thereby and belatedly effected? 9. I think it unlikely that the parties intended that the Agreement operate this way. 10. The words making time of the essence appear in cl 4.3(b), rather than cl 4.3(a). That suggests that the parties' intention was not to make time of the essence regarding the obligation to start paying the Deferred Payment on the "monthly anniversary" of the Completion Date, which was the subject of cl 4.3(a). Rather, it suggests their intention was to make time of the essence regarding the obligation to make such payments within the seven day period of grace referred to in cl 4.3(b); making clear that the period of grace could not be extended. 11. The parties may also have intended the words to have the effect of giving Mr Kay a right to rescind the Agreement in the event that a Deferred Payment was not made within seven days of the due date; although it is hard to see what benefit that would confer on Mr Kay over and above that specified in cl 4.3(b) itself. 12. My attention has not been drawn to any authority for the proposition that a clause making time of the essence has the effect of converting dependent contractual obligations into independent contractual obligations. 13. Indeed, as Mr Kidd submitted, such a proposition would appear to be inconsistent with the accepted functions of a stipulation making time essential. As Mr Kidd submitted, those functions, which include making the time stipulation an essential term of the contract, breach of which gives rise to an entitlement to terminate, as well as barring some types of equitable relief, would not operate effectively if the stipulation making time essential also had the effect of making dependent contractual obligations independent obligations. 14. Mr Kidd gave the example of a contract making a time stipulation essential in relation to a purchaser's obligation to pay the purchase price on a specified completion date. Ordinarily, time stipulations give rise to a right to terminate. It does not follow that the essential time stipulation made the purchaser's obligations to deliver the purchase price on that date independent of the vendor's obligations to deliver title documents in exchange for the purchase price. Thus, in the absence of clear words, time stipulations do not necessarily indicate independence. 15. In this case, and to paraphrase the language used by Leeming JA in Hillam v Iacullo, to the extent that clear words are required to discern a relationship of independency between cl 4.3 of the Agreement and cll 5.2, 6.3 and 6.11 of the Agreement, I do not see the words "in this regard time should be of the essence" to comprise such clear words. 16. For those reasons, my conclusion is that the parties intended that Playup's obligation to make the Deferred Payment was dependent on Mr Kay fulfilling his obligation to ensure appropriate adjustments to the purchase price. 17. By cl 6.3, Mr Kay was obliged to do that on the Completion Date: 7 June 2018. 18. His failure to do that, and his actions to in effect cause Completion to take place on 7 June 2018 by the unheralded delivery of the documents referred to at [63] on that day, had the effect of suspending Playup's obligation to make the Deferred Payment until such time as Mr Kay fulfilled his obligations. 19. That occurred on 16 July 2018, whereupon Playup's obligation to make the Deferred Payment revived. 20. The parties must in those circumstances be taken to have intended that Playup would be entitled to set off the amount of the agreed adjustment against the next Deferred Payment. 21. I did not understand there to be any controversy about this. 22. But when did the parties intend in these circumstances that the first Deferred Payment, subject to such set off, be made? 23. Mr Kidd submitted that the parties must be taken to have intended that Playup have until the "monthly anniversary" of the date of agreed adjustment, that is until 16 August 2018, to make the first Deferred Payment. Mr Kidd submitted that this would give Playup the same time to make the first Deferred Payment as it would have had had the relevant adjustments been made on Completion. 24. I see the force of that submission. However, that is not expressly contemplated in the Agreement. 25. Nevertheless, even if the parties are taken to have intended that the dates of the Deferred Payment continue to be determined in accordance with cl 4.3(a), and thus be made on the next "monthly anniversary" of the Completion Date, the next such date was 7 August 2018. 26. Playup made a payment to Mr Kay of $19,242.24 on 13 August 2018: within the seven day period of grace in cl 4.3(b). 27. It follows that cl 4.3(b) was not enlivened. Is cl 4.3 a penalty? 1. In the alternative to its submissions as to the proper construction of the Agreement, Playup seeks a declaration that cl 4.3(b) of the Agreement is unenforceable as a penalty. 2. In light of my conclusions as to the proper construction of the Agreement, it is not necessary to deal with this question. However, in deference to the careful arguments addressed by the parties I shall do so. 3. The High Court has considered the question of penalty in three recent cases, Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71; Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30; and Paciocco (to which I referred at [35] above). 4. The law was recently summarised by McDougall J sitting as a member of the Court of Appeal in Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328. 5. At [72] McDougall J set out the familiar propositions of Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79: "'2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage… 3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach… 4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are: (a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach… (b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid… (c) There is a presumption (but no more) that it is penalty when 'a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage'." 1. McDougall J then summarised, at [74], the proposition which emerged from the reasons of the majority (French CJ, Kiefel, Gageler and Keane JJ) in Paciocco: "(1) Lord Dunedin's propositions were not 'rules of law', but 'distillations of principle' (Gageler J at [143]; compare Kiefel J at [32] and Keane J at [260]). (2) The essence of a penalty is that it is a collateral stipulation, the (or a predominant) purpose of which is to punish the borrower for breach, and thus to compel performance (Kiefel J at [29]; Gageler J at [127], [159], [166]; Keane J at [254], [259], [273]). (3) One way of testing whether the impugned stipulation is penal – intended to punish – is to inquire whether the sum that it stipulates to be payable on breach (as I have indicated, the equitable origins and continuing equitable operation of the principle have no present relevance) is to ask whether the stipulated sum is extravagant or out of all proportion to, or unconscionable in comparison with, the maximum amount of damage that might be anticipated to follow from the breach (Kiefel J at [29], [54]; Gageler J at [158] to [162]; Keane J at [221]). (4) 'Damage' in this sense is not limited to damages recoverable upon breach of contract, but may extend to damage, or losses, caused by the impairment of other legitimate commercial interests that were intended to be protected by the stipulation (Kiefel J at [33], [42] to [47]; Gageler J at [145], [160] to [162]; Keane J at [216], [283]). (5) The analysis is to be made at the time, and taking into account the circumstances applicable, when the contract was made; not at the time of breach; the analysis is prospective, not retrospective (or as is said in some judgments, is ex ante, not ex post) (Kiefel J at [62]; Gageler J at [169]). (6) Mere disproportion between the stipulated sum and the possible damage is not enough to indicate 'penalty'; the disproportion must be such that it is unconscionable for the lender to rely on the stipulation (Kiefel J at [54], Gageler J at [164]; Keane J at [221], [240, [279])." 1. As Ward JA (with whom McColl and Gleeson JJA agreed) said in Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd [2017] NSWCA 99: "…it is necessary, first, to identify the interests which are sought to be protected by the impugned stipulation; and, second, to ask whether the impugned stipulation was a stipulation collateral or accessory to another stipulation (the primary stipulation) which imposed an additional detriment…in the sense that…it was in the nature of a security for and in terrorem of the satisfaction of the primary stipulation in a manner that…was out of all proportion to the interests…intended to be protected by the primary stipulation." 1. Mr Condon submitted that cl 4.3(b) of the Agreement was a primary, and not merely collateral or accessory by reason of the fact that "Deferred Payment" was defined in the Agreement to mean: "…the amount of $600,000 payable in accordance with clause 4.3(a)-(b)." (Emphasis added.) 1. I do not accept that submission. 2. Despite the reference in the definition to cl 4.3(b) as well as cl 4.3(a), the structure and wording of cl 4.3 makes clear that Deferred Payment of $600,000 is "payable" in accordance with cl 4.3(a). Clause 4.3(b) deals with a different question; it deals with what happens if the Deferred Payment is not so paid. 3. The transaction represented by the Agreement had an unusual structure. 4. Mr Kay agreed to sell to Playup his shareholding in Bestbet for a total consideration of $1.6 million. $1 million of that consideration was payable on exchange. Apart from the making of any adjustment called for, nothing was payable on completion. 5. The balance representing 37.5% of the total consideration, was payable over a period of two years from the Completion Date and was, apart from a guarantee given by Mr Simic and another, unsecured. 6. Mr Kay was taking a risk by agreeing that 37.5% of the purchase price for his shareholding in Bestbet be paid over time in the two year period following completion and without real property security. 7. It was that interest that Mr Kay sought to be protected by cl 4.3(b); the timely payment of the Deferred Payment of $600,000. 8. That was made clear to Playup by the conversations between Mr Kay and Mr Simic set out at [38]-[47] above. 9. It is true that the consequences of a failure to make a Deferred Payment within seven days of its due date were severe. 10. The critical question is whether those consequences are out of "all" proportion to the damage that Mr Kay might, at the date of contract, have anticipated to follow from the failure by Playup to make a Deferred Payment; or "unconscionable" in comparison to the damage that Mr Kay might have anticipated at the date of the contract to thereby follow; or otherwise "extravagant". 11. I do not think such disproportion as exists between the consequences of non-compliance with the provisions in cl 4.3 and the damage that Mr Kay might suffer by reason of non payment can be said to unconscionable. 12. An impugned provision cannot be a penalty unless its purpose is punitive. 13. In Paciocco Gageler J referred to the need for the punishment to be "the only purpose" (at [158], [165]-[166] and [176]). Keane J referred to "a predominant punitive purpose" (at [221]). Kiefel J (as the Chief Justice then was) (French CJ agreeing) referred to "the purpose" of the stipulation (at [29]). In Arab Bank McDougall J doubted that Kiefel J thereby intended to embrace the Gageler J "sole purpose" test (at [79]). 14. In my opinion, the words used by the parties in cl 4.3(b) do not permit the conclusion that the "sole" or even the "predominant" purpose of the clause was intended to punish Playup for failure to pay the Deferred Payments within seven days of their due date. 15. The words used by the parties indicate to me that the purpose was to focus Playup's corporate mind, and the mind of Mr Simic as Playup's only director, on the high importance of making the Deferred Payment on time. 16. My conclusion is that the predominant, if not the sole purpose of cl 4.3(b) was to ensure that the Deferred Payments were made on time. 17. Evidently, the clause did not have the desired effect as indicated by Mr Arora's statement to Mr Kay on 10 August 2018 that "I got tied up with a few things in the last couple of weeks so didn't get to [the payment]" (see [84] above) and Mr Amirbeaggi's 13 September 2018 statement that "the second instalment due on 22 July 2018, was not paid on time due to an administrative error within the offices of Playup" (see [93] above). 18. To the extent that it is permissible to have regard to what transpired between the parties prior to execution of the Agreement, those matters are strongly confirmatory of that conclusion: see [38]-[46] above. As Mr Kay then said "we want to be sure that you will pay on time". 19. Further, cl 4.3 was the culmination of hard bargaining between well advised, commercially sophisticated parties. 20. Mr Kay made it clear that the inclusion of cl 4.3 of the Agreement was a "deal breaker" without which he was not prepared to proceed with the transaction. There was negotiation of the terms of clause, which led to Mr Kay agreeing to the seven day period of grace. 21. In Cavendish Square Holding BV v Makdessi; ParkingEye Ltd v Beavis [2015] 3 WLR 1373; [2015] UKSC 67 at [35], Lord Neuberger and Lord Sumption stated that in a the case of a negotiated agreement between properly advised parties of comparable bargaining power, the "strong initial presumption must be that the parties themselves are the best judges of what is legitimate in a provision dealing with the consequences of breach". 22. In Ringrow v BP Australia the High Court (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ) said (at [31]-[32]): "The law of contract normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships. … 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. For those reasons, had the question arisen, I would not have been persuaded of the need for judicial intervention in this case. Should Playup be granted relief against forfeiture? 1. Mr Kidd submitted alternatively that Playup should be relieved from forfeiture of its accrued rights arising from the Restraints and the Warranties in circumstances where it has now paid to Mr Kay the whole of the Deferred Payment. 2. Again, in view of my conclusions as to the proper construction of the Agreement, this question does not arise. 3. Assuming that relief against forfeiture was available to preserve accrued contractual rights (see J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) at [18-320]) I would not, as a matter of discretion, have granted such relief. 4. If, contrary to my findings, Playup's obligation to make the Deferred Payment was not dependent on Mr Kay's obligation to ensure that adjustments were made on the Completion Date, Playup's loss of the benefit of the Restraints and Warranties would have been the consequence of the operation of the terms of an Agreement that, well advised, it entered after detailed focus on the terms of the clause in question. 5. Had the question arisen, I would have seen no reason for equity to intervene. Conclusion 1. Playup is entitled to the declaratory relief it seeks. 2. I invite the parties to confer and agree on appropriate short minutes of order. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 June 2019