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A restatement of relief against contractual penalties (II): A framework for applying the Australian and English approaches

Tiverios, N; (2017) A restatement of relief against contractual penalties (II): A framework for applying the Australian and English approaches. Journal of Equity , 11 pp. 185-218. Green open access

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Abstract

This article provides an analytical restatement of the law of penalties in Australia and England. It demonstrates that in applying the penalties doctrine, a three-stage framework can be adopted. The first stage is to ask whether the impugned contractual clause attracts the operation of the penalties doctrine (this was the issue considered by the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, (2012) 247 CLR 205). If the penalties doctrine is applicable the second stage is to consider whether the impugned clause is punitive in character (this was the issue subsequently considered by the High Court in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28, (2016) 333 ALR 569). If the impugned clause is punitive the final stage of analysis is to consider the consequences that should flow from a finding that a clause is a penalty. By providing a restatement of the Australian and English approaches at each stage of inquiry, the key convergences and divergences between the two jurisdictions become clear. The key divergences exist at the first and third stage of the inquiry. In Australia, unlike England, a breach of contract is not required to enliven the penalties doctrine. Rather, it suffices under Australian law that A’s contractual right to a fixed remedy exists to secure the happening of some other contractual stipulation (being either a contractual duty or, in rare circumstances, a non-promissory condition). The second key divergence is the consequence of a finding that a clause is a penalty. In Australia, the penalties doctrine provides for a pro tanto enforcement of A’s right to a fixed remedy so that it is not punitive in operation. English law has staunchly rejected that such an approach is possible. However, there is one significant convergence. Both Australia and England have recently adopted a deferential ‘legitimate interest’ standard at the second stage of inquiry in order to assess whether an impugned clause is punitive in character.

Type: Article
Title: A restatement of relief against contractual penalties (II): A framework for applying the Australian and English approaches
Open access status: An open access version is available from UCL Discovery
Publisher version: https://www.lexisnexis.com.au/aus/services/tools/p...
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of Laws
URI: http://discovery.ucl.ac.uk/id/eprint/1556779
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