Zenith Engineering P/L v Qld Crane and Machinery P/L & Anor

[2000] QCA 221

Queensland Court of Appeal

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For Australian Law.

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Interrogate

Catchwords

1. Equity
2. › General principles
3. › Penalty
4. › Deed of settlement
5. › Default clause providing for judgment in amount exceeding settlement sum
6. › Whether clause a penalty provision
7. › Whether disputed claim constituted a present debt
8. › Acceleration of payment distinguished from penalty
1. Contract
2. › Settlement agreements
3. › Default provisions
4. › Clause entitling party to judgment for full amount of original claim on default in payment of settlement instalments
5. › Whether enforceable or penalty

Quick Take

A default clause in a deed of settlement that entitles a party to judgment for the full amount of the original disputed claim (exceeding the settlement sum) upon failure to pay settlement instalments on time is an unenforceable penalty. The Protector Loan principle — that acceleration of a present debt is not a penalty — does not apply where the larger sum was never established as a present debt but was merely a disputed claim. Practitioners drafting settlement deeds should ensure that default provisions bear a rational relationship to the loss suffered by late payment, rather than reverting to the full amount of the original disputed claim.