A clause in a settlement agreement providing for equitable compensation on breach is not a penalty where the compensation reflects an obligation independently owed to the innocent party and is central to the purpose of the agreement, rather than merely collateral to it. Where a party to a settlement agreement agrees to transfer property and, on breach, to pay equitable compensation for breach of fiduciary duty, the agreement may contain implicit admissions of the facts necessary to support that entitlement, particularly where the party has failed to advance evidence of a superior beneficial interest. The admissibility of evidence of subsequent conduct as an aid to contractual interpretation remains uncertain in Australian law.
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