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ARTICLE · 11 DECEMBER 2008

Penalty Clauses Clarified

Norton Rose Fulbright Australia
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A recent unanimous decision of the Court of Appeal (Interstar Wholesale Finance Pty Limited v Integral Home Loans Pty Limited [2008] NSWCA 310), in which Deacons acted for the successful appellant, has given some guidance on the law of penalties.

AustraliaCorporate/Commercial Law
David Goldman
David Goldman
Chris Cruikshank
Chris Cruikshank
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A recent unanimous decision of the Court of Appeal (Interstar Wholesale Finance Pty Limited v Integral Home Loans Pty Limited [2008] NSWCA 310), in which Deacons acted for the successful appellant, has given some guidance on the law of penalties.

Termination on basis of reasonable opinion

A financial institution (Lender) had an agreement with a loan originator (Originator) for the Originator to provide loan origination and management services to the Lender. In return the Lender was obliged to pay the Originator an upfront fee and ongoing trail commissions.

The agreement allowed the Lender to terminate the agreement if the Lender formed the reasonable opinion that the Originator had engaged in deceptive or fraudulent activity. The Lender terminated the agreement under this power.

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