ARTICLE · 31 OCTOBER 2006

Law Of Penalties Reviewed

Turks Legal

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In the recent High Court Decision of Ringrow Pty Limited v BP Australia Pty Limited, the High Court has had occasion to consider the operation of the law of penalties. The decision has implications beyond the scope of the immediate facts.

AustraliaStrategy

Paul Anderson

In the recent High Court Decision of Ringrow Pty Limited v BP Australia Pty Limited, the High Court has had occasion to consider the operation of the law of penalties. The decision has implications beyond the scope of the immediate facts.

Facts

On 27 May 1999, Ringrow Pty Limited ("Ringrow") entered a Contract with BP Australia Pty Limited ("BP") to buy a BP Service Station. Ringrow, or persons connected with the company, had operated a service station on the site as franchisee since 1988.

On completion of the contract, the parties entered into two related transactions - an Option Deed and a Privately Owned Sites Agreement ("POSA").

A term of the POSA was that Ringrow would only purchase fuel from BP. The Option Deed only applied if the POSA "was terminated" but in such an event BP was granted an irrevocable option to purchase the service station at its market valuation as an operational service station as determined by an independent valuer.

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