HIGH COURT OF AUSTRALIA
FRENCH CJ,
GUMMOW, CRENNAN, KIEFEL AND BELL JJ
JOHN ANDREWS & ORS APPLICANTS
AND
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED RESPONDENT
Andrews v Australia and New Zealand Banking Group Limited
[2012] HCA 30
6 September 2012
M48/2012
ORDER

2.


Representation
J T Gleeson SC with J A Watson for the applicants (instructed by Maurice
Blackburn)

A C Archibald QC with M H O'Bryan SC for the respondent (instructed by
Ashurst Australia)


Notice: This copy of the Court's Reasons for Judgment is subject
to formal revision prior to publication in the Commonwealth Law
Reports.

CATCHWORDS

Andrews v Australia and New Zealand Banking Group Limited

Banker and customer – Penalty doctrine – Consumer and commercial credit card
accounts – Honour fee – Dishonour fee – Late payment fee – Non-payment fee –
Over limit fee – Whether those fees penalties – Whether penalty doctrine limited
to circumstances where there is breach of contract – Significance of law
respecting penal bonds – Grounds for equitable intervention – Whether penalty
doctrine now wholly a rule of common law.

Equity – Doctrines and remedies – Relief against penalties – Significance of law
respecting penal bonds – Whether relief available only in cases of breach of
contract – Whether penalty doctrine now wholly a rule of common law.

Words and phrases – "bond", "condition", "dishonour fee", "exception fees",
"honour fee", "penalty".

Federal Court of Australia Act 1976 (Cth), Pt IVA, ss 5, 21, 24(1A).
Judiciary Act 1903 (Cth), s 80.
Judicature Act 1873 (UK), s 24(11).


1 FRENCH CJ, GUMMOW, CRENNAN, KIEFEL AND BELL JJ. In this
litigation the applicants challenge the legal efficacy of various bank fees charged
to customers.

2 These reasons are organised as follows:

Introduction [3]-[8]
The penalty doctrine [9]-[15]
The course of the Federal Court litigation [16]-[28]
The Interstar decision [29]-[32]
Bonds, contracts and the meanings of "condition" [33]-[45]
Limited scope of the penalty doctrine? [46]-[50]
The common law action of assumpsit [51]-[63]
AMEV-UDC in the High Court [64]-[68]
The Dunlop Case [69]-[77]
Conclusion [78]-[83]
Order [84]-[87]

Introduction

3 There is pending in the Federal Court of Australia a representative action
pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) ("the
Federal Court Act") against the respondent ("the ANZ"). There are
approximately 38,000 group members. In addition there also are pending in the
Federal Court six proceedings against other banks which raise the same or
similar issues.

4 The prolix pleading filed by the applicants puts their case on various
grounds. These include engagement by the ANZ in "unconscionable conduct" in
contravention of the Australian Securities and Investments Commission Act 2001
(Cth) and the Fair Trading Act 1999 (Vic) ("the FTA"), the application of s 32W
and s 32Y of the FTA to avoid "unfair terms", and the operation of provisions of

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the Consumer Credit (Victoria) Code and the National Credit Code with respect
to "unjust transactions".

5 These aspects of the litigation are not before the Court. But it may be
observed that this pattern of remedial legislation suggests the need for caution in
dealing with the unwritten law as if laissez faire notions of an untrammelled
"freedom of contract" provide a universal legal value1.

6 What is immediately material is the claim for declaratory relief under s 21
of the Federal Court Act that certain provisions in contracts between the ANZ
and the applicants are void or unenforceable as penalties, and that the applicants
and group members are entitled to repayment of fees charged to them under those
provisions, as moneys had and received by the ANZ to their use.

7 In this Court the applicants rely upon the doctrine identified with relief
against penalty obligations and, on its part, the ANZ refers to matters of legal
history to demonstrate the inapplicability of that doctrine to the present case.

8 It is convenient to begin with some reference to settled aspects of the
penalty doctrine.

The penalty doctrine

9 Mason and Deane JJ observed in Legione v Hateley2 that, as the term
suggests, a penalty is in the nature of a punishment for non-observance of a
contractual stipulation and consists, upon breach, of the imposition of an
additional or different liability.

10 In general terms, a stipulation prima facie imposes a penalty on a party
("the first party") if, as a matter of substance, it is collateral (or accessory) to a
primary stipulation in favour of a second party and this collateral stipulation,
upon the failure of the primary stipulation, imposes upon the first party an


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additional detriment, the penalty, to the benefit of the second party3. In that
sense, the collateral or accessory stipulation is described as being in the nature of
a security for and in terrorem of the satisfaction of the primary stipulation4. If
compensation can be made to the second party for the prejudice suffered by
failure of the primary stipulation, the collateral stipulation and the penalty are
enforced only to the extent of that compensation. The first party is relieved to
that degree from liability to satisfy the collateral stipulation.

11 It has been established at least since the decision of Lord Macclesfield in
Peachy v Duke of Somerset5 that the penalty doctrine is not engaged if the
prejudice or damage to the interests of the second party by the failure of the
primary stipulation is insusceptible of evaluation and assessment in money terms.
It is the availability of compensation which generates the "equity" upon which
the court intervenes; without it, the parties are left to their legal rights and
obligations. The point is illustrated by Waterside Workers' Federation of
Australia v Stewart6. A bond was given by the appellant in the sum of £500 on
condition that it pay £50 if and so often as its members in combination should go
on strike. Isaacs and Rich JJ7 emphasised that, whilst refusal to work almost
inevitably would cause loss to employers, "no one can ever tell how much loss is
sustained by not doing business" and on the principle stated by Lord
Macclesfield no relief was to be given against payment of the £50.




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12 It should be noted that the primary stipulation may be the occurrence or
non-occurrence of an event which need not be the payment of money8. Further,
the penalty imposed upon the first party upon failure of the primary stipulation
need not be a requirement to pay to the second party a sum of money.

13 In Jobson v Johnson9 Dillon LJ and Nicholls LJ explained that there is no
distinction in principle here between a stipulation upon default for the transfer (or
the use10) of property and a payment of money; such a distinction would elevate
form over substance. In that case, cl 6(b) of a share sale contract provided that
upon default in payment of an instalment of the purchase price the purchaser was
obliged to retransfer the shares to the vendors upon payment of a stipulated sum
to the purchaser. The Court of Appeal held that cl 6(b) had the characteristics of
a penalty clause. It ordered that either the shares be sold by the purchaser and the
amount of the unpaid instalments be paid to the assignee of the vendors; or the
current value of the shares, the aggregate of the unpaid instalments and amounts
charged on the shares be ascertained and, if this was less than the sum presently
due from the vendors under cl 6(b), effect be given to cl 6(b).

14 It will already be apparent that an understanding of the penalty doctrine
requires more than a brief backward glance. In his reasons in Austin v United
Dominions Corporation Ltd11, after referring to the common law and statutory
developments which had occurred by the first half of the 18th century, and noting
that the equitable origin of the penalty doctrine was accepted throughout the
18th century, Priestley JA continued:

"In the latter part of the eighteenth century and through much of the
nineteenth century the courts showed restlessness with their longstanding
duty to relieve against penalties. This has been attributed to the fact that

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during this period the principle of freedom of contract reached its zenith:
see Atiyah, The Rise and Fall of Freedom of Contract12. Whatever the
reason, during the nineteenth century the way in which the law concerning
penalties originated and the way in which that law became incorporated in
the common law were to some extent lost sight of. At the same time the
operation of that law was clarified by the recognition of the distinction
between a penalty and a genuine pre-estimate of liquidated damages."

15 The formulation of that distinction between a penalty and a pre-estimate
of liquidated damages which was made by Lord Dunedin in Dunlop Pneumatic
Tyre Co Ltd v New Garage and Motor Co Ltd13 has been described as a product
of centuries of equity jurisprudence14. It was recently applied by this Court in
Ringrow Pty Ltd v BP Australia Pty Ltd15. But the present dispute requires
attention at an anterior stage of analysis, namely identification of those criteria by
which the penalty doctrine is engaged.

The course of the Federal Court litigation

16 The litigation was instituted and has been conducted in the Victorian
District Registry of the Federal Court. Section 5 of the Federal Court Act creates
the Federal Court as a court of law and equity. The governing law for the
litigation is the common law of Australia as modified by applicable federal and
Victorian statute law16.

17 Before this Court there is that part of a pending application for leave to
appeal to the Full Court of the Federal Court removed into this Court by order
made 11 May 2012. That order removed grounds 1-4 of the proposed appeal by
the applicants from the answers to certain separate questions given by the
primary judge (Gordon J)17 on 13 December 2011. The interlocutory nature of

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the proceeding before her Honour necessitates the grant of leave for an appeal to
the Full Court18 and delineates the process which has been removed into this
Court.

18 Shortly put, grounds 1-4 of the proposed Full Court appeal concern the
nature and scope of the jurisdiction to relieve against penalties and the question
whether relief is available only after the penalty is imposed upon a breach of
contract.

19 The Federal Court litigation concerns fees identified as honour, dishonour,
and non-payment fees charged by the ANZ in respect of various retail deposit
accounts and business deposit accounts, and fees identified as over limit and late
payment fees charged by the ANZ in respect of consumer credit card accounts
and commercial credit card accounts; these fees were identified in the reasons of
the primary judge as "exception fees".

20The substance of the relevant, but awkwardly expressed, separate
questions before the primary judge was to ask whether the exception fees were
payable upon breach by the applicants of contractual obligations to the ANZ,
and, in the alternative, to ask whether it had been the responsibility of the
applicants to see that the circumstances occasioning the imposition of the
exception fees did not arise. If there was an affirmative answer to either of the
alternative questions, it then was asked whether the fees were "capable of being
characterised as a penalty by reason of that fact".

21 The primary judge found that the late payment fee was payable upon
breach of contract and therefore was capable of characterisation as a penalty.
The ANZ has not sought to appeal against that finding.

22 However, in respect of the honour, dishonour, non-payment and over limit
fees the primary judge held that these were not charged by the ANZ upon breach
of contract by the customer, nor was the occurrence of the event upon which the
fees were charged (overdrawing the account or credit limit or attempting to do
so) an event which the customer had an obligation or responsibility to avoid19.
Having thus answered in the negative each of the alternative questions, the
primary judge held it was unnecessary to answer the question whether these fees
were capable of characterisation as a penalty.


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23 However, her Honour did find that under the pre-existing terms agreed
between them, these fees were charged by the ANZ as a consequence of the
decision of the ANZ to afford or to decline the provision of further
accommodation to the customer. The ANZ did so respectively by approving or
authorising payment on an "instruction" issued to it by the customer, or by
refusing to do so, where the honouring of the "instruction" would have the effect
of overdrawing the customer's account or exceeding the account credit limit. But
the separate questions were not so framed as to ask whether, by reason of these
conclusions just mentioned, the fees were incapable of characterisation as
penalties. Hence, the proposed grounds of appeal which are presently before this
Court (grounds 1-4) do not include an express challenge to those significant
findings. Nevertheless, it will be necessary in these reasons to make further
reference to them20. Ground 6, which is not before this Court, asserts error by
her Honour in failing to characterise the fees as payable on breach.

24 The primary judge conducted a detailed analysis by reference to the
document identified as "PDS March 2005". This was the "ANZ Saving &
Transaction Products – Product Disclosure Statement" issued in compliance with
Pt 7.9, Div 2 (ss 1011A-1016F) of the Corporations Act 2001 (Cth). What was
identified as "Exception Fee No 3" was a Retail Deposit Account (Saving
Account, Honour Fee). Clause 2.12 of PDS March 2005 relevantly stated21:

"ANZ does not agree to provide any credit in respect of your account
without prior written agreement, which (depending on your account type)
can be through an ANZ Equity Manager Facility, an Overdraft Facility or
an ANZ Assured Facility. It is a condition of all ANZ accounts that you
must not overdraw your account without prior arrangements being made
and agreed with ANZ.
If you request a withdrawal or payment from your account which would
overdraw your account, ANZ may, in its discretion, allow the withdrawal
or payment to be made on the following terms:



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Clause 2.7 of PDS March 2005 provided that a dishonour fee and a non-payment
fee would be charged, respectively, if the customer authorised a third party to
direct debit an account and payment was not made, or if the customer authorised
a periodical payment and payment was not made, in either case because there
were insufficient cleared funds in the customer's account22.

25 These provisions were modified in December 2009. An "Honour Fee"
was charged for considering a deemed (and successful) request for an "Informal
Overdraft". An "Outward Dishonour Fee" was charged for considering a deemed
(and rejected) request where the customer did not satisfy the ANZ's credit criteria
for an Informal Overdraft. The request was deemed to be made where a debit
was initiated which, if processed by the ANZ, would result in an account being
overdrawn or an approved limit on the account being exceeded.

26 The principal findings of the primary judge made irrelevant the concession
by the ANZ that it did not determine the quantum of these fees by reference to a
sum which would have constituted a genuine pre-estimate of the damage the
ANZ might suffer as a consequence of permitting the overdrawing of an account.

27 The applicants plead that the fees in question were imposed upon or in
default of the occurrence of stipulated events but were "out of all proportion" to
the loss or damage which might have been sustained by the ANZ by reason of the
occurrence of those events.

28 The applicants also submit to this Court that these fees were charged "for
a service with no content". Further, the applicants contend that despite the form


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of the honour fee, with the provision of further accommodation by the ANZ to
the customer, in substance it is a disguised penalty.

The Interstar decision

29 In reaching her conclusion respecting the scope of the penalty doctrine,
the primary judge, with respect quite properly, followed what had been decided
by the New South Wales Court of Appeal in Interstar Wholesale Finance Pty Ltd
v Integral Home Loans Pty Ltd23. In that case the Court of Appeal held24 that the
primary judge (Brereton J)25 had erred in denying that the doctrine had ceased to
be one of equity and now was wholly legal in nature and in concluding that the
doctrine was not limited to the failure of stipulations which were breaches of
contract.

30 The appellants in Interstar were finance companies and the respondents
conducted the business of "mortgage originators". Upon the happening of any
one of a range of events, the appellants were empowered to terminate
agreements, under which they made to the respondents payments described as
commissions. Not all of these events were breaches of those agreements by the
respondents and not all were acts or omissions over which the respondents had
control26. The respondents successfully contended at first instance that the event




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giving rise to the penalty, as the act or event upon which liability was
conditioned, could be the termination of the agreements even if the ground for
termination was not breach thereof. Brereton J held that the termination clause
was a penalty provision and wholly void27, and that the respondents were entitled
to continued receipt of the commissions. The Court of Appeal held that the
agreements conferred no accrued rights upon the respondents, so that upon
termination there was no forfeiture of accrued property for the collateral purpose
of encouraging compliance with the contract and no engagement of the penalty

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doctrine; further, the character of the provisions was to define entitlement to the
commissions28.

31 These holdings would have been sufficient for the Court of Appeal to
dispose of the case. However, the Court went on, with reference to observations
of Mason and Wilson JJ in AMEV-UDC Finance Ltd v Austin ("AMEV-UDC")29,
to state that "[t]he modern rule against penalties is a rule of law, not equity"30.
The Court of Appeal also, with particular reference to the speech of Lord Roskill
in Exports Credits Guarantee Dept v Universal Oil Products Co ("ECGD")31,
said that the limits of the doctrine of penalties arise "from the consequences of
breach of contract" and so reflect "the public policy of keeping commercial
parties to their bargains"32.

32 The applicants seek in this Court to challenge these statements in
Interstar. For the reasons which follow that challenge should succeed.

Bonds, contracts and the meanings of "condition"

33 Before proceeding further with the challenge which the applicants seek to
make to Interstar, something first should be said about the nature of the bond
because it was here that equity first intervened. This, in turn, involves
consideration of the use of the term "condition" in the relevant legal discourse.
Like the term "rescission"33, the term "condition" has several distinct meanings
and applications. This must clearly be kept in mind to avoid engendering
confusion of legal principle.



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34 Unlike a simple contract containing an exchange of promises, which are
classified as conditions or warranties, a bond is an instrument under seal, usually
a deed poll, whereby the obligor is bound to the obligee. The ordinary form of
bond in use in modern times is not merely for a certain money payment, but is
accompanied by a condition in the nature of a defeasance, the performance or
occurrence of which discharges the bond.

35 One meaning of "condition" is an important, vital, or material promise, the
breach of which will repudiate a contract; the term "breach of contract" is used in
contrast to "breach of warranty". But as Professor Stoljar pointed out in his
article "The Contractual Concept of Condition"34, while the obligation under a
bond may be said to be conditioned upon the occurrence of a particular event, it
is important to note that the term "condition" is not used here in the sense just
described with respect to breaches of contract.

36 The distinction is drawn as follows in Williston, A Treatise on the Law of
Contracts35:
"The common early form of contractual obligation was a bond
upon condition, so that in the early books the word 'obligation' without
more is used to designate such a bond. The purpose of the bond obviously
was, and still is, to secure performance of the condition, but instead of
attempting to secure this result by exacting a promise from the obligor to
perform the condition, there is an acknowledgment of indebtedness – in
effect a promise to pay a sum of money if the condition is not performed."

37 In these reasons the term "stipulation" has been used when describing the
penalty doctrine36. This reflects the origin of the penal obligation or condition, as
known today, in the stipulations (stipulatio) in Roman law at a period where
stipulations for the payment of money were alone valid. The practical method at
that period of stipulating for the performance of a collateral act was to make the
payment of a money sum conditional on the non-performance of the desired act;



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that sum might be recovered in full even if it exceeded the value of the stipulated
act or forbearance37.

38 Williston wrote that it came to be recognised in Roman law that the
amount stated in a stipulation and named as a penalty might be reduced if found
to be excessive38. But in the early common law the bond, regarded as a penal
sum, secured strict performance of the principal obligation. In modern civil law
systems the subject is not dealt with on uniform principles39. It is said, for
example, that the Louisiana courts have confused the principles of the governing
Civil Code and their French derivation40 with the common law concept of
liquidated damages41. Section 343 of the German Civil Code, which came into
force in 1900, provides that upon the motion of the obligor a "disproportionately
high" penalty may be reduced, by a judgment, to an appropriate amount, after
taking into account "every legitimate interest" of the obligee, not merely the
obligee's economic interest42.

39 The condition in a bond must not be unlawful, for example, in general or
unreasonable restraint of trade43. However, the condition may be an occurrence
or event which need not be some act or omission of the obligor, analogous to a
contractual promise by the obligor. Moreover, the condition is not invalid
merely because it provides for the performance of an act or the happening of an
event which is improbable, albeit, at the outset44, not impossible. Thus, in

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Campbell v French45, Lord Kenyon, in delivering the opinion of the Court of
King's Bench, said:

"The general law respecting conditions is extremely well settled in a vast
variety of books and cases; and, without detailing them, it is sufficient to
say that they will be found in Rolle's Abridgment, and in Coke upon
Littleton; and the uncontrolled result from them all is, that if the condition
be an impossible condition, the bond becomes single, but if the condition
be only improbable, as in the instance put, if the Pope of Rome should
come here to-morrow, yet that condition is a good condition however
improbable it may be."

It also should be noted that from the time of Lord Nottingham, the "conditions"
which attracted relief in equity extended beyond those described as such in bonds
and simple contracts, and to provisions which were secured by a determinable
estate in land and to conditions for the vesting of an estate46.

40 While an action in debt for the sum of the bond was the remedy for
enforcement of the bond at law, equity looked to what was involved in
satisfaction of the condition for which the bond was security. However, as noted
above47, unless the failure of the condition was compensible there was no
"handle" for equity to intervene48. A further example of this requirement for
equitable intervention is presented by the decision of the United States Supreme
Court in Clark v Barnard49. A bond was given to the government by the holder
of a statutory franchise for the completion of an item of public infrastructure by a
given date; the prejudice to the body politic by failure to complete did not sound
in damages.





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41 Williston describes the position as follows50 :

"The court of equity early assumed jurisdiction to limit the
recovery in an action on a bond to the damages actually suffered by the
obligee, regarding the literal enforcement of the obligation as
unconscientious. Although some eminent authorities expressed
disapproval of the doctrine of equitable relief against penalties and
forfeitures as 'a principle long acknowledged in this court but utterly
without foundation,' others of equal note have urged that '[t]here is no
more intrinsic sanctity in stipulations by contract than in other solemn acts
of the parties which are constantly interfered with by courts of equity upon
the broad grounds of public policy on the pure principles of natural
justice.'

A distinction was taken at an early day between bonds 'where the
party might be put in as good a plight as where the condition itself was
literally performed,' and cases 'where the condition was collateral and no
recompense or value could be put on the breach of it.' In the former case,
equity would give relief; in the latter case, it would not; and this
distinction has developed into the modern distinction between penalties
and liquidated damages." (footnotes omitted)

42 If the condition of the bond was the conveyance or settlement of an estate
or interest in land, or the non-performance of certain acts, for example, by way of
competition with a former business partner, a court of equity might treat the
condition as evidence of an agreement to convey51, or of a non-competition
covenant52 . In such cases, specific performance then might be decreed or an
injunction granted to enforce the negative covenant; damages would be an
inadequate remedy and so it would be no answer by the defendant to offer to pay
the sum fixed by the bond. But, contrary to what the ANZ submitted, these cases




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do not establish any general proposition as to the contractual character of the
condition in a bond.

43 Some analogy to the issues which presently arise is presented by those
concerning the nature of a deposit which were considered in Federal
Commissioner of Taxation v Reliance Carpet Co Pty Ltd53 . The law respecting
bonds, like that respecting deposits, was received from Roman law and
developed before the rise of what might be called the modern law of contract.
The courts of equity did not treat their jurisdiction to relieve against penalties and
forfeitures as extending to forfeiture of a deposit, being an amount paid as an
earnest of performance54. Those courts did, however, relieve against stipulations
which were penal conditions in bonds.

44 The courts of equity went on to extend their jurisdiction to deal with
stipulations which were penal provisions in simple contracts. But it does not
follow that that extension was a change to the nature of the jurisdiction. In
particular, the requirement that equity intervene to ensure the recovery of no
more than compensation, accommodated the "fundamental principle" of modern
contract law to redress breach by adequate compensation55.

45 Enough has been said to show that (a) the first field for the operation of
the equitable doctrine concerned the enforcement of bonds, (b) with respect to
bonds, the expressions "obligation" and "condition" are not employed in the same
or corresponding sense as appears in dealing with the breach of contractual
promises, and (c) it does not follow, as the ANZ would have it, that in a simple
contract the only stipulations which engage the penalty doctrine must be those
which are contractual promises broken by the promisor.

Limited scope of the penalty doctrine?

46 Thus, while the ANZ maintains that the penalty doctrine has the limited
scope, respecting breaches of contract, which in Interstar the Court of Appeal
identified with ECGD, this limitation should not be accepted.


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47 What was in issue in ECGD was a defence to an action upon an indemnity
given to a guarantor which was a government body to hold the guarantor
harmless by reimbursement of moneys it paid to answer calls on the guarantee.
The circumstance, as was the case in ECGD, that this might turn out to have been
a commercially improvident arrangement for the indemnifier would not attract
the intervention of equity when the indemnity was called upon by the guarantor.
The liability of the indemnifier would mirror the loss incurred by the guarantor.
It was in that particular situation that Lord Roskill said in ECGD56 :

"[P]erhaps the main purpose, of the law relating to penalty clauses is to
prevent a plaintiff recovering a sum of money in respect of a breach of
contract committed by a defendant which bears little or no relationship to
the loss actually suffered by the plaintiff as a result of the breach by the
defendant."

48 In AMEV-UDC Gibbs CJ57 emphasised that this Court was not required to
consider the proposition, said to be derived from ECGD, that no clause which
provided for the payment of money on the happening of a specified event other
than a breach of a contractual duty owed by the contemplated payor to the
contemplated payee could ever be a penalty.

49 Brereton J in Interstar58rejected the submission that liability to pay,
forfeit or suffer the retention of money or property which engages the penalty
doctrine may never be triggered by the failure in occurrence of an event which is
stipulated in a prior agreement between the parties but is not itself the subject of
a contractual promise between them. Brereton J pointed to the regard paid by
equity to substance rather than merely to form and referred to the grant of relief
in the case of penal bonds for non-performance of a condition which was not the
subject of any contractual promise59. These are significant considerations. They
are not displaced by fixing solely upon a breach of contract by the party seeking
relief from an alleged penalty.



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50 In Interstar the Court of Appeal misunderstood the scope of the penalty
doctrine. The question whether in a given case the operation of a stipulation
which is not a contractual promise may attract the penalty doctrine is not
foreclosed by the rejection in the Court of Appeal of what had been said by
Brereton J at first instance.

The common law action of assumpsit

51 There remains for consideration the further proposition in Interstar which,
rather than acknowledging the concurrent administration in New South Wales (as
elsewhere) of law and equity, appears to treat the penalty doctrine as having
disappeared from equity by absorption into the common law action of assumpsit.
This proposition should be rejected.

52 It will be recalled that the common law courts developed assumpsit as a
general remedy for breach of agreements not under seal, simple contracts, for
which an action for breach of covenant would not lie. Moreover, assumpsit was
extended to certain cases where there was no more than an implied undertaking
to pay, thus giving the occasion for the unhappy expression "quasi-contract"60.

53 With respect to money bonds, by the time of Lord Nottingham, who was
Lord Chancellor 1673-1682, and thus well before the statutes dealing with the
procedure in actions upon bonds61, the common law courts significantly revised
their procedures with respect to trials of actions pleaded in assumpsit. They did
so in the fashion described by Lord Nottingham in his handbook (first published
only in 1965) "Prolegomena of Chancery and Equity" and repeated by
Priestley JA in Austin62:

"The settling of the chancery practice of relieving penalties brought
a prompt response from the common law courts. Lord Nottingham

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recorded it in his Prolegomena, in Ch V headed 'Equitas Sequitur Legem',
as follows:

'10. In the midst of those cases which refer to this head, it
may be worth the while a little to invert the rule, and to consider
how far lex sequitur equitatem, that is, to observe how courts of
law have changed their rules and, when they saw that equity would
relieve, have chosen rather to relieve the parties themselves than
send them hither.

11. Thus in all suits on bonds it's now become the course
of the Court, that, if the defendant will pay the principal and
interest and charges, the plaintiff shall be obliged to accept it till
plea pleaded, else the defendant shall have a perpetual
imparlance[63], and all this to prevent a suit in Chancery, which
otherwise would give the same relief' (at 203).

The position thus reached was regulated at common law by statute
in 1696 in regard to plaintiffs suing for penalties for non-performance of
covenants or agreements64 and in 1705 in regard to money bonds65.
Practice in England based on the Statutes of William and Anne had the
effect of making the law concerning penalties as familiar to the common
law courts as in chancery."

54 The effect of the statute of 1705 upon the enforcement of a money bond
was that the debtor was discharged on paying principal, interest and costs; with
respect to other bonds and covenants with a penalty the statute of 1696 enabled
damages to be assessed for such breaches as were proved, execution being stayed


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on payment of the amount assessed and costs, but with the judgment remaining
to answer any further breach66.

55 Writing in 1769, Blackstone had identified as one of the advances made
since the revolution of 1688, "the liberality of sentiment, which (though late) has
now taken possession of our courts of common law, and induced them to adopt
(where facts can be clearly ascertained) the same principles of redress as have
prevailed in our courts of equity, from the time Lord Nottingham presided
there"67. This adoption of equitable doctrine by the common law courts, in the
period before the introduction of the Judicature system, was not limited to the
principles concerning penalties. The trend was the subject of comment in 1845
by the standard text Law Studies written by Samuel Warren68. For example,
Parke B spoke in Smith v Winter69 of the equitable doctrine with respect to the
discharge of sureties having "crept into the law"; the result was that a parol
agreement by the creditor to give time to the principal debtor might be pleaded to
an action at law on a guarantee not given under seal70.

56 The position established in the common law courts with respect to
penalties was exemplified by the remarks of Lord Mansfield in Lowe v Peers71,
Lord Ellenborough in Wilbeam v Ashton72, Tindal CJ in Kemble v Farren73, and



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Parke B in Horner v Flintoff74, Galsworthy v Strutt75 and Atkyns v Kinnier76. In
Kemble v Farren77, an action in assumpsit by the manager of the Covent Garden
Theatre against an actor who had failed to meet an engagement at that theatre,
Tindal CJ said:

"But that a very large sum should become immediately payable, in
consequence of the nonpayment of a very small sum, and that the former
should not be considered as a penalty, appears to be a contradiction in
terms; the case being precisely that in which courts of equity have always
relieved, and against which courts of law have, in modern times,
endeavoured to relieve, by directing juries to assess the real damages
sustained by the breach of the agreement."

57 In Reynolds v Bridge78, a decision of the Court of Queen's Bench,
Coleridge J referred to Astley v Weldon, Kemble v Farren and Atkyns v Kinnier
and concluded that:

"the principle seems to be, that, if you find a covenant the breach of which
will occasion a damage, not uncertain, but such as is capable of being
ascertained, as where there is a particular sum to be paid which is much
less than the sum named as payable upon the breach, there it is held that
the last named sum is specified by way of penalty, because a Court of
equity would limit the amount to be actually paid".

58 To the above English authorities it may be added that by the mid-19th
century, common law courts in the United States "almost universally" adopted a
practice whereby, although judgment for the full amount of the bond was
entered, the courts then proceeded to "chancery the bond"; execution issued only
for the just amount found to be due on a reference to a master, assessor, or jury79.



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It also should be noted that where in Chancery it appeared that the sum in
question was a penalty, the court would direct an issue of quantum damnificatus
for jury determination80.

59 However, the common law courts were constrained by the limitations of
their remedies and procedures. Thus, they lacked the procedures to take complex
accounts and the remedy of injunction to restrain, for example, attempts by the
defendant to recover the amount of a bond by an action at law81. The Common
Law Procedure Act 1854 (UK)82 was directed to enlarging the jurisdiction of the
common law courts, having regard to the inconvenience of concurrent
proceedings necessary in certain cases to establish a right in a common law court
and to obtain a remedy in Chancery. However, the power of the common law
courts to grant injunctions under that Act was limited to restraining the repetition
or continuation of breaches of contract in respect of which the plaintiff was
entitled to bring an action for damages83.

60 Where the collateral stipulation relieved against was one not for the
payment of money but for the transfer or use of property, there was no scope in
an assumpsit action for what Nicholls LJ called "the scaling down exercise" by
which a court of equity would tailor specific relief to ensure adequate
compensation, but no more84. This had to await the arrival of the united court
administration under the Judicature system. Further, as Lord Eldon pointed out
in Seton v Slade85, where the condition of the bond was a temporal stipulation, it
remained the position that in equity time was not of the essence.




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61 The developments in the practice of the common law courts in assumpsit
actions before the introduction of the Judicature system did not somehow
supplant the equity jurisdiction86.

62 Moreover, the applicants correctly submit that the ANZ can point to no
reason in principle why the scope of the equitable doctrine should be restricted to
those cases today where, hypothetically, an assumpsit action would have lain at
common law in the 19th century. Indeed, considerations of principle point in the
other direction. It is undoubtedly the case that in fields of private and public law
the principles of equity continue to develop by principled advances of traditional
doctrine87 . Sir Anthony Mason has noted that while the common law comprised
rules which traditionally existed as a body of customary law, equity "made no
secret of its evolutionary development"88 . Why, with respect to the penalty
doctrine, that evolutionary process should be restricted by hypothetical assumpsit
actions is not apparent.

63 A further point is that, to the extent that the common law courts had so
developed their procedures and the action in assumpsit by the second half of the
19th century as in some situations to speak with courts of equity with the same
voice, there was at that time, and within the terms of the Judicature legislation,
no "conflict or variance ... with reference to the same matter"; and so there was
no occasion under the statute for the doctrine of equity to "prevail"89 . It should
be emphasised that, in any event, under the Judicature legislation it is equity not
the law that is to prevail. In Interstar the Court of Appeal thus had no basis for
the proposition that the penalty doctrine is a rule of law not of equity.




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AMEV-UDC in the High Court

64 That counsel for the successful respondent in AMEV-UDC was well aware
of the pre-Judicature developments in the common law courts is apparent from
the citation90 of Lord Eldon's judgment in Astley v Weldon91, which was
delivered when he was Chief Justice of the Court of Common Pleas.

65 There is, with respect, no ground upon which to cavil with four of the five
propositions distilled from the history of the penalty doctrine and stated in
AMEV-UDC by Mason and Wilson JJ as follows92 :

"(1) equity would only relieve where compensation could be made for the
actual damage suffered by the party seeking to recover the penalty; (2) the
actual damage suffered by the party was assessed in an action at common
law, such as an action of covenant, or upon a special issue quantum
damnificatus which could be joined in an action on the case ... (3) the
expression 'actual damage' seems to have been used in contradistinction to
'agreed sum' or 'liquidated' or 'stipulated' damages, not by way of
opposition to damage which was recoverable at law; (4) there seems to
have been no instance of equity awarding compensation over and above
the amount awarded as common law damages, other than cases in which
equity would not relieve against the penalty; and (5) relief was granted, in
the case of penal bonds, where there was no express contractual promise
to perform the condition (see Hardy v Martin[93]), though it seems such a
promise could in many cases readily be implied."

66 However, as noted earlier in these reasons under the heading "Bonds,
contracts and the meanings of 'condition'", a reference such as that in
proposition (5) to the implication into a bond of an "express contractual promise
to perform the condition" tends to obscure the path taken by the common law
courts in developing the action in assumpsit.



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67 The upshot is that at first instance in Interstar94 , Brereton J properly
understood the significance of what had been said by Mason and Wilson JJ,
when he concluded:
"[T]heir Honours' judgment does not decide that relief against a penalty is
available only when it is conditioned upon a breach of contract; to the
contrary, it suggests that relief may be granted in cases of penalties for
non-performance of a condition, although there is no express contractual
promise to perform the condition – apparently on the basis that despite the
absence of such an express promise, a penalty conditioned on failure of a
condition is for these purposes in substance equivalent to a promise that
the condition will be satisfied."

68 A further statement by Mason and Wilson JJ in AMEV-UDC95, that it was
the effect of the Judicature system which led:
"to the conclusion that the equitable jurisdiction to relieve against
penalties withered on the vine for the simple reason that, except perhaps in
very unusual circumstances, it offered no prospect of relief which was not
ordinarily available in proceedings to recover a stipulated sum or,
alternatively, damages", overlooks the proposition that the only relevant effect of the Judicature system,
as explained above, was upon the procedures in the unified court system not
upon substantive doctrine. Thereafter, in whatever court the action was brought
in respect of a penalty, a money remedy, declaratory and injunctive relief and the
taking of an account were available in that one action.

The Dunlop Case

69 Extensive reference was made by the primary judge to the decision of the
House of Lords in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co
Ltd96. The conduct of that litigation illustrates the operation just mentioned of
the Judicature system. Something more should be said on that matter.


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70 The appellant in Dunlop was a manufacturer of motor tyres and related
products which it sold under the registered trade mark "Dunlop". It allowed trade
purchasers discounts from the list prices, but in order to prevent under-selling
insisted that the trade purchasers agree not to sell to private buyers at less than
list prices or to trade buyers at less than list prices after deducting certain
discounts. The trade purchasers also agreed, as agents for the appellant, to obtain
from their trade customers similar undertakings to observe list prices of the
appellant.

71 It appeared to follow from the then recent decision of Kekewich J in
Elliman, Sons & Co Ltd v Carrington & Son Ltd97 that resale price maintenance
stipulations of this nature were not contracts in restraint of trade98 . No challenge
to that decision was made in Dunlop.

72 A company curiously styled A. Pellant Limited had a contract with the
appellant under which it received considerable quantities of the appellant's
products. Before supplying these goods to the respondent as sub-purchaser,
A. Pellant Limited, as required by its contract with the appellant, required the
respondent to enter into a contract with it, as agent for the appellant99 . The
contract obliged the respondent on its part to observe the restrictions described
above. This contract contained the clause:

"We agree to pay to [the appellant] the sum of £5 for each and every tyre,
cover or tube sold or offered in breach of this agreement, as and by way of
liquidated damages and not as a penalty, but without prejudice to any
other rights or remedies [A. Pellant Limited] or [the appellant] may have
hereunder."

The contract appears to have been in a standard form, and was headed "Price
Maintenance Agreement to be entered into by trade purchasers of Dunlop Motor
Tyres"100.




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73 The appellant commenced an action in the King's Bench Division, seeking
an equitable remedy, namely an injunction to restrain further breaches of this
contract by the respondent, in particular, by making further sales of a tyre cover
for £3.12.11 per item instead of the list price of £4.1.0. The appellant also sought
damages. One of the defences pleaded was that the sum of £5 stipulated in the
contract was a penalty.

74 The primary judge (Phillimore J) granted the injunction and also directed
an inquiry as to damages. The Court of Appeal (Vaughan Williams and Swinfen
Eady LJJ; Kennedy LJ dissenting) held that the stipulation as to £5 was a penalty
and, moreover, the appellant was entitled only to nominal damages in the sum of
£2. On the other hand, at the earlier inquiry before the Master, evidence had
been accepted that price cutting by a particular firm soon became generally
known and the local agents of the appellant suffered a loss of business and
resorted for supplies to other firms, thereby upsetting the selling organisation of
the appellant. The Master had assessed the damages at £250.

75 In the House of Lords, Lord Atkinson summarised the evidence directed
to showing that even if the sum agreed appeared imprecise as a pre-estimate of
damage, it protected the appellant's interest in preventing undercutting, which
would disorganise its trading system101 . Thus the critical issue, determined in
favour of the appellant, was whether the sum agreed was commensurate with the
interest protected by the bargain.

76 The effect of the decision of the House of Lords was to restore the
outcome at first instance and the award made by the Master upon the inquiry.

77 The litigation in Dunlop, where in the one court, and in the same
proceeding, legal and equitable remedies were sought by the plaintiff and the
defendant raised the penalty doctrine in its defence, illustrates the place of the
penalty doctrine in a court where there is a unified administration of law and
equity but equitable doctrines retain their identity.

Conclusion

78 The upshot is that the restrictions upon the penalty doctrine urged by the
Court of Appeal in Interstar should not be accepted. The primary judge erred in
concluding, in effect, that in the absence of contractual breach or an obligation or

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responsibility on the customer to avoid the occurrence of an event upon which
the relevant fees were charged, no question arose as to whether the fees were
capable of characterisation as penalties.

79 Indeed, a further issue appears to have been presented by her Honour's
findings set out above102 . This may be stated as being whether the requirement to
pay the fees in question was not enjoyed by the ANZ as security for performance
by the customer of its other obligations to the ANZ, or whether the fees were
charged by the ANZ, as specified in pre-existing arrangements with the
customer, and ANZ, respectively, for the further accommodation provided to the
customer by its authorising payments upon instructions by the customer upon
which the ANZ otherwise was not obliged to act, or upon refusal of that
accommodation.

80 The operative distinction would be that upon which the majority of the
New South Wales Court of Appeal (Jacobs JA and Holmes JA) decided
Metro-Goldwyn-Mayer Pty Ltd v Greenham103. Their Honours contrasted a
stipulation attracting the penalty doctrine and one giving rise consensually to an
additional obligation. This distinction had been identified long before, by Lord
St Leonards in French v Macale104 , as follows:

"[I]t appears, that the question for the Court to ascertain is, whether the
party is restricted by covenant from doing the particular act, although if he
do it a payment is reserved; or whether according to the true construction
of the contract, its meaning is, that the one party shall have a right to do
the act, on payment of what is agreed upon as an equivalent. If a man let
meadow land for two guineas an acre, and the contract is, that if the tenant
choose to employ it in tillage, he may do so, paying an additional rent of
two guineas an acre, no doubt this is a perfectly good and unobjectionable
contract; the breaking up the land is not inconsistent with the contract,

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which provides, that in case the act is done the landlord is to receive an
increased rent."105 (emphasis added)

81 The English and United States authorities in which the distinction
thereafter was applied are collected and discussed in the treatise by Pomeroy106,
under the heading "Stipulations not Penalties – Alternative Stipulations".

82 In Metro-Goldwyn-Mayer, the contract for the hiring of films to exhibitors
for public showing conferred the right to one screening only. The exhibitor was
obliged to pay for each additional screening a sum equivalent to four times the
original fee. The questions of construction of the contract were resolved by
Jacobs JA and Holmes JA in such a fashion that the penalty doctrine had no
application. Jacobs JA concluded107:

"There is no right in the exhibitor to use the film otherwise than on an
authorized occasion. If he does so then he must be taken to have
exercised an option so to do under the agreement, if the agreement so
provides. The agreement provides that he may exercise such an option in
one event only, namely, that he pay a hiring fee of four times the usual
hiring fee."

83 But it should be emphasised that the determination, with respect to the
relevant exception fees, of live issues of this nature is entirely a matter upon
further trial, along with the grounds upon which the applicants submit the penalty
doctrine does apply to those fees.

Order

84 The applicants should have leave to appeal upon grounds 1-4 of the
amended draft notice of appeal, and, to that extent, the appeal should be allowed
with costs. The answers to so much of paragraphs 1 and 2 of the orders of the
primary judge against which the applicant appeals should be set aside. In place
of those answers, the answer should be substituted that the circumstances that the
honour, dishonour, non-payment and over limit fees were not charged by the

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respondent upon breach of contract by its customers and that the customers had
no responsibility or obligation to avoid the occurrence of events upon which
these fees were charged, do not render the fees incapable of characterisation as
penalties.

85 That will leave for determination by the Full Court the grant of leave with
respect to ground 6, by which the applicants challenge the finding of the absence
of breach. Ground 5, which also remains, may add nothing to the other grounds.
It will be for the applicants to decide whether to press those grounds.

86 If those grounds remain in play and the Full Court has disposed of them
and of any consequent appeal and remaining costs issues in that Court, it will be
for the applicants to seek the hearing at trial of the live issues respecting penalties
and of the statutory claims.

87 The primary judge made a costs order and gave comprehensive reasons
for doing so. So much of those orders as require the applicants to pay fifty
percent of the costs of the ANZ of and incidental to the hearing of the separate
questions should be set aside. The making of a substituted costs order should be
for the primary judge upon the further conduct of the trial.

1See Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 at 60 [20], 62-63 [24]-[25]; [1999] HCA 67; Aid/Watch Inc v Federal Commissioner of Taxation (2010) 241 CLR 539 at 549 [22]; [2010] HCA 42.
2(1983) 152 CLR 406 at 445; [1983] HCA 11.
3Waterside Workers' Federation of Australia v Stewart (1919) 27 CLR 119 at 128-129, 131; [1919] HCA 63; Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514 at 520; [1985] HCA 63.
4Rolfe v Peterson (1772) 2 Bro PC 436 at 442 [1 ER 1048 at 1052]; Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 86; cf, as to irrevocable letters of credit and "performance bonds", the proceeds of which are in substitution for performance by a contractor, Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812; Mason, "'I'll have my bond; speak not against my bond': Constructive trusts and surplus proceeds from performance bonds", (2012) 6 Journal of Equity 74 at 81-83.
5(1720) 1 Strange 447 [93 ER 626].
6(1919) 27 CLR 119.
7(1919) 27 CLR 119 at 131-132.
8Story, Commentaries on Equity Jurisprudence as Administered in England and America, 13th ed (1886), vol 2 at [1314].
9[1989] 1 WLR 1026 at 1034-1035, 1039 respectively; [1989] 1 All ER 621 at 628, 632.
10See Forestry Commission (New South Wales) v Stefanetto (1976) 133 CLR 507 at 519-521 per Mason J; [1976] HCA 3.
11[1984] 2 NSWLR 612 at 626; affd sub nom AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170; [1986] HCA 63 (Gibbs CJ, Mason and Wilson JJ; Deane and Dawson JJ dissenting).
12(1979) at 414-416.
13[1915] AC 79 at 86-87.
14Rossiter, Penalties and Forfeiture, (1992) at 33.
15(2005) 224 CLR 656 at 662-663 [11]-[12]; [2005] HCA 71. See also the opinion of Douglas J in Priebe & Sons Inc v United States 332 US 407 at 411-412 (1947).
16Judiciary Act 1903 (Cth), s 80.
17 Andrews v Australia and New Zealand Banking Group Ltd (2011) 288 ALR 611.
18Federal Court Act, s 24(1A).
19(2011) 288 ALR 611 at 667-668 [205]-[208].
20At [79].
21(2011) 288 ALR 611 at 654 [153].
22(2011) 288 ALR 611 at 655 [156].
23(2008) 257 ALR 292.
24(2008) 257 ALR 292 at 321-330.
25Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (2007) Aust Contract Reports ¶90-261 at 90,037; Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (No 2) [2007] NSWSC 592.
26The relevant provisions read: "20. Termination 20.1 Interstar may terminate this Agreement immediately upon the happening of any of the following events: (a) upon the occurrence of an Insolvency Event in relation to the Originator; (b) upon the Originator breaching any of the terms and conditions of this Agreement and/or the Manual and (Footnote continues on next page) ... the breach not being rectified to the absolute satisfaction of Interstar within fourteen days after the date upon which written notice of such breach is given by Interstar to the Originator; (c) where the Originator or Originator's Representative has engaged in any proven deceptive or fraudulent activity in relation to an Application or a Settled Loan or Interstar considers, in its reasonable opinion, that the Originator or Originator's Representative has engaged in deceptive or fraudulent activity in relation to an Application or a Settled Loan; (d) where, in the sole bona fide opinion of Interstar, there is a change in the management or effective control of the Originator which change is not acceptable to Interstar. ... 20.3 In the event that this Agreement is terminated by Interstar: ... (c) pursuant to clause 20.1(a) or (c), then the Originator shall, with effect from the date of termination, have no further entitlement to receive any Originator's Fee."
27[2007] NSWSC 592 at [7], [49].
28(2008) 257 ALR 292 at 319.
29(1986) 162 CLR 170 at 191.
30(2008) 257 ALR 292 at 320.
31[1983] 1 WLR 399 at 402-404; [1983] 2 All ER 205 at 223-224.
32(2008) 257 ALR 292 at 324.
33See Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 379-380; [1936] HCA 6; Johnson v Agnew [1980] AC 367 at 392-393, 396-397.
34(1953) 69 Law Quarterly Review 485 at 486-487.
35Fourth ed (2000), §42:15; see also Halsbury, The Laws of England, 1st ed (1908), vol 3 at 80.
36At [10]-[11].
37Loyd, "Penalties and Forfeitures", (1915) 29 Harvard Law Review 117.
38Williston, A Treatise on the Law of Contracts, rev ed (1957), vol 3, §792. See also Loyd, "Penalties and Forfeitures", (1915) 29 Harvard Law Review 117 at 117-118.
39Williston, A Treatise on the Law of Contracts, rev ed (1957), vol 3, §792.
40Cox, "Penal Clauses and Liquidated Damages, a Comparative Survey", (1958) 33 Tulane Law Review 180 at 186-187.
41Cox, "Penal Clauses and Liquidated Damages, a Comparative Survey", (1958) 33 Tulane Law Review 180 at 192.
42Zimmermann, The Law of Obligations, (1996) at 107-108.
43Mitchel v Reynolds (1711) P Wms 181 [24 ER 347].
44With respect to supervening impossibility, see Williston, A Treatise on the Law of Contracts, 4th ed (2000), §42:17.
45(1795) 6 TR 200 at 211 [101 ER 510 at 516].
46Pitcarne v Bruce (1676) Lord Nottingham's Chancery Cases, Volume II, Selden Society vol 79 (1961), Case 587; Yale, "Introduction" at 20.
47At [10].
48Lord Macclesfield, in Peachy v Duke of Somerset (1721) 1 Strange 447 at 453 [93 ER 626 at 630], said that "it is the recompence that gives this Court a handle to grant relief".
49108 US 436 at 455-459 (1883).
50 Fourth ed (2000), §42:15.
51Parks v Wilson (1724) 10 Mod 515 at 518 [88 ER 832 at 833]; Prebble v Boghurst (1818) 1 Swans 309 at 318-319 [36 ER 402 at 407-408]; Evans, Appendix to Pothier, A Treatise on the Law of Obligations, or Contracts, (1806), vol 2, Appendix XII at 81-85.
52 Hardy v Martin (1783) 1 Cox 26 [29 ER 1046]; National Provincial Bank of England v Marshall (1888) 40 Ch D 112.
53 (2008) 236 CLR 342 at 349-352 [22]-[27]; [2008] HCA 22.
54NLS Pty Ltd v Hughes (1966) 120 CLR 583 at 589; [1966] HCA 63.
55Farnsworth, Contracts, 4th ed (2004), §12.18; cf Attorney General v Blake [2001] 1 AC 268 at 284-285.
56 [1983] 1 WLR 399 at 403; [1983] 2 All ER 205 at 224.
57(1986) 162 CLR 170 at 174.
58(2007) Aust Contract Reports ¶90-261 at 90,044.
59(2007) Aust Contract Reports ¶90-261 at 90,044.
60Anson wrote that where "for purposes of pleading" obligations acquired "the form of agreement", the term "quasi-contract" was used "for want of a better name": Anson, Principles of the English Law of Contract, 10th ed (1903) at 382.
618 & 9 Will III, c 11 (1696); 4 & 5 Anne, c 16 (1705). The relevant statutory texts are set out in Newland, "Equitable Relief Against Penalties", (2011) 85 Australian Law Journal 434 at 442.
62[1984] 2 NSWLR 612 at 625-626. See also Simpson, "The Penal Bond with Conditional Defeasance", (1966) 82 Law Quarterly Review 392 at 419.
63An imparlance denoted the time given to the defendant to plead either of course or in the discretion of the court (Mellor v Walker (1671) 2 Wms Saund 1 at 1 note (2) [85 ER 524 at 530]), and a perpetual imparlance would have had the effect of a permanent stay.
648 & 9 Will III, c 11, s 8.
654 & 5 Anne, c 3, s 12.
66White and Tudor's Leading Cases in Equity, 9th ed (1928), vol 2 at 224. See also AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 202 per Deane J; Instruments Act 1958 (Vic), s 30.
67Blackstone, Commentaries on the Laws of England, (1769), bk 4 at 435.
68Second ed (1845) at 300-302. A recent observation of this "fusion by convergence" is made by Professor Polden in The Oxford History of the Laws of England, vol XI (2010) at 757.
69(1838) 4 M & W 454 at 464 [150 ER 1507 at 1512].
70Rowlatt, The Law of Principal and Surety, 3rd ed (1936) at 252-254. However, as de Colyar noted (A Treatise on the Law of Guarantees, 3rd ed (1897) at 424-425), "of course the surety was still at liberty to resort to a court of equity for relief".
71(1768) 4 Burr 2225 at 2228-2229 [98 ER 160 at 162].
72(1807) 1 Camp 78 [170 ER 883].
73(1829) 6 Bing 141 at 148 [130 ER 1234 at 1237].
74(1842) 9 M & W 678 at 680-681 [152 ER 287 at 287-288].
75(1848) 1 Ex 659 at 662-666 [154 ER 280 at 282-283].
76(1850) 4 Ex 776 at 783-784 [154 ER 1429 at 1432-1433].
77(1829) 6 Bing 141 at 148 [130 ER 1234 at 1237].
78(1856) 6 El & Bl 528 at 541 [119 ER 961 at 966].
79Merwin, The Principles of Equity and Equity Pleading, (1895) at 220.
80AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 187; Astley v Weldon (1801) 2 Bos & Pul 346 at 350-351 [126 ER 1318 at 1321] per Lord Eldon; Hardy v Martin (1783) 1 Cox 26 [29 ER 1046]; Daniell, The Practice of the High Court of Chancery, 5th ed (1871), vol 1 at 1008-1010.
81Edwards-Wood v Baldwin (1863) 4 Giff 613 [66 ER 851].
8217 & 18 Vict, c 125.
83Sections 79 and 82.
84Jobson v Johnson [1989] 1 WLR 1026 at 1042, 1045-1046; [1989] 1 All ER 621 at 634, 636-637.
85(1802) 7 Ves Jun 265 at 273-274 [32 ER 108 at 111].
86cf AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 201; Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717 at 727.
87 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 241 [90]; [2001] HCA 63.
88 Mason, "The Impact of Equitable Doctrine on the Law of Contract", (1998) 27 Anglo-American Law Review 1 at 3. See also PGA v The Queen (2012) 86 ALJR 641 at 649-650 [20]-[21]; 287 ALR 599 at 605; [2012] HCA 21; Watt, Equity Stirring, (2009) at 231-232.
89 Judicature Act 1873 (UK), s 24(11). See Supreme Court Act 1986 (Vic), s 29.
90 (1986) 162 CLR 170 at 172-173.
91(1801) 2 Bos & Pul 346 [126 ER 1318].
92 (1986) 162 CLR 170 at 190.
93(1783) 1 Cox 26 [29 ER 1046].
94 (2007) Aust Contract Reports ¶90-261 at 90,037.
95(1986) 162 CLR 170 at 191.
96[1915] AC 79.
97 [1901] 2 Ch 275.
98 See Heydon, The Restraint of Trade Doctrine, 3rd ed (2008) at 248-249.
99 cf Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847.
100See [1915] AC 79 at 80-81, where the full text is set out.
101 Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 91-93.
102 At [23].
103[1966] 2 NSWR 717 at 723-724, 727.
104 (1842) 2 Drury and Warren 269 at 275-276. The case was decided when, as Sir Edward Sugden, Lord St Leonards was Lord Chancellor of Ireland.
105To the same effect were remarks of Lord Loughborough in Hardy v Martin (1783) 1 Cox 26 at 27 [29 ER 1046 at 1046-1047].
106Pomeroy, A Treatise on Equity Jurisprudence, 5th ed (1941), vol 2, §437.
107[1966] 2 NSWR 717 at 723.

1See Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 at 60 [20], 62-63 [24]-[25]; [1999] HCA 67; Aid/Watch Inc v Federal Commissioner of Taxation (2010) 241 CLR 539 at 549 [22]; [2010] HCA 42.

2(1983) 152 CLR 406 at 445; [1983] HCA 11.

3Waterside Workers' Federation of Australia v Stewart (1919) 27 CLR 119 at 128-129, 131; [1919] HCA 63; Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514 at 520; [1985] HCA 63.

4Rolfe v Peterson (1772) 2 Bro PC 436 at 442 [1 ER 1048 at 1052]; Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 86; cf, as to irrevocable letters of credit and "performance bonds", the proceeds of which are in substitution for performance by a contractor, Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812; Mason, "'I'll have my bond; speak not against my bond': Constructive trusts and surplus proceeds from performance bonds", (2012) 6 Journal of Equity 74 at 81-83.

5(1720) 1 Strange 447 [93 ER 626].

6(1919) 27 CLR 119.

7(1919) 27 CLR 119 at 131-132.

8Story, Commentaries on Equity Jurisprudence as Administered in England and America, 13th ed (1886), vol 2 at [1314].

9[1989] 1 WLR 1026 at 1034-1035, 1039 respectively; [1989] 1 All ER 621 at 628, 632.

10See Forestry Commission (New South Wales) v Stefanetto (1976) 133 CLR 507 at 519-521 per Mason J; [1976] HCA 3.

11[1984] 2 NSWLR 612 at 626; affd sub nom AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170; [1986] HCA 63 (Gibbs CJ, Mason and Wilson JJ; Deane and Dawson JJ dissenting).

12(1979) at 414-416.

13[1915] AC 79 at 86-87.

14Rossiter, Penalties and Forfeiture, (1992) at 33.

15(2005) 224 CLR 656 at 662-663 [11]-[12]; [2005] HCA 71. See also the opinion of Douglas J in Priebe & Sons Inc v United States 332 US 407 at 411-412 (1947).

16Judiciary Act 1903 (Cth), s 80.

17Andrews v Australia and New Zealand Banking Group Ltd (2011) 288 ALR 611.

18Federal Court Act, s 24(1A).

19(2011) 288 ALR 611 at 667-668 [205]-[208].

20At [79].

21(2011) 288 ALR 611 at 654 [153].

22(2011) 288 ALR 611 at 655 [156].

23(2008) 257 ALR 292.

24(2008) 257 ALR 292 at 321-330.

25Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (2007) Aust Contract Reports ¶90-261 at 90,037; Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (No 2) [2007] NSWSC 592.

26The relevant provisions read: "20. Termination 20.1 Interstar may terminate this Agreement immediately upon the happening of any of the following events: (a) upon the occurrence of an Insolvency Event in relation to the Originator; (b) upon the Originator breaching any of the terms and conditions of this Agreement and/or the Manual and (Footnote continues on next page) ... the breach not being rectified to the absolute satisfaction of Interstar within fourteen days after the date upon which written notice of such breach is given by Interstar to the Originator; (c) where the Originator or Originator's Representative has engaged in any proven deceptive or fraudulent activity in relation to an Application or a Settled Loan or Interstar considers, in its reasonable opinion, that the Originator or Originator's Representative has engaged in deceptive or fraudulent activity in relation to an Application or a Settled Loan; (d) where, in the sole bona fide opinion of Interstar, there is a change in the management or effective control of the Originator which change is not acceptable to Interstar. ... 20.3 In the event that this Agreement is terminated by Interstar: ... (c) pursuant to clause 20.1(a) or (c), then the Originator shall, with effect from the date of termination, have no further entitlement to receive any Originator's Fee."

27[2007] NSWSC 592 at [7], [49].

28(2008) 257 ALR 292 at 319.

29(1986) 162 CLR 170 at 191.

30(2008) 257 ALR 292 at 320.

31[1983] 1 WLR 399 at 402-404; [1983] 2 All ER 205 at 223-224.

32(2008) 257 ALR 292 at 324.

33See Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 379-380; [1936] HCA 6; Johnson v Agnew [1980] AC 367 at 392-393, 396-397.

34(1953) 69 Law Quarterly Review 485 at 486-487.

35Fourth ed (2000), §42:15; see also Halsbury, The Laws of England, 1st ed (1908), vol 3 at 80.

36At [10]-[11].

37Loyd, "Penalties and Forfeitures", (1915) 29 Harvard Law Review 117.

38Williston, A Treatise on the Law of Contracts, rev ed (1957), vol 3, §792. See also Loyd, "Penalties and Forfeitures", (1915) 29 Harvard Law Review 117 at 117-118.

39Williston, A Treatise on the Law of Contracts, rev ed (1957), vol 3, §792.

40Cox, "Penal Clauses and Liquidated Damages, a Comparative Survey", (1958) 33 Tulane Law Review 180 at 186-187.

41Cox, "Penal Clauses and Liquidated Damages, a Comparative Survey", (1958) 33 Tulane Law Review 180 at 192.

42Zimmermann, The Law of Obligations, (1996) at 107-108.

43Mitchel v Reynolds (1711) P Wms 181 [24 ER 347].

44With respect to supervening impossibility, see Williston, A Treatise on the Law of Contracts, 4th ed (2000), §42:17.

45(1795) 6 TR 200 at 211 [101 ER 510 at 516].

46Pitcarne v Bruce (1676) Lord Nottingham's Chancery Cases, Volume II, Selden Society vol 79 (1961), Case 587; Yale, "Introduction" at 20.

47At [10].

48Lord Macclesfield, in Peachy v Duke of Somerset (1721) 1 Strange 447 at 453 [93 ER 626 at 630], said that "it is the recompence that gives this Court a handle to grant relief".

49108 US 436 at 455-459 (1883).

50Fourth ed (2000), §42:15.

51Parks v Wilson (1724) 10 Mod 515 at 518 [88 ER 832 at 833]; Prebble v Boghurst (1818) 1 Swans 309 at 318-319 [36 ER 402 at 407-408]; Evans, Appendix to Pothier, A Treatise on the Law of Obligations, or Contracts, (1806), vol 2, Appendix XII at 81-85.

52Hardy v Martin (1783) 1 Cox 26 [29 ER 1046]; National Provincial Bank of England v Marshall (1888) 40 Ch D 112.

53(2008) 236 CLR 342 at 349-352 [22]-[27]; [2008] HCA 22.

54NLS Pty Ltd v Hughes (1966) 120 CLR 583 at 589; [1966] HCA 63.

55Farnsworth, Contracts, 4th ed (2004), §12.18; cf Attorney General v Blake [2001] 1 AC 268 at 284-285.

56[1983] 1 WLR 399 at 403; [1983] 2 All ER 205 at 224.

57(1986) 162 CLR 170 at 174.

58(2007) Aust Contract Reports ¶90-261 at 90,044.

59(2007) Aust Contract Reports ¶90-261 at 90,044.

60Anson wrote that where "for purposes of pleading" obligations acquired "the form of agreement", the term "quasi-contract" was used "for want of a better name": Anson, Principles of the English Law of Contract, 10th ed (1903) at 382.

618 & 9 Will III, c 11 (1696); 4 & 5 Anne, c 16 (1705). The relevant statutory texts are set out in Newland, "Equitable Relief Against Penalties", (2011) 85 Australian Law Journal 434 at 442.

62[1984] 2 NSWLR 612 at 625-626. See also Simpson, "The Penal Bond with Conditional Defeasance", (1966) 82 Law Quarterly Review 392 at 419.

63An imparlance denoted the time given to the defendant to plead either of course or in the discretion of the court (Mellor v Walker (1671) 2 Wms Saund 1 at 1 note (2) [85 ER 524 at 530]), and a perpetual imparlance would have had the effect of a permanent stay.

648 & 9 Will III, c 11, s 8.

654 & 5 Anne, c 3, s 12.

66White and Tudor's Leading Cases in Equity, 9th ed (1928), vol 2 at 224. See also AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 202 per Deane J; Instruments Act 1958 (Vic), s 30.

67Blackstone, Commentaries on the Laws of England, (1769), bk 4 at 435.

68Second ed (1845) at 300-302. A recent observation of this "fusion by convergence" is made by Professor Polden in The Oxford History of the Laws of England, vol XI (2010) at 757.

69(1838) 4 M & W 454 at 464 [150 ER 1507 at 1512].

70Rowlatt, The Law of Principal and Surety, 3rd ed (1936) at 252-254. However, as de Colyar noted (A Treatise on the Law of Guarantees, 3rd ed (1897) at 424-425), "of course the surety was still at liberty to resort to a court of equity for relief".

71(1768) 4 Burr 2225 at 2228-2229 [98 ER 160 at 162].

72(1807) 1 Camp 78 [170 ER 883].

73(1829) 6 Bing 141 at 148 [130 ER 1234 at 1237].

74(1842) 9 M & W 678 at 680-681 [152 ER 287 at 287-288].

75(1848) 1 Ex 659 at 662-666 [154 ER 280 at 282-283].

76(1850) 4 Ex 776 at 783-784 [154 ER 1429 at 1432-1433].

77(1829) 6 Bing 141 at 148 [130 ER 1234 at 1237].

78(1856) 6 El & Bl 528 at 541 [119 ER 961 at 966].

79Merwin, The Principles of Equity and Equity Pleading, (1895) at 220.

80AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 187; Astley v Weldon (1801) 2 Bos & Pul 346 at 350-351 [126 ER 1318 at 1321] per Lord Eldon; Hardy v Martin (1783) 1 Cox 26 [29 ER 1046]; Daniell, The Practice of the High Court of Chancery, 5th ed (1871), vol 1 at 1008-1010.

81Edwards-Wood v Baldwin (1863) 4 Giff 613 [66 ER 851].

8217 & 18 Vict, c 125.

83Sections 79 and 82.

84Jobson v Johnson [1989] 1 WLR 1026 at 1042, 1045-1046; [1989] 1 All ER 621 at 634, 636-637.

85(1802) 7 Ves Jun 265 at 273-274 [32 ER 108 at 111].

86cf AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 201; Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717 at 727.

87Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 241 [90]; [2001] HCA 63.

88Mason, "The Impact of Equitable Doctrine on the Law of Contract", (1998) 27 Anglo-American Law Review 1 at 3. See also PGA v The Queen (2012) 86 ALJR 641 at 649-650 [20]-[21]; 287 ALR 599 at 605; [2012] HCA 21; Watt, Equity Stirring, (2009) at 231-232.

89Judicature Act 1873 (UK), s 24(11). See Supreme Court Act 1986 (Vic), s 29.

90(1986) 162 CLR 170 at 172-173.

91(1801) 2 Bos & Pul 346 [126 ER 1318].

92(1986) 162 CLR 170 at 190.

93(1783) 1 Cox 26 [29 ER 1046].

94(2007) Aust Contract Reports ¶90-261 at 90,037.

95(1986) 162 CLR 170 at 191.

96[1915] AC 79.

97[1901] 2 Ch 275.

98See Heydon, The Restraint of Trade Doctrine, 3rd ed (2008) at 248-249.

99cf Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847.

100See [1915] AC 79 at 80-81, where the full text is set out.

101Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 91-93.

102At [23].

103[1966] 2 NSWR 717 at 723-724, 727.

104(1842) 2 Drury and Warren 269 at 275-276. The case was decided when, as Sir Edward Sugden, Lord St Leonards was Lord Chancellor of Ireland.

105To the same effect were remarks of Lord Loughborough in Hardy v Martin (1783) 1 Cox 26 at 27 [29 ER 1046 at 1046-1047].

106Pomeroy, A Treatise on Equity Jurisprudence, 5th ed (1941), vol 2, §437.

107[1966] 2 NSWR 717 at 723.