Aquila Steel Pty Ltd v AMCI (IO) Pty Ltd & Anor; BD Coal Pty Ltd & Anor v Belcoal Pty Ltd & Ors

The Full Federal Court heard appeals in *Aquila Steel Pty Ltd v AMCI (IO) Pty Ltd & Anor* and *BD Coal Pty Ltd & Anor v Belcoal Pty Ltd & Ors*. The disputes concerned the interpretation and enforceability of certain agreements relating to the sale and purchase of coal, and the rights and obligations of parties under those agreements, particularly in circumstances where the counterparty had become insolvent.

The primary legal issues before the Full Court were whether the insolvency of a party to a coal sale and purchase agreement triggered a right for the other party to terminate the agreement, and whether certain clauses within those agreements were void or unenforceable as penalties. The Court also considered the proper construction of the agreements in light of the insolvency events.

The Court reasoned that the insolvency of a party did not, in itself, give rise to a right to terminate the agreements. It held that the agreements did not contain express provisions for termination upon insolvency, nor could such a right be implied. Regarding the penalty clauses, the Full Court applied the principles established in *Paciocco v Australia and New Zealand Banking Group Ltd* [2016] HCA 50, determining that the clauses in question were not penalties but rather legitimate pre-estimates of loss or genuine pre-contractual arrangements for the consequences of breach. The Court found that the clauses were enforceable and did not offend the rule against penalties.

The appeals were dismissed, with the Court affirming the primary judge's findings and orders.