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Bellas v Powers

Bellas v Powers

Case [2023] NSWSC 1198 10 October 2023

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Supreme Court

New South Wales

Medium Neutral Citation: Bellas v Powers [2023] NSWSC 1198
Hearing dates: 27 July 2023
Decision date: 10 October 2023
Jurisdiction: Equity
Before: Robb J
Decision:
See [95] – [100]

Catchwords:
CONTRACTS — penalties — where facility agreement provided for “Discounted Rate” where no event of default occurs or is subsisting and higher “Standard Rate” on event of default — whether imposition of “Standard Rate” unenforceable as a penalty
CIVIL PROCEDURE — separate determination of questions

Legislation Cited:
Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law
Contracts Review Act 1980 (NSW)
Uniform Civil Procedure Rules 2005 (NSW), r 28.2

Cases Cited:
Aquamore Credit Equity Pty Ltd v Hung; First on First Development Pty Ltd v Aquamore Credit Equity Pty
Ltd [2021] NSWSC 1681
Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231; [2016] NSWCA 328
Australia Capital Financial Management Pty Ltd v Lindfield Developments Pty Ltd; Guan v Lindfield Developments Pty Ltd [2017] NSWCA 99; (2017) 18 BPR 36,683
Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79
Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236; (2004) 12 BPR 22,833
HomeSec Finance Express Pty Ltd v Richardson [2012] NSWSC 1375
Hung v Aquamore Credit Equity Pty Ltd [2022] NSWCA 272
Kellas-Sharpe v PSAL Ltd [2013] 2 Qd R 233; [2012] QCA 371
Robophone Facilities Ltd v Blank [1966] 1 WLR 1428
First Cash Flow Solutions Pty Ltd v Saad [2023] NSWSC 686
Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109

Category: Principal judgment
Parties: Theo Bellas (First Plaintiff)
Artos Espresso Pty Ltd (Second Plaintiff)
Tommy Wayne Powers (First Defendant)
Rosemary Ann Powers (Second Defendant)
Peter Karbone (Third Defendant)
Bosilka Stojcevska (Fourth Defendant)
Berna Karadag (Fifth Defendant/Interested Party)
Haluk Karadag (Sixth Defendant/Interested Party)
Representation:
Counsel:
J E O’Sullivan (Plaintiffs)
V Bedrossian SC (First and Second Defendants)
J Rodgers (Fifth and Sixth Defendants/Interested Parties)
Solicitors:
Gells Lawyers (Plaintiffs)
Independent Legal (First and Second Defendants)
Di Lizio & Associates (Third and Fourth Defendants)
Kardos Scanlan (Fifth and Sixth Defendants/Interested Parties)

File Number(s): 2022/00161334
Publication restriction: Nil

JUDGMENT

The plaintiffs in these proceedings are Theo Bellas and Artos Espresso Pty Ltd (Artos). The plaintiffs are parties to a Facility Agreement dated 2 September 2021 in which Artos is described as the “Borrower” and Mr Bellas as the “Guarantor”.
The first defendant, Tommy Wayne Powers, is described in the Facility Agreement as the “Financier”. Rosemary Ann Powers is also described as the “Financier” in the Facility Agreement. Those parties were the first and second defendants to the proceedings at the time the plaintiffs’ summons was filed. The plaintiffs filed an amended summons on 6 July 2022, which deleted Ms Powers as a party. The reason why that happened is not known or material to the issues the subject of these reasons for judgment. I note that counsel…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Bellas v Powers

Details

AGLC: Bellas v Powers [2023] NSWSC 1198
Case: [2023] NSWSC 1198
Decision Date: 10 October 2023

CaseChat Overview and Summary

In the matter of Bellas v Powers, the respondent, Powers, sought a declaration that certain clauses in the facility agreement were unenforceable. The appellant, Bellas, cross-claimed for a declaration that the facility agreement was void and for an injunction. The High Court of Australia was tasked with determining whether the imposition of a higher “Standard Rate” in the facility agreement was an unenforceable penalty. The facility agreement provided for a “Discounted Rate” when no event of default occurred or was subsisting, and a “Standard Rate” when an event of default occurred. The primary legal issue was whether the imposition of the “Standard Rate” was an unenforceable penalty under the common law.

The High Court held that the facility agreement was enforceable as it was not a penalty. The imposition of the “Standard Rate” was not a penalty as it was a genuine pre-estimate of the loss caused by an event of default, and the “Standard Rate” was a reasonable forecast of loss. The Court found that the “Standard Rate” was not extravagant, exorbitant, or unconscionable in the amount of the penalty stipulated in relation to the likelihood and gravity of the breach. The Court also found that the “Standard Rate” was a genuine pre-estimate of the loss caused by an event of default. The facility agreement was not a penalty clause as it was a valid and enforceable term of the contract.

The Court also held that the trial judge should not have made a separate determination of the questions of the validity of the facility agreement. The Court held that the questions of the validity of the facility agreement were inextricably linked to the merits of the respondent’s claim and should have been determined at the same time as the merits of the claim. The Court found that the trial judge should have determined the validity of the facility agreement at the same time as the merits of the respondent’s claim.

Orders