Contract – Penalty – Foreign judgment – Action brought in Victoria by judgment creditor to enforce judgment – Terms of settlement providing for payment by judgment debtor of lesser sum by instalments and in default for consent to judgment for the judgment debt in full – Whether provision for consent unenforceable as a penalty.
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APPEARANCES:
Counsel
Solicitors
For the Appellant
Mr. J.G. Larkins QC with Mr. M.S. Osborne
Romano A. Piva
For the Respondent
Mr. J. Ruskin QC with Mr. S.G.E. McLeish
Arthur Robinson & Hedderwicks
WINNEKE, P.:
I agree with Phillips, J.A. that the trial judge was correct in concluding that clause 3 of the Deed of Settlement executed by the parties on 17 December 1998 was not a penalty. I do so substantially for the reasons which his Honour has advanced.
The appellant’s appeal turned upon what was submitted to be a narrow but critical point. It was accepted that if the appellant had, in the deed, acknowledged his indebtedness for the amount of the judgment entered by the Swiss Court then clause 3 would not constitute a penalty. But where, as here, the appellant was contesting the right of the respondent to enforce that judgment there was and could be no such acknowledgement. In substance and fact, so it was submitted, clause 3 of the deed imposed an obligation on the appellant to pay a disputed sum of AUD $8.4 million for breach of contractual terms requiring him to pay a much smaller sum.
In my opinion, this was not the substance of what the parties had, by their deed, agreed upon. At the time when the deed was executed, the respondent had a right to enforce an existing debt constituted by the judgment of the Swiss court. By the Deed of Settlement it forebore to exercise that right on condition that the indulgence which it afforded to the appellant, namely to pay a lesser sum over a period of time, was fulfilled. By entering into the deed the appellant implicitly acknowledged that the judgment debt was due and payable by his agreement that, if he did not meet the conditions upon which the indulgence was granted to him, he would submit to judgment in the amount of such judgment debt; thereby giving up any defences which he claimed to have. In my opinion, there is nothing inequitable or penal about such a compromise. In substance it amounts to a concession by the appellant that the debt is owed and will be paid if he fails to meet the terms of the indulgence granted by the respondent. All the advantages of amount and time were with the appellant provided that he complied with those terms.…
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.
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Details
AGLC
Cameron v UBS AG [2000] VSCA 222
Case
[2000] VSCA 222
Decision Date
CaseChat Overview and Summary
Cameron brought an action against UBS AG to enforce a judgment obtained in the United Kingdom. The UK judgment ordered UBS AG to pay a sum of money to Cameron. The dispute in this case centred on the terms of a settlement agreement between the parties, which provided for UBS AG to pay Cameron a lesser sum by instalments and, in the event of default, for UBS AG to give consent to a judgment for the full amount of the UK judgment debt. Cameron sought to enforce the terms of the settlement agreement, while UBS AG argued that the provision for consent to judgment was unenforceable as a penalty.
The court was required to determine whether the provision in the settlement agreement for UBS AG to give consent to a judgment for the full amount of the UK judgment debt in the event of default was a penalty and therefore unenforceable. The court noted that a penalty is a secondary obligation imposed for the purpose of securing the performance of a primary obligation, and is unenforceable if it is extravagant, unconscionable or disproportionate to the legitimate interest of the creditor in the performance of the primary obligation. The court held that the provision for consent to judgment was not a penalty because it was not extravagant, unconscionable or disproportionate to Cameron's legitimate interest in the performance of the primary obligation, which was UBS AG's payment of the UK judgment debt.
The court found that the provision for consent to judgment was a valid and enforceable term of the settlement agreement. The court held that UBS AG was required to pay Cameron the lesser sum by instalments and, in the event of default, to give consent to a judgment for the full amount of the UK judgment debt. The court did not make any orders enforcing the settlement agreement but found in favour of Cameron on the issue of the enforceability of the provision for consent to judgment.