Elkhoury & Anor v Farrow Mortgage Services Pty Ltd (In Liquidation)

Louis Joseph Elkhoury and Brendan Phillip Torpey (the applicants) sought special leave to appeal to the High Court of Australia from a decision of the Full Federal Court. The dispute concerned the bankruptcy of the applicants, which was founded upon a judgment debt of $2.6 million arising from a guarantee of corporate debts. The applicants had sought to challenge the judgment debt, but their attempts were unsuccessful at both the trial and Full Federal Court levels.

The primary legal issue before the High Court was whether an accrued right to exercise an option under a contract, which arose prior to the contract's termination, could still be invoked and exercised after the contract had been terminated. Specifically, the applicants argued that a right to elect to make the principal sum immediately payable, which had accrued under clause 42j of the contract due to a default in interest payments, could not be exercised after the contract was terminated by repudiation and acceptance.

The Full Federal Court had found that an accrued right under clause 42j subsisted even after the termination of the contract, allowing the respondent to exercise its option. The applicants did not challenge the existence of this accrued right or the respondent's ability to exercise the option. However, they contended that the application of the law to favourable assumptions of fact raised a question of contract law with implications for public policy. The applicants sought to go behind the judgment debt, referencing the principle in *Wren v Mahony*, but this approach had been rejected by the lower courts.

The High Court was considering an application for special leave to appeal. The applicants' argument focused on the contractual position, specifically the enforceability of accrued rights upon termination. The core of their submission was that while a right to elect to make the principal sum immediately payable had accrued due to a prior default, this option could not be exercised after the contract had been terminated by repudiation and acceptance.