Fayad v B & G Properties Pty Ltd

[2022] NSWCA 129

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Fayad v B & G Properties Pty Ltd [2022] NSWCA 129

Hearing dates:

18 July 2022

Decision date:

22 July 2022

Before:

Bell CJ at [1];
Leeming JA at [2];
Basten AJA at [41].

Decision:

Appeal dismissed with costs.

Catchwords:

CONTRACTS – construction – loan agreement – construction of clause imposing default interest – whether interest accrued only on outstanding principal, or entire indebtedness – whether default interest unenforceable as penalty

Cases Cited:

A F C Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15

Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266

Central Coast Council v Norcross Pictorial Calendars Pty Ltd [2021] NSWCA 75

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79

Kay v Playup Australia Pty Ltd [2020] NSWCA 33

Vauxhall Motors Ltd (formerly General Motors UK Ltd) v Manchester Ship Canal Co Ltd [2020] AC 1161; [2019] UKSC 46

XL Insurance Co SE v BNY Trust Company of Australia Ltd [2019] NSWCA 215

Texts Cited:

D McLauchlan, “The lingering confusion and uncertainty in the law of contract interpretation” [2015] LMCLQ 406

Category:

Principal judgment

Parties:

Sam Fayad (Appellant)
B & G Properties Pty Ltd (Respondent)

Representation:

Counsel:
S J Stanton (Appellant)
S Mirzabegian SC; D T Wong (Respondent)

Solicitors:
Madison Marcus Law Firm (Appellant)
Gilbert + Tobin (Respondent)

File Number(s):

2021/337207

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Commercial List

Citation:

[2021] NSWSC 1382

Date of Decision:

01 November 2021

Before:

Ball J

File Number(s):

2021/102379

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellant, Mr Sam Fayad, was the guarantor of a $4 million loan by the respondent, B & G Properties Pty Ltd, to his company, NR Developers Pty Ltd. The money was advanced pursuant to a written agreement dated 16 February 2015 which provided for repayment of the principal after 6 months, plus interest at a rate of 25% pa. The interest component was to be paid in two instalments of $250,000. Clause 4 provided in part that “Default fees and charges will be at the rate of thirty (30%) per centum of the advance per annum or part thereof.”

It was common ground that no repayment of the principal sum was made. Payments of some interest were made. By Deed of Variation in July 2018 and Deed of Further Variation in November 2018, the Final Repayment Date was amended to 15 November then 15 December 2018. The outstanding “fees and charges” were ultimately specified at $1,483,333. Clause 4 was not amended.

The issues on appeal were (i) whether the default rate of interest…