Lachlan v HP Mercantile Pty Ltd - [2014] NSWSC 356

Supreme Court

New South Wales

Medium Neutral Citation: Lachlan v HP Mercantile Pty Limited [2014] NSWSC 356
Hearing dates: 18 March 2014
Decision date: 31 March 2014
Jurisdiction: Equity Division
Before: Darke J
Decision:
Cross-claimant is entitled to judgment on the cross-claim in accordance with order 6 made on 28 June 2011.

Catchwords:
CONTRACT- penalty - compromise of litigation - cross-claimant agrees to accept certain amount by instalments - provision that in event of default cross-claimant can enter judgment for higher amount - whether provision constitutes a penalty - higher amount implicitly acknowledged by cross-defendant as a present debt - no penalty

PROCEDURE - civil - consent orders based on a contract of compromise - extension of time for compliance - whether exceptional circumstances shown - extension of time refused
PROCEDURE - civil - consent orders providing for entry of judgment - whether grounds for stay - mistake - stay refused
Legislation Cited: Supreme Court Act 1970 (NSW), s 61
Uniform Civil Procedure Rules, rr 1.12, 36.5
Cases Cited: Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30
Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514; [1985] HCA 63
Attwells v Marsden [2011] NSWSC 38
Australian Management Consultants Pty Ltd v Direct Mortgage Funding Pty Ltd [2003] VSC 202
Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24
Calcorp (Australia) Pty Ltd v 271 Collins Pty Ltd [2010] VSCA 259
Cameron v UBS AG [2000] VSCA 222
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24
O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359; [1983] HCA 3
Paino v Hofbauer (1988) 13 NSWLR 193
Perpetual Trustee Co Ltd v Aspley Specialist Centre Pty Ltd [2010] QSC 232
Perpetual Trustee Co Ltd v Mitchell [2010] NSWSC 825
In the matter of Prismex Technologies Pty Ltd; Colin Lindsay Taggert v John [2013] NSWSC 292
Thompson v Hudson (1869) LR 4 HL 1
Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2000] QCA 221
Texts Cited: Professor P Parkinson, The Principles of Equity, (1st ed 1996, LawBook Co)
Category: Principal judgment
Parties:
Graham Lachlan (plaintiff)
HP Mercantile Pty Ltd (first defendant)
Tumut River Orchard Management Ltd (second defendant)
Treetop Projects Pty Ltd (third defendant)
Merilbah Investments Pty Ltd (fourth defendant)
Representation: Counsel: Mr A P Coleman SC and Ms J Wright (plaintiff)
Mr P Knowles (first defendant)
Solicitors: Horton Rhodes Lawyers (plaintiff)
Versace McKenzie Lawyers Pty Ltd (first defendant)

File Number(s): 2009/287584
Publication restriction: Nil

Judgment

The plaintiff ("Dr Lachlan") commenced these proceedings against the first defendant ("HPM") in 2009. Declaratory relief was sought to the effect that certain choses in action were not able to be enforced by HPM against Dr Lachlan. Dr Lachlan subsequently filed an amended Summons. In May 2010, HPM filed a Cross-Claim against Dr Lachlan pursuant to which it sought to recover amounts…

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

Case: [2014] NSWSC 356
Decision Date: 31 March 2014

CaseChat Overview and Summary

In the case of Lachlan v HP Mercantile Pty Ltd, the plaintiff sought to enforce a contract of compromise of litigation, which was intended to settle the amount owed to the plaintiff by the defendant. The contract included a provision that, in the event of default, the defendant could be held liable for a higher amount, which the plaintiff argued constituted a penalty. Additionally, the plaintiff sought an extension of time to comply with the consent orders and a stay of the entry of judgment, which the defendant opposed.

The primary legal issue before the court was whether the provision in the compromise agreement that allowed for a higher amount in the event of default constituted a penalty. The court considered whether this provision was a genuine pre-estimate of loss or a punishment. It was also necessary to determine whether the defendant had implicitly acknowledged the higher amount as a present debt, which would negate any penalty. Furthermore, the court had to decide if there were exceptional circumstances justifying an extension of time to comply with the consent orders, and whether there were grounds for a stay of the entry of judgment due to a mistake.

The court found that the provision in the compromise agreement did not constitute a penalty as it was not a punishment but a genuine pre-estimate of the loss that might occur in the event of default. The defendant's acceptance of the instalment plan impliedly recognised the higher amount as a present debt. Consequently, the court dismissed the plaintiff's application for an extension of time to comply with the consent orders, finding that no exceptional circumstances had been shown. The court also refused the plaintiff's application for a stay of the entry of judgment, determining that there was no mistake that warranted a stay.

The final orders of the court were that the provision in the compromise agreement did not constitute a penalty, and the defendant was not liable for the higher amount in the event of default. The application for an extension of time to comply with the consent orders was dismissed, and the application for a stay of the entry of judgment was also refused.

Orders