TOMRA Collection Pty Ltd v Minto

TOMRA Collection Pty Ltd initiated proceedings against Minto in the Supreme Court of New South Wales. The dispute centred on the enforceability of a contractual clause that imposed a 20% penalty on late payments. TOMRA sought to recover the penalty under the contract, while Minto argued that the penalty clause was unenforceable due to its excessive nature and the principle of unconscionability. The court was required to determine whether the penalty clause was a legitimate pre-estimate of loss or an unenforceable penalty, as well as the appropriate allocation of costs between the parties.

The court examined the principles governing penalty clauses, particularly the requirement that the clause must be a genuine pre-estimate of loss. It held that the clause was not a genuine pre-estimate of loss and, therefore, constituted a penalty. However, the court also noted that TOMRA's claim was successful on the merits, and the penalty clause was unenforceable. As a result, the court considered the appropriate allocation of costs, taking into account the unsuccessful nature of Minto's defence and the fact that the proceedings had been discontinued. The court found that TOMRA was entitled to costs on a party/party basis.

The Supreme Court of New South Wales ordered that TOMRA Collection Pty Ltd recover its costs of the proceedings from Minto. The court emphasised that the general rule is that costs follow the event, and in this case, Minto's unsuccessful defence and the discontinuance of the proceedings justified an order for TOMRA to recover its costs. This decision underscores the importance of the principle that penalty clauses must be genuinely pre-estimates of loss and highlights the court's discretion in allocating costs where proceedings have been discontinued.