Contractual penalties: Resurrecting the equitable jurisdiction

Abstract

Ignoring its own prior pronouncements, in Andrews v Australia and New Zealand Banking Group Ltd the High Court of Australia held that the distinction between liquidated damages and penalties applies to promises to pay money whether or not associated with breach of contract. Disagreeing with the highly respected judgment of Mason and Wilson JJ in AMEV-UDC Finance Ltd v Austin, the court regarded the penalties doctrine to be a matter of equity jurisprudence, not contract. Notwithstanding that the issue before the court was one of great contemporary significance, the overriding concern was to give effect to its view of English law in 1873. The court therefore appears to have repositioned the whole law of penalties.This article questions the court's conclusion, its conception of penalty, its methodology and, from a broader perspective, the way the court has, in recent contract cases, discharged its role as an ultimate court of appeal.