The penalty doctrine again came under the spotlight in Quantum Asset Management Pty Ltd v Love Properties (WA) Pty Ltd .
A 53% per annum interest rate may seem steep, but the Court declined to label it a penalty. The decision took into account the high-risk nature of the loan.
In a recent NZ Court of Appeal decision a late payment fee of over $30 million on a $37 million loan dodged the penalty tag. The Court held the fee to be proportionate to the lender’s interests and so enforceable.
What are the effects of this key judgment? It certainly issues a warning to commercial borrowers. Escaping late payment fees may not be as simple or clear cut.
Penalty Interest – Court of Appeal confirms that it is permissible for a lender to charge a higher and a lower rate of interest.
In Kellas-Sharpe & Ors v PSAL Limited  QCA 371, the Queensland Court of Appeal considered whether the charging of a lower concessionary rate of interest and a higher standard rate of interest gives rise to the operation of an unenforceable penalty rate of interest.