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Feb 29, 2016 · In this article we consider the recent decision in the case of Cavendish Square Holding BV v Talal El Makdessi and ParkingEye Limited v Beavis, in which the English Supreme Court has introduced a new test for when a contractual provision will be considered penal and therefore unenforceable under English law.
Nov 16, 2015 · In July 2015, the Supreme Court heard two appeals together, both of which raised issues surrounding the penalty rule. The principal difference between the two was that the first appeal, Cavendish Square Holding BV v Talal El Makdessi, concerned a commercial contract, while the second appeal, ParkingEye Ltd v Beavis, concerned a consumer contract.
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Dec 3, 2015 · In this blog post, we consider the impact of the recent Supreme Court decision in Cavendish Square Holding BV v El Makdessi and ParkingEye Ltd v Beavis (Beavis). The Supreme Court welcomed the opportunity to consider the “penalty rule” in two cases at the opposite end of the financial spectrum.
- The Old Test For Penalty Clauses
- The New Test For Penalty Clauses
- The Extent of The Doctrine
- So, What Are The Key Implications of The Judgment?
- What Does This Mean For Your Construction Project?
The long-standing law on penalty clauses derives from Lord Dunedin’s judgment in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915]. The test had traditionally been expressed as being a dichotomy between compensatory and deterrent clauses. To that end, the concepts of genuine pre-estimates of loss and deterrence were fundamental to t...
While there has been some erosion into the doctrine over the years (e.g. the Court of Appeal decisions in Lordsvale Finance v Bank of Zambia and Cine Bes v United International Pictures), the Supreme Court noted that Lord Dunedin’s tests had achieved “the status of a quasi-statutory code”. All 7 judges in the Supreme Court took the view that Lord D...
The Supreme Court confirmed the decision of the Court of Appeal that the penalty rule not only applies to contractual remedies stipulating a payment of money but equally to: 1. obligations to transfer assets; and 2. withholding of payments, where one party is in breach of default. However, for the type of LDs clause typically seen on a construction...
This decision represents a significant redefinition of the law. The court has re-written the rule and introduced a more flexible test, which is intended to be applicable to more complicated cases. In some cases, liquidated damages which may be designed to deter a party from breach, and which do not represent a genuine pre-estimate of loss, may now ...
The two clauses debated in Makdessi involved the withholding of two lump sum payments to Mr Makdessi on his default and the forced sale of shares at an unfavourable price. These are not the typical LDs clauses seen in construction contracts where a contractor / subcontractor pays or allows a sum of money to the Employer / Contractor for every week ...
Dec 3, 2015 · Cavendish Square – how the new penalties test affects banking transactions. In Cavendish Square Holding BV v. Makdessi and ParkingEye Ltd v. Beavis, reported together at [2015] UKSC 67 ( Cavendish Square) the Supreme Court reviewed, and significantly recast, the basis on which a contractual term will be treated as an unenforceable penalty.
The holding company's claim (for breach of fiduciary duty) was settled in October 2012 when it accepted a Part 36 payment of US$500,000 made by Mr El Makdessi. Cavendish's claim was for declarations that Mr El Makdessi's breach of clause 11.2 means that clauses 5.1 and 5.6 now have the effect stated. Mr El Makdessi argued that they were ...
This case established a new penalty test: a clause is a unenforceable if it is all out of proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation; Facts. The Supreme Court heard a conjoined appeal of two cases concerning the penalty rule: Cavendish Square Holding BV v El Makdessi
