Key takeaways

• Australia’s highest court has considered an alleged penalty clause and has taken an approach largely consistent with last year’s UK Supreme Court decision in Cavendish.
• The judgment confirms, however, that while the penalty doctrine only applies to secondary obligations under English law, Australian law allows a broader range of clauses to be considered penalties in appropriate circumstances.
• The general commitment of common law jurisdictions to freedom of contract and upholding parties’ bargains remains a key theme of the judgments in both England and Australia.