The 'Interest' Based Penalty Tests in Pacioccoa and Cavendish/Parkingeye and the Law of Penalties and Damages in Australia and the United Kingdom

• Author: Larissa Welmans and John Naughton
• Position: UWALJ Editorial Board 2017-18/Partner in Charge, King & Wood Mallesons, Perth
• Pages: 157-171

THE ‘INTEREST’ BASED PENALTY TESTS IN PACIOCCO

AND CAVENDISH/PARKINGEYE AND THE LAW OF

PENALTIES AND DAMAGES IN AUSTRALIA AND THE

UNITED KINGDOM

LARI SSA WELMAN S* A ND JOHN NA UGH TO N†

This article maps the current penalty tests in Australia and the

United Kingdom following recent revision. It demonstrates how

this revision has relaxed the relationship between sums

recoverable under liquidated damages clauses and damages

recoverable at law for breach of contract. This article

acknowledges that the relaxation of that relationship makes

liquidated damages clauses more attractive to powerful

contracting parties. However, it also cautions that the new

penalties tests may spark certain further legal developments,

including to realign the scope of interests protectable under

liquidated damages clauses with damages recoverable at

common law.

TABLE OF CONTENTS

I. Introduction

II. Revising the UK and Australian Penalty Tests

A. The Cavendish Test

B. The Paciocco Test

III. The Relationship Between Liquidated Damages Clauses and Damages at

Common Law

A. Distancing the Inquiry from Concepts of Loss

B. Movement Away from Compensation Directly Flowing and

Common Law Causation and Remoteness

* UWALJ Editorial Board 2017-18

† Partner in Charge, King & Wood Mallesons, Perth