impaired consent, unconscionability or consumer law infringement. That means there is less for the prohibition against penalties to do. Commercial parties should generally be left to the certainty of the bargains they have made, including the remedies they have elected collectively, save in cases of gross overreach. The Court went on to explain that “[t]he primary test for a penalty is now the disproportionality test. The essential question is whether the secondary obligation challenged as a penalty imposes a detriment on a promisor out of all proportion to any legitimate interest of the promisee in the enforcement of the primary obligation.” The Court described the disproportionality test as “a more sophisticated and demanding one than the comparative damages test which prevailed under Dunlop,” and noted: “[t]he disproportionality test may also be cross-checked by another intimately associated test: the punitive purpose test. That is, whether the predominant purpose of the secondary obligation is to punish the promisor rather than protect the legitimate interest of the promisee in performance of the primary obligation. These tests are two sides of the same coin.”
Lodder v Slowey [1904] AC 442 Professor John Sharkey AM says that those at a Sydney conference last year might recall a lively discussion around the 21st century propriety of the principle derived from the Privy Council decision in Lodder v Slowey [1904] AC 442, namely that, in the circumstance of an employer or owner having repudiated a construction contract, the contractor is entitled at its election to be paid on a quantum meruit as an alternative to the traditional remedy of damages. Professor Sharkey reports that on Friday, 14 December 2018 the High Court of Australia granted the owners’ application for special leave to appeal from the decision of the Victorian Court of Appeal in Mann v Paterson Constructions Pty Ltd [2018] VSCA 231. The owners had, in the view of the trial judge, repudiated a construction contract. Applying Lodder, as he was bound to do, the judge held the contractor entitled to be paid on a quantum meruit an amount considerably in excess of any damages calculation made in accordance with the contract. The Victorian Court of Appeal upheld the trial judge, saying if Lodder was to be overturned then that was a matter for the High Court. The grant of the application for special leave will come as a surprise to some, given that the High Court has in recent years twice refused to entertain the same application - in 1992 in Renard and in 2009 in Sopov. So, 115 years on, sometime in 2019 the High Court of Australia can be expected to pronounce upon whether or not Lodder remains part of the law of Australia. It shapes as the most significant appeal in Australian construction law for many years and will be closely watched, not just in Australia but throughout the common law world.