49 In Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656, the High Court referred with approval to a statement by Mason and Wilson JJ in AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 190 that an agreement to pay a sum as damages should only be struck down as a penalty if " it is out of all proportion to damage likely to be suffered as a result of breach " (at 667 [27]). In Ringrow Pty Ltd v BP Australia Pty Ltd the High Court said (at 669 [32]):
"Exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. That is why the law on penalties is, and is expressed to be, an exception from the general rule. It is why it is expressed in exceptional language. It explains why the propounded penalty must be judged 'extravagant and unconscionable in amount'. It is not enough that it should be lacking in proportion. It must be 'out of all proportion'."
33 The defendants' counsel submitted that Secure Funding has not provided any evidence to show that four per cent is not "out of all proportion". In my view, the defendants have to show they have a bona fide defence and they must establish, at least at a prima facie level, that the penalty rate must be out of all proportion. They have not done so. In any event, four per cent can hardly be said to be "out of all proportion".
34 There is provision in the schedule to the loan agreement for the charge of an administration fee. So far as the administration fees are concerned, where there is a default in payment, the administration fee rises from $25 to $95. Likewise, the defendants have not shown that this administration fee is a penalty and is "out of all proportion".
35 In my view, it is not necessary to have the dealing number on the mortgage for the defendants to acknowledge that the loan agreement was covered by the registered mortgage. The mortgage incorporated the provisions of the memorandum. The mortgage was granted as security for moneys advanced to the defendants pursuant to the loan agreement. The loan agreement incorporated the consumer loan agreement terms and conditions and the schedule. The mortgage and loan agreement and schedule are dated 26 July 2006. The defence is doomed to failure.
(3) Secure funding has elected not to enforce the acceleration clause
36 The defendants alleged that Secure Funding has elected not to enforce the acceleration clause. As previously stated, on 4 June 2008, the defendants made a payment of $45,000. The defendants submitted that as this payment was accepted and no correspondence was sent by Secure Funding refusing to accept the payment as being in compliance with the offer, the delay of two days is trivial having regard to the amount of money and the time frame in which it was requested and provided and falls within the de minimis exception. The amount of $45,000 was a lesser sum than the debt. It would have been to the defendants' benefit had it been paid on time. But it was not. It is my view that the de minimis rule does not apply here.
37 Alternatively, the defendants submitted that if the Court is not minded to regard the delay, as a de minimis one, then Secure Funding should be estopped from enforcing its legal rights strictly. The defendants further submitted that they proffered payment of $45,000 on account of the offer made by Secure Funding, and it would be unconscionable for Secure Funding to rely upon the defendants' delay to make payment when the plaintiff did nothing to disabuse the defendants of the notion that the payment was in compliance with the settlement offer. The letter in its own terms advised that it would continue with the proceedings. In these circumstances, it cannot be said that the plaintiff acted unconscionably. Finally, the defendants submitted it would appear that, even following default judgment, Secure Funding has treated the mortgage as being on foot, with Secure Funding purporting to continue to charge the defendants ordinary contractual interest, default administration fees, default interest, professional legal costs, expired insurance fees, service fees and a valuation payment. These submissions overlook the correspondence by the plaintiff where it was saying that the loan repayments were in arrears. In my view, the defences raised are hopeless. They are not bona fide. Further, it is not in the interests of justice to set aside the default judgment in circumstances where the defendants have agreed they owe the plaintiff $445,000. There have been three stays on the execution of the writ of possession, the property is vacant and there is little or no equity in the property.