Justice Brereton became confounded about the law in this case. He wrote:
At first sight, it seems to me, there is a strongly arguable case that the provision for default interest… is a penalty.
In fact whether or not a default rate of interest is a penalty is not an arguable matter. The law of penalties as it applies to default rates is ancient, unambiguous and not open to argument – an interest clause either is or is not a penalty. Astley v Weldon (1801) 126 ER 1318 notes at 1322-3:
It is a well-known rule in equity, that if a mortgage covenant be to pay 5l per cent and if the interest be paid on certain days then to be reduced to 41 per cent the Court of Chancery will not relieve if the early day be suffered to pass without payment; but if the covenant be to pay 41 per cent and if the party do not pay at a certain time it shall be raised to 51 there the Court of Chancery will relieve.
For a detailed discussion, including concurring High Court authority, consult page 85 of The Essential Guide to Mortgage Law by Matthew Bransgrove.