Phoenix Commercial Enterprises v City of Canada Bay [2010] NSWCA 183

The Court of Appeal confirmed that the following principle still applies in NSW:

Once a judgment is obtained under a loan agreement for a principal sum and judgment is entered, the contract merges in the judgment and the principal becomes owed under the judgment and not under the contract.  Parties to a contract may agree that a covenant to pay interest will not merge in any judgment for the principal sum due, and in that event interest may be charged under the contract even after judgment for that sum.

The judgment creditor must have wished they had used Bransgroves Lawyers to draft their documents. Bransgroves mortgages contain this clause:

If the liability of the Debtor to pay the Debt becomes merged in a judgment, deed or otherwise then the Higher Rate of interest shall continue to apply to the whole of the debt and shall not merge.

Click here to read the full judgment

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