There are two recent cases of high authority and much importance concerning the doctrine of penalties. One is the Court of Appeal’s decision in Murray v. Leisureplay Plc 1 concerning an employment contract. The other is a decision of the High Court of Australia in the context of arrangements affecting the sale of fuel at petrol stations: Ringrow Pty Ltd v. BP Australia Pty Ltd .2 In both cases, the court found there was no penalty. Whilst the results were similar, the Court of Appeal and the High Court offer quite different interpretations of Lord Dunedin’s classic test in Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Co .3

In Murray , the Court of Appeal upheld the validity of a so-called “golden parachute” clause. In 1998, Kenneth Murray established Murray Financial Corporation (later, Leisureplay Plc). The corporation engaged Mr Murray as Chief Executive Director. The service agreement stipulated that “the Executive” was entitled to either one year’s written notice, or payment in lieu of notice, before the contract of employment could be lawfully terminated. Pursuant to cl 17.1, non-compliance with the notice provisions would entitle the Executive to “a sum equal to one year’s gross salary, pension contributions and benefits in kind”. On 7 May 2003, Mr Murray received a letter from Leisureplay which purported to terminate his employment with effect from 30 June 2003. The company did

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