Genuity Pty Ltd v IG Power (Callide) Ltd [2026] QSC 194

David Pearce | Hazal Gacka | Lois Min

Key takeouts

• A general clause which permits a lender to pass on ‘fees, costs and expenses’ to a borrower will not extend to interest if there is a specific clause in the loan agreement which expressly states that ‘the loan shall not bear interest’.  If parties intend that interest charges are to be passed on, this must be expressed in clear and unambiguous terms in the contract.
• In construction contracts, provisions dealing with how and when interest is to be charged on late payments are often left to boilerplate clauses that are not fit for purpose. This decision is a reminder that a court will interpret a contract on its terms and any entitlement to charge interest for late payment must be properly articulated in the contract.

Facts

Background

Callide C, part of the Callide Power Station near Biloela, was operated until October 2024 by an unincorporated joint venture between IG Power (Callide) Ltd (IGPC), then a subsidiary of Genuity Pty Ltd (Genuity), and a CS Energy subsidiary. In May 2021, an explosion caused critical damaged to the C4 generating unit requiring approximately $70 million of remedial work.

Unable to raise external funds, Genuity lent IGPC $60 million under a two-page loan agreement dated 1 April 2022, repayable on demand and in any event within 12 months. Clause 4 provided that the loan would not bear interest. Clause 5, headed ‘Fees and Costs’, required IGPC to reimburse Genuity for all necessary and reasonable fees, costs, charges and expenses it might incur in funding and maintaining the loan.

To fund the loan, Genuity borrowed $60 million from its parent, OzGen (UK) Limited (OUK), at 10 per cent per annum. OUK obtained those funds from its shareholders as equity, not debt. Genuity repaid the principal balance on 5 June 2026 and about $24.4 million of interest on 10 June 2026. IGPC drew down $59.29 million, could not repay, and entered administration in March 2023.

Proceedings and questions

Genuity commenced proceedings in July 2025 claiming the interest under clause 5. IGPC advanced an offsetting debt claim. Of five separate questions identified for determination, this hearing decided two: whether clause 5 obliged IGPC to reimburse the interest, and if so, whether the amounts were ‘necessary and reasonable’.

Decision

The Court answered both questions ‘no’ and held that IGPC was not obliged to reimburse Genuity for the interest charges.

Construction of clause 5

Muir J held that the plain meaning of the words ‘the loan shall not bear interest’ in clause 4 are clear. IGPC was not liable to pay interest on the loan. Clause 5 made no reference to ‘interest’, even though interest was addressed expressly in the clause immediately above (clause 4), and that omission was not inadvertent. The objective intention underlying clause 5 was that it would not permit Genuity to pass interest on to IGPC.

The fact that interest was expressly mentioned in one clause rationally tends to exclude the implication of it arising in another clause. In particular, Muir J noted that the heading to clause 5 (‘Fees and Costs’) contained no reference to interest. While the heading was not determinative, it informed the interpretation of the clause and sat uncomfortably with the proposition that interest at 10 per cent per annum on $60 million would be captured by it.

If the parties had intended that interest was to be passed on as a ‘cost’ or ‘expense’ of funding the loan, it was reasonable to expect they would have expressed this in clear and unambiguous terms. It would have been very easy to do so, given that interest at 10 per cent was being contemplated and was known to the parties at the time the loan agreement was executed.

Construed objectively, the expression ‘necessary and reasonable fees, costs, charges and expenses’ in clause 5 may be seen to contemplate relatively modest transactional expenses such as bank fees, legal fees and accounting fees that might arise in funding and maintaining the loan. It would be uncommercial for ‘costs’ and ‘expenses’ to include approximately $24 million in interest charges on a $60 million interest-free loan.

Commercial nonsense

Muir J rejected Genuity’s submission that the construction advanced by IGPC produced a ‘commercial nonsense’ or ‘commercial inconvenience’. Muir J accepted that Genuity was in a difficult position arising from the substantial outlay required to fund the rebuild following the explosion but held that the outcome was not uncommercial. Whether or not a clause is onerous to one party does not determine whether it is uncommercial. It was not for the Court to rewrite the bargain that was struck.

Necessity and reasonableness of the interest charges Separately, Muir J held that even if clause 5 could capture interest charges, Genuity had not established that the interest charges were ‘necessary and reasonable’. The evidence showed that the relevant funds had been provided to the corporate group by way of equity rather than debt and Muir J was not satisfied that it was necessary or reasonable for Genuity to incur the interest charges that it later sought to recover.