Andrews v ANZ Group Ltd
High Court of Australia [2012] HCA 30
Case details
Court
High Court of Australia
Case
M48/2012 ➤
Judges
French CJ
Gummow J
Crennan J
Kiefel J
Bell J
Appeal from
Federal Court of Australia
Andrews v Australian and New Zealand Banking Group Limited
[2011] FCA 1376 ➤
Judge
Justice Gordon
Issues
Penalty clauses
Link to decision
AustLII ➤
Citator
LawCite ➤
Copyright
Judgement summary © Commonwealth of Australia and reproduced in accordance with the High Court copyright notice.
Overview
This case related to a representative action brought by around 38,000 members against the ANZ bank alleging unconscionable conduct and unfair terms, amongst other things.
For purposes of this proceeding, the relevant issue related to whether or not certain provisions in contracts between the ANZ and customers were void or unenforceable as penalties. The relevant provisions related to over limit and late payment fees.
After being remitted to the Federal Court it was renamed Paciocco v ANZ (but still represented the same action). That case eventually returned to the High Court (see further reading below).
High Court
French CJ, Gummow, Crennan, Kiefel and Bell JJ
A joint judgment was delivered.
[10] In general terms, a stipulation prima facie imposes a penalty on a party (“the first party”) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation. If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation. The first party is relieved to that degree from liability to satisfy the collateral stipulation.
Further details to follow. See further resources for some great overviews of the case - including what followed in Paciocco.
Judgment summary
The following judgement summary was released by the Court:
6 September 2012
ANDREWS v AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
[2012] HCA 30
Today the High Court granted leave to appeal against a decision of the Federal Court of Australia and allowed the appeal. The Court held that the fact that particular fees were not charged by the respondent, Australia and New Zealand Banking Group Ltd ("the ANZ"), upon breach of contract did not render the fees incapable of being characterised as penalties.
The applicants, approximately 38,000 group members, commenced representative proceedings in the Federal Court of Australia. They sought, amongst other remedies, declaratory relief that certain provisions between each of them and the ANZ were void or unenforceable as penalties. On that basis, the applicants claimed repayment of fees charged to them by way of "honour fees", "dishonour fees", "late payment fees", "non-payment fees" and "over limit fees" (collectively, "exception fees").
The applicants asked the Federal Court, by way of separate questions, whether the exception fees were payable by the applicants upon breach of contractual obligations owed to the ANZ, and, in the alternative, whether it had been the responsibility of the applicants to see that the circumstances occasioning the imposition of the exception fees did not arise. If either question was answered in the affirmative, the applicants then asked whether such fees were capable of being characterised as penalties.
On 5 December 2011, the Federal Court held that only the late payment fees were payable upon breach of contract. Following the decision of the New South Wales Court of Appeal in Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292, the primary judge held that the penalty doctrine was limited to breaches of contract and thus could only be applied to the late payment fees. The applicants sought leave to appeal to the Full Court of the Federal Court of Australia.
On 11 May 2012 the High Court, acting pursuant to s 40(2) of the Judiciary Act 1903 (Cth), removed the application for leave. A question before the Court was whether the Interstar decision correctly stated the law with respect to penalties and whether the modern doctrine respecting penalties had become wholly a doctrine of the common law, rather than of Equity.
The High Court unanimously rejected the proposition that the penalty doctrine applies only where there has been a breach of contract. The question is one of substance rather than form. The Court also rejected the proposition in Interstar that the doctrine had been absorbed into the common law.
The fact that the honour, dishonour, non-payment and over limit fees were not payable for breach of contract did not prevent them from being characterised as penalties. It will be for the Federal Court on the further hearing of the matter to decide whether these exception fees are penalties.
This statement is not intended to be a substitute for the reasons of the High Court or to be used in any later consideration of the Court’s reasons.
Further resources
Coralling the penalties horse: Paciocco v Australia and New Zealand Banking Group Ltd ➤
Katy Barnett (High Court blog, 8 August 2016)
Paciocco v Australia and New Zealand Banking Group Ltd ➤
Martin Clark (High Court blog, 27 July 2016)
News: Most bank fees not illegal penalties ➤
Katy Barnett (High Court blog, 5 February 2014)
Bank fees back in court again ➤
Katy Barnett (High Court blog, 4 December 2013)
Andrews v ANZ - the High Court and the doctrine of Penalties ➤
Summary by King&Wood Mallesons (6 September 2012)