Fees? Not so simple: Andrews and ORS v Australia New Zealand Banking Group Ltd [2012] HCA 30 (6 September 2012).

Author:Robinson, Ludmilla K.


On 22 September 2010 the appellants commenced representative proceedings in the Federal Court of Australia against the Australia New Zealand Banking Group ('ANZ') pursuant to Part IV of the Federal Court of Australia Act 1976 (Cth). There were approximately 38,000 group members. John Andrews, Angelo Saliba and Geoffrey Field were the 'head' applicants, or representatives, for the group members. Their claim was based upon the premise that certain 'fees' charged by the ANZ are not, in effect, fees at all, but penalties imposed upon the Bank's customers and, as such, are void or unerforceable pursuant to the doctrine of penalties. As a consequence, the appellants further claimed restitution for money had and received of, in the alternative, damages.

At first instance, Gordon J held that the majority of the lees charged by the ANZ could not be characterised as penalties because the penalty doctrine cold only be invoked when the impost arose from a breach of contract or where there was no responsibility or obligation upon the appellants to avoid the events which triggered the imposition of the fees.

The appellants appealed against this finding to the High Court, which allowed the appeal with costs, determining that the penalty doctrine could be applied where there was no breach of contract of occurrence of an 'uncontrolled' event. The High Court remitted the matter to the Full Court of the Federal Court for determination as to whether the ANZ fees were penalties within the parameters discussed in its judgment.

In addition to the proceedings under consideration, six similar proceedings were commenced in the Federal Court against other Australian financial institutions, including the other major banks, bringing the total of represented litigants to approximately 170,000 and the total value of the claims in excess of $223 million.

Apart from the significance of the number of litigants involved in the representative actions, the ultimate effect of the High Court's decision and the subsequent findings of the Full Court of the Federal Court in this matter upon banking and finance practice, bank/client relations and financial institution profitability, cannot be overstated. (1)


The Federal Court proceedings were commenced in the Victorian Registry of the Federal Court (2) and claimed relief against:

fees identified as honour, dishonour, and non-payment fees charged by the ANZ in respect of various retail deposit accounts and business deposit accounts, and lees identified as over limit and late payment fees charged by the ANZ in respect of consumer credit card accounts and commercial credit card accounts. (3) Although the initial pleadings filed by the applicants contained a number of grounds upon which their claim was based, including unconscionable conduct on the part of the ANZ (4) and the use by the Bank of 'unfair' terms (5) in its contracts and which were accordingly 'unjust' transactions, (6) the principal emphasis of their claim was for:

  1. declarations that the disputed 'fees' were void or unenforceable as penalties; and

  2. the repayment of all or part of the disputed fees by way of restitution for money had and received or damages.

    In addition, separate questions were presented to the court for resolution. These questions included the issues of:

  3. whether the fees were payable by the applicants upon breach of contractual obligations and, or in the alternative,

  4. whether the applicants had a responsibility to ensure that the circumstances giving rise to the fees did not occur.

    As pointed out on appeal by the High Court in its judgment: 'If there was an affirmative answer to either of the alternative questions, it was then asked whether the fees were capable of being characterised as a penalty by reason of that fact.' (7)

    What had been conceded by the ANZ, and was therefore not in issue, was the fact that the disputed fees were not based upon an estimate by the Bank of the damage it would suffer should a breach of the Bank's requirements occur. It was therefore accepted by the parties and consequently by the court, that the fees charged were disproportionately high in relation to the costs incurred and the resultant loss suffered by the Bank.

    Gordon J, the primary judge, found that a late payment fee was payable on breach of contract and, as such, could be characterised as a penalty and was therefore void. In respect of the other fees, however, her Honour found that the charges were not imposed as a result of any breach of contract, nor did the applicants have a responsibility to avoid the occurrence of any event which would give rise to the imposition of the fees. Thus, these fees could not be brought within the ambit of the penalty doctrine. In arriving at this decision, her Honour followed the reasoning Interstar Wholesale Finance Pty ltd v Integral Home Loans Pty Ltd (8) ('Interstar').

    On 21 December 2011, the applicants filed an Application for Leave to Appeal in the Federal Court against part of the orders made by Gordon J. In January 2012, application was made by the applicants to have the Leave Application and the Appeal itself, if Leave were granted, removed to the High Court. On 11 May, the High Court granted the Application.


    A Grounds for the Appeal

    The appellants appealed to the High Court to set aside the findings, set out in orders 1 and 2 and as handed down by Gordon J in the primary proceedings on 13 December 2011:

  5. that the honour, dishonour, non-payment and over limit fees were not charged by the ANZ upon breach of contract by its customers; and

  6. that the customers had no responsibility or obligation to avoid the occurrence of events upon which these fees were charged, and

    accordingly, the fees could not be characterised as penalties. The effect of Gordon J's decision was to limit the application of the penalty doctrine to those instances where the fee was imposed as a result of:

    * breach of contract, or

    * the occurrence of an event which the appellants had no obligation or responsibility to control (i.e. an uncontrolled event).

    It could be argued this limitation of the penalty doctrine puts a 'block' upon equitable relief by confining it solely to the remediation of...

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