Andrews & Ors v Australia and New Zealand Banking Group Limited [2012] HCATrans 181

[2012] HCATrans 181

[2012] HCATrans 181

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne       No M48 of 2012

B e t w e e n -

JOHN ANDREWS

First Applicant

ANGELO JULIAN SALIBA

Second Applicant

GEOFFREY ALLAN FIELD

Third Applicant

and

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522)

Respondent

FRENCH CJ
GUMMOW J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 14 AUGUST 2012, AT 10.17 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC:   May it please the Court, I appear with MR J.A. WATSON for the applicants.  (instructed by Maurice Blackburn)

MR A.C. ARCHIBALD, QC:   May it please the Court, I appear with MR M.H. O’BRYAN, SC for the respondent Bank.  (instructed by Ashurst Australia)

FRENCH CJ:   Yes, Mr Gleeson.

MR GLEESON:   Your Honours, the place we had proposed to start is with the structure of the case which deals with the first five points on our outline and in the course of that exercise I will try and deal with the Court’s question in relation to the Metro decision.  In terms of the larger case in the Federal Court, the fees fall into two broad categories.  The first, which are not before the Court today, are the late payment fees.  The second, which are before the Court, are what are described as the overdraw or the overlimit fees. 

The fees are structurally and functionally similar save for one matter.  In each case the customer is obliged to pay a significant sum of money, say $35, if an event occurs which is within the customer’s control or responsibility.  In the case of the late payment fees the event is not making the necessary payment on your credit card on time and in the case of the present fees the event is not making sure there are sufficient cleared funds in your account when the bank is required to meet your instruction.

Now, that is the functional and structural similarity.  There is one possible difference which is her Honour has held that in relation to the first group of fees, the late payment fees, the condition has been made promissory whereas her Honour has held in relation to the overlimit fees, the condition has not been made promissory, the condition being, as I have said, to make sure you have sufficient cleared funds in your account.  The critical question of law that poses is whether the equitable doctrine of penalties is necessarily excluded where a condition over which the obligor has control or responsibility is not made promissory.

GUMMOW J:   Is not the difficulty in the second line of your outline when you say “when the customer calls upon”?  Why is not the calling simply an application for further accommodation?

MR GLEESON:   The way the condition is worded, your Honour, if there are insufficient cleared funds in my account on each occasion when the Bank is called upon to do X then the debt arises and I must pay the fee, so that the debt obligation has attached to it a condition which is in my control or responsibility to make sure I have sufficient clear funds in the account each day.

GUMMOW J:   But the Bank does not have to honour the cheque.

MR GLEESON:   The Bank does not have to honour the cheque and that will then come ‑ ‑ ‑

GUMMOW J:   Well, if it does, it is making some new arrangement.

MR GLEESON:   That will then come, your Honour, as I will try and distinguish between the honour and the dishonour cases – at the moment I was simply seeking to identify that whether the fees are late payment fees or overdraw fees ‑ ‑ ‑

GUMMOW J:   To put it another way, it is no breach by the customer in drawing a cheque which cannot be met.

MR GLEESON:  That is the question which her Honour has held as a matter of common law construction against us and that remains in the Full Court and we have not obtained a removal on that.  However, what the clause does, and I will hurry to it in a moment, is establish as a fundamental condition of the banker/customer relationship that there is an agreed position in relation to credit, either none or a certain amount and the clause says you must not overdraw, you must not go beyond that limit.

GUMMOW J:   Does it say that?

MR GLEESON:   Yes.  Perhaps I should take your Honours to the key clause.  If your Honours were to go to page 143 of the book ‑ ‑ ‑

FRENCH CJ:   Is this the clause set out at paragraph 12 of your submissions?

MR GLEESON:   I am sorry, your Honour, 12 of the ‑ ‑ ‑

FRENCH CJ:   Your submissions.

MR GLEESON:   Yes.  No, your Honour, it is the letter of offer which then leads to that clause.  In the letter of offer at 143 the starting point is the – there is an agreed credit limit of $1,000.  There is an interest rate and there is a credit fee.  If one comes to the top of the next page, next to “repayments”, it says:

Payments must be made –

mandatory language –

so the daily closing unpaid balance after processing of all transactions, interest and fees does not exceed your credit limit.

Now, in terms of creating a condition or a stipulation, placing the obligation upon the customer, it is hard to think of clearer language save if you added the words “and I hereby so promise”.  What it is said is that the repayments – that is by me – must be made to achieve a position where the daily closing unpaid balance after processing transactions does not exceed the credit limit and then the next sentence says:

The full balance . . . must be repaid on or before the end of the facility.

If your Honours drop down to about line 40, the default rate is that if you pay a higher four per cent per annum on any balance of the account in excess of your credit limit, that is then to be read together with the terms which follow, and the critical term is on page 152.

GUMMOW J:   When you say “which follow”, how are they connected to the letter of offer textually?

MR GLEESON:   At the top of page 145 they are incorporated and on page 152 in clause 8, the clause that ‑ ‑ ‑ 

GUMMOW J:   Is there anything in the documentation which says what happens if there is a disharmony between the terms of the letter of offer and the terms of the standard provisions which start at page 147?

MR GLEESON:   The sentence at the top of 145 says that not all the precontractual information is in the letter of offer, more can be found in the terms and conditions.  There is no express paramountcy ‑ ‑ ‑ 

GUMMOW J:   That says “pre‑contractual information”?

MR GLEESON:   Yes.  There is no express paramountcy clause, your Honour.  At page 152 in clause 8 it commences with language which is in harmony with the letter of offer:

You must not draw cheques or require payments that exceed your credit limit.

Again, mandatory language imposing the obligation on the customer and it could hardly be in stronger language unless it said “and I hereby so promise”.

What it then goes on to provide is what will occur if the customer requests a withdrawal or payment which would result in a breach of the condition in the first sentence of clause 8, and it says that the Bank has a discretion to allow that to occur ‑ ‑ ‑

GUMMOW J:   Where does it say that?

MR GLEESON:   In the second sentence ‑ ‑ ‑

GUMMOW J:   Line 4?

MR GLEESON:   Yes.

CRENNAN J:   That is an accommodation.

MR GLEESON:   The Bank has a discretion to allow an accommodation on terms and the short‑term accommodation has those four terms attached to it.  The interest goes up by the default rate of 4 per cent set out in the letter of offer.  The honour fee may be charged.  Each of those, that is, the overdrawn amount, the interest and the honour fee, is debited and then you must repay it all within seven days.  Then the default rate is further referred to in clause 9:

Your credit limit is . . . the maximum debit balance . . . which you may incur.

Now, again in terms of a condition or a stipulation, it is made tolerably clear what is the liberty which is accorded to the customer under the contract and if you exceed the credit limit then the default interest rate is payable.  If your Honours could go to page 154 at clause 14, where certain events of default occur the Bank can require immediate repayment in full of the money you owe and the events of default are defined.  Some are contractual and some are not.  The second bullet point says:

if there is any breach of any term or condition of this facility –

It would appear the Bank is framing it that a breach of the condition in clause 8, namely drawing cheques over the credit limit, is a breach of condition which allows the Bank to terminate the facility in full.  In clause 15 over the page where you breach you are required to pay expenses and the second sentence says:

These expenses include . . . expenses resulting from dishonour of a cheque or payment.

KIEFEL J:   Clause 8 does not say that there is a breach of condition if they exceed the limit.  It says that ANZ will charge fees (by way of accommodation) if the limit is exceeded and the repayments provision at page 144 really says no more than you must keep the account in credit.

CRENNAN J:   May I just add to that, because I think it is to be added, does the document you are showing us deal exclusively with the circumstances in which the Bank itself does not allow any breach of the terms of the contract because when a customer attempts to overdraw, say, a retail account by a direct debit, the Bank does not permit that to happen, where is the charges that flow from that?  I think you call it a dishonour fee, do you not?

MR GLEESON:   Yes.

CRENNAN J:   Where is that dealt with in the contract?

MR GLEESON:   It is dealt with in the third document I was coming to which commences at page 161 which is the product disclosure statement required under the Corporations Act.  Just as a cross‑reference, her Honour has explained the statutory role of the PDS in paragraph 95 of the judgment.  It is a mandatory document which must set out all relevant information, particularly in paragraph (f) of all the “terms, conditions and obligations attaching to the product” under sections 1013C and following of the Corporations Act.

FRENCH CJ:   What is its contractual effect?

MR GLEESON:   It is deemed by law to be a part of the contract and if one asks about paramountcy it probably takes paramountcy because it is –

FRENCH CJ:   Because it has statutory force – or is backed by the statute.

MR GLEESON:   Force - and is required to set out everything you need to know about your contract.  It is in that document that the relevant right of dishonour and the consequence is referred to.  It is page 167 in the second column:

At the bank’s discretion, a cheque may be dishonoured or payment refused where –

and then the first situation -

there are insufficient funds in the account –

Then at the bottom it says:

ANZ may charge a dishonour fee.

Then, over on page 169 at the end of clause 2.7:

A Dishonour Fee is also charged if you authorise a third party to direct debit your account and payment is not made because there are insufficient cleared funds –

and likewise with the non‑payment fee.

GUMMOW J:   So that deals with the merchant?

MR GLEESON:   Yes, that deals with the merchant and the last subparagraph, your Honour, deals with the case where the customer has given the instruction in advance to the Bank.  So, putting those three together, if you issue a cheque which is presented to the Bank on a day when there are insufficient cleared funds, if you have authorised the merchant in advance to present on such a day, or if your direct instruction electronically to the bank is to be met on a day when there are insufficient cleared funds, the dishonour fee may be charged.

Your Honours will observe there that there is no duty of any sort imposed upon the Bank before it dishonours.  It has an absolute discretion to dishonour if there are insufficient funds on the relevant date.  Then, for the final step which is the fee, if your Honours go to page 175, section 5 is the right to impose the fees. 

FRENCH CJ:   You have passed over 2.12 at 171.  That is the discretionary charging of the honour fee where accommodation is made.

MR GLEESON:  Yes, yes that is the other repetition of the ‑ ‑ ‑

FRENCH CJ:   And which is what appears in the terms and conditions?

MR GLEESON:   Yes.  Your Honours see in 2.12 ‑ ‑ ‑

GUMMOW J:   That is what appears in paragraph 12 of your submissions.

MR GLEESON:   Yes, your Honour.  Paragraph 12 has the language – it is a condition that you must not overdraw your account without a prior arrangement and, whether that is promissory or not, which is what her Honour looked at, we submit, is clearly at least being made a fundamental stipulation of the arrangement and it is the breach of that condition ‑ ‑ ‑

GUMMOW J:   But, it is headed “Provision of Credit”.

MR GLEESON:   Yes.

FRENCH CJ:   The honour fee may be charged – that is expressed in discretionary terms ‑ ‑ ‑

MR GLEESON:   Yes.

FRENCH CJ:   Is there evidence about automatic charging of an honour fee in every case?

MR GLEESON:   Not squarely, your Honour, because that was deferred to look at stage two of the matter which is whether there was any ‑ ‑ ‑

FRENCH CJ:   I see.  This is just looking at the question of capability of ‑ ‑ ‑

MR GLEESON:   Capability and in terms of whether we even got in the door and in any event that is the condition and then if you breach that condition, there are at least these consequences – on page 185, in the second column under heading “Cancellation of Cards or Electronic Access”, they can terminate your electronic access and your card if, dropping down:

the account has been overdrawn, or you have exceeded your agreed credit limit –

and then, under the next heading, “Withdrawal of Electronic Access”, it is framed slightly more broadly, they can withdraw electronic access if – third bullet point:

any one of the accounts is overdrawn or will become overdrawn –

So it would seem that if you do not have the sufficient cleared funds there, the Bank can dishonour your instruction without any legal duties being imposed on it.  It can terminate your electronic access and then it can impose the fee.

CRENNAN J:   Was there evidence about the processes involved in relation to the dishonour fees?

MR GLEESON:   I can only show your Honour from a bank statement how it happens, but the process of whether the Bank simply does it automatically where you have exceeded by a certain amount, whereas if you are a lesser amount over the limit, you might be given the temporary honour fee, that really has been left for ‑ ‑ ‑ 

CRENNAN J:   Another day.

MR GLEESON:   ‑ ‑ ‑ another day.  One might infer from the documents that there is a computer program in place which says you have a certain amount of leeway for which you pay under the honour fee and then beyond that the Bank dishonours, but that is for another day.  The fees booklet is at page 190 and at page 195 in the middle of the first column, the dishonour fee is:

Charged to your account on the day of the dishonour, when any payment on your account . . . is dishonoured due to lack of cleared funds in your account.

So at least with respect to the dishonour fee, our analysis is that there is a condition of this arrangement that you must have sufficient cleared funds in your account, you become bound to pay $45 where you have failed to observe that condition and the Bank takes the self‑help remedy of dishonour.  In that circumstance no accommodation is being provided, you are being charged the $45, we wish to submit at trial, as a deterrent and a punishment against allowing your account to be operated in this fashion.  Our central point is whether the condition had a promise attached to it or not.  Equity would ask the fundamental question, is the purpose of the $45 within this arrangement a deterrent or a punishment against you allowing this circumstance to occur that you do not have sufficient cleared funds in your account on the relevant date?

FRENCH CJ:   So, if you like, the base upon which we are asked to look at characterisation of the dishonour fee and application of the relevant doctrines is that there is an attempt to draw beyond limit – the terms and conditions provide that in the event of an attempt to draw beyond limit which is refused by the Bank there will be a dishonour fee and it will be that much?

MR GLEESON:   Yes.

FRENCH CJ:   That is it beyond the text, we do not go beyond the text of the terms and conditions?

MR GLEESON:   That is correct, your Honour, and then the assumption for the removal application is that that breach of condition by the customer which created that event is not a breach of a promise.  So we take that as found against us.  Then apart from that, we say it is the fact that it was not worded as a promise, a fatal roadblock to a court inquiring into whether in all the circumstances which would go to trial, the purpose of that $45 was to deter ex ante a customer from operating the account in this fashion and ex post was to punish a customer who did so and punish to the unjust enrichment of the Bank.  That is the question.  I apologise for the shocking print.  With the honour fee it says:

Payable on each occasion that ANZ honours a drawing where sufficient cleared funds are not available in the account or where the credit limit on your account is exceeded.  The Honour fee is payable on the date of the excess and drawings include those made at a branch by cheque or electronic banking.  Electronic banking includes Internet, Phone, EFTPOS, Periodical Payments, Direct Debits and ATMs.

GUMMOW J:   Now, the dishonour fee on page 195 links back to page 167, is that right?  You took us to page 167.

MR GLEESON:   To 167 and 168.

GUMMOW J:   Whereabouts in 168?

MR GLEESON:   In 168 – I am sorry, 169 just above section 2.8.

GUMMOW J:   Yes, thank you.

MR GLEESON:   Your Honours, could I then go ‑ ‑ ‑

GUMMOW J:   Just a minute.  Where is the honour fee linked back to?

MR GLEESON:   The honour fee is linked back to page 152, clause 8, and by repetition it is linked to page 171 at clause 2.12.

GUMMOW J:   It is bullet point 2 in clause 8.

MR GLEESON:   Yes, bullet point 2 in clause 8 and by repetition page 171, clause 2.12, second bullet point.  The other aspect that I need to identify before coming to Metro is in terms of how the Bank sought to defend the case of penalty there is what we call the roadblock proposition, if it is not promissory it cannot be penalty and then, if the Bank were wrong on that, their substantive defence your Honours will see at pages 127 to 128.

In their paragraph 55 they commenced by the admissions that we seize upon that the quantum of the fees were determined by them so they were unilaterally determined.  There is no question of there being true bargaining over the fees.  Then importantly they did not determine the fees by reference to what would be recoverable as unliquidated damages.  So the usual defence is not taken.  What is taken, in paragraph (c), is an alternative performance‑type defence that you are paying the fees for something, and what is the something - the service.  They say over the page that the service includes the assessment of your request ‑ ‑ ‑

GUMMOW J:   Sorry, where are you reading from?

MR GLEESON:   The top of page 128.  Then they say it includes your request for processing and then they say in relation to the honour fees it includes the accommodation. 

FRENCH CJ:   Now, are these fees, under the terms and conditions, able to be varied unilaterally by the Bank?

MR GLEESON:   Unilaterally, so that, in our submission, where the true debate legally ought to be if the matter is permitted to go to trial is let us take the dishonour fee – which is our best case obviously – I operate the account wrongly in a sense, I do not have enough money in there.  The Bank does what it is entitled to do without any legal requirement, dishonours the instruction, charges me $45.  There is no accommodation.  The Bank wants to say I am getting something, I am paying for the pleasure of having my cheque dishonoured and what we would then wish to explore at the trial, in terms of that being a penalty, is that we would have at least five matters we would be putting forward. 

One is the sheer size of the amount.  The second is the Bank’s admission that it is not in any way referable to the loss.  The third is that there may be no loss or trivial loss to the Bank.  I may be one dollar over or a day late and the fourth is overall that the true purpose of it within the relationship is to deter me from allowing that event to occur.

In relation to the honour fee, we must accept that if we are permitted to go to trial, the Bank has an additional argument which is that it is giving us some accommodation and the Bank wishes to argue you are not paying for nothing – you are paying for the accommodation you get and the $29.90 is the price.  If you choose to go over the limit and the Bank chooses to grant you the accommodation that is just contractual bargain. 

What we would wish to argue at trial in respect to the honour fee is that in substance this is not a case of true alternative performance.  This is really a case where the Bank is receiving more than full compensation for the temporary accommodation, namely the rise in the interest rate by four per cent, and the purpose of the fee is really exactly the same as it is in the dishonour case, which is for the customer to keep the account within the agreed limit.

FRENCH CJ:   But as framed in the terms and conditions – I am looking at 152, paragraph 8 – the honour fee is cast as consideration or part of the consideration:

may be charged for ANZ agreeing to honour –

et cetera.

MR GLEESON:   Yes, and so, as we have sought to indicate in our note in paragraph 5, our case is strongest with the standard dishonour fee where we say no accommodation, no true alternative performance exception where we are paying something for something and the purpose is deterrence.  In relation to the honour fee, what we wish to argue is that the form disguises the substance and the substance of it is a disguised penalty which again is acting as deterrence, particularly because the Bank has pre‑liquidated the compensation it needs, which is the jump in the interest rate. 

CRENNAN J:   But the accommodation remains quite a difficulty in the context of that argument, does it not?

MR GLEESON:   There is a difficulty over and above the dishonour fee.  I must accept that. 

CRENNAN J:   Yes.

MR GLEESON:   The inquiry, we submit, which is to be had is whether the form is a disguise of the substance which is that what you are getting is supposedly a short seven‑day accommodation at the end of which you are then in breach if you have not repaid it.  You are paying four per cent higher interest which is the compensation the Bank has assessed for the additional accommodation and we make no claim about the four per cent.  At some point, that default interest will clearly, we would say, step over into penalty.  We do not claim four per cent is so clearly extravagant and unreasonable that it crosses the line. 

The feature of the default interest which in principle justifies it is that the default interest is proportioned to the accommodation.  It is charged for each day you are over and it is charged on each dollar you are over.  So given that the Bank has in advance extracted the compensation we submit it is entitled to for the additional accommodation, one is then left with the question, why also the $29.90 fee.  In circumstances where the Bank does not – I have shown you paragraph 55 – say that the $29.90 is any way estimated by reference to what is recoverable as unliquidated damages, at the moment the position appears to be it is being extracted for nothing because the accommodation is being compensated for by the four per cent.

BELL J:   But the fact of the arrangement and the provisions of clauses 8 and 2.12 in the product disclosure statement tend against the contention that is agitated in your fourth ground of appeal.

MR GLEESON:   If your Honour is framing that question in terms of the honour fee as opposed to the dishonour fee ‑ ‑ ‑ 

BELL J:   Yes.  I am directing your attention to the provision that is made in contemplation that you may exceed your credit limit. 

MR GLEESON:   Yes.

BELL J:   It is just there is some difficulty in seeing that as consistent with a view that the obligation to pay the honour fee was imposed to secure the performance of a principal object of the transaction, namely, that the customer would at all times ensure the conduct of the account did not result in a request of that character which the Bank in its discretion chooses to honour conformably with the contractual arrangement.

MR GLEESON:   Yes.  I recognised it is harder with the honour than with the dishonour.

BELL J:   Yes, I understand.

MR GLEESON:   What I am really adverting to as the way in which we would wish to advance the attack upon the honour fee is that in form it looks okay.  What is actually happening, though, with the honour fee in circumstances where the Bank has extracted the compensation it says it properly requires for the additional accommodations, the four per cent, it leaves then a question of, what role is the obligation to pay the $29.90 paying within the relationship given that the compensatory function we would say has been determined? 

Then if one at that point then goes back and recognises the customer does not control whether the Bank chooses to dishonour or to honour and you then put both these together, basically what is being said is if for whatever reason I operate my account such that I do not have the cleared funds in there at the end of each night, I will be subject to a substantial fee; 45 one way, $29 the other way.  The Bank will decide which and they will decide whether to give me the short-term accommodation.  If one puts the two fees together, is the effect in both cases, given the customer cannot control the Bank’s response, one that has strayed into deterrents?  That is the way we would wish to put that, your Honours.

KIEFEL J:   Is it necessary for you and do you rely upon this purpose or object of these conditions as operating as deterrents?

MR GLEESON:   Yes.

KIEFEL J:   Do you need to do that?  If the object was to extract fees would not that suffice?

MR GLEESON:   For our case, your Honour?  If the object was to extract fees for which ‑ ‑ ‑

KIEFEL J:   Which are not truly for services.

MR GLEESON:   Which are not truly for services and for nothing then that, one would think, would take one a long way into ‑ ‑ ‑

KIEFEL J:   The reason I ask you is that the notion of deterrence does not operate so well in the context of the honour fee and not the least because it is not necessarily in the Bank’s interest to deter people from requesting further accommodation.

MR GLEESON:   Yes.  If we were correct in our premise that in the dishonour fee case you get nothing and in the honour fee case while you get this small amount of accommodation that has been compensated for by the four per cent you are left with saying, “On what basis is the Bank extracting from you the fee?”, whether it be the larger one - or the slightly larger one and if no basis is left underneath that as a genuine service that is being provided the question then in the Court of Equity would be, we submit, while you are purporting to rely upon a legal right, a right to a fee, when you can provide no underlying basis within the banker/customer relationship for that fee is that a conscientious demand?

FRENCH CJ:   So the way it works is the customer exceeds the limit or overdraws.  That could be characterised as an instruction or a request to the Bank to make the accommodation.  If the answer is no it is an automatic dishonour fee.  If the answer is yes it is an honour fee, in terms discretionary but in fact an honour fee which is fixed in the disclosures.

MR GLEESON:   Yes.

GUMMOW J:   Following the Chief Justice’s question, how does your outline 5c then fit in, “The attempt to reword the documents in 2010”?

MR GLEESON:   Yes.

GUMMOW J:   You say there is a fictional request and a suggested obligation to consider?

MR GLEESON:   Yes.

GUMMOW J:   Do we need to be aware of that?

MR GLEESON:   I need to show your Honours the terms of that.  Your Honours will see from the attachment to our outline in our attempt to assist with the Court’s question we have grouped the fees.  If - at the bottom of the page - we were permitted to go to trial at least on the dishonour fee, the case can be decided on exception fee No 1 and 4214 and 17 follow the track.

GUMMOW J:   You have been taking us to examples of fee 1?

MR GLEESON:   Yes, and to fee 3 above it which is the honour fee hinging off the same thing.

GUMMOW J:   Yes.

MR GLEESON:   So your Honours see that for the period of the major claim in the Federal Court which is 2003 through to, say, 2010, up until 2010 all the documents are in the old form.  In 2010, with the new drafting, the Bank came up with a different idea.  If I could invite your Honours, following that document, to go over to paragraph 343 and following.

KIEFEL J:   I am sorry?

MR GLEESON:   Paragraph 343 and following.

GUMMOW J:   Of what?

MR GLEESON:   Of the judgment, page 339 of the book.  It starts at the same place:

At the Bank’s discretion, a cheque may be dishonoured or payment refused where:

Ø    There are insufficient funds . . . 

ANZ may charge a dishonour fee.

So it looks like it is at least the same in relation to the dishonour.  Then the new drafting is 344 which is the so‑called informal overdraft facility which is said to arise if there is a debit to your account, excluding periodical payments.  So they are not – it seems from that, to come back to one of your Honour Justice Crennan’s questions, that for periodical payments there will be dishonour always.  If it would result in your account being overdrawn, then if you initiate such a transaction, you are deemed to request the informal overdraft, and then the next sentence is where we wish to submit that fiction has triumphed:

will consider your request and assess your eligibility for an Informal Overdraft based on ANZ’s credit criteria -

an undefined term which in the PDS has no content.  The PDS is meant to set out all the terms and conditions at law.  If a customer wants to know what is the content of the obligation to consider the answer is it is illusory:

You will be charged an Informal Overdraft Assessment fee for this service -

So the new idea is it is a fee for service and they have moved away expressly from the idea it is a fee for accommodation because they are trying to somehow capture both dishonour and honour.  When you come to the bottom of the page, you now have the honour fee identical in amount to the dishonour fee.  The first is:

Charged for considering a request for an Informal Overdraft where you satisfy –

the undefined criteria.  The second, the dishonour fee:

for considering a request for an Informal Overdraft where you do not satisfy –

the undefined criteria.  So the fiction that we submit that is occurring there is there is no legal content to this obligation to consider.  A customer cannot know what are the so‑called credit criteria by which it is governed.  You pay the same fee whichever way they go.  It is now not being tailored to the accommodation as such because you pay it whether they grant you the accommodation or not.  It is a fee supposedly for a service with no content.

FRENCH CJ:   When you say “a service with no content”, you mean no defined content?

MR GLEESON:   No defined content.  That will be the ‑ ‑ ‑ 

FRENCH CJ:   Is that a stage two question?

MR GLEESON:   Ultimately it will be a stage two question.  That is my prima facie case for trial on why it has no content, that the term is undefined in a PDS that is meant to define everything, therefore there is no qualifying or conditioning of the consideration, therefore there is no real consideration.  The Bank will be free to try and say that this is a real service.  What is interesting is that by this attempt to reframe the service away from the accommodation and into the consideration, in one sense they may have gone backwards rather than forwards because it is all going to hinge on whether there is a genuine service.

What that leads us to is our primary proposition that if the breach of contract roadblock is removed, here we have a clearly identified issue for trial even in respect to the Bank’s best efforts to rework the material to suggest the customer is getting something for the fee.

KIEFEL J:   So for the purposes of these proceedings you say that really the only issue is the removal of the notion that this is all dependent upon breach of contract?

MR GLEESON:   Yes.

GUMMOW J:   But looking at your draft notice of appeal on 394, that is really expressed in various ways in grounds 1, 2 and 3 ‑ ‑ ‑

MR GLEESON:   Yes, and in our submission the only ‑ ‑ ‑

GUMMOW J:   The problem there is that the primary judge was under the authority of Interstar, I suppose, as a trial judge ‑ ‑ ‑

MR GLEESON:   Yes, and bound to follow it and ‑ ‑ ‑

GUMMOW J:   Therefore, getting to your point 4, I think perhaps Mr Archibald will be saying that as to the honour fee, they are incapable of being characterised and there is nothing to go to trial.

MR GLEESON:   Yes.

GUMMOW J:   But if 1, 2 and 3 are out of the way, you both may be ad idem in that there is a ground to go to trial as to the dishonour fee.

MR GLEESON:   Yes, and we are clearly stronger on the trial ground there on the early documents for the reasons we have discussed and in relation to the honour fee I have sought to capture what is the triable issue.  If you have removed the breach of contract roadblock, we are looking at whether what in form is a fee said to be for accommodation really is deprived of that character because the accommodation has been compensated for by the four per cent and then, as I have sought to show your Honours on the reworked documents, because the Bank has shifted its ground and is trying to identify a different service which covers both honour and dishonour, it is appropriate for both to go trial because the question we will be testing is whether this fictional obligation to consider is something for which you can pay $37.70 whatever the outcome.

I should just say while your Honour Justice Gummow has referred me to ground 4 to deal with it in advance, another point that Mr Archibald seeks to make is, even if we were right on 1 to 3, we have somehow got findings of her Honour against us on 4 even on the contingent basis that she did not think it was open to her.  We have dealt with that in our written submissions but it really hinges on ultimately one paragraph of the judgment which is paragraph 191.

GUMMOW J:   At page?

MR GLEESON:   Page 297.

GUMMOW J:   Thank you.

MR GLEESON:   That is the rejection of the alternative case.  Her Honour has two lines of reasoning.  The first is she repeats what is in 73 to 74.  That is the statement that it is just not open in law.  Then she says:

In any event, I do not accept that Exception Fee No 3 is analogous or similar to a traditional money bond.

Her Honour is drawing a distinction in the last sentence between this case and the traditional money bond and our short point is that nothing in the last sentence has gone to the merits of the case that we are framing assuming Interstar is wrong.

The fact that it is within a single contract, it can be charged more than once and in circumstances where the customer can terminate the contract, if you like, none of those matters, individually or collectively, have addressed the two critical questions – is this a condition which has been placed under your control or responsibility and does it otherwise have the features of a penalty? 

KIEFEL J:   Could I just take you back to your ground 4 which, I think, refers to the principal object of the characterisation of the fees as penalty because they were:

imposed to secure the performance or enjoyment of a principal object of the transaction ‑ ‑ ‑

MR GLEESON:   Yes.

KIEFEL J:   The object of the transaction, I think on your submissions thus far, is the maintenance of the account within limits by the customers.

MR GLEESON:   Yes.

KIEFEL J:   But it is the Bank that maintains the account within limits because it does not have to provide anything more.  This is where, I think, we might be trying to put a round peg in a square hole.

MR GLEESON:   Yes.

KIEFEL J:   I do not think we are talking about the realities, perhaps, of the situation.

MR GLEESON:   Yes.

KIEFEL J:   The customer, it is true, is obliged to promise other third parties that they will not be paying any more moneys than they have in their account and, I suppose, there is a promise to the Bank that – well, I do not think there has to be a promise to the Bank.  The customer has a finite credit limit and it is the Bank unilaterally which is controlling the account and the provision of further money or not.  So we are really just talking about fees imposed, either for a service or not a service, on one view, are we not?

MR GLEESON:   Your Honour, I should make clear that within the case that we wish to take to trial, paragraph 4 is not the entirety of the case.  It is one way we wish to put it, but if your Honour were to go to page 62 of the book to see the actual case in its articulation, it does embrace, I wish to submit, the broader notion your Honour has said of is there any basis upon which the fee is being extracted.  In paragraph 52 of the pleading, the starting point was that the fees were penalty because:

the quantum of each Exception Fee was not a covenanted or agreed sum which could be regarded as a genuine pre‑estimate of the damage likely to be caused by the breach –

“Breach” is there being used in the sense of breach of the condition – that is, of not keeping the account with sufficient cleared funds and then there are a number of particulars to that.  The fee was not agreed through a true bargain.  The point the Chief Justice raised with me, they changed the fee as they liked from time to time.

GUMMOW J:   Where do we see that?

MR GLEESON:   Paragraph 52(a)ii.

GUMMOW J:   Yes.

MR GLEESON:   The third one was that the quantum was determined by one party without reference to recoverable and liquidated damages.  That is the one we have the express admission on.  Paragraph 52(a)iii sees the express admission on page 127.  Then, over the page, (b) puts it slightly differently and then (c) which seeks to pick up the language of Dunlop and Ringrow, is that the quantum is:

extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

Some particulars are given of that.  Then in those particulars, your Honours will see at the top of page 64, paragraph c.  That goes back and picks up some earlier allegations, particularly paragraph 19 on pages 34 and following.

FRENCH CJ:   Now, the relief you are seeking is simply in relation to this limb of the case.  I know there were all sorts of statutory claims.  There was declaratory relief under section 21of the Federal Court Act, is that right?

MR GLEESON:   Yes, and then monetary relief primarily by way of an account where the court would reconstruct in the correct manner the account ‑ ‑ ‑ 

FRENCH CJ:   The penalty provisions were void and then you were entitled ‑ ‑ ‑ 

MR GLEESON:   Yes.  Reconstruction of the account as if the fees had not been charged and the interest had not been debited.  There is a separate question where of course – Interstar is also controversial – where Interstar said that penalty is now solely a doctrine of law, it solely leads to unenforceability or voidness ab initio and it is all or nothing if they have shot themselves in the foot with a penalty.

FRENCH CJ:   I just wonder whether your relief was on that premise.

MR GLEESON:   We have sought to cover both by saying we have claimed in Interstar terms that we simply have the full amount back, but we have also recognised the possibility that relief might be conditioned in an equitable manner.  Your Honours will see that, for example, on page 6.  At the foot of that page there is an alternative claim that we recover the amount by which the fees charged exceeded any actual damage they can prove, if any, and ‑ ‑ ‑ 

FRENCH CJ: They are orders under the ASIC Act and the Trade Practices Act, are they not?

MR GLEESON:   Yes.  I will just find the parallel under the equity ‑ ‑ ‑ 

FRENCH CJ:   I am not sure it is there.  I could not see it.

MR GLEESON:   Yes.  It is in the body of the main document, your Honour, it may need to be ‑ ‑ ‑

GUMMOW J:   Page 4, is it, “a declaration pursuant to section 21”?

MR GLEESON:   Yes.  That is the declaration that is said to capture the two ways of dealing with it.  That is picked up in the pleading at page 65, paragraphs 60 and 61.  The form of relief by way of accounting is pleaded on page 67.  The Bank has also made an affirmative plea on those lines in the alternative, which is on page 134, paragraph 99.

KIEFEL J:   Where is the claim in equity then?  You took us to the paragraph dealing with the claim arising if there were a breach of contract, but if that is not really the position where is the claim in equity?  Is it paragraphs 64 and 65?

MR GLEESON:   That is the claim in the ‑ ‑ ‑

KIEFEL J:   In 63 to 65.

MR GLEESON:   In the body of the document that is the claim and they hinge off paragraph 55 through to 59 ‑ ‑ ‑

FRENCH CJ:   When you say the body of the document are you referring here to the fast track statement?

MR GLEESON:   Yes.

KIEFEL J:   What is the legal right referred to in paragraph 64 as the “unconscientious exercise of those legal rights”?

MR GLEESON:   The right to claim the fees as a debt, a right which ‑ ‑ ‑

KIEFEL J:   How does the right arise?  How does it arise legally?

MR GLEESON:   Through the contractual relationship which has the statutory underpinning bringing in the PDS.

GUMMOW J:   It is 65, is it not, money had and received?

KIEFEL J:   Yes.

MR GLEESON:   Yes, that is one of the simplest ways in which it is put and had and received in the sense that because they administer the account they have taken them.

KIEFEL J:   So it is a claim in restitution.

MR GLEESON:   We wanted to be a little open about it ‑ ‑ ‑

GUMMOW J:   The reason why it is held to the use of the customer is that it is exacted as a penalty.

MR GLEESON:   Yes, that is the simplest way of framing it and then ‑ ‑ ‑

GUMMOW J:   These pleadings sort of strangle themselves and ‑ ‑ ‑

MR GLEESON:   At least we included the right one, your Honour, hopefully.  But it is a case which is why we have 68 in there for the accounting where you really have multiple “money had and received” claims and the accounting would rework the account once those claims had been addressed.

KIEFEL J:   It is money had and received to the use of the customer because the amount claimed, both under the contract and then enforced by the Bank, took an unconscientious advantage of the customer at the contractual point, or at the point when the fee is applied or both?

MR GLEESON:   The answer is both.  The character of it as an unconscientious exercise of legal right strictly arises at the time the right is exercised, which is when the fee is deducted ‑ ‑ ‑

KIEFEL J:   It is unconscientious because no benefit is provided.

MR GLEESON:   No benefit is provided and one of the areas where the cases have got into difficulties is whether one treats penalties I have said as solely common law and, therefore, solely void ab initio, or whether one leaves room for the equitable approach that it is about the unconscientious exercise of the right ‑ ‑ ‑

GUMMOW J:   They were never void solely ab initio at common law.

MR GLEESON:   That is our submission, your Honour.

CRENNAN J:   Unenforceable.

MR GLEESON:   Unenforceable and even then the common law and the statutes followed equity and rendered them unenforceable to the extent that they exceeded what was a permissible security purpose within the transaction.  The whole point of the statutes, of course, was that you could get your judgment for the full amount, but you could only execute your judgment for the amount proven to be justly payable, in the light of the breach of condition.

GUMMOW J:   I think the common law courts long before 1873 at the beginning of the 19th century started to direct juries in an action at common law in assumpsit with the measure of damages they would award would be limited. 

MR GLEESON:   Yes, your Honour.

GUMMOW J:   To what would be the ultimate result, if you have gone over to Chancery and got an order for quantum damnificatus back in common law.

MR GLEESON:   Yes, we agree with that your Honour.

CRENNAN J:   But the enforceability is limited to the damage suffered.

MR GLEESON:   The damage suffered which can be assessed ‑ ‑ ‑

GUMMOW J:   Yes, so if the common law courts are attacking the business by reaching the same result and by directing the jury accordingly.

MR GLEESON:   Yes, we accept that, your Honour.

CRENNAN J:   Just applying some of the things you have said, Mr Gleeson, I am sorry to come back to this.  You might have said all you want to say about it, but I must say I am having the greatest difficulty in relation to the honour fees of understanding why they are unconscientious or why you say they have got something to do with the pre‑estimate of damages, whether it is genuine or not, when it is prima facie open to characterise them as the price of a benefit, or the price of a service, or the price of accommodation.  It does not really matter which word you use.

MR GLEESON:   Well, I have drawn the distinction between the drafting changes of the early and the late ‑ ‑ ‑

CRENNAN J:   Yes, I understand that.

MR GLEESON:   ‑ ‑ ‑ and, the late seems to have moved away from the ‑ ‑ ‑

CRENNAN J:   Accommodation.

MR GLEESON:   ‑ ‑ ‑ accommodation and back to the idea of the consideration request and that is our attack on that as being a genuine reflection of something happening in the real world.  In relation to the earlier ones ‑ ‑ ‑

CRENNAN J:   But the price of a benefit or an accommodation, or a service, if that is what one must focus on, is a very different concept from the concept of a pre‑estimate of damage, genuine or not.

MR GLEESON:   Your Honour, we completely accept that in principle, and one of the points we were seeking to make was where the law has gone wrong in some of the cases, is to say that because penalty has been squeezed down into the box of “you must have a breach of contract before you can have a penalty” the only alternative to penalty is then, is this a genuine pre‑estimate of damage.  They are the only two alternatives you can consider.  One of the very reasons that is a wrong binary divide is that, in some cases, which the honour fee is a good example, the true alternative for why it is said to be proper is not about pre‑liquifying damage from breach, but it is about saying, you had a choice to pay more for something extra and you have got what you bargained for. 

So unless it is an improvident bargain which equity might relieve under some other head, tough luck.  So I would accept from your Honour’s questions that, in principle, one of the major reasons why the breach of contract limitation is wrong is that it does not allow one to consider either the breadth of the area where penalty can apply, or the breadth of the reasons why penalty may be excluded; so I accept all of that.  What we are left with is whether, at the level of a tribal issue we can do enough to persuade your Honours that, were we given the trial on that, there is an arguable case that this is not true alternative performance. 

GUMMOW J:   One of the cases I had in mind is a case called Kemble v Farren – Kemble as in the acting family - (1829) 130 ER 1234 at 1236 to 1237.

CRENNAN J:   Tab 26.

MR GLEESON:   That is in tab 26, your Honour, yes.  We accept that is a good example of where, as the 19th century was unfolding and contracts were starting to take more of a bilateral and written form, the action in assumpsit to recover a fixed sum of money as the liquidated damages was then considered to be penalty or not and Chief Justice Tindal confirmed that in this case it would fall into the penalty side of the line.  Where the parties radically differ is that we submit that this is an instance of the application of the penalty doctrine done by the common law courts and it is where you have an assumpsit for a breach of an undertaking but it does not subsume the entire universe.

GUMMOW J:   Over at page 1237 about point 4 the Chief Justice says:

the case being precisely that in which courts of equity have always relieved, and against which courts of law have, in modern times, endeavoured to relieve, by directing juries to assess the real damages sustained by the breach of the agreement.

MR GLEESON:   Yes.  What we are left with though is the respondent saying in answer to this because ‑ ‑ ‑

GUMMOW J:   It has nothing to do with the judicature system.

MR GLEESON:   No.

GUMMOW J:   This is 1829.

MR GLEESON:   Yes.  Indeed one of Lord Bramwell’s points was that the common law judges were so very equitable in what they were doing in the 19th century, they often did not expressly refer to the Statutes of William and Anne, they just applied the equitable principle at common law and got to what he described as usually the right result, sometimes in direct ignorance of the statutes.  We would submit that what one sees through the 19th century is this occurring at common law.  One sees in Exchequer, both on the equity side and the common law side, relief continues to be granted, and one sees in the pure equity side relief also continuing to be granted with the equitable principle being applied throughout and with breach of contract not being the defining feature of the jurisdiction.

GUMMOW J:   What the Court of Common Pleas could not have done would be to grant an injunction against an attempted enforcement of the penalty.

MR GLEESON:   Yes, and it probably could not have ordered the sort of – it could not have ordered an equitable accounting by a bill ‑ ‑ ‑

GUMMOW J:   Or a sophisticated accounting.

MR GLEESON:   A sophisticated account and where there had been multiple wrongful extractions, as we allege here, through the self‑help remedy it would have been the very case, we submit, where one would have gone to equity and said if we are right on the principle, the accounting process will give us the multiple “money had and received” outcomes together with their consequential interest effect.

GUMMOW J:   Anyhow, for a long time now it can all be done in the one court.

MR GLEESON:   Yes. 

GUMMOW J:   In Victoria for a long time, I would have thought.  That is one thing.  That is the notion that has withered on the vine or some metaphor that does not really work.  What do you then say, though, about this notion of condition, breach of a condition?

MR GLEESON:   Yes.  Our submission as per point 6 of the document ‑ ‑ ‑ 

GUMMOW J:   Which, in a way, is a distinct point.

MR GLEESON:   Yes.  Our submission as per point 6 is that the origin of equitable relief was in the case of breaches of condition which were not ‑ ‑ ‑ 

CRENNAN J:   Promissory.

MR GLEESON:    ‑ ‑ ‑ promissory and where the action at law, which was the subject of the relief, was primarily debt in which no breach of promise was being alleged by the plaintiff at law and where the Equity Court did not conduct a hypothetical inquiry, “Before I grant relief, can I be satisfied that the plaintiff at law could”, although he did not, he obviously did not, “frame an action in a breach of assumpsit?”  That was just never the question which equity asked.  So we submit the origin of the doctrine applied to breaches of condition.  When it came about that breaches of condition were sometimes also promissory, well, that was no obstacle to the doctrine also operating in that area, but it was ‑ ‑ ‑ 

GUMMOW J:   The condition had to be something susceptible of satisfaction by the obligee?

MR GLEESON:   Yes, your Honour, by the obligor, yes.

GUMMOW J:   Is that right?

CRENNAN J:   So whether third parties could have an effect really is not relevant to this area of discourse?

MR GLEESON:   I am sorry, your Honour.  I want to accommodate the ‑ ‑ ‑ 

GUMMOW J:   Suppose the bond said that, as an example given in one of the cases - in the 1790s it said in one of the cases if the Pope should seek refuge in Britain from the marauding French or something, that will be the condition.  Now, that is insusceptible performance, but not impossible, but it is not bound up with anything to be done by the party to the bond.

MR GLEESON:   We would submit that that is not within the category where equity developed this doctrine.

GUMMOW J:   Lord Kenyon said it was, I am afraid.  There are plenty of bonds like that surely.  I think you are confusing the notion of condition.  You are bound up with condition as a promise or something, promise by the promisee to do something, not a stipulation that if something happens, the bond will be activated.

KIEFEL J:   A condition on the occurrence of an event.

GUMMOW J:   Yes, exactly.  Provided the event is not impossible, that can be a good bond.  It is not impossible in the nature of things.

MR GLEESON:   Yes.  In the earliest case that we have found where – in fact, it was a common law court at least treating as doctrine, which is tab 1, Umfraville v Lonstede in 1308.  That was a case of debt on the bond and the underlying condition was the bond would be made void if the obligor on the bond delivered a certain writing on a particular day and the obligor had not performed strictly on time but had performed late and remained ready to perform the underlying matter or condition.  The approach of the judge, even at common law, was to interrogate the advocate for the holder of the bond rather severely – this is on the next page – that:

Moreover, this is not, properly speaking, a debt ; it is a penalty ; and with what equity (look you !) can you demand this penalty?

There is doubt as to what was the end result of the case.  One reading of the decision was that the case of law was adjourned for seven years – see the final comments – in order to give the hint to the holder of the bond that even the common law court would not look with favour upon this situation.

That is the sense in which we are seeking to use condition and it is at least broad enough to cover matters within the control or responsibility of the obligor on the bond.  Whether it has the broader scope may not be necessary to resolve for our purposes, but it does not have to be promissory is our basic point.

GUMMOW J:   The example given of the Pope seeking refuge in Britain from the revolutionary forces in Europe is given by Lord Kenyon in the case called Campbell v French (1795) 101 ER 510 at 516.

MR GLEESON:   Thank you, your Honour.

GUMMOW J:   There are plenty of other cases I am sure.

MR GLEESON:   Yes.  The other point we wish to ‑ ‑ ‑

GUMMOW J:   The point is that this notion of promise postdated the law of bonds.

MR GLEESON:   That is our submission, your Honour, and it also was never apt ‑ ‑ ‑

GUMMOW J:   This notion of promise in the sense of a contractual term which is either a condition or a warranty.

MR GLEESON:   Yes.  We would add to that, which is our point 6d, that the notion of a promise was always inapt to deal with the forfeiture cases which originally, at least, were very closely related to penalty.  We have handed your Honour as a separate bundle which commences with Fry v Porter (1669) referred to by the respondents - three cases, Fry v Porter which is a forfeiture case, Tall v Ryland which is a penalty case and then, finally, from 1675, Puleston, which is again a forfeiture case.  Clearly enough, in the forfeiture area there is no promise involved.  There is a conveyance on a condition and if the condition is not met then at law there may be a forfeiture and then equity relieves, assuming compensation is appropriate or not.

Your Honours will see in the last of those cases, Puleston, on the second‑last page of the little bundle, there is a statement which was later picked up in Equity:  Doctrines and Remedies, 1st edition (1975):

For conditions are of two sorts, either they are such as if they are broken are capable of equivalent recompense, and then the breach is always relieved in equity, as conditions for payment of money or the like, or such conditions as are not capable of any compensation, and the breach is never relieved, as in the case of Fry v Porter.

So the underlying approach in both penalty and forfeiture was not to be hinged off promise but was to be hinged off the notion of whether the condition was capable of either satisfaction or an alternative mode of performance.

GUMMOW J:   Now, have we been referred to Professor Stoljar’s article in 69 Law Quarterly Review, 485?

MR GLEESON:   Yes.  Your Honour, it is in the second volume of the ‑ ‑ ‑

GUMMOW J:   On this slippery concept of condition?

MR GLEESON:   Yes.  It is in the second volume at tab 58 and in discussing the slippery concept, Professor Stoljar on pages 486 and following, identifies 12 various meanings of “condition” and most of his article goes on to discuss the twelfth meaning where:

“Condition” may mean a fact or event upon which a promise somehow depends ‑ ‑ ‑

GUMMOW J:   Number (iv).

MR GLEESON:   Then in condition (iv) back on page 486 and the footnote:

“Condition” may mean a promise or covenant to do or not to do a certain thing.  In this sense, the “special conditions” in a bond denote the things which the obligor has undertaken to do –

and footnote 11 draws a distinction between:

bonds conditioned on performance and not to “common money bonds.”  The condition was at first a true condition, but the equitable policy against forfeiture as well as statute transformed the condition into the covenant.

Now, as we apprehend the primary argument of the respondent, it is that because of the peculiar way in which equity came to grant its relief which the statutes then, in a sense, picked up at common law, all that hardened into a mandatory requirement for relief in equity that the condition is promissory in the sense that a breach of assumpsit action would remedy.  That, we submit, is an elision and is the fatal turning and is not what Professor Stoljar meant by that reference. 

He referred to Williston there.  He also referred to bonds in the article on pages 509 to 510 and particularly on 510 at the bottom, over to 511, gave, we submit, a useful understanding of how the condition operated within the bond and the manner in which the debt which was conceived of as being granted, subject to the condition, would then at law become absolute where the condition failed.

KIEFEL J:   I notice that at tab 62 in Mr Evans’ discussion of Pothier’s Law of Obligations, at page 967 at about point 7, it is said that the condition of the bond in equity may be regarded:

as evidence of an agreement . . . such conditions are not regarded as agreements at law, and cannot be declared upon as such ‑ ‑ ‑

MR GLEESON:   Yes, so that the equitable approach, we submit ‑ ‑ ‑

KIEFEL J:   Was never to consider them as agreements.

MR GLEESON:   ‑ ‑ ‑ never to ask the question whether it would be actionable in an assumpsit at law.  The fact that many of them are now so actionable does not narrow equity.  That is our central point. 

GUMMOW J:   A condition had to be one, as it were, where the non‑performance would occasion some prejudice to the other party against which equity would act so as to give them recovery of that but no more.  If the condition was one that could not cause any monetary prejudice to the other party, equity would not get involved, would it?  Take the example of the Pope fleeing the Vatican in the 1790s and coming to Britain.

MR GLEESON:   Yes.  It would not, in that event ‑ ‑ ‑

GUMMOW J:   If that happened, or did not happen, it would be hard to assess that in any monetary prejudice ‑ ‑ ‑

MR GLEESON:   Yes.

GUMMOW J:   ‑ ‑ ‑ so equity would not interfere, would it?

MR GLEESON:   Not in that case.  Where it would, though, interfere – and this is the decision of the US Supreme Court in Priebe, which is at tab 42, Priebe v United States in 1947, a very important application, we would submit, of equity.  This was the case where the primary obligation of the contract, which can be seen on page 408 in Justice Douglas’ decision, near the bottom was:

There was an objection of the ground of relevance.  The objection was that the ultimate question, whether they were charged for a service, was not before her Honour.  Her Honour, in the next paragraph ‑ ‑ ‑

GUMMOW J:   It says there is no ambiguity.

MR GLEESON:   There is no ambiguity, so it is unnecessary, and then says a bit further down:

Moreover, and no less importantly, ANZ made no attempt to tie the generalised ‘facts’ concerning bank practices to the 17 Exception Fees.

They also did not prove they were known in the Codelfa sense.  There is no appeal from that finding on the evidence.  So our submission is that if the appeal were allowed, the matter would go back and the question of genuine fee for a service can then be dealt with on all of the evidence that either party chooses to lead and we cannot and would not object to it.  In answer to a matter your Honour Justice ‑ ‑ ‑

GUMMOW J:   Sorry, just say that again, what could be dealt with?

MR GLEESON:   The question whether the defence in paragraph 55 by the Bank that there is a genuine service being offered for which a fee is being charged can be addressed.  If your Honours go to the current orders we seek to appeal against on page 356 – and this relates to a matter Justice Kiefel has raised – the reason we have appealed order 2 is that on any view it is too broad because what her Honour has done is to strike out all of our claims between paras 46 and 69 so far as they relate to the fees which she has ruled to be non‑promissory. 

The effect of that is that, without the Court yet having looked at any of the matters such as fee for service, the case that has been struck out includes not just 55 to 59, which is the Interstar Case, but then includes, in particular, the money had and received case and the accounting case.  Our submission is that – and there may be a slip in the form of that order – her Honour could not have been intending to conclude finally all of those cases because some of them at least involve additional elements or alternative elements to the penalty case.

FRENCH CJ:   Now, coming back to a question I put to you earlier in relation to the form of orders, what answer would you be seeking to the question 1(a), just going as an example, page 353?

MR GLEESON:   Nothing from this Court because that is ground 6.

GUMMOW J:   Sorry, which question?

MR GLEESON:   Question 1(a).

GUMMOW J:   On page 344?

MR GLEESON:   On page 353 relating back to 344 – would involve our ground 6 which we have not had removed to this Court.  Assuming where it says “breach”, breach is being used in the sense of a breach of a promissory obligation, if it means payable upon breach of condition, then the answer would be – it would simply be yes, because that is the tenor of what I have been putting today.

FRENCH CJ:   You are seeking an order that answers in accordance with the reasons of the court be substituted?

MR GLEESON:   Yes.  Can I give your Honour the revised form of order that I promised?

FRENCH CJ:   So the answers to be substituted depend upon the outcome of appeal ground 6?

MR GLEESON:   Yes.  They would ultimately depend on appeal ground 6 in the light of this Court’s reasons on appeal grounds 1 to 4.  If, for example, to the extent we win on 1 to 4 and it is just an irrelevant limitation whether there is a breach of contract, appeal ground 6 falls away, but what we envisage is that consistent with the document I gave up this morning, the fees fall into those four categories and if we establish capability in respect to all four, then the order is straightforward.  If we achieve in part, the order can be modified.  So, your Honours, on that critical point we would submit the appeal is not futile and if we are successful, the orders should be made in respect to all four grounds.  Your Honours, the other matters in reply were ‑ ‑ ‑ 

GUMMOW J:   But are you seeking to expand the grant of removal to 6?

MR GLEESON:   Would your Honour give me one moment to consider that?  Your Honour, the short answer is no, 6 was designed to cover the pure contract construction question, is it a breach of contract, and that is the matter which involved looking at the detailed documents and for reasons given on the removal application was not appropriate to come here.  Insofar as we are running the narrower argument I put today, which is this is clearly a breach of condition and it is the sort of condition which was capable of equitable relief, that is the matter which is within grounds 1 to 4.

Your Honours, in terms of the other matters in reply, now that Export Credits is not put up as an authority which is persuasive on the relevant question before the Court, could we submit that on page 250 of the book in paragraph 59 the critical plank upon which the trial judge found against us has now been effectively and correctly disavowed.  The so‑called extensive and longstanding authority really is Lord Diplock in Philip Bernstein, then Export Credits and then cases following Export Credits, and so there is not an extensive line of authority against the case we are putting.  That is the second matter in reply.  The third matter ‑ ‑ ‑

GUMMOW J:   I think Mr Archibald says there is a whole lot of much earlier cases decided, long before Lord Diplock drew breath, in supporting ‑ ‑ ‑ 

MR GLEESON:   Yes, and coming to that, to the extent that is his case, that contains the fallacy that equity supposedly was erecting as a condition of even considering the grant of relief, a hypothetical question, whether the plaintiff at law could have framed a claim for damages for breach of assumpsit, and our answers to that are:  number one, that is not the basis upon which the equitable cases reasoned; number two, the notion that there needs to be damages measured by the common law standard is not reflected in the cases.

The real damage is to be compensated for if it exists.  In some cases, there will be no damage, no reason for a quantum damnificatus at law.  Take the example of a trifling default referred to by Mr Simpson at page 1012 of the book.  Take the example of Priebe where there was no damage, and so to require common law notions of breach or damage does not reflect the basis on which the cases were decided.  Relatedly, cases such as Hardy v Martin concern express negative covenants and when an injunction will be granted in those situations, and do not purport to exhaust the entire field for equitable relief against penalties.  In terms of when equity first ‑ ‑ ‑

GUMMOW J:   That is the restraint of trade case.

MR GLEESON:   Yes.  In terms of when equity first intervened, it was about 200 years earlier than Mr Archibald put.  Sir William Cappell’s Case in tab 3 and Lord Mansfield’s discussion in Wyllie v Wilkes at tab 17 places it clearly in the time of Sir Thomas More.

Your Honour, the matter I just wish to finish on was in terms of principle rather than simply the history we have both been debating over.  The respondents have not offered a real reason why, in principle, the scope of equitable relief would be limited solely to the case where the assumpsit action would hypothetically be available at common law.  In our submissions, we have sought to suggest that any such limitation will produce capricious results.  It will lead to drafting which disguises breaches under conditions as in the present case, or drafting in forms of fictitious alternative performance rather than breaches of contract.  It produces Lord Denning’s absurd paradox that to get relief in equity, you have to be a person breaking your contract, but a person performing the contract does not get relief, and ultimately it is not a limitation which sits with the principles which equity sought to act in this area.  May it please the Court.

FRENCH CJ:   Thank you, Mr Gleeson.  The Court will reserve its decision.  The Court adjourns until 9.30 tomorrow morning for pronouncement of orders.

AT 4.15 PM THE MATTER WAS ADJOURNED