Andrews v Australia and New Zealand Banking Group Ltd

The High Court of Australia considered an appeal by customers against Australia and New Zealand Banking Group Ltd (ANZ) concerning various fees charged on consumer and commercial credit card accounts. The dispute centred on whether honour fees, dishonour fees, late payment fees, non-payment fees, and over limit fees constituted penalties at common law or in equity.

The central legal issues before the High Court were whether the penalty doctrine was limited to circumstances involving a breach of contract, the significance of historical legal principles regarding penal bonds, the grounds for equitable intervention in such matters, and whether the penalty doctrine had evolved to become exclusively a rule of common law. The applicants also argued that some fees were charged for services with no real content and that, in substance, certain honour fees were disguised penalties, notwithstanding their contractual form.

The High Court, in allowing the appeal, departed from the approach taken by the Federal Court, which had followed the New South Wales Court of Appeal's decision in *Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd*. The Court determined that the penalty doctrine was not confined to situations where there was a breach of contract. It clarified that the circumstances of fees being charged without a breach by the customer, and without the customer having an obligation to avoid the events triggering the fees, did not preclude those fees from being characterised as penalties. The Court's reasoning indicated a broader application of the penalty doctrine than previously understood, suggesting it was not solely a rule of common law and retained equitable underpinnings.

The High Court set aside the orders of the Federal Court regarding the characterisation of the fees and the costs of the separate questions. It declared that the fact the fees were not charged upon breach of contract and that customers had no responsibility to avoid the triggering events did not render the fees incapable of being penalties. The question of costs for the separate questions was remitted to the Federal Court.