Paciocco v Australia and New Zealand Banking Group Ltd - [2015] FCAFC 50

FEDERAL COURT OF AUSTRALIA
Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50

Citation: Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50

Appeal from: Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35

Parties:
LUCIO ROBERT PACIOCCO and SPEEDY DEVELOPMENT GROUP PTY LTD v AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED v LUCIO ROBERT PACIOCCO and SPEEDY DEVELOPMENT GROUP PTY LTD

File numbers: VID 141 of 2014
VID 149 of 2014

Judges: ALLSOP CJ, BESANKO J and MIDDLETON J

Date of judgment: 8 April 2015

Catchwords:
BANKING AND FINANCIAL INSTITUTIONS – CONSUMER PROTECTION – whether various stipulations for fees are penalties at law or equity, or genuine pre-estimate of damage or compensation – whether the relevant stipulations were for breach of term of contract, collateral or accessory in the nature of security for, and in terrorem of the primary stipulations, or for a further contractual right or accommodation – the relevance of the “tests” in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79 to the construction and characterisation of the provisions – whether the fees were extravagant or unconscionable – whether the charging of the fees constituted unconscionable conduct, unjust transactions or unfair contract terms under Australian Securities and Investments Commission Act 2001 (Cth), National Consumer Credit Protection Act 2009 (Cth), and Fair Trading Act 1999 (Vic)

LIMITATION OF ACTIONS – whether recovery statute-barred – construction of s 27(c) of the Limitation of Actions Act 1958 (Vic) – whether it applied to a mistake of law

Legislation: Australian Securities and Investments Commission Act 2001 (Cth), ss 12BG, 12CA, 12CB, 12CC, 12GF, 12GM
Contracts Review Act 1980 (NSW)
Fair Trading Act 1999 (Vic), ss 8, 8A, 32W, 32X, 158, 159
Judiciary Act 1903 (Cth) s 68
Limitation Act 1939 s 26
Limitation Act 1980 (UK) s 32
Limitations of Actions Act 1955 (Vic) s 27
Limitation of Actions Act 1958 (Vic) ss 5, 27
Marine Insurance Act 1909 (Cth) ss 39-47, 52-54
National Consumer Credit Protection Act 2009 (Cth), Sch 1
Retail Leases Act 1994 (NSW), s 62B

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The Iodine (1844) 3 No C 140 cited
Jenyns v Public Curator (Qld) [1953] HCA 2; 90 CLR 113 discussed
Johnson vSmith [2010] NSWCA 306 cited
The Juliana (1822) 2 Dods 504; 165 ER 1560 discussed
Kakavas v Crown Melbourne Ltd [2013] HCA 25; 250 CLR 392 cited
Kemble v Farren (1829) 6 Bing 141; 130 ER 1234 considered
Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 referred to
Lange v Atkinson [2000] 1 NZLR 257 cited
Larson v Larson 636 NE 2d 1365 (Mass App Ct 1994) cited
Legione v Hateley [1983] HCA 11; 152 CLR 406 cited
Lord Elphinstone v Monkland Iron and Coal Co (1886) 11 AC 332 applied
Lordsvale Finance Plc v Bank of Zambia [1996] QB 752 cited
Louth v Diprose [1992] HCA 61; 175 CLR 621 cited
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Meinhard v Salmon 249 NY 458; 164 NE 545 (1928) referred to
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The Medina (1876) 1 PD 272 cited
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The Office of Fair Trading v Abbey National PLC [2008] EWHC 2325 (Comm) referred to
Paciocco v ANZ (No 2) [2014] FCA 254
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Date of hearing: 18, 19, 20 August 2014

Place: Melbourne

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 406

VID 141 of 2014
Counsel for the Appellants:
Mr MBJ Lee SC with Mr JF Richardson and Mr WAD Edwards

Solicitor for the Appellants: Maurice Blackburn

Counsel for the Respondent: Mr AC Archibald QC with Mr MH O’Bryan QC and Ms C Van Proctor

Solicitor for the Respondent: Ashurst Australia

VID 149 of 2014
Counsel for the Appellant:
Mr AC Archibald QC with Mr MH O’Bryan QC and Ms C Van Proctor

Solicitor for the Appellant: Ashurst Australia

Counsel for the Respondents: Mr MBJ Lee SC with Mr JF Richardson and Mr WAD Edwards

Solicitor for the Respondents: Maurice Blackburn

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 141 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
LUCIO ROBERT PACIOCCO
First Appellant

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Appellant

AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Respondent

JUDGES:

ALLSOP CJ, BESANKO J and MIDDLETON J

DATE OF ORDER:

8 april 2015

WHERE MADE:

sydney (heard in MELBOURNE)

THE COURT ORDERS THAT:
1.Appeal dismissed with costs.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 149 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Appellant

AND:
LUCIO ROBERT PACIOCCO
First Respondent

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Respondent

JUDGES:

ALLSOP CJ, BESANKO J and MIDDLETON J

DATE OF ORDER:

8 april 2015

WHERE MADE:

sydney (heard in MELBOURNE)

THE COURT ORDERS THAT:
1.Appeal allowed.
2.Declarations 1 and 2, and order 3 made by the Court on 13 February 2014 be set aside.
3.Order 6 made by the Court on 13 February 2014 be set aside, and in lieu thereof it be ordered that, for the purpose of s 33ZB of the Federal Court of Australia Act 1976 (Cth), orders 4 and 5 made by the Court on 13 February 2014 bind the parties and group members, other than those who opted out of the proceeding.
4.The order of the Court made on 19 March 2014 be set aside, and in lieu thereof it be ordered that the applicants pay the respondent’s costs of the proceeding at first instance (other than costs, if any, specifically ordered in interlocutory proceedings), subject to any variation that may be made pursuant to application by Mr Paciocco and Speedy Development Group for such variation to be file and served together with any supporting material on or before 4 pm Monday 13 April 2015.
5.The respondents pay the appellant’s costs of the appeal.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 141 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
LUCIO ROBERT PACIOCCO
First Appellant

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Appellant

AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Respondent

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 149 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Appellant

AND:
LUCIO ROBERT PACIOCCO
First Respondent

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Respondent

JUDGES:

ALLSOP CJ, BESANKO J and middleton j

DATE:

8 april 2015

PLACE:

SYDNEY (HEARD IN MELBOURNE)

REASONS FOR JUDGMENT
ALLSOP CJ

These are two appeals from orders of the Court made on 13 February and 19 March 2014 consequent upon reasons delivered by the primary judge (Gordon J) on 5 February 2014, following a five day hearing in December 2013. (See Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35.)
Though I have reached a different conclusion to the primary judge on a number of matters in the Australia New Zealand Banking Group Limited (ANZ) appeal (VID 149 of 2014), I wish to pay tribute to the meticulous detail and clarity that mark her Honour’s reasons in respect of a large and factually and legally complex commercial case.
The organisation of these reasons is as follows:

The nature of the proceedings [4]-[7]

The accounts and fees in question [8]-[16]

Penalties [17]-[247]

·           The approach of the primary judge

·           The appeal of ANZ (VID 149 of 2014) in relation to late payment fees

·           The appeal of Mr Paciocco and Speedy Development Group Pty Ltd (VID 141 of 2014) in relation to all other fees

·           Conclusion as to penalties

Statutory unconscionability, unjustness or unfairness [248]-[365]

·           The appeal of Mr Paciocco and SDG in VID 141 of 2014 and the notice of contention in VID 149 of 2014 otherwise than as to penalties

Orders [366]-[370]
The nature of the proceeding

The proceeding brought by Mr Lucio Paciocco and a company controlled by him, Speedy Development Group Pty Ltd (SDG), was a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) in which they sought to set aside bank fees charged by Australia and New Zealand Banking Group Limited (ANZ) on various bases. The fees were referred to in the primary judgment as Exception Fees; and the contractual provisions justifying them were referred to as Exception Fee Provisions.
The attack on the fees was made on the basis that they were either penalties at common law or equity; or were the product of unconscionable conduct by ANZ within the meaning of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act), ss 12CB and 12CC, or the Fair Trading Act 1999 (Vic) (the FT Act), ss 8 and 8A; or were unjust under the National Credit Code in Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth); or as unfair contract terms under the FT Act, s 32W and the ASIC Act, s 12BG.
For the following reasons ANZ’s appeal should be allowed and that of Mr Paciocco and SDG dismissed.
It is appropriate to say at the outset that the case was run by Mr Paciocco and SDG, both below and on appeal, for the benefit not only of themselves but also of those in the group. No aspect of the penalties case was limited to them as applicants. In relation to the statutory claims, some aspects of facts attended the consideration of Mr Paciocco’s claims, but he propounded those claims on his own behalf, as well as on behalf of the group.
The accounts and fees in question
The proceeding concerned three accounts held by Mr Paciocco – a consumer deposit account and two consumer credit card accounts, and one account held by SDG – a business deposit account. Using abbreviations to maintain the privacy of Mr Paciocco and SDG, the accounts were as follows and as referred to by the primary judge:
(1)Mr Paciocco’s consumer deposit account being an Access Advantage Account, called Savings Account 156;
(2)Mr Paciocco’s first consumer credit card account being a Low Rate MasterCard account, called Card Account 9522;
(3)Mr Paciocco’s second consumer credit card account being another Low Rate MasterCard account, called Card Account 9629; and
(4)SDG’s business deposit account being a Business Classic Account, called Business Account 58555.

Savings Account 156 was opened in June 1997 and from June 2009 had an overdraft facility with a limit of $500.
Card Account 9522 was opened in June 2006 with a credit limit of $15,000 that was increased to $18,000 in November 2009.
Card Account 9629 was opened in July 2009 with a credit limit of $4,000.
Business Account 58555 was opened in December 2008 and from April 2011 had an overdraft of $10,000 that was increased to $49,999 in November 2011.
The fees that were charged were of five kinds. For Mr Paciocco’s accounts, they were honour fees, dishonour fees, non-payment fees, late payment fees and overlimit fees; and for SDG’s account, they were honour fees, dishonour fees and non-payment fees. The terms of these fees were not in dispute and will be described later. The primary judge found the late payment fees to be penalties and the balance of the fees not to be penalties; and her Honour found that none of the statutory provisions applied to impugn ANZ’s conduct or the fees.
The trial was limited to a determination of the claims in relation to the fees: (a) in the case of Savings Accounts, from May 2004 to 14 December 2009; (b) in the case of Card Accounts, after March 2004; and (c) in the case of Business Accounts, after August 2004. To the extent that the period after December 2009 was relevant (for Card Accounts and Business Accounts) the relevant terms were different before and after December 2009.
Before December 2009, the following were the contractual terms of the fees:
(a)       Late Payment Fee: the terms of Card Account 9522 were set out in [53]-[57] of her Honour’s reasons, as follows:
53       The relevant contractual documents comprised a Letter of Offer dated 16 June 2006 (para 4 of Annexure 2), ‘ANZ Credit Card Conditions of Use’ dated September 2006 (para 5 of Annexure 2) (September 2006 Conditions of Use) and ‘ANZ Personal Banking Account Fees and Charges’ dated August 2006 (August 2006 Fees and Charges Booklet) (para 6 of Annexure 2).
54       The Letter of Offer dated 16 June 2006, under the heading “Minimum Repayment”, stated:
Each month you are required to pay [the amount] by the Due Date shown on [the] statement of account.
55       The September 2006 Conditions of Use similarly stated:
The account holder must make the ‘Minimum Monthly Payment’ shown on each statement of account by the ‘DUE DATE’ shown on that statement of account.
56       Under the heading “Credit Fees and Charges”, the Letter of Offer went on to state:
Late Payment Fee: A fee of $35 will be charged to your credit card account if the “Monthly Payment” plus any “Amount Due Immediately” shown on the statement of account is not paid within 28 days of the end of the “Statement Period” shown on that statement.
57       The Late Payment Fee was imposed by the August 2006 Fees and Charges Booklet:
Late Payment Fee$35
Charged to ANZ Low Rate MasterCard … if the “Monthly Payment” plus any “Amount Due Immediately” shown on the statement of account is not paid within 28 days of the end of the “Statement Period” shown on that statement.
Thus, the fee was charged 28 days from the end of the Statement Period if the minimum monthly repayment was not made by that date. The terms and conditions required that the minimum monthly payment be paid by the Due Date, which was 14 or 25 days from the end of the Statement Period. Thus there was a 14 day or 3 day period between the Due Date and the date on which a fee was charged if payment was not made – in effect, a grace period of 14 or 3 days.
(b)       Overlimit Fee: the terms of Card Account 9629 and Card Account 9522 were set out in [59]-[62] of the reasons, as follows:
59       For the Overlimit Fee on Card Account 9629 and the Overlimit Fee on Card Account 9522, the contractual documents comprised:
1.        in relation to the Exception Fee on 12 August 2009 on Card Account 9629 (Exception Fee 12), a Letter of Offer dated 24 July 2009 (para 7 of Annexure 2); and
2.        in relation to the Exception Fee on 6 September 2009 on Card Account 9522 (Exception Fee 13), the Letter of Offer dated 16 June 2006 (para 4 of Annexure 2);
3. in relation to both Exception Fees:
(a)‘ANZ Credit Cards Conditions of Use’ dated July 2009 (July 2009 Conditions of Use) (para 8 of Annexure 2); and
(b)‘ANZ Personal Banking Account Fees and Charges’ dated July 2009 (July 2009 Fees and Charges Booklet) (para 9 of Annexure 2).
60       The July 2009 Conditions of Use stated in cl 2:
The Credit Limit
(a)Your credit limit is set out in the Letter of Offer and is for the credit card account. If ANZ issues more than one credit card for use on your credit card account no separate limit applies for each credit card. The account holder can ask ANZ to increase or decrease the credit limit at any time. ANZ is not required to agree to any request to increase the credit limit. ANZ is not required to agree to any request to decrease the credit limit if the decrease would result in the outstanding balance exceeding the credit limit.
(b)You must not exceed the credit limit unless ANZ has consented in writing or ANZ otherwise authorises the transaction which results in the account holder’s outstanding balance exceeding the credit limit. By authorising a transaction which results in the account holder’s outstanding balance exceeding the credit limit, ANZ is not increasing the account holder’s credit limit. If you exceed your credit limit, you must pay the amount by which the outstanding balance exceeds the credit limit immediately.
(c)Any withdrawal, transfer or payment from the credit card account will be made firstly from any positive (Cr) balance and secondly from any available credit in the credit card account.
(Emphasis added.)
61       Both Letters of Offer, under the heading “Credit Fees and Charges”, stated:
Overlimit Fee: A fee of $35 will be charged to your credit card account at the end of the “Statement Period” shown on the statement of account if the balance of the account exceeds the “Credit Limit” during that statement period. Charged at a maximum of once per statement period.
[Note that the Letter of Offer dated 24 July 2009 stated that “A fee of $35* will be charged…” and “… account exceeds the “Credit Limit”^# during that statement period…”. Neither party contended that the matters referred to in the “*” or “^#” had any substantive relevance to this case.]
62       The July 2009 Fees and Charges Booklet imposed the fee:
Overlimit Fee     $35
Ø Charged at the end of the “Statement Period” shown on the statement of account if the balance of the account exceeds the “Credit Limit” during that statement period …
Ø Charged at a maximum of once per “Statement Period”
Thus, the fee was charged at the end of the Statement Period if the account balance exceeded the Credit Limit at any time during the Statement Period. It was charged once irrespective of the number of transactions that brought about the exceeding of the limit. The terms and conditions provided that a customer must not overdraw the account unless ANZ has consented in writing or otherwise authorises the transaction.
(c)       Honour Fee: the terms of Savings Account 156 were set out in [63] and [65]-[66] of the reasons, as follows:
63       Mr Paciocco was charged three Exception Fees on Saving Account 156 – a Saving Honour Fee on 15 September 2008 (Exception Fee 1), a Non-Payment Fee on 26 September 2008 (Exception Fee 2) and a Non-Payment Fee on 27 January 2009 (Exception Fee 3). All three Exception Fees were charged pursuant to the same contractual documents: A Signature Card for opening Saving Account 156 dated 10 June 1997 (para 1 of Annexure 2), ‘ANZ Saving & Transaction Products – Terms and Conditions dated August 2008’ (August 2008 Terms and Conditions) (para 2 of Annexure 2) and ‘ANZ Personal Banking Account Fees and Charges’ dated August 2008 (August 2008 Fees and Charges Booklet) (para 3 of Annexure 2).
…
65       Clause 2.12 of the August 2008 Terms and Conditions for Saving Account 156 provided:
Provision of Credit
ANZ does not agree to provide any credit in respect of your account without prior written agreement. Depending on your account type, credit can be provided through an ANZ Equity Manager facility, an Overdraft facility or an ANZ Assured facility. It is a condition of all ANZ accounts that you must not overdraw your account without prior arrangements being made and agreed with ANZ.
…
If a debit would overdraw your account, ANZ may, in its discretion, allow the debit on the following terms:
•     interest will be charged on the overdrawn amount at the ANZ Retail Index Rate plus a margin (refer to ‘ANZ Personal Banking Account Fees and Charges’ booklet for details);
•     an Honour Fee may be charged for ANZ agreeing to honour the transaction which resulted in the overdrawn amount (refer to ‘ANZ Personal Banking Account Fees and Charges’ booklet for details);
•     the overdrawn amount, any interest on that amount and the Honour Fee will be debited to your account; and
•     you must repay the overdrawn amount and pay any accrued interest on that amount and the Honour Fee within seven days of the overdrawn amount being debited to your account.
…
(Emphasis added.)
66       The imposition of the Honour Fee was also addressed in the August 2008 Fees and Charges Booklet:
Honour Fee
Ø Payable on each occasion that ANZ honours a drawing where sufficient cleared funds are not available in the account or when the credit limit on your account is exceeded.        $35
…
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.
The fee was charged once per day, irrespective of the number of transactions where ANZ honoured a drawing when insufficient cleared funds were available or a credit limit was exceeded.
(d)      Non-Payment or Dishonour Fee: the terms of Savings Account 156 were set out in [67]-[68] of the reasons:
67       Clause 2.7 of the August 2008 Terms and Conditions provided:
A Periodical Payment Non-Payment Fee is charged if you have authorised a Periodical Payment that is not made because there are insufficient cleared funds in your account.
68       The imposition of the Non-Payment Fee was also addressed in the August 2008 Fees and Charges Booklet. For “Periodical Payments”, it stated that the “Non-payment fee” was $35.
After December 2009, the following were the contractual terms of the fees:
(a)       Late Payment Fee: the terms of Card Account 9629 – were set out in [72]-[75] of the reasons as follows:
72       For the Late Payment Fee on 12 January 2010 on Card Account 9629 (Exception Fee 14), the contractual documents comprised the Letter of Offer dated 24 July 2009 (para 10 of Annexure 2), ‘ANZ Credit Cards Conditions of Use’ dated December 2009 (December 2009 Conditions of Use) (para 11 of Annexure 2) and ‘ANZ Personal Banking Account Fees and Charges’ dated December 2009 (December 2009 Fees and Charges Booklet) (para 12 of Annexure 2).
73       The 24 July 2009 Letter of Offer, under the heading “Credit Fees and Charges”, stated:
Late Payment Fee
A fee of $35* will be charged to your credit card account if the “Monthly Payment” plus any “Amount Due Immediately” shown on the statement of account is not paid within 28 days of the end of the “Statement Period” shown on that statement.
[Note that the material referred to in the asterisk had no substantive relevance to this case.]
74       The fee level was set in the December 2009 Fees and Charges Booklet:
Late Payment Fee  $20
Ø Charged to your credit card account if the “Minimum Monthly Payment” plus any amount “Payable Immediately” shown on the statement of account is not paid by the “Due Date” shown on that statement.
75       The other Late Payment Fees charged on the Card Accounts after December 2009 were charged pursuant to different contractual documents. There is no dispute that the terms in those documents were not materially or substantively different from those applicable to Exception Fee 14.
Thus, the Late Payment Fees on the card accounts after December 2009 were substantially the same. The fee was charged if the minimum monthly payment plus any amount payable immediately was not paid by the Due Date.
(b)       Overlimit Fee: the Terms of these fees in the Card Accounts were various and set out at [76]-[81] of the reasons, as follows:
76       For the Overlimit Fee charged on 12 May 2010 on Card Account 9629 (Exception Fee 15), the contractual documents comprised the Letter of Offer dated 24 July 2009 (para 10 of Annexure 2), ‘ANZ Credit Cards Conditions of Use’ dated March 2010 (March 2010 Conditions of Use) (para 13 of Annexure 2) and the December 2009 Fees and Charges Booklet (para 12 of Annexure 2).
77       Clause 2 of the March 2010 Conditions of Use stated:
The Credit Limit
(a)Your credit limit is set out in the Letter of Offer and is for the credit card account. If ANZ issues more than one credit card for use on your credit card account no separate limit applies for each credit card. The account holder can ask ANZ to increase or decrease the credit limit at any time. ANZ is not required to agree to any request to increase the credit limit. ANZ is not required to agree to any request to decrease the credit limit if the decrease would result in the outstanding balance exceeding the credit limit.
(b)From time to time, there may be a debit made to your credit card account which, if processed, would temporarily result in the outstanding balance exceeding your credit limit. ANZ has an Informal Overlimit service to help you in these circumstances.
(c)When a debit is initiated which, if processed, would result in the outstanding balance temporarily exceeding your credit limit, you make a request for an Informal Overlimit amount. ANZ will consider your request for an Informal Overlimit amount and, if both the debit and the account holder satisfy ANZ’s credit criteria for Informal Overlimit amounts, ANZ will allow the debit to be processed as an Informal Overlimit amount, on the following terms:
•interest will be charged on the Informal Overlimit amount at the applicable interest rate for purchases, cash advances and other payments (see Condition (19));
•an Overlimit Fee will be charged (refer to the Letter of Offer for details);
•the Informal Overlimit amount, any interest on that amount and any Overlimit Fees will be debited to your credit card account; and
•you must repay the Informal Overlimit amount on the earlier of:
-the time shown for payment of ‘Overdue/Overlimit’ amount on the next statement of account after the Informal Overlimit amount is debited to your credit card account; and
-the day that is 60 days after the day on which the Informal Overlimit amount is debited to your credit card account.
(d)By processing a debit as an Informal Overlimit amount, ANZ is not increasing the account holder’s credit limit.
(e)Any withdrawal, transfer or payment from the credit card account will be made firstly from any positive (Cr) balance and secondly from any available credit in the credit card account. An Informal Overlimit amount will only be provided if there is no available credit in the credit card account and both the debit and the account holder satisfy ANZ’s criteria for Informal Overlimit amounts.
(f)If you want to avoid exceeding your credit limit, you should ask ANZ:
-how to have ANZ decline transactions you initiate that will take you over your credit limit – please note that this service is not available for all transaction types (for example, it is not available for a transaction that is not electronically authorised such as a purchase that is manually debited to your credit card account if EFTPOS is not available). Please ask for our Overlimit Credit Card Opt Out Form;
-about ways in which you can monitor the balance of your credit card account; or
-if you have longer-term, ongoing borrowing needs, how to apply for an increase to the account holder’s credit limit or for information about other products that may suit your needs.
(Emphasis added.)
78       The ‘ANZ Personal Banking Account Fees and Charges’ dated November 2011 (November 2011 Fees and Charges Booklet) set the fee for Overlimit Fees 19-22 and 24-26. There was no dispute that the relevant Exception Fee Provisions in the December 2009 Fees and Charges Booklet and the November 2011 Fees and Charges Booklet were not materially or substantively different. They provided:
Overlimit Fee  $20
Ø Charged to your credit card account at the end of the “Statement Period” shown on the statement of account if we agree to provide an Informal Overlimit amount during that statement period. The Overlimit Fee is charged at a maximum of once per statement period.
79       The other Overlimit Fees charged on the Card Accounts in this period were charged pursuant to different contractual documents. Some of the provisions were redrafted. In the ‘ANZ Credit Cards Conditions of Use’ dated June 2010 (para 14 of Annexure 2) (and in all subsequent versions) a preamble was added to the document under the heading “Important things to know about using your ANZ credit card”, which included the following:
Fees
We tell you which fees can apply to your credit card account in the Letter of Offer that we sent to you, and you can also find these in the ANZ Personal Banking Account Fees and Charges booklet which is available on anz.com or at any ANZ branch.
Some of the key fees you need to know are below:
…
Fees that apply when you do something, or request us to do something for you
We provide you with services on your credit card account and sometimes there are fees for doing so. The most common service fees are:
…
·Late Payment Fee
·Overlimit Fee (not applicable to ANZ Visa PAYCARD and ANZ Rewards Visa PAYCARD accounts, or if you hold an ANZ Access Basic Account)
You can avoid some of these fees:
You can avoid a Late Payment Fee by paying the Minimum Monthly Payment shown on your statement by the due date
·We have convenient services available to you that make it easy to make your minimum payment on time such as CardPay Direct – please ask us for details.
You can avoid an Overlimit Fee by staying within your approved credit limit
·We tell you what your credit limit is on your Letter of Offer that we sent you, and it’s also shown on your monthly account statement
·Sometimes you might have a transaction that temporarily causes you to exceed your credit limit. In this situation, we want to help you avoid embarrassing moments such as being declined while purchasing your groceries. Where you and the transaction which would exceed your credit limit satisfy our criteria, we will provide you with a convenient service to cover your payment needs – we call this service an Informal Overlimit facility. An Overlimit Fee will be charged for this service.
·You can also ask us to decline certain transactions so that you don’t exceed your credit limit. Please see clause 2 in this booklet for further information.
80       For some of the Overlimit Fees (Exception Fees 29, 30, 32, 33 and 35), the Fees and Charges Booklet was amended with effect from June 2012 (para 15 of Annexure 2) as follows:
Overlimit Fee  $20
A.Charged to your credit card account at the end of the “Statement Period” shown on the statement of account where:
•any type of debit is initiated on your credit card account that would cause you to exceed your credit limit during the Statement Period; and
•we agree to provide you with an Informal Overlimit amount to allow this debit to be charged to your credit card account.
81       For Exception Fees 39, 40, 43 and 44, the Fees and Charges Booklet was amended with effect from March 2013 and for the balance of the Overlimit Fees (Exception Fees 48 and 50), the Fees and Charges Booklet was amended with effect from July 2013. No party suggested that there was any material or substantive difference between the documents.
In substance, in December 2009, the terms and conditions were redrafted so that it was clearly stated that the initiation of a debit which would take the account outside its limits was a request for an informal overdraft to be considered by the ANZ; there was no express obligation that the customer must not overdraw the account.
(c)       Honour Fees: the terms of Business Account 58555 were set out at [83]-[88] of the reasons, as follows:
83       For the Business Honour Fees charged on 4 March 2010 and 9 July 2010 (Exception Fees 51 and 52), the contractual documents comprised a Signature Card regarding the opening of Business Account 58555 dated 15 December 2008 (para 16 of Annexure 2), a Company/Formal Trust Account Authority for the account dated 15 December 2008 (para 17 of Annexure 2), ‘Business Transaction Accounts Terms and Conditions – ANZ Business Banking’ dated December 2009 (December 2009 Terms and Conditions) (para 18 of Annexure 2) and ‘Transaction Accounts Fees and Charges – ANZ Business Banking’ dated December 2009 (December 2009 Business Fees and Charges Booklet) (para 19 of Annexure 2).
84       One of the applicable provisions in the December 2009 Business Terms and Conditions provided:
If you satisfy ANZ’s credit criteria for an Informal Overdraft facility, ANZ will agree to your request by allowing the debit to be processed as an Informal Overdraft, on the following terms:
Ø If the balance of your Informal Overdraft facility exceeds $50 at the time of your request, or will exceed $50 once the debit requested is processed, you will be charged an Informal Overdraft Assessment Fee on the day on which the debit is processed (or if that day is not a business day, on the next business day). The Informal Overdraft Assessment Fee (referred to in your bank statements and in the ‘ANZ Business Banking Transaction Accounts Fees and Charges’ booklet as an ‘Honour Fee’) is payable immediately.
85       The Honour Fee was set by the December 2009 Business Fees and Charges Booklet as follows:
Honour Fee  $37.70
Charged for considering a request for an Informal Overdraft where you satisfy ANZ’s credit criteria for an Informal Overdraft, and the balance of your Informal Overdraft facility exceeds $50 at the time of your request or will exceed $50 after the debit requested has been processed.
(b)      Other Honour Fees (Exception Fees 53-61 and 72)
86 For Exception Fees 53-61 and 72, the contractual documents comprised the documents at [83] above (or materially and substantively the same documents) as well as ‘Finance Conditions of Use – ANZ Business Banking’ dated August 2011 (para 22 of Annexure 2) (or a later version which was materially and substantively the same) and ‘Finance Fees and Charges – ANZ Business Banking’ dated December 2009 (or a later version which was materially and substantively the same).
87 For Exception Fees 53 and 54, the applicable provisions included the two provisions extracted at [84]-[85] above as well as the terms of an Overdraft Facility Letter of Offer for $10,000 dated 28 April 2011 (para 20 of Annexure 2) which stated:
A fee is charged if the balance of your Overdraft facility exceeds $50 or will exceed $50 after a requested debit has been processed. This fee is for considering a request for an Informal Overdraft where you satisfy ANZ’s credit criteria.
88 For Exception Fees 55-61 and 72, the applicable provisions again included the two provisions extracted at [84]-[85] above. The Overdraft increased to $49,999 pursuant to an Overdraft Facility Letter of Offer dated 29 November 2011 (para 21 of Annexure 2). The relevant provision from that Letter of Offer provided that “[a]n Honour Fee of $37.70 is payable if ANZ pays drawings on your account in excess of the Facility Limit. This fee is payable on the date of the excess drawing”.
Thus, the fee was expressed to be charged for considering a request for an informal overdraft, but would be charged once per day irrespective of the number of transactions.
(d)      Dishonour Fees: the terms of Business Account 58555 were set out at [89]-[91] of the reasons, as follows:
(c)       Dishonour Fees (Exception Fees 62-71)
89 For Exception Fees 62-71, the contractual documents comprised the documents at [86] above (or materially and substantively the same documents) as well as the Overdraft Facility Letter of Offer dated 29 November 2011 at [88] above.
90       The parties accepted that the contractual documents were materially and substantively similar to the December 2009 Terms and Conditions and the December 2009 Business Fees and Charges Booklet: see [83] above. The December 2009 Terms and Conditions provided:
At the Bank’s discretion, a cheque may be dishonoured or payment refused where:
Ø there are insufficient funds in the account of the drawer;
…
ANZ may charge a dishonour fee.
…
If you do not satisfy ANZ’s credit criteria for an Informal Overdraft, ANZ will decline your request and will not allow the debit to be processed. You will be charged an Informal Overdraft Assessment Fee (referred to in your bank statements and in the ‘ANZ Business Banking Transaction Accounts Fees and Charges’ booklet as an ‘Outward Dishonour Fee’) and this fee is payable immediately.
91       The December 2009 Business Fees and Charges Booklet provided:
Outward Dishonour Fee  $37.70 per dishonour
Charged for considering a request for an Informal Overdraft where you do not satisfy ANZ’s credit criteria for an Informal Overdraft.
The fee was thus expressed to be charged per transaction for considering a request for an informal overdraft where the ANZ’s credit criteria were not satisfied.
Penalties

It is convenient to deal with the question of penalties first. Mr Paciocco and SDG, as well as ANZ, appeal against the primary judge’s conclusions.
It is convenient first to identify the approach of the primary judge and then consider the challenges to her Honour’s reasoning and approach leading to her conclusion.
The approach of the primary judge
General principles
From [13]-[48] of the reasons, the primary judge set out the relevant principles in the light of the High Court’s decision in Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; 247 CLR 205 (Andrews (HC)). As her Honour pointed out, the principal operative conclusion from Andrews (HC) was that the doctrine of penalties in Equity had not been subsumed in the common law leading to the necessity to consider the question at common law and in Equity.
Prior to her discussion of the principles at common law and Equity, the primary judge set out at [15] of the reasons a structure of analysis which she employed as follows:
15 To assist in understanding the form and substance of the following analysis, a particular stipulation may (not must) be considered by reference to the following steps:
1.Identify the terms and inherent circumstances of the contract, judged at the time of the making of the contract: Dunlop at 86-87 and AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170.
2.Identify the event or transaction which gives rise to the imposition of the stipulation: Dunlop at 86-87 and Andrews High Court at [12].
3.Identify if the stipulation is payable on breach of a term of the contract (a necessary element at law but not in equity). This necessarily involves consideration of the substance of the term, including whether the term is security for, and in terrorem of, the satisfaction of the term.
4.Identify if the stipulation, as a matter of substance, is collateral (or accessory) to a primary stipulation in favour of one contracting party and the collateral stipulation, upon failure of the primary stipulation, imposes upon the other contracting party an additional detriment in the nature of a security for, and in terrorem of, the satisfaction of the primary stipulation.
5.If the answer to either question 3 or 4 is yes, then further questions arise (at law and in equity: see Andrews High Court at [77]) including:
5.1 Is the sum stipulated a genuine pre-estimate of damage?
5.2Is the sum stipulated extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved?
5.3Is the stipulation payable on the occurrence of one or more or all of several events of varying seriousness?
These questions are necessarily interrelated.
6.If the answer to question 5 is that the sum stipulated is not a genuine pre-estimate of damage and is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have been sustained by the breach, or the failure of the primary stipulation upon which the stipulation was conditioned, then the stipulation is unenforceable to the extent that the stipulation exceeded that amount. Put another way, the party harmed by the breach or the failure of the primary stipulation may only enforce the stipulation to the extent of that party’s proved loss: Andrews High Court at [10].
A number of points relevant to the arguments on appeal need to be noted at this point. First, at [21] of the reasons, her Honour emphasised that whether a provision is a penalty at law is a question of construction that must be determined as a matter of substance viewing the contract as a whole; and the provision is judged at the time the contract is made.
Secondly, at [14] of the reasons, her Honour noted that although the circumstances that enliven the doctrine at common law and in Equity are different (breach of contract at law, and a collateral or accessory stipulation in Equity) common to both is that the provision will not be a penalty (at law or in Equity) unless it is “extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved.” This point was the subject of some elaboration at [39]-[45] of the reasons. Importantly, at [39] of the reasons, the primary judge noted the essential element (at law or in Equity) of the sum being extravagant, exorbitant and unconscionable, referring to Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1914] UKHL 1; [1915] AC 79 at 86-87; RingrowPty Ltd v BP Australia Pty Ltd [2005] HCA 71; 224 CLR 656 at 669 [31]-[32]; Clydebank Engineering and Shipbuilding Company v Don Jose Ramos Yzquierdo Y Castaneda [1905] AC 6 at 10 and 17; AMEV-UDC Finance Ltd v Austin [1986] HCA 63; 162 CLR 170 at 197 and 201; and Story J, Commentaries on Equity Jurisprudence, as Administered in England and America (13th Ed, Boston: Little, Brown and Co, 1886) Vol 2.
In dealing with the position at law, the primary judge referred to Dunlop at 86-87, 97 and 101-102. In discussing the position in Equity, the primary judge noted the essential question identified by the High Court in Andrews HC at [10]: whether, as a matter of substance, the collateral or accessory stipulation operates in the nature of a security for, and in terrorem of, the satisfaction of the primary stipulation, in the sense that the collateral stipulation, upon the failure of the primary stipulation, imposes an additional detriment on the first party to the benefit of the second party. The identification of the existence of such a collateral stipulation involves recognising the “operative distinction” (Andrews (HC) at [80]-[82]) between such a stipulation and one giving rise consensually to an additional obligation in exchange for an additional benefit: Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717 at 723-724 and 727.
In relation to this distinction, the High Court in Andrews (HC) at [80] quoted from French v Macale (1842) 2 Drury and Warren 269 at 275-276, in which passage Lord St Leonards said that the distinction was to be drawn “according to the true construction of the contract”.
The primary judge further noted in this discussion of the position in Equity that the distinction between a penalty and a genuine pre-estimate of damages made by Lord Dunedin in Dunlop at 86 was a product of Equity jurisprudence: Andrews (HC) at [15]. It was the availability of compensation which generated the equity upon which the court intervenes: Andrews (HC) at [11]. Her Honour elaborated upon this critical distinction in an important section of her reasons at [40]-[42]. Though her Honour did not deal with the matter quite in the following terms in those paragraphs, the following can be seen to be the approach she was describing. Even if it be wrong to attribute the following to her Honour in these paragraphs, the following, nevertheless, represents an approach that is relevant to the resolution of this appeal and an approach that is, for the reasons later discussed, correct. The requirement for extravagance and unconscionability and its distinction from a genuine pre-estimate of damage must require the latter concept to be a broad objective one, not limited to a clause expressly said to be a genuine pre-estimate of damage or containing a sum actually fixed in amount by reference to contemporaneous considerations concerned with such. Rather, if extravagance and unconscionability, on the one hand, and a genuine pre-estimate, on the other, are to operate as the relevant universe of discourse, the latter must be a descriptive phrase used to explain a sum paid upon breach of a term or pursuant to a collateral stipulation upon the failure of the primary stipulation that is not extravagant and not out of all proportion to the compensation for the breach or failure of the stipulation. The penal character of the provision is derived from the extravagance of the relationship between the payment and the possible loss capable of compensation. If there is no such extravagance present, the provision failure of which (by breach or not) admits of compensation is taken to be a genuine pre-estimate of damage, and not penal in character. This is so, even if the parties do not express the clause to be an agreed pre-estimate of damage and even if the parties did not negotiate or set the amount payable by reference to an estimate of damage.
The legitimacy of the above approach is central to dealing with ANZ’s appeal and its argument that the primary judge failed to address the question of extravagance and exorbitance prospectively, that is ex ante, in the manner that she said was necessary in [43]-[45] of the reasons, as follows:
43       How then does equity and the common law distinguish between provisions that are penal rather than compensatory? In AMEV, after acknowledging that equity and the common law have long maintained a supervisory jurisdiction not to rewrite contracts imprudently made but to relieve against provisions which are so unconscionable or oppressive that their nature is penal rather than compensatory, the High Court stated that the test to be applied in drawing that distinction (at 193):
is one of degree and will depend on a number of circumstances, including (1) the degree of disproportion between the stipulated sum and the loss likely to be suffered by the plaintiff, a factor relevant to the oppressiveness of the term to the defendant, and (2) the nature of the relationship between the contracting parties, a factor relevant to the unconscionability of the plaintiff’s conduct in seeking to enforce the term.
That test was subject to an important qualification that “[t]he courts should not, however, be too ready to find the requisite degree of disproportion lest they impinge on the parties’ freedom to settle for themselves the rights and liabilities following a breach of contract”: at 193-194.
44       In assessing whether the stipulated sum is extravagant and unconscionable in amount in comparison to the maximum loss that might be suffered from the breach (or failure of the primary stipulation), the Court may receive evidence addressing the quantum of loss that may have been suffered, assessed as at the date of contract: Elberg v Fraval [2012] VSC 342 at [99]ff citing Robophone Facilities v Blank [1966] 1 WLR 1428.
45       That task is simply stated but not necessarily straightforward. It is for the Applicants to prove that the stipulated sum was extravagant and unconscionable but, as ANZ sought to do here, that does not prevent ANZ from seeking to establish that the stipulated sum was not extravagant and unconscionable: Clydebank at 16 and Ringrow at [27]. A calculation of the maximum loss that might be suffered from the non-performance of a primary stipulation involves a forward-looking or hypothetical assessment.
At [46]-[48] of the reasons, the primary judge discussed the correct approach in Equity once a provision is found to be penal: to relieve the burdened party of the penal effect of the provision by restricting the party with its benefit to compensation for loss actually suffered by it from the failure of the provision. This assessment is made ex post. So, the provision is unenforceable only to the extent that the amount stipulated exceeded the quantum of loss or damage proved to have been sustained by the breach or failure: see Andrews (HC) at [10] resolving the apparent discordance in AMEV-UDC Finance Ltd v Austin between the approach of Mason and Wilson JJ at 192-193 (favouring the unenforceability or voidness of penal provisions) and the approach of Deane J at 199-203 (limiting the unenforceability to that which exceeds the true damnification), in favour of the views of Deane J. At [48] of the reasons, her Honour said the following:
…Equity assesses the quantum of loss or compensation based on what is just and equitable, or fair and reasonable, in all the circumstances. …
It will be necessary to consider the scope of this compensation and its relationship to the ex ante assessment of what is extravagant or exorbitant. In this regard, it is to be borne in mind that the approach of Equity was, as Mason and Wilson JJ said in AMEV-UDC at 190, that the actual damage suffered was assessed in an action at common law such as in an action of covenant, or upon a special issue quantum damnificatus which could be joined in an action on the case. On the other hand, the ex ante assessment of extravagance or exorbitance can be seen to be infused by notions of disproportion to, and unconscionable excess over, the legitimate interests of the covenantee represented by “the greatest loss that could conceivably be proved to have followed from the breach”: Dunlop at 87 (para 4(a)).
The wider framework in which to consider the provisions
After identifying the relevant contractual provisions at [49]-[91] of the reasons (as to which, see above) the primary judge considered the wider framework of the contractual provisions in question. The requirement for the proper context for the examination of the provision was derived from the requirement, as Lord Dunedin said in Dunlop at 86-87, of examining the provision in the “inherent circumstances” of each particular contract.
At [92]-[102] of the reasons, the primary judge referred to three bodies of context that were relevant: (a) the applicable regulatory framework that was described by her Honour in Andrews v ANZ [2011] FCA 1376; 211 FCR 53 at [87]-[134]; (b) the established principles concerning the banker and customer relationship summarised by her Honour in Andrews 211 FCR 53 at [81]-[82]; and (c) various “inherent circumstances” of each contract relied on by Mr Paciocco and SDG.
It is unnecessary to say anything about the regulatory framework at this stage. Neither side referred to her Honour’s discussion of this in Andrews 211 FCR 53, nor indicated any error in that regard.
As to the principles concerning the relationship of banker and customer, the primary judge rejected the submission of Mr Paciocco and SDG that they were merely historical, saying that they were to be seen as inherent in the arrangement. In particular, the core banking law principles inherent in the arrangement included the following set out at [93] of the reasons and taken from Andrews 211 FCR 53 at [82]:
1.        A savings or deposit account is in law a loan to the banker: Pearce v Creswick (1843) 2 Hare 286; Dixon v Bank of New South Wales (1896) 17 LR (NSW) Eq 355; Khan v Singh [1936] 2 All ER 545.The bank borrows the money and proceeds from the customer and undertakes to repay them on demand. The bank’s undertaking includes a promise to pay any part of the amount due against the written order of the customer addressed to the branch of the bank where the account is kept: Joachimson at [127]. Conversely, the bank will not pay any part of the amount due to the customer without such an order or some other compulsion or entitlement recognised by law;
2.        The issue of a cheque by a customer, or the giving of a payment instruction or withdrawal request to its bank, which would have the effect of overdrawing a customer’s account, is construed as a request by the customer for an advance or loan from the bank, and the bank has a discretion to approve or disapprove the loan: Cuthbert v Robarts, Lubbock & Company [1909] 2 Ch 226 at 233; Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] 1 QB 677 at 699-700; Ryan v Bank of New South Wales [1978] VR 555 at 577; Narni Pty Ltd v National Australia Bank Ltd [1998] VSC 146 at [37] and Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31 at [21];
3.        A written order by a customer which requires the bank to pay a greater amount than the balance standing to the credit of the customer may be declined. There is no obligation on the bank to pay a cheque unless there is a sufficient balance in the account to pay the entire amount or unless overdraft arrangements have been made which are adequate to cover the amount of the cheque: Bank of New South Wales v Laing [1954] AC 135 at [154]; Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) at [45] and Narni [2001] VSCA 31 at [12];
4.        If a customer with no express overdraft facility draws a cheque which causes his account to go into overdraft, the customer, by necessary implication, requests the bank to grant an overdraft on its usual terms as to interest and other charges: Lloyds Bank plc v Voller [2000] 2 All ER (Comm) 978 at 982.
At [95] of the reasons, the primary judge noted the four main “inherent circumstances” relied on by Mr Paciocco and SDG: (a) the lack of negotiation of the terms and their unilateral provision by ANZ; (b) the charging by other banks of similar fees; (c) the right of ANZ unilaterally to vary the terms and conditions; and (d) the determination of the quantum of the fees by ANZ and the fact that it did not do so by reference to any amount that would have been recovered in damages.
These considerations were accepted by ANZ; but it relied on a number of other considerations which were identified at [96]-[102] of the reasons. The first was the size of ANZ’s business which included six million retail depositors, two million consumer credit card accounts and over half a million business accounts. These considerations dictated the nature and manner in which the contracts were offered, entered into and administered.
Secondly, the standard terms, offer letters and other documentation were all available to customers, at the time of opening accounts, in leaflets with statements, and in letters when honour fees were invoked. The accounts could be terminated at will; and it was up to the customer whether to engage in transactions.
Thirdly, customers had it within their power to avoid the fees. Apart from monitoring their own behaviour, they could “switch off” or opt out of the ability, except in certain circumstances, to overdraw their accounts and so avoid fees. Further, they could close accounts which did not permit or limit the right to overdraw.
Whether the provisions were penalties
With this background, her Honour then turned, in Part 6 of the judgment, to the analysis as to whether the different exception fees were penalties.
This analysis was done by reference to the two periods (pre and post-December 2009) and by reference to late payment fees and fees other than late payment fees.
Late Payment Fee – pre December 2009
The primary judge said that ANZ only maintained a formal submission, in relation to both periods, that the fee was not payable upon breach of contract. Her Honour proceeded to deal with the relevant provisions from [113] and from [180] of the reasons.
At [114] and [181] of the reasons, the primary judge rejected the submission of ANZ (that was renewed on appeal) that the fees were payable upon a further period of credit necessarily extended by it to the customer because of an absence of timely payment. Her Honour concluded at [114] of the reasons, referring to the provisions at [53]-[57] of the reasons (see [15(a)] above), as follows:
… A plain reading of the contractual documents and the applicable Exception Fee Provisions leads to the conclusion that the Late Payment Fee was payable upon breach by the customer of his contractual obligation to make payment by a stated date: see [53]-[57] above. Contrary to the submission of ANZ, the stipulation was not a fee payable upon a further period of credit necessarily extended by the bank to the customer because of the absence of timely payment. The credit had already been extended. It was the repayment of the credit, or at least part of the credit, already extended that ANZ was seeking. Put another way, no further credit was extended.
See also [181].
At [115] and [182] of the reasons, the primary judge said that if not payable upon breach, the late payment fee provision was collateral to the primary stipulation to pay by the due date.

At [116] and [182] of the reasons, the primary judge concluded that at law and in Equity the collateral stipulation was, as a matter of substance, to be viewed, as security for or in terrorem of, the satisfaction of the primary stipulation. This conclusion flowed from the express language, the subject matter of the stipulation (from not paying money), and from the fact that the payment was not for further credit.
It will be important, in due course, when dealing with the complaints of ANZ on its appeal to appreciate that her Honour can be taken to have incorporated her reasoning in Andrews 211 FCR 53 where she dealt in detail (at [239]-[251]) with the argument of ANZ, which was formally maintained and repeated. Thus, the expression used by the primary judge at [114]-[116] of the reasons, should be understood in the light of the more detailed treatment of the argument in Andrews 211 FCR 53 at [239]-[251].
These conclusions at [114], [115], [116], [181] and [182] are challenged on appeal. For the reasons expressed later, that challenge fails.
The primary judge then returned to extravagance, exorbitance and unconscionability with which she dealt at [117]-[169]. It is to be recalled that, on a number of occasions ([14], [15 (5.2)], [39] and [45] of the reasons), the primary judge referred to the essentiality of the party impugning the provision as penal to demonstrate (whether at law or in Equity) that the provision is extravagant or exorbitant and unconscionable in amount. ANZ contends that, in this section, the primary judge made a fundamental error by failing to deal with this question, either at all, or on the correct basis of a forward looking, ex ante analysis.
The primary judge began the analysis at [117] of the reasons by stating once again the further “and essential” element of a penalty (at law or in Equity) that the stipulated sum be extravagant, exorbitant and unconscionable. ANZ points out that, at this point in the reasons as supporting material, her Honour referred to the earlier parts of her reasons dealing not only with “Extravagant, Exorbitant and Unconscionable” (Part 4E), but also that dealing with “Loss and Damage” (Part 4F). The latter is the ex post calculation of loss in fact, once a provision has been characterised as penal.
The primary judge then, at [119], examined three categories of factual consideration that were said to be relevant to the question of extravagance and unconscionability. The first category were some features of the late payment fee. One feature was that the same fee was payable regardless of whether the late payment was of a short or long period or of a trifling or large amount. At [119], her Honour said, the test in para 4(c) in Dunlop was engaged – the so-called third rule of construction because there was a presumption (but no more) that the stipulation was a penalty because a single sum was payable by way of compensation on the occurrence of one or more or all of several events, some of which may occasion serious, and others trifling damage. The primary judge then continued at [119] of the reasons:
… As a result, there necessarily was a degree of disproportion between the stipulated sum and the loss likely to have been suffered by ANZ…
The primary judge continued at [120]-[121] of the reasons:
120 That degree of disproportion cannot be considered in isolation. Other contractual terms must be considered. In particular, it must be recalled that, in addition to the late payment fee, the same contractual documents entitled ANZ, amongst other things, to charge (which it did) annual interest of 12.24% on the specific outstanding amount.
121 That leads to the second rule of construction referred to by Lord Dunedin in Dunlop and described by him as conclusive: see [18(4)(b)] above. The first part of that rule of construction was applicable to the Late Payment Exception Fees – the breach (or failure of the stipulation) consisted only in not paying a sum of money. The question which then arose was whether the second part of that rule was met – is the sum stipulated a sum greater than the sum which ought to have been paid? The Applicants said it was, ANZ said it was not. Before turning to that aspect, it is necessary to consider the other categories of facts and matters identified by the Applicants.
Thus, at this point of the reasons, her Honour’s approach was that, given the circumstances here were that the breach or failure was the failure to pay a sum of money (which could be $0.01, late by one day, or a large sum, late by weeks), the question of the “degree of disproportion” and the question whether the provision was penal fell to be considered by reference to whether or not no more was paid by the fee as the stipulated sum than the sum which ought to have been paid.
That exercise was dealt with by her Honour at [131]-[176] being the “quantitative assessment” by reference to the expert evidence of Mr Inglis and Mr Regan. Central to her Honour’s approach was her conclusion, drawn from para 4(c) of Dunlop and Lord Elphinstone v Monkland Iron and Coal Co (1886) 11 AC 332 (see [119] of the reasons) that the provision was prima facie a penalty; and her conclusion as to the relevance of para 4(b) of Dunlop that given the fee was payable for the non-payment of a sum of money, the question was whether the sum was greater than the sum which ought to have been paid: Dunlop at 87 (see [121] of the reasons). The rebuttal of that presumption arising from para 4(a) of Dunlop and the enquiry required by para 4(b) of Dunlop was, her Honour said at [139], to be executed by undertaking an enquiry as:
… to what extent (if any) did the amount stipulated to be paid exceed the quantum of the relevant loss or damage which can be proved to have been sustained by the breach, or the failure of the primary stipulation, upon which the stipulation was conditioned: see [48] and [126]-[130] above.
By this expression of the matter, the primary judge did not consider it necessary to undertake a forward looking, ex ante, analysis in part because of the relevance and application of the third and second tests in paras 4(c) and (b) of Dunlop, respectively. The relevance and application of the third test (4(c)) reflects the acceptance by the primary judge that some breaches would lead to trifling damage. The second test (4(b)) is one that depends upon a comparison between the sum in the stipulation and the sum “which ought to have been paid”. Given this was a nominal money sum, any argument by ANZ that some greater amount was payable (in damages for the breach or failure) was taken by her Honour to be an ex post calculation, not the forward looking, ex ante, calculation of the “greatest loss that could conceivably be proved to have followed from the breach” (for the purposes of para 4 (a) in Dunlop). One aspect of that conclusion was what her Honour described as ANZ’s admission that the late payment fee was not a genuine pre-estimate of damage. At [129] of the reasons, the primary judge said the following in relation to her rejection of the utility of examining certain ANZ documents said to show the bank’s intention:
That documentation does not assist in the resolution of the question to be answered in this case. Having determined that the Exception Fee Provisions relating to Late Payment Fees were prima facie a penalty at law and in equity and given that ANZ admitted that the Late Payment Fee was not a genuine pre-estimate of damage, the question left to be determined is to what extent (if any) did the amount stipulated to be paid exceed the quantum of the relevant loss or damage which can be proved to have been sustained by the breach, or the failure of the primary stipulation, upon which the stipulation was conditioned: see [48] above. Again, none of those matters identified answered or assisted in answering that question.
That analysis (as well as the conclusion in [139]) was the subject of complaint by ANZ on appeal. Its central submission was that the primary judge, wrongly substituted without justification in all the circumstances an ex post calculation of actual damage from the breaches by Mr Paciocco and SDG for the correct ex ante enquiry of the greatest loss that could be proved to have followed from a breach. For the reasons that follow, that central submission should be accepted.
The clarity of the primary judge’s language that the question left to be determined was an ex post analysis of the damage caused by the breaches in question (by Mr Paciocco and SDG) is to be noted. There was an attempt in submissions on appeal by Mr Paciocco and SDG to construct from some of the language used elsewhere in the reasons an argument that the primary judge did engage in a forward looking analysis of the greatest conceivable damages that might flow from such a breach. For reasons to which I will come, that argument must fail: principally because, as at this point in the reasons, the primary judge did not say that she was undertaking that task.
Before turning to the calculation of the sums, her Honour dealt at [122]-[130] of the reasons, with various other matters raised by Mr Paciocco and SDG as relevant. The inherent circumstances that her Honour had considered at [92]-[102] of the reasons (and discussed at [30]-[36] above) were also relevant to her conclusion as to the penal character of the provision and fees. At [123] of the reasons, her Honour said:
However, taken as a whole, these circumstances provide further support for the conclusion that, at least on its face, the late payment provision and fee is penal. ANZ was able to impose these fees because of the inequality of bargaining power between the Bank and its customer (here Mr Paciocco). The terms were contained in printed forms, which the customer had no opportunity to negotiate. There was no agreement between “people contracting on equal terms”: English Hop Growers v Dering [1928] 2 KB 174 at 181.
The primary judge refused, however, to give any weight to certain business records of ANZ which Mr Paciocco and SDG said were relevant. These were records that were said to demonstrate ANZ’s state of mind and commercial intention in levying the fees. The primary judge rejected these documents for a number of reasons: their selectivity (see [128] of the reasons); that the enquiry as to extravagance was objective not subjective (see [126] of the reasons); and the importance of what her Honour took to be ANZ’s admission that the late payment fee was not a genuine pre-estimate of damage (see [129] of the reasons).
Given the nature of the subject matter, it is convenient to deal with the detail of her Honour’s ex post quantitative analysis when dealing with ANZ’s arguments on appeal. At [173] of the reasons, the primary judge concluded that ANZ suffered some loss or damage by each late payment exception fee event of no more than $3, though, for some fees, the damage was $0.50. This was comprised of operational collection costs (to the extent they existed) rounded up. The balance over this was penal and recoverable.
Late Payment Fee – post December 2009
The same approach applied to the late payment fees after December 2009. The loss in respect of each event was calculated at $0.50: see [234]-[242] of the reasons.
The other fees – Honour, Overlimit and Non-Payment Fees: pre-December 2009
The primary judge dealt with the position before December 2009, in respect of the honour fee in Savings Account 156 at [188]-[212] of the reasons, with the overlimit fees on the Card Accounts at [213]-[229] of the reasons, and with non-payment fees at [230]-[233].
The Savings Account Honour Fee
The terms of the provision were set out at [63] and [65]-[66] of the reasons: see [15(c)] above. Her Honour referred to as relevant the other circumstances discussed at [117]-[130] of the reasons: see [46]-[48] and [54]-[55] above. Her Honour then referred to what were the uncontentious “exception fee events”: see [190]-[195] of the reasons.
At [196]-[204] of the reasons, the primary judge construed the honour fee as not payable on breach of contract. Mr Paciocco and SDG focused in their submissions upon the statement by ANZ in its terms and conditions that it was a required condition of all accounts that the customer must not overdraw an account without prior arrangements being made and agreed with ANZ. The primary judge rejected that focus as too narrow, noting that the relevant term (cl 2.12 of the August 2008 Terms and Conditions: ([65] of the reasons and [15(c)] above) deals with the discretion of ANZ to deal with a debit that would overdraw the account. This discretionary conduct by ANZ was, her Honour said, to be placed into the framework of the banker and customer relationship, with the consequence that it was to be viewed as set out at [198] of the reasons:
198     …
1.        A withdrawal or payment instruction given by a customer that would have the effect of overdrawing the customer’s account or exceeding the account credit limit is to be construed as a request from the customer for an advance or loan from ANZ. ANZ may approve or decline the request in its discretion: Andrews Trial at [82], [177], [279], [306] and [322].
2.        The overdrawing of a customer account (whether a deposit account or a credit card account) was not a unilateral action by the customer, but was an action that required the consensual conduct of ANZ and the customer: for example, see [191] above. For the transaction to proceed, ANZ had to agree to and approve or authorise the transaction: Andrews Trial at [182], [280], [291], [307] and [323].
3.        Overdrawing the account could not constitute a breach by the customer of a contractual obligation. Such transactions fell within the express provisions of the applicable contractual terms which stated that ANZ may allow or authorise such transactions, or were outside the contractual terms because ANZ approved the transaction: Andrews Trial at [182], [280], [291], [307] and [323].
4.        It was not a breach of contract for ANZ’s customers to give a withdrawal or payment instruction to ANZ that would have the effect, if honoured, of overdrawing the customer’s account or exceeding the account credit limit. The relevant provisions of the customer contracts did not impose a contractual obligation not to give such an instruction. In fact, the relevant provisions stated expressly that ANZ may allow or authorise such a transaction: Andrews Trial at [185], [186], [208], [214], [328] and [331].
5.        Honour and overlimit fees (as will become relevant later) were charged by ANZ as a consequence of a customer issuing a withdrawal or payment instruction to ANZ that would have the effect, if honoured, of overdrawing the customer’s account or exceeding the account credit limit and ANZ approving or authorising the instruction. The fees were charged in respect of ANZ’s decision concerning the request for additional borrowing: Andrews Trial at [182], [183], [187], [279], [280], [291], [306], [307] and [328]. The honour fee in respect of consumer accounts was charged once per day, regardless of how many transactions that occurred on that day overdrew the account (Andrews Trial at [187]) and the overlimit fee in respect of card accounts was charged once per month, at the end of a statement period, if the balance of the account exceeded the credit limit during the statement period: Andrews Trial at [277]. Honour and overlimit fees were not charged by ANZ upon a breach of contract by the customer.
This analysis is equally applicable to the Exception Fee Provisions in this case: see [65]-[66] above in relation to Exception Fee 1, and in respect of other Honour and Overlimit Fees to be discussed later in these reasons, see [60]-[62] (Overlimit Fee), [77]-[79] (Overlimit Fee), [84]-[88] (Business Honour Fee) and [248] (Overlimit Fee); see also Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) at [76]-[80].
Thus, there was no breach.
Mr Paciocco and SDG attacked this approach on appeal. For the reasons later set out, that attack fails.
The primary judge then (from [200] of the reasons) examined whether the fee was collateral or accessory to a primary stipulation. The primary judge rejected the submission that from all the circumstances it was clear that the event ANZ was seeking to discourage was exceeding the limit. The rejection (at [202] of the reasons) was because the fee was not payable upon the failure of a stipulation – ANZ was not bound to meet the request. Her Honour said at [202]:
Those contentions are rejected. They are rejected because the Honour Fee is not payable upon failure of a stipulation. ANZ was not bound to meet the customer’s request. The liability to pay the fee arose as a result of, and in exchange for, something more than and different from that which had existed up to that point in time. Properly construed, the provision which entitled ANZ to charge the Honour Fee did not impose a fee to be regarded as security for performance by the customer of other obligations to ANZ. It was a fee charged in accordance with pre-existing arrangements according to whether ANZ chose to provide something more and further to the customer. In the present case, it was a fee charged by ANZ for authorising payments upon instructions by Mr Paciocco upon which ANZ otherwise was not obliged to act: see [33]-[38] above.
This reasoning can be seen to be founded upon the substantive importance of the principles to the banker customer relationship to which her Honour had referred. This is the subject of significant attack on appeal. For the reasons later set out, that attack fails.
At this point in the reasons ([203]-[204]), the primary judge discussed the relevance of so-called “shadow limits”. Shadow limits (as explained by the primary judge at [101] of the reasons) were informal limits that enabled the customer (unless he or she opted out of the arrangement) to be given additional credit upon the payment of the relevant fee. This permitted, as the primary judge said at [203], the ANZ to deal with the discretionary credit arrangement (and the fee) automatically.
At [205]-[208] of the reasons, the primary judge rejected the contention (though it was unnecessary to do so) that the honour fee was unconscionable.
The Card Account Overlimit Fee
The terms of these provisions were set out at [59]-[62] of the reasons: see [15(b)] above. Again, her Honour referred to as relevant the other circumstances discussed at [117]-[130] of the reasons: see [46]-[48] and [54]-[55] above. Her Honour then referred to what were the uncontentious “exception fee events”: see [214]-[219] of the reasons.
At [220]-[227] of the reasons, the primary judge construed the overlimit fee as neither payable upon breach of a term or as collateral (or necessary) to a primary stipulation. This was for the same reasons as her Honour reached this conclusion in respect of the honour fee. Her Honour saw it (see [222] of the reasons) as substantially the same, notwithstanding the differences in nomenclature. The clause provided for what was said to be prohibited: overdrawing and the consequences in cost thereof. The customer chose to initiate the transaction that the ANZ could choose to honour, for a fee. The essence of the reasoning was set out with clarity in [224] and [225] of the reasons as follows:
224 An overlimit fee was not charged in order to secure the performance of a primary stipulation not to overdraw the account or initiate an overdraw transaction. Rather, the customer was entitled to initiate such a transaction and the fee was payable in respect of ANZ’s consideration of and decision in respect of the request for a further advance. The fee was charged if ANZ chose to allow the transaction and thereby approve the request for additional borrowing. Moreover, an overlimit fee was charged once per month, regardless of how many transactions occurred in that month which caused the credit limit to be exceeded: see [61]-[62] above. The fee was not payable upon a failure of a stipulation. It was payable in respect of ANZ’s response to the request for further borrowing. Indeed, it was not payable each time that a request and response was made. It was only payable once per month.
225 As was the position with Saving Account 156, it was within ANZ’s power to prevent Mr Paciocco from overdrawing his Card Accounts. There was no necessity for ANZ to accommodate such informal requests for additional borrowings and exercise any discretion with respect to the requests. ANZ could have elected not to permit Mr Paciocco to overdraw at all. Instead of preventing overdraw transactions, ANZ anticipated and planned for such transactions and developed procedures and systems to assess and determine whether to allow the overdrawing to occur. The fact that ANZ chose to accommodate these informal requests, when there was no necessity for it to do so, supports the conclusion that the overlimit fee cannot be characterised as security for the performance of a stipulation, especially a stipulation not to overdraw the credit limit. As noted above, the overlimit fee was a consensual additional obligation in the card account and not a penalty. The term imposed a fee in circumstances where Mr Paciocco had the right to initiate a transaction that would exceed the credit limit, thereby seeking further accommodation from ANZ, and the fee was payable for ANZ’s consideration and approval of the relevant instruction.

I certify that the preceding three hundred-seventy (370) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.
Associate:
Dated: 8 April 2015

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 141 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
LUCIO ROBERT PACIOCCO
First Appellant

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Appellant

AND: AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Respondent

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 149 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Appellant

AND:
LUCIO ROBERT PACIOCCO
First Respondent

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Respondent

JUDGES:

ALLSOP CJ, BESANKO J and MIDDLETON J

DATE:

8 april 2015

PLACE:

SYDNEY (HEARD IN MELBOURNE)

REASONS FOR JUDGMENT
besanko J:

I have had the advantage of reading the reasons for judgment of the Chief Justice. I respectfully agree with those reasons and with the orders his Honour proposes. In the circumstances, it is not strictly necessary for this Court to address the issue raised concerning the Limitation of Actions Act 1958 (Vic). However, the issue is an important one and it was the subject of detailed submissions from the parties. I will address it for the sake of completeness.
Mr Paciocco and Speedy Development Group Pty Ltd commenced this proceeding on 14 March 2013. Two of the Exception Fees debited to Mr Paciocco’s card account 9522 were late payment fees debited to the account more than six years prior to the commencement of the proceeding. They were a late payment fee debited to the account on 4 September 2006 (Exception Fee 4), and a late payment fee debited to the account on 4 March 2007 (Exception Fee 5).
The primary judge found that Exception Fee 5 was not statute-barred because, although it was debited to Mr Paciocco’s account more than six years before the proceeding was commenced, it was in fact paid within the six years preceding the date on which the proceeding was commenced. The date of payment is the date upon which the cause of action for the recovery of money paid because of a mistake of law accrues: Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581. It was accepted by the Bank that the issue relating to the Limitation of Actions Act 1958 (Vic) was only relevant in relation to Exception Fee 4.
The relief Mr Paciocco sought in relation to his claim that the late payment fee was a penalty included declaratory relief, and orders for an account, interest and ancillary relief. The Bank pleaded in its amended defence various Limitation of Actions Acts, but it was common ground before the primary judge that the recovery of Exception Fee 4 was to be determined by Victorian law. Therefore, the relevant time limit, according to the Bank, was s 5 of the Limitation of Actions Act 1958 (Vic).
Section 5 relevantly provided as follows:
5 Contracts and Torts
(1)The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued -
(a)Subject to sub-sections (1AAA), (1AA) and (1A), actions founded on simple contract (including contract implied in law) or actions founded on tort including actions for damages for breach of a statutory duty;
...
(2)An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.
...
(7)Save as otherwise expressly provided an action shall not be brought to recover any arrears of interest in respect of any sum of money whether payable in respect of a specialty, judgment, legacy, mortgage or otherwise, or any damages in respect of such arrears, after the expiration of six years after they became due.
Mr Paciocco sought to avoid the operation of s 5 by arguing that, because he sought declaratory relief, the proper basis for relief was not restitution for money had and received. The primary judge rejected that argument and found that the legal entitlement (if it existed) was a claim in restitution for money had and received. In addition, her Honour said that it was immaterial that the legal entitlement was based in restitution, rather than as previously thought, implied contract (Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 356-357 per Mason CJ; Australian and New Zealand Banking Group Limited v Westpac Banking Corporation (1988) 164 CLR 662 at 673 per Mason CJ, Wilson, Deane, Toohey and Gaudron JJ). Having reached those conclusions, her Honour held that a six year limitation period applied to Mr Paciocco’s claim that the Exception Fees were penalties. Mr Paciocco does not challenge that conclusion.
However, her Honour went on to hold that s 27(c) of the Limitation of Actions Act 1958 (Vic) applied to Mr Paciocco’s penalty cause of action and that, in the circumstances of the case, time did not begin to run until 22 September 2010. Section 27 is the following terms:
27. Postponement of limitation periods in case of fraud or mistake
Where, in the case of any action for which a period of limitation is prescribed by this Act—
(a)the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or
(b)the right of action is concealed by the fraud of any such person as aforesaid; or
(c)the action is for relief from the consequences of a mistake—
the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it:
Provided that nothing in this section shall enable any action to be brought to recover or enforce any charge against or set aside any transaction affecting any property which—
(i)in the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know or have reason to believe that any fraud had been committed; or
(ii)in the case of mistake, has been purchased for valuable consideration, subsequently to the transaction in which the mistake was made by a person who did not know or have reason to believe that the mistake had been made.
The Bank contended before the primary judge that s 27(c) did not apply to Mr Paciocco’s penalty cause of action because the section was limited to mistakes of fact and did not extend to mistakes of law. Her Honour accepted that, at the time s 27(c) was enacted, a mistake of law as a basis for a restitutionary claim was not recognised at law, and that at the time it was enacted, the section was not intended to extend to include a mistake of law. However, she said that for the reasons given by a majority of the House of Lords in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (“Kleinwort Benson Ltd”) at 387-389 per Lord Goff of Chieveley, 398-401 per Lord Hoffmann, and 416-418 per Lord Hope of Craighead, when construing the equivalent English section, s 27(c) was not limited to a mistake of fact.
Her Honour then turned to consider when Mr Paciocco had discovered the mistake within the terms of s 27(c). She found that he did not do so before the Andrews Trial proceeding (previously defined by her Honour in her reasons as Andrews v Australia and New Zealand Banking Group Ltd (2011) 211 FCR 53) was commenced on 22 September 2010. She found that until then, Mr Paciocco was operating under the belief that the Bank was entitled to charge the Exception Fees and that he was obliged to pay Exception Fee 4. Her Honour did not address that limb of the test in s 27(c) which activates the limitation period where an applicant could, with reasonable diligence, have discovered the mistake. That seems to have been because, as her Honour noted (at [366]), other than to contend that s 27(c) was limited to a mistake of fact, “ANZ did not contend for a different date” from 22 September 2010 as the date activating the limitation period.
In its supplementary notice of appeal, the Bank challenges her Honour’s conclusion that s 27(c) applied to Exception Fee 4. It does so on the following ground:
15. The Court erred in concluding that:
a. for the purpose of s 27 of the Limitation of Actions Act 1958 (Vic) (Limitations Act), a “mistake” is not limited to a mistake of fact and includes a mistake of law (at [365]); and
b. s 27 of the Limitations Act applied to the payment of the Late Payment Fees by Mr Paciocco to ANZ (at [365]).
In its oral submissions on the appeal, the Bank sought to advance an argument about the operation of s 27(c) to the facts of this case which was not addressed by the primary judge. The Bank submitted that Mr Paciocco had not shown that he could not, with reasonable diligence, have discovered that he was not obliged to pay Exception Fee 4 before 14 March 2007 and, therefore, he had not brought his case within s 27(c). The Bank submitted that Mr Paciocco had not adduced any evidence of inquiries he had made, or of any impediment to the making of inquiries by him, or of any judicial decision which had disabused him of his prior belief. As the Bank put it, these are only examples of the type of evidence Mr Paciocco might have adduced to discharge the onus on him to show that his case fell within the terms of the section. I do not think that it is open to the Bank to put this argument on the appeal. The argument was not put to the primary judge and it is not raised in the supplementary notice of appeal. It is not dealt with in the Bank’s written outline of submissions. The Bank did not make an application to amend its supplementary notice of appeal, and it should not be permitted to raise this argument in the absence of an amendment to its notice of appeal. An application to amend would raise issues such as whether the amendment ought to be refused on the basis that had the point been raised below, Mr Paciocco might have conducted his case differently (Coulton and Others v Holcombe and Others (1986) 162 CLR 1 at 7-8 per Gibbs CJ, Wilson, Brennan and Dawson JJ; Water Board v Moustakas (1988) 180 CLR 491).
The principal argument advanced by the Bank is that s 27(c) of the Limitation of Actions Act 1958 (Vic) does not apply to a mistake of law.
Section 27 of the 1958 Act is, in material respects, in the same terms as s 27 of the Limitations of Actions Act 1955 (Vic). The latter Act was modelled on the English Limitation Act of 1939, and s 27 of the 1955 Act is, in material respects, in the same terms as s 26 of the English Act.
The English Act followed upon the Fifth Interim Report of the Law Revision Committee (1936) (Cmd 5334). Paragraph 23 of the report was in the following terms:
A somewhat similar position arises in cases where relief is sought from the consequences of mistake, e.g., when money is paid on property transferred under a mistake. The equitable rule is that the time should only run under the Statutes of Limitation from the time at which the mistake was, or could with reasonable diligence have been, discovered. At present this rule does not apply in cases which formerly fell within the exclusive cognisance of a court of law (Baker v Courage, [1910] 1 K.B. 56). It only applies to cases which were formerly only actionable in a court of equity, or were within the concurrent jurisdiction of the two systems (Re Mason [1928] Ch. 385, and [1929], 1 Ch.1; Re Blake, [1932], 1 Ch. 52). It was held in Baker v. Courage (supra) that the Judicature Acts had not altered the common law rule.
This position appears to us as unsatisfactory as the position with regard to the effect of concealed fraud, and accordingly we recommend that in all cases when relief is sought from the consequences of a mistake, the equitable rule should prevail and time should only run from the moment when the mistake was discovered, or could with reasonable diligence have been discovered. We desire to make it clear, however, that the mere fact that a plaintiff is ignorant of his rights is not to be a ground for the extension of time. Our recommendation only extends to cases when there is a right to relief from the consequences of a mistake. In such cases it appears to us to be wrong that the right should be defeated by the operation of the Statues of Limitation.
We wish to add that neither this recommendation nor those contained in the preceding paragraph are intended to encroach upon or affect the existing rules of equity relating to laches and acquiescence.
Prior to the decision of the House of Lords in Kleinwort Benson Ltd, the law in England was that there was a general rule that money paid because of a mistake of law, as distinct from a mistake of fact, was not recoverable. This general rule can be traced back to the decision in Bilbie v Lumley (1802) 2 East 469. There were a limited number of specific exceptions to the general rule, and a number of these exceptions were identified by Lord Bridge of Harwich in Reg v Tower Hamlets LBC., Ex p. Chetnik Developments Ltd [1988] 1 AC 858 at 874-877 (see also “Relief Under Mistakes of Law” (1907) 7 Columbia Law Review 279).
In addition to the exceptions at law, Courts of Equity, when exercising their jurisdiction on the ground of mistake, attached less importance to the distinction between a mistake of fact and a mistake of law. I put the matter in that rather general way because a good deal might be said on the topic, but I do not need to explore the matter for the purposes of resolving the issues in this case. The fact that Courts of Equity were less concerned about whether the mistake was one of fact or one of law may be seen from authorities such as Stone v Godfrey (1854) 5 De GM & G 76; (1854) 43 ER 798; Earl Beauchamp v Winn (1873) LR 7 HL 223 at 232-235; In re Diplock; Diplock v Wintle [1948] Ch 465 at 515-516; Kleinwort Benson Ltd at 388-389 per Lord Goff. On the other hand, absent a fiduciary relationship or a supervening equity, it has been said that Courts of Equity did not provide relief in the case of a voluntary payment made in full knowledge of the facts: Rogers v Ingham (1876) 3 Ch D 351; Campbell v Kitchen & Sons Ltd and Brisbane Soap Co Ltd (1910) 12 CLR 515 at 524-525 per Griffith CJ; at 531-532 per Barton J; at 537-538 per O’Connor J.
In Kleinwort Benson Ltd the House of Lords, by a majority, decided that the general rule precluding the recovery of a payment made because of a mistake of law no longer formed part of English law.
Their Lordships in Kleinwort Benson Ltd were also required to consider the scope of s 32(1)(c) of the Limitation Act 1980 (UK) which was in materially similar terms to s 26(c) of the Limitation Act 1939, and is in materially similar terms to s 27(c) of the Limitation of Actions Act 1958 (Vic). Lord Goff (at 388-389) rejected the argument that s 32(1)(c) did not apply to mistakes of law because the rule precluding the recovery of payments made because of a mistake of law applied in full force in 1939 when the predecessor to the section (s 26(c)) was first enacted. Lord Hope (at 417-418) also rejected the argument. His Lordship referred to the fact that the word “mistake” appeared in the subsection without qualification. He also referred to the fact that there were exceptions to the rule precluding recovery in a case involving a mistake of law and that, if s 32(1)(c) was interpreted having regard to the law at the time s 26(c) was enacted, then recovery was possible in the case of some mistakes of law. His Lordship considered that there was no reason why, if s 32(1)(c) could apply to some mistakes of law, it should not apply to mistakes of law generally.
The law in Australia before the decision of the High Court in David Securities Pty Limited and Others v Commonwealth Bank of Australia (1992) 175 CLR 353 was similar to the law in England before the decision in Kleinwort Benson Ltd. The Full Court of this Court in David Securities Pty Limited and Others v Commonwealth Bank of Australia and Others (1990) 23 FCR 1 identified the existing law by reference to what had been said by an earlier Full Court in J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539. In the latter case, the Full Court said (at 550-551):
It is true that the distinction which has been drawn between mistake of fact and mistake of law has been subjected to much learned criticism and is often difficult to apply. It is, however, at least in so far as this court is concerned, firmly entrenched.
...
The insufficiency of mistake of law as the foundation of an action for recovery of money paid is commonly stated as a general principle or rule of law precluding any right of action in a case where the payment was voluntary. Thus, for example, Latham CJ in Werrin v Commonwealth (1938) 59 CLR 150 at 157, said that the “general rule, as stated in Leake On Contracts, 6th ed, (1911) p 63, is that money paid voluntarily, that is to say, without compulsion or extortion or undue influence and with a knowledge of all the facts cannot be recovered” (see also, to the same effect, Whiteley (Wm) Ltd v R (1909) 101 LT 741 at 745; Sawyer & Vincent v Window Brace Ltd [1943] 1 KB 32 at 34). Such statements of a general rule precluding recovery require to be hedged around by categories of exceptions which while “more or less canalized or defined” need not necessarily be regarded as closed. It is preferable to frame the general rule in terms of insufficiency rather than in terms of preclusion. So stated, the general rule is that a mistake of law does not, on its own, found an action for the recovery of money paid: see, generally, Kiriri Cotton Co Ltd v Dewani ([1960] AC) at 204–5.
In 1955 and in 1958 “an action ... for relief from the consequences of a mistake” would not, as a general rule, have included an action for the recovery of money paid because of a mistake of law. However, as I have said, at that time there were a limited number of specific exceptions to the general rule.
The next step in the Bank’s argument is to submit that s 27(c) should be construed as what Bennion calls a “fixed-time” provision (Jones O, Bennion on Statutory Interpretation, (6^th ed, Lexis Nexis UK, 2013) section 288) to which the maxim, contemporanea expositio est optima et fortissima in lege (the best and surest mode of construing an instrument is to read it in the sense which would have been applied when it was drawn up) is to be applied (Broom H, Broom’s Legal Maxims, (10^th ed, rev Kersley RH, Sweet & Maxwell, (1939) p 463); Corporate Affairs Commission of New South Wales v Yuill & Others (1991) 172 CLR 319 at 323 per Brennan J (as his Honour then was).
By contrast, Mr Paciocco submits that the canon of construction which should be applied to s 27(c) is that which gives it an ambulatory construction and that it should be construed as “always speaking”.
In Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 531, the High Court considered the proper construction of legislation which conferred jurisdiction on the District Court of New South Wales by reference to the jurisdiction of the Common Law Division of the Supreme Court of New South Wales and a specified monetary limit. Subsequent legislation reorganised the Civil Divisions of the Supreme Court, and the question was whether the jurisdiction of the District Court was fixed by reference to the position as it was when jurisdiction was first conferred. The High Court held that it was so fixed.
The majority (Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ) said that to speak in terms of a rebuttable presumption that a legislative provision is “always speaking” is apt to mislead.
... What it bespeaks is an exercise in statutory interpretation which seeks to discern what is called the intention of the legislature in enacting the specific provision, having regard to its context, scope and purpose. ...
(at 548, [39]).
Their Honours then went on to address the context, scope and purpose of the section in issue and said that the significant matters in that regard were first, that there was no reason to assume that Parliament would have intended a provision conferring jurisdiction on a court of limited and defined jurisdiction to be construed as ambulatory, second, an ambulatory construction would not promote one of the objectives of removing doubt about the District Court’s jurisdiction and, finally, a fixed-time construction was consistent with the other limb of the relevant section which prescribed a monetary limit.

In R v Gee and Another (2003) 212 CLR 230, the High Court gave an ambulatory construction to s 68(2) of the Judiciary Act 1903 (Cth) so that it included jurisdiction to hear and determine a question of law reserved to the Full Court of the Supreme Court of South Australia in a case of a person charged with offences against the laws of the Commonwealth. Gleeson CJ said that it did not further the general policy of placing the administration of the criminal law of the Commonwealth in each State upon the same footing as that of the State, “to treat the provisions of Div 3 of Part X as, in effect, confining the case stated procedures provided for by the Judiciary Act to those of the kind in force at the time of Federation” (at 242-243, [13]).
In my opinion, s 27(c) of the Limitation of Actions Act 1958 (Vic) should be given an ambulatory construction. I should say at the outset that I do not think that there is anything in the Report of Law Revision Committee that assists either way. The reference in paragraph 23 to the equitable rule, is a reference to the rule in equity as to the postponement of time, not a reference to equitable rules more generally. With respect, I think that there is a good deal to be said for Lord Hope’s approach in Kleinwort Benson Ltd that, even before the abolition of the general rule against recovery for a mistake of law, recovery was permitted in the case of some (albeit limited) mistakes of law, and the only ambulatory effect to be given to s 26(c) was to include all mistakes of law. However, I think that the case can be decided on a more general basis. The words used in paragraph 27(c) are quite general, and are capable of being given an ambulatory effect. Having regard to the inferred objects of s 27(c), I do not think there is a convincing reason, not to give the paragraph an ambulatory construction. The Bank referred to the general policy objectives that lie behind Limitation of Actions legislation (Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 552-553 per McHugh J), but I think it is the object which lies behind s 27(c) itself which is significant. That object is to postpone the activation of limitation periods in the case of a mistake until the mistake is discovered, or could, with reasonable diligence, have been discovered. At the risk of stating the obvious, it seems perfectly reasonable, as a general proposition, that time should not run against a person whose cause of action is based on a mistake until that person discovers or could, with reasonable diligence, discover the mistake. The Bank also submitted that undesirable consequences would result if s 27(c) is given an ambulatory construction so as to include mistakes of law. For example, transactions considered final and settled might be upset many years after they have taken place on the basis of a mistake of law, possibly revealed by a subsequent judicial decision which reverses earlier authority. There is some force in this argument which may at some stage attract the attention of the legislature, but it is not sufficient to dissuade me from giving s 27(c) an ambulatory construction. The same type of problem (although not to the same degree) potentially arises where proceedings are issued shortly before the expiration of the six year period.
I would reject the Bank’s contention that recovery of Exception Fee 4 is statute-barred by reason of s 5 of the Limitation of Actions Act 1958 (Vic).

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.
Associate:
Dated: 8 April 2015

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 141 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
LUCIO ROBERT PACIOCCO
First Appellant

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Appellant

AND:
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Respondent

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 149 of 2014

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Appellant

AND:
LUCIO ROBERT PACIOCCO
Respondent

SPEEDY DEVELOPMENT GROUP PTY LTD
Second Respondent

JUDGES:

ALLSOP CJ, BESANKO J and MIDDLETON J

DATE:

8 April 2015

PLACE:

SYDNEY (HEARD IN MELBOURNE)

REASONS FOR JUDGMENT
MIDDLETON J:
Introduction

I have had the advantage of reading the draft reasons of Allsop CJ and Besanko J. I agree with those reasons and the orders proposed by Allsop CJ.
In relation to the issues of penalties and unconscionability, I make the following brief observations.
Penalties
The object and purpose of the penalty doctrine (controlling the use of extravagant or unconscionable terms) must always be kept in mind when determining the ultimate issue of whether a term is a penalty. Exceptions from freedom of contract, as the case law indicates, require good reason to attract judicial intervention in setting aside commercial bargains. This explains the high hurdle required in the case of a propounded penalty, such that it must be found to be “extravagant and unconscionable”.
One starting point in considering whether a penalty has been imposed is to identify the commercial interests that are sought to be protected by the bargain reached between the parties. This can be achieved through a consideration of the language used by the parties, the circumstances addressed by the bargain, and the objects that the bargain intended to secure. For instance, even though a sum designated to be paid is not at all referable to any genuine pre-estimate of loss, if the sum is referable to an additional benefit, or part of the bargain for another right, and is not out of all proportion to the attainment of that benefit or right, then no intervention of the Court is necessary or appropriate to disturb that commercial bargain.
Statutory unconscionability
On the issue of statutory unconscionability, a rationally based system of law needs to set out the limits of acceptable commercial behaviour in order that persons can order their commercial affairs in advance. Such a system cannot depend on the personal approach of a judge, based upon his or her view of commercial morality. Worse still, if there is the perception that the judge makes the law in any individual case and then applies it retrospectively.
Commercial law must keep up with the development of commerce, and hard and fast rules may readily become out of date. As many contemporary judges have stated, commercial values, norms and community expectations evolve over time. Rigid rules (as distinct from general principles) are often unable to withstand the pressure of change. The European civil law codes recognise the need for general principles directed to commercial behaviour, although there is an attempt to strike a balance between specificity and generality. However, no legislator can predict every individual dispute situation, and must resort to legislating in a proactive manner.
Lord Mansfield appreciated that a systematic and principled system was required, although in some ways the articulated legal principles that were developed almost became a “code” of commercial law. However, the important aspect of the work of Lord Mansfield was the creation of a clearly articulated set of legal principles, informed by commercial values and standards. These principles provided the proper basis for a court’s ability to decide a commercial dispute.
Similarly, in the context of determining the content of statutory unconscionable conduct, as described by Allsop CJ, the task of a court is to make an evaluation of the facts and an ultimate determination by reference to a statutory standard of conduct, guided by the text and structure of the statute and its purpose. This task is a familiar one undertaken in the course of the judicial process.
This approach is not to be seen as any particular judge imposing his or her perception of desirable social goals as the basis for his or her ultimate determination. Nor does this process involve the court in determining policy. The legislature has enacted the law in pursuit of the community standard or expectation of commercial behaviour, which the court then applies in any given factual scenario.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.
Associate:
Dated: 31 March 2015

Citation:	Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50
Appeal from:	Paciocco v Australia and New Zealand Banking Group Limited [2014] FCA 35
Parties:	LUCIO ROBERT PACIOCCO and SPEEDY DEVELOPMENT GROUP PTY LTD v AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED v LUCIO ROBERT PACIOCCO and SPEEDY DEVELOPMENT GROUP PTY LTD
File numbers:	VID 141 of 2014 VID 149 of 2014
Judges:	ALLSOP CJ, BESANKO J and MIDDLETON J
Date of judgment:	8 April 2015
Catchwords:	BANKING AND FINANCIAL INSTITUTIONS – CONSUMER PROTECTION – whether various stipulations for fees are penalties at law or equity, or genuine pre-estimate of damage or compensation – whether the relevant stipulations were for breach of term of contract, collateral or accessory in the nature of security for, and in terrorem of the primary stipulations, or for a further contractual right or accommodation – the relevance of the “tests” in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79 to the construction and characterisation of the provisions – whether the fees were extravagant or unconscionable – whether the charging of the fees constituted unconscionable conduct, unjust transactions or unfair contract terms under Australian Securities and Investments Commission Act 2001 (Cth), National Consumer Credit Protection Act 2009 (Cth), and Fair Trading Act 1999 (Vic) LIMITATION OF ACTIONS – whether recovery statute-barred – construction of s 27(c) of the Limitation of Actions Act 1958 (Vic) – whether it applied to a mistake of law
Legislation:	Australian Securities and Investments Commission Act 2001 (Cth), ss 12BG, 12CA, 12CB, 12CC, 12GF, 12GM Contracts Review Act 1980 (NSW) Fair Trading Act 1999 (Vic), ss 8, 8A, 32W, 32X, 158, 159 Judiciary Act 1903 (Cth) s 68 Limitation Act 1939 s 26 Limitation Act 1980 (UK) s 32 Limitations of Actions Act 1955 (Vic) s 27 Limitation of Actions Act 1958 (Vic) ss 5, 27 Marine Insurance Act 1909 (Cth) ss 39-47, 52-54 National Consumer Credit Protection Act 2009 (Cth), Sch 1 Retail Leases Act 1994 (NSW), s 62B
Cases cited:	Aboody v Ryan [2012] NSWCA 395 cited Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; 214 CLR 51 referred to Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90; ATPR 42-447 cited Australian and New Zealand Banking Group Limited v Westpac Banking Corporation (1988) 164 CLR 662 cited Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27 cited Alcatel Australia Ltd v Scarcella [1998] NSWSC 483; 44 NSWLR 349 referred to AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 cited AMEV-UDC Finance Ltd v Austin [1986] HCA 63; 162 CLR 170 cited AMPAT/Midwest Inc v Illinois Tool Works Inc 896 F.2d 1035 (7th Cir 1990) cited Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 1376; 211 FCR 53 referred to Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; 247 CLR 205 applied Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 cited Australian Securities and Investment Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 cited Baltic Shipping Co v Dillon (1993) 176 CLR 344 cited Baumgartner v Baumgartner [1987] HCA 59; 164 CLR 137 cited Betts v Burch (1859) 4 H&N 506; 157 ER 938 referred to Bilbie v Lumley (1802) 2 East 469 referred to Blomley v Ryan [1956] HCA 81; 99 CLR 362 cited Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 cited Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 cited The British Empire (1842) 6 Jur 608 cited Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; 69 NSWLR 558 referred to Campbell v Kitchen & Sons Ltd and Brisbane Soap Co Ltd (1910) 12 CLR 51 cited Campbell Discount Co Ltd v Bridge [1962] AC 600 referred to Chan v Zacharia [1984] HCA 36; 154 CLR 178 cited Chandler v Doran Co 44 Wash 2d 396; 267 P.2d 907 (1954) cited Cine Bes Filmcilik VE Yapimcilik v United International Pictures [2003] EWCA Civ 1669 discussed Clydebank Engineering and Shipbuilding Company v Don Jose Ramos Yzquierdo Y Castaneda [1905] AC 6 referred to Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; 151 CLR 447 cited Commonwealth Bank of Australia v Barker [2014] HCA 32; 88 ALJR 814 referred to Corporate Affairs Commission of New South Wales v Yuill & Others (1991) 172 CLR 319 cited Coulton and Others v Holcombe and Others (1986) 162 CLR 1 cited Daitch Crystal Dairies Inc v Neisloss 190 NYS 2d 737 (Appeal Div 1959) cited David Securities Pty Limited and Others v Commonwealth Bank of Australia (1992) 175 CLR 353 referred to David Securities Pty Limited and Others v Commonwealth Bank of Australia and Others (1990) 23 FCR 1 referred to Director General of Fair Trading v First National Bank plc [2001] UKHL 52; [2002] 1 AC 481 referred to Dowsett v Reid [1912] HCA 75 ; 15 CLR 695 cited Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1914] UKHL 1; [1915] AC 79 applied Earl Beauchamp v Winn (1873) LR 7 HL 223 cited Earl of Aylesford v Morris (1873) LR 8 Ch App 484 cited The Emulous (1832) 1 Sumn 207 cited Fermiscan Pty Ltd v James [2009] NSWCA 355; 261 ALR 408 Forsyth v Deputy Commissioner of Taxation (2007) 231 CLR 53 referred to Financing Ltd v Baldock [1963] 2 QB 104; 1 All ER 443 referred to The Firefly (1857) Swab 240; 166 ER 1116 cited Ford Motor Company (England) v Armstrong (1914) 30 Times LR 400 referred to French v Macale (1842) 2 Drury and Warren 269 referred to Friend v Burgh (1679) Rep Temp Finch 437; 23 ER 238 cited G & C Kreglinger v New Patagonia Meat and Cold Storage Company Limited [1914] AC 25 considered Hamilton v Mendes (1761) 2 Burr 1198; 97 ER 787 referred to Harbor Insurance Co v Continental Bank Corp 922 F.2d 357 (7th Cir 1990) cited Harden v Gordon 11 F Cas 480; 2000 AMC 893 (Circuit Court 1823) referred to Hardy v Martin (1783) 1 Cox Eq Cas 26; 29 ER 1046 cited Harry v Kreutziger (1978) 95 DLR (3d) 231 cited The Helen and George (1858) Swab 368; 166 ER 1170 cited Hillas & Co Ltd v Arcos Ltd [1932] All ER Rep 494 referred to Hinton v Sparkes (1868) LR 3 CP 161 referred to Hospital Products Limited v United States Surgical Corporation [1984] HCA 64; 156 CLR 41 cited Hughes Aircraft Systems International v Airservices Australia (No 3) [1997] FCA 558; 76 FCR 151 cited Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 referred to Hungerfords v Walker [1989] HCA 8; 171 CLR 125 cited J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539 referred to In re Diplock; Diplock v Wintle [1948] Ch 465 cited Industrial Representatives, Inc v CP Clare Corp 74 F.3d 128 (7th Cir 1996) cited The Iodine (1844) 3 No C 140 cited Jenyns v Public Curator (Qld) [1953] HCA 2; 90 CLR 113 discussed Johnson vSmith [2010] NSWCA 306 cited The Juliana (1822) 2 Dods 504; 165 ER 1560 discussed Kakavas v Crown Melbourne Ltd [2013] HCA 25; 250 CLR 392 cited Kemble v Farren (1829) 6 Bing 141; 130 ER 1234 considered Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 referred to Lange v Atkinson [2000] 1 NZLR 257 cited Larson v Larson 636 NE 2d 1365 (Mass App Ct 1994) cited Legione v Hateley [1983] HCA 11; 152 CLR 406 cited Lord Elphinstone v Monkland Iron and Coal Co (1886) 11 AC 332 applied Lordsvale Finance Plc v Bank of Zambia [1996] QB 752 cited Louth v Diprose [1992] HCA 61; 175 CLR 621 cited Magee v Laxell LR 9 CP 107 referred to Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 Market Street Associates Limited Partnership v Frey 941 F.2d 588 (1991) referred to Meinhard v Salmon 249 NY 458; 164 NE 545 (1928) referred to Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717 The Medina (1876) 1 PD 272 cited Minnick v Clearwire US LLC 174 Wash 2d 443; 275 P.3D 1127 (2012) cited Moorgate Tobacco Co v Philip Morris Ltd (No 2) [1984] HCA 73; 156 CLR 414 cited Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 cited Muschinski v Dodds [1985] HCA 78; 160 CLR 583 cited O’Sullivan v Noarlunga Meat Ltd No(2) [1956] HCA 9; 94 CLR 367 cited The Office of Fair Trading v Abbey National PLC [2008] EWHC 2325 (Comm) referred to Paciocco v ANZ (No 2) [2014] FCA 254 Peachy v The Duke of Somerset (1721) 1 Strange 447; 93 ER 626 cited Perpetual Trustee Company v Khoshaba [2006] NSWCA 41 cited Philips Hong Kong Ltd v Attorney General for Hong Kong [1993] 1 HKLR 269 cited Public Works Commission v Hills [1906] AC 368 referred to Puleston v Puleston (1675) Rep Temp Finch 312; 73 Seld Soc 295 cited R v Gee and Another (2003) 212 CLR 230 referred to Radaich v Smith [1959] HCA 45; 101 CLR 209 referred to Re Newman (1876) 4 Ch D 724 referred to Reg v Tower Hamlets LBC., Ex p. Chetnik Developments Ltd [1988] 1 AC 858 referred to Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 cited RingrowPty Ltd v BP Australia Pty Ltd [2005] HCA 71; 224 CLR 656 cited Robophone Facilities Ltd v Blank [1966] 1 WLR 1428; 3 All ER 128 cited Rogers v Ingham (1876) 3 Ch D 351 cited Schroeder Music Publishing Co v Macaulay [1974] 1 WLR 1308 referred to Skelton v Collins [1966] HCA 14; 115 CLR 94 cited Sloman v Walker (1783) 1 Bro 419; 28 ER 1213 cited Stevens v Kabushiki Kaisha Sony Computer Entertainment [2005] HCA 58; 224 CLR 193 cited Stone v Godfrey (1854) 5 De GM & G 76; (1854) 43 ER 798 cited The Strathgarry [1895] P 264 cited Strickland v Williams [1899] 1 QB 382 referred to Taylor v Johnson [1983] HCA 5; 151 CLR 422 cited Thompson v Hudson (1869) LR 4 HL 1 referred to Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699 cited Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581 cited The True Blue (1843) 2 W Rob 176; 166 ER 721 cited United Dominions Corp Ltd v Brian Pty Ltd [1985] HCA 49; 157 CLR 1 cited United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177; 74 NSWLR 618 referred to Verco v Rutland Fund Management Ltd [2010] EWHC 424 (Ch) referred to Wallis v Smith 21 Ch D 243 referred to Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 cited Water Board v Moustakas (1988) 180 CLR 491 cited Webster v Bosanquet [1912] AC 394 discussed Woodward v Gyles (1690) 2 Vern 119; 23 ER 686 cited Yarra Capital Group Pty Ltd v Sklash [2006] VSCA 109 referred to
Articles and Texts:	Broom H, Broom’s Legal Maxims, (10^th ed, rev Kersley RH, Sweet & Maxwell, 1939) Burrows A, “The Relationship Between Common Law and Statute in the Law of Obligations” (2012) 128 LQR 232 Farnsworth E A, Farnsworth on Contracts (3rd Ed, Aspen, 2004) Vol 2 Finn P, “Statutes and the Common Law” (1992) 22 UWALR 7 Finn P, “Statutes and the Common Law: the Continuing Story” in Corcoran S and Bottomley S (ed), Interpreting Statutes (5^th Ed, Federation Press, 2005) Heydon J, Leeming M and Turner P, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th Ed, LexisNexis Butterworths, 2015) Jones O, Bennion on Statutory Interpretation, (6^th ed, Lexis Nexis UK, 2013) section 288 Law Revision Committee, Fifth Interim Report of the Law Revision Committee, (Lord Chancellor’s Department, London, 1936) Sir Pollock F, The First Book of Jurisprudence for Students of the Common Law (5^th Ed, London: Macmillan, 1923) Pound, R “Common Law and Legislation” (1908) 21 Harvard LR 383 “Relief Under Mistakes of Law” (1907) 7 Columbia Law Review 279 Rose F, Kennedy and Rose Law of Salvage (8^th Ed, Sweet and Maxwell, 2013) Rossiter C, Penalties and Forfeiture (Law Book Company, 1992) Seddon N, Bigwood R, Ellinghaus M, Cheshire and Fifoot’s Law of Contract (10^th Ed, Aust Ed, 2012) The Shorter Oxford English Dictionary on Historical Principles (3rd Ed, Oxford, 1969) Vol 2 Smith L, “Fiduciary Relationships: Ensuring the Loyal Exercise of Judgement on Behalf of Another” (2014) 130 LQR 608 Spence G, The Equitable Jurisdiction of the Court of Chancery (London: Stevens, 1856) Vol 1 Story J, Commentaries on Equity Jurisprudence, as Administered in England and America (13^th Ed, Boston: Little, Brown and Co, 1886) Vol 2 Thomas D, Maritime Liens (Colinvaux R (ed), London: Stevens & Sons 1980, British Shipping Laws, Vol 14)
Date of hearing:	18, 19, 20 August 2014
Place:	Melbourne
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	406
VID 141 of 2014 Counsel for the Appellants:	Mr MBJ Lee SC with Mr JF Richardson and Mr WAD Edwards
Solicitor for the Appellants:	Maurice Blackburn
Counsel for the Respondent:	Mr AC Archibald QC with Mr MH O’Bryan QC and Ms C Van Proctor
Solicitor for the Respondent:	Ashurst Australia
VID 149 of 2014 Counsel for the Appellant:	Mr AC Archibald QC with Mr MH O’Bryan QC and Ms C Van Proctor
Solicitor for the Appellant:	Ashurst Australia
Counsel for the Respondents:	Mr MBJ Lee SC with Mr JF Richardson and Mr WAD Edwards
Solicitor for the Respondents:	Maurice Blackburn

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 141 of 2014

BETWEEN:	LUCIO ROBERT PACIOCCO First Appellant SPEEDY DEVELOPMENT GROUP PTY LTD Second Appellant
AND:	AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED Respondent
JUDGES:	ALLSOP CJ, BESANKO J and MIDDLETON J
DATE OF ORDER:	8 april 2015
WHERE MADE:	sydney (heard in MELBOURNE)

JUDGES:	ALLSOP CJ, BESANKO J and middleton j
DATE:	8 april 2015
PLACE:	SYDNEY (HEARD IN MELBOURNE)

The nature of the proceedings	[4]-[7]
The accounts and fees in question	[8]-[16]
Penalties	[17]-[247]
· *The approach of the primary judge*
· *The appeal of ANZ (VID 149 of 2014) in relation to late payment fees*
· *The appeal of Mr Paciocco and Speedy Development Group Pty Ltd (VID 141 of 2014) in relation to all other fees*
· *Conclusion as to penalties*
Statutory unconscionability, unjustness or unfairness	[248]-[365]
· *The appeal of Mr Paciocco and SDG in VID 141 of 2014 and the notice of contention in VID 149 of 2014 otherwise than as to penalties*
Orders	[366]-[370]