Paciocco v Australia and New Zealand Banking Group Ltd

[2014] FCA 35

FEDERAL COURT OF AUSTRALIA

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

Citation:

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

Parties:

LUCIO ROBERT PACIOCCO and SPEEDY DEVELOPMENT GROUP PTY LTD (ACN 006 835 383) v AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522)

File number:

196 of 2013

Judge:

GORDON J

Date of judgment:

5 February 2014

Catchwords:

BANKING AND FINANCIAL INSTITUTIONS – law of penalties – penalties at law – penalties in equity – genuine pre-estimate of damage – breach of contract – collateral or accessory stipulation – security for, and in terrorem of, satisfaction of primary stipulation – further accommodation – alternative mode of performance – inherent circumstances – extravagant and unconscionable – loss and damage – late payment fee – honour fee – dishonour fee – overlimit fee – non-payment fee – card accounts – saving accounts – business accounts – unconscionable conduct – unjust transactions – unfair contract terms – limitation defences

Legislation:

Australian Securities and Investments Commission Act 2001 (Cth)
Competition and Consumer Act 2010 (Cth)
Federal Court of Australia Act 1976 (Cth)
National Consumer Credit Protection Act 2009 (Cth)
Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth)

Australian Consumer Law and Fair Trading Act 2012 (Vic)
Fair Trading Act 1999 (Vic)
Fair Trading (Amendment) Act 2003 (Vic)
Fair Trading Amendment (Australian Consumer Law) Act 2010 (Vic)
Fair Trading Amendment (Unfair Contract Terms) Act 2010 (Vic)
Fair Trading and Other Acts Amendment Act 2009 (Vic)
Limitation of Actions Act 1958 (Vic)

Cases cited:

Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514
Air Express v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249
AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170
Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205
Andrews v Australia and New Zealand Banking Group Ltd (2011) 211 FCR 53
Ange v First East Auction Holdings Pty Ltd (2011) 284 ALR 638
Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491
Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) (2009) 253 ALR 324
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] ATPR 42-447
Australian Competition and Consumer Commission v Simply No-Knead Franchising Pty Ltd (2000) 104 FCR 253
Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132
Baltic Shipping Company v Dillon (“Mikhail Lermontov”) (1991) 22 NSWLR 1
Baltic Shipping Company v Dillon (1993) 176 CLR 344
BMP Global Distribution Inc v Bank of Nova Scotia [2009] 1 SCR 504
Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398
Clydebank Engineering and Shipbuilding Company v Don Jose Ramos Yzquierdo Y Castaneda [1905] AC 6
Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Commonwealth Trading Bank of Australia v Sydney Wide Stores Proprietary Limited (1981) 148 CLR 304
Concut Pty Ltd v Worrell (2000) 75 ALJR 312
Custom Credit Corporation Ltd v Lupi [1992] 1 VR 99
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
Devaynes v Noble (1816) 1 Mer 529 (Clayton’s case)
Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168
Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79
Elberg v Fraval [2012] VSC 342
English Hop Growers v Dering [1928] 2 KB 174
Farmer v Arundel (1772) 96 ER 485
Fink v Fink (1946) 74 CLR 127
Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812
French v Macale (1842) 2 Drury and Warren 269
Godfrey v National Australia Bank (2001) NSWSC 977
Hardy v Martin (1783) 1 Cox Eq Cas 26
Hurley v McDonald’s Australia Ltd (2000) ATPR 41-741
InterstarWholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292
Jetstar Airways Pty Ltd v Free [2008] VSC 539
Johnes v Johnes (1814) 3 ER 969
Kedem v Johnson Lawyers Legal Practice Pty Ltd [2013] FCA 432
Kleinwort BensonLtd v Lincoln City Council [1999] 2 AC 349
Knezevic v Perpetual Trustees Victoria Ltd [2013] NSWCA 199
Knowles v Victorian Mortgage Investments Ltd [2011] VSC 611
La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299
Leduva Pty Ltd v NM Structural Engineering Pty Ltd [2010] NSWSC 1164
Limpgrange Ltd v Bank of Credit and Commerce International SA [1986] FLR 36
Lordsvale Finance Plc v Bank of Zambia [1996] QB 752
Mackenzie v Albany Finance Ltd [2003] WASC 100
May v Brahmbhatt [2013] NSWCA 309
Mayne Nickless Ltd v Multigroup Distribution Services Pty Ltd (2001) 114 FCR 108
McRae v Commonwealth Disposals  Commission (1951) 84 CLR 377
Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26
Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717
Murray v Leisureplay plc [2005] EWCA Civ 963
National Bank of Commerce v National Westminster Bank [1990] 2 Lloyd’s Rep 514
Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 587
O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) l52 CLR 359
Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm)
Perdaman Chemicals and Fertilisers Pty Ltd v ICICI Bank Ltd [2013] FCA 175
Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41
Provident Capital Ltd v Papa [2013] NSWCA 36
Radin v Commonwealth Bank of Australia [1998] FCA 1361
Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656
Robophone Facilities v Blank [1966] 1 WLR 1428
Rolfe v Peterson (1772) 2 Bro PC 436
Roumanus v Orchard Holdings (NSW) Pty Ltd (in liq) (2012) 90 ACSR 677
Sent v Jet Corporation of Australia Pty Ltd (1986) 160 CLR 540
Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852
Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) (2012) 287 ALR 360
Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699
Torrens Aloha Pty Ltd v CitibankNA (1997) 72 FCR 581
Wardley Australia Limited v Western Australia (1992) 175 CLR 514
Waterside Workers’ Federation of Australia v Stewart (1919) 27 CLR 119
West v AGC (Advances) Ltd (1986) 5 NSWLR 610
Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109

Mason, “‘I’ll have my bond; speak not against my bond’: Constructive trusts and surplus proceeds from performance bonds” (2012) 6 Journal of Equity 74
Pomeroy JN, A Treatise on Equity Jurisprudence (5^th ed, The Lawyers Co-operative Publishing Company 1941)
Story J, Commentaries on Equity Jurisprudence as Administered in England and America, (13^th ed, Boston: Little, Brown and Company, 1886)

Date of hearing:

2-4 and 8-9 December 2013

Date of last submissions:

11 December 2013

Place:

Melbourne

Division:

GENERAL DIVISION

Category:

Catchwords

Number of paragraphs:

379

Counsel for the Applicants:

MBJ Lee SC with JF Richardson and WAD Edwards

Solicitor for the Applicants:

Maurice Blackburn

Counsel for the Respondent:

AC Archibald QC with MH O'Bryan SC, RG Craig and C Van Proctor

Solicitor for the Respondent:

Ashurst Australia

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	196 of 2013

BETWEEN:

LUCIO ROBERT PACIOCCO
First Applicant

SPEEDY DEVELOPMENT GROUP PTY LTD (ACN 006 835 383)
Second Applicant

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

JUDGE:	GORDON J
DATE OF ORDER:	5 FEBRUARY 2014
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.The parties are directed to bring in orders to give effect to these reasons for judgment by 4:00pm on 12 February 2014.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	196 of 2013

BETWEEN:

LUCIO ROBERT PACIOCCO
First Applicant

SPEEDY DEVELOPMENT GROUP PTY LTD (ACN 006 835 383)
Second Applicant

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

JUDGE:	GORDON J
DATE:	5 FEBRUARY 2014
PLACE:	MELBOURNE

INDEX

Part 1:     OVERVIEW	[1]
Part 2: SCOPE OF INITIAL TRIAL	[7]
Part 3:     STRUCTURE OF BALANCE OF REASONS FOR JUDGMENT	[11]
Part 4:     APPLICABLE LEGAL PRINCIPLES – PENALTIES	[13]
A.   Introduction	[13]
B.   Common Law	[17]
C.    In Equity	[22]
D.   Further Accommodation / Additional Stipulation / Alternative Mode of Performance	[33]
E.    Extravagant, Exorbitant and Unconscionable	[39]
F.    Loss and Damage	[46]
Part 5:     SPECIFIC CONTRACTS AND TERMS	[49]
A.    Introduction	[49]
B.    Pre-December 2009	[51]
(1)     Card Accounts 9522 and 9629	[51]
(a)     Card Account 9522 – Late Payment Fee (Exception Fees 4-11)	[52]
(b)     Card Account 9629 – Overlimit Fee (Exception Fee 12) and Card Account 9522 – Overlimit Fee (Exception Fee 13)	[59]
(2)     Saving Account 156 (Exception Fees 1, 2 and 3)	[63]
(a)     Honour Fee (Exception Fee 1)	[65]
(b)     Saving Account 156 – Non-Payment Fees (Exception Fees 2 and 3)	[67]
(3)     Business Account 58555	[69]
C.    Post December 2009	[70]
(1)     Saving Account 156	[70]
(2)     Card Accounts 9522 and 9629	[71]
(a)     Late Payment Fees (Exception Fees 14, 16-18, 23, 27, 28, 31, 34, 36, 37, 38, 41, 42, 45, 46, 47 and 49)	[72]
(b)     Overlimit Fees (Exception Fees 15, 19-22, 24-26, 29, 32, 33, 35, 39, 40, 43, 44, 48 and 50)	[76]
(3)     Business Account 58555	[82]
(a)     Honour Fees (Exception Fees 51 and 52)	[83]
(b)     Other Honour Fees (Exception Fees 53-61 and 72)	[86]
(c)     Dishonour Fees (Exception Fees 62-71)	[89]
D.    Other Relevant Considerations - The Wider Framework	[92]
Part 6:     THE EXCEPTION FEE, THE EXCEPTION FEE EVENT AND IS IT A PENALTY?	[103]
A.    Introduction	[103]
B.    Pre-December 2009 – Late Payment Fees	[108]
(1)     Exception Fee 4	[108]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[109]
(b)     Exception Fee Events – step 2	[111]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[113]
(d)     Extravagant and Unconscionable – step 5	[117]
(i)     Relevant facts and matters	[117]
Aspects of the Late Payment Fee Provision	[119]
The “inherent circumstances”	[122]
ANZ’s State of Mind	[124]
(ii)    Quantitative assessment	[131]
Introduction	[131]
Issues with the Inglis Reports	[138]
Finch Report	[169]
(e)     Loss and damage – step 6	[170]
(f)     ANZ’s other submissions	[175]
(2)     Exception Fees 5-11	[177]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[178]
(b)     Exception Fee Events – step 2	[179]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[180]
(d)     Extravagant and Unconscionable – step 5	[183]
(e)     Loss and damage – step 6	[184]
C.    Pre-December 2009 –- Honour, Overlimit and Non-Payment Fees	[188]
(1)     Saving Honour Fee (Exception Fee 1)	[188]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[189]
(b)     Exception Fee Events – step 2	[190]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[196]
(d)     Extravagant and Unconscionable – step 5	[205]
(e)     Loss and damage – step 6	[212]
(2)     Overlimit Fees on the Card Accounts:  Exception Fees 12 and 13	[213]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[213]
(b)     Events or transactions giving rise to the imposition of Exception Fees 12 and 13 – step 2	[214]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[220]
(d)     Extravagant and Unconscionable – step 5	[228]
(e)     Loss and damage – step 6	[229]
(3)     Non-Payment Fees:  Exception Fees 2 and 3	[230]
D.    Post December 2009 – Late Payment Fees	[234]
(1)     Exception Fees 14, 16-18, 23, 27, 28, 31, 34, 36-38, 41, 42, 45-47 and 49	[235]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[235]
(b)     Exception Fee Events – step 2	[236]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[239]
(d)     Extravagant and Unconscionable – step 5	[240]
(e)     Loss and damage – step 6	[241]
E.    Post December 2009 – Overlimit, Honour and Dishonour Fees	[243]
(1)     Overlimit Fees (Exception Fees 15, 19-22, 24-26, 29, 30, 32, 33, 35, 39, 40, 43, 44, 48 and 50)	[243]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[243]
(b)     Exception Fee Events – step 2	[244]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[246]
(d)     Extravagant and Unconscionable – step 5	[252]
(e)     Loss and damage – step 6	[253]
(2)     Business Honour Fees (Exception Fees 51-61 and 72)	[254]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[254]
(b)     Exception Fee Events – step 2	[255]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[258]
(d)     Extravagant and Unconscionable – step 5	[265]
(e)     Loss and damage – step 6	[266]
(3)     Business Dishonour Fees (Exception Fees 62-71)	[267]
(a)     Terms and Inherent Circumstances of the Contract, judged at the time of the making of the Contract – step 1	[267]
(b)     Exception Fee Events – step 2	[268]
(c)     Proper Construction of the relevant stipulation(s) – steps 3 and 4	[270]
(d)     Extravagant and Unconscionable – step 5	[273]
(e)     Loss and damage – step 6	[274]
Part 7:     UNCONSCIONABLE CONDUCT	[275]
A.    Introduction	[275]
B.    Applicable legal principles	[279]
C.    Applicants’ submissions	[286]
D.    Analysis	[289]
(1)     Introduction	[289]
(2)     ANZ had all or most of the bargaining power in its relationship with the Applicants	[292]
(3)     Exception Fees imposed by standard form contracts drafted by ANZ and other terms of those standard form contracts	[294]
(4)     Contracts for essential services where termination attended by significant inconvenience	[298]
(5)     Fees more likely paid by low-income customers in financial difficulty	[299]
(6)     Quantum of Exception Fees out of proportion to ANZ’s loss from Exception Fee Event	[300]
(7)     Applied fee waiver inconsistently between customers	[302]
(8)     ANZ took advantage of fact that Applicants initiated Exception Fee Events irrationally, inadvertently and unintentionally and as the result of accident, oversight or mismanagement of finances	[304]
(9)     ANZ uniquely placed to prevent customers inadvertently triggering most if not all exception fees	[305]
(10)   Exception Fees charged regardless whether caused by ANZ’s payment systems and thus incurred beyond the control or understanding of the customer	[307]
(11)   Honour and Overlimit Fees – ANZ fully compensated by interest on overdrawn sum (which included a profit margin)	[308]
(12)   December 2009 redrafting of the contracts	[309]
(13)   Conclusion	[310]
Part 8:     UNJUST TRANSACTIONS UNDER THE CREDIT CODES	[311]
A.    Introduction	[311]
B.    Applicable law	[314]
C.    Analysis	[322]
Part 9:     UNFAIR CONTRACT TERMS	[326]
A.    Introduction	[326]
(1)     Phase 1 – 9 October 2003 to 11 June 2009	[328]
(2)     Phase 2 – 11 June 2009 to 1 July 2010	[332]
(3)     Phase 3 – 1 July 2010 to 31 December 2010	[336]
(4)     Phase 4 –- 1 January 2011 to 1 July 2012	[339]
B.    Areas of dispute	[342]
C.    Analysis	[352]
Part 10:   LIMITATION DEFENCES	[354]
A.    Penalty claims	[356]
B. Unconscionable conduct under the ASIC Act and the FTA	[367]
C. Unjust Transactions under the New Code	[371]
D. Unfair Terms under the FTA and the ASIC Act	[372]
PART 11: REMEDIES AND ORDERS	[373]

REASONS FOR JUDGMENT

PART 1:        OVERVIEW

1. The Applicants, Mr Paciocco and one of his companies, Speedy Development Group Pty Ltd (SDG), held accounts with the Australia and New Zealand Banking Group Limited (ANZ).  Mr Paciocco held a consumer deposit account and two consumer credit card accounts.  SDG held a business deposit account.

2. The contractual terms for both the consumer deposit account and the business deposit account entitled ANZ to charge honour, dishonour and non-payment fees.  The contractual terms for the consumer credit card accounts entitled ANZ to charge late payment fees and overlimit fees.  Mr Paciocco and SDG alleged that the contractual terms that entitled ANZ to charge these fees (the Exception Fee Provisions) constituted penalties at common law and in equity.  The 72 fees in issue (the Exception Fees), including the Exception Fee Provision(s) applicable to each Exception Fee, are listed in Annexure 1. 

3. If the Court found that an Exception Fee did not constitute a penalty at common law or a penalty in equity, Mr Paciocco and SDG then contended that:

   1.By including the Exception Fee Provision in the contract and giving effect to it, ANZ engaged in unconscionable conduct within ss 12CB and 12CC of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and/or ss 8 and 8A of the Fair Trading Act 1999 (Vic) (FTA).

   2.The consumer credit card accounts were unjust under the National Credit Code found in Sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (the New Code).

   3.The Exception Fee Provisions in Mr Paciocco’s consumer deposit account and consumer credit card accounts were unfair contract terms within s 32W of the FTA and/or s 12BG of the ASIC Act.

4. For the reasons that follow, the Late Payment Fees charged by ANZ on Mr Paciocco’s consumer credit cards constituted a penalty at common law and a penalty in equity.  The liability to pay the Late Payment Fee was contingent upon a breach of contract and further or alternatively, was collateral (or accessory) to a primary stipulation (to make a payment by a particular date) in favour of ANZ.  That collateral stipulation, upon failure of the primary stipulation, imposed upon the customer an additional detriment in the nature of a security for, and in terrorem of, the satisfaction of the primary stipulation which was extravagant, exorbitant and unconscionable. 

5. The honour, dishonour, non-payment or overlimit fees charged to the Applicants by ANZ were of a different character.  None of them constituted a penalty at common law or a penalty in equity.  The liability to pay each of those fees was not contingent upon a breach of contract, nor collateral (or accessory) to a primary stipulation in favour of ANZ.  The liability to pay each arose as a result of, and in exchange for, something more than and different from what had been agreed in the primary stipulation.  They were not penal in nature.  Further, none of the Exception Fee Provisions that entitled ANZ to charge the Applicants the Honour, Dishonour, Non-Payment or Overlimit Fees contravened any of the other statutory provisions earlier identified. 

1. Finally, Exception Fee 2 and Exception Fee 3 are different.  ANZ accepted that Mr Paciocco is entitled to common law damages for breach of contract in the sum of the amount of Exception Fee 2 and Exception Fee 3 from the date of the charging of each Exception Fee together with interest.  Mr Paciocco’s entitlement to those damages arises because ANZ admitted that the applicable contractual arrangements between ANZ and Mr Paciocco did not permit ANZ to charge each of the Exception Fees.

   PART 2: SCOPE OF INITIAL TRIAL

2. This is a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth): Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2009] FCAFC 26 at [6]-[9].

3. By consent, this trial was limited to the determination of:

   the entirety of each of the applicants’ claims in relation to Exception Fees … charged by ANZ during the following periods:

   (a)       in the case of Saving Accounts, 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.

4. The Saving Account was Mr Paciocco’s Access Advantage Account number xxx-xxl56 (Saving Account 156) opened on 10 June 1997 and which, from June 2009, had an Assured Overdraft Facility with an approved overdraft limit of $500.  There were two Card Accounts.  Mr Paciocco’s first Card Account was Low Rate MasterCard Account number xxxx-xxxx-xxxx-9522 (Card Account 9522) opened in June 2006 with a credit limit of $15,000 which increased to $18,000 in November 2009.  His second Card Account was Low Rate MasterCard Account number xxxx-xxxx-xxxx-9629 (Card Account 9629) opened in July 2009 with a credit limit of $4,000. 

5. SDG’s claims related to Exception Fees charged on Business Classic Account number xxxx-58555 (Business Account 58555) opened in December 2008.  From April 2011, that account had an overdraft of $10,000 which increased in November 2011 to $49,999. 

   PART 3:        STRUCTURE OF BALANCE OF REASONS FOR JUDGMENT

6. These reasons for judgment will introduce the penalty doctrine at common law and in equity (Part 4, Section A), address the principles for a penalty at common law (Part 4, Section B) and for a penalty in equity (Part 4, Section C), and then turn to consider the “alternative mode of performance” line of authorities (Part 4, Section D), the requirement of extravagance and unconscionability (Part 4, Section E) and the question of loss and damage (Part 4 Section F).  Next, these reasons will identify the contracts and terms by which ANZ charged each Exception Fee (Part 5) and then consider each Exception Fee (Part 6). 

7. The balance of these reasons will address the alternative statutory causes of action relied upon by the Applicants (Parts 7-9) and finally the question whether some of the Applicants’ claims were statute barred (Part 10).

   PART 4:        APPLICABLE LEGAL PRINCIPLES – PENALTIES

   A.       Introduction

8. The Applicants alleged that the Exception Fee Provisions were penalties at common law and, further or alternatively, penalties in equity.  The need to consider them separately was said by both sides to arise from the decision of the High Court in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 (Andrews High Court).  The penalty doctrine in equity has not been subsumed into the common law:  Andrews High Court at [51].

9. Although it is said now by both sides to be necessary to consider the penalties question at law and in equity separately, the principles, and the relief, are not unconnected.  While the circumstances necessary to enliven the common law doctrine are different from those necessary to enliven equity, a stipulation (to pay a sum or other property) will not constitute 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”:  Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79 at 87.

10. 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:

    5.1Is 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].

11. Consideration of the matters listed in [15(5) and (6) above] (namely, is the stipulated sum “extravagant and unconscionable”, and if so, what is the party’s proved loss?) are addressed last because they are applicable at law and in equity. 

    B.       Common Law

12. The principles set out in Dunlop at 86-87 (confirmed in Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 at [12]) remain applicable. Those principles were not in issue, and were not considered or affected by, the decision in Andrews High Court.  The High Court did not disapprove of any aspect of Dunlop and observed that Dunlop was a case in which “legal and equitable remedies were sought by the plaintiff and the defendant raised the penalty doctrine in its defence, illustrat[ing] the place of the penalty doctrine in a court where there is a unified administration of law and equity but equitable doctrines retain their identity”: at [77].

13. The starting point therefore is Lord Dunedin’s speech in Dunlop at 86-87 (cited by the High Court in Ringrow):

    2.The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.

    3.The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.

    4.To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive.  Such are:

    (a)It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

    (b)It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid. …

    (c)There is a presumption (but no more) that it is penalty when “a single lump sum is made 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 but trifling damage”.

    On the other hand:

    (d) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make a precise pre-estimation almost an impossibility.  On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties.

    (Citations omitted.)

14. In addition to those propositions, the following emerges from Dunlop:

    1.The exercise involves an enquiry into the substance and the reality of the thing and the real nature of the transaction to determine the object of the obligee in stipulating for the sum:  Lord Atkinson at 92.

    2.Where the damages which may arise out of a breach of contract are of their nature uncertain, the law permits the parties to agree beforehand on the amount to be paid on breach in determining whether the sum being paid is a penalty.  It will not be a bona fide pre-estimate of damage if the sum stipulated is in excess of any actual damage which could possibly or probably arise from the breach or if the parties have stipulated for the payment of a larger sum in the event of a breach of an agreement for the payment of a smaller sum:  Lord Parker at 97.

    3.Where the damage for the breach of a covenant to pay a fixed or definitely ascertainable sum is capable of exact definition, the substitution of a larger sum for that smaller ascertainable sum will not be a pre-estimate of damage, but a penalty:  Lord Parmoor at 101-102.

15. Furthermore, as Mason and Wilson JJ stated in AMEV at 193-194, the question of whether a clause is penal 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.

    Their Honours noted that the 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.

16. Again, it is worth emphasising two propositions:  (1) 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:  O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) l52 CLR 359 at 368, 375 and 399; and (2) The provision is judged at the time the contract was made, not at the time of the breach: Dunlop at 86-87, O’Dea at 368; Lordsvale Finance Plc v Bank of Zambia [1996] QB 752 at 762; Ringrow at [12]; Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) (2012) 287 ALR 360 at [22].

    C.       In Equity

17. This aspect of the judgment must be framed (initially) by reference to the decision in Andrews High Court.  It is necessary to understand what Andrews High Court decided and what it did not decide.  Indeed, what the Court decided is dictated by the way the separate questions had been framed.  The separate questions were cast as they were having regard to the decision in InterstarWholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292 both at first instance and on appeal to the New South Wales Court of Appeal. In particular, as the High Court pointed out, the substance of the questions was to ask whether the exception fees were payable on breach and, in the alternative, to ask whether it had been the responsibility of the applicants to see that the circumstances occasioning the imposition of the exception fees did not arise. If there was an affirmative answer to either question, it was then asked whether the fees were capable of being characterised as a penalty by reason of that fact.

18. The questions that had been framed in Andrews v Australia and New Zealand Banking Group Ltd (2011) 211 FCR 53 (Andrews Trial), and were the subject of the appeal in Andrews High Court, did not ask whether the fees were incapable of characterisation as penalties because under pre-existing terms agreed between banker and customer the fees were charged in consequence of the bank’s decision to afford or decline provision of further accommodation to the customer.  Because the separate questions were not framed to ask that last mentioned question, the High Court did not decide that question.  That conclusion is reinforced by the form and content of paragraph 3 of the Orders in Andrews High Court which relevantly stated (at 238-239):

    set aside orders 1 and 2 of the orders made by the Federal Court of Australia on 13 December 2011, and in their place declare that the circumstances:

    (a)that the honour, dishonour, non-payment and over limit fees were not charged by the [ANZ] upon breach of contract by its customers, and

    (b)that the customers had no responsibility or obligation to avoid the occurrence of events upon which these fees were charged,

    do not render these fees incapable of characterisation as penalties.

    (Emphasis added.)

19. What then did the High Court decide?

20. First, the penalty doctrine in equity has not been subsumed into the common law:  Andrews High Court at [51] and see also [13] above.

21. Second, the law of penalties was not confined to payments (or other obligations) imposed upon breach of contract:  Andrews High Court at [78]. As the Court explained at [10], in general terms:

    [A] stipulation prima facie imposes a penalty on a party (the first party) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party. 

    See also Waterside Workers’ Federation of Australia v Stewart (1919) 27 CLR 119 at 128-129, 131-132 and Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514.

22. Third, 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”: Andrews High Court at [10] citing Rolfe v Peterson (1772) 2 Bro PC 436 at 442 [1 ER 1048 at 1052]; Dunlop at 86 (“search for truth”); cf, as to irrevocable letters of credit and “performance bonds”, the proceeds of which are in substitution for performance by a contractor, Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812; Mason, “‘I’ll have my bond; speak not against my bond’: Constructive trusts and surplus proceeds from performance bonds” (2012) 6 Journal of Equity 74, at 81-83.

23. In other words:

    1.The primary stipulation carries the substantive objective of the contract.

    2.The collateral stipulation is engaged on the failure of the primary stipulation and fulfils the function of acting as a security for, and in terrorem of, the satisfaction of that primary stipulation. 

    3.The objective of the contract is achieved by payment of the money sum not being made rather than by being made.  The second party wants the primary stipulation observed, not the payment of the penalty sum; the first party is so averse to paying the exorbitant sum that it will observe the primary stipulation. 

24. Fourth, if compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are only enforced to the extent of that compensation; the first party is relieved to that degree from liability to satisfy the collateral stipulation:  Andrews High Court at [10].

25. Fifth, the penalty doctrine is not engaged if the prejudice or damage to the interests of the second party by the failure of the primary stipulation is insusceptible of evaluation and assessment in money terms:  Andrews High Court at [11]. This is not relevant in the present case. ANZ does not contend that the prejudice or damage to it by the failure of the primary stipulation is insusceptible of evaluation and assessment in money terms.

26. Sixth, the primary stipulation may be the occurrence or non-occurrence of an event which need not be the payment of money:  Andrews High Court at [12] and Story J, Commentaries on Equity Jurisprudence as Administered in England and America, (13^th ed, Boston: Little, Brown and Company, 1886), vol 2 at [1314]. Seventh, the penalty imposed upon the first party upon failure of the primary stipulation need not be a requirement to pay to the second party a sum of money: Andrews High Court at [12].

27. Eighth, the distinction between a penalty and a genuine pre-estimate of liquidated damages made by Lord Dunedin in Dunlop (see [18] above) was a product of equity and remained applicable:  Andrews High Court at [15]. In other words, equity will operate and equally the law will operate so as to ensure that the only money that the second party gets is that which would compensate for the financial prejudice occasioned by the actual failure of the stipulation. Notions of extravagance and exorbitance are as much a part of equity as they are of the law itself.

    D.       Further Accommodation / Additional Stipulation / Alternative Mode of Performance

28. The analysis of the decision in Andrews High Court is not complete without reference to a further issue identified by the Court.  The further relevant issue was whether the requirement to pay the fees was (in effect) to be regarded as security for performance by the customer of other obligations to ANZ or was a fee charged in accordance with pre-existing arrangements according to whether ANZ chose to provide further accommodation to the customer by ANZ authorising payments upon instructions by the customer upon which ANZ otherwise was not obliged to act, or refused that further accommodation.  The Court described this as an “operative distinction”:  Andrews High Court at [80].

29. The High Court identified the operative distinction as that considered by the New South Wales Court of Appeal in Metro-Goldwyn-Mayer Pty Ltd v Greenham [1966] 2 NSWR 717 at 723-724 and 727. There, Jacobs and Holmes JJA contrasted a stipulation attracting the penalty doctrine with one giving rise consensually to an additional obligation.

30. As pointed out in Andrews High Court at [80], that operative distinction had been earlier identified by Lord St Leonards in French v Macale (1842) 2 Drury and Warren 269 at 275-276:

    [I]t appears, that the question for the Court to ascertain is, whether the party is restricted by covenant from doing the particular act, although if he do it a payment is reserved; or whether according to the true construction of the contract, its meaning is, that the one party shall have a right to do the act, on payment of what is agreed upon as an equivalent.  If a man let meadow land for two guineas an acre, and the contract is, that if the tenant choose to employ it in tillage, he may do so, paying an additional rent of two guineas an acre, no doubt this is a perfectly good and unobjectionable contract; the breaking up the land is not inconsistent with the contract, which provides, that in case the act is done the landlord is to receive an increased rent.

    See also Lord Loughborough in Hardy v Martin (1783) 1 Cox Eq Cas 26 at 27. 

1. The distinction was adopted in Metro-Goldwyn-Mayer. In that case, the contract for the hiring of films to exhibitors for public showing conferred the right to one screening only. The exhibitor was obliged to pay for each additional screening a sum equivalent to four times the original fee. Properly construed, the penalty doctrine had no application to the contract in issue. Jacobs JA concluded at [723]:

   There is no right in the exhibitor to use the film otherwise than on an authorised occasion.  If he does so then he must be taken to have exercised an option so to do under the agreement, if the agreement so provides.  The agreement provides that he may exercise such an option in one event only, namely, that he pay a hiring fee of four times the usual hiring fee.

   Neither Metro-Goldwyn-Mayer nor Macale has been since cited or considered elsewhere. 

2. The High Court referred to Pomeroy’s treatise under the heading “Stipulations not Penalties – Alternative Stipulations” as having collected and discussed the English and United States authorities in which the distinction thereafter was applied:  see Pomeroy JN, A Treatise on Equity Jurisprudence (5^th ed, The Lawyers Co-operative Publishing Company, 1941) vol 2 at [437]. In that section of the treatise, Pomeroy stated:

   Such being the general test by which to determine the nature of a penalty, there are certain kinds of stipulations not unfrequently inserted in agreements which have been judicially interpreted and held not to be penalties, and therefore not subject to be relieved against by courts of equity.  The nature and effect of these stipulations I shall briefly explain.  The first instance is that of a contract by the terms of which the contracting party so binds himself that he is entitled to perform either one of two alternative stipulations, at his option; and if he elects to perform one of those alternatives, he promises to pay a certain sum of money, but if he elects to perform the other alternative, then he binds himself to pay a larger sum of money.

   To state the substance of the agreement in briefer terms, the contracting party may do either of two things, but is to pay higher for one alternative than for the other.  In such a case equity regards the stipulation for a larger payment, not as a penalty, but as liquidated damages agreed upon by the parties.  It will not relieve the contracting party from the payment of the larger sum, upon his performance of the latter alternative to which such payment is annexed; nor, on the other hand, will it deprive him of his election by compelling him to abstain from performing whichever alternative he may choose to adopt.

   (Citations omitted and emphasis in original.)

3. The question therefore remains – as a matter of construction of the relevant contract, was the requirement to pay the fee to be regarded as security for performance by the customer of other obligations to ANZ or was it a fee charged in accordance with pre-existing arrangements according to whether ANZ chose to provide something more and further to the customer;  for example, by ANZ authorising payments upon instructions by the customer upon which ANZ otherwise was not obliged to act, or refusing further accommodation.

   E.       Extravagant, Exorbitant and Unconscionable

4. As noted at [14] above, there is a further and essential element for there to be a penalty at common law and in equity – a stipulated sum will only be regarded as a penalty if it is extravagant (or exorbitant) and unconscionable in amount: Dunlop at 86-87; Ringrow at [31]-[32]; see also Story J, (1886), vol 2 at p 650-651; AMEV at 197 and 201 and Clydebank Engineering and Shipbuilding Company v Don Jose Ramos Yzquierdo Y Castaneda [1905] AC 6 at 10 and 17.

5. In assessing whether a stipulation is a penalty, the difficulty in establishing the quantum of the loss that might be suffered by reason of the breach (or failure of the primary stipulation) is relevant.  A stipulated payment is more likely to be regarded as a bargain between the parties pre-estimating loss or compensation, and not as a penalty, when the consequences of the breach (or failure of the primary stipulation) upon which the payment is due are difficult or impossible to estimate:  Clydebank at 11; Dunlop at 87-88, 95-96 and 104; Waterside at 128-129 and 132; Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 at [13].

6. There is a distinction between a stipulation which is “extravagant and unconscionable” in amount and one which is a “genuine covenanted pre-estimate of damage”.  The latter expression does not invite an inquiry into the parties’ states of mind at the time of the contract.  The requisite inquiry is objective.  It necessitates an objective assessment of the possible loss that might be incurred, not the subjective views or calculations of the parties prior to entering into the contract:  Yarra Capital at [13]; Leduva Pty Ltd v NM Structural Engineering Pty Ltd [2010] NSWSC 1164 at [109]. “Genuine covenanted pre-estimate of damage” is a descriptive phrase used to explain that it is lawful for a contract to stipulate an amount payable upon the failure of a primary stipulation as agreed damages or compensation, provided the amount is not penal in character: Murray v Leisureplay plc [2005] EWCA Civ 963 at [111]. In Dunlop (at 86), the phrase was used in contradistinction to the concept of “penalty”, not to suggest that that is where the focus of the enquiry is.

7. As was said in Ringrow at [31]-[32]:

   The law of contract normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships.  As Mason and Wilson JJ observed in [AMEV]:

   [T]here is much to be said for the view that the courts should return to … allowing parties to a contract greater latitude in determining what their rights and liabilities will be, so that an agreed sum is only characterised as a penalty if it is out of all proportion to damage likely to be suffered as a result of breach.

   Exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed.  That is why the law on penalties is, and is expressed to be, an exception from the general rule.  It is why it is expressed in exceptional language.  It explains why the propounded penalty must be judged “extravagant and unconscionable in amount”. It is not enough that it should be lacking in proportion. It must be “out of all proportion”.

   (Footnotes omitted and emphasis added.)

8. 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.  

9. 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.

10. 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.

    F.        Loss and Damage

11. If a stipulation is found to be a penalty, the Court will relieve the burdened party of the penalty provided the prejudice or damage to the interests of the other party is susceptible of evaluation and assessment in money terms:  Andrews High Court at [11] and [12]. The “equity” upon which a Court will intervene is generated by the availability of compensation to the party in whose favour the stipulation is made. In Andrews High Court, the High Court observed that the principle was illustrated by Waterside.  Here, ANZ did not contend that the losses or costs that might be suffered by ANZ from the transactions or events that gave rise to its entitlement to charge the Applicants the Exception Fees (Exception Fee Events) were impossible to assess.  It did contend that such an assessment, on an ex ante basis, would have been very complex and expensive.  But that is no answer. 

12. Moreover, ANZ accepted that damages will not be refused merely because the calculation or estimation of loss is difficult or because the circumstances do not permit the loss to be assessed with certainty:  Fink v Fink (1946) 74 CLR 127 at 143; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411; Air Express v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 249 at 284 and Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83; see also Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 at [7] and La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 at [90], [95] (value of the loss must be estimated no matter how difficult the task and even if some guesswork and speculation required) and [110] (sufficient for a party to prove on the balance of probabilities that it suffered some loss or damage and the quantum of the loss or damage to be calculated even where it is impossible to be precise).

13. Next, a stipulation that is found to be a penalty is unenforceable only to the extent that the amount stipulated to be paid exceeded 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:  AMEV at 199-203.  Put another way, the party harmed by the breach or the failure of the primary stipulation may enforce the stipulation that is found to be a penalty to the extent of that party’s loss:  Andrews High Court at [10]. Equity assesses the quantum of loss or compensation based on what is just and equitable, or fair and reasonable, in all the circumstances. The loss may include costs incurred in securing payment of the amount owing, including costs of the proceeding: Johnes v Johnes (1814) 3 ER 969 at 975. Here, ANZ charged the Exception Fees to the Applicants. The Applicants seek repayment of those Exception Fees. It was common ground that (1) the Applicants, as the parties seeking to resist the enforcement of the Exception Fee Provisions, bear the onus of proving on the balance of probabilities that the Exception Fee Provisions are a penalty; but (2) if the Exception Fee Provisions are found to be penalties, ANZ bears the onus of establishing that it has suffered loss from the Exception Fee Events and the quantum of that loss.

    PART 5:        SPECIFIC CONTRACTS AND TERMS

    A.       Introduction

14. For each Exception Fee, the contractual documents are listed in the column entitled “Contracts” in Annexure 1 and set out in detail in Annexure 2.  The specific provision or provisions by which each Exception Fee was charged is identified in the column entitled “Extract of Specific Exception Fee Provision” in Annexure 1.  It was common ground that those contractual documents comprised a contract between ANZ and the relevant Applicant. 

15. There were two relevant time periods – prior to December 2009 and after December 2009.  The two time periods were relevant because ANZ amended the Exception Fee Provisions in December 2009.  Within each period, there are three sub-categories – Card Accounts, Saving Accounts and a Business Account. 

    B.       Pre-December 2009

    (1)       Card Accounts 9522 and 9629

16. Mr Paciocco was charged 10 Card Exception Fees – eight Late Payment Fees (on 4 September 2006, 4 March 2007, 5 August 2007, 4 November 2007, 6 April 2008, 6 July 2008, 4 August 2008 and 4 February 2009) and two Overlimit Fees (on 12 August 2009 and 6 September 2009).

    (a)       Card Account 9522 – Late Payment Fee (Exception Fees 4-11)

17. The Late Payment Fee of $35 charged on 4 September 2006 on Card Account 9522 (Exception Fee 4) was the first Exception Fee charged.

18. 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).

19. 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.

20. 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.

21. 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.

22. 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.

23. The other Late Payment Fees charged to Mr Paciocco prior to December 2009 (Exception Fees 5-11) 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 4.

    (b)       Card Account 9629 – Overlimit Fee (Exception Fee 12) and Card Account 9522 – Overlimit Fee (Exception Fee 13)

24. 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).

25. 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.)

26. 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.]

27. 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”

    (2)       Saving Account 156 (Exception Fees 1, 2 and 3)

28. 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). 

29. The Honour Fee and then the Non-Payment Fees will be considered. 

    (a)       Honour Fee (Exception Fee 1)

30. 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.)

1. 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.

   (b)       Saving Account 156 – Non-Payment Fees (Exception Fees 2 and 3)

2. 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.

3. 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.

   (3)       Business Account 58555

4. SDG did not claim any Exception Fees on Business Account 58555 before December 2009.

   C.       Post December 2009

   (1)       Saving Account 156

5. Mr Paciocco does not claim any Exception Fees on Saving Account 156 after December 2009.

   (2)       Card Accounts 9522 and 9629

6. Mr Paciocco was charged 37 Card Exception Fees – 18 Late Payment Fees on different dates between 12 January 2010 and 12 August 2013 and 19 Overlimit Fees on different dates between 12 May 2010 and 4 September 2013.

   (a)       Late Payment Fees (Exception Fees 14, 16-18, 23, 27, 28, 31, 34, 36, 37, 38, 41, 42, 45, 46, 47 and 49)

7. 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).

8. 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.]

9. 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.

10. 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.

    (b)       Overlimit Fees (Exception Fees 15, 19-22, 24-26, 29, 32, 33, 35, 39, 40, 43, 44, 48 and 50)

11. 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).

12. 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.)

13. 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.

14. 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.

15. 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. 

16. 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.

    (3)       Business Account 58555

17. SDG was charged 22 Business Exception Fees – 12 Business Honour Fees (charged on different dates between 4 March 2010 and 23 July 2013) and 10 Business Dishonour Fees (charged on different dates between 8 January 2013 and 18 April 2013).

    (a)       Honour Fees (Exception Fees 51 and 52)

18. 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).  

19. 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.

20. 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)

21. 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).

22. 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.

23. 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”.

    (c)       Dishonour Fees (Exception Fees 62-71)

24. 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.

25. 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.

26. 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.

    D.       Other Relevant Considerations - The Wider Framework

27. It was common ground that the contractual documentation in issue in these proceedings operated in, and formed part of, a wider framework.  Aspects of that wider framework (the applicable regulatory framework) were considered in Andrews Trial at [87]-[134]. It is unnecessary to repeat that analysis.

28. However, as part of the wider framework, reference also must be made to the established principles concerning the relationship of banks and their customers.  These were summarised in Andrews Trial at [81]-[82] (see also BMP Global Distribution Inc v Bank of Nova Scotia [2009] 1 SCR 504 at [47]-[48]) as follows:

    It is trite that the relationship between a banker and a customer is in contract:  Foley v Hill (1848) 2 HL Cas 28. Such contracts have been described as:

    … ordinary commercial contracts to be construed and applied according to their terms, and in accordance with a ‘basic principle of the common law of contract … that parties to a contract are free to determine for themselves what primary obligations they will accept’.

    Williams and Glyn’s Bank v Barnes [1981] Com LR 205 at 209 (quoting Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 at 848) cited with approval in Narni Pty Ltd v National Australia Bank [2001] VSCA 31 at [19].

    Unsurprisingly, the contractual terms are important; it is a contract usually with many terms (Joachimson v Swiss Bank Corporation [1921] 3 KB 110 at 127) but from which the following core banking law principles derive:

    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.

    See also Weaver GA and Craigie CR, The Law Relating to Banker and Customer in Australia, (Thompson Lawbook Co) at [2.140] (update 62).

29. The Applicants accepted that characterisation of the relationship between banker and customer but contended that its relevance was merely historical.  The contention that these established principles concerning the relationship of banks and their customers are merely historical is rejected.  It is rejected because the proper construction of the relevant terms of each contract is in accordance, and entirely consistent, with those established principles.  It is therefore unnecessary to imply any contractual term into the applicable contractual terms to incorporate these established principles.  Thirdly, these findings, described as “significant findings” by the High Court in Andrews High Court were not the subject of challenge in, or disturbed by, the High Court in Andrews High Court. 

1. The August 2008 Fees and Charges Booklet relevantly provided:

   Direct Debit or Direct Credit  Free

   An arrangement you make with a third party to debit or credit your account directly.

   ØA Dishonour Fee may apply if a payment is dishonoured

   Note: ANZ does not charge for providing this service, however the third party may charge a fee.

   Dishonour Fee

   ØCharged to your account on the day of the dishonour, when any payment on your account (cheque or direct debit) is dishonoured due to lack of cleared funds in your account.   $35

   ØDishonour Fee – ANZ Access Basic account   $10

   ØDishonour Fee – ANZ Access Limited account   $0

   Honour Fee

   ØPayable 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

   Ø…

   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.

   …

   Overdrawn Account Interest

   Overdrawn Account (accounts without a credit limit)

   ØANZ Retail Index Rate plus a margin of 8.5% per annum**

   The ANZ Retail Index Rate is published weekly in the Australian Financial Review and other major newspapers.

   Periodical Payments

   …

   ØNon-payment fee   $35

   ØNon-payment fee – ANZ Access Basic account   $10

   ØNon-payment fee – ANZ Access Limited account   $0

2. Card Accounts 9522 and 9629

3. The Letter of Offer dated 16 June 2006 relevantly provided:

   Minimum Repayment

   Each month you are required to pay:

   ·the greater of $10 or 2% of the monthly Closing Balance shown on your statement of account, rounded up to the nearest dollar

   ·or, if the Closing Balance of your statement of account is less than $10, the full closing balance

   by the Due Date shown on that statement of account.

   In addition you will need to pay any Amount Due Immediately on receipt of your statement of account.

   Credit Fees and Charges

   …

   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.

   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.

   Under the contract the annual percentage rate, the minimum repayment, the interest free period and the credit fees and charges may be changed by ANZ without your consent.  New fees and charges may also be introduced by ANZ without your consent… You will be notified of any change in accordance with Condition 33 of the ANZ Credit Card Conditions of Use.

   …

   This document does not contain all the pre-contractual information required to be given to you.  More pre-contractual information can be found in the Credit Card Conditions of Use enclosed with this letter.  The Credit Card Conditions of Use booklet outlines the rights and obligations you and the Bank must meet when operating your account. …

4. The September 2006 Conditions of Use relevantly provided:

   (1)ANZ would (subject to certain limited exceptions) mail a statement of account to the account holder each month:  cl 12;

   (2)the statement would detail all amounts processed to or from the credit card account during the statement period (including any refunds or payments made as well as any fees and charges incurred on the credit card account):  cl 13;

   (3)in cl 14, that:

   Making payments to your credit card account

   (14)       Repayment obligations

   The statement of account shows how much the account holder must pay to ANZ and when payment is due.

   (14.1)     Amounts payable immediately

   The greater of:

   (i)         overlimit amounts; and

   (ii)        overdue amounts

   will be shown on statements of account as being payable immediately.

   (14.2)     Amounts payable by the ‘DUE DATE’

   (a)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. Additional payments can also be made towards the ‘Closing Balance’ shown on the statement of account.

   (b)[This clause set out how the ‘Minimum Monthly Payment’ would be calculated]

   (c)For all types of Gold credit card accounts, ANZ First (Low Interest option), ANZ Low Rate MasterCard, ANZ Low Interest MasterCard credit card accounts, the ‘DUE DATE’ is 25 days from the end of the statement period.  For all other credit card accounts, the ‘DUE DATE’ is 14 days from the end of the statement period.  If the ‘DUE DATE’ would fall on a day that is not an ANZ business day, the ‘DUE DATE’ will be the next ANZ business day.

   (4)in the Introduction, under the heading Meanings of words:

   ‘Overdue amount’ means any ‘Minimum Monthly Payment’ that remains unpaid from previous statements of account;

   ‘overlimit amount’ means the amount by which, at any time, the outstanding balance of the credit card account exceeds the approved credit limit.

   (5)how payments could be made to a credit card account: cl 15;

   (6)in cl 20, how interest was calculated, including that:

   1.no interest was payable on purchases, where the full closing balance of the account was paid by the due date; if it was not paid by the due date, the interest would be charged from the date of each purchase; and

   2.interest was payable on cash advances from the date of the cash advance,

   and in each case the interest would be debited to the account on the closing date of the statement period;

   (7)in cl 22, under the heading “Fees and Charges” and the sub-heading “Bank fees and charges”, that:

   (a)ANZ reserves the right to charge the credit card account with fees and charges for the provision and operation of the credit card account.  The fees and charges applicable to the credit card account are those shown in the Letter of Offer and in the ANZ Personal Banking Fees and Charges booklets, as varied from time to time.

   (b)        …

   (c)ANZ is also irrevocably authorised to debit any interest, fees or change [sic] applicable to the credit card account.

   (d)The monthly statement of account will detail all fees and charges applied to the credit card account during the relevant statement period.

   (8)in cl 29, headed “Default”, that:

   (a)The account holder is in default under the credit card contract if you have not met any of your obligations under this credit card contract.  If the account holder is in default under the credit card contract, or if ANZ believes on reasonable grounds that you induced it to enter into the credit card contract by fraudulent misrepresentation, the outstanding balance including the outstanding balance on any Promotional Plans on the credit card account will, at the option of ANZ, become immediately due and payable to the ANZ and the credit card(s) relating to this credit card contract will be cancelled, by ANZ giving the account holder notice in accordance with any applicable law.

   (b)         …

   (c)Any reasonable amount reasonably incurred or expended by ANZ in exercising its rights in relation to the credit card account arising from any default (including expenses incurred by the use of ANZ’s staff and facilities) are enforcement expenses and become immediately payable by the account holder.  ANZ may debit the credit card account for such amounts without notice.

   (d)Upon payment to ANZ, in accordance with this condition, of all amounts owing on the credit card account, the agreement governing the operation of the credit card account will be terminated without the need for any further notice.

   (9)in cl 30 headed “Cancellation by ANZ”:

   (a) …

   (b) ANZ reserves the right to cancel a credit card or refuse authorisation of further transactions on any credit card account at any time:

   (i)without prior notice if:

   (A)ANZ believes that use of the credit card or the credit card account may cause loss to you or to ANZ (for example, if you are in default under the credit card contract or under the terms and conditions applicable to another credit facility provided by ANZ to you);

   (B)The credit card account is an inactive account;

   (C)The credit limit has been exceeded or a repayment is overdue (Note that ANZ may elect not to cancel a credit card or refuse authorisation of a transaction for these reasons but the fact that ANZ has elected not to do so on one or more previous occasions does not stop ANZ from taking these actions);

   (D)In the reasonable view of ANZ you have tampered with, misused or allowed any other person to use the chip on your credit card; or

   (ii)upon giving you not less than three months written notice.

   If the credit card account is closed, all credit cards issued in relation to that credit card account will also be cancelled.

   (c) …

   (d)ANZ will not cancel any individual credit card(s) without good reason. ANZ reserves the right to cancel any credit card at any time without prior notice if:

   (i)ANZ believes that use of the credit card may cause loss to you or to ANZ; or

   (ii)the credit card account has been closed.

   (10)in cl 31 headed “Cancellation by you”, it stated:

   (a)The account holder may close the credit card account at any time by making a telephone request to ANZ for closure of the credit card account.  If the credit card account is closed, all credit cards issued in relation to that credit card account will also be cancelled.

   (11)in cl 33, that ANZ could, at any time, “change any term of the credit card contract by giving the account holder notice”, including the applicable interest rate(s), the way in which interest is calculated or applied, the amount, frequency, time for payment of or the method of calculation of repayments, increasing the amount of a credit fee or charge or changing the frequency or time for payment of a credit fee or charge, or introducing a new credit fee or charge;

   (12)ANZ could combine the balances of two or more of a customer’s accounts:  cl 40; and

   (13)Part B, under the heading “Electronic Banking Conditions of Use”, contained terms to the same effect as those set out in [2(9), 2(10) and 2(11)] above.

5. The August 2006 Fees and Charges Booklet relevantly provided:

   Late Payment Fee   $35

   ØCharged 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.

6. The Letter of Offer dated 24 July 2009 relevantly provided:

   Minimum Repayment

   Each month you are required to pay:

   ·    the greater of $10 or 2% of the monthly ‘Closing Balance’ shown on your Statement of Account, rounded up to the nearest dollar

   ·    or, if the ‘Closing Balance’ of your Statement of Account is less than $10, the full ‘Closing Balance’

   by the Due Date shown on that Statement of Account.

   …

   Amount Due Immediately

   If an Amount Due Immediately appears on your monthly Statement of Account, you will need to pay this amount in full as soon as you receive your statement.  This Amount Due Immediately is payable in addition to the Monthly Minimum Repayment.

   Credit Fees and Charges

   …

   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.

   * A reduced fee of $10 will apply if you hold an ANZ Access Basic Account.

   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.

   *A reduced fee of $10 will apply if you hold an ANZ Access Basic Account.

   #Ask us how you can avoid going over your Credit Limit by opting to have ANZ decline transactions (in most cases) that will take you over your limit.

   Pre-Contractual Information

   Under the contract the annual percentage rate, the minimum repayment, the interest free period and the credit fees and charges may be changed by ANZ without your consent.  New fees and charges may also be introduced by ANZ without your consent… You will be notified of any change in accordance with Condition 33 of the ANZ Credit Card Conditions of Use.

7. The July 2009 Conditions of Use contained materially the same terms as the September 2006 Conditions of Use (see [5] above) except for the following matters.

   (1)cl 2 headed “The Credit Limit”, stated:

   (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.

   (2)cl 30, headed “Cancellation by ANZ” (which differed from that in the September 2006 Conditions of Use (see [5] above)), stated:

   (a)        …

   (b)ANZ reserves the right to cancel a credit card at any time without prior notice and will provide notice as soon as practicable after the credit card is cancelled. If the credit card account is closed, all credit cards issued in relation to that credit card account will also be cancelled.

   (c)        …

   (d)Examples of when ANZ may cancel a credit card include, without limitation, where a credit card has not been activated within 6 months of the date of the Letter of Offer relating to that credit card or where ANZ believes the use of the credit card account will cause loss to you or ANZ. This is not an exhaustive list of when ANZ may cancel a credit card and is a guide only.

   (3)Part B, headed “Electronic Banking Conditions of Use” (which differed from that in the September 2006 Conditions of Use (see [5(12)] above)), stated that:

   Cancellation of Cards or Electronic Access

   ANZ may cancel any card, [Customer Registration Number] or electronic access at any time without prior notice as set out in Clause 30(b).

   …

   The account holder may cancel a card at any time by sending ANZ a written request or by calling ANZ on the relevant number listed at the front of this booklet.

8. The July 2009 Fees and Charges Booklet relevantly provided:

   Overlimit Fee   $35

   ØCharged 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 (excluding ANZ Visa PAYCARD / ANZ Rewards Visa PAYCARD accounts).

   ØCharged at a maximum of once per “Statement Period”

   (Emphasis added in bold)

POST-DECEMBER 2009

1. Card Accounts 9522 and 9629

2. The 24 July 2009 Letter of Offer:  see [7] above.

3. The December 2009 Conditions of Use contained materially the same terms as those set out at [5] and [8] above.

4. The December 2009 Fees and Charges Booklet relevantly provided:

   Late Payment Fee   $20

   ØCharged 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.

   ØNo Late Payment Fee will apply if you hold an ANZ Access Basic Account.

   ØCharged to ANZ Visa PAYCARD and ANZ Rewards Visa PAYCARD accounts if the “Minimum Monthly Payment” plus any amount “Payable Immediately” shown on the statement of account is not paid in full by the “Due Date” shown on that statement.

   Overlimit Fee   $20

   ØCharged 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. (Refer to the ANZ Credit Cards Conditions of Use for information about Informal Overlimit amounts).

   ØAsk us how you can avoid going over your credit limit by opting to have ANZ decline transactions (in most cases) that will take you over your credit limit.  (Refer to the ANZ Credit Cards Conditions of Use for more information).

   ØNo Overlimit Fee will apply if you hold an ANZ Access Basic Account.

   ØThis fee does not apply to ANZ Visa PAYCARD and ANZ Rewards Visa PAYCARD accounts.

5. The March 2010 Conditions of Use contained materially the same terms as those set out at [5] and [8] above except for [8(a)] above which instead provided in cl 2:

   (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)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.

1. The ‘ANZ Credit Cards Conditions of Use’ dated June 2010 (and all subsequent versions) included a preamble under the heading “Important things to know about using your ANZ credit card” which included:

   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.

   (Emphasis added in bold.)

2. The ‘ANZ Personal Banking Account Fees and Charges’ dated June 2012 relevantly provided:

   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; and

   ·    we determine that:

   (1)   Your account was opened before 18 June 2012 and either:

   a.you have not asked us to decline transactions (in most cases) that will take you over the credit limit; or

   b.you previously asked us to decline the transactions referred to in (a), but have since asked us to approve these transactions where they meet ANZ’s criteria by consenting to be charged an Overlimit Fee; or

   (2)Your account was opened on or after 18 June 2012 and you have consented to be charged an Overlimit Fee.

   ·    The Overlimit Fee (where payable) is charged at a maximum of once per statement period. Please refer to the ANZ Credit Cards Conditions of Use for information about Informal Overlimit amounts.

   B.You will not be charged an Overlimit Fee where ANZ provides you with an Informal Overlimit amount during the Statement Period and:

   -     you hold an ANZ Access Basic Account; or

   -     we determine that:

   (1)Your account was opened before 18 June 2012 and you have asked us to decline transactions (in most cases) that will take you over the credit limit; or

   (2)Your account was opened on or after 18 June 2012 and at the time the Informal Overlimit amount is provided you have not consented, or you have withdrawn your consent to being charged an Overlimit Fee (unless you are charged an Overlimit Fee in accordance with paragraph A in respect of an earlier Informal Overlimit amount).

3. Business Contract

4. The Signature Card relevantly provided:

   I/We agree to be bound by the terms and conditions for the account types which are opened in my/our names, and which are noted on this card, including the terms dealing with the disclosure of information.  I/We authorise the nominated signatories to act fully and effectively in all dealings with ANZ regarding the operation of the account as set out in the terms.

   I/We acknowledge receipt of all booklets containing terms and conditions for each account.

5. The Account Authority contained, inter alia, a purported resolution of SDG as follows:

   That a bank account for the company be opened with [ANZ] at its Lower Templestowe branch, and that [any one to sign] be authorised to:

   ·Operate and enter into agreements to operate on the account(s) in any way permitted by ANZ including transactions by electronic, mechanical and other means.

   ·Sign cheques; draw, endorse, accept and discount bills of exchange and drafts; make, endorse and discount promissory notes.

   ·Overdraw or increase the overdraft on the account.

   ·Sign authorities for periodical payments; place money on term deposit or other non-current deposit and deal with and receive payment for such deposits, including interest, and deal with term deposit receipts and certificates of deposit.

   ·Give receipts for shipping documents and the like and sign requisitions for letters of credit.

   ·Sign and make withdrawals in respect of any deposit or current account.

   ·Generally act fully and effectually in all dealings, matters and transactions between the company and ANZ.

6. The December 2009 Terms and Conditions relevantly provided:

   (1)ANZ could combine the balances of two or more of a customer’s accounts.

   (2)ANZ could in its discretion close an account “due to unsatisfactory conduct or for any other reason it considers appropriate”.

   (3)ANZ could change the terms and conditions by, inter alia, introducing a new fee or charge, increasing an existing fee or charge, or changing any other term or condition.

   (4)that a cheque may, at ANZ’s discretion, be dishonoured or payment refused where, inter alia, there are insufficient funds in the account of the drawer, and that “ANZ may charge a dishonour fee”.

   (5)in a section headed “Informal Overdraft facility”, it stated:

   For the purposes of this clause the following definitions apply:

   ‘Informal Overdraft' means an amount advanced to you under the Informal Overdraft facility.

   ‘Informal Overdraft facility’ means the informal short-term credit facility ANZ may provide to you pursuant to this clause if a debit to your account (excluding a periodical payment) would, if processed, result in either:

   Øyour account becoming overdrawn; or

   Øthe approved limit on your account being exceeded.

   When any debit (excluding a periodical payment) is initiated which, if processed, would result in either:

   Øyour account becoming overdrawn; or

   Øthe approved limit on your account being exceeded,

   you are deemed to request an Informal Overdraft.

   For accounts other than ANZ Equity Manager in a Company Name

   ANZ will consider your request and assess your eligibility for an Informal Overdraft based on ANZ’s credit criteria.  You will be charged an Informal Overdraft Assessment Fee for this service in the circumstances described below.

   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:

   ØIf 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.

   ØInterest will be charged on the sum of the Informal Overdraft and any fees and charges debited to the account at the ANZ Retail Index Rate plus a margin …

   ØThe Informal Overdraft, any Informal Overdraft Assessment Fee and any interest on both of those amounts will be debited to your account; and

   Øyou must repay each of those amounts by the earlier to occur of either:

   ·    7 days of the Informal Overdraft being debited to your account; or

   ·    ANZ demanding repayment. Demand for payment may be made in your next statement of account or by letter to you.

   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.

   ØOther than amounts debited to your account in accordance with this clause, ANZ does not agree to provide any credit in respect of your account without prior written agreement.

   You should inform ANZ as soon as possible if you are in financial difficulty.

   (6)Under the heading “Overdraft Facility”, it stated:

   If you require credit, an ANZ Business Overdraft Facility can be arranged on your account …  All applications are subject to ANZ’s normal credit approval criteria.

   (7)under the heading ‘Electronic Banking Conditions of Use’, it stated:

   15.       Cancellation of Cards, Security Devices or Electronic Access

   (a)ANZ may cancel or limit any card, Security Device, [Customer Registration Number] or electronic access:

   ·    Without prior notice if:

   ·     ANZ believes that use of the card, Security Device or electronic access may cause loss to the Account Holder or to ANZ;

   ·     The Account is an inactive account;

   ·     All the Accounts which the card may access or the Security Device relates to have been closed;

   ·     The Account has been overdrawn, or you have exceeded your agreed credit limit (other than by use of the Informal Overdraft facility);

   ·     The account or your use of the account is otherwise out of order; or

   ·    On giving you not less than three months written notice.

   …

   (c)The Account Holder may cancel a card at any time by sending ANZ a written request or by calling ANZ on the relevant number listed at the back of this booklet.

   16.       Withdrawal of Electronic Access

   (a)ANZ may withdraw your electronic access to Accounts (including by BPAY) without prior notice if:

   ·    Electronic equipment malfunctions or is otherwise unavailable for use;

   ·    A merchant refuses to accept your card;

   ·    Any one of the Accounts is overdrawn or will become overdrawn (other than by use of the Informal Overdraft facility);

   ·    Any one of the Accounts or your use of an account is otherwise considered out of order by ANZ;

   ·    ANZ believes your access to Accounts through electronic equipment may cause loss to the Account Holder or to ANZ;

   ·    ANZ believes that the quality or security of your electronic access process or ANZ’s systems may have been compromised;

   ·    All the Accounts which you may access using ANZ Phone Banking, ANZ Internet Banking or ANZ Internet Banking for Business have been closed or are inactive or the account you have nominated for ANZ Mobile Phone Banking fees and charges to be charged to is closed; or

   ·    ANZ suspects you of being fraudulent or engaging in inappropriate behaviour; unless this is prohibited by law.

7. The December 2009 Business Fees and Charges Booklet relevantly provided:

   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.

   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.

   It also contained a term specifying the ‘Informal Overdraft Interest Rate’ as the ‘Overdraft Interest Rate’ plus 4% p.a.

8. The Letter of Offer dated 28 April 2011 relevantly provided:

   The Facility Limit is the maximum amount of credit (inclusive of any interest and fees debited to your account) that you may incur. If you exceed the Facility Limit and ANZ offers you an Informal Overdraft Facility, you will be charged the Overdraft Interest Rate plus a further 4% p.a. on the balance of your Informal Overdraft Facility.

   …

   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.

9. The Letter of Offer dated 29 November 2011 relevantly provided:

   (1)the facility limit on SDG’s overdraft facility was $49,999;

   (2)under the heading ‘Informal Overdraft Interest Rate’:

   The Facility Limit is the maximum amount of credit (inclusive of any interest and fees debited to your account) that you may incur unless ANZ agrees to advance you any further amount under an Informal Overdraft facility.  If ANZ provides you with an Informal Overdraft facility, you will be charged the Interest Rate plus a further 4.00% pa on the sum of the Informal Overdraft and any applicable Informal Overdraft Assessment Fee…

   (3)an 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”; and

   (4)the facility was to be secured by a guarantee and indemnity given by Mr Paciocco.

10. The ‘Finance Conditions of Use – ANZ Business Banking’ dated August 2011 relevantly provided:

    (1)under the heading “Request for Informal Overdraft facility”, provisions to the same effect as those set out in [18(5)] above;

    (2)interest would be charged on amounts not paid when due (an ‘overdue amount’):  cl 11, and:

    You agree to pay ANZ, on demand, in addition to the interest payable under sub-clause (a), a fee determined by ANZ so that the interest and the fee will compensate ANZ for the Costs ANZ incurs or loss ANZ suffers as a result of an overdue amount.

    (3)it was a review event if “ANZ has dishonoured or refused payment of cheque(s) issued on any of your accounts because there are insufficient funds”:  cl 13(h)(v);

    (4)ANZ could change the terms and conditions by, inter alia, introducing a new fee or charge, changing an existing fee or charge, or changing any other term or condition:  cl 14;

    (5)in cl 35, headed “Consolidation of Accounts”, that:

    ANZ may at any time combine, consolidate, merge or apply any credit balance in any of your accounts, or any amount available to ANZ by way of set-off, lien or counterclaim, towards payment of money which is then, or will become, due and payable by you to ANZ under any Transaction Document.  If ANZ does any of these things, ANZ will tell you in writing. ANZ can do any of these things despite any previous agreement to the contrary. You authorise ANZ to do anything in your name which is necessary for ANZ to be able to do any of these things.

    ANZ’s rights under this clause are in addition to any other rights it has at law or under any other agreement.

    (6)that a cheque may, at ANZ’s discretion, be dishonoured or payment refused where, inter alia, there are insufficient funds in the account of the drawer, and that “ANZ may charge an Informal Overdraft Assessment Fee (referred to in your bank statements and ANZ Business Banking Finance Fees and Charges booklet as an Outward Dishonour Fee)”:  cl 39; and

    (7)under the heading ‘Electronic Banking Conditions of Use’, provisions to the same effect as those set out in [18(7)] above.

    
    
    

    Annexure 4

    Pre-2008

    Exception Fee Discussion Paper dated 24 March 2006

    1.The paper stated that within ANZ, at that time, there was a series of actions recommended to implement pricing changes by which dishonour fees and periodical non-payment fees were reduced from $45 to $35 and honour fees were increased from $29.50 to $35.  The first objective identified for the re-pricing was to “improve revenue streams”.  Another objective was to improve “alignment between fees and service provided”.  There was a “strong rationale for changing existing exception fee levels and policy”.  That rationale had the following components:

    a.A “pricing rationale” – ANZ noted that only the highest balance savings accounts were profitable, “exception fees revenue aligns well with lower value centiles”, customer research confirmed that “exception fees are not a driver of acquisition choice and rarely a driver of attrition” and “competitor pricing provides headroom for change without being top of market”.

    b. Insofar as the changes had a “policy rationale”, it noted that there was no strong rationale for having different online limit policies for cheque and savings customers and existing fee levels were “misaligned” across the personal fees.

    c.In relation to “customer and community rationale”, the paper recorded that “[e]xisting differences in honour and dishonour fee levels are hard to justify; changes may reduce the pressure on dishonour fees which are hardest to justify as “no service is provided”.  (The substance of this statement was repeated in the 30 June 2006 Exception Fee Discussion Paper).

    2.The outcome of customer research was then considered.  The conclusion was that honour fees were not a substantial part of acquisition or attrition.  In relation to “attrition”, the paper recorded that “very few respondents had even considered changing banks because of honour fees” because “for most customers, honour fees were charged rarely at all” and where they did play a role, “respondents were already dissatisfied with their bank”.

    3.The paper also addressed the rationale for the proposed pricing change to a common honour and dishonour fee of $35.  The paper stated that it was difficult to justify to customers and regulators why the dishonour fee was higher than the honour fee “given that there is no incremental service provided for dishonour”.  Another rationale was said to “provide some cost recovery and incentive for proper account management”. 

    Exception Fee Discussion Paper dated 30 June 2006

    4.The paper stated that by “changing exception fee prices and opening online limits for new advantage and select savings accounts will reduce losses in otherwise unprofitable balance segments”.  In particular, the paper stated that a “fee alignment at $35 result[ed] in an increase in profit in unprofitable accounts”.

    5.Exception fees were stated to represent “a significant part of the Transaction Banking” profit and loss.  The current level of exception fees was put in context.  The paper stated that they totalled $93 million whereas the entire transaction banking earnings before provisions was $208 million and account service fees totalled $50 million.  

    6.The paper further stated that the proposed changes were based on the outcome of customer research.  The research confirmed:

    a.All customers disliked fees but they disliked the dishonour fee more than the honour fee because of the “lack of perceived service”. 

    b.Customers did not understand or appreciate why the honour fee and dishonour fee were different in fee amount. 

    c.Customers were looking for better communication in relation to fees and options and that customers would prefer a buffer of $10. 

    7.“As laid out in the research [the] results were”:

    a.lowering the dishonour fee;

    b.aligning fees;

    c.improving communication with customers; and

    d.reducing basic fees.

    8.The conclusion reached was that ANZ could not afford to do all of these things and increase the buffer and still make the changes financially worthwhile so they have chosen to let go the item which customers viewed as a distant third, the buffer. 

    Exception Fee Briefing Paper dated July 2006

    9.The paper stated that exception fees:

    a.        were to be simplified and made consistent ($35) across other ANZ products. 

    b.were to be reduced to $10 for Access Basic customers to reduce the impact of these fees on low income earners.

    10.The paper further stated that customer communication was to be improved when a fee is incurred by ANZ writing to customers to explain when these fees are charged and how they can be avoided in the future.

    11.The unauthorised overdraft rate was to be aligned with the ANZ Assured overdraft rate, which meant that one interest rate was charged for overdrawing accounts.

    12.From late 2006, any new customers opening both cheque and non-cheque accounts may be able to overdraw their account electronically (not applicable to Access Basic and currently only applied to cheque accounts).

    May 2007 – Internal Emails

    13.The penalty fee debate was discussed internally within ANZ.  The emails recorded that ANZ was aware that the Australian Securities and Investments Commission (ASIC) was focusing on two issues:  the legality of the fees, that is, “whether the amount charged is reasonable to protect the legitimate interest of the Bank” and secondly, the “public perception of the amount of the fees is too high”.  In an email dated 9 May 2007, an ANZ bank officer recognised that at this time any review of the terms and conditions would not lead to a change in the level of fees and expressed doubts whether this would “ultimately satisfy ASIC and the issue will resurface”.  The email recorded that “ASIC is basically giving the industry an opportunity to manage the issue itself”.  

    2008

    Australian Securities and Investments Commission (Fair Bank and Credit Card Fees) Amendment Bill 2008 (Bank Fees Bill). 

    14.On 14 February 2008, the Bank Fees Bill was introduced to the Senate and had its first and second readings. Its proposed short title was “A Bill for an Act to Amend the Australian Securities and Investments Commission Act 2001 to limit unfair banking and credit card penalty fees, and for related purposes”. The core of the Bill was to prohibit a ‘default charge’ which was not “at or below a genuine pre-estimate of the damage likely to be suffered by the financial service provider resulting from the consumer default” (cl 12FA), and to enable ASIC to determine a valid “default charge” based upon a consideration, inter alia, of “whether the default charge reflects a genuine pre-estimate of the additional administrative costs that might reasonably be expected to result from the consumer default, reduced by costs that are not able to be identified with reasonable precision and an amount that takes account of the ability of the financial service provider to mitigate the loss it suffers resulting from consumer defaults”: cl 12FB(5)(a)).

    15.The Bank Fees Bill did not lapse until Parliament was prorogued on 19 July 2010.  Through 2008, the Bill was the subject of inquiry by the Senate Standing Committee on Economics, which reported on 16 September 2008.

    16.Shortly before the introduction of the Bank Fees Bill, the Australian Bankers Association (ABA) commissioned a review of the Code of Banking Practice.  The commencement of the review was publicised in a press release by the ABA on 21 December 2007.  Consultation occurred during the review process.  ANZ contributed to the review. 

    February 2008 Personal Banking Account Fees and Charges Booklet

    17.ANZ issued the February 2008 Personal Banking Account Fees and Charges Booklet. 

    Weekly Management Board Meeting of ANZ on 17 March 2008

    18.Under the heading “Bob Santamaria” (in house counsel for ANZ), the Minutes of the weekly management board meeting of ANZ on 17 March 2008 stated “review exception fees for appropriateness to avoid retrospective penalties”.

    Exception Fees Updates, Product Development 1 April 2008

    19.Paper entitled “Exception Fees Updates – Product Development” prepared.  The introduction explained that the paper was a response to the proposal in the Bank Fees Bill to “limit banking and credit card penalty fees by ensuring that fees are for cost recovery only …”. 

    20.The introduction to the paper stated:

    –“How ANZ Consumer Cards can project manage the potential requirement to change the disclosure of such ‘exception fees’ to ‘service fees’

    –Identifies key milestones for the above to occur

    –Highlights key considerations for the imitative. ”

    21.The suggested approach was to “changing exception fees to service fees”.  The paper then listed “key considerations moving [that suggested approach] forward”.  One key consideration was whether the terminology change was “sufficient protection against the potential impact?”

    22.The update also recorded that ANZ’s Legal and Government Regulatory Affairs Department, on the basis of its advice, had advised there was “therefore definite revenue at risk figure”. 

    Review of the Code of Banking Practice, Issues Paper, August 2008

    23.ANZ made a written submission to the Independent Code Reviewer, Jan McClelland in August 2008 in relation to a review of the Code of Banking.  In relation to the Issues Paper Interim Recommendation number 7 – Fees and Charges, ANZ submitted that “Fees, charges and interest, including exception fees, are set by member banks in a highly competitive environment.  ANZ believes that exception fees are avoidable and we give our customers the information, products and options they need to avoid them”.

    24.ANZ’s submission stated ANZ was continuing to look at new ways to help customers avoid these fees and expected to announce further developments shortly.  As such, ANZ believed that fees and charges should not be regulated, particularly in an industry code.  ANZ referred to the Commonwealth Government’s June 2008 Green Paper on Financial Services and Credit Regulation which suggested that:

    Regulation of bank fees and charges discourages new investment and innovation, increases compliance costs for industry and may actually lead to an increase in prices for consumers.  …

    25.ANZ further submitted that the Banking and Financial Services Ombudsman’s Terms of Reference stated that it cannot consider the amount of a fee so far as it relates to a policy or practice of a bank.  ANZ agreed and believed that the Code of Banking Practice was not the appropriate vehicle for determining the level of fees and charges.  ANZ recommended that the market should be allowed to continue to place downward pressure on these fees and charges through innovation and clear and transparent disclosure which would include continuing to update the [Australian Bankers’ Association] Exception Fee fact sheet to ensure customers could compare products across providers with regard to these fees. 

    26.Attachment A to ANZ’s submission was two Exception Fee policies which ANZ released in August 2007.  The policies were said to “outline a series of commitments to [ANZ’s] personal customers”.

    27.The first entitled “ANZ Exception Fees Policy Consumer Credit Cards” was said to set out ANZ’s commitment to customers with regard to late payment fees and overlimit fees applicable to ANZ consumer credit cards.  The second policy was entitled “ANZ Exception Fees Policy Consumer Transaction and Savings Products”.  This policy was for Access Advantage, Access Select, Access Basic, Access Deeming, Progress Saver, Premium Case Management, Prime Cash Management, Home Loan Interest Saver, ANZ One and Equity Manager account and was said to set out ANZ’s commitments in relation to honour fees, dishonour fees and periodical payment non-payment fees that applied to these accounts.  Both documents stated it was ANZ’s policy to provide consumers with:

    ofull disclosure;

    okeeping fees simple;

    ohelping the consumer avoid fees; and

    oapplying the fees fairly. 

    Confidential Paper, Response to Fee Headwind, 11 August 2008

    28.The document was incomplete.  The document described the “external environment” as being one where banks “are asked to set Exception fees limited to costs recovery only”. 

    29.The response outlined options that ANZ could consider to mitigate the revenue loss from the potential reduction in exception fees such as tightening criteria further on some exception fees including reducing late payment fee ‘grace’ days and reducing the overlimit ‘buffer’.

    30.Other options for raising revenue included increasing annual fees, charging monthly fees instead of annual fees on credit cards, increasing retail rates and cash rates on all products, moving from charging on overlimit fee per cycle to per honoured transaction and introducing differential exception fees on different products. 

    Exception Fees Strategy, September 2008, by Louis Hawke

    31.The Executive Summary stated:

    *Recent events overseas and in Australia are generating heightened focus and increasing the risk of regulation on bank fees, in particular exception fees.

    *Focus on strategy is to source additional income streams to offset the potential loss of exception fee revenue due to regulation.

    *Actions to address political concerns and improve customer experience include – new exception fee free account, new ATM warning message and low balance text alerts.

    * Strategies to cover revenue gap include – changing the mix of honour and dishonoured transactions, increasing the monthly account service fee.

    *Significant component of honour/dishonour fee is at risk.

    *Largest threat Senator Fielding Bill – ASIC (Fair Bank and Credit Card Fees) Amendment Bill 2008.

    *Corporate Affairs, Legal & Banking Products are monitoring the situation and working together on the strategies.

    32.The paper stated that the following initiatives “have been / will be implemented to provide customers with more options to avoid overdrawing their accounts”:

    ·    Exception Fee Free Account (Access Limited) - launched 15 September 2008

    o Provides choice to customers who do not wish to overdraw their account

    ·    New ATM warning Message – to be rolled out progressively in March 2009

    o New message to allow customers to proceed with or cancel transactions that will overdraw their account

    o Based on the assumption that 50% of customers will choose not to proceed with the transaction, the revenue impact is a reduction of up to $12 million per annum

    ·    Low Balance Text Alert Messages …

    33.ANZ’s short to long term strategies were stated in that document:

    Short/Medium Term Strategies

    *         Change Terms and Conditions for transaction accounts

    - Honour and dishonour fees to be changed to “service fees” for overdrawn amounts less than $500 and “temporary overdraft fee” for amounts greater than $500. (More than 90% of honour fees charged are for overdrawn amounts of less than $500).

    *         Switch on Online shadow limits for non cheque Access Accounts

    -Expected additional revenue of $20 million per annum (at $35 per item)

    -Controlled phased roll out with new ATM warning message

    *         Change honour/dishonour mix from 70%/30% to 50%/50%

    -Expected additional revenue of $18 million per annum (at $35 per item)

    *Change the mix of Online/Batch honour transactions (honour more transactions via Online channels and honour less transactions via batch channels)

    -Expected additional revenue – to be confirmed.

    Long Term Strategies

    If exception fees were regulated/capped to cost recovery, the approach would be to:

    *Increase monthly account service fee ($0.13 for every $ reduction in per item fee applied on all active accounts or $0.25 for every $ reduction if applied on fee paying accounts only).

    *Increase proportion of dishonour transactions to over 50%.

    *Change exception fee charging methodology

    -item based honour fee

    -change posting sequence and charge for uncleared funds.

    December 2008 – ABA Review Report

    34.The ABA Report was published in December 2008:  Review of the Code of Banking Practice, Final Report, December 2008. 

    35.Chapter 9 dealt with fees and charges.  Among other things, the review noted that of particular concern to consumer advocates and regulators were exception fees.  Those concerns focused on:

    a.the charging of exception fees unilaterally and automatically, often in relation to trivial defaults or unintentional errors by consumers and in situations which compounded the problem for people experiencing financial difficulties;

    b.the amount charged was disproportionate to the penalised transaction and the cost to the Bank;

    c.the lack of assistance provided by Banks to assist customers to avoid exception fees; and

    d.        the level of exception fees was not covered by the Code.

    36.The review noted that while regulators and consumer advocates acknowledged “that banks are entitled to recover costs incurred by them upon default by a customer”, they argued that the code should include reference to the provision of information on exception fees.  Express reference was made in the Review to developments in the United Kingdom, which was noted to have “found that fees charged by a Bank in relation to the customer’s overdrawing of their account or overdraft limit were not common law penalties”:  Office of Fair Trading v Abbey National Plc [2008] All ER (D) 349, [2008] EWHC 875 (Comm). That decision had been handed down on 24 April 2008. In relation “to the issue of the quantum of exception fees”, the report recommended that “the definition of fees and charges include reference to the reasonable recovery of costs incurred by the Banks when customers default on their repayments, exceed their overdraft limit or are overdrawn on their account”.

    22 December 2008 Internal Email 

    37.The Senior Manager, Product and Project Initiation, of ANZ sent an email to, among others, the Managing Director, Retail and Business Banking entitled “Fee for service initiative”.  The email included statements that:

    a.The “fee for service” initiative was an appropriate direction for ANZ moving forward given the “pressure that is mounting on exception fees earned on retail and commercial (small business)”.

    b.For the period October 2005-October 2008, over $300 million was earned from late payment and overlimit fees in Consumer Cards.  The actual size of the impact across all Consumer and Commercial Businesses was currently being sized.

    2009

    Fee Review – Project plan and challenges, Product Development January 2009

    38.It stated the “Fee for Service” initiative aimed to update the fee name or descriptions so customers understood why the fees are charged.

    Fee for Service Review, Road-show document, January / February 2009

    39.In early 2009, ANZ prepared a “Road-show document” entitled “Fee for service review”.  In the introduction and scope section, the document stated:

    ANZ is currently reviewing the ‘fees for Service” that are being charged to customers.  Part of this review may involve the tailoring of existing fee names or descriptions to more suitable wording to help our customers understand why fees are charged.

    Presentation to DIRC / PIRC, Fee for Service February 2009

    40.Under the heading “Nature of the origins of the proposal, what is the strategic rationale and what are the desired outcomes”, the document stated “to reduce the risk of disputation proceedings against ANZ” and to reduce the “risk of government or regulatory action against ‘Fees for Service’ charged to customers”.

    Fee for Service Scope / Approach prepared by John Papasoulis / Joe Lewis, February 2009

    41.This paper, prepared by John Papasoulis and Joe Lewis (who had responsibility for the Fee for Service Project) recommended to ANZ that the proposal implemented focus initially on “tailoring” fees to the higher risk / value revenue streams given that Consumer Cards and Deposits consisted of $251 million or 76% of fee revenue.

    42.The paper recommended a phased introduction of the initiative.  In phase 1, the Letter of Offer, Terms and Conditions and other “up-front” collateral changes would be made to introduce the new fee names and descriptions but with “continued reference to old fee names”.

    “Penalty Fee Review Project – Feasibility Analysis” prepared by Alicia Hall on 16 February 2009.

    43.In the background to the “penalty fee project”, Ms Hall noted:

    *The ANZ legal teams are in the process of reviewing all account penalties with the intention that there will be changes made to the penalty fee names and descriptions.

    *Penalty fees are currently applied to every ANZ account type, across every business unit and are applicable/visible on multiple platforms. The interdependencies for penalty fees from a technology and business process perspective are substantial as are the volume of fees affected and potentially to be including in the scope of this change.

    *Our understanding is that the Service Fees already being charged to accounts are not included in this initiative.

    (Emphasis in original).

    44.One of the assumptions and considerations was a differentiation between “Penalty Fees” and “Service Fees and other charges not related to Penalty Fees”.

    45.Ms Hall listed the Risks. The eighth risk was “Changing Fee names and Descriptions and not addressing the integral intent of the charges may present an ethical challenge to risk and legal teams and hence [ANZ] may face litigation or regulatory issues”.

    Presentation to DIRC / PIRC, Fee for Service, Initiative Review, 23 February 2009

    46.The description / summary for the meeting stated that:

    a.The Fee for Service was directed to “pre-empting likely regulatory change in banks [sic] ability to charge exception fees to customers”;

    b.The “[p]rimary benefit is to tailor exception fee name and/or description to protect the existing fee revenue received”.

    47.Another version of the same document stated in the description / summary for the meeting that disputation against exception fees was leading to extreme risk that ANZ would suffer severe consequences from any action and that proposed regulatory action against exception fees was regarded as an “almost certain likelihood”.

    Fee For Service Steering Committee #1, 12 March 2009 prepared by John Papasoulis and Joe Lewis

    48.The key benefit to the initiative was the “risk to current fee revenue generated, which the ANZ may not be able to charge in the future and be requested to repay retrospectively” and “each day the proposed changes are not made, the future exposure increases - as much as $1 [million] per day”.

    52.Consistently with this, further reference is made to the fact that each day the proposed changes are not made, the future exposure increases by as much as $30 million per month.

    53.In talking of customers who held both customer and business accounts, the report stated that the phased approach to changing the fees would involve the customer being aware that a variation was being made to a fee that “restates it as a service fee rather than a penalty fee while the business fee with the same name is unchanged as a penalty fee”.

    54.The report referred to the risk of media attention including the risk of drawing attention to the activity of new fee names and descriptions with resulting negative media exposure.  The report however stated that the “media is relatively quiet on this particular issue at the moment, and hence it is a comparatively good time to make the changes, but potential still exits”. 

    Minutes of Meeting of Fee for Service Steering Committee on 12 March 2009

    49.The minutes recorded that “Penalty Regime risks based on UK experience are still the focus of this initiative”.

    50.External legal advice was to be sought, and an officer (Mr John Papasoulis) was assigned to action the “single referencing of fees” which had been agreed to be utilised.  The agreement was that “the ‘old’ fees will be updated to ‘new’ fee names and/or descriptions”.

    Fee for Service Steering Committee #2, 28 April 2009, prepared by John Papasoulis, and Joe Lewis  

    51.A number of versions were in evidence.

    52.In Version 1, the “Key Takeaway” was that the “Fee for Service initiative will justify the ‘service element’ of current fees and therefore not limit ability to charge to cost recovery only but cost recovery + amount on top (unknown)”.

    53.In Version 2, one of the challenges in meeting a 1 July deadline for implementation of the initiative was described as being “considerable delays have been encountered in receiving the finalised fee name and descriptions”.

    54.In Version 4, in discussing the various options of “dual referencing” or “single referencing”, it was noted that the option of “Do nothing” had a “key advantage” in that it “[d]oes not draw attention to penalty fee regime”. 

    Minutes of Meeting of Fee for Service Steering Committee on 8 May 2009

    55.The minutes recorded that it was decided that “the effective date risk could not be mitigated” and therefore “not to proceed with the variations of fees”.

    “Penalty Fee Review Project, Technology Status Report” on 18 May 2009 prepared by Mike Lewicki.

    56.The Report contained a Project Overview.  The “problem” was described as follows:

    Fees are currently applied to every ANZ account type, across every business unit and are applicable / visible on multiple platforms.  The interdependencies for penalty fees from a technology and business process perspective are substantial as are the volume of fees affected / requiring change.

    For instance, account penalties are applied when a savings account in (sic) overdrawn, this fee will be disclosed in the customers terms and conditions …

    At this stage it does not appear that the mechanisms for applying the charges will change however as the new names and fee descriptions will need to be applied to all accounts, all penalty fee types, and all changes will need to be considerate of downstream implications including change testing / verification impact which can result in a significant program of work to be managed.”

    57.Given this, the report noted there was a current priority of fees: (1) Honour Fee, (2) Late Payment Fee, (3) Overlimit Fee and (4) Dishonour Fee.

    Report, Fee For Service Steering Committee # 3, 15 June 2009

    58.The Report gave an update on the “initiative” and the status of legal advice received.  It noted the initiative was on hold and unlikely to be reconsidered unless the Commonwealth legislation changed to the Victorian model, or the national implementation timeline increased from 1 January 2010. 

    59.It noted that Working Groups had been established whose job it was to “scenario plan for likely outcomes of penalty fee regime, to identify initiatives to respond to impacts of incoming legislation.”

    Minutes of Meeting of Fee For Service Steering Committee # 3, 15 June 2009

    60.At the meeting “Questions [were] raised if there was an opportunity to change CoU’s [Conditions of Use] and T&Cs [Terms and Conditions] for new accounts (contracts) to edit current fee wording that highlighted the breach/penalty component”.  .

    July 2009 – Internal correspondence and discussions

    61.On 29 July 2009, there was internal bank discussion about exception fees and “what drove NAB’s decision”.  A consideration was “legal view – including amount of margin on cost that can be recouped”. 

    August 2009 – Internal correspondence and discussions

    62.On 3 August 2009, there was internal bank discussion about what level of fee “the market will settle at” following the decisions of Westpac and St George to cut them across the board to $9.

    63.On 10 August 2009, Exception Fees were discussed at the Weekly Management Board meeting.

    64.One paper presented to the Board was “ANZ exception fee response – Update” dated 10 August 2009 prepared by Mr Graham Hodges (CEO, Australia Division).  The paper reviewed the market position, noted that ANZ’s price response should be driven by a number of key factors including what were “Justifiable fees & structure”.  The paper proposed an alternative structure where a daily honour fee was charged on overdrawn accounts which would “encourage rectification of account” and noted that statistically more than half of overdrawn accounts were “corrected” in 5 days or less.  The paper recorded that $436m of revenue was at risk, which represented a significant share of fee income for transaction accounts and credit cards, but not from highly-valued customers.

    Weekly Management Board meeting on 7 September 2009

    65.Exception Fees were again discussed at the Weekly Management Board meeting. The Board met to discuss the plan to overhaul the fees due to the incoming unfair contracts legislation (that is, the Australian Consumer Law to commence on 1 January 2010). The Minutes record:

    Changes will be required to fees anyway due to the changes in the regulatory environment come 1 Jan with the introduction of the Unfair contracts legislation.  We are taking into consideration what is the highest fee we can charge when these changes come into effect.

    ANZ exception fee response – Recommendation, prepared by Graham Hodges, CEO, Australia Division

    66.This paper was annexed to the Minutes of the Weekly Management Board Meeting on 7 September 2009. 

    67.An executive summary included the following aspects:

    a.exception fees have become a major focus for media, lobby groups and politicians so change for customers is now mandatory;

    b.most consumers will accept a reasonable fee, however, want clear, timely information and communication;

    c.introduce a ‘buffer’ and reduce fees for Retail; 

    d.certain fees be removed from people who receive government benefits;

    e.introduce a ‘buffer’ but predominantly maintain fees for Commercial;

    f.remove 27 fees and increase account service fees by $1 per month. 

    68.One aspect of ANZ’s response to the qualitative customer research was that “Fees need to ‘fit the fault’” if they were to be perceived as “justified and proportional.”

    CEO Interview, 2012

    69.Mr Philip Chronican, CEO of ANZ, when giving an interview in 2012, said “most of these fees relate to the early stages of people’s accounts being out of order in some way or another”.