Andrews v ANZ Banking Group Ltd (2012) 247 CLR 205

Facts: The applicants (approximately 38,000 group members) commenced representative proceedings in FCA. They sought, amongst other remedies, declaratory relief that certain provisions between them and ANZ were void or unenforceable as penalties. On that basis, the applicants claimed repayment of fees charged to them by way of "honour fees", "dishonour fees", "late payment fees", "non-payment fees" and "over limit fees" (collectively, "exception fees"). 

The applicants asked FCA whether the exception fees were payable by the applicants upon breach of contractual obligations owed to the ANZ, and, in the alternative, 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 either question was answered in the affirmative, the applicants then asked whether such fees were capable of being characterised as penalties.

Held (FCA): Only the late payment fees were payable upon breach of contract. Following Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292, the penalty doctrine was limited to breaches of contract and thus could only be applied to the late payment fees. 

The applicants sought leave to appeal to the FCFCA. HCA, acting pursuant to s 40(2), Judiciary Act 1903 (Cth), removed the application for leave.

Issue: Whether the Interstar decision correctly stated the law with respect to penalties? Whether the modern doctrine respecting penalties had become wholly a doctrine of the CL rather than of equity?

Held (High Court): Allowed the appeal. The fact that particular fees were not charged by ANZ upon breach of contract did not render the fees incapable of being characterised as penalties. 

- Rejected that the penalty doctrine applies only where there has been a breach of contract. The question is one of substance rather than form. 

- Rejected the proposition in Interstar that the doctrine had been absorbed into the common law. The fact that the honour, dishonour, non-payment and over limit fees were not payable for breach of contract did not prevent them from being characterised as penalties. It will be for the FCA on the further hearing of the matter to decide whether these exception fees are penalties.