Andrews v Australia and New Zealand Banking Group Ltd

Facts

ANZ Bank imposed various fees on customers, including honour fees, dishonour fees, and late payment fees, when customers exceeded their credit limits or failed to make timely payments. The applicants brought a representative proceeding alleging that these fees constituted unenforceable penalties. The primary question was whether the penalties doctrine could apply to stipulations in a contract that were not conditional upon a breach of contract by the party against whom the fee was imposed.

Issues

1. Whether the penalties doctrine in Australian law is confined to stipulations that are triggered by a breach of contract, or whether it extends to stipulations that impose a detriment upon the occurrence of a non-breach event. 2. Whether equity independently recognises a doctrine of penalties broader than the common law rule.

Holding

The High Court held unanimously that the penalties doctrine in Australia is not confined to contractual provisions triggered by breach of contract, and that equity's jurisdiction to relieve against penalties extends to stipulations conditioning payment or forfeiture on events other than breach.

Ratio decidendi

The penalties doctrine in Australian law, as a doctrine of equity, is not limited to provisions triggered by a breach of contract; it applies to any contractual stipulation that imposes a penalty — being a sum or forfeiture out of all proportion to the legitimate interest of the stipulating party — regardless of whether the triggering event constitutes a breach by the obligor.

Obiter dicta

The Court observed that the question of whether each specific ANZ fee actually constituted an unenforceable penalty (i.e., whether it was extravagant or unconscionable in comparison to the greatest loss that could conceivably flow from the relevant event) was a separate matter remitted for further consideration, and the Court did not finally determine the validity of the individual fees. The Court also noted the historical divergence between English and Australian equity on this point, signalling that Australian law had developed independently of the English position subsequently confirmed in Cavendish Square Holding BV v Makdessi.

Significance

Andrews confirmed that Australian equity recognises a penalties doctrine broader than the English common law rule, extending relief beyond breach-triggered clauses to any stipulation imposing a disproportionate detriment, thereby preserving a distinctive and more expansive penalties jurisdiction in Australian contract law.

Key authorities

• Dunlop Pneumatic Tyre Co v New Garage and Motor Co Ltd [1915] AC 79considered
• AMEV-UDC Finance Ltd v Austin AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170applied
• O'Dea v Allstates Leasing System (WA) Pty Ltd O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359applied
• Ringrow Pty Ltd v BP Australia Pty Ltd Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656considered
• Acron Pacific Ltd v Offshore Oil NL Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514considered
• Forestry Commission of New South Wales v Stefanetto Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507cited
• Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399distinguished