Bank exceptions fees class action, round one goes to the customers

This is the first of the interlocutory skirmishes in the much awaited class action by  customers of the ANZ bank. The customers seek repayment of a variety of fees for unauthorised overdrafts, overdrawn accounts, dishonour fees and over limit credit card accounts (“Exception Fees”). The fees are charged pursuant to contracts between the customers and the bank.

The customers claim the contracts and/or Exception Fees are void or unenforceable as a penalty on traditional grounds, namely:

  1. the fees were not a genuine pre-estimate of the damage likely to be caused by the breach;
  2. upon any comparison, substantially exceeded what would be recoverable as unliquidated damages by ANZ upon breach; and/or
  3. were extravagant and unconscionable compared to the greatest loss that could conceivably be proved by reference to publicly available information (that indicates that the cost to ANZ was substantially less that the amount of the Exception Fees throughout the period in dispute); and

They also claimed on wider and more novel grounds. The novel ground was designed to seek compensation where no breach had occurred.

In its defense ANZ argued:

  1. that the novel ground is not open as a matter of law and contended that the doctrine of penalties must be confined to a case of actual breach.
  2. that the Exception Fees were not extravagant compared to both the costs to the bank and the benefits to the customers.

ANZ proposed to adduce expert evidence as to the costs and benefits because it had not previously measured these costs. The customers sought to prevent this because:

  1. it measures a cost that was never measured before by ANZ; and
  2. the hypothetical cost is irrelevant to the penalty argument;
  3. the irrelevant exercise would be costly and time consuming.

The customers sought to strike out part of the defence pursuant to Order 11 rule 16 of the Federal Court Rules.

ANZ estimated their proposed enquiry would be a 13 month exercise by Deloittes. It is complex because banks have very high levels of central costs and it is difficult to attribute these to particular services. The exception fees cut across a significant proportion of reporting points and cost centres within those reporting points and it would be necessary to reconstruct these for previous financial years because they change each year.

Application to Strike Out

An order to strike out will only be made in an obvious case and only where the allegations (not the evidence), assuming they are true, cannot succeed as a matter of law but bearing in mind principles of case management. Order 11 rule 16 of the Federal Court Rules applies to these proceedings filed in Fast Track.

The court struck out the claim in ANZ’s defence because it was made without any factual evidence supporting it. The accounting exercise was intended to provide some opinion evidence to support the allegation, but this is not sufficient, and is an abuse of process. Furthermore, the length and cost of such a fishing expedition was regarded by the court as an even stronger reason to strike out the allegation as an abuse of process. The court declined to decide whether the cost measuring exercise was relevant to the penalty argument and found it unnecessary to decide at an interlocutory stage.

Application for separate determination of penalty argument
The customers sought a separate determination of the following questions in respect of the exception fees:

  1. are the amounts payable upon breach, so as to be capable of amounting to a penalty?
  2. are the amounts otherwise payable on the occurrence of an event within the area of obligation of the customer, such that they are capable of amounting to a penalty?

The court agreed to order a separate hearing on these questions because they are critical issues that can be determined in the next 12 months and will enable the parties to better assess their risk and contribute to a better prospect of settlement. The court did not accept that it should wait and conduct a trial in all issues in two or three years’ time, given the cost measuring exercise had never been done before and there was no certainty that it could be done


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