Paciocco v ANZ [2015] FCAFC 50

This is the decision in the big litigation-funded class action over bank late fees.

We previously reported that the litigation funder won at first instance. This report concerns the appeal (which was won by the bank). 

ANZ made an admission that it did not determine the quantum of each Exception Fee by reference to a sum that would have been recoverable as unliquidated damages.

The Full Court held that absence of that conduct does not mean that the fee in question was a penalty. It was wrong to conclude that the admission was that the late payment fee was not a genuine covenanted pre-estimate of damage. To so conclude was to conclude that it was penal in character and so necessarily exorbitant and extravagant without the need for any further analysis.

In fact the Fullcourt held the reverse is true. The late payment fees could not be characterised exorbitant and extravagant accordingly there was no need to consider whether they were a genuine pre-estimate of damages. 

In finding the fees were not exorbitant and extravagant the Full Court accepted that ANZ needed to be compensated for:

1. An increase in loss provision

2. An increase in regulatory capital

3. Collection costs

The court concluded:

The above should not be taken to be, or reflect, a mechanical approach to the construction or characterisation of a provision as penal. One must examine all the circumstances. Here, given the nature of the relationship, the legitimate interest of ANZ and the correct analytical perspective, the fees were not demonstrated to be extravagant, exorbitant or unconscionable.

What was left unsaid, but likely influenced the decision, is that charging a customer small sums of money, for example $10, as opposed to thousands or tens of thousands of dollars, can hardly have ruined anyone. As such the activity could hardly have kept the perpetrators awake at night with a bad conscience. As such, if upheld by the High Court, the decision will likely remove from contention as penalties small fees in the future (as they were before the advent of litigation funded class actions).  

Click here to read the full judgement.

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