FEDERAL COURT OF AUSTRALIA Andrews v Australian and New Zealand Banking Group Limited [2011] FCA 1376 Citation: Andrews v Australian and New Zealand Banking Group Limited [2011] FCA 1376 Parties: JOHN ANDREWS, ANGELO JULIAN SALIBA and GEOFFREY ALLAN FIELD v AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) File number: VID 811 of 2010 Judge: GORDON J Date of judgment: 5 December 2011 Catchwords: BANKING AND FINANCIAL INSTITUTIONS – history of the law of penalties – penal bonds – rule of law and equity – Statute of William III – Statute of Anne – law of penalties in Australia and United Kingdom – liquidated damages – agreed damages – genuine pre-estimate of damage – requirement of breach – relationship between banker and customer – construction of contract between banker and customer – regulatory framework – product disclosure statements – retail deposit accounts – consumer credit card accounts – commercial credit card accounts – business classic accounts – honour fee – dishonour fee – late payment fee – late payment fee – non-payment fee – overlimit fee Legislation: Administration of Justice Act 1925 (Imp) Administration of Justice Act 1965 (Imp) Australian Courts Act, 9 Geo IV, c 83 (Imp, 1828) Australian Securities and Investments Commission Act 2001 (Cth) Banking Act 1959 (Cth) Consumer Credit Regulations 1995 Corporations Act 2001 (Cth) Corporations Amendment Regulations 2005 (No 5) Corporations Regulations 2001 (Cth) Instruments Act 1958 (Vic) National Consumer Credit Protection Act 2009 (Cth) Supreme Court of Judicature Act 1873 (Imp) 36 & 37 Vict, c 66 Supreme Court of Judicature Act 1875 (Imp) 38 & 39 Vict, c 77 Trade Practices Act 1974 (Cth) Statute of Anne (1705) 4 & 5 Anne c16 (The Administration of Justice Act 1705) Statute of William III (1696) 8 & 9 Will 3 c11 (The Administration of Justice Act 1696 entitled "An Act for the Better Preventing of Frivolous and Vexatious Suits") Cases cited: Akbar Khan v Attar Singh [1936] 2 All ER 545 American Express International Inc v Commissioner of Taxation (2009) 73 ATR 173 AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170 Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 388 Ange v First East Auction Holdings Pty Ltd [2011] VSCA 335 Apex Supply Co Ltd; In re [1942] Ch 108 Associated Distributors v Hall [1938] 2 KB 83 Bank of New South Wales v Laing [1954] AC 135 Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] 1 QB 677 Bartercard Ltd v Myallhurst Pty Ltd [2000] QCA 445 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Camatos Holdings Ltd v Neil Civil Engineering (1992) Ltd [1998] 3 NZLR 596 Campbell Discount Co Ltd v Bridge [1962] AC 600 Clydebank Engineering and Shipbuilding Company v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6 Castles v Goodrick and Anor as Executors of the Estate of the late Castles (Unreported, Simos J, 21 August 1998 Charrington & Co v Wooder [1914] AC 71 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Collins v Collins (1759) 2 Burr 820 Commissioner of Taxation v American Express Wholesale Currency Services Pty Ltd (2010) 273 ALR 501 Commonwealth v Amann Aviation (1991) 174 CLR 64 Cooden Engineering Co v Stanford [1953] 1 QB 86 Cuthbert v Robarts, Lubbock & Co [1909] 2 Ch 226 Diakos v Mason [2010] SASCFC 37 Dixon v Bank of New South Wales (1896) 12 WN (NSW) 101 Doman Forest Products Ltd v GMAC Commercial Credit Corp [2007] 29 BLR (4th) 1 Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 Esanda Finance Corporation v Plessnig (1989) 166 CLR 131 Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER 205 Fermiscan Pty Ltd v James [2009] NSWCA 355 Financings Ltd v Baldock [1963] 2 QB 104 First East Auction Holdings Pty Ltd v Mimi Ange [2010] VSC 72 Foley v Hill (1848) 2 HL Cas 28 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 Friend v Burgh (1679) Rep TF 437 Gunning v Thorne Riddell [1990] B.C.J. No.36 Hardy v Martin (1783) 1 Cox 26 IAC (Leasing) Ltd v Humphrey (1972) 126 CLR 131 Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2007] NSWSC 406 Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292 Jervis v Harris [1996] Ch 195 Joachimson v Swiss Bank Corp [1921] 3 KB 110 Jobson v Johnson [1989] 1 WLR 1026 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 Kemble v Farren (1829) 6 Bing 141 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 Legione v Hateley (1983) 152 CLR 406 Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1 Lipohar v The Queen (1999) 200 CLR 485 Lloyds Bank plc v Voller [2000] 2 All ER (Comm) 978 Mandarin Container; Re [2004] 3 HKLRD 554 Maritime Union of Australia v Patrick Stevedores No 1 Pty Ltd (1998) 77 FCR 456 MBF Investments Pty Ltd v Nolan [2011] VSCA 114 Murray v Earl of Stair (1823) 2 B & C 82 Narni Pty Ltd v National Australia Bank [2001] VSCA 31 Narni Pty Ltd v National Australia Bank Ltd [1998] VSC 146 News Limited v Australian Rugby League (1996) 64 FCR 410 O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) Office of Fair Trading v Abbey National plc [2008] EWHC 2325 (Comm) Office of Fair Trading v Abbey National plc [2009] EWHC 36 (Comm) Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Pattison v Mudry [1999] OJ No 65 Peachy v The Duke of Somerset (1720) 1 Strange 447 Pearce v Creswick (1843) 2 Hare 286 Philip Bernstein (Successors) Ltd v Lydiate Textiles (Unreported, Court of Appeal UK, Diplock LJ, 26 June 1962) Philips Hong Kong Limited v The Attorney General of Hong Kong [1993] 1 HKLR 269 Preston v Dania (1872-73) LR 8 Ex 19 Protector Endowment Loan and Annuity Co v Grice (1880) LR 5 QBD 592 Puleston v Puleston (1677) Case 428 Reardon Smith Line Limited v Hansen-Tangen [1976] 3 All ER 570 Reynolds v Bridge (1856) 6 EL &BL 528 Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 Rolfe v Peterson (1772) 6 Bro PC 470 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 Ruxley Electronics Ltd v Forsyth [1966] AC 344 Ryan v Bank of NSW [1978] VR 555 Sloman v Walter (1783) 1 Bro CC 418 Smith v Bond (1833) 10 Bing 125 Tall v Ryland (1670) 22 ER 753 The City of Sydney v Streetscape Projects (Aust) Pty Ltd [2011] NSWSC 1214 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 United Dominions Trust (Commercial) Ltd v Ennis [1968] 1 QB 54 Wall v Rederiaktiebolaget Luggude [1915] 3 KB 66 Wallis v Smith (1882) LR 21 Ch D 243 Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 Williams and Glyn's Bank v Barnes [1981] Com LR 205 Blackshield & Williams, Australian Constitutional Law and Theory: Commentary & Materials (4th ed, The Federation Press, 2006) Browne, Ashburner's Principles of Equity (2nd ed, Legal Books, 1983) Bullen E and Leake SM, Precedents of Pleadings in personal actions in the superior courts of common law, (3rd ed, Steven and Sons, 1868) Ibbetson DJ, A Historical Introduction to the Law of Obligations, (Oxford University Press, 1999) Carter JW and Harland DJ, Contract Law in Australia (4th ed, Butterworths, 2002) Carter JW and Peden E, "A Good Faith Perspective on Liquidated Damages" (2007) 23 JCL 157 Carter JW and Peden E, "Agreed Damages Clauses – Back to the Future?" (2006) 22 JCL 189 Carter, JW, Carter on Contract, (LexisNexis Australia, Subscription Service) Loyd WH, "Penalties and Forfeitures" (1915) 29 Harv L Rev 117 at 119 Lewison K, The Interpretation of Contracts (4th ed, Sweet & Maxwell, 2007) Meagher R, Heydon D and Leeming M, Equity Doctrines and Remedies, (4th ed LexisNexis Butterworths, 2002) Meagher RP, Penalties in Chattel Leases in Finn PD (ed), Essays in Equity, (The Law Book Company Limited, 1985) McGee J, Snell's Equity (31st ed, Sweet & Maxwell, 2005) Newland W, "Equitable relief against penalties" (2011) 85 ALJ 434 Parkinson P, The Principles of Equity (2nd ed, Lawbook Co, 2003) Rossiter CJ, Penalties and Forfeiture: Judicial Review of Contractual Penalties and Relief Against Forfeiture of Proprietary Interests (The Law Book Company Limited, 1992) Simpson, AWB, "The Penal Bond with Conditional Defeasance" (1966) 82 LQR 392 Story J, Commentaries on Equity Jurisprudence as Administered in England and America (13th ed, Little, Brain and Company, 1886) Yale, DEC (ed), Lord Nottingham's "Manual of Chancery Practice" and "Prolegomena of Chancery and Equity" (1965, Cambridge University Press) Yale, DEC (ed), Lord Nottingham's Chancery Cases (Vol 73, Selden Society, 1954) Yale, DEC (ed), Lord Nottingham's Chancery Cases (Vol 79, Selden Society, 1961-62) Date of hearing: 3-6 October 2011 Date of last submissions: 10 October 2011 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 354 Counsel for the Applicants: Mr J Gleeson QC with Mr MBJ Lee Solicitor for the Applicants: Maurice Blackburn Counsel for the Respondent: Mr A Archibald QC with Mr M O'Bryan and Mr R Craig Solicitor for the Respondent: Blake Dawson IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 811 of 2010 BETWEEN: JOHN ANDREWS First Applicant ANGELO JULIAN SALIBA Second Applicant GEOFFREY ALLAN FIELD Third Applicant AND: AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Respondent JUDGE: GORDON J DATE OF ORDER: 5 DECEMBER 2011 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. By 4:00pm on 12 December 2011, the parties bring in orders to give effect to these reasons for decision and for the future conduct of the litigation. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 811 of 2010 BETWEEN: JOHN ANDREWS First Applicant ANGELO JULIAN SALIBA Second Applicant GEOFFREY ALLAN FIELD Third Applicant AND: AUSTRALIAN AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) Respondent JUDGE: GORDON J DATE: 5 DECEMBER 2011 PLACE: MELBOURNE Table of Contents A INTRODUCTION [1] B LAW OF PENALTIES [7] (1) History – Rule of Law and / or Equity? [7] (a) Stage One – From the beginning of the 14th century [8] (b) Stage Two – Late 16th and early 17th centuries [11] (c) Stage Three – From the end of 17th century to the 18th century [18] (d) Stage Four – 19th century in England and then Australia [35] (e) The law in the United Kingdom immediately before Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 [41] (f) Dunlop [42] (2) The Australian Cases [45] (a) Introduction [45] (b) Breach and the role of damages? [47] (c) When are Liquidated or Agreed Damages clauses not enforceable? [49] (d) After Ringrow? [61] (i) Payments upon termination of an agreement [62] (ii) Interstar [68] (3) Conclusion [77] C LEGAL FRAMEWORK FOR BANKER – CUSTOMER RELATIONSHIPS [81] (1) Relationship between Banker and Customer in Contract [81] (2) Approach to Construction? [83] (3) Regulatory Framework [87] (a) Period prior to 20 December 2005 [89] (b) After 20 December 2005 [99] (c) Uniform Consumer Credit Code [112] (d) Codes of Conduct / Banking Practice [121] (i) Code of Banking Practice [121] (ii) ASIC Electronic Funds Transfer Code of Conduct [127] (e) The Instruments Act [135] (4) Other Facts Sought to be relied upon by ANZ [141] D EXCEPTION FEES [143] (1) Retail Deposit Accounts [144] (a) Exception Fee No 3 – Saving Honour Fee – 14 February 2006 – Saliba [147] (i) Introduction [147] (ii) The relevant documents and the relevance of the regulatory framework and other documents [150] 1 PDS March 2005 [150] 2 Saliba Letter of Offer [159] 3 Overdraft Terms & Conditions Dec 2004 [160] 4 Account Fees and Charges Jan 2006 [165] 5 The relevance of the regulatory framework and other documents [167] (iii) Proper Construction – Saving Honour Fee? [169] (iv) Other submissions [190] (v) Conclusion [193] (b) Exception Fees No 1, 2 and 4 [194] (i) Exception Fee No 1 – Saving Dishonour Fee – 13 October 2006 - Saliba [195] (ii) Exception Fee No 4 – Saving Non-Payment Fee – 15 November 2006 – Field [210] (iii) Exception Fee No 2 – Saving Dishonour Fee – 26 February 2007 – Andrews [216] (2) Consumer Credit Card Accounts [223] (a) Exception Fee No 7 – Late Payment Fee – 28 March 2004 – Andrews [224] (b) Exception Fee No 8 – Late Payment Fee – 29 June 2005 – Andrews [253] (c) Exception Fee No 9 – Late Payment Fee – 28 November 2006 – Andrews [260] (d) Exception Fee No 5 – Overlimit Fee – 29 November 2006 – Andrews [269] (e) Exception Fee No 6 – Overlimit Fee – 28 February 2010 – Andrews [282] (3) Commercial Credit Card Accounts [294] (a) Exception Fee No 10 – Commercial Card Overlimit Fee – 16 July 2008 – Fields [296] (b) Exception Fee No 11 – Commercial Card Late Payment Fee – 16 July 2008 – Field [309] (4) Business Classic Account [313] (a) Exception Fee No 12 – Business Honour Fee – 13 October 2005 – Saliba [314] (b) Exception Fee No 14 – Business Dishonour Fee – 27 October 2005 – Saliba [325] (c) Exception Fee No 17 – Business Non-Payment Fee – 27 October 2006 – Andrews [329] (d) Exception Fee No 13 – Business Honour Fee – 9 July 2007 – Andrews [332] (e) Exception Fee No 15 – Business Honour Fee – 3 May 2010 – Saliba [337] (f) Exception Fee No 16 – Business Dishonour Fee – 4 May 2010 – Saliba [349] E ORDERS [354] REASONS FOR JUDGMENT A INTRODUCTION 1 The applicants were customers of Australia and New Zealand Banking Group Limited (ANZ). ANZ charged the applicants a variety of fees for overdrafts, overdrawn accounts, dishonour fees and overlimit credit card accounts (the Exception Fees). The "arrangements" between the applicants and ANZ entitled ANZ to charge the Exception Fees (the Disputed Provisions). The applicants seek declarations that the Disputed Provisions and / or the Exception Fees are void or unenforceable as a penalty. The applicants also seek repayment of all or part of the Exception Fees or damages. 2 This is a representative action. Separate Questions were identified for resolution: see Sch A to these reasons for judgment. The Separate Questions consider specific Exception Fees charged to one of three applicants referred to, respectively, as Andrews, Saliba and Field in relation to an identified ANZ account. Contrary to the position adopted by the parties during the course of the hearing, the Separate Questions cannot be answered divorced from the regulatory framework in which ANZ conducts its business. The regulatory framework is relevant because ANZ is a trading corporation. The relevant statutory framework is imposed federally and, in the context of the Separate Questions, also by the State of Victoria. 3 It is also important to identify what is not in issue. ANZ accepted that in considering the law of penalties, the Exception Fees did not constitute a genuine pre-estimate of damage. However, consideration of the quantum of the Exception Fees and, in particular, whether that Exception Fee was out of all proportion to the likely damage suffered by ANZ was deferred to a later hearing. Next, these reasons for decision do not consider other accounts offered by ANZ or undertake some general enquiry into the practices of ANZ or any other bank. They consider only the Separate Questions. 4 A number of general observations should be noted at the outset. As will become evident, the Court's modern jurisdiction in relation to the law of penalties cannot be divorced from its origins in the wide dispensing power of the Court of Chancery in respect of oppressive bargains. The law of penalties is a narrow exception to the general rule that the law seeks to preserve freedom of contract, allowing parties the widest freedom, consistent with other policy considerations, to agree upon the terms of their contract. Equity, however, continues to play a role in the law of penalties, a law which is confined to payments for breach of contract. 5 The Court's task in answering the Separate Questions is to construe the words of the Disputed Provisions in the context of the regulatory framework in which they are intended to, and do, operate and having regard to the law of penalties. For the reasons that follow, I consider that the Late Payment Fees (Exception Fee Nos 7-9 and 11) are capable of being characterised as a penalty. On the other hand: 1. the Honour Fees (Exception Fee Nos 3, 12, 13 and 15); 2. the Dishonour Fees (Exception Fee Nos 1, 2, 14 and 16); 3. the Overlimit Fees (Exception Fee Nos 5, 6 and 10); and 4. the Non-payment Fees (Exception Fee Nos 4 and 17), are not capable of being characterised as a penalty. 6 These reasons for decision will consider: 1. the history of the law of penalties; 2. the current state of the law of penalties in Australia including the continuing requirement for breach and the continuing role of equity; 3. the regulatory framework relevant to the Exception Fees; and 4. each of the Exception Fees and the necessary distinctions to be drawn between them. B LAW OF PENALTIES (1) History – Rule of Law and / or Equity? 7 There was little dispute about the historical development. However, the conclusions the applicants submitted should be drawn from the historical analysis were diametrically opposed to those of ANZ. The applicants divided the legal history into four stages. It is convenient to adopt those divisions not because they reflect the only way in which the relevant history may be considered but because the applicants placed considerable reliance upon this historical analysis to support its contention that breach was not a necessary element of the modern law of penalties and that the equitable jurisdiction of the rule against penalties has a continuing role. (a) Stage One – From the beginning of the 14th century 8 The bond, not the modern law of contract, was the context in which the rule against penalties first developed: Newland W, "Equitable relief against penalties" (2011) 85 ALJ 434 at 439 and Simpson, AWB "The Penal Bond with Conditional Defeasance" (1966) 82 LQR 392 at 392-393. Indeed, one historian has suggested that conditional bonds were "the principal device for the framing of substantial contracts" from the 1350s until the 18th century: Ibbetson DJ, A Historical Introduction to the Law of Obligations, (Oxford University Press, 1999) p 30 cited in Newland at 439. One reason why bonds had become common was that they facilitated the lending of money without contravening the then existing canonical prohibition against usuary: Loyd WH, "Penalties and Forfeitures" (1915) 29 Harv L Rev 117 at 119, Simpson at 414 and Newland at 439. 9 There were, however, different types of bonds. A simple bond was a unilateral promise by the obligor to pay a certain sum, or do a certain thing, by a particular date. A conditional bond, on the other hand, contained a condition of defeasance which, when satisfied, extinguished the primary debt or obligation of the bond: Newland at 439. In substance, the bond was a security device: a mechanism by which parties secured payment of a sum or an act to be done by a certain date and if not, the payment of a larger sum. 10 The early common law governing bonds was rigid. It took a strict view of the observance of the underlying condition; if the defendant had met the condition, but after the due date, that would not provide a good defence to the plaintiff's action upon the bond. The plaintiff would succeed in recovering the greater amount. Outcomes were necessarily harsh. Courts would not rewrite private contracts: Newland at 440 and Simpson at 411. As a result, the remedy provided by the early common law went beyond proper and necessary compensation: see Loyd at 119-122 and Simpson at 395-415 and the authorities cited. (b) Stage Two – Late 16th and early 17th centuries 11 Unsurprisingly, there was a place for the intervention of equity. By the late 16th and early 17th centuries, equity would provide relief where there were specific circumstances rendering it unjust that the bond be sued upon in full. For example, where the obligor had failed to meet the underlying obligation on time due to accident, mistake or extremity; where the default was trifling; or where the payment had in fact been made without the obligor obtaining a cancellation of the bond: see Loyd at 124-125, Simpson at 416-417 and the authorities cited. 12 During the latter 17th century, the scope of equitable intervention further extended. First, where the bond secured an underlying obligation to pay money, equity would grant relief against performance of the bond on condition that the debtor pay principal, interest and costs. The relief could be by way of injunction restraining the action at law or execution of a judgment obtained at law. Indeed, equity would grant a refund of a penalty actually paid; that is, require the obligee to repay the excess over the true principal sum, interest and costs: Friend v Burgh (1679) Rep TF 437, quoted in Simpson at 417-418. 13 Where the penalty was due for the failure to perform a covenant, equity would grant an injunction restraining the action at law, or restraining execution upon a verdict, on condition that the defaulting party paid damages. Equity would then direct an issue for the assessment of damages on a quantum damnificatus which could be joined in an action on the case; alternatively a writ of covenant for damages could be used: see Loyd at 125, Simpson at 417-418 and the authorities cited. (These two situations later became the subject of, respectively, the Statute of William III and the Statute of Anne: see [18]-[25] below.) 14 The applicants submitted that two aspects of general application emerged from these developments. First, where the penalty consisted of a bond to secure a money obligation, any disproportion between the amount of the bond and the underlying amount of principal, including interest and costs, attracted the jurisdiction and, secondly, the equitable jurisdiction applied to the full range of conditioned bonds. I will deal with each in turn. 15 In relation to the first aspect, the applicants submitted that the proper compensation which equity (as distinct from the law) recognised for failure to meet a money obligation extended as far as, but no further than, the principal sum plus interest and costs. On the other hand, where the underlying condition or obligation involved some activity which was or was not to be performed, there was greater latitude than with ordinary compensatory damages on a default. Equity would look to some clear disproportion between the amount of the bond and damages which would be likely to be assessed were the matter remitted to law, before granting relief. The applicants placed considerable reliance on Tall v Ryland (1670) 22 ER 753 where the bond was conditioned upon the obligor not disparaging the business or goods of the obligee. When the obligor did disparage the goods of the obligee, the Court refused to grant an injunction and remit the matter to a suit for damages at law because the amount of the penalty (some £20) would probably be exceeded by the costs of the suit in equity and at law. However, the Court noted this was not to be a precedent in the case of a bond of £100 or the like. If the bond had stipulated a sum of £100 (being a sum greater than the damages necessary to compensate the obligee), the Court may have moulded the relief to ensure that the amount awarded was in fact limited to compensation. In the reasons in Tall v Ryland, the Chancery Court acknowledged the latitude of equity. 16 Now the second aspect contended for by the applicants – that the equitable jurisdiction applied to the full range of conditioned bonds. The traditional wording of a bond required a fixed sum to be paid under the bond, there being a condition that if a smaller sum was paid on a given date or if certain behaviour occurred or did not occur, the bond would be declared void: see [9] above. Equity granted relief in respect of such typical bonds even though the underlying matter was expressed in the language of condition and defeasance, rather than in the language of an obligation capable of breach. The applicants described this change as equity adopting a view of substance over form and not restricting its jurisdiction to breach, or what would later be considered to be a contractual obligation. That statement is correct, to a point. Equity did adopt a view of substance over form. As a result, although the equitable jurisdiction was restricted to breach it extended to include matters expressed in the language of condition and defeasance, rather than in the language of an obligation capable of breach. What the equitable jurisdiction did not do was extend "to the full range of conditioned bonds", whatever that phrase means. 17 So, for example, equity granted relief against the performance of a penal bond but in relation to the different bonds – a bond securing performance of a covenant or a bond securing an underlying obligation to pay money (see [9] above) – the relief granted was different. The former was addressed in Prolegomena of Chancery and Equity (Yale, DEC (ed), Lord Nottingham's "Manual of Chancery Practice" and "Prolegomena of Chancery and Equity" (1965, Cambridge University Press) p 275) when Lord Nottingham (the Lord Chancellor from 1673 to 1682) described the equitable jurisdiction to grant relief against performance of such a bond as follows: Bond for £1000 for performance of covenants is forfeitable at law by any breach, though the damages of that breach be not £10. Yet equity will not suffer any advantage to be taken of this bond beyond the true damnification ... So that a penal bond to secure the performance of covenants is not much better security than a mere covenant, as equity now orders. See also Puleston v Puleston (1677) Case 428 in Yale, DEC (ed), Lord Nottingham's Chancery Cases (Vol 73, Selden Society, 1954) p 295, cited in Meagher R, Heydon D and Leeming M, Equity Doctrines and Remedies, (4th ed LexisNexis Butterworths, 2002) at [18-010]. (c) Stage Three – From the end of 17th century to the 18th century 18 The significant change to the common law jurisdiction at the end of the 17th century and the beginning of the 18th century was the enactment of the two penalty statutes; the Statute of William III (1696) 8 & 9 Will 3 c 11 (The Administration of Justice Act 1696 entitled "An Act for the Better Preventing of Frivolous and Vexatious Suits") and the Statute of Anne (1705) 4 & 5 Anne c 16 (The Administration of Justice Act 1705): see also Collins v Collins (1759) 2 Burr 820. Indeed, the equitable jurisdiction to grant relief against performance of a bond was to a great extent superseded by these statutes: see Browne, Ashburner's Principles of Equity (2nd ed, Legal Books Pty Ltd, 1983) at 264. 19 The effect of the Statute of William III was summarised in Wall v Rederiaktiebolaget Luggude [1915] 3 KB 66 at 72: … in an action upon a bond (and this includes a penalty clause in a contract) conditioned for the performance of a contract the plaintiff must assign a breach, or as many breaches as he thinks fit, of the condition, and though he is entitled on proving a breach to judgment for the full amount of the penalty he can only recover by execution the amount of the damages proved to have been sustained by the breach or breaches assigned. The result of suing for the penalty is therefore that the plaintiff recovers proved damages, but never more than the penal sum fixed. 20 As the passage makes clear, the statute was (and remains) concerned with actions upon bonds with special conditions. These provisions apply to covenants and agreements in writing containing a penal sum for non-performance. In those circumstances, a plaintiff must assign or suggest breaches and can only recover damages for the breaches so assigned or suggested: Bullen E and Leake SM, Precedents of Pleadings in personal actions in the superior courts of common law, (3rd ed, Steven and Sons, 1868), at 116. 21 The Statute of Anne was quite different. The difference between the statutes of William III and Anne were described in Yale DEC (ed), Lord Nottingham's Chancery Cases, (Vol 79, Selden Society, 1961-62) p 29 as follows: These Acts of 1697 and 1705 allowed the plaintiff suing successfully on a penal bond to enter judgment for the whole sum, but provided that he should state the breaches, and restricted him from recovering more than he proved as damages. The judgment as to the balance secured him against further possible breaches. [The Statute of William] The defendant was, on his side, entitled to plead a payment of principal and interest against the form of the obligation. [The Statute of Anne]. (Emphasis added.) 22 Where a bond falls within the Statute of Anne, it does not fall within the Statute of William III: Smith v Bond (1833) 10 Bing 125 at 132 citing Holroyd J in Murray v Earl of Stair (1823) 2 B & C 82 at 317-318. So, for example, annuity bonds, and bonds for money payable by instalments, are within the Statute of William III. Why? Because they depend on the provision in the Statute of William III that judgment should stand as a security for future payments of the annuity, or the further instalments which might become due, as the case may be: Smith v Bond at 131. Such bonds are to be contrasted with a bond for the payment of a principal sum and interest on a fixed date. Once principal and interest are due, the Court may stay the proceedings and relieve the defendant and there is no need for the judgment to stand as a security for the future. As Bramwell B said in Preston v Dania (1872-73) LR 8 Ex 19, a common money bond is within the Statute of Anne, and not within the Statute of William III, "because only one breach can be assigned, and the penal sum is not for the non-performance of several covenants". 23 On whether a bond falls within the Statute of William III or the Statute of Anne, Murray v Earl of Stair (1823) 2 B & C 82 at 317-318 is instructive. In that case, their Honours stated that: It is now, however, fully established by decided cases, that bonds for the payment of annuities, or of money by instalments, are within the [Statute of William III]; but that bonds for the payment of a sum certain, at a day certain, are not within it. Bonds for the payment of annuities are clearly within the provision, that the judgment shall stand as a security for future payments. Before the statute a Court of Equity could only put a value upon the annuity, but could not effect that which is now done by the statute. A bond for the payment of a sum certain, at a day certain, is not within the Statute of William, for in order to ascertain the precise sum due in such a case, computation only is necessary, and intervention either of a jury, or a Court of Equity is unnecessary. … The [Statute of William] seems to have contemplated bonds by the condition of which more than one act was required to be done; for it directs that the judgment shall be for the penalty, but that execution shall be for the damages assessed only, and that the judgment shall remain as security for further damages that might occur. The main object of the Legislature was to make it unnecessary for parties to go into a Court of Equity to obtain relief. Now, where the penalty was a security for the doing of several acts, it became the debt at law by the non-performance of any one. And it was necessary therefore for a party to apply to a Court of Equity for relief, which was granted upon the terms of paying what was due in conscience … it is perfectly clear that if this bond be within the [Statute of Anne] it is not within the [Statute of William]. … The mischief contemplated by the [Statute of Anne] was that where a bond was conditioned for the payment of a lesser sum at a day certain, and payment was not made at the day, the penalty became the debt at law; and payment after the day could not be pleaded in a Court of Law in bar of the action; and even pending the action, the payment of the principal, and interest, and costs, would not be a ground for discontinuing it, but the obligor of the bond was driven to a Court of Equity. Here, before the [Statute of Anne], the obligor would have been obliged to apply to a Court of Equity for relief if he had not paid the money at the day. This is therefore clearly a bond within the mischief contemplated by the [Statute of Anne]. … [The Statute of William] is highly remedial, and calculated to advance justice and to give relief to plaintiffs up to the extent of the damage sustained, and to protect defendants from the payment of more than what is justly due, and ought not to be so construed, as to compel plaintiffs to put unnecessary matter on the record. It appears to me that a suggestion is required in two cases; first, where upon the first breach, all that may become due is not payable, as in the case of an annuity or money payable by instalments, and then justice requires that the party should recover only what is due, which cannot be ascertained without a suggestion. The second case is where the damages are unliquidated, and must be ascertained by the verdict of a jury, as in cases of breaches of covenant. 24 Under the Statute of William III, where an action was commenced at law upon a bond or any penal sum for the non-performance of a covenant or agreement in any indenture, deed or writing, and judgment was given for the plaintiff, then if the defendant paid into court damages to be assessed by reason of the breaches, together with costs and expenses, the defendant would be discharged from further execution on the bond. The concept of breach was central. Rossiter CJ in Penalties and Forfeiture: Judicial Review of Contractual Penalties and Relief Against Forfeiture of Proprietary Interests (The Law Book Company Limited, 1992) at p 11 explained it in the following terms: The plaintiff suing on a bond or on any penal sum for breach of covenant in any indenture, deed or writing, could recover judgment in the usual way. However, upon the plaintiff assigning or alleging specific breaches, the jury was to assess the damage suffered. If the defendant paid into court, at any time before execution, the amount of the damages plus costs, stay of judgment was entered in the court record. The judgment acted as security for the damages thus suffered. 25 Under the Statute of Anne, however, where an action for debt was brought under a bond which had a condition or defeasance whereby the bond would become void upon payment of a lesser sum at a particular time, then payment by the obligor of the principal plus interest could be pleaded in bar of the action as if the condition or defeasance had been strictly met; and if the payment was made in court during the action together with costs it would constitute full satisfaction and discharge of the bond: Rossiter at 12. 26 The applicants submitted that the Statute of William III reflected that limb of equity's jurisdiction which focused on bonds or penalties referable to the non-performance of a covenant or agreement to do or refrain from any activity and that the Statute of Anne reflected equity's jurisdiction which focused on money bonds where the amount payable under the bond exceeded the underlying amount. The statutes were dealing with different types of bonds. Moreover, the applicants' submission ignores the object of the statutes. The statutes were practical and procedural. They streamlined relief against penalties. Where proceedings were brought at law by the obligee, the obligor would obtain from the court of law the relief for which otherwise it would have needed to institute a separate suit in equity to obtain. It is necessary to keep these distinctions at the forefront of any consideration of the Australian law of penalties because the provisions still form part of the law of Victoria under the Instruments Act 1958 (Vic) (the Instruments Act). The content of those provisions and their relevance are considered later in these reasons under the heading Regulatory Framework at [(C)(3)] below. 27 The applicants then submitted that three further matters should be noted about this stage in the administration of the common law as affected by the statutes: 1. the circumstances grounding relief at common law were essentially those previously recognised in equity; 2. the approach of substance over form was carried over from equity into the common law as demonstrated by the Statute of Anne. In money bonds where the stipulation was expressed in the traditional language of a conditional bond, whereby the bond would become void upon payment of the lesser sum at a certain time, relief was available whenever the bond required payment of a larger sum than the underlying amount stipulated. Thus, common law relief against money bonds was available in respect of instruments which did not in terms impose an obligation to pay the lesser sum; terms which did not reflect a promise or what would later become a term of a contract; and 3. thirdly, the procedural reforms, and expansion of the common law, did not abolish the jurisdiction in equity. 28 At one level, these propositions are unexceptional. It is true that the circumstances grounding relief at common law were essentially those previously recognised in equity, that the Statute of Anne adopted the approach of substance over form and that the procedural reforms and expansion of the common law did not abolish the jurisdiction in equity. But what follows from acceptance of those propositions was not made clear by the applicants. What, in my view, does not follow is some general proposition that common law relief against money bonds was available in respect of instruments which did not in terms impose an obligation to pay the lesser sum; terms which did not reflect a promise or what would later be construed as a term or condition of a contract. 29 The applicants referred to four cases from the 18th century as some support for the propositions they identified. The first was Peachy v The Duke of Somerset (1720) 1 Strange 447 where relief against forfeiture of a copyhold estate was granted upon the making of due recompense. One ground for seeking relief was in respect of the non-payment of rent or fines. Relief was granted because the forfeiture was by way of security. The Lord Chancellor said at 453: The true ground of relief against penalties is from the original intent of the case, where the penalty is designed only to secure money, and the Court gives him all that he expected or desired. This case does not advance the understanding of the historical development of the law of penalties or provide support for the applicants' second proposition. The questions posed by the court were orthodox – whether any of several acts were forfeitures at law and, if so, whether any of them were relievable in equity: Peachy at 448. It was an orthodox application of principle and the usual grant of relief. 30 Next, the applicants cited Collins v Collins (1759) 2 Burr 820. In that case, Lord Mansfield discussed the two penalty statutes. The claim was an action of debt upon a bond where the condition involved the payment to the plaintiff of an annuity for life plus an obligation of maintenance. Lord Mansfield held this satisfied the language of the Statute of William III and, under that statute, allowed judgment to be obtained for the whole penalty. However, execution was stayed so that the plaintiff could not recover more than the debt, interest and costs or any other amounts ascertained as the true damage. Consistent with the title and object of the Statute of William III (see [18] above), the obligor was relieved from the need for an expensive suit in equity. 31 The applicants submitted that this case was further evidence that people had frequently gone to equity upon conditions in bonds under the Statute of William III and that under the Statute of William III, as well as the Statute of Anne, a broad view of substance over form was taken in bringing conditional bonds within the language of the available relief. Moreover, the applicants submitted that no point had been taken that the condition needed to be expressed as a promise or as a contractual obligation before the relief was available. Those submissions require close analysis. First, as demonstrated earlier, the two penalty statutes were different in substance and effect. The statutes were mutually exclusive: see [22]-[26] above. So, for example, if a bond fell within one statute, it could not fall within the other. Secondly, Lord Mansfield applied the Statute of William III, not the Statute of Anne, and described the operation of that statute as follows (Collins at 825): A very beneficial remedy, and a very just one to the subject, this is. The judgment is to be for the whole penalty, and it is to remain as a further security; though, execution is to be stayed on payment of the sum due, &c. So that the penalty is a security for the debt, interest and costs, upon any future breach. (Emphasis added.) As is apparent, there was an agreement in writing between the parties, the penalty was payable upon breach (for non-payment to the plaintiff of an annuity for life or maintenance) and judgment for the whole penalty was retained as security for any future breach. The substance of the bond, not its form, was critical: see Collins at 826. That it was described as a "condition" was not determinative. It was a penalty for "breach". 32 The third case was Sloman v Walter (1783) 1 Bro CC 418. It was cited as an example of equity granting an injunction to restrain execution upon a verdict at law and requiring a quantum damnificatus to try the real damage. The plaintiff and defendant were partners in a coffee house. It was agreed that the business would be conducted entirely by the plaintiff but the defendant would have the use of a room in the house whenever he thought proper. In order to enforce the agreement, a bond was entered into by the plaintiff to the defendant to pay a penalty of £500. The plaintiff refused the defendant use of the room and the action was brought for the penalty of the bond. The Lord Chancellor in Sloman at 419 said the bond was to be considered as a penalty rather than as assessed damages and stated the rule as follows: The rule, that where a penalty is inserted merely to secure the enjoyment of a collateral object, the enjoyment of the object is considered as the principal intent of the deed, and the penalty only as accessional, and, therefore, only to secure the damage really incurred, is too strongly established in equity to be shaken. An injunction against a suit for recovery of the bond was continued. Sloman is an example of the continuing existence of the equitable jurisdiction where the common law would not assist. In that case, the "condition" was held to be the principal object or real bargain and the penalty intended only to secure the due performance of the principal object. Again, it was an orthodox application of principle and the usual grant of relief. 33 The final case cited by the applicants was Hardy v Martin (1783) 1 Cox 26. The plaintiff and the defendant had been partners in a business of brandy merchants. The plaintiff quit the business and sold the lease and goodwill to the defendant and entered into a bond to the defendant to pay a penalty of £600. The condition stated on the bond was that, if the plaintiff did not engage in certain competitive activity for an identified period, the bond would be void. The defendant obtained a verdict for the penalty at law. Lord Loughborough said equity would not regard the penalty as the price for doing what he had expressly agreed not to do: Hardy at 26-27. The Court restrained the plaintiff from competing even if he had paid the penalty and moderated the damages to the real injury. The conditional bond did not contain any promise. However, properly construed, the Court concluded this was "an agreement not to sell brandy, with a penalty for selling it": at Hardy at 27. The penalty was treated as security for the performance of the real object of the bargain – for the plaintiff not to sell brandy. The injunction was granted and the Court directed an issue to be tried quantum damnificatus. Significantly, the Court distinguished an earlier decision in Rolfe v Peterson (1772) 6 Bro PC 470 where land had been demised to a lessee to do with the land as he thought proper; if he used it one way, to pay one rent and if another way, another rent. The Court distinguished Rolfe by stating that it did not involve an agreement not to do a thing with a penalty for doing it and, accordingly, it was apparent why equity would not interfere: Hardy at 27. 34 Before leaving this stage in the development, it is necessary to consider one further aspect. In relation to the third contention (that the expansion of the common law did not abolish the jurisdiction in equity) the applicants identified two groups of cases where equity retained jurisdiction. First, where the obligee chose to bring his suit in equity under an available bill on the bond itself, thereby enabling the obligor to raise by way of defence the equitable matters and, secondly, where the obligor would need to seek affirmative relief which would be available only in the court of equity: for example, where the obligee had already obtained a verdict and execution through the common law court, or had exercised a self help remedy and obtained payment under the bond, it would be the court of equity that granted relief: see Loyd at 126 and Simpson at 418-421 and the authorities cited. In my view, the cases identified by the applicants do not assist. The first example simply reflected a choice of suit having been made by the obligee. The second reflected the procedural nature of the remedy: see [22]-[26] above. In any event, there is no doubt that the equitable jurisdiction continues to exist – indeed, the applicants and ANZ agreed on that aspect. The area of dispute between them was the extent of the operation of the continued equitable jurisdiction in relation to the law of penalties in Australia in 2011. That issue will be addressed later in these reasons for decision: see [45]-[80] below. (d) Stage Four – 19th century in England and then Australia 35 By the 19th century, the general principle that developed was described by Story J in Commentaries on Equity Jurisprudence as Administered in England and America (13th ed, Little, Brain and Company, 1886) at [1314] as follows: … In short, the general principle now adopted is, that, whenever a penalty is inserted merely to secure the performance or enjoyment of a collateral object, the latter is considered as the principal intent of the instrument, and the penalty is deemed only as accessory, and, therefore, as intended only to secure the due performance thereof, or the damage really incurred by the non-performance. In every such case, the true test (generally, if not universally,) by which to ascertain whether relief can or cannot be had in Equity, is, to consider whether compensation can be made or not. If it cannot be made, then Courts of Equity will not interfere. If it can be made, then, if the penalty is to secure the mere payment of money, Courts of Equity will relieve the party, upon paying the principal and interest. If it is to secure the performance of some collateral act or undertaking, then Courts of Equity will retain the bill, and will direct an issue of Quantum damnificatus; and, when the amount of damages is ascertained by a jury, upon the trial of such an issue, they will grant relief upon payment of such damages. (Citations omitted and emphasis added.) 36 Two conclusions can be drawn about where the law of penalties had reached by the end of the 19th century. First, breach was a necessary element of the law of penalties (Kemble v Farren (1829) 6 Bing 141 at 148; Reynolds v Bridge (1856) 6 EL & BL 528 at 541; Protector Endowment Loan and Annuity Co v Grice (1880) LR 5 QBD 592 and Wallis v Smith (1882) LR 21 Ch D 243) and second, consistent with that view, cases dealing with the non-performance or satisfaction of a condition upon which payment of the bond was required were treated or characterised as a breach of contract: see [29], [30], [32] and [33] above. 37 A significant change in the 19th century was the passing of the Judicature Acts in England in 1873 and 1875: Supreme Court of Judicature Act 1873 (Imp) 36 & 37 Vict, c 66 and Supreme Court of Judicature Act 1875 (Imp) 38 & 39 Vict, c 77. These were a procedural reform that enabled a single court to exercise all the jurisdiction which had separately lay in courts at common law and in equity. Where there was a conflict, the rules of equity prevailed. As the applicants submitted, this reform was of the same character as the two penalty statutes. The substantial difference was that it now operated across the entire jurisdictions at common law and equity. (Indeed, ultimately the penalty statutes ceased to be necessary and were repealed in the United Kingdom: Jobson v Johnson [1989] 1 WLR 1026 at 1039; Administration of Justice Act 1925 (Imp) and Administration of Justice Act 1965 (Imp)). 38 The description of the effect and operation of the Judicature Acts is significant. The Judicature Acts did not extinguish the equitable jurisdiction or fuse or merge it with the jurisdiction at common law. Rather the two systems were administered concurrently in the same courts, with equity prevailing where there was a conflict. The effect was that a single court could grant relief to the obligor whether he or she was a defendant or a plaintiff in the action; however the principles upon which the relief would be granted were those which had been developed over the centuries at common law and in equity: see, by way of example, s 29 of the Supreme Court Act 1986 (Vic); s 25 of the Supreme Court Act 1933 (ACT); ss 57-63 of the Supreme Court Act 1970 (NSW); ss 61-69 of the Supreme Court Act 1979 (NT); ss 244 and 249 of the Supreme Court Act 1995 (Qld); ss 20-28 of the Supreme Court Act 1935 (SA); s 24 of the Supreme Court Act 1935 (WA); s 10 of the Supreme Court Civil Procedure Act 1932 (Tas). 39 Upon reception in Australia, the entirety of the jurisdiction in England became part of Australian law including the common law, the two penalty statutes, and the additional jurisdiction in equity. Section 24 of the Australian Courts Act, 9 Geo IV, c 83 (Imp, 1828) provided that all laws and statutes in force within the realm of England on 25 July 1828 should be applied in the courts of New South Wales (then including what is now Victoria and Queensland) and Van Diemen's Land "so far as the same can be applied within the said colonies". Thus, the penalty statutes were incorporated into the law of New South Wales (and upon its succession, Victoria): see Blackshield & Williams, Australian Constitutional Law and Theory: Commentary & Materials (4th ed, The Federation Press, 2006) at 135.7. 40 The Judicature Act system was enacted in Australia at various times. In Victoria, that occurred in 1883: Judicature Act 1883 (Vic). Accordingly, at various times there were different procedural mechanisms by which the penalty jurisdiction would be exercised in different states. So, for example, between 1883 and 1972, in Victoria, a single court could grant relief to the obligor whether he was plaintiff or defendant, whereas in New South Wales at that time the relief would be granted separately either in the common law court or in the equity court, depending on the circumstances including whether the obligor was plaintiff or defendant. (e) The law in the United Kingdom immediately before Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 41 The law in the United Kingdom, immediately before Dunlop, could be summarised as follows: 1. Relief against penalties was granted by a single court which applied the jurisdiction which had been developed previously both in the common law courts and equity courts, and where there was a conflict, gave priority to the equitable principles. 2. Whether at common law or equity, to ascertain whether the jurisdiction was available, it was necessary to prefer substance over form: it was not a question of precisely how the contract or other arrangement between the parties was worded. The question was whether, in substance, the parties were treating either the payment of the sum of money, or the doing or not doing of an act by a party, with a stipulation to pay a sum of money if that did not occur being inserted by way of security for performance of that payment of the sum of money, or the doing or not doing of that act by that party. 3. Where the substance of the agreement was the payment of money, identifying whether the stipulation for the payment of money was in the nature of a penalty was straightforward. The law had a settled position that the proper compensation was for the obligor to pay principal, interest and costs. Any stipulation that a larger sum of money was to be paid would be penal. The law, whether at common law or equity, would treat the larger sum as being inserted by way of security for payment of the lesser sum; it would not permit the obligee to recover the larger sum. 4. The mechanism by which the relief would be played out in the case of a stipulation for the payment of money would still depend upon the timing of the defence. If the full principal plus interest and costs had been paid prior to the action, it constituted a complete defence. If the money was brought into court during the action, together with costs, that would be treated as a full discharge. If the verdict had been given and the obligee was at the stage of execution, relief could be obtained against execution on the payment of the principal plus interest and costs. 5. On the other hand, where the substance of the agreement was the doing or not doing of an act, in determining whether the requirement to pay a stipulated sum was penal, the law would enquire into whether it could be justified as a genuine attempt by the parties at the date of entering the contract to estimate and liquefy the damages which might flow from the failure to perform. See also Jobson v Johnson [1989] 1 WLR 1026 at 1039 and Newland at 443. This description records, as was the fact, that the penalty doctrines preceded 19th century views of freedom of contract. As will become evident, that emergence of the freedom of contract has, on some occasions, become difficult to reconcile with the law of penalties. (f) Dunlop 42 The next significant event was the decision in Dunlop. That case concerned an agreement for the supply of tyres under which the defendant promised to pay £5 as liquidated damages for every article sold or offered in breach of its obligations, inter alia, not to sell below listed prices and not to supply persons on a suspended list. The decision at first instance, which was ultimately upheld in the House of Lords, saw the damages assessed by application of the net amount stipulated in the contract to the number of breaches. It was held that there was no reason to suspect that ₤5 did not reflect a true bargain to assess damages. 43 It is appropriate to set out the following passage in Lord Dunedin's speech at 86-87 (cited by the High Court in Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656): … 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". (Citations omitted.) 44 In addition to the above propositions from Lord Dunedin's speech, 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. (2) The Australian Cases (a) Introduction 45 Before turning to the Australian cases, a number of matters should be noted. The heading to this section does not read "the law of penalties in Australia". There is a good reason for that; there is a distinct and relevant Australian regulatory framework which must be taken into account and which is considered at [(C)(3)] below. 46 Next, it is important to recognise that there is now a single common law (in the sense of judge-made law – both common law and equity) within Australia: Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 113; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 563; Lipohar v The Queen (1999) 200 CLR 485 at [43]-[44]. Whether the jurisdiction is being exercised across separate courts at common law and equity, or in a single court, the principles are the same, consisting of the full set of propositions that have been developed at common law and in equity over the centuries. There is, however, one necessary qualification to that general principle – the statutes peculiar to particular states or territories. In the present case, as will become evident, that qualification is relevant: see [135]-[140] below. (b) Breach and the role of damages? 47 The primary remedy for a breach of contract is an award of damages: News Limited v Australian Rugby League (1996) 64 FCR 410 at 517. The object of such an award of damages is to compensate for loss and damage occasioned by breach: Commonwealth v Amann Aviation (1991) 174 CLR 64 at 98. The object of an award of damages is not to punish the party in breach: Maritime Union of Australia v Patrick Stevedores No 1 Pty Ltd (1998) 77 FCR 456 at 471; cf Ruxley Electronics Ltd v Forsyth [1966] AC 344 at 353 (Lord Bridge) and 365 (Lord Lloyd with whom Lords Keith and Mustill agreed). 48 Consistent with those general principles, parties to a contract are entitled (and often do) stipulate in the contract an amount that will be payable by one to the other in the event of breach: Dunlop at 97 (Lord Parker) and 101-102 (Lord Parmoor). Such clauses have been described as "agreed damages" clauses: Carter, JW, Carter on Contract, (LexisNexis Australia, Subscription Service) at [43-070] (Update 30); Carter JW and Peden E, "A Good Faith Perspective on Liquidated Damages" (2007) 23 JCL 157 and Carter JW and Peden E, "Agreed Damages Clauses – Back to the Future?" (2006) 22 JCL 189. These clauses are generally enforceable provided they fix a sum which is a genuine pre-estimate of loss or damage – sometimes described as "liquidated damages". These clauses obviate the need to prove in court the amount of loss or damage suffered as a result of a breach. Courts have recognised that such clauses are mutually beneficial to the parties; providing certainty in respect of their rights and obligations without the need for costly litigation or, at the very least, minimising the cost of litigation: AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170 at 193; Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1447 and The City of Sydney v Streetscape Projects (Aust) Pty Ltd [2011] NSWSC 1214 at [384]. (c) When are Liquidated or Agreed Damages clauses not enforceable? 49 The preceding paragraph states that agreed damages clauses are generally enforceable. It is therefore necessary to explore when such clauses are not enforceable and why. This lies at the heart of the determination of the Separate Questions. 50 ANZ submitted that an agreed damages clause will not be enforceable if it is a penalty. In defining a "penalty", ANZ referred to two decisions in the High Court: Legione v Hateley (1983) 152 CLR 406 at 455 and Ringrow at 662-663. It is necessary to consider both of these cases in some detail. In Legione v Hateley at 445, Mason and Deane JJ stated that: A penalty, as its name suggests, is in the nature of a punishment for non-observance of a contractual stipulation; it consists of the imposition of an additional or different liability upon breach of the contractual stipulation … 51 Similarly, in Ringrow at [10], Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ unanimously stated: The law of penalties, in its standard application, is attracted where a contract stipulates that on breach the contract-breaker will pay an agreed sum which exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused by the breach. (Emphasis added.) 52 Much of the applicants' arguments in this case centred on what the High Court meant by standard application and sought to identify what was non-standard. The applicants submitted that the reference to "standard application" amounted to an acknowledgement by the High Court that there was, and remains, some other class of penalty which could be struck down and that this other class was one in which breach was not a necessary element. It was and remains inappropriate to select a phrase, as the applicants did, from one case and then seek to elevate it into an acknowledgement by the High Court that there is some other class of penalty which could be struck down and that this other class just happened to be (or include) the class of cases into which the applicants' individual claims fell. That is, a class of cases in which breach was not a necessary element. Ringrow provides no support for the applicants' submissions. 53 First, the facts in Ringrow. Ringrow purchased a service station from BP Australia. Under a related agreement, the POSA, the site was to be operated by Ringrow under the BP brand. If Ringrow breached the POSA, BP was entitled to terminate it and claim liquidated damages. Liquidated damages were to be calculated by reference to the expected profits of BP over the balance of the term of the agreement. At various times, Ringrow purchased fuel from a supplier other than BP and on-sold that fuel to the public. That was a breach of the POSA. BP gave Ringrow notices of breach of condition, followed by notice of termination of the POSA. Subsequently, BP gave Ringrow notice that it intended to exercise its contractual rights under another agreement (an option deed) to buy back the service station site. Clause 1.2(a) of the option deed provided that the option was only exercisable if the POSA "is terminated". Clauses 2.1 and 2.5 of the option deed provided that the price to be paid by BP was the market value of the site without reference to the goodwill. The POSA provided that if the option was exercised, liquidated damages for breach were not payable. Ringrow contended that cl 1.2(a) was "void and unenforceable" because it operated as a penalty for breach of the POSA. The High Court rejected that contention. As will be apparent, the facts in Ringrow were fundamentally different from those that must be considered for the purposes of the Separate Questions. 54 Next, the so called "standard application": see Ringrow at [10] extracted at [51] above. The High Court described the law of penalties as being attracted where a contract stipulates that on breach the contract-breaker will pay an agreed sum which exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused by the breach: at [10]. This "standard application" had, as its foundation, the speech of Lord Dunedin in Dunlop at 86-87: see [43] above. In Ringrow, the correctness of the passage in Lord Dunedin's speech and, in particular, "the principles governing the identification, proof and consequences of penalties in contractual stipulations" were not challenged: Ringrow at [12]. As the High Court said at [12]: The formulation has endured for ninety years. It has been applied countless times in this and other courts [eg, O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 at 368, 378, 399, 400; Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514 at 520; AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 190; Stern v McArthur (1988) 165 CLR 489 at 540; Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131 at 139, 143, 145]. In these circumstances, the present appeal afforded no occasion for a general reconsideration of Lord Dunedin's tests to determine whether any particular feature of Australian conditions, any change in the nature of penalties or any element in the contemporary market-place [See eg AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 190] suggest the need for a new formulation. It is therefore proper to proceed on the basis that Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd continues to express the law applicable in this country, leaving any more substantial reconsideration than that advanced, to a future case where reconsideration or reformulation is in issue [O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 at 400; cf at 392; AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 at 566, 574]. 55 That passage requires close analysis. The High Court recognised that there may be a particular feature of Australian conditions, a change in the nature of penalties or an element in the contemporary market-place that could suggest the need for a new formulation. The list cannot be seen as exhaustive. However, whatever may provide a reason for a new formulation, at that time, it had not arisen. The only indication of the kinds of reasons that the High Court then had in mind was contained in the footnoted reference to AMEV-UDC Finance Ltd at 190 where Mason and Wilson JJ emphasised the importance of freedom of contract 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. In my view, the High Court did not suggest that breach was not an essential element or would not otherwise be necessary. Indeed, this passage relied upon by the applicants provides no support for the applicants' contention that breach is not an essential element. At its highest, it reinforced the principle, developed as far back as the late 16th and early 17th centuries of preferring substance over form so that even where there was no express contractual promise to perform a condition, the doctrine of penalties was applied where such a promise could readily be implied such as in the case of penal bonds: see [16] above. There was nothing to suggest that a breach, or conduct in the nature of breach, was not necessary. 56 Why then did the High Court refer to the law of penalties in its "standard application"? What fell outside this so called "standard application"? In my view, that question was answered in Ringrow at [21] by the High Court itself when it stated: The respondent did not contest the appellant's submission, for which there is authority [Forestry Commission (NSW) v Stefanetto (1976) 133 CLR 507 at 519, 524; Jobson v Johnson [1989] 1 WLR 1026 at 1034-1035, 1042; [1989] 1 All ER 621 at 628, 634; Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 at 555], that Lord Dunedin's statement applies not only to cases where money is payable but also to cases where money's worth (including property) is transferable on a particular event. In that extended application, Lord Dunedin's statement requires a different approach from that employed in typical penalty cases. (Emphasis added.) 57 As that passage identified, the law of penalties addressed two different cases – (1) cases where money is payable (referred to by the High Court as the standard application or typical penalty case: Ringrow at [10] and [21]) and (2) cases where money's worth (including property) is transferable on a particular event (referred to by the High Court as the extended application: Ringrow at [21]). The latter has, on occasion, been referred to as encompassing relief against forfeiture. Given the different nature of the relief sought, it was inevitably necessary to adopt a different approach for each type of case. That difference in approach was explained by the High Court in Ringrow at [21] as follows: In typical penalty cases, the court compares what would be recoverable as unliquidated damages with the sum of money stipulated as payable on breach. In [extended application] cases … one relevant comparison would be between the price payable by the respondent to the appellant on retransfer of [the service station site] and the actual value of what is transferred. (Emphasis added.) However, the comparison itself and a mere difference, or suspicion of difference, was not and is not sufficient. There has to be something "extravagant and unconscionable" in the value of what is transferred compared to the price to be received or a "degree of disproportion" sufficient to point to oppressiveness: Ringrow at [21]. In assessing the extravagance and oppressiveness, the High Court stated that it was necessary to be able to compare the price to be paid and the value of what was to be transferred: Ringrow at [22]. 58 Put another way, the law of penalties requires the court to determine whether the payment for non-observance of the contract is payable in terrorem. That is, as a punishment to deter breach of the contractual obligation: see Clydebank Engineering and Shipbuilding Company v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6 at 9-10. As expressed by Lord Dunedin in Dunlop, "[t]he Court must find out whether the payment stipulated is in truth a penalty or liquidated damages" (emphasis added): at 86; see also O'Dea at 400. 59 As ANZ submitted, there is extensive and longstanding authority in Australia and the United Kingdom that the law of penalties has no application to a contractual provision requiring a payment on the happening of an event that does not constitute a breach of contract. Those authorities include, in chronological order, In re Apex Supply Co Ltd [1942] Ch 108 at 109; Campbell Discount Co Ltd v Bridge [1962] AC 600 at 613-614 (per Viscount Simonds); Philip Bernstein (Successors) Ltd v Lydiate Textiles (Unreported, Court of Appeal UK, Diplock LJ, 26 June 1962); United Dominions Trust (Commercial) Ltd v Ennis [1968] 1 QB 54 at 66-67 (per Harman LJ); IAC (Leasing) Ltd v Humphrey (1972) 126 CLR 131 at 140-144 (per Walsh J, with whom Barwick CJ and McTiernan J agreed); Export Credits Guarantee Department v Universal Oil Products Co [1983] 2 All ER 205 at 224 (per Lord Roskill, with whom Lords Diplock, Elwyn-Jones, Keith of Kinkel and Brightman agreed); AMEV-UDC Finance Ltd at 184, 189-190 and 211 (per Mason, Wilson JJ and Dawson J (in dissent on the primary issue)); Jervis v Harris [1996] Ch 195 at 206-207 (per Millet LJ, Otton LJ and Sir Stephen Brown P); Office of Fair Trading v Abbey National plc [2008] EWHC 875 at [295] (per Andrew Smith J); Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292 at [106] (per Allsop P, with whom Giles and Ipp JJA agreed); Fermiscan Pty Ltd v James [2009] NSWCA 355 at [134]-[136]; Diakos v Mason [2010] SASCFC 37 at [16] and [18] (per Gray J, with whom Duggan and Kelly JJ agreed) and First East Auction Holdings Pty Ltd v Mimi Ange [2010] VSC 72 at [151] and [157] (per Hargrave J). See also Rossiter at 66; McGee J, Snell's Equity (31st ed, Sweet & Maxwell, 2005) at 294; Carter JW and Harland DJ, Contract Law in Australia (4th ed, Butterworths, 2002) at [2216]; Lewison K, The Interpretation of Contracts (4th ed, Sweet & Maxwell, 2007) at [16.01]; Parkinson P, The Principles of Equity (2nd ed, Lawbook Co, 2003) at [819]; Meagher RP, Penalties in Chattel Leases in Finn PD (ed), Essays in Equity, (The Law Book Company Limited, 1985), p 52. 60 Finally, for the sake of completeness, it should be noted that Lord Dunedin's statement of the law of penalties in Dunlop, including the "breach" requirement, has also been adopted in: 1. Canada: see Gunning v Thorne Riddell [1990] B.C.J. No.36 at [26]-[27] (approved on appeal); Pattison v Mudry [1999] OJ No 65 at [49]-[50] and Doman Forest Products Ltd v GMAC Commercial Credit Corp [2007] 29 BLR (4th) 1 at [121]-[125] and [134]; 2. New Zealand: see Camatos Holdings Ltd v Neil Civil Engineering (1992) Ltd [1998] 3 NZLR 596 at 606; and 3. Hong Kong: see Philips Hong Kong Limited v The Attorney General of Hong Kong [1993] 1 HKLR 269 at 277-278 and Re Mandarin Container [2004] 3 HKLRD 554 at 559. (d) After Ringrow? 61 The High Court has not considered the law of penalties since Ringrow. However, judicial statements that breach is not an essential element, before or after Ringrow, are rare: see Campbell Discount at 629-631 (per Lord Denning); AMEV-UDC Finance Ltd at 197-198 (per Deane J) and Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2007] NSWSC 406 at [74] (per Brereton J) (but overturned on appeal in Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292). Each of these cases was confined to a particular fact situation – payments upon termination of an agreement. I will deal with this particular fact situation first and then turn to consider Interstar in greater detail. (i) Payments upon termination of an agreement 62 The context of judicial statements that breach is not an essential element (see [61] above) has been confined to the applicability of the law of penalties to provisions of lease and hire purchase agreements governing the consequences of termination of the agreements. One question raised in these cases is whether the law of penalties has any application to contractual provisions that operate upon termination of the agreement, where the right to terminate the agreement is exercisable on the occurrence of a number of events, some of which constitute breaches of contract and some of which do not. As ANZ submitted, while these cases help define the boundaries of the law of penalties, they have no direct application to the Separate Questions. It is not alleged by the applicants, and it is not the fact, that any of the Fees were payable upon termination of the relevant customer contracts. 63 In relation to contractual payments upon termination, the state of the authorities is that the law of penalties is applicable where the agreement is terminated for breach of contract: Cooden Engineering Co v Stanford [1953] 1 QB 86 at 96-97 and 116 (per Somervell LJ and Hodson LJ); Campbell Discount at 614-615, 621, 631 and 632 (all members of the House of Lords supported the application of the law of penalties in those circumstances); United Dominions Trust (at 64, 67 and 69 (per Lord Denning MR, Harman LJ and Salmon LJ); O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 at 367, 375, 382-383, 391 and 397-398 (all members of the High Court supported the application of the law of penalties in those circumstances): AMEV-UDC Finance Ltd and Esanda Finance Corporation v Plessnig (1989) 166 CLR 131. 64 Conversely, the law of penalties has been held to have no application to contractual payments that arise upon termination of the agreement where the agreement is terminated on the occurrence of an event that does not constitute a breach of contract: Associated Distributors v Hall [1938] 2 KB 83 at 87-88 (per Slesser LJ, with whom Scott LJ and Clauson LJ agreed); IAC (Leasing) Limited v Humphrey (1972) 126 CLR 131 at 142-143 (per Walsh J, with whom Barwick CJ and McTiernan J agreed). 65 In Campbell Discount, the House of Lords considered the question whether the law of penalties would apply to contractual payments upon termination if the agreement had been terminated at the election of the hirer. Viscount Simonds (at 613) and Lord Morton of Henryton (at 614) decided that the provision would not be a penalty. Lord Radcliffe did not decide the question: see 625-626. Lord Denning concluded that the law of penalties should be applicable in those circumstances for the reason that the payment would be due upon the non-performance of a condition: at 629-631. Lord Devlin concluded (obiter) that the law of penalties would apply for the reason that if the provision requiring the payment to be made was unenforceable as a penalty in one set of circumstances, it must be unenforceable in all circumstances: at 634. 66 In O'Dea, only Gibbs CJ and Brennan J referred directly to the question whether the law of penalties would apply if the agreement had been terminated at the election of the hirer (that is, without breach). Gibbs CJ left the question open (at 368) and Brennan J's reasons favoured the view that the law of penalties did not apply in those circumstances: at 390-392. 67 In AMEV-UDC Finance Ltd, the High Court considered a lease agreement containing substantially the same provisions as those considered in O'Dea. It was accepted that the provisions constituted a penalty on the authority of O'Dea. The issue considered by the Court was the measure of damages available to the lessor as a consequence of terminating the lease agreement and repossessing the leased equipment, given that the relevant contractual provisions governing that event were unenforceable as a penalty. Accordingly, the question that was decided by the High Court in AMEV-UDC Finance Ltd is not directly relevant to the initial hearing in this proceeding. Relevantly for present purposes, the reasons of Mason and Wilson JJ support the conclusion that the law of penalties is confined to sums agreed to be paid upon a breach of contract: at 184 and 189-190. Dawson J (in dissent on the primary issue) expressed similar views, concluding (at 211) that: Treatment of the termination of an agreement upon breach in the same way as the breach itself for the purpose of determining whether a stipulated payment is capable of amounting to a penalty has no extended application. It would seem clear that a provision calling for the payment of money by one party on the occurrence of a specified event, rather than upon breach by that party, cannot be a penalty. Only Deane J (also in dissent on the primary issue) expressed the view that the law of penalties extended beyond payments for breach of contract (or upon termination for breach of contract): at 199-200. (ii) Interstar 68 What then is left? The applicants placed considerable reliance upon the decision in Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2007] NSWSC 406 where Brereton J, at first instance, held that the provision in issue was a penalty. That decision was overturned on appeal by the New South Wales Court of Appeal in Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292. The losing party to the appeal was granted special leave to appeal by the High Court but the parties settled just before the High Court was due to commence hearing the substantive appeal. It is necessary to consider Interstar in some detail. 69 Interstar were finance companies engaged in lending, and procuring the lending of moneys on the security of mortgages. The other entity, Integral, was a "mortgage originator", which found and brought to Interstar applications for loans to be secured by mortgage. If a loan was made to a loan applicant, Integral managed the ongoing servicing of the loan: Interstar at [1]. In March 2003, and then again in November 2005, Integral entered into a "Loan Origination and Management Agreement" with Interstar (the LOMA1 and LOMA2 respectively). 70 Under each LOMA, Interstar agreed to pay to Integral an upfront fee on settlement of a loan introduced by Integral and an ongoing "originators fee" calculated as a percentage of the outstanding balance of the loan introduced by Integral, payable monthly (conventionally called "trailer commission"). Under each LOMA, cl 6 included an obligation on Integral "to act honestly in its dealing with all parties and not engage in misleading, deceptive or unethical conduct": Interstar at [11]-[12]. Clause 20.1 of each LOMA entitled Interstar to terminate the agreement in various circumstances including the insolvency of Integral, a breach of the agreement by Integral or a change in control of Integral: Interstar at [20]. Clause 20.3 provided for the consequences of termination. Clause 20.3(c) of each LOMA provided that Interstar could terminate the LOMA where Integral or its representative had engaged in any proven misleading or deceptive conduct in relation to a loan or where Interstar considered, in its reasonable opinion, that Integral or its representative had engaged in deceptive or fraudulent conduct in relation to a loan: Interstar at [20]. In March 2006, Interstar gave Integral notice under each LOMA that it was exercising its right of termination under cl 20.3(c) because it had formed the opinion that Integral had engaged in deceptive conduct in relation to loan application files: Interstar at [24]. Integral contended that Interstar was not entitled to terminate the LOMAs and alternatively, if it was, cl 20.3(c) was void as a penalty. 71 The trial judge (Brereton J) held cl 20.3(c) was void as a penalty: Integral at [79]. Brereton J decided that the law of penalties was applicable to cl 20 of the LOMA. His Honour concluded (Integral at [71]) that a contractual provision entitling a party to terminate a contract on various events such as death or insolvency of the other party was susceptible to the law of penalties because they: … serve to secure the interests of the [terminating] party in receiving performance of the main promise of the contract ... Their effect is that the [other] party's entitlement to continue to enjoy the benefit of the contract is conditional upon its not committing any event of default .... His Honour reached that conclusion notwithstanding that the right to terminate the agreement was not conditioned on a breach of contract and that no right to damages resulted from the occurrence of the event entitling termination: Integral at [71]. (It is important to note that Brereton J failed to adopt fully Deane J's expanded formulation of the law of penalties: that the stipulated payment contains an element of compensation for the economic loss or damage which might be sustained by the other party by reason of the particular occurrence or default: AMEV-UDC Finance Ltd at l99-200.) 72 Brereton J held the law of penalties encompassed not only an obligation to pay a monetary sum but extended to obligations to transfer property: Integral at [12], [74] and [78]. What was new, and what was rejected by the Court of Appeal, was the view expressed by Brereton J that the law of penalties was not limited in its application to circumstances where a contract is terminated for breach but that its scope extended to circumstances where a contract is terminated pursuant to a right to do so upon occurrence of an event of default which the non-terminating party had, in substance, an obligation to avoid: Integral at [74]-[76]. 73 Putting to one side the role of precedent (an issue addressed in further detail at [75]-[76] below), with respect to Brereton J, I reject the contention that the law of penalties extends to circumstances where a contract is terminated pursuant to a right to do so upon occurrence of an event of default which the non-terminating party had, in substance, an obligation. It finds no support in history, in the decided cases in Australia, the United Kingdom, Canada, Hong Kong or New Zealand (see [60] above) and, finally, and no less importantly, it is a phrase or concept devoid of certain meaning. Given the importance and rising significance of the freedom of contract since the late 19th century, it would be contrary to that trend to now expand the law of penalties in the manner proposed by Brereton J and, in particular, in a way which is at best uncertain and at worst ambiguous. 74 A number of points may be made about the decisions at both first instance and on appeal in Interstar. First, as has already been noted, Brereton J founded his ultimate decision on alternative bases: that the disputed sum was payable on breach or, if it was not, it was nonetheless governed by the law of penalties because the disputed sum was payable in respect of a matter within the non terminating party's field of obligation. The former analysis represented an orthodox engagement of accepted principles. The latter conclusion, however, upon which the applicants placed great emphasis, was evidently intended to travel beyond any requirement for breach. The central difficulty presented by this alternative analysis is to understand what exactly is meant by the notion of "a field of obligation". If, by that expression, it meant something larger than, and different from, a contractual stipulation which the party concerned has breached, how can the relevant "field of obligation" be marked out except by reference to terms and conditions of the contract which impose obligations on the parties? As the facts in Interstar demonstrate, the better analysis of that case may well be that the non-terminating party had acted in breach of its obligations under the LOMAs and that it was the occurrence of that breach as reasonably determined by the terminating party that founded, underpinned, constituted and was a necessary requirement for termination. That analysis of the case was not adopted by the Court of Appeal. Instead, the Court of Appeal concluded that it was appropriate to confine attention to the fact that the terminating party reasonably held a certain opinion and to set aside from consideration the facts and circumstances (including the conduct of the non-terminating party) that founded the opinion reasonably held by the terminating party: Interstar at [154]-[157]. 75 For present purposes, it is enough to say of Interstar that analysis by reference to breach was in my opinion reasonably open, and if that is the proper construction of the LOMAs (and I consider it is the better view), it is unnecessary to heed the warning of the Court of Appeal at [106] that: The intermediate appellate authorities in Australia, the persuasive view of a unanimous House of Lords, existing High Court authority and other views expressed in the High Court constrained the primary judge (and constrain this court) to limiting the application of the doctrine of penalties to circumstances of breach of contract. See also Diakos v Mason at [16] and [18]: see [59] above. 76 If, however, the Court of Appeal was right to conclude that the facts and circumstances do not yield to an analysis founded on breach, it then is important to recognise, as the Court of Appeal did, that to extend the law relating to penalties to such circumstances is not a step that is open to this Court: see Interstar at [159]-[160] and Ange v First East Auction Holdings Pty Ltd [2011] VSCA 335 at [91]-[94]. (3) Conclusion 77 What the applicants sought to do was to construct an argument, based not only on old decisions but also the historical origins of the law of penalties, that the law of penalties is not confined to payments upon breach but extends to payments upon conditions or events lying within the area of obligation of the party required to make the payment. That enterprise carried at least as much risk as that warned against by Mason and Wilson JJ in AMEV-UDC Finance Ltd at 183 and 186. 78 The modern jurisdiction cannot be divorced from its origins in the wide dispensing power of the Court of Chancery in respect of oppressive bargains: Meagher, Heydon and Leeming, at [18-095]. The law of penalties, confined (as it is) to payments for breach of contract, is a narrow exception to the general rule whereby the law seeks to preserve freedom of contract, allowing parties the widest freedom, consistent with other policy considerations, to agree upon the terms of their contract. As stated in Ringrow at [31] and [32] in the joint judgment of Gleeson CJ and Gummow, Kirby, Hayne, Callinan and Heydon JJ: The law of contract normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships ... 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. See also Thomas JA in Bartercard Ltd v Myallhurst Pty Ltd [2000] QCA 445 (at [26]) that "[t]he surveillance of courts over contracts is not based upon any underlying approval or disapproval of incentives or disincentives, which are a natural part of commercial arrangements". 79 Courts have consistently rejected a jurisdiction in equity to interfere with contractual freedom on the generalised ground that the provision in question is harsh or constitutes a hard bargain: see, by way of example, Campbell Discount at 614 per Viscount Simonds and at 626 per Lord Radcliffe; Export Credits Guarantee at 224 per Lord Roskill; Meagher, Heydon and Leeming, at [18-100]. Instead, courts have developed equitable and common law principles in particular, well recognised, circumstances to prevent contracts being used as a means of taking unfair advantage of persons in positions of vulnerability, particularly the principles relating to unconscionable conduct, undue influence and duress. 80 Indeed, the parties agreed that equity had a continued role to play in a number of circumstances where the common law would otherwise operate harshly or unconscientiously. In those circumstances, equity would operate remedially and apply its restitutionary principles to overcome the consequences of a party having paid a penalty. For present purposes, it is neither necessary nor desirable to seek to classify that jurisdiction as concurrent or auxiliary: see Meagher, Heydon and Leeming, at [1-095]. C LEGAL FRAMEWORK FOR BANKER – CUSTOMER RELATIONSHIPS (1) Relationship between Banker and Customer in Contract 81 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]. 82 Unsurprisingly, the contractual terms are important; it is a contract usually with many terms (Joachimson v Swiss Bank Corp [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) 12 WN (NSW) 101; Akbar Khan v Attar 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 & Co [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 NSW [1978] VR 555 at 577; Narni Pty Ltd v National Australia Bank Ltd [1998] VSC 146 at [37] and [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 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); (2) Approach to Construction? 83 During argument, the parties argued their respective positions by contending, in effect, that the court was faced with choosing between a label for various provisions; a "contractual obligation", a definition of the limits of ANZ's obligation to honour the client's instructions or merely "advisory or explanatory". 84 The issue for resolution may be posed, adopting the language of Allsop P in Fermiscan at [134]: … through the process of construction of the contract and an examination of the inherent circumstances is, … the clause … contractually intended to operate as a deterrent against breach, the object of the clauses being to prevent the commission of the breach or the contract by coercing compliance ("in terrorem" – see point 2 in Lord Dunedin's statement of principle at [43] above) or … was [it] intended as an agreed pre-estimated sum representing compensation to be paid upon breach and addressing the consequences of breach … . 85 A court's approach to construction of relevant provisions does not involve a "choice" between labels or placing the provisions in one box or another box. The court's approach is to construe the words of the provisions in the context of the regulatory framework in which they are intended to, and do, operate. As the High Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]: This Court, in Pacific Carriers Ltd v BNP Paribas [(2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction [Pacific Carriers at [22]]. 86 It is to that task that I now turn. (3) Regulatory Framework 87 In Australia, banker-customer relationships or contracts are subject to a regulatory (constitutional, statutory and other) framework. In the context of the Separate Questions, the relevant statutes included the Corporations Act 2001 (Cth) (the Corporations Act), the Uniform Consumer Credit Code (the UCCC) (in existence from 1996 until 1 July 2010) and the Instruments Act. In addition, in the context of the Separate Questions, there were at least four complicating factors – the applicable legislative provisions changed over time, the applicable legislative provisions applied to some but not all banker-customer relationships, the regulatory framework varied between the States and territories and, finally, there were in existence voluntary codes of conduct which lacked statutory force but which ANZ agreed governed its conduct. None of the regulatory framework was addressed by the parties until after the hearing, in response to a direct request from the Court. 88 It is necessary to address the regulatory framework relevant to determination of the Separate Questions by reference to the following topics: 1. the period prior to 20 December 2005; 2. the period after 20 December 2005; 3. the UCCC; 4. the Codes of Practice / the Banking Code; and 5. the Instruments Act. (a) Period prior to 20 December 2005 89 Subdivision B of Div 2, Pt 7.9 of the Corporations Act contained the requirement for a Product Disclosure Statement (PDS) to be given: s 1012B of the Corporations Act. The PDS regime applied in respect of "financial products". A "credit facility" was not a financial product to which the regime applied: s 765A(1)(h)(i) of the Corporations Act and reg 7.1.06 of the Corporations Regulations 2001 (Cth) (the Regulations). A "credit facility" included the provision of "credit" (see reg 7.1.06(1)): 1. for any period; 2. with or without prior agreement between the credit provider and the debtor; 3. whether or not both credit and debit facilities are available; and 4. that is not, relevantly, a deposit-taking facility made available by an Australian Deposit-Taking Institution (of which ANZ was one) in the course of its banking business (other than a retirement savings account) (see s 764A(1)(i)), unless the whole or predominant purpose of that facility is, or is intended to be, the provision of credit. "Credit" was defined broadly as a contract, arrangement or understanding under which payment of a debt owed by a person to a credit provider is deferred, or under which a person incurs a deferred debt to a credit provider, including any form of financial accommodation and an article known as a credit card or charge card: reg 7.1.06(3). 90 It was common ground that Pt 7.9 of Div 2 of the Corporations Act did not apply to Exception Fees 5 to 11 because the consumer and commercial credit card accounts which gave rise to those fees fell within the carve-out of a "credit facility": see reg 7.1.06(1). These accounts were therefore not subject to the PDS regime in Pt 7.9 of the Corporations Act. 91 The parties agreed that, prior to 20 December 2005, the product disclosure regime in Pt 7.9 of Div 2 of the Corporations Act applied to: 1. ANZ's retail deposit accounts; and 2. ANZ's business accounts offered to small businesses, (collectively, the Retail Products), that were issued on or after 11 March 2004. 92 Implicit in that agreement is that ANZ's Retail Products were deposit-taking facilities within the meaning of s 764A(1)(i) of the Corporations Act. Of note, while some of the Retail Products, specifically the Access Advantage Accounts, and Andrews' Business Classic Account, had approved overdraft limits (see [145] and [313] below), there was no evidence that "the whole or predominant purpose of [each] facility was, or was intended to be, the provision of credit". Accordingly, those accounts did not fall within the carve-out of a "credit facility" exception in s 764A(1)(i) of the Corporations Act and the PDS regime applied to those accounts. 93 What then were the requirements of the PDS regime? 94 Section 1013A, in subdiv C of Div 2, Pt 7.9 of the Corporations Act described who must prepare the PDS. The title, "Product Disclosure Statement", had to be used on the cover of, or at or near the front of, a PDS but, in any other part of the document, could be abbreviated to "PDS": s 1013B of the Corporations Act. 95 Subdivision C of Div 2, Pt 7.9 of the Corporations Act also contained the main content requirements of a PDS: ss 1013C, 1013D and 1013E of the Corporations Act. The "main requirements" were prescribed by s 1013D and included in s 1013D(1): … a Product Disclosure Statement must include the following statements, and such of the following information as a person would reasonably require for the purpose of making a decision, as a retail client, whether to acquire the financial product: (a) a statement setting out the name and contact details of: (i) the issuer of the financial product; and … (b) information about any significant benefits to which a holder of the product will or may become entitled, the circumstances in which and times at which those benefits will or may be provided, and the way in which those benefits will or may be provided; and … (d) information about: (i) the cost of the product; and (ii) any amounts that will or may be payable by a holder of the product in respect of the product after its acquisition, and the times at which those amounts will or may be payable; and … (f) information about any other significant characteristics or features of the product or of the rights, terms, conditions and obligations attaching to the product; and … 96 Section 1013D(2) of the Corporations Act further defined s 1013D(1)(d) as follows: For the purposes of paragraph (1)(d), an amount will or may be payable in respect of a financial product by the holder of the financial product if: (a) the holder will or may have to pay an amount in respect of the product; or (b) an amount will or may be deducted from: (i) a payment to be made by the holder; or (ii) a payment to be made to the holder; or (iii) an amount held on the holder's behalf under the financial product; or (c) an account representing the holder's interest in the financial product will or may be debited with an amount. It includes an amount that the holder will or may have to pay, or that will or may be deducted or debited, as a fee, expense or charge in relation to a particular transaction in relation to the financial product. 97 Section 1013D(4) of the Corporations Act stated that the regulations may provide that a subsection of s 1013D(1) does not apply in a particular situation or that particular information is not required by a provision of s 1013D(1) in a particular situation or generally or, conversely, that a more detailed statement of the information is required by a provision of s 1013D(1) in a particular situation or generally. Next, s 1013E provided (subject to some exceptions not presently relevant) that a PDS "must also contain any other information that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire the product". Neither ANZ nor the applicants submitted that there were any regulations which modified the contents of a PDS in the context of ANZ's Retail Products. 98 Other relevant provisions of subdiv C of Div 2, Pt 7.9 of the Corporations Act should be noted. The PDS must be dated (s 1013G) and may consist of two or more separate documents given at the same time: s 1013L of the Corporations Act. (b) After 20 December 2005 99 In addition to the above provisions which remained in force, with effect from 20 December 2005, a new s 1012D(7A) was inserted into the Corporations Act by reg 7.9.07FA of the Corporations Amendment Regulations 2005 (No 5) (Cth). Section 1012D(7A) does not appear in the consolidated Corporations Act but in the Regulations. The effect of s 1012D(7A) is not agreed. 100 ANZ submitted that the effect of s 1012D(7A) was to exclude ANZ's Retail Products from the PDS regime in Pt 7.9 of Div 2 of the Corporations Act. The applicants submitted that the PDS regime in Pt 7.9 of the Corporations Act relevantly continued to apply at the time Fees 1 to 4 and 12 to 17 were charged. As these reasons for decision demonstrate, ANZ's submission should be accepted, save that the exclusion was prospective, not retrospective. 101 Section 1012D of the Corporations Act set out various exemptions from the requirement to provide a PDS to a customer. Paragraph (7A) set out exemptions for certain specified products as follows: (7A) In a recommendation situation, an issue situation or a sale situation, the regulated person does not have to give the client a Product Disclosure Statement for the financial product if: (a) the product is: (i) a basic deposit product; or (ii) a facility for making non-cash payments (see section 763D) that is related to a basic deposit product; or (iii) a travellers' cheque; and (b) the regulated person has provided information about the cost of the product (if any) to the client; and (c) the regulated person has informed the client as to whether or not any amounts will or may be payable by the holder of the product, in respect of the product, after its acquisition; and (d) the regulated person has asked the client whether or not the client would like further information about the amounts mentioned in paragraph (c); and (e) if the client indicates that the client would like the further information mentioned in paragraph (d) – the regulated person has provided that information. (Emphasis added.) 102 "Basic deposit product" was defined in s 761A of the Corporations Act. Relevantly, for present purposes, it stated: basic deposit product means a deposit product that is a facility in relation to which the following conditions are satisfied: (a) the terms applicable to the facility (the governing terms) do not permit the amount from time to time standing to the credit of the facility to be reduced otherwise than in consequence of one or more of the following: (i) a withdrawal, transfer or debit on the instruction of, or by authority of, the depositor, not being on account of entry fees, exit fees or charges for the management of the funds (but this does not exclude charges for the maintenance of the facility itself); (ii) a payment of charges or duties on deposits into, or withdrawals from, the facility that are payable under a law of the Commonwealth or of a State or Territory; (iii) a payment that a law of the Commonwealth, or of a State or Territory, requires to be made out of the facility; (iv) a payment that an order of a court requires to be made out of the facility; (v) the exercise of a right to combine accounts; (vi) the correction of an error; (vii) any other circumstances specified in regulations made for the purposes of this subparagraph; … (Emphasis added.) Section 1012D(7A) exemption apply? 103 First, s 1012D(7A) applies not just to any circumstance in which a basic deposit product is either recommended, issued or sold to a retail client but only where, inter alia, the additional cumulative requirements set out in subparas (b) to (c) have been satisfied. Most notably, the effect of subparagraphs 1012D(7A)(d) and (e) (see [101] above) is that ANZ will only be relieved of the obligation to provide a PDS where: 1. ANZ has asked its customer whether or not the customer would like further information about amounts payable in respect of the product after its acquisition; and 2. if the customer has indicated he or she would like such information, ANZ has provided such information. 104 ANZ adduced no evidence that the conditions set out in s 1012D(7A)(d) and (e) were satisfied in respect of ANZ's dealings with the applicants. For that reason alone, the applicants submitted that the exemption did not apply to the Exception Fees charged in relation to the Retail Products. I reject that submission. 105 For the reasons that follow, regardless of whether or not the exemption in s 1012D(7A) applied, the PDSs in existence in relation to each Retail Product prior to 20 December 2005, considered in further detail below, continued to apply. Put another way, there was nothing in s 1012(7A) which amended or altered the legal force of the PDSs issued in relation to Retail Products prior to 20 December 2005. Section 1012(7A) was prospective, not retrospective. So much is clear from the express words of s 1012(7A): see also Item [8] of the Explanatory Statement for Select Legislative Instrument 2005 No. 324. 106 Put another way, the product disclosure regime in Pt 7.9 of Div 2 of the Corporations Act applied (relevantly) to the issue of a financial product (see ss 1012B and 1012D of the Corporations Act). In the context of ANZ providing deposit products, ANZ is taken to "issue" the deposit product when it first issued, granted or otherwise made available the product to the customer: see s 761E(2). The subsequent variation of the terms of the basic deposit product issued to the customer did not constitute the "issue" of a financial product and did not, therefore, attract an obligation to give a new PDS to the customer. 107 What then was the legal effect after 20 December 2005 of a PDS issued after 11 March 2004 but prior to 20 December 2005? A PDS issued by ANZ in accordance with Pt 7.9 of Div 2 of the Corporations Act (as it existed prior to 20 December 2005) applied at the time the Exception Fees were charged in relation to the Retail Products, even if the relevant fee was charged after 20 December 2005. It applied because under s 1017B(1A)(a) of the Corporations Act (as it existed prior to 20 December 2005) a PDS was required to be issued by ANZ disclosing "any material change to a matter, or significant event that affects a matter, being a matter that would have been required to be specified in a [PDS]", a PDS was in fact issued by ANZ in relation to each of the Retail Products and each PDS was not withdrawn or amended before the relevant Exception Fee was charged. 108 Therefore, a question for determination is the proper construction of each PDS in light of the changing operation of the product disclosure regime in Pt 7.9 of Div 2 of the Corporations Act. 109 In that context, s 1017D(7A) stated that a PDS was not required for certain specified products which included "basic deposit products" (BDPs) and facilities for making non-cash payments (NCPFs) related to BDPs (such as ATM cards, telephone banking and internet banking). The reasons for this exemption included that BDPs were considered to be relatively low risk and well understood financial products, the organisations offering the BDPs and related NCPFs were licensed, subject to oversight by the Australian Securities and Investments Commission (ASIC) and subject to industry codes such as the Code of Banking Practice and ASIC's Guide to Good Transaction Fee Disclosure for Bank, Building Society and Credit Union Deposit and Payments Products: see Item [8] of the Explanatory Statement for Select Legislative Instrument 2005 No. 324. In other words, there was "an increasing amount of information available for consumers on fees charged by banks … that [was] displayed on websites in a well-presented and comprehensible manner": see Item [8] of the Explanatory Statement for Select Legislative Instrument 2005 No. 324. This was a statutory reflection of the general position about the risk profile of "basic deposit products" expressly referred to in s 1013F of the Corporations Act as a factor to be considered. In any event, for the reasons stated above, the PDS that existed prior to 20 December 2005 continued to apply to the Retail Products after 20 December 2005 subject to any amendments notified to the customers including the amendments prescribed by s 1017B of the Corporations Act. 110 That conclusion also deals directly with ANZ's submission that Pt 7.9 of Div 2 of the Corporations Act does not apply to a BDP with an overdraft facility and therefore does not apply to the Retail Products in issue in the Separate Questions. The definition of "basic deposit product" in s 761A(a)(i) does extend to include a deposit account with an overdraft facility where, as here, ANZ customers authorised ANZ to debit their retail deposit account with the expenses referred to in cll 14 and 15 of the ANZ Assured & Personal Overdraft – Terms and Conditions. However, that exemption is prospective, not retrospective (see [105] above), and each financial product was issued prior to 20 December 2005. 111 Finally, although it is not determinative, it should be noted that: 1. in September 2006, ANZ continued to describe the documentation for its Retail Deposit Products as "Product Disclosure Statement": see [122(7)] below; and 2. in March and December 2006, ANZ continued to describe the documentation for its business transaction accounts as "Product Disclosure Statement": see [122(6)] and [122(9)] below. (c) Uniform Consumer Credit Code 112 From 1996 until 1 July 2010, the UCCC also applied where credit was provided by a credit provider (which included ANZ) to an individual for predominantly personal, domestic or household purposes: see s 6 of the UCCC. Accordingly, at all relevant times the UCCC was applicable to: 1. the Assured Overdraft facilities held by the applicants; and 2. the consumer credit card accounts held by the applicants. (collectively, the Retail Credit Products). It therefore applied to the accounts the subject of the Exception Fees No 1-9 (inclusive). 113 The UCCC formed part of a legislative scheme that involved the enactment of adopting legislation by the states and territories. Queensland was the state nominated to enact the UCCC and the regulations to the UCCC. The Queensland Parliament enacted the Consumer Credit (Queensland) Act 1994 (Qld) which incorporated the UCCC. The Consumer Credit Regulations 1995 (the UCCC Regulations) were made under Pt 4 of the Consumer Credit (Queensland) Act 1994 (Qld). 114 Initially all other Australian states and territories introduced legislation adopting the Queensland Code, except Western Australia which passed "alternative but consistent" legislation to the Queensland Code: see Consumer Credit (New South Wales) Act 1995; Consumer Credit (Victoria) Act 1995; Consumer Credit (South Australia) Act 1995; Consumer Credit (Western Australia) Act 1996; Consumer Credit (Northern Territory) Act 1995; Consumer Credit Act 1995 (ACT) and Consumer Credit (Tasmania) Act 1996. Finally, it should be noted that the UCCC was replaced by the National Credit Code (NCC) from 1 July 2010 (which is after the date of all 17 Exceptions Fees). The NCC largely replicates the UCCC. The NCC is a schedule to the National Consumer Credit Protection Act 2009 (Cth). 115 Section 12 of the UCCC provided that a "credit contract" must be in the form of a "written contract document" signed by the debtor and credit provider or a written contract signed by the credit provider and constituting an offer to the debtor that is accepted by the debtor in accordance with the terms of the offer. An offer may be accepted, inter alia, by the debtor or a person authorised by the debtor "accessing or drawing down credit to incur a liability": s 12(2) of the UCCC. The UCCC Regulations could prescribe other ways of making a credit contract that did not involve a written document: s 13 of the UCCC. 116 The phrase "credit contract" was defined in s 5 of the UCCC as "a contract under which credit is or may be provided, being the provision of credit to which this Code applies". Section 6(1) of the UCCC relevantly further stated: This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into - (a) the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and (b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and (c) a charge is or may be made for providing the credit; and (d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider. (Emphasis added.) See also ss 6(2)-(5) of the UCCC. 117 Section 7 of the UCCC further stated that the Code did not apply to the provision of credit, if under the contract, inter alia: (1) Short term credit. This Code does not apply to the provision of credit if, under the contract – (a) the provision of credit is limited to a total period that does not exceed 62 days; and (b) the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5% of the amount of credit; and (c) the maximum amount of interest charges that may be imposed or provided for does not exceed an amount (calculated as if the Code applied to the contract) equal to the amount payable if the annual percentage rate were 24% per annum. (2) Credit without express prior agreement. This Code does not apply to the provision of credit if, before the credit was provided, there was no express agreement between the credit provider and the debtor for the provision of credit. For example, when a cheque account becomes overdrawn but there is no expressly agreed overdraft facility or when a savings account falls into debit. 118 Accordingly, the UCCC applied to the Retail Credit Products but not overdraft facilities which were not the subject of express prior agreement: see [117] above. None of the Exception Fees subject to the UCCC involved an overdraft facility which was not the subject of express prior agreement. 119 Significantly, s 14 of the UCCC provided that, prior to offering or entering into a credit contract, the credit provider must give the debtor a precontractual statement (which may be the proposed contract) setting out the matters required by s 15 of the UCCC. Section 15 of the UCCC, headed "Matters that must be in contract document" stated that the contract document must contain, inter alia: 1. the credit provider's name: s 15(A); 2. if the amount of credit to be provided is ascertainable, the amount and the persons or bodies to whom it is to be paid: s 15(B)(a); 3. if the amount of credit to be provided is not ascertainable, the maximum amount of credit agreed to be provided, or the credit limit under the contract, if any: s 15(B)(b); 4. the annual percentage rate or rates under the contract: s 15(C); 5. the method of calculation of the interest charges payable under the contract and the frequency with which interest charges are to be debited under the contract: s 15(D); 6. a statement of the credit fees and charges that are, or may become, payable under the contract, and when each such fee or charge is payable, if ascertainable. The amount of any such fee or charge if ascertainable and, if not, the method of calculation of the fee or charge, if ascertainable: s 15(G)(a)(b); 7. if the annual percentage rate or rates or the amount or frequency of payment of a credit fee or charge or instalment payment under the contract may be changed, or a new credit fee or charge may be imposed, a statement or statements to that effect and the means by which the debtor will be informed of the change or the new fee or charge: s 15(H); 8. if the contract is a contract under which a default rate of interest may be charged when payments are in default, a statement to that effect and the default rate and how it is to be applied. If the default rate under the contract is determined by referring to a reference rate, the name of the rate or description of it, the margin or margins (if any) above or below the reference rate to be applied to determine the default rate and when and where the reference rate is published or, if it is not published, how the debtor may ascertain the rate and the current default rate: s 15(J); 9. a statement that enforcement expenses may become payable under the credit contract (if any) in the event of a breach: s 15(K); 10. any information or warning required by the regulations: s 15(O). 120 Regulations 13, 14 and 15 of the UCCC Regulations prescribed certain matters for the purposes of s 15 of the UCCC. For the purposes of s 14 of the UCCC (pre-contractual statements), reg 13 repeated a large part of s 15 of the UCCC. Regulations 14 and 15 prescribed additional information that was to be provided. (d) Codes of Conduct / Banking Practice (i) Code of Banking Practice 121 ANZ adopted a voluntary Code of Banking Practice published by the Australian Bankers' Association (the Banking Code). It lacked and continues to lack statutory force. The Banking Code, in its current form, was first published in August 2003. It was slightly amended in May 2004 and has not been amended since. The amendments in May 2004 did not amend the paragraphs that follow. 122 ANZ accepted that the Banking Code applied to ANZ's dealings with individual and small business customers. Indeed, a statement to the following effect: Code of Banking Practice If you are an individual or a small business (as defined in the Code of Banking Practice) ANZ is bound by the Code of Banking Practice when it provides its products and services to you. appeared in each of the following relevant documents: 1. ANZ Credit Card Conditions of Use (March 2004) (Credit Card Conditions of Use March 2004); 2. ANZ Assured & Personal Overdraft – Terms & Conditions (December 2004) (Overdraft Terms & Conditions Dec 2004); 3. ANZ Saving & Transaction Products – Product Disclosure Statement (March 2005) (the PDS March 2005); 4. ANZ Credit Card Conditions of Use (April 2005) (Credit Card Conditions of Use April 2005); 5. ANZ Business Banking – Business Transaction Accounts Product Disclosure Statement (July 2005) (Business PDS July 2005); 6. ANZ Business Banking – Business Transaction Accounts Product Disclosure Statement (March 2006) (Business PDS Mar 2006); 7. ANZ Saving & Transaction Products – Product Disclosure Statement (September 2006) (the PDS September 2006); 8. ANZ Credit Card Conditions of Use (September 2006) (Credit Card Conditions of Use September 2006); 9. ANZ Business Banking – Business Transaction Accounts Product Disclosure Statement (December 2006) (Business PDS Dec 2006); 10. ANZ Business Banking – Finance Conditions of Use (September 2006); 11. ANZ Commercial Card Terms and Conditions (August 2007) (Commercial Card Terms Aug 2007); 12. ANZ Credit Cards Conditions of Use (December 2009) (Credit Card Conditions of Use Dec 2009); and 13. ANZ Business Banking – Business Transaction Accounts Terms and Conditions (December 2009) (Business Account Terms Dec 2009). 123 The Banking Code required ANZ (and ANZ agreed) to provide specified information to its customers. First, ANZ agreed to "provide general information about the rights and obligations that arise out of the banker and customer relationship in relation to banking services": para 2.1(c). The information was to be provided in "plain language": para 2.1(d). "Banking service" was defined in para 40 to mean, relevantly, "any financial service or product provided by [ANZ] in Australia to [the customer]". The Banking Code also required ANZ (and ANZ agreed) to monitor external developments relating to banking codes of practice, legislative changes and related issues: para 2.1(e). ANZ also agreed that it would act fairly and reasonably towards the customer in a consistent and ethical manner and, in doing so, would consider the customer's conduct, ANZ's conduct and "the contract between us": para 2.2. 124 In the context of the "laws" that govern the banker and customer relationship, the Banking Code stated that: 1. ANZ "will comply with all relevant laws relating to banking services" including those concerning consumer credit products and other financial products and services: para 3.1(a)(b); 2. if the Banking Code imposes an obligation on ANZ in addition to obligations applying under a relevant law, ANZ will also comply with the Code except where doing so would lead to a breach of the law: para 3.2; 3. in addition to a customer's rights under the Banking Code, a customer retains any rights the customer may have under Federal laws including the Trade Practices Act 1974 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth) and Ch 7 of the Corporations Act and under state and territory laws, especially the UCCC and Fair Trading Acts: para 4. 125 Paragraph 10 of the Banking Code was headed "Terms and Conditions". That phrase was defined in the Banking Code to mean "those terms and conditions specifically applied by [ANZ] to a banking service but does not include any other terms and conditions that may apply by operation of law": para [40]. In addition to agreeing to provide expeditiously to a customer a copy of the terms and conditions, full particulars of the standard fees and charges and particulars of the interest rates applicable to any banking service (para 10.1), ANZ also agreed that the terms and conditions of the banking services would, inter alia: 1. be distinguishable from marketing and promotional material: para 10.2(a); and 2. be consistent with the Code: para 10.2(c). 126 Paragraph 10.4 of the Banking Code stated that ANZ would include, where relevant, the following in the terms and conditions applying to a banking service: (a) the standard fees and charges that then apply; (b) the method by which interest, if any, is calculated and the frequency with which it will be credited or debited; (c) the manner in which you will be notified of changes to: (i) the terms and conditions; (ii) fees and charges; and (iii) interest rates; (d) if appropriate, the fact that more than one interest rate may apply; … (i) a statement that information on current interest rates and standard fees and charges is available on request; … (Emphasis added.) The phrase "standard fees and charges" was defined as the "fees and charges normally charged by [ANZ] in respect of a banking service". (ii) ASIC Electronic Funds Transfer Code of Conduct 127 ANZ also subscribed to the voluntary Electronic Funds Transfer Code of Conduct issued by ASIC on 1 April 2001 (the EFT Code). It was amended on 18 March 2002 and 1 November 2008 and has not been amended since. 128 The EFT Code applied to funds transfers initiated by giving an instruction, through electronic equipment, to an account institution (which included ANZ) to debit or credit an account maintained by the account institution, defined as an "access method": see cll 1.1(a) and 1.5. 129 ANZ accepted that the EFT Code applied. Indeed, a statement to the following effect: ANZ warrants that it will comply with the requirements of the Electronic Funds Transfer Code of Conduct. appeared in the following relevant documents: 1. Credit Card Conditions of Use March 2004; 2. The PDS March 2005; 3. Credit Card Conditions of Use April 2005; 4. Credit Card Conditions of Use September 2006; 5. The PDS September 2006; 6. ANZ Business Banking – Finance Conditions of Use (September 2006); and 7. Credit Cards Conditions of Use Dec 2009. 130 Although the substantive part of the EFT Code (Pt A) did not apply to an account that was designed primarily for use by a business and established primarily for business use (cl 1.3) a statement to the following effect: For non-business customers only, ANZ warrants that it will comply with the requirements of the Electronic Funds Transfer Code of Conduct. appeared in the following documents: 1. Business PDS July 2005; 2. Business PDS Mar 2006; and 3. Business PDS Dec 2006. 131 Moreover, the Business Account Terms Dec 2009 contained the following statement: For business customers holding products under the ANZ Commercial Card Facility Terms and Conditions or the ANZ Business One Terms and Conditions and for personal accounts accessed using ANZ Internet Banking for Business, ANZ warrants that it will comply with the requirements of the Electronic Funds Transfer Code of Conduct. 132 Clause 2.1 of the EFT Code required account institutions (which ANZ is) to prepare for their users clear and unambiguous "Terms and Conditions" applicable to EFT transactions which reflect the requirements of the EFT Code. The phrase "Terms and Conditions" was not defined in the EFT Code. 133 Clause 2.3(a) and (d) of the EFT Code required account institutions to provide users with specified information, including: 1. any charges for the issue or use of an access method, separate from activity or other charges applying to the account generally; 2. a description of any credit facility, which may be accessed by the user through electronic equipment using the access method. 134 In addition, cl 3 of the EFT Code imposed obligations on account institutions (including ANZ) when they wished to vary or modify the EFT Terms and Conditions. The relevant provisions of the EFT Code have remained the same since 2001. (e) The Instruments Act 135 Next, the Instruments Act. Section 30 of the Instruments Act relevantly states: (1) In any action on any bond or on any penal sum for non-performance of any covenant or agreement in any indenture deed or writing the plaintiff may assign as many breaches as he thinks fit and may recover not only such damages as have been usually awarded in such cases, but also damages for such of the said breaches so assigned as the plaintiff proves to have occurred; and judgment may be entered as nearly as may be as heretofore has been usually done in such actions. … (3) If the defendant after judgment and before execution pays into the court where the action is brought to the use of the plaintiff such damages together with the costs of the action, or if by reason of any execution the plaintiff is fully paid or satisfied all such damages together with his costs of the action and all reasonable charges and expenses for the said execution, further proceedings in the said judgment shall be stayed. But notwithstanding in each case such judgment shall remain as a further security to answer to the plaintiff such damages as are sustained for further breach of any covenant or agreement in the same indenture deed or writing contained, and upon any such breach the plaintiff may summon the defendant or his executors or administrators to show cause before the court why execution should not be had or awarded upon the said judgment, upon which there shall be the like proceeding or such other proceeding as the court may order for inquiry as to such breaches and assessing damages thereon; and upon payment or satisfaction in manner as aforesaid of such future damages costs charges and expenses as aforesaid all further proceedings on the said judgment shall to the like extent again be stayed. (4) Where an action is brought upon any bond which has a condition or defeasance to make void the same upon payment of a lesser sum at a day or place certain, if the obligor has before the action brought paid to the obligee the principal and interest due by the defeasance or condition of such bond, though such payment was not made strictly according to the condition or defeasance, yet it may nevertheless be pleaded in bar of such action; and shall be as effectual a bar thereof as if the money had been paid at the day and place according to the condition or defeasance and had been so pleaded. (5) If at any time pending an action upon any such bond with a penalty the defendant brings into court all the principal money and interest due on such bond and also all costs properly chargeable by the plaintiff against the defendant in respect of any actions or suits upon such bond, the said money so brought in shall be deemed and taken to be in full satisfaction and discharge of the said bond; and the court shall give judgment to discharge every such defendant of and from the same accordingly. 136 This section was the modern enactment of the Statute of William III and the Statute of Anne. Actions upon bonds with special conditions subject to the Statute of William III are in Victoria now governed by ss 30(1)-(3) of the Instruments Act. Actions upon common money bonds subject in the past to the Statute of Anne, are now subject in Victoria to ss 30(4) and (5) of the Instruments Act. It is necessary to address each statute (or in this case, ss 30(1)-(3) and then ss 30(4) and 5 of the Instruments Act) in turn. 137 The effect of the Statute of William III (now enshrined in Victoria in ss 30(1)-(3) of the Instruments Act) was summarised in Wall v Rederiaktiebolaget Luggude: see [19] above. As that case made clear, the Statute of William (ss 30(1)-(3) of the Instruments Act) remains concerned with actions upon bonds with special conditions. These provisions apply to covenants and agreements in writing containing a penal sum for non-performance. In those circumstances, a plaintiff must assign or suggest breaches, and can only recover damages for the breaches so assigned or suggested: Bullen and Leake at 116. 138 The Statute of Anne (now enshrined in ss 30(4) and (5) of the Instruments Act) was and remains quite different. Section 30(4) applies where a "condition or defeasance" of a bond is that it will be voided if payment of a lesser sum on a certain date and place is made. Section 30(5) applies where an action is pending against a defendant in respect of a penal bond. These provisions apply defensively where an action is brought against a defendant in respect of a bond. In those circumstances, it is sufficient to declare for a penalty without assigning any breach of the condition: Bullen and Leake at 116; Smith v Bond (1833) 10 Bing 125 at 132. 139 These differences between the Statutes of William III and Anne are long standing and of practical and legal significance: see [19] and [25] above. However, as ss 30(1)-(3) of the Instruments Act makes clear, it now extends beyond bonds to actions "on any penal sum for non-performance of any covenant or agreement in any indenture deed or writing". The only Australian authority to consider a provision equivalent to s 30(1) was Simos J in Castles v Goodrick and Anor as Executors of the Estate of the late Castles (Unreported, Simos J, 21 August 1998). His Honour stated: I note that the statute of William III referred to by counsel for the defendant was repealed by the Imperial Acts Application Act 1969 which enacted in substitution therefor s 33 of that Act, subs(1) of which is in the following terms:- 33.(1) In any action on any bond or on any penal sum for non-performance of any covenant or agreement, the plaintiff may assign as many breaches as he thinks fit, and may recover not only such damages as have been usually awarded in such cases, but also damages for such of the said breaches so assigned as the plaintiff proves to have occurred. Although it is unnecessary for me to decide the question it may well be that the general effect of s 33 and, in particular, subs (1) thereof, is that when a claim is made at common law to recover "any penal sum for non-performance of any ... agreement" the plaintiff is not entitled to recover the full amount of the "penal sum" (penalty) but is entitled to recover "not only such damages as have been usually awarded in such cases, but also damages for such of the said breaches so assigned as the plaintiff proves to have occurred." In that event it may well be that the position under that section is, in general, the same as the position in equity. 140 As the preceding analysis makes clear, the relevant provisions of the Instruments Act continue to be applicable and, in doing so, adopt and restate the necessary requirement of breach. (4) Other Facts Sought to be relied upon by ANZ 141 Numerous 'facts' were sought to be tendered by ANZ as relevant to the proper construction of the documents governing the banker-customer relations relating to the Exception Fees in issue. ANZ submitted that such 'facts' were relevant to the surrounding circumstances in which the contracts giving rise to the Exception Fees were entered into. Most of those generalised 'facts' were directed towards how ANZ assesses, approves and authorises transactions. ANZ submitted that these 'facts' were relevant, inter alia, to ANZ's contention that the Exception Fees were not charged for breach of contract and were charged for services supplied to customers by ANZ. The applicants objected to the tender on the grounds of relevance. 142 In construing the words in a contract, evidence of surrounding circumstances may be relevant: see Charrington & Co v Wooder [1914] AC 71 at 82; Reardon Smith Line Limited v Hansen-Tangen [1976] 3 All ER 570 at 574; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 618; MBF Investments Pty Ltd v Nolan [2011] VSCA 114 at [195]-[203]. That evidence is not admissible to contradict the language of the contract when it has a plain meaning: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at 62-63; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; cf Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1 at [46], [83], [122] and [238]. That is this case – there is no ambiguity in the contractual terms. Moreover, and no less importantly, ANZ made no attempt to tie the generalised 'facts' concerning bank practices to the 17 Exception Fees. Nor did ANZ submit that these were 'facts' known to both parties prior to entering into the contract: cf Codelfa at 352. For those reasons, ANZ's tender of these documents is rejected on the grounds of relevance. D EXCEPTION FEES 143 Different fees were charged for different events and for different types of accounts: see Sch C. The Exception Fees will be addressed under the following headings, in chronological order within each heading: Retail Deposit Accounts, Consumer Credit Card Accounts, Commercial Credit Card Accounts and Business Classic Accounts. Each Exception Fee is considered by reference to the documents relevant to that fee and in the context of the legal framework for banker-customer relations discussed above. (1) Retail Deposit Accounts 144 Retail deposit accounts are offered to retail customers. The ANZ Access Advantage Account is a Retail Deposit Account, specifically a transaction account or "everyday" account. 145 Three specific accounts are relevant. The specific accounts and, where relevant, the pre-arranged credit limit are listed below: 1. In October 2004, Saliba opened an Access Advantage Account (Saliba's Access Advantage Account). As at 13 February 2006 and 12 October 2006, Saliba's Access Advantage Account had an ANZ Assured Overdraft Facility with an approved overdraft limit of $1,000. The relevant Exception Fees are No 1 and 3: see [195]ff and [147]ff below. 2. In August 1991, Andrews (jointly with his wife) held an Access Advantage Cheque Account (Andrews' Access Advantage Account). As at 23 February 2007, Andrews' Access Advantage Account had an approved overdraft limit of $500. The relevant Exception Fee is No 2: see [216]ff below. 3. In February 1996, Mr Field opened a saving account, now known as an Access Advantage Account (Field's Access Advantage Account). As at 15 November 2006, Field's Access Advantage Account had an ANZ Assured Overdraft Facility with an approved overdraft limit of $1,000. The relevant Exception Fee is No 4: see [210]ff below. 146 The Separate Questions concern one honour fee, two dishonour fees and one non-payment fee charged on these Access Advantage Accounts. Each fee is considered in turn. (a) Exception Fee No 3 – Saving Honour Fee – 14 February 2006 – Saliba (i) Introduction 147 As at 10 February 2006, the closing balance of Saliba's Access Advantage Account was a debit balance of $964.60. On 13 February 2006, three separate deposits (of $165, $360 and $480) were credited to Saliba's Access Advantage Account. 148 On or about 13 February 2006, ANZ received a request for a payment to be made from Saliba's Access Advantage Account, by way of a direct debit, of $1,246.11 (described on the account statement as being "TO AUS MORTGAGE SEC"). ANZ honoured the direct debit. The effect of the direct debit was that the debit balance increased to $1,205.71 (which was $205.71 in excess of the approved overdraft limit of $1,000). On 14 February 2006, ANZ charged to Saliba's Access Advantage Account a Saving Honour Fee of $29.50. 149 As at 14 February 2006, the following documents were said to be relevant to the operation and maintenance of Saliba's Access Advantage Account and pursuant to which the Saving Honour Fee was charged: 1. ANZ Saving & Transaction Products – Product Disclosure Statement (March 2005) (the PDS March 2005); 2. ANZ Personal Banking Account Fees and Charges (January 2006) (the Account Fees and Charges Jan 2006); 3. Letter of Offer from ANZ to Saliba dated 3 December 2004 (the Saliba Letter of Offer); and 4. ANZ Assured & Personal Overdraft – Terms & Conditions (December 2004) (Overdraft Terms & Conditions Dec 2004). The parties agreed that the documents listed in subparagraphs 1 and 2 above were relevant but did not agree on which parts of the documents were relevant or the legal effect of them. In relation to the documents listed in subparagraphs 3 and 4 above, ANZ rejected the contention that they were relevant in whole or in part. As will be self evident, the content and construction of these documents must be considered in the context of the legal (constitutional, statutory and regulatory) framework set out above. (ii) The relevant documents and the relevance of the regulatory framework and other documents 1. PDS March 2005 150 The first document, the PDS March 2005, contained terms and conditions for accounts which did not include a credit facility, including the ANZ Access Advantage Account. 151 The cover stated that it contained terms and conditions, that it was to be read in conjunction with the "ANZ Personal Banking Account Fees and Charges Booklet", and that the two documents together formed the Product Disclosure Statement. At the time of Saliba's Honour Fee, the relevant Account Fees and Charges document was dated January 2006: see [149(2)] above. As a PDS, the documents were required to contain the information set out in Pt 7.9 of the Corporations Act: see [93]-[98] above. The Introduction to the PDS March 2005, under the heading "If you are opening a new account, this PDS will apply immediately", also stated: In addition to the PDS, other terms and conditions, including those implied by law, apply. To the extent permitted by law, this PDS shall prevail in the event of any inconsistency. If the law implies terms and conditions which cannot be excluded, ANZ's liability under those implied terms and conditions will be limited to the maximum extent permitted by law. 152 Clause 5 of the PDS March 2005, entitled "Bank Fees and Charges", stated: All ANZ accounts are subject to specific account related fees and charges. Other general fees and charges may also apply to your account for other services or account activity. ANZ offers fee free transaction banking on some accounts under certain conditions. ANZ may also waive fees under certain conditions. If ANZ fails to collect a fee to which it is entitled, ANZ has not waived its right to collect the fee for future transactions of the same nature. For information about: • specific account fees and charges (including the types of transactions you can make, monthly withdrawal quotas and specific fee amounts); … Please refer to the 'ANZ Personal Banking Account Fees and Charges' booklet. For information about other general fees and charges, please refer to the 'ANZ Personal Banking General Fees and Charges' booklet. This booklet is available from any ANZ branch or on-line at www.anz.com. 153 Clause 2.12 of the PDS March 2005, entitled "Provision of Credit", stated that: [1] ANZ does not agree to provide any credit in respect of your account without prior written agreement, which (depending on your account type) can be through an ANZ Equity Manager Facility, an Overdraft Facility or an ANZ Assured facility. [2] It is a condition of all ANZ accounts that you must not overdraw your account without prior arrangements being made and agreed with ANZ. [3] If you request a withdrawal or payment from your account which would overdraw your account, ANZ may, in its discretion, allow the withdrawal or payment to be made 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 Charge' booklet for details); • the overdrawn amount, any interest on that amount and the Honour Fee will be debited to your account; and • you must pay 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.) For the ease of reference, the sentences have been numbered, eg [1]. The bracketed numbers did not appear in the original document. The sentence numbered [2] was defined in the Amended Fast Track Statement (AFTS) as the "Saving Overdraw Condition". 154 The parties referred to cl 2.3 of the PDS March 2005 entitled "Cheques". Under the subheading "When should a cheque be dishonoured or payment refused", s 2.3 stated that "at [ANZ's] discretion, a cheque may be dishonoured or payment refused where there are insufficient funds in the account…". Clause 2.3 does not apply to Exception Fee No 3. Exception Fee No 3 concerned a direct debit being honoured, not a cheque being dishonoured. 155 Clause 2.5 of the PDS March 2005, entitled "Withdrawing or transferring money", stated that "[u]nless otherwise noted, you may withdraw money from your account (provided your account contains sufficient funds)". The phrases "direct debit" and "periodical payment" were defined in cl 2.6 as follows: A direct debit is a debit from your ANZ account that you arrange through a merchant or other service provider. A periodical payment is a debit from your ANZ account, which you instruct ANZ to make to the account of another person or business. … 156 In cl 2.7, entitled "Crediting of withdrawals and deposits", it stated: Generally, any transaction made on your ANZ account will be processed to your account on the same day provided it is made before the following times: … A Dishonour Fee is also charged if you authorise a third party to direct debit your account and payment is not made because there are insufficient cleared funds in your account. A 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. (Emphasis added.) Clauses 2.3 and 2.7 of the PDS March 2005 (to the extent it refers to a Dishonour Fee) were collectively referred to in the AFTS as a "Saving Dishonour Event". The other aspect of cl 2.7 dealing with the Non-Payment Fee was referred to in the AFTS as the "Periodical Payment Dishonour Event" or the "Saving Periodical Payment Dishonour Event". 157 Finally, cl 8, entitled "Electronic Banking Conditions of Use", stated that ANZ may cancel a card or electronic access without prior notice if, amongst other things, the account has been overdrawn or is otherwise considered out of order by ANZ as follows: Cancellation of Cards or Electronic Access ANZ may cancel any card, CRN or electronic access: • without prior notice if: • … • the account has been overdrawn, or you have exceeded your agreed credit limit; or … … Withdrawal of Electronic Access ANZ may withdraw your electronic access to accounts … without prior notice if: … • any one of the accounts is overdrawn or will become overdrawn, or is otherwise considered out of order by ANZ; … 158 Clause 8 also contained a subclause headed "Processing instructions – general" which provided, inter alia: The account holder authorises ANZ to act on the instructions you enter into electronic equipment. Any electronic transaction made by you cannot be cancelled, altered or changed by you unless allowed by the applicable terms and conditions. 2. Saliba Letter of Offer 159 By the Saliba Letter of Offer (see [149(3)] above), ANZ offered Saliba an "ANZ Assured credit facility", being one of the prior arrangements referred to in cl 2.12 of the PDS March 2005: see [153] above. The Saliba Letter of Offer stated, amongst other things, that: 1. the terms of the credit facility were set out in the letter and the Overdraft Terms & Conditions Dec 2004, the latter which is considered below; 2. the Credit Limit, described as the "maximum amount of credit", was $1,000; 3. for "Repayments", "Payments must be made so the daily closing unpaid balance after processing of all transactions, interest and fees does not exceed your credit limit"; 4. the "Default rate", being the rate of interest on amounts borrowed in excess of the overdraft limit, was 4% per annum above the standard rate on interest rate charged; 5. the letter did not contain all of the pre-contractual information required to be given to Saliba and that more information was contained in the "accompanying ANZ Assured & Personal Overdraft Terms and Conditions booklet". 3. Overdraft Terms & Conditions Dec 2004 160 The Overdraft Terms & Conditions Dec 2004 (see [149(4)] above), contained "the general terms and conditions for" the "ANZ Assured" credit facility. The full contract comprised the general terms set out in the booklet and any individual terms as outlined in a letter of offer. It also included the statement that the booklet did not "contain all of the pre-contractual information required to be given to you. The rest of the information is contained the covering Letter of Offer". The term of the facility was addressed in cl 1 of the Overdraft Terms & Conditions Dec 2004. It stated that: Your facility commences when ANZ links it to your account. You can terminate your facility at any time by repaying all amounts owing and notifying ANZ. … If there is no nominated date, ANZ will not terminate your facility during the first 12 months, unless there is an event of default. … 161 Clause 8 headed "Exceeding your credit limit", stated that "You must not draw cheques or require payments that exceed your credit limit". The rest of the clause stated: If you request a withdrawal or payment from your credit facility account which would result in you exceeding your credit limit, ANZ may, in its discretion, allow the withdrawal or payment to be made on the following terms: • interest will be charged on the overdrawn amount at the default rate set out in your Letter of Offer; • an Honour fee may be charged for ANZ agreeing to honour the transaction that resulted in the overdrawn amount (refer to the Product Disclosure Statement for the account to which your credit facility is attached for more information); • 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 you credit facility account. 162 Clause 9 headed "Default rate" stated that the credit limit set out in the Letter of Offer for the overdraft facility was "the maximum debit balance (inclusive of any interest and fees charged to your account) which you may incur". The clause stated that the default rate of interest was set out in the Letter of Offer and would be charged on the amount in excess of the customer's credit limit. 163 Clause 14 contained "ANZ's rights if there is a default under this agreement" and stated: Lending for personal use, regulated by the Consumer Credit Code If any of the following Events of Default occur, ANZ can refuse to provide further credit and (subject to notice as described below) require you to make immediate repayment in full of all money you owe ANZ or will or may owe ANZ in the future under the facility. An Event of Default occurs: • If you do not make a payment by its due date; • If there is a breach of any term or condition of this facility, or any other facility provided to you by ANZ, or any security provided to ANZ for this facility or the other facility; or … Before ANZ requires immediate repayment in full, you will be given 30 days written notice to allow you an opportunity to remedy your default. If ANZ fails to give you notice regarding any Event of Default, ANZ has not waived its right to do so later. (Emphasis added.) 164 Finally, cl 15 headed "Enforcement expenses" stated that: If you breach any term of this facility or any security required under it, you will be required to pay expenses reasonably incurred by ANZ in enforcing or preserving its rights under this facility or the security. These expenses include those incurred by ANZ in preserving or maintaining property subject to the security, collection expenses and expenses resulting from dishonour of a cheque or payment. Enforcement expenses may be debited in the same manner as other fees and charges. (Emphasis added.) 4. Account Fees and Charges Jan 2006 165 The Account Fees and Charges Jan 2006 (see [149(2)] above) outlined "the most essential fees and charges for [ANZ's] personal product range" and "the most common fees and charges". However, the booklet did state that "[o]ther fees and charges may apply" and referred a reader of that document to the "ANZ Personal Banking General Fees and Charges booklet". The latter document was not in evidence. 166 Under the heading "Associated Account Fees and Charges" the following entries appeared: … Direct Debit or Credit Free An arrangement you make with a third party to debit or credit your account directly. • Dishonour Fee may apply if a payment is dishonoured Note: Although ANZ does not charge for providing this service, the third party may charge a fee. Dishonour Fee $45 Charged 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. Honour Fee $29.50 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. 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 /Margins Overdrawn Account (accounts without a credit limit) • ANZ Retail Index Rate plus a margin of 4% per annum The ANZ Retail Index Rate is published weekly in the Australian Financial Review and other major newspapers. Periodical Payments … Non-payment fee $45 5. The relevance of the regulatory framework and other documents 167 Much of the detail in the documents (at [150]-[166] above) was included to satisfy the relevant requirements of the regulatory framework – in this case, the Corporations Act and the Codes of Conduct / Banking Practice. So, for example, Pt 7.9 of the Corporations Act prescribed the minimum contents of the PDS. It was contractual in nature – the PDS stated it contained terms and conditions: see [151] above. That description is, however, not determinative of whether a particular provision in the PDS is a term or condition or is capable of giving rise to a breach: see [83] and [85] above. 168 ANZ also referred to a number of other documents. The contents of some of these documents were tendered in evidence by consent. During the course of submissions, Senior Counsel for ANZ informed the Court that ANZ would not be advancing any argument that the Court should give any weight to them. In my view, none of the other documents referred to by ANZ result in a different construction or result. They may be put to one side. (iii) Proper Construction – Saving Honour Fee? 169 What then is the proper construction of these documents and, in particular, do the provisions described at [150]-[166] above and [174] below (and, in particular, at [153] and [161] above), when read as a whole, impose on Saliba a contractual obligation not to, or not to attempt to, make a withdrawal or payment from his ANZ account if the withdrawal or payment would have the effect of overdrawing the account beyond the approved credit limit (defined as the Saving Overdraw Condition in the AFTS as explained in [153] above). For the reasons that follow, I do not accept that the provisions impose such a contractual obligation on Saliba. Such a construction is contrary to the express words of the contract (read as a whole), contrary to established banking principles reflected in the contract between ANZ and the customer and is not supported by authority. 170 The applicants submitted that the language of cl 2.12 of the PDS March 2005 (at [153] above) and cl 8 of the Overdraft Terms & Conditions (at [161] above) was emphatic ("condition" and "must not") and that no other sensible meaning (other than contractual obligation) could be given to the words. Indeed, the applicants submitted that "it [was] hard to imagine language that could be more mandatory, normative or prescriptive". The applicants' submission that the provisions described at [152]-[166] above and [174] below (and, in particular, at [153] and [161] above), when read as a whole, should be construed as imposing on Saliba a contractual obligation not to, or not to attempt to, give an instruction to ANZ to make a withdrawal or payment from his account if the withdrawal or payment would have the effect of overdrawing the account beyond the approved credit limit carried with it a necessary corollary that the honour, dishonour and non-payment fees were payable for breach of either obligation. As stated above, I reject those contentions. It is neither appropriate nor possible to select one or two sentences in one document and then construe it in the manner contended for by the applicants. By way of contradistinction, ANZ submitted that the clauses simply defined the limits of ANZ's obligation to honour Saliba's instructions (cf Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) at [302], [306], [314], [317] and [321]; Office of Fair Trading v Abbey National plc [2008] EWHC 2325 (Comm) at [42]-[43], [61]-[62], [71], [80] and [87]-[88]; and Office of Fair Trading v Abbey National plc [2009] EWHC 36 (Comm) at [24]-[25] and [30]-[31]) or that the passages, when read in context and in light of the surrounding circumstances, should properly be construed as advisory or explanatory and not as a contractual obligation of the customer. In my view, that submission should also be rejected. 171 First, the express terms. The statements relied upon by the applicants appear in a section of the PDS March 2005 headed "Provision of Credit" (see [153] above) and in other identified parts of the documents set out at [149] above. 172 The PDS March 2005 set out some of the terms and conditions of the contract between ANZ and its customers: see [151] above. The first part of the section headed "Provision of Credit" stated that ANZ was not under an obligation to extend credit to the customer beyond that expressly agreed and set out the circumstances in which ANZ might nevertheless agree to honour a transaction that overdrew the customer's account and thereby lend additional money to the customer: see [153] above. The second sentence stated: It is a condition of all ANZ accounts that you must not overdraw your account without prior arrangements being made and agreed with ANZ. 173 However, the section then stated: If you request a withdrawal or payment from your account which would overdraw your account, ANZ may, in its discretion, allow the withdrawal or payment to be made ... 174 Other provisions in the PDS March 2005 and in other documents were relied upon by the applicants including the statements: 1. in cl 2.3 of the PDS March 2005 that "at [ANZ's] discretion, a cheque may be dishonoured or payment refused where there are insufficient funds in the account": see [154] above; 2. in cl 2.5 of the PDS March 2005 that "you may withdraw money from your account (provided your account has sufficient funds)": see [154] above; 3. in cl 8 of the PDS March 2005 containing the "Electronic Banking Conditions of Use" that ANZ may cancel a card or electronic access for a card or withdraw electronic access to accounts if, amongst other things, the account has been overdrawn or is otherwise considered out of order by ANZ: see [157] above; 4. in the Saliba Letter of Offer in respect of his Assured Overdraft Facility that the "maximum amount of credit" for the overdraft was $1,000, that "Payments must be made so the daily closing unpaid balance after processing of all transactions, interest and fees does not exceed your credit limit" and the rate of interest on amounts borrowed in excess of the overdraft limit was 4% above the standard rate on interest and was referred to as a "default rate": see [158] above; 5. in cl 8 of the Overdraft Terms and Conditions Dec 2004 (headed "Exceeding your credit limit") that "You must not draw cheques or require payments that exceed your credit limit": see [161] above; 6. in cl 9 of the Overdraft Terms and Conditions Dec 2004 (headed "Default rate") that the credit limit set out in the Letter of Offer for the overdraft facility was "the maximum debit balance (inclusive of any interest and fees charged to your account) which you may incur": see [162] above; and 7. in cl 15 of the Overdraft Terms and Conditions Dec 2004 (headed "Enforcement expenses" that "[i]f you breach any term of this facility or any security required under it, you will be required to pay expenses reasonably incurred by ANZ in enforcing or preserving its rights under this facility or the security. These expenses include those incurred by ANZ in preserving or maintaining property subject to the security, collection expenses and expenses resulting from dishonour of a cheque or payment. Enforcement expenses may be debited in the same manner as other fees and charges": see [164] above. 175 It is these provisions which are to be construed. The applicants submitted that whenever Saliba attempted to make a withdrawal or payment from his Access Advantage Account by giving a relevant instruction to ANZ, ANZ would have a discretion as to whether it would allow the withdrawal or payment. That submission is too broad. A distinction must be drawn between an account that is in credit, or at least within a pre-arranged approved overdraft limit, and one that is in excess of the pre-arranged limit, whether that limit be zero or a specified sum less than zero. 176 When the Access Advantage Account is in credit (as that term has been described in [175] above), the applicants' submission is contrary to the fundamental principles which underpin a banker-customer relationship. A savings or deposit account is in law a loan to the banker. 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. 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: see generally [81]-[82] above. 177 On the other hand, if the issue of a cheque by a customer, or the giving of a payment instruction or withdrawal request to its bank, would have the effect of overdrawing a customer's account, it is construed as a request by the customer for an advance or loan from the bank and the bank does have a discretion to approve or disapprove the loan: see generally [82(2)] above. A written order by the 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: see generally [82(3)] above. 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: see generally [82(4)] above. None of the terms and conditions attached to Saliba's Access Advantage Account alter those arrangements. 178 Does the same position apply when the Access Advantage Account is less than zero but is subject to a pre-arranged approved overdraft limit? That is the relevant question in relation to Exception Fee No 3 because Saliba's Access Advantage Account had an approved overdraft limit of $1,000 (see [148] above) but that pre-arranged credit limit was insufficient to meet a request made on or about 13 February 2006 that payment be made from Saliba's Access Advantage Account by direct debit. ANZ honoured the request thereby temporarily increasing Saliba's overdraft limit to $1,205.71. 179 In the context of Exception Fee No 3, upon giving a payment instruction to ANZ and ANZ exercising its discretion to provide a further loan to Saliba, Saliba immediately became liable to pay the exception fee to ANZ – an Honour Fee. The precise description and amount of the fee could not be ascertained until ANZ had chosen to either honour or dishonour the instruction; nevertheless the relevant act which caused the imposition of the fee was the giving of the instruction, or the request, by Saliba. 180 Subject to any contractual provision to the contrary, there is an obligation on the bank to pay a cheque or meet a payment instruction or withdrawal request provided the overdraft arrangements that have been made are adequate to cover the amount of the cheque: see generally [82(3)] above. In the context of Exception Fee No 3, Saliba's pre-arranged approved overdraft limit was not adequate. The provisions attached to Saliba's Access Advantage Account expressly incorporated the principles summarised in [177] above: see cl 2.12 of the PDS March 2005 referred to in [153] above and cl 8 of the Overdraft Terms & Conditions Dec 2004 referred to in [161] above. 181 ANZ had a discretion to "allow" a withdrawal or payment which would have the effect of overdrawing Saliba's account beyond the approved credit limit. The retail deposit account contracts stipulated that the Honour Fee was charged for ANZ agreeing to honour a transaction that would overdraw the customer's account: see cl 2.12 of the PDS March 2005 and the Account Fees and Charges Jan 2006 booklet extracted at [166] above. Such an exercise of a discretion is not consistent with the Honour Fee being payable on breach of a term or condition. A retail deposit customer does not breach his or her contract with ANZ when ANZ permits the customer to overdraw his or her account. The request is made by the customer. The bank decides whether to exercise its discretion and meet the request: see [82(2)] above. If it does so, then the bank charges the fee – in this case, the Honour Fee – a fee that was not payable on breach of any term or condition of the contract between ANZ and Saliba but on the bank meeting a request from a customer. 182 Put another way, the action in overdrawing the account was not a unilateral action by Saliba. It was an action that required the consensual conduct of the bank and the customer. That is not, and cannot be, conduct constituting a breach of some contractual obligation. If ANZ agreed to and approved a transaction that overdrew a customer's account (thereby allowing the transaction to proceed), the customer could not then be in breach of its contract with ANZ. Once agreed and approved, the transaction fell within the express exception in the statement relied on by the applicants (a prior arrangement having been made and agreed with ANZ), or fell outside of the statement for the reason that ANZ had separately approved the transaction. Whichever way the transaction is characterised, a customer could not breach its contract with ANZ by giving a payment instruction to ANZ that had been allowed by ANZ. Of course, the additional borrowing of the customer was required to be repaid to ANZ; however, that borrowing was not a breach of contract. The Honour Fee was charged in respect of ANZ's decision concerning the request for additional borrowing. 183 The applicants contended that construction was not consistent with the fact that ANZ could withdraw access to Saliba's accounts if one of them became overdrawn beyond the approved credit limit and alternatively, by the fact that such an account was referred to as being "out of order": see [157] and [174(3)] above. I reject that contention. The provisions prescribe consequences that might flow from a customer overdrawing an account. Those consequences include the right of ANZ to terminate the contract with Saliba and, I accept, are consistent with sanctions normally attendant upon breach. However, such a conclusion does not alter the fact that the question to be determined is whether the fee in issue, an Honour Fee, was payable on breach of a term and condition. It was not. It was payable by a customer in response to a request for credit – a request that in this case was met. 184 Such a construction is further supported by considering the manner in which the same provisions operate when a payment instruction or withdrawal request to a bank which would have the effect of overdrawing the customer's account or pre-arranged credit limit is not approved by a bank – in other words an attempt to overdraw the account. Again: 1. the payment instruction or withdrawal request is a request by the customer for an advance or loan from the bank: see [82(2)] above; 2. the bank has a discretion to approve or disapprove the loan: see [82(2)] above. If the request is disapproved, no advance or loan is made by the bank to the customer. The account is not overdrawn. The customer attempted to overdraw it but did not. Thus, even if one or more of the provisions were a contractual obligation, there was no breach. 185 It is appropriate at this point to make some further points about the applicants' alternative submission that the relevant provisions imposed a contractual obligation not to attempt to overdraw their account. Again, it is contrary to the express words of the provisions and is not supported by authority. The relevant provisions of the PDS refer to overdrawing, not attempting to overdraw. Indeed, such a construction would be contrary to those provisions which expressly stated that ANZ may allow overdrawing: see [173] above. Moreover, there is no basis for the implication of such an obligation: the obligation is not reasonable and equitable vis a vis the customer; the obligation is not necessary to give business efficacy to the contract; nor is such an obligation so obvious to ANZ and its customers that it "goes without saying": BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283. 186 Indeed, if the contractual obligation advanced by the applicants was implied into the banker-customer contract it would lead to absurd results. As an examination of Exception Fee No 3 shows, the payment instruction given to ANZ by Saliba would have overdrawn his account but was, nevertheless, honoured by ANZ. The relevant provisions of the contract between ANZ and Saliba addressed such an event: see [152]-[166] and [174] above. They provided for the charging of a fee in connection with ANZ's decision whether or not to honour the payment instruction: see [166] above. If the applicants' construction of the customer contracts was correct, a customer would breach its contract with ANZ if: 1. the customer issued a cheque expecting that funds would be available by the time the cheque was presented for payment by the payee, but the funds were not available and yet ANZ honoured the cheque; or 2. the customer had established a monthly direct debit with a utility provider and, a long time later, did not have sufficient funds in the account to meet the direct debit on the day of the month it became due. Such a result is absurd and provides a further reason why the applicants' construction should not be adopted. Indeed, the applicants did not refer to any authority in Australia or the United Kingdom that has construed such a banker-customer contract as imposing a contractual obligation on the customer not to attempt to overdraw their account: cf Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) at [310]. 187 Finally, even if such an obligation could be implied into the customer contract (a view I reject), the Honour Fee was not charged by reason that a payment instruction was given. The Honour Fee was not charged in respect of a transaction that attempted to overdraw the account. The Honour Fee was not charged in respect of each transaction that was honoured and caused the account to be overdrawn or further overdrawn. The Honour Fee was charged in respect of ANZ's decision about the request for additional borrowing: cf Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) at [311]. The Honour Fee was charged once per day, regardless of how many transactions occurred on that day that overdrew the account. 188 In characterising the Honour Fee for the purposes of applying the law of penalties, it is also important to recall the range of fees and charges levied by ANZ in respect of its retail deposit products. Those fees were set out in the Account Fees and Charges Jan 2006 booklet: see [165]-[166] above. The booklet set out a range of fees in respect of retail deposit accounts including monthly account service fees, withdrawal fees, ATM and EFTPOS transaction fees, various fees in connection with cheques (cashing cheques, re-presentation and special clearance), statement fees, money transfer fees, honour, dishonour and non-payment fees. None of the fees was in the nature of "agreed damages" payable for breaches of contract. Indeed, in cl 5 of the PDS March 2005 headed "Bank Fees and Charges" it stated, in part, that: All ANZ accounts are subject to specific related fees and charges. Other general fees and charges may also apply to your account for other services or account activity … 189 Much of the analysis of the construction of the contract between ANZ and Saliba has focussed on the PDS. Of course, that was not the only document containing provisions relevant to the banker-customer relationship. Other provisions in the PDS and in other documents were referred to: see [174] above. Many of the provisions identified did not impose a contractual obligation on the customer: eg [174(1)-(2) and (5)] above. Others defined the extent of ANZ's contractual obligation to extend credit: eg see [174(4)] above. Others again identified provisions which entitled ANZ to take steps in the absence of any breach of contract: eg see [174(3) and (4)] above. None of those provisions lead to a different construction of the relationship between Saliba and the ANZ. (iv) Other submissions 190 Before leaving Exception Fee No 3, further aspects of the submissions should be addressed. First, the applicants submitted that if the Exception Fee was payable as a result of a breach (not a view I have formed), then liability for a payment need not be incurred contemporaneously with an event of breach to attract scrutiny under the doctrine of penalties. Why? Because the applicants submitted that the proper nexus is causative, not temporal. In support of that contention, the applicants referred to a line of authorities applying the doctrine to payments incurred upon termination of a hire purchase contract: see Financings Ltd v Baldock [1963] 2 QB 104, O'Dea and AMEV-UDC Finance Ltd. In each of those cases, a party breached a term of a contract; the other party then elected to terminate the contract for that breach, and imposed a penal liability upon the party in breach. I do not consider that these cases are authority for some general proposition that liability for a payment need not be incurred contemporaneously with an event of breach to attract scrutiny under the doctrine of penalties because the proper nexus is causative, not temporal. What the historical analysis revealed (see B(1) above) is that the courts have always looked to the substance, not the form, of the provisions subject to challenge and then, with the intervention of equity and, later, statute, moulded the relief accordingly. 191 Secondly, the applicants submitted, in the alternative, that the terms imposed a clear obligation of the kind described by Brereton J in Integral, and therefore fall within the ambit of the law of penalties. For the reasons set out at [73]-[74] above, I reject that contention. In any event, I do not accept that Exception Fee No 3 is analogous or similar to a traditional money bond. The common feature of penal bonds was the singular obligation to pay a sum of money, typically on the failure to pay a smaller sum by a specified date and as a collateral obligation to a primary obligation that existed under a separate contract: see [9] above. Exception Fee No 3 was charged by ANZ in connection with the supply of a banking product within a single contract, was able to be charged on many occasions and was charged in circumstances in which the customer was entitled to terminate the contract under which the fees were charged at any time of its choosing without penalty. 192 Thirdly, ANZ submitted that this Court should adopt the unanimous approach of the United Kingdom Supreme Court in Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) and hold that charges for unauthorised overdrafts (equivalent to honour fees) were consideration for the package of banking services supplied to personal current (transaction) account customers. In my view, the approach of the United Kingdom Supreme Court should not be and cannot be adopted just because the view is expressed. Account must be taken of the fact that the regulatory framework is different. The terms of the "arrangements" between the bank and the customer are different. There can be no automatic application of what is said by the United Kingdom Supreme Court to the contracts under consideration in the Separate Questions. (v) Conclusion 193 For those reasons, the answers to question 1 of the Separate Questions in relation to Exception Fee No 3 are: (a) No. (b) No. (c) Not necessary to answer. (b) Exception Fees No 1, 2 and 4 194 It is appropriate to consider Exception Fees No 1, 2 and 4 together. Each concerned the charging of a dishonour fee for an attempted overdrawing of the account. The distinguishing factor was the method by which the account was attempted to be overdrawn – No 1 was a direct debit, No 4 was a periodical payment and No 2 was by cheque. As will become apparent, the method adopted was and is not important. (i) Exception Fee No 1 – Saving Dishonour Fee – 13 October 2006 - Saliba 195 As at 9 October 2006, the closing balance of Saliba's Access Advantage Account was a debit balance of $574.28. 196 On or about 12 October 2006, ANZ received a request for two payments to be made from Saliba's Access Advantage Account by way of a direct debit – one of $97.01 and one of $597.12 (both described on the account statement as being "TO PERPETUAL PERPETUAL TRUSTEES" (sic)). 197 The effect of the first direct debit was that the debit balance of Saliba's Access Advantage Account increased to $671.29. If the second direct debit had been made it would have increased the debit balance of Saliba's Access Advantage Account to $1,268.41 (which would have been $268.41 in excess of the approved overdraft limit of $1,000): see [145] above. On 13 October 2006, the second direct debit was dishonoured with effect from 12 October 2006, the entry in Saliba's Access Advantage Account relating to that direct debit was reversed with effect from 12 October 2006 and a Saving Dishonour Fee of $35 was charged to the account. 198 As at 13 October 2006, the express written terms regarding the operation and maintenance of Saliba's Access Advantage Account, and pursuant to which the Saving Dishonour Fee was charged, relevantly comprised: 1. the PDS September 2006; 2. ANZ Personal Banking Account Fees and Charges (August 2006) (the Account Fees and Charges Aug 2006); and 3. the Saliba Letter of Offer: see [149(3)] and [159] above; 4. the Overdraft Terms & Conditions Dec 2004: see [149(4)] and [160] above. Again, the parties agreed that the documents listed in paragraphs 1 and 2 contained relevant terms but did not agree on which parts of the documents were relevant. In relation to the documents listed in subparagraphs 3 and 4 above, ANZ again rejected the contention that they contained any relevant terms. 199 Consistent with the earlier version (see [150] above), the PDS September 2006 contained terms and conditions for, amongst others, the ANZ Access Advantage Account. Again the cover stated that it was to be read in conjunction with the "ANZ Personal Banking Account Fees & Charges booklet". At the time of Saliba's Dishonour Fee, the relevant Account Fees and Charges document was dated August 2006: see [198(2)] above. The two documents together were said to form the PDS. 200 So far as is relevant cl 2.5 (see [155] above), cl 5 (see [152] above) and cl 8 (see [157] above) of the PDS September 2006 were in the same form as the PDS March 2005. 201 Two clauses were different. The changes were stylistic. Clause 2.7 of the PDS September 2006, entitled "Crediting of withdrawals and deposits", now included the following statements: … A Dishonour Fee will be charged if you authorise a third party to Direct Debit your account and payment is not made because there are insufficient cleared funds in your account. A Periodical 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. … As noted above (see [156]), cl 2.7 (to the extent it referred to a Dishonour Fee) was referred to in the AFTS as a "Saving Dishonour Event". The AFTS also referred to cl 2.3 of the PDS September 2006 but that section was not relevant to Exception Fee No 1 as it did not involve a cheque. 202 Clause 2.12 of the PDS March 2005, entitled "Provision of Credit", had also been amended. Again the changes were stylistic. Clause 2.12 in the PDS September 2006 now read: [1] ANZ does not agree to provide any credit in respect of your account without prior written agreement. [2] Depending on your account type, credit can be provided through an ANZ Equity Manager facility, an Overdraft facility or an ANZ Assured facility. [3] 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 you request a withdrawal or payment from your account which would overdraw your account, ANZ may, in its discretion, allow the withdrawal or payment to be made 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 Charge' 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.) Again, the sentences have been numbered for ease of reference. The numbers do not appear in the original document. 203 The second document, the Account Fees and Charges Aug 2006, again outlined "the most essential fees and charges for [ANZ's] personal product range" and "the most common fees and charges" and stated that "other fees and charges may apply" as referred to in the "ANZ Personal Banking General Fees and Charges booklet". The entries under the heading "Associated Account Fees and Charges" were substantially in the same form as the earlier edition and stated: Direct Debit or Credit Free An arrangement you make with a third party to debit or credit your account directly. • A 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 • Charged 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 • Dishonour Fee – ANZ Access Basic Account $10 Honour Fee • 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 • Honour Fee – ANZ Access Basic Account $10 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 ATM. … Overdrawn Account Interest Overdrawn Account (accounts without a credit limit) • ANZ 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 … • Non-payment fee $35 • Non-payment Fee – ANZ Access Basic Account $10 204 The contents of the Saliba Letter of Offer (see [149(3)] and [159] above) and the Overdraft Terms & Conditions Dec 2004 (see [149(4)] and [160] above) are also applicable to this Exception Fee. 205 What then is the proper construction of these documents and, in particular, do the provisions described at [200]-[204] above, when read as a whole, impose on Saliba a contractual obligation not to, or not to attempt to, make a withdrawal or payment from his ANZ account if the withdrawal or payment would have the effect of overdrawing the account beyond the approved credit limit? Put another way, do the provisions described at [200]-[204] above, when read as a whole, lead to a different construction than that adopted for Exception Fee No 3? For the reasons that follow, the answer to both questions is "No". 206 The documents and provisions relied upon by the applicants were the same as Exception Fee No 3 except to the extent identified in [201]-[203] above. The amendments to the provisions did not substantively alter the content of the provisions from that adopted in relation to Exception Fee No 3. Indeed, the applicants and ANZ both submitted that there were no material difference between the relevant contractual documents relating to Exception Fees Nos 1 and 3 and that the same construction should follow. 207 In the context of Exception Fee No 1, Saliba's Access Advantage Account had a pre-arranged credit limit of $1,000. Saliba gave a payment instruction, by way of direct debit, to ANZ which would have the effect of overdrawing his account beyond that pre-arranged credit limit. Such a request is construed as a request by Saliba for an advance or loan from ANZ which ANZ had the discretion to approve or disapprove: see [177]-[181] above. ANZ did not approve the loan. It dishonoured the payment instruction. Upon giving the payment instruction to ANZ and ANZ exercising its discretion to not approve the loan, Saliba immediately became liable to pay the exception fee to ANZ – a Dishonour Fee. As with Exception Fee No 3 (see [179] above), the precise description and amount of the fee could not be ascertained until ANZ had chosen to either honour or dishonour the instruction; nevertheless the relevant act which caused the imposition of the fee was the giving of the instruction, or the request, by Saliba. 208 Exception Fee No 1 is the converse of Exception Fee No 3. Again, the action in issuing the payment instruction and it being rejected (so as to give rise to the Dishonour Fee) was not a unilateral action by Saliba. It was an action that required conduct of the bank and the customer. That is not, and cannot be, conduct constituting a breach of some contractual obligation. Moreover, as noted in relation to Exception Fee No 3 (see [184] above), when a payment instruction or withdrawal request is made to ANZ which would have the effect of overdrawing the customer's account or pre-arranged credit limit is not approved by a bank, there is no breach of a contractual obligation. There was an attempt to overdraw the account. If the request is disapproved, no advance or loan is made by the bank to the customer. The account is not overdrawn. The customer attempted to overdraw it but did not. Thus, even if one or more of the provisions were a contractual obligation, there was no breach. 209 For those reasons, the answers to question 1 of the Separate Questions in relation to Exception Fee No 1 are: (a) No. (b) No. (c) Not necessary to answer. (ii) Exception Fee No 4 – Saving Non-Payment Fee – 15 November 2006 – Field 210 On 15 November 2006, ANZ charged to Field's Access Advantage Account a Saving Non-Payment Fee of $35. 211 As at 15 November 2006, the express written terms regarding the operation and maintenance of Field's Access Advantage Account, and pursuant to which the Saving Non-Payment Fee was charged, relevantly comprised the documents listed in [198(1)], [198(2)] and [198(4)] above. 212 As noted at [201] above, cl 2.7 of the PDS September 2006, entitled "Crediting of withdrawals and deposits", included the statement: … A Periodical 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. … This clause in the PDS was defined in the AFTS as a Periodical Payment Dishonour Event or a Saving Periodical Payment Dishonour Event. 213 The documents and provisions relied upon by the applicants were the same as Exception Fee No 1 save for two matters – the Saliba Letter of Offer (see [149(3)] above) was not relevant but a particular part of cl 2.7 of the PDS September 2006 (see [212] above) was relevant. 214 Again, the parties accepted that the provisions were substantively equivalent to the Exception Fee No 1 and, when read as a whole, should not lead to a different construction than that adopted for Exception Fee No 1. I agree. 215 Thus, the answers to question 1 of the Separate Questions in relation to Exception Fee No 4 are: (a) No. (b) No. (c) Not necessary to answer. (iii) Exception Fee No 2 – Saving Dishonour Fee – 26 February 2007 – Andrews 216 As at 22 February 2007, the closing balance of Andrews' Access Advantage Account was a credit balance of $131.04. 217 On or about 23 February 2007, ANZ received a request for a payment to be made from Andrews' Access Advantage Account, by way of a cheque (No 200799) drawn on the account in the amount of $1,409. Had the cheque been honoured, it would have resulted in Andrews' Access Advantage Account having a debit balance of $1,277.96 (which would have been $777.96 in excess of the approved overdraft limit of $500). 218 On the following business day, 26 February 2007, the cheque was dishonoured, with effect from 23 February 2007, the entry in Andrews' Access Advantage Account relating to that cheque was reversed with effect from 23 February 2007 and a Saving Dishonour Fee of $35 was charged to Andrews' Access Advantage Account. 219 As at 26 February 2007, the documents which contained the express written terms regarding the operation and maintenance of Andrews' Access Advantage Account, and pursuant to which the Saving Dishonour Fee was charged, relevantly comprised the documents listed in [198(1)], [198(2)] and [198(4)] above. As noted above (see [201]), cl 2.7 (to the extent it referred to a Dishonour Fee) was referred to in the AFTS as a "Saving Dishonour Event". 220 The only other relevant clause of the PDS September 2006 was cl 2.3 entitled "Cheques" it stated: … What if the cheque is dishonoured? ANZ will debit your account by the amount of the cheque and may also charge you a dishonour fee. … When should a cheque be dishonoured or payment refused? At the bank's discretion, a cheque may be dishonoured or payment refused where: • there are insufficient funds in the account of the drawer; … ANZ may charge a dishonour fee when a payment on your account is dishonoured. … 221 Again, the parties accepted that the provisions were substantively equivalent to the Exception Fee No 1 (except that the Saliba Letter of Offer was irrelevant) and when read as a whole, should not lead to a different construction than that adopted for Exception Fee No 1. I agree. 222 Thus, the answers to question 1 of the Separate Questions in relation to Exception Fee No 4 are: (a) No. (b) No. (c) Not necessary to answer. (2) Consumer Credit Card Accounts 223 Consumer credit card accounts are offered to retail customers. Two specific accounts opened by Andrews are relevant. This section of the facts was not in dispute. The specific accounts and, where relevant, the pre-arranged credit limit are listed below: 1. In May 1989, Andrews opened a Visa Account (Andrews' ANZ First Low Interest Visa Account). From 30 October 2006 to 29 November 2006 and from 1 February 2010 to 28 February 2010, Andrews' ANZ First Low Interest Visa Account had an approved credit limit of $6,000. The relevant Exception Fees are Nos 5, 6 and 8: see [269]ff, [282]ff and [253]ff below; 2. In November 2001, Andrews opened a Qantas ANZ Visa Gold Card Account (later known as an ANZ Frequent Flyer Visa Gold Account) (Andrews' ANZ Frequent Flyer Visa Gold Account). On 6 December 2002, the credit limit was increased to $21,000 and then on 9 October 2005 to $23,500. The relevant Exception Fees are Nos 7 and 9: [224]ff and [260]ff below. (a) Exception Fee No 7 – Late Payment Fee – 28 March 2004 – Andrews 224 On or about 29 February 2004, Andrews received an account statement for Andrews' ANZ Frequent Flyer Visa Gold Account which recorded, inter alia, the following: 1. the closing balance of the account, as at 29 February 2004, was $6,672.89 DR; 2. the "Overdue" amount was $0.00 and the "Overlimit" amount was $0.00, and thus the "Amount Due Immediately" was $0.00; and 3. the "Monthly Payment" was $134 for which the "Due Date" was 25 March 2004. 225 Between 29 February 2004 and 28 March 2004 no payments were made to Andrews' ANZ Frequent Flyer Visa Account. On 28 March 2004, ANZ charged to Andrews' ANZ Frequent Flyer Visa Gold Account a Late Payment Fee of $35. 226 As at 28 March 2004, the documents which contained the express written terms regarding the operation and maintenance of Andrews' ANZ Frequent Flyer Visa Gold Account, and pursuant to which the Late Payment Fee was charged, relevantly comprised: 1. Credit Card Conditions of Use March 2004; and 2. ANZ Personal Banking Account Fees and Charges (October 2003) (Accounts Fees and Charges Oct 2003). The parties agreed these were the relevant documents but did not agree about which parts were relevant or the proper construction of them. 227 The first document, the Credit Card Conditions of Use March 2004 was concerned with "Consumer Finance". "[A]ccount" was defined to mean "any ANZ account which can be operated by a credit card and which you have nominated for use in this way, and includes a credit card account". 228 In part A of the document, under the heading "The Credit Limit", cl 2(b) stated that: 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 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. (Emphasis added.) In the AFTS, this clause was defined as the "Card Overdraw Condition" or the "Credit Card Overdraw Condition". (This clause is relevant to Exception Fees No 5 and 6 addressed below). 229 Clause 12 entitled "When will the account holder receive a statement of account?" stated that: (a) ANZ will mail a statement of account to the account holder each month unless: … (ii) the account holder has been in default during the statement period and for the last two (2) statement periods and ANZ has determined not to provide, and has not provided, further credit; … 230 The charges that would appear on the statement of account were listed in cl 13. Clause 13(a) stated: The monthly statement of account will 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. 231 Clause 14 concerned making payments to the credit card account and stated that "[t]he statement of account shows how much the account holder must pay to ANZ and when payment is due". It also relevantly provided: (14.1) Amounts payable immediately The greater of: (i) overlimit amounts; and (ii) overdue amounts will be shown on statements of account as payable immediately. (14.2) Amounts payable by the 'Due Date' (a) The account holder must make the '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) If the 'Closing Balance' is within the credit limit, the 'Monthly Payment' is the greater of 2% of the 'Closing Balance' (rounded up to the nearest dollar) or $10. … … 232 The phrases "overdue amount" and "overlimit account" were defined under the heading "Meaning of Words" as follows: 'overdue amount' means any 'monthly payments' that remain 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. 233 Clauses 2(b) and 14.2 (to the extent that they referred to a customer making the monthly payment shown on the statement of account by the due date and / or a customer paying any amount by which the outstanding balance exceeds the credit limit immediately), were defined in the AFTS as the "Card On-time Payment Condition". (These clauses are relevant to this Fee (No 7) and Exception Fees No 8 and 9 addressed below). 234 "Bank Fees and charges" were addressed in cl 22 which provided: 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. (Emphasis added.) 235 Clause 29 was entitled "Default, cancellation and termination". So far as is relevant, it stated: (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 … the outstanding balance on the credit card account will, at the option of ANZ, become immediately due and payable to ANZ and the credit card(s) relating to this credit card contract will be cancelled … … (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. 236 The second document, Account Fees and Charges Oct 2003, covered "ANZ Credit Card Accounts". In relation to Late Payment Fees and Overlimit Fees it provided: Late Payment Fee $35 • Charged if the "Monthly Payment" plus any "Amount Due Immediately" shown on the statement of account is not paid within 28 days of the statement date … Overlimit Fee $35 • Charged at statement date if the balance of the account exceeds the limit at any time during the statement period … 237 In the AFTS, the obligation referred to under the heading "Late Payment Fee" in [236] was defined as the "Late Payment Event". However, the AFTS referred to that obligation by reference to a letter of offer. At trial, neither the applicants nor ANZ referred to the letter of offer but to the Account Fees and Charges Oct 2003 which contained the same obligation. (This is relevant to this Exception Fee (No 7) and Exception Fees Nos 8 and 9 addressed below). 238 Similarly, in the AFTS, the obligation referred to under the heading "Overlimit Fee" in [236] was defined was defined as the "Overlimit Event". However, the AFTS referred to that obligation by reference to a letter of offer. At trial, neither the applicants nor ANZ referred to the letter of offer but to the Account Fees and Charges Oct 2003 which contained the same obligation. (Again, this is relevant to this Exception Fee (No 7) and Exception Fees Nos 8 and 9 addressed below). 239 The question is the proper construction of the relevant provisions and in particular whether the Late Payment Fee was imposed by ANZ as a result of Field's breach of those provisions. The applicants said yes. ANZ said no. It was not in dispute that the repayment provisions in cl 14 of the Credit Card Conditions of Use March 2004 (see [231] above) were contractual obligations of the customers. However, the proper construction of cl 14 and the other relevant provisions was not agreed. 240 The starting point must again be the express words of these documents. Under cl 14 of the Credit Card Conditions of Use March 2004 Conditions of Use, the statement of account shows how much the account holder must pay to ANZ and when payment is due. Clause 14 contained two relevant stipulations. First, that the greater of the overlimit amount and the overdue amount shown on statements of account was immediately payable: cl 14.1; see [232] for definitions of "overdue amount" and "overlimit account". In the context of Exception Fee No 7, that clause may be put to one side. 241 The second stipulation was that the "Monthly Payment" shown on each statement of account was payable by the "Due Date" shown on the statement of account. In the context of Exception Fee No 7, the due date was 25 days from the end of the statement period: cl 14.2. 242 However, the Conditions of Use did not stop there. They went on to specify other relevant terms and conditions: 1. ANZ reserved 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 were set out, inter alia, in the ANZ Personal Banking Fees and Charges booklets, as varied from time to time: see [234] above; 2. default, cancellation and termination: see [235] above. Relevantly, the Account Fees and Charges Oct 2003, which covered "ANZ Credit Card Accounts", stated that a "Late Payment fee" was "[c]harged if the "Monthly Payment" plus any "Amount Due immediately" shown on the statement of account is not paid within 28 days of the statement date" (emphasis added). As is self evident, the documents must be read together. 243 The question for determination is whether the "Late Payment fee" was payable as a direct result of Andrews' breach, namely his failure to pay, in the context of Exception Fee No 7, the "Monthly Payment" within 28 days? In my view, it was. The fact that there was a three day window between the period specified in cl 14.2 and the period specified in the Account Fees and Charges Oct 2003 is not determinative. Contracts may, and often do, contain stipulations which do not necessarily give rise to a breach or give rise to the possibility of one consequence but not another. Here, the stipulation in cl 14.2 of the Conditions of Use did not give rise to an imposition of a Late Payment fee. It did, however, give rise to the possibility of at least one of the consequences stipulated in cl 29 (at the option of ANZ). If the non-payment of the Monthly Fee continued until after day 28, the Late Payment Fee was imposed as a result of cl 22 of the Credit Card Conditions of Use March 2004 read with the Account Fees and Charges Oct 2003. Thus, it is capable of being a penalty. ANZ accepts that it was not a genuine pre-estimate of ANZ's damages. 244 Other aspects about this Exception Fee should be noted. ANZ submitted that properly characterised, the late payment fee was a fee charged by ANZ, as part of the operation of the account, in respect of credit extended to the customer for a period of time beyond that previously agreed with the customer and for the increased risk of default in repayment of the amounts borrowed. As is apparent, I reject that characterisation. In particular, ANZ submitted that its construction was confirmed by a number of matters. I will address each in turn. 245 First, ANZ submitted that the late payment fee was not payable upon the customer failing to comply with its repayment obligations. That submission was based on a false premise. The false premise was that the customer's only contractual obligation was to pay immediately any "amount due immediately" and to pay the monthly payment within 25 days from the end of the statement period. That was not the only stipulation. The Fees and Charges booklet stipulated that the late payment fee was "charged if the "Monthly Payment" plus any "Amount Due Immediately" shown on the statement of account was not paid within 28 days after the statement date" (which was the last day of the statement period). 246 ANZ submitted that "there was a significant difference between the date on which repayments were contractually due and the date on which the late payment fee was charged …". The difference in date was not determinative. The issue is to characterise the contractual stipulation and determine the consequences, if any, for failure to comply with it. Here, there was the possibility of a consequence for failing to comply with cl 14.1 within 25 days but a certainty of consequence for failing to comply with cl 22 of the Credit Conditions of Use March 2004 read with the Account Fees and Charges Oct 2003 after 28 days: see [243] above. Indeed, ANZ accepted that the late payment fee was one of many fees charged by ANZ in connection with the provision and operation of credit card accounts. 247 Next, ANZ submitted that the fee was not properly characterised as "agreed damages" payable upon a breach of contract by the customer. That submission simply begs the question – if it is payable on breach and it is not agreed damages, is it a penalty? It is capable of being characterised as one. Whether it is, depends upon determination of Stage 2: see [3] above. 248 Finally, ANZ submitted that the evidence adduced by it demonstrated that late repayments were associated with increased credit risk on the account and affected ANZ's capital and provisioning allowances for the account with the corollary that "the fee was properly characterised as an additional fee charged in connection with the operation of the account reflecting, in part, the increased risk associated with the account when repayments were not made within the stipulated time". There are, at present, a number of answers to that submission. I say at present because the way ANZ may seek to justify the size of the fee has been the subject of extensive (but incomplete) debate and has not yet been determined: see Andrews v Australia and New Zealand Banking Group Ltd [2011] FCA 388 at [71]-[74]. It is an exercise for Stage 2. 249 First, given my preferred construction of the provisions, I do not accept that the late payment fee is properly to be characterised "as an additional fee charged in connection with the operation of the account reflecting, in part, the increased risk associated with the account when repayments were not made within the stipulated time". It is a fee imposed by ANZ on a customer when it fails to make a payment within the stipulated time, 28 days. It is for ANZ to seek to justify the size of that fee in Stage 2 and, in undertaking that task, may seek to attribute some part of the fee to credit risk. Whether that is open to ANZ is a question of fact and law which I am not required now to determine. Secondly, assuming for the sake of argument (and without deciding) that the late repayments were associated with increased credit risk and affected ANZ's capital and provisioning allowances, those facts provide further cogent support for my preferred construction. Banks trading in Australia are subject to strict regulatory control which extends to include appropriate provisioning: eg, Prudential Standard APS 220, Credit Quality (January 2008), made under s 11AF of the Banking Act 1959 (Cth). Unlike the requests for a loan which are at the discretion of ANZ (see for example, Exception Fees No 1-4 above), the failure to comply with the payment obligations within the stipulated time is not at the discretion of ANZ. That is, ANZ wants card customers to comply with the payment obligations within the stipulated time to provide it with some control over its credit exposure. The fee is imposed by ANZ on a customer for failing to comply with the payment obligation within the stipulated time. 250 The applicants referred to the decision of Emmett J in American Express International Inc v Commissioner of Taxation (2009) 73 ATR 173. His Honour considered the fee payable by a card holder who failed to pay the monthly payment by the due date. His Honour was in no doubt that the late payment fee was imposed by American Express as a result of the customer having breached its contract with American Express. Indeed, his Honour stated (at [15]) that "[s]o long as the card holder pays at least the minimum amount, there is no breach of the Credit Card Terms and Conditions": see statements to a similar effect at [56] and [58] of American Express. 251 ANZ submitted that the decision of Emmett J in American Express did not assist the applicants. I accept that the decision is not binding. The case concerned the construction of provisions of the GST legislation and whether the late payment fee charged by American Express constituted revenue derived from input taxed supplies. The terms and conditions were different. There was, for example, no grace period: see [236], [242] and [243] above. Notwithstanding the points of difference, the decision at first instance and on appeal reinforces the importance of the particular terms and conditions of the contract, when read as a whole: Commissioner of Taxation v American Express Wholesale Currency Services Pty Ltd (2010) 273 ALR 501 at [137] and [186]. 252 As noted at [237] and [238] above, the difficulty with answering the Separate Questions is that in relation to these fees (the late payment fee), the AFTS referred to that obligation by reference to a letter of offer, not the Account Fees and Charges Oct 2003. On the assumption that the reference in the AFTS is to the documents containing the provisions referred to above, the answers to question 2 of the Separate Questions in relation to Exception Fee No 7 are: (a) Yes, but only in relation to the Late Payment Event. (b) No. (c) Yes, but only in relation to the Late Payment Event. (b) Exception Fee No 8 – Late Payment Fee – 29 June 2005 – Andrews 253 On or about 29 May 2005, Andrews received an account statement for Andrews' ANZ First Low Interest Visa Account which recorded, inter alia, the following: 1. the closing balance was $470.80 DR; 2. the "Overdue" amount was $0.00 and the "Overlimit" amount was $0.00, and thus the "Amount Due Immediately" was $0.00; and 3. the "Monthly Payment" was $10, for which the "Due Date" was 23 June 2005. 254 Between 29 May 2005 and 29 June 2005, no payments were made to Andrews' ANZ First Low Interest Visa Account. On 29 June 2005, ANZ charged to Andrews' ANZ First Low Interest Visa Account a Late Payment Fee of $35. 255 As at 29 June 2005, the documents which contained the express written terms regarding the operation and maintenance of Andrews' ANZ First Low Interest Visa Account, and pursuant to which the Late Payment Fee was charged, relevantly comprised: 1. Credit Card Conditions of Use April 2005; and 2. ANZ Personal Banking Account Fees and Charges (March 2005) (Account Fees and Charges Mar 2005). Again, the parties agreed these were the relevant documents but did not agree about which parts were relevant or the proper construction of them. 256 The first document, the Credit Card Conditions of Use April 2005, contained the terms and conditions for ANZ Credit Cards. Its terms were substantially similar to the March 2004 version: see [227]-[235] above. In particular, the following clauses were in identical terms: 1. Clause 2(b) under the heading "The Credit Limit": see [228] above; 2. Clause 12(a)(ii) entitled "When will the account holder receive a statement of account": see [229] above; 3. the definitions of "Overlimit amounts" and "Overdue amounts": see [232] above; 4. Clause 14 regarding making payments to the credit card account: see [231] above; 5. Clause 22 entitled "Bank Fees and charges": see [234] above; and 6. Clause 29 was entitled "Default, cancellation and termination": see [235] above. 257 The second document, Account Fees and Charges Mar 2005, covered "ANZ Credit Card Accounts". In relation to Late Payment Fees and Overlimit Fees it was substantially similar to that dated October 2003 (see [236] above). It provided: Late Payment Fee $35 • Charged 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 $35 • 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 the statement period … … 258 In the AFTS, the obligation referred to under the heading "Late Payment Fee" at [257] was again defined as the "Late Payment Event". However, the AFTS referred to that obligation by reference to a letter of offer. At trial, neither the applicants nor ANZ referred to the letter of offer but to the Account Fees and Charges Mar 2005 which contained the same obligation. 259 Both the applicants and ANZ submitted that there was no relevant distinction between this Fee and Exception Fee No 7 (save for issues not presently before the Court). I agree. Thus, subject to the matter raised in the preceding paragraph, the answers to question 2 of the Separate Questions in relation to Exception Fee No 8 are: (a) Yes, but only in relation to the Late Payment Event. (b) No. (c) Yes, but only in relation to the Late Payment Event. (c) Exception Fee No 9 – Late Payment Fee – 28 November 2006 – Andrews 260 On or about 29 October 2006, Andrews received an account statement for Andrews' ANZ Frequent Flyer Visa Gold Account which recorded, inter alia, the following: 1. the closing balance of the account, as at 29 October 2006, was $21,703.05DR; 2. the "Overdue/Overlimit" amount was $208 which was "DUE IMMEDIATELY"; and 3. the "Minimum Monthly Payment" was $435 for which the "Due Date" was 23 November 2006. The total minimum amount due was $643 ($208 plus $435). 261 Between 29 October 2006 and 28 November 2006, payments were made to Andrews' ANZ Frequent Flyer Visa Account totalling $600. On 28 November 2006, ANZ charged to Andrews' ANZ Frequent Flyer Visa Gold Account a Late Payment Fee of $35. 262 As at 28 November 2006, the documents which contained the express written terms regarding the operation and maintenance of Andrews' ANZ Frequent Flyer Visa Gold Account, and pursuant to which the Late Payment Fee was charged, relevantly comprised: 1. Credit Card Conditions of Use September 2006; and 2. Account Fees and Charges Aug 2006. Again, the parties agreed these were the relevant documents but did not agree about which parts were relevant or the proper construction of them. 263 The first document, the Credit Card Conditions of Use September 2006, contained the terms and conditions for ANZ Credit Cards. Its relevant terms were identical to the March 2004 version: see [227]-[235] above. In particular, the following clauses were in identical terms: 1. Clause 2(b) under the heading "The Credit Limit": see [228] above; 2. Clause 12(a)(ii) entitled "When will the account holder receive a statement of account": see [229] above; 3. Clause 22 entitled "Bank Fees and charges": see [234] above; 4. Clause 29 was entitled "Default, cancellation and termination": see [235] above. Clause 14 (see [231] above) and the definitions of Overlimit amounts" and "Overdue amounts" (see [232] above) were in substantially identical terms. The changes were merely stylistic. 264 In addition to those clauses, the applicants sought to rely upon cl 30(b)(i)(C) which stated: (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: … (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); (Emphasis added.) 265 The second document, Account Fees and Charges Aug 2006 covered "ANZ Credit Card Accounts". In relation to Late Payment Fees and Overlimit Fees it was substantially similar to that dated October 2003 (see [236] above) and March 2005 (see [257] above). It now provided: Late Payment Fee $35 • Charged to ANZ Low Rate MasterCard, ANZ Gold, ANZ Frequent Flyer Visa Gold, ANZ Rewards Visa Gold, ANZ First-Low Interest and ANZ Low Interest 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. … Overlimit Fee $35 • 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 … 266 In the AFTS, the obligation referred to under the heading "Late Payment Fee" at [265] was again defined as the "Late Payment Event". However, the AFTS referred to that obligation by reference to a letter of offer. At trial, neither the applicants nor ANZ referred to the letter of offer but to the Account Fees and Charges Mar 2005 which contained the same obligation. 267 Both the applicants and ANZ submitted that there was no relevant distinction between this Fee and Exception Fee No 7 (save for the additional term in cl 30(b)(i)(C) above). That additional term does not lead to a different characterisation of the provisions to the construction adopted in relation to Exception Fee No 7. Indeed, cl 30(b)(i)(C) gives rise to the possibility of at least another consequence arising from late payment (again at the option of ANZ). 268 Thus, subject to the matter raised in the preceding paragraph, the answers to question 2 of the Separate Questions in relation to Exception Fee No 9 are: (a) Yes, but only in relation to the Late Payment Event. (b) No. (c) Yes, but only in relation to the Late Payment Event. (d) Exception Fee No 5 – Overlimit Fee – 29 November 2006 – Andrews 269 As at 30 October 2006 (the first day of the relevant statement period) the opening balance of Andrews' ANZ First Low Interest Visa Account was $5,889.14 DR. 270 On 13 November 2006, $367.43 (described on the account statement as "LEADING EDGE GROUP GORDON") was processed on Andrews' ANZ First Low Interest Visa Account, the effect of which was that the balance increased to $6,256.57 DR (which was $256.57 in excess of the approved credit limit of $6,000). 271 From then until 29 November 2006 (the last day of the relevant statement period) the balance remained in excess of the approved credit limit of $6,000, with a closing balance on 29 November 2006 (including fees, charges and interest) of $6,231.40 DR. On 29 November 2006, ANZ charged an Overlimit Fee of $35. 272 As at 29 November 2006, the documents which contained the express written terms regarding the operation and maintenance of Andrews' ANZ First Low Interest Visa Account, and pursuant to which the Overlimit Fee was charged, relevantly comprised the documents described in relation to the Exception Fee No 9 referred to in [262(1)] and [262(2)] above. However, this was a different fee – an overlimit fee. (It was defined as an "Overlimit Fee" payable on an "Overlimit Event" in the AFTS.) As a result, other aspects of the documents are relevant. 273 Clause 2 of the Credit Card Conditions of Use September 2006 entitled "The Credit Limit" provided: (a) Your credit limit is set out in the Letter of Offer. The account holder can ask ANZ to increase the credit limit at any time. ANZ is not required to agree to any such request. (b) [1] 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. [2] 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. [3] 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.) For the ease of reference, the sentences have been numbered eg [1]. Those bracketed numbers did not appear in the original document. 274 Under cl 30(b)(i)(C) of the Conditions of Use, ANZ reserved the right, without prior notice, to cancel a credit card or refuse authorisation of further transactions on any credit card account if the credit limit was exceeded: see [264] above. If ANZ refused to authorise transactions, Andrews was prohibited from using his credit card until the account has been brought back within the credit limit. 275 Next, in part B entitled "Electronic Banking Conditions of Use", two clauses are relevant. Under the heading "Cancellation of Cards or Electronic Access" it stated: ANZ may cancel any card, CRN or electronic access: • without prior notice if: … • the account has been overdrawn, or you have exceeded your agreed credit limit … 276 Similarly under the heading "Withdrawal of Electronic Access", it stated: ANZ may withdraw your electronic access to accounts … without prior notice if: … • any one of the accounts is overdrawn or will become overdrawn, or is otherwise considered out of order by ANZ … 277 Finally, under the Fees and Charges Brochure, an Overlimit Fee would be charged at the end of a statement period if the balance of the account exceeded the credit limit during that statement period. 278 What then is the proper construction of these documents and, in particular, do the provisions described at [272]-[277] above, when read as a whole, impose on Andrews a contractual prohibition not to attempt a transaction which, if authorised by ANZ, would have the effect of Andrews exceeding his credit limit. For the same reasons given in relation to Exception Fee No 3 (see [147]-[192] above), I do not accept that the provisions impose such a contractual prohibition on Andrews. 279 Andrews' ANZ First Low Interest Visa Account had a pre-arranged credit limit of $6,000. Andrews gave a payment instruction to ANZ, which would have the effect of overdrawing his account beyond that pre-arranged credit limit. Such a request is construed as a request by Andrews for an advance or loan from ANZ which ANZ had the discretion to approve or disapprove: see [177]-[181] above. In the context of Exception Fee No 5, ANZ approved the loan. It honoured the payment instruction. Upon giving the payment instruction to ANZ and ANZ exercising its discretion to approve the loan, Andrews became immediately liable to pay the exception fee to ANZ – an Overlimit Fee – which would be charged at the end of the statement period: see [277] above. 280 As with the Honour Fee and Dishonour Fee charged in relation to the Retail Savings Accounts, the action in issuing the payment instruction and it being accepted (so as to give rise to the Overlimit Fee) was not a unilateral action by Andrews. It was an action that required conduct of the bank and the customer. That is not, and cannot be, conduct constituting a breach of some contractual obligation. Something particular should be said about the sentences numbered [1] and [3] in [273] above. The credit limit could not be exceeded unless ANZ authorised the transaction. Indeed, that is what ANZ did – it authorised the transaction. Moreover, the fact that the contract between ANZ and the customer required the customer to bring the account within limit at once does not alter the character of the fee that was charged or the circumstances which led to its imposition. 281 For those reasons, the answers to question 2 of the Separate Questions in relation to Exception Fee No 5 are: (a) No. (b) No. (c) Not necessary to answer. (e) Exception Fee No 6 – Overlimit Fee – 28 February 2010 – Andrews 282 As at 1 February 2010 (the first day of the relevant statement period) the opening balance of Andrews' ANZ First Low Interest Visa Account was $6,045.16 DR (which was $45.16 in excess of the approved credit limit of $6,000). 283 On 1 and 2 February 2010, several transactions were processed on Andrews' ANZ First Low Interest Visa Account, the combined effect of which was that the balance increased to $6,148.85 DR. On 4 February 2010, a payment of $200 was made to Andrews' ANZ First Low Interest Visa Account, the effect of which was that the balance reduced to $5,948.85 DR. Between 8 and 15 February 2010, several further transactions were processed on Andrews' ANZ First Low Interest Visa Account, the combined effect of which was the balance increased to $6,154.89 DR. On 22 February 2010, a payment of $600 was made to Andrews' ANZ First Low Interest Visa Account, the effect of which was that the balance reduced to $5,554.89 DR. Further transactions were processed on Andrews' ANZ First Low Interest Visa Account after 22 February 2010. The balance of the account remained below the approved credit limit of $6,000 between 22 February 2010 and 28 February 2010 (the last day of the relevant statement period) when the closing balance (including fees, charges and interest) was $5,872.06 DR. 284 On 28 February 2010, ANZ charged to Andrews' ANZ First Low Interest Visa Account an Overlimit Fee of $20. 285 As at 28 February 2010, the documents which contained the express written terms regarding the operation and maintenance of Andrews' ANZ First Low Interest Visa Account, and pursuant to which the Overlimit Fee was charged, relevantly comprised: 1. Credit Card Conditions of Use Dec 2009; and 2. ANZ Personal Banking Account Fees and Charges (December 2009) (Personal Account Fees and Charges Dec 2009). 286 In Credit Card Conditions of Use Dec 2009, cll 2 and 22 and part B entitled "Withdrawal of Electronic Access" were relevant. Clauses 22 and part B entitled "Withdrawal of Electronic Access" were in the same form as that considered respectively at [234] and [276] above. 287 Clause 2 entitled "The Credit Limit" was in an amended form and provided: (a) Your credit limit is set out in the Letter of Offer and is for the credit card account. … 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 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 increasing your credit limit, you should ask ANZ: • how to have ANZ decline transactions you initiate that will take you over your credit card limit – please note that this service is not available for all transactions types … 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 card limit or for information about other products that may suit your needs. (Emphasis added.) 288 Under the heading "Overlimit Fee" in the Personal Account Fees and Charges Dec 2009, it stated: • 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. (Refer to the ANZ Credit Card Conditions of Use for information about Informal Overlimit amounts). • 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 credit limit. (Refer to the ANZ Credit Card Conditions of Use for more information). … 289 The Letter of Offer (referred to in Credit Cards Conditions of Use Dec 2009) at [287] above was not in evidence. The parties submitted that the Court should refer to Saliba's Letter of Offer in relation to the ANZ Assured & Personal Overdraft Facility which is referred to at [149] above. I reject that submission. That letter does not refer to credit card facilities, it was not an offer addressed to Mr Andrews, and none of its content appears capable of applying to credit card facilities. Against that background, I turn to the proper construction of Exception Fee No 6. 290 Andrews' ANZ First Low Interest Visa Account had a pre-arranged credit limit of $6,000. Andrews gave a payment instruction to ANZ, which had the effect of overdrawing his account beyond that pre-arranged credit limit. In the present case, such a request is a request by Andrews for an advance or loan (described as an "Informal Overlimit amount") from ANZ which ANZ had the discretion to approve or disapprove: see [177]-[181] above. In the context of Exception Fee No 6, ANZ approved that Informal Overlimit amount. ANZ honoured the payment instruction. Upon giving the payment instruction to ANZ and ANZ exercising its discretion to approve that Informal Overlimit amount, Andrews became immediately liable to pay the fee to ANZ – an Overlimit Fee – which would be (and was) charged at the end of the statement period: see [288] above. 291 As with the Honour Fee and Dishonour Fee charged in relation to the Retail Savings Accounts, the action in issuing the payment instruction and it being accepted (so as to give rise to the Overlimit Fee) was not a unilateral action by Andrews. It was an action that required conduct of the bank and the customer. That is not, and cannot be, conduct constituting a breach of some contractual obligation. 292 As is apparent, cl 2 entitled "The Credit Limit" in the Credit Card Conditions of Use Dec 2009 enshrined, in more direct language, that which had been the contractual position under the earlier versions of the Conditions of Use relevant to Exception Fees Nos 3 and 5. For the same reasons given in relation to those fees (see [147]-[192] and [269]-[280] above), I do not accept that the provisions referred to above (and, in particular, cl 2 entitled "The Credit Limit" in the Credit Card Conditions of Use Dec 2009 at [287] above) impose a contractual prohibition on Andrews. That view is fortified by the fact that if Andrews did not want a payment instruction given at a time when the account was already in excess of the pre-arranged credit limit to be treated as a request for an Informal Overlimit amount, then Andrews had to take steps to advise ANZ of that fact: see [287] above. There was no evidence to suggest that he took any such step. Something further should be said about subparagraph (c) at [287] above. It states that ANZ "will consider" a request for an Informal Overlimit amount. I doubt that bound ANZ to consider such a request. However, even if ANZ was bound to consider such a request and then "allowed" such a request, that conduct was still not a unilateral action by the customer. It required conduct of both ANZ and the customer. 293 For those reasons, the answers to question 2 of the Separate Questions in relation to Exception Fee No 6 are: (a) No. (b) No. (c) Not necessary to answer. (3) Commercial Credit Card Accounts 294 Commercial credit card accounts are offered to business customers. Only one account was relevant. 295 In November 2007, Field (jointly with Catherine Esther Williams), trading as Olden 1, opened a commercial credit card account with ANZ, being an ANZ Business One Visa Account (the Fields' ANZ Business One Visa Account). From 17 June 2008 to 16 July 2008, Field's ANZ Business One Visa Account had an approved credit limit of $10,000. The relevant Exception Fees are No 10 and 11: see [296]ff and [309]ff below. (a) Exception Fee No 10 – Commercial Card Overlimit Fee – 16 July 2008 – Fields 296 As at 17 June 2008 (the first day of the relevant statement period) the opening balance of the Fields' ANZ Business One Visa Account was $10,142.75 DR (which was $142.75 in excess of the approved credit limit of $10,000). 297 Between 17 June 2008 and 16 July 2008 (the last day of the relevant statement period), the balance of the Fields' ANZ Business One Visa Account remained in excess of the approved credit limit of $10,000. On 16 July 2008, ANZ charged to the Fields' ANZ Business One Visa Account a Commercial Card Overlimit Fee of $7.14. 298 As at 16 July 2008, the documents which contained the express written terms regarding the operation and maintenance of the Fields' ANZ Business One Visa Account, and pursuant to which the Commercial Card Overlimit Fee charged, relevantly comprised: 1. Commercial Card Terms Aug 2007; 2. ANZ Commercial Cards Fees and Charges (May 2007) (Commercial Card Fees and Charges May 2007); and 3. Letter of Offer from ANZ dated 27 November 2007 (the Olden Letter of Offer). 299 Commercial Card Terms Aug 2007 was again divided into clauses. Clause 7 entitled, "Facility Limit", provided: The Facility Limit is the amount approved in writing by ANZ and which is notified to the Principal at the time the ANZ Commercial Credit Card Facility is offered to the Principal or such other amount as ANZ authorises from time-to-time. The total amount of Commercial Card Transactions must not exceed the Facility Limit without ANZ's prior written approval. The amount by which the Facility Limit is exceeded is immediately payable by the Principal and any further Transactions may be declined by ANZ in its absolute discretion until the ANZ Commercial Card Facility is brought within the Facility Limit. The Principal can request ANZ in writing to vary the Facility Limit. If ANZ approves the request, ANZ will notify the Principal of the approval, the effective date of the approval and of any change to the fees and charges payable by the Principal as a result of the approval. In the event the Principal does not agree to the revised fees and charges, the Principal is entitled, by notice in writing to ANZ, to cancel the request for a Facility Limit increase. (Emphasis added.) The phrase "Facility Limit" was defined to mean "the aggregate Facility Limit approved by ANZ applicable to the Principal's Billing Account". The "Principal" was the entity who applied for the ANZ Commercial Credit Card Facility subject to the terms and conditions set out in the Commercial Card Terms Aug 2007. The applicants described the italicised sentence in cl 7 (see above) in the AFTS as a "Commercial Card Overdraw Condition". 300 "Bank Fees and Charges", so far as is relevant, were dealt with in cl 13 as follows: ANZ reserves the right to charge the Principal's Billing Account … with any fees and charges applicable to the ANZ Commercial Card Facility. ANZ will notify the Principal at the time the ANZ Commercial Card Facility is offered to the Principal of any other fees and charges and when they are payable. ANZ may also vary the rate, frequency or method by which fees and charges are calculated, debited or credited to the Principal's Account and may create new fees or charges. … 301 In part B, entitled "Electronic Banking Conditions of Use", two clauses are relevant. Under the heading "Cancellation of Cards or Electronic Access" it stated: ANZ may cancel any card, CRN or electronic access without prior notice if: … • the account has been overdrawn, or you have exceeded your agreed credit limit … 302 Similarly under the heading "Withdrawal of Electronic Access" it stated: ANZ may withdraw your electronic access to accounts … without prior notice if: … • any one of the accounts is overdrawn or will become overdrawn, or is otherwise considered out of order by ANZ … 303 Commercial Card Fees and Charges May 2007 listed the following fees and charges for ANZ Business One: ... Late Payment Fee A fee of $35 will be charged to the Principal's Account if the "Minimum Amount Due" shown on the Consolidated Cardholder Summary Statement is not paid in full by the Statement Due Date Overlimit Fee A fee will apply if the Closing Balance on your statement of account exceeds your approved credit limit. The Overlimit Fee will be 5% of the overlimit amount, to a maximum of $50 per monthly statement cycle. (Emphasis added.) 304 Finally, the Olden Letter of Offer. It relevantly stated: ANZ is pleased to offer the ANZ Business One Facility (the Facility) set out below subject to the conditions contained within this letter and the enclosed ANZ Commercial Card Terms and Conditions. … To the extent that the ANZ Commercial Card Terms and Conditions are inconsistent with this Letter of Offer, this Letter of Offer will prevail. Facility in the name of: [Olden] Facility limit: $10,000.00 Interest Rate: 14.24% pa, subject to change. … Product Option: Low Rate … Fees and Charges The following fees and charges apply to your ANZ Business One Facility: … Payment Dishonour Fee…………………………$12 A fee of $12 will be charged to the Principal's Account if a payment made to your credit card account must be reversed or is dishonoured. … [1] Late Payment Fee………………………………..$35 A fee of $35 will be charged to the Principal's Account if the "Minimum Amount Due" shown on the Consolidated Cardholder Summary Statement is not paid in full by the Statement Due Date. [2] Overlimit Fee………………………………..5% of the overlimit amount A fee will apply if the Closing Balance on your statement of account exceeds your approved credit limit by $100 or more. The Overlimit Fee will be 5% of the overlimit amount, to a maximum of $50 per monthly statement cycle. … (Emphasis added.) For the ease of reference, the passages have been numbered eg [1]. The bracketed numbers did not appear in the original document. The passage numbered [1] was defined in the AFTS as the "Commercial Card Late Payment Fee" giving rise to a "Commercial Card Late Payment Event". The passage marked [2] was referred to in the AFTS as a "Commercial Card Overlimit Fee" giving rise to a "Commercial Card Overlimit Event". . 305 What then is the proper construction of these documents and, in particular, do the provisions described at [299]-[304] above, when read as a whole, impose on the Fields a contractual prohibition not to attempt a transaction which, if authorised by ANZ, would have the effect of Fields exceeding the credit limit. For the same reasons given in relation to Exception Fees No 3 and 5 (see [147]-[192] and [269]-[280] above), I do not accept that the provisions impose such a contractual prohibition on Field. 306 The Fields' ANZ Business One Visa Account had a pre-arranged credit limit of $10,000. Mr Field gave a payment instruction to ANZ, which would have the effect of overdrawing the account beyond that pre-arranged credit limit. Such a request is construed as a request by Fields for an advance or loan from ANZ which ANZ had the discretion to approve or disapprove: see [177]-[181] above. In the context of Exception Fee No 10, ANZ approved the advance or loan. It honoured the payment instruction. Upon giving the payment instruction to ANZ and ANZ exercising its discretion to approve the loan, Fields however did not become immediately liable to pay an Overlimit Fee. Such a fee was only charged if the closing balance at the end of the statement period was still over the limit: see [303] and [304] above. 307 As with the Honour Fee and Dishonour Fee charged in relation to the Retail Savings Accounts, the action in issuing the payment instruction and it being accepted was not a unilateral action by Fields. It was an action that required conduct of the bank and the customer. That is not, and cannot be, conduct constituting a breach of some contractual obligation. In my view, the fact that the Overlimit Fee was not immediately payable does not alter that characterisation. It is a fee charged by ANZ in response to a request by the customer for a further loan which ANZ meets. One of the costs of the request being met is the charging of the overlimit fee if the closing balance of the statement of account exceeds the approved credit limit by more than $100. 308 For those reasons, the answers to question 3 of the Separate Questions in relation to Exception Fee No 10 are: (a) No. (b) No. (c) Not necessary to answer. (b) Exception Fee No 11 – Commercial Card Late Payment Fee – 16 July 2008 – Field 309 On or after 16 June 2008, Field received an account statement for Field's ANZ Business One Visa Account which recorded, inter alia, the following: 1. the closing balance of the account, as at 16 June 2008, was $10,142.75 DR; 2. there were "Overlimit + Overdue" amounts totalling $282.75, for which the "Due Date" was "IMMEDIATELY"; 3. the "Monthly Payment" was $200, for which the "Due Date" was 30 June 2008; and 4. the "Minimum Amount Due" (being the sum of the amounts referred to 2 and 3) was $482.75. 310 Between 16 June 2008 and 16 July 2008, no payments were made to Field's ANZ Business One Visa Account. On 16 July 2008, ANZ charged to Field's ANZ Business One Visa Account a Commercial Card Late Payment Fee of $35. 311 As at 16 July 2008 the documents which contained the express written terms regarding the operation and maintenance of Field's ANZ Business One Visa Account, and pursuant to which the Commercial Card Late Payment Fee was charged, relevantly comprised the documents referred to in [298] above. As noted above at [304], the relevant passage (numbered [1]) was defined in the AFTS as the "Commercial Card Late Payment Fee" giving rise to a "Commercial Card Late Payment Event". The Separate Questions also referred to cl 11 of the Commercial Card Terms Aug 2007. It was defined in the AFTS as the "Commercial Card On-time Payment Condition". That allegation may be put to one side. Neither party referred to cl 11 in relation to this Exception Fee. 312 The parties accepted that there was no relevant distinction between this fee and Exception Fee No 7. I agree. However, it should be noted that in relation to Exception Fee No 11, the failure to pay in full the "Minimum Amount Due" shown on the Statement resulted in the immediate imposition of the Late Payment Fee. There was no grace period: see [236], [242] and [243] above. For the same reasons as Exception Fee No 7, the answers to question 3 of the Separate Questions in relation to Exception Fee No 11 are: (a) Yes, but only in relation to the Late Payment Event. (b) No. (c) Yes, but only in relation to the Late Payment Event. (4) Business Classic Account 313 Business classic accounts were, as the name suggests, offered to business customers. Two specific accounts are relevant. The specific accounts and, where relevant, the pre-arranged credit limit are listed below: 1. In October 2004, Saliba opened a business cheque account, being a Business Classic Account (Saliba's Business Classic Account). As at 12 October 2005, 26 October 2005 and 3 May 2010, Saliba's Business Classic Account had no approved overdraft limit. The relevant Exception Fees are No 12 and 14 to 16: see [314]ff, [325]ff, [337]ff and [349]ff below. 2. On or about 3 August 2005, Andrews (jointly with his wife) opened a business cheque account, being a Business Classic Account (Andrews' Business Classic Account). As at 21 November 2006 and 6 July 2007, Andrews' Business Classic Account had an approved overdraft limit of $25,000. The relevant Exception Fees are Nos 13 and 17: see [332]ff and [329]ff below. (a) Exception Fee No 12 – Business Honour Fee – 13 October 2005 – Saliba 314 As at 11 October 2005, the closing balance of Saliba's Business Classic Account was a credit balance of $11.98. On or about 12 October 2005, ANZ received a request for a payment to be made from Mr Saliba's Business Classic Account, by way of a direct debit, of $178.75 (described on the account statement as being "TO AM1-ACFC SALIBA981964"). ANZ honoured the direct debit. The direct debit had the effect of overdrawing Saliba's Business Classic Account to the extent of $166.77 (in circumstances where there was no approved overdraft limit for the account). 315 On 13 October 2005, ANZ charged to Saliba's Business Classic Account a Business Honour Fee of $37.70. 316 As at 13 October 2005, the documents which contained the express written terms regarding the operation and maintenance of Saliba's Business Classic Account, and pursuant to which the Business Honour Fee was charged, relevantly comprised: 1. Business PDS July 2005; and 2. ANZ Business Banking – Transaction Accounts Fees and Charges (July 2005) (Business Account Fees and Charges July 2005). The two documents comprised the PDS for the Business Classic Account. 317 The Business PDS July 2005 contained the terms and conditions for, inter alia, the Business Classic Account. Under the heading "Withdrawals" it stated: You can withdraw money from your accounts by using your linked ANZ Access Card or ANZ Credit Card at any ANZ Night & Day Bank ATM. Your withdrawal limit using this method and EFTPOS is a combined total of AUD$1,000 per ANZ Access Card per day. This means that you can use each ANZ Access Card to withdraw AUD$1,000 per day via an ATM or EFTPOS from the account(s) to which it is linked provided the account(s) contain sufficient cleared funds. If you need to withdraw additional cash via an ATM or EFTPOS you will need to make prior arrangements with your branch. … 318 Under the heading "Fees", it stated: Information on all current standard fees and charges, together with fee free thresholds, is contained in the 'ANZ Business Banking Transaction Accounts Fees and Charges' booklet available from any ANZ branch. Fees incurred will be charged to your account monthly, … If ANZ fails to collect a fee to which it is entitled, ANZ has not waived its right to collect the fee for future transactions of the same nature. ANZ may waive fees under certain conditions. 319 Under the heading "When may a Cheque be Dishonoured or Payment Refused?", it stated: At the bank's discretion, a cheque may be dishonoured or payment refused where: • There are insufficient funds in the account of the drawer; • … ANZ may charge a dishonour fee. This clause does not apply to Exception Fee No 12. Exception Fee No 12 concerned a direct debit being honoured, not a cheque being dishonoured. 320 "Overdrawing" and "Overdraft Facility" were addressed separately as follows: Overdrawing [1] Unless you have made prior arrangements with ANZ your account should have a credit balance at all times. [2] If you overdraw the account (or overdraw the approved limit) and ANZ dishonours your withdrawal a fee will be charged to your account. [3] If you overdraw and ANZ in its discretion honours your withdrawal you will be charged an Honour Fee and interest on the overdrawn balance. [4] Refer to the 'ANZ Business Banking Transaction Accounts Fees and Charges' booklet for details. [5] You should inform ANZ as soon as possible if you are in financial difficulty. Overdraft Facility If you require credit, a Business Overdraft Facility can be arranged on your account. … All applications are subject to ANZ's normal credit approval criteria. For the ease of reference, the sentences have been numbered eg [1]. Those bracketed numbers did not appear in the original document. 321 Finally, under the heading "Electronic Banking Conditions of Use", it stated, inter alia: Cancellation of Cards or Electronic Access ANZ may cancel any card, CRN or electronic access: • without prior notice if: … • the account has been overdrawn, or you have exceeded your agreed credit limit … Withdrawal of Electronic Access ANZ may withdraw your electronic access to accounts … without prior notice if: … • any one of the accounts is overdrawn or will become overdrawn, or is otherwise considered out of order by ANZ … 322 Finally, the Business Account Fees and Charges July 2005. Under the heading "Associated Fees and Charges", the following entries appeared: Honour Fee • … • For all other accounts $37.70 Charged on each occasion that the account is overdrawn or exceeds its maximum credit limit without prior arrangement with your ANZ Manager. … Outward Dishonour Fee $37.70 per dishonour Charged when a cheque written, direct debit, or periodic payment from your account is dishonoured due to the lack of cleared funds in your account. The sentence marked [3] in [320] together with this paragraph headed "Honour Fee" were defined in the AFTS as the "Business Honour Fee" giving rise to a "Business Honour Event". 323 The parties submitted, and I accept, that there is no material difference between the content in [320] above and that considered in relation to Retail Deposit Accounts at [153], [154], [161], [173], [174], [202] and [220] above. 324 For the reasons given in relation to Exception Fee No 3 at [147] above (which concerned a Saving Honour Fee), the answers to question 4 of the Separate Questions in relation to Exception Fee No 12 are: (a) No. (b) No. (c) Not necessary to answer. (b) Exception Fee No 14 – Business Dishonour Fee – 27 October 2005 – Saliba 325 As at 25 October 2005, the closing balance of Saliba's Business Classic Account was a credit balance of $1,175.84. On 26 October 2005, an ATM withdrawal of $50 was made from Saliba's Business Classic Account. On or about 26 October 2005, ANZ received a request for a payment to be made from Saliba's Business Classic Account, by way of a cheque (No 001083) drawn on the account, in the amount of $2,288. 326 If the cheque had been honoured, it would have had the effect of overdrawing Saliba's Business Classic Account to the extent of $1,162.16 (in circumstances where there was no approved overdraft limit for the account). On 27 October 2005: 1. the cheque was dishonoured, with effect from 26 October 2005; 2. the entry in the account relating to that cheque was reversed, with effect from 26 October 2005; and 3. ANZ charged to Saliba's Business Classic Account a Business Dishonour Fee of $37.70. 327 As at 27 October 2005, the documents which contained the express written terms regarding the operation and maintenance of Saliba's Business Classic Account, and pursuant to which the Business Dishonour Fee was charged comprised those described in [316] above. 328 The parties accepted that there was no relevant distinction between this fee and Exception Fee No 12 although this concerns a Dishonour Fee. I agree. For the same reasons, the answers to question 4 of the Separate Questions in relation to Exception Fee No 14 are: (a) No; (b) No; (c) Not necessary to answer. (c) Exception Fee No 17 – Business Non-Payment Fee – 27 October 2006 – Andrews 329 On 21 November 2006, ANZ charged to Andrews' Business Classic Account a Business Non-Payment Fee of $35. The underlying facts which led to the imposition of this fee are not apparent from the account statements. The applicants submitted, and I accept, that it is open to conclude that on or about 21 November 2006, a periodical payment which Andrews had previously authorised to be made from his Business Classic Account was not made because of insufficient funds or alternatively, insufficient available credit in the account to make the payment. Thus, on 21 November 2006, ANZ charged Andrews' Business Classic Account a Non-Payment Fee of $35. 330 As at 21 November 2006, the documents which contained the express written terms regarding the operation and maintenance of Andrews' Business Classic Account, and pursuant to which the Business Non-Payment Fee was charged, relevantly comprised: 1. Business PDS Mar 2006; 2. ANZ Business Banking – Transaction Accounts Fees and Charges (March 2006); 3. ANZ Periodical Payment authority dated 5 August 2005, signed Mr Andrews and Carol Ann Andrews; 4. Letter of Offer from ANZ to Andrews and Carol Ann Andrews trading as Hamilton Place Books dated 24 June 2005; 5. ANZ Business Banking - Finance Conditions of Use (September 2006). 331 The parties further submitted, and I accept, that there are no material differences between the provisions in the documents listed in [330] above and the provisions in the documents which applied to Exception Fee No 12: see [316]-[323] above. Thus, for the same reasons, the answers to question 4 of the Separate Questions in relation to Exception Fee No 17 are: (a) No. (b) No. (c) Not necessary to answer. (d) Exception Fee No 13 – Business Honour Fee – 9 July 2007 – Andrews 332 As at 5 July 2007, the closing balance of Andrews' Business Classic Account was a debit balance of $24,977.30. 333 On or about 6 July 2007: 1. two deposits were made to Andrews' Business Classic Account (totalling $1,549.35); 2. three payments, by way of internet banking funds transfers, were made from Andrews' Business Classic Account (totalling $183); and 3. ANZ received a request for a payment to be made from Andrews' Business Classic Account, by way of a cheque (No 001647) drawn on the account in the amount of $4,157.37. ANZ honoured the cheque. 334 The combined effect of the transactions was that, as at 6 July 2007, the closing balance of Andrews' Business Classic Account was a debit balance of $27,768.32 (which was $2,768.32 in excess of the approved overdraft limit of $25,000). On 9 July 2007, ANZ charged to Andrews' Business Classic Account a Business Honour Fee of $37.70. 335 As at 9 July 2007, the documents which contained the express written terms regarding the operation and maintenance of Andrews' Business Classic Account, and pursuant to which the Business Honour Fee was charged, relevantly comprised: 1. Business PDS Dec 2006; 2. ANZ Business Banking – Transaction Accounts Fees and Charges (December 2006); and 3. the documents listed in [330(4) and (5)] above. 336 The parties accepted that there was no relevant distinction between this fee and Exception Fee No 12. I agree. For the same reasons, the answers to question 4 of the Separate Questions in relation to Exception Fee No 13 are: (a) No. (b) No. (c) Not necessary to answer. (e) Exception Fee No 15 – Business Honour Fee – 3 May 2010 – Saliba 337 As at 29 April 2010, the closing balance of Saliba's Business Classic Account was a credit balance of $270.32. 338 On the following day, 30 April 2010: 1. a deposit was made to Saliba's Business Classic Account (in the amount of $400); 2. ANZ received a request for a payment to be made, by way of a direct debit, in the amount of $131.22 (described on the account statement as being "TO ST ANDREWS INS RCVBM0032"); and 3. ANZ received a request for a further payment to be made, by way of a direct debit, in the amount of $2,781 (described on the account statement as being "TO DEFT PAYMENTS RENT PAYMENT701122"). ANZ honoured the direct debits. 339 The combined effect of the transactions was to overdraw Saliba's Business Classic Account to the extent of $2,241.90 (in circumstances where there was no approved overdraft limit for the account). On 3 May 2010, ANZ charged to Saliba's Business Classic Account a Business Honour Fee of $37.70. 340 As at 3 May 2010, the documents which contained the express written terms regarding the operation and maintenance of Saliba's Business Classic Account, and pursuant to which the Business Honour Fee was charged, relevantly comprised: 1. Business Account Terms Dec 2009; and 2. ANZ Business Banking – Transaction Accounts Fees and Charges (December 2009) (Business Account Fees and Charges Dec 2009). The two documents comprised the terms and conditions. 341 The Business Account Terms Dec 2009 contained the terms and conditions for, inter alia, the Business Classic Account. Under the heading "Withdrawals" it stated: You can withdraw money from your accounts by using your linked ANZ card at any ATM or EFTPOS terminal that accepts the card. A daily withdrawal limit applies to card transactions … … 342 Under the heading "Fees", it stated: Information on all current standard fees and charges, together with fee free thresholds, is contained in the 'ANZ Business Banking Transaction Accounts Fees and Charges' booklet available from any ANZ branch. Fees incurred will be charged to your account monthly, … ANZ may waive fees under certain conditions. If ANZ fails to collect a fee to which it is entitled, ANZ has not waived its right to collect the fee at a later date with notice to you; or for future transactions of the same nature. 343 Under the heading "When may a Cheque be Dishonoured or Payment Refused?", it stated: At the Bank's discretion, a cheque may be dishonoured or payment refused where: • there are insufficient funds in the account of the drawer; • … ANZ may charge a dishonour fee. This clause does not apply to Exception Fee No 15. Exception Fee No 15 concerned a direct debit being honoured, not a cheque being dishonoured. 344 Under the heading "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: • your account becoming overdrawn; or • the approved limit on your account being exceeded. When any debit (excluding a periodical payment) is initiated which, if processed, would result in either: • your account becoming overdrawn; or • the approved limit on your account being exceeded, you are deemed to request an Informal Overdraft. … 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 … 345 Finally, under the heading "Electronic Banking Conditions of Use", it stated, inter alia: 15. Cancellation of Cards … or Electronic Access (a) ANZ may cancel any card, … CRN or electronic access: • Without prior notice if: … • the account has been overdrawn, or you have exceeded your agreed credit limit … 16. Withdrawal of Electronic Access (a) ANZ may withdraw your electronic access to Accounts … without prior notice if: … • Any one of the Accounts is overdrawn or will become overdrawn … 346 That brings us to the Business Account Fees and Charges Dec 2009. Under the heading "Associated Fees and Charges", the following entries appeared: 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. 347 Before turning to the parties' respective submissions and the proper construction of the documents, a careful reader of the documents will notice that although the language of the section headed "Informal Overdraft Facility" has changed and now refers to a "service", the name of the fee for that so called service has not – it is still called an "Honour Fee" and a "Dishonour Fee". 348 The applicants submitted that there was no relevant distinction between this fee and Exception Fee No 6. I disagree. Exception Fee No 6 gave rise to an Overlimit Fee and concerned quite different provisions. ANZ submitted that since the changes in December 2009 (referred to in [341]-[347] above), it was abundantly clear that a business customer did not breach its contract with ANZ if it initiated a transaction that would overdraw the account. I agree. I do not consider that there is any material difference between this fee and the fee charged on Retail Deposit Accounts: see [323] above. For the same reasons, the answers to question 4 of the Separate Questions in relation to Exception Fee No 15 are: (a) No. (b) No. (c) Not necessary to answer. (f) Exception Fee No 16 – Business Dishonour Fee – 4 May 2010 – Saliba 349 The closing balance of Saliba's Business Classic Account, as at 30 April 2010, was a debit balance of $2,241.90, in circumstances where there was no approved overdraft limit for the account: see [313] above. 350 On 3 May 2010, ANZ received a request for a payment to be made from Saliba's Business Classic Account: 1. in the amount of $80.25 (described on the account statement as being "TO GMHBA 99028"); and 2. in the amount of $484.10 (described on the account statement as being "TO TOYOTA FINANCE 12038055"). The combined effect of the direct debits, had they been honoured, would have been to overdraw Saliba's Business Classic Account to the extent of $2,843.95 (in circumstances where there was no approved overdraft limit for the account). 351 On the following day, 4 May 2010: 1. both direct debits were dishonoured, with effect from 3 May 2010; 2. the entries in the account relating to those direct debits were reversed, with effect from 3 May 2010; and 3. ANZ charged to Saliba's Business Classic Account a Business Dishonour Fee in respect of each reversal of $37.70. 352 As at 4 May 2010 the documents which contained the express written terms regarding the operation and maintenance of Saliba's Business Classic Account, and pursuant to which the Business Dishonour Fee was charged, relevantly comprised the documents referred to in [340] above. 353 The parties accepted that there was no relevant distinction between this fee and Exception Fee No 6. I agree. For the same reasons, the answers to question 4 of the Separate Questions in relation to Exception Fee No 16 are: (a) No. (b) No. (c) Not necessary to answer. E ORDERS 354 The parties will be directed to bring in orders to give effect to these reasons for decision and for the future conduct of the litigation by 4:00pm on 12 December 2011. I certify that the preceding three hundred and fifty-four (354) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: 5 December 2011 SCHEDULE A – SEPARATE QUESTIONS 1. In respect of each of the Saving Exception Fees listed in Schedule B: (a) Was the Saving Exception Fee payable upon breach of any or all of the provisions stated in sub-paragraphs 46(a), (b) and (c) of the AFTS (Saving Provisions) (as alleged by the applicants in paragraph 46 of the AFTS)? (b) In the alternative: (i) was the occurrence or default of occurrence of the events set out in the Saving Provisions (Saving Event), as a matter of substance, treated by ANZ and the applicant who incurred the Saving Exception Fee, as lying within the area of obligation of that applicant in the sense that it was that applicant's responsibility to see that the Saving Event did or did not occur; and (ii) was that applicant obliged contractually to pay or forfeit or suffer the retention of the Saving Exception Fee upon or in default of the occurrence of the Saving Event, (as alleged by the applicants in paragraphs 55 and 56 of the AFTS)? (c) If the answer to either paragraph (a) or (b) above is yes, is the Saving Exception Fee capable of being characterised as a penalty by reason of that fact? 2. In respect of each of the Card Exception Fees listed in Schedule B: (a) Was the Card Exception Fee payable upon breach of any or all of the provisions stated in sub-paragraphs 47(a), (b), (c) and (d) of the AFTS (Card Provisions) (as alleged by the applicants in paragraph 47 of the AFTS)? (b) In the alternative: (i) was the occurrence or default of occurrence of the events set out in the Card Provisions (Card Event), as a matter of substance, treated by ANZ and the applicant who incurred the Card Exception Fee, as lying within the area of obligation of that applicant in the sense that it was that applicant's responsibility to see that the Card Event did or did not occur; and (ii) was that applicant obliged contractually to pay or forfeit or suffer the retention of the Card Exception Fee upon or in default of the occurrence of the Card Event, (as alleged by the applicants in paragraphs 55 and 56 of the AFTS)? (c) If the answer to either paragraph (a) or (b) above is yes, is the Card Exception Fee capable of being characterised as a penalty by reason of that fact? 3. In respect of each of the Commercial Card Exception Fees listed in Schedule B: (a) Was the Commercial Card Exception Fee payable upon breach of any or all of the provisions stated in sub-paragraphs 48(a), (b), (c) and (d) of the AFTS (Commercial Card Provisions) (as alleged by the applicants in paragraph 48 of the AFTS)? (b) In the alternative: (i) was the occurrence or default of occurrence of the events set out in the Commercial Card Provisions (Commercial Card Event), as a matter of substance, treated by ANZ and the applicant who incurred the Commercial Card Exception Fee, as lying within the area of obligation of that applicant in the sense that it was that applicant's responsibility to see that the Commercial Card Event did or did not occur; and (ii) was that applicant obliged contractually to pay or forfeit or suffer the retention of the Commercial Card Exception Fee upon or in default of the occurrence of the Commercial Card Event, (as alleged by the applicants in paragraphs 55 and 56 of the AFTS)? (c) If the answer to either paragraph (a) or (b) above is yes, is the Commercial Card Exception Fee capable of being characterised as a penalty by reason of that fact? 4. In respect of each of the Business Exception Fees listed in Schedule B: (a) Was the Business Exception Fee payable upon breach of any or all of the provisions stated in sub-paragraphs 49(a), (b) and (c) of the AFTS (as alleged by the applicants in paragraph 49 of the AFTS), and/or upon breach of the provision stated at sub-paragraph 36(i) of the AFTS (Business Provisions)? (b) In the alternative: (i) was the occurrence or default of occurrence of the events set out in the Business Provisions (Business Event), as a matter of substance, treated by ANZ and the applicant who incurred the Business Exception Fee, as lying within the area of obligation of that applicant in the sense that it was that applicant's responsibility to see that the Business Event did or did not occur; and (ii) was that applicant obliged contractually to pay or forfeit or suffer the retention of the Business Exception Fee upon or in default of the occurrence of the Business Event, (as alleged by the applicants in paragraphs 55 and 56 of the AFTS)? (c) If the answer to either paragraph (a) or (b) above is yes, is the Business Exception Fee capable of being characterised as a penalty by reason of that fact? SCHEDULE B – IDENTIFIED EXCEPTION FEES A. The Saving Exception Fees are: (i) the Saving Dishonour Fee incurred by the Second Applicant on 13 October 2006 on his Access Advantage Account particularised at paragraph b. of the Particulars to paragraph 9(c) of the AFTS; (ii) The Saving Dishonour Fee incurred by the First Applicant on 26 February 2007 on his Access Advantage Cheque Account particularised at paragraph a. of the Particulars to paragraph 8(c) of the AFTS (referred to in Schedule 10, Part 1 to the AFTS but erroneously described therein as a "Saving Honour Fee"); (iii) The Saving Honour Fee incurred by the Second Applicant on 14 February 2006 on his Access Advantage Account particularised at paragraph b. of the Particulars to paragraph 9(c) of the AFTS; and (iv) The Saving Non-Payment Fee incurred by the Third Applicant on 15 November 2006 on his ANZ Access Account particularised at paragraph a. of the Particulars to paragraph 10(d) of the AFTS. B. The Card Exception Fees are: (i) The Overlimit Fee incurred by the First Applicant on 29 November 2006 on his ANZ First Low Interest Visa credit card account particularised at paragraph c. of the Particulars to paragraph 8(c) of the AFTS; (ii) The Overlimit Fee incurred by the First Applicant on 28 February 2010 on his ANZ First Low Interest Visa credit card account particularised at paragraph c. of the Particulars to paragraph 8(c) of the AFTS; (iii) The Late Payment Fee incurred by the First Applicant on 28 March 2004 on his Qantas ANZ Visa Gold credit card account particularised at paragraph b. of the Particulars to paragraph 8(c) of the AFTS; (iv) The Late Payment Fee incurred by the First Applicant on 29 June 2005 on his ANZ First Low Interest Visa credit card account particularised at paragraph c. of the Particulars to paragraph 8(c) of the AFTS; and (v) The Late Payment Fee incurred by the First Applicant on 28 November 2006 on his Qantas ANZ Visa Gold credit card account particularised at paragraph b. of the Particulars to paragraph 8(c) of the AFTS. C. The Commercial Card Exception Fees are: (i) The Commercial Card Overlimit Fee incurred by the Third Applicant on 16 July 2008 on his Business One credit card account particularised at paragraph c. of the Particulars to paragraph 10(d) of the AFTS; and; (ii) The Commercial Card Late Payment Fee incurred by the Third Applicant on 16 July 2008 on his Business One credit card account particularised at paragraph c. of the Particulars to paragraph 10(d) of the AFTS. D. The Business Exception Fees are: (i) The Business Honour Fee incurred by the Second Applicant on 13 October 2005 on his Business Classic Account particularised at paragraph c. of the Particulars to paragraph 9(c) of the AFTS; (ii) The Business Honour Fee incurred by the First Applicant on 9 July 2007 on his Business Classic Account particularised at paragraph d. of the Particulars to paragraph 8(c) of the AFTS; (iii) The Business Dishonour Fee incurred by the Second Applicant on 27 October 2005 on his Business Classic Account particularised at paragraph c. of the Particulars to paragraph 9(c) of the AFTS; (iv) The Business Honour Fee incurred by the Second Applicant on 3 May 2010 on his Business Classic Account particularised at paragraph c. of the Particulars to paragraph 9(c) of the AFTS; (v) The first of the two Business Dishonour Fees incurred by the Second Applicant on 4 May 2010 on his Business Classic Account particularised at paragraph c. of the Particulars to paragraph 9(c) of the AFTS; and (vi) The Business Non-Payment Fee incurred by the First Applicant on 21 November 2006 on his Business Classic account with Business Overdraft Facility Account particularised at paragraph d. of the Particulars to paragraph 8(c) of the AFTS. SCHEDULE C – SUMMARY OF EXCEPTION FEES IN ISSUE Exception Fee No Account Holder Account Type Name of Fee Date Fee Charged Fee Type Name of Document(s) relevant to specific fee Exception Fees covered 1 Saliba Access Advantage Saving Dishonour 13.10.2006 Saving Exception ANZ Saving & Transaction Products – Product Disclosure Statement (September 2006) 1, 2 and 4 ANZ Personal Banking Account Fees and Charges (August 2006) 1, 2 and 4 Letter of Offer from ANZ to Mr Saliba dated 3 December 2004 1 and 3 ANZ Assured & Personal Overdraft – Terms & Conditions (December 2004) 1, 2, 3 and 4 2 Andrews Access Advantage Saving Dishonour 26.02.2007 Saving Exception ANZ Saving & Transaction Products – Product Disclosure Statement (September 2006) 1, 2 and 4 ANZ Personal Banking Account Fees and Charges (August 2006) 1, 2 and 4 ANZ Assured & Personal Overdraft – Terms & Conditions (December 2004) 1, 2 and 3 3 Saliba Access Advantage Saving Honour 14.02.2006 Saving Exception ANZ Saving & Transaction Products – Product Disclosure Statement (March 2005) 3 ANZ Personal Banking Account Fees and Charges (January 2006) 3 Letter of Offer from ANZ to Mr Saliba dated 3 December 2004 1 ANZ Assured & Personal Overdraft – Terms & Conditions (December 2004) 1 and 2 4 Field Access Advantage Saving Non-Payment 15.11.2006 Saving Exception ANZ Saving & Transaction Products – Product Disclosure Statement (September 2006) 1, 2 and 4 ANZ Personal Banking Account Fees and Charges (August 2006) 1, 2 and 4 ANZ Assured & Personal Overdraft – Terms & Conditions (December 2004) 1, 2, 3 and 4 5 Andrews First Low Interest Visa Overlimit 29.11.2006 Card Exception ANZ Credit Card Conditions of Use (September 2006) 5 ANZ Personal Banking Account Fees and Charges (August 2006) 5 6 Andrews First Low Interest Visa Overlimit 28.02.2010 Card Exception ANZ Credit Cards Conditions of Use (December 2009) 6 ANZ Personal Banking Account Fees and Charges (December 2009) 6 7 Andrews Frequent Flyer Visa Late Payment 28.03.2004 Card Exception ANZ Credit Card Conditions of Use (March 2004) 7 ANZ Personal Banking Account Fees and Charges (October 2003) 7 8 Andrews First Low Interest Visa Late Payment 29.06.2005 Card Exception ANZ Credit Card Conditions of Use (April 2005) 8 ANZ Personal Banking Account Fees and Charges (March 2005) 8 9 Andrews Frequent Flyer Visa Late Payment 28.11.2006 Card Exception ANZ Credit Card Conditions of Use (September 2006) 9 ANZ Personal Banking Account Fees and Charges (August 2006) 9 10 Field Business One Commercial Card Overlimit 16.07.2008 Commercial Card Exception ANZ Commercial Card Terms and Conditions (August 2007) 10 ANZ Commercial Cards Fees and Charges (May 2007) 10 Letter of Offer from ANZ to Olden 1 dated 27 November 2007 10 11 Field Business One Commercial Card Late Payment 16.07.2008 Commercial Card Exception ANZ Commercial Card Terms and Conditions (August 2007) 11 ANZ Commercial Cards Fees and Charges (May 2007) 11 Letter of Offer from ANZ to Olden 1 dated 27 November 2007 11 12 Saliba Business Classic Business Honour 13.10.2005 Business Exception ANZ Business Banking – Business Transaction Accounts Product Disclosure Statement (July 2005) 12 and 14 ANZ Business Banking – Transaction Accounts Fees and Charges (July 2005) 12 and 14 13 Andrews Business Classic Business Honour 09.07.2007 Business Exception ANZ Business Banking – Business Transaction Accounts Product Disclosure Statement (December 2006) 13 ANZ Business Banking – Transaction Accounts Fees and Charges (December 2006) 13 Letter of Offer from ANZ to Mr Andrews dated 24 June 2005 13 ANZ Business Banking – Finance Conditions of Use (September 2006) 13 14 Saliba Business Classic Business Dishonour 27.10.2005 Business Exception ANZ Business Banking – Business Transaction Accounts Product Disclosure Statement (July 2005) 12 (minus addition) and 14 ANZ Business Banking – Transaction Accounts Fees and Charges (July 2005) 12 and 14 15 Saliba Business Classic Business Honour 03.05.2010 Business Exception ANZ Business Banking – Business Transaction Accounts Terms and Conditions (December 2009) 15 and 16 ANZ Business Banking – Transaction Accounts Fees and Charges (December 2009) 15 and 16 16 Saliba Business Classic Business Dishonour 04.05.2010 Business Exception ANZ Business Banking – Business Transaction Accounts Terms and Conditions (December 2009) 15 and 16 ANZ Business Banking – Transaction Accounts Fees and Charges (December 2009) 15 and 16 17 Andrews Business Classic Business Non-Payment 21.11.2006 Business Exception ANZ Business Banking – Business Transaction Accounts Product Disclosure Statement (March 2006) 17 ANZ Business Banking – Transaction Accounts Fees and Charges (March 2006) 17 ANZ Periodical Payment Authority dated 5 August 2005 17 Letter of Offer from ANZ to Mr Andrews dated 24 June 2005 17 ANZ Business Banking – Finance Conditions of Use (September 2006) 17