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  • In the recent judgment in the case of Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28, the High Court held that bank fees are indeed enforceable.
  • The Court’s judgment offers guidance as to the scope and proper application of traditional tests for whether a provision is penal, i.e. the rule against penalties.

On 27 July 2016, the High Court handed down the latest in a series of significant decisions on the scope and content of the rule against penalties (‘the penalty rule’).

Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 (‘Paciocco’) involved a challenge to the enforceability of credit card late payment fees charged by the ANZ. The fees were impugned on two independent bases:

  • the fees offended the general law rule against penalties; and
  • the charging of the fees contravened the statutory proscription of unconscionable conduct and that the relevant terms of the credit card contracts were unjust and unfair within the meaning of a number of statutory provisions (a discussion of this aspect of the case is omitted here in favour of a focus upon the penalty rule).

The Court (constituted by French CJ, Kiefel, Gageler, Keane and Nettle JJ) rejected both of these contentions by 4:1 (Nettle J dissenting).

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