In a 4-1 decision the High Court of Australia in Paciocco v Australia & New Zealand Banking Group Ltd ("the Bank") has finally determined once and for all that late payment fees charged by the Bank were not penalties in that they were not extravagant, exorbitant or unconscionable, or indeed, out of proportion compared to the greatest loss that could be conceivably be suffered by the Bank as a result of those late payments.

Just as importantly, 4 of the 5 Judges (the 5th Judge making no comment in relation to the issue) determined that none of the dishonour fees, non-payment fees, "over the limit" fees as well as the late payment fees that have been charged by the Bank breached any of the various statutory provisions relating to unconscionable conduct, and unjust and unfair contract terms. Indeed not one of the 8 Judges who have given Judgment in the Full Court or High Court found that the Bank had breached those various statutory provisions.


The Federal Court (Gordon J) at first instance found that only the late payment fees charged by the Bank on credit card facilities could be considered penalties. The ultimate outcome of that judgment, if it had survived the appeal process would have been that the Bank would have had to reimburse the many thousands of customers that had registered in the class action for those late payment fees charged against the customer's account (being either $35 or for later transactions, $20).

The Full Court of the Federal Court allowed the Bank's Appeal and set aside the orders made by the primary judge. They considered that the primary judge had excessively narrowed the content of the notion of a genuine pre-estimate of damage to find what amounted to a penalty. Instead the Full Court viewed the assessment as being one of considering the greatest possible loss on a forward looking basis and assessed that loss by reference to the protection of the Bank's economic interest.

The High Court on the Late Payment Penalty Claim

Each of the 5 High Court Judges carefully considered the application of the common law principles relating to penalties and 4 of those Judges concluded that it could not be considered that the late payment fees were a disproportionate charge against the Bank's customers compared to the greatest loss that could conceivably arise from a late payment, as calculated at the time of entering into the contract.

The High Court on the Statutory Claims

Whilst the issue of whether or not the late payment fees were penalties took up a substantial amount of the Court's time, due principally to the Court's need to clarify the law of penalties and its particular application in relation to Bank's fees and charges, the High Court's consideration of the statutory claims was more decisive. The Statutory Claims made by the Bank customer class action participants ("the Appellants") were that the Bank had contravened:-

  • the unconscionable conduct provisions in S.12BC of the ASIC Act and S.8 of the Fair Trading Act (Vic);
  • the unjust transaction provision under Section 76 of the National Credit Code (in relation to the provision of credit);
  • the unfair contractual terms provision in Ss 12BF and 12BG of the ASIC Act. and Part 2B of the Fair Trading Act (Vic);

in relation to the imposition of charged "honour" fees, dishonour fees, non-payment fees over-limit fees and late payment fees.

Mr Justice Keane considered that the Appellants' Statutory Claims took on a "air of unreality" when one considered that:-

  • the Appellants were not treated any less favourably than any other person in the market place being provided credit card facilities;
  • there was no suggestion of any unlawful conduct by the Bank;
  • there was no suggestion of unreasonable financial pressure being applied to any of the applicants.

The High Court considered that any suggestion for breach of these unconscionable, unjust or unfair provisions in the statutory regimes fell distinctly short of the mark in circumstances where the lead Appellant had no pressure or undue influence exerted on him, and he did not incur fees as a result of any financial difficulties which prevented him from making timely payment in accordance with his contractual obligations. The High Court also noted that, as a result, the lead Appellant simply chose to pay late and thereby incur the late payment fee as a matter of his own convenience.

Whilst these various Statutory Claims were maintained and vigorously argued in each of the Courts, in each of the proceedings they were dismissed with clear and simple reasoning.


The High Court has overwhelmingly concluded (and confirmed the clear view of the Full Court of the Federal Court) that the challenge made by the Appellants, to late payments on credit cards, and all the other fees charged by the Bank in relation to the operation and conduct of their accounts, should be dismissed.