By Gareth Vaughan
Lawyers on both sides of the dispute over New Zealand bank exception fees are poring over a fresh appeal judgment in a related Australian case.
Across the ditch, the Full Court of Australia's Federal Court has delivered a judgment in favour of the banks.
In a case funded by litigation funder IMF Bentham Limited against ANZ Australia on behalf of about 43,500 of its customers, the Full Court has reversed an earlier ruling that ANZ’s late payment fees on credit cards of up to A$35 are penalties. The Full Court has also upheld the decision that ANZ’s honour and dishonour fees on bank accounts, and over limit fees on credit cards, don't constitute penalties.
IMF is likely to seek special leave to appeal to the High Court on all of these matters, IMF chief operating officer Diane Jones said. Both IMF and ANZ had appealed the initial judgment.
Not surprisingly ANZ welcomed the judgment in its favour.
“We were particularly pleased the Court found there was no dishonesty on ANZ’s part and these avoidable fees were fairly and fully disclosed and there was no lack of good faith by ANZ. We would hope today’s carefully reasoned and unanimous decision will put an end to this lengthy and expensive litigation that has been brought against the Bank by publicly listed litigation funder IMF Bentham,” ANZ CEO Australia Mark Whelan said.
'No dishonesty, trickery or sharp practice'
The judgment itself says there was no dishonesty, trickery or sharp practice.
"The fees were fully and not unfairly disclosed; the applicants were not vulnerable, nor were customers generally; the fees could be avoided by the customer; these applicants chose to run their affairs by risking the fees; there was no victimisation, predation or taking advantage of the applicants, or, on the evidence, of anyone; the bargaining power to set the terms was real, but the customer was not forced to deal with the bank or to incur the fees; there was no lack of good faith by ANZ," the judgment says.
"Though the fees, from one perspective, may be seen to be high in the eye of the consumer, they were openly charged and can be justified...It was not demonstrated that customers could not go to financial institutions that did not charge these fees."
Separate New Zealand action over the same bank fees, funded by Litigation Lending Services and featuring New Zealand lawyer Andrew Hooker and Australian law firm Slater & Gordon, has been stayed pending the outcome of this Australian appeal. On behalf of thousands of the banks' customers, Fair Play on Fees has sued ANZ, Kiwibank, Westpac and BNZ and pledged - but not yet filed - a suit against ASB. The group has said it has 6,000 ASB customers signed up.
'Quite a different outcome could be possible in NZ'
Hooker told interest.co.nz: "We are aware of the ANZ appeal in Australia and note that the plaintiffs in that case have indicated an intention to appeal to the High Court of Australia. We will be reviewing the judgment closely, but note that Australia and New Zealand are two different jurisdictions, so a quite different outcome could be possible in New Zealand."
An ANZ NZ spokesman said his bank was still considering the detail of the Australian judgment.
"We’ve always been upfront about our exception fees; they’re in our terms and conditions. Exception fees are avoidable and the vast majority of New Zealanders don’t pay them in any given year. If customers find themselves in a position where they are incurring regular exception fees, we’d ask them to come and talk to us as we can look for solutions," the ANZ NZ spokesman said.
Meanwhile, a Kiwibank spokesman continued that bank's policy of publicly ignoring Fair Play on Fees.
"Kiwibank has not provided any comment of the actions by Fair Play On Fees in New Zealand or the cases in Australia and does not wish to change that position," a spokesman for the state owned bank said.
Last July a Fair Play on Fees spokeswoman told interest.co.nz the group was awaiting the outcome of the Australian appeal because it was likely to help determine an agreed set of preliminary questions for the New Zealand cases.
"This was done by agreement with representatives for ANZ and Kiwibank. Narrowing the issues in dispute by agreement, as much as is possible, is important in large scale litigation, as a complex case like this can spend years going through interlocutory stages if every point is taken. We think that the benefits to case management justify waiting a few months for the Australian precedent," the Fair Play on Fees spokeswoman said last year.
Penalty, or exception, fees in dispute between Fair Play on Fees and the banks include credit card late payment fees, unarranged overdrafts (account out of order fees), rejected payments on deposit accounts (dishonour fees), and exceeding credit limit (over limit fees).
In statements of defence both ANZ and Kiwibank have said, among other things, customers acquiesced to the fees by failing to avoid them.
'The burden sits with Fair Play on Fees'
Minter Ellison Rudd Watts partner Stacey Shortall last year told interest.co.nz the New Zealand exception fees litigation would have to stand and fall on its own legs. Any decision in Australia would have no precedent effect legally in a New Zealand courtroom, she said.
"The law's different, the fact's will be different and the case will need to be established in this setting. There's no ability to transport what an Australian court heard or found over here for a New Zealand judge to look at," Shortall said.
Shortall, who is not involved in the case, also said given Fair Play on Fees has made the allegations, the burden sits with them to establish the case "does in fact hold water."
Commerce Commission determination
Credit card late payment fees were the one area that went against ANZ Australia in the initial judgment. In New Zealand the Commerce Commission said in 2010 late payment credit card fees of up to $15 were likely to be justifiable on a cost recovery basis, telling banks any late payment fees at or below $15 "should not trigger future investigation or enforcement action." The banks have been abiding by this $15 limit. However, Hooker has told interest.co.nz this doesn't mean banks are off the hook.
"Firstly, the Commerce Commission is not the regulator of the banks so that's the first point. Secondly the Commerce Commission did not say that it was okay to charge $15. And thirdly the Commerce Commission does not make the law, it does what it thinks is right and a civil case is a totally separate arena," Hooker has said.
Announcing its plans amid much media fanfare in March 2013, Fair Play on Fees claimed the major banks had pocketed about $1 billion through "excessive" charges on exception fees over six years. Banks were charging up to $20 dollars a time (and had charged more in the past) for fees covering events that probably actually cost them no more than a dollar, Fair Play on Fees said. ANZ, the first bank targeted by the group, disputed this saying it had mathematical calculations backing up the basis of its fees.
Last year's Federal Court judgment in the Australian class action against ANZ, now successfully appealed by the bank, found no problem in law with four of the five disputed ANZ fees being honour, dishonour, non-payment and over-limit fees. However, Justice Michelle Gordon said ANZ's credit card late payment fees were "extravagant, exorbitant and unconscionable" and unenforceable. She said losses or damages incurred by ANZ ranged from A50 cents to A$5.50 when the actual fees charged were between A$20 and A$35.
Here's IMF's full statement
1. The Board of Directors of IMF Bentham Limited (“IMF”) announces that the Full Court of the Federal Court has today delivered judgement against the class action representative funded by IMF in the matter of Paciocco v ANZ Banking Group Limited (“ANZ”).
2. The Full Court reversed the decision of Gordon J in the Federal Court that ANZ’s late payment fees on credit cards are penalties. The Full Court also upheld the decision of Gordon J that ANZ’s honour and dishonour fees on bank accounts and over limit fees on credit cards do not constitute penalties.
3. It is likely that the representative will seek special leave to appeal to the High Court on all of these matters. IMF will fund the representative both to make the application and on the appeal if the application is successful.
4. The ANZ matter is the first of a series of actions against Australian Banks in respect of exception fees. One of the other matters has been the subject of settlement discussions and the others have been stayed awaiting the outcome of the ANZ case.
5. The litigation funding arrangements include a provision for all clients to be responsible for common costs which includes the costs in the ANZ matter.
6. Accordingly it is likely that IMF will, pending the outcome of the special leave application and the appeal, write off approximately $4 million from its intangible assets as at 30 June 2015 and create a provision for adverse costs of approximately $1.5 million.
7. Further information is available by calling IMF on 1800 016 464 or on IMF’s website: www.imfbenthamltd.com.
Diane Jones, chief operating officer.
And here's ANZ Australia's statement
ANZ welcomed today’s decision by the Full Federal Court of Australia in ANZ's favour on all fees subject to appeal in the litigation brought by IMF Bentham Limited.
The case dates back to 2010 and involves claims that certain fees charged or formerly charged by ANZ in Australia are not enforceable, including late payment and over limit fees on credit cards and honour, dishonour and non-payment fees on deposit accounts.
ANZ CEO Australia Mark Whelan said: “Our long standing position has been these fees were lawful and we’re pleased this has been vindicated by the Full Federal Court.
“We were particularly pleased the Court found there was no dishonesty on ANZ’s part and these avoidable fees were fairly and fully disclosed and there was no lack of good faith by ANZ.
“We would hope today’s carefully reasoned and unanimous decision will put an end to this lengthy and expensive litigation that has been brought against the Bank by publicly listed litigation funder IMF Bentham,” Mr Whelan said.
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