By Gareth Vaughan
Lawyers from Chapman Tripp say a court ruling this week in the high profile A$50 million exception fee class action taken against ANZ in Australia is good news for local banks, meaning the bulk of the fees in question in Australia would also be deemed okay by a New Zealand court.
Chapman Tripp partners Victoria Heine and Michael Harper, principal Fiona Bennett and senior solicitor Nicholas Wood say the Australian judgment is likely to be "very persuasive" if a New Zealand court ever considers whether bank fees of the types in issue in Australia were unenforceable penalties under New Zealand law.
"As in Australia, the orthodox position in New Zealand is that the law of penalties applies only to sums payable on breach of contract. We also expect that, as in Australia, New Zealand law would not accept a customer to be in breach of its banking contract simply by overdrawing, or attempting to overdraw, its account," the Chapman Tripp lawyers say.
"It follows that a New Zealand court is very unlikely to find that honour fees, dishonour fees, over-limit fees and overdrawn fees (exception fees) are capable of being unenforceable penalties, although each case will turn on the precise terms and conditions of the relevant contract between banker and customer."
The Federal Court of Australia ruling fell mostly in favour of ANZ on the class action brought by litigation funder IMF on behalf of about 34,000 of the bank's customers over an estimated A$50 million in fees. Most of the challenged fees were not penalties and so could be enforced by the bank, the judge said. But late payment fees were ruled as capable of being characterised as a penalty, with this to be probed further in a substantive hearing next year. Read more on the case and NZ ramifications here.
The Chapman Tripp lawyers said a key issue for New Zealand is how, if at all, the judgment will affect cases brought under our Credit Contracts and Consumer Finance Act, under which default fees can only arise from a breach of contract.
"If the types of fees in the Australian case do not relate to a breach of contract, then they might not be default fees either. This would mean that for the CCCFA to apply, such fees would need to fall within the definition of credit fees."
See more on the issues and Australian case from Chapman Tripp here.