CIIAPTER ONtr _ PENALTIES AT LAW
l.l Key findiogs
t .2
Th€ eD€rgdc€ olphone bdkire,, EFTPOS. ATMS md Inlemet beking in r€sr ye6 ha efleterla signi6@t cbeg€ iD the bdftins pa$em of Autralim consuDere. A;idid b.!ks have arivetvprcDoted eletrcnjc bdhng mices a5 tow te opriotrs. ffidflng h.+tetuce d,isratre at Lb;bark @ulB alm6l a Lbra ol rhe pasr Aryubl). beks stsnd o mate saving( from rhe* adwn(esD rannoroges. yetlhde is lifile fl ideDce ro 3'row dat d) ofrhe q\ ijgs pRsumabt, berng oade bythe banls @ elDally being pssed onto coasuheB. Indee4 coffme.s app@ toG !";"g .;thd€vo for the s@ices prcvided by banks dd brnk fs ue ;rcreasing. dlh* thu d#rin'g], ar a
This is-pdticlrldly the c8e with regard lo the les in sooe ca*s, as high as S5O - beine chdrged bybarls fo. cEroDd defautts, slch .s cheque or direcr debit dishonous. Ledoral evid;e s;se;th'l bar*s My bo seking to puish cutones for defaults, vhjch raises rhe question ofwherh; thef6 beidg charged by bnks h these drcMstan es m excesive and disproponionate ao the lo$, ifdy, sutreftd by the bdl 6 a Esull ofa cutomd defaur
It-is a welfstablished l€gal principle thar a cdhachul clause lroviding for the forfeit@ or p3lDdror a specilied $n of noaey upon brech of mntracl k valid md.rforceable ody if theeontprevided. for k a sftuire pE-esumte of rhe toq titet' lo be jujlercd d a 6ulr ;t be bl@h ofcoD|I&r' chapre I eminec rhr,leeat pnnc,pte in dtuit We appt) Lhe lesal princ,ptes ro tuexdimfie of lbe fees (MoUy cha.ged by badks for custone. defaulrs, which w; etu.benatry
13 The l€ed doct ine ofpenalties
A @ntE t is u €rement b€tweer two parlies io do or nol do various r,hinEs, Contr&l. navcht 'D all sorts of reffi. fs e\dple rhar a plw pmqd. a prod,a o, sen,es. o, [,"r a peny pajuoun pany tG a prodr4l c serccs.
Oi. rem thal Day be includld ia a cont&t is a reb that, if a pdty bE&hes the cooEact or defaul&in some way, that party nu6l pay lhe orher ..iD@ent'. perty a su of nodey.
' See, for M!re, O Dar r,]/l/116 L^i.E Stst h (wA) pty Lt 1 (rgsj.t 152 cLP. 3ss (O,Daj..lMElu.?:-,:*:1-Lq-l {uri, ' 1q36, ,b? .LR '1a t4vLy-r Dc,. I vnda td^n , ",p*.,"n u ct^n,e(r e39) l66CLR t3l lBz,r'.r.
A @ntd.tEl ted is liket io be a peiElq, it
is determtued by the subslance oftheAlsI!!! !!4@44 !y !I" 'ubc.ance of rbe lttuL not rbe trme or fom of iL
l. The _sm io be paid dder the rem by 1be parly in b.oach is dt of aI pmpontutr o. qlfavasdt*orbitart d uMciorable h conpdjstr wirh ril€ lo$ $frercd by he -iono@trr pdty;
2. The rcldiolEhip t€reee! the cdt sctjng rFdies, including radols rch d {te rehrive bdEairirgpostti@ ofdre !6nies dd wtetlq tbefe \6 any oplo.tuity to negotiale ibe idr\ is si tbd ;iwodd be udscioBble for rh€ -imcmt', pany b enfo@ th€ iern.
/4,�.
l l
The )esal pinciples rcsrdins suh clau*s or ,ems .re rclatively well-establishe{L' Suc! a ted isvalid if it p.ovid.s for payment of a sm of money that is a eenuire pe$rimate of the lN ordaDage effded by lhe irroceni party. However, ecordiag lo lhe legal dehine ofpedlties, s@h aclaw is lo be distinguisbed fiom a pe.alty cbuq which seels nol ro coqenste tbe im(ldr pdtybut 10 pemlis the othq plrty for the b@ch or defa'!t. Such pelalti$ arc unenforceable at law-
l3.l RMvert of loss ulan i b@ch
Cosally sp€king tu itument party co Mov{ a loss sutlded a a rcsull of a bie&h tbEqgh oneof two @ys. It my bring a gddal &tion for damaels upotr b@ch of mrtra.l ag4iB1 th€ othdpdry. Alte@tively, it day recover a sum of money ude. a claB€ iD the coDtFlt tblt povids frthe palndt of "liquiilrted .lr@ees ', that is a sm that aflels a genuine pe+stitui. of tho l6ssutrerc4 npor the bech.
Upon a bre€ch of @rt-ac! rhe ilrMenl party is entitled io re.over the acr&a/ /6r sutrsed by i. a aEsuL oflhe othe pdty's breeh, reerrdlers ofwhethd a clause p.oviding for paymot upon thebtwh is uqfircble a a penalty.' Howqor, jf the cbus js 3 pqdly, th. inl'lldt pdity tuotrely d the clae in l@vdirg irs etuat loss.a
This is nol to sy that the imocent party nust first psve the &t@1 lo6s it ha sqfier€d beforc thecourt a d€ietrnine whethq a cla6e providing for Fymenr upon the br@h is a FBlty. Howevd,lhe iDcluion of lbe chse in qustion mul ar the time the contrac! Y6 d1€red into, have ben aeeNin€, good faith attemp to peestimdte &e los or damages that would be sufftd a a Bdt of ati@h, fism lhe point of viw of a[ panies."
Tbe courts have held lhal if it h not Dosible to make d estimalion in dve.e of th€ los io bostr@d lpor a bl@b, a .huie pFviding for payment LLpd the bre&h is les lil€ly to bo a pdalry.dHow*s, s@h n claw My sliU b€ a pdally, regddless ofthe subjective intmtios oflll€ pdties, ifrheclaeis monrbleor unonscionrble iD corpdison wi$ tbe los {lTercd.l
l3J A qGtior of substare, .ot form
The fi.st Firciple in dehining whelhd a ch6e Btipulating the pa)DeDt of a sm of m@y fd ab@ch of coDtact is a perafty, is that ir is a question 'not of wo.d6 or of foDs of spe@h, bur ofsobstaa@ ed of ahings'.'
ti Dnlop Pn@natic Tv.e Co LId I i^ (mnsc ohd uotor Co ld lDunlop).lnd Dweiin
'ltlhe qBrid of wh€ihs a sm stipulated is : penalty or liquidr€d d@g$ t a queni@ of@nsftdim 10 be de.ided npon &e te@ @d i.h€rdt drcunNLnces of een particul,r cofte!judsed ord ar lh€ tine oflhe DEkins ofrh. onlract, nor s al lI€ dne 6r&€ lr@h'.t0
'� Se, for qorle o D.4 above n I al 168 pd cibbs Ct.'. S@. a�ot exepre, AWV-UDC, ahov€ n I al 215 po D!s&n J.'As above a1 192193 per M:JM &d Wilson J; se also PC D€wloprc4t Ptr Ltd ' R*ll (1991t 22NSWLR 6rs (PC t rr@turd6) at 645 Fr Clek€ JAj &tsl,, Pl, Ltd t BP,lqtralia PE Ltd (2004) 2$ALR 12 (Xtigdl a1 60 pr Cdn &d CE0m lJ.' Dt,]@ PnMh. rw C4 l td v u6 Carucc n.l Matot Ca. Lul lte tl ac 1o,D.nlapt rq7 Ft tadPdke\ CltddM"L E,Ci@inC azd Shipbuildins Co y Dan Jase RMN yzq,ie lo I Cdtdheno lrgf�sl Ac 6\Cltded.) * 11 w lnd D*ey. Esoda, ^bote n | 61 142 W Wilsn ed T@hey Jl.'D?.rrrqp. tbove n 5 at 88 per Lord Dudil: al95- pdLord Aiti$on.' O'Dea ahov. a I d ,(ro pd D6e I�" cb\.teba.*,*Fveas ot15 ptL&dDN.J, w^te Ca,tpbe Dis@ut Co. Lkl y Eri.tEeIr 2lAC600,I
/\"_.
l4
&codt withou! rbe customer having suincienr fdds available i! &eii accout to honou the chesdeor sidile 1,. ha ng a diret debir parm€nl prccessed I n fa\ ou ot a rtud parll s Lhou I Lhe cbroberhavirs $ftder! fiDds aaailable in their dccount io honou the pdlment.
Monlbly accoul serice fees aDd trmsclion fees, lor exanple ATM, EFTPOS o. ltrleaerwiihdrawalc ltuler fe6. @ not l)6idd€d by us ro be pdahy li€s. As sdch. *tilenudr hsben kitieu aboui rhse sons ofb6k fG, tbey re not the subject ofthis Repon.
In p3niculd- ve mnsider penally fees to include:
Tabk r Pen.l$ Fee
Dee.!i0tior
CheqE Dishonou . Outbodd
Cba.ged by tle b.nk wh6 the customer writes acheque and, at the time the cleque is pqetrtedfor pa,tbot tud p.ocssed the cBtodd dBnol have $fficietrl nDds in Ineir accout rosatis& the moul of the choquj corBequdtly,tne cheque is dishonowd.
Deposired Cheque Dishonou
ChcqE Dishoeu - Inbond
Charged by thc batrk *hen the cunorc. pre*n,sa chcque for delosit into rheir &6ul ed thech€qu€ is subsequently dishonourEd by the
Cheged by the bdt to stop paymst on acheaue that lhe esromer ba slta& sisned
Pdiodic Palna! Dishonou.* Chdged by the hdk whetr the culomer hstulho.ied their b&i< to male an eleclronictrdsfer of fuds Aom their ecodt 10 a thi.dpdtyt account e4 at tle time &e paymenl isprocqsed &e cslomer docs not have suitrcientfunds in their accout to etis6, dE mout or t'epalmetr! coseqEndy, the parrdl is
Dira_t Debit Dishorouf Charged by the bek wbetr the custond naa honsed a third pety to take an ele.rrcnictanslb. of tulds Aom their accout ro the thi.dparty\ &count and. at lhe time the paynem isp.ocessed. the cusloms does not have sufficiorfuds in lhen account 10 etisly the dour of thcpaynerti con*qudlly, the paymeot is
(where no aprroved oladnn facility or f.cility
Charged by the bdk who the cutoms wit€s achequ€ or authoriss d elet onic tEDsfer ofnDds iom their accoml 10 a third party'saccout d4 at rh6 rine tle pa)dent isprccsrd, lhe custoder does not have s!{!c.idtfiu.ls in then ecomt 10 satisi, he amoul of rhepalrenl howwer lhe p.ynent is .evennelshonowd by tle bak and the aeoul is
.'-l..-
Credit Ced Lati Patmcnl chrsed by tho ba.k wher the customd fails bmake p€ymet ofthe minimun monlhly paymenrdE oa their trdit cdd accoul's outsrardingb.ldce by the due date for the Dinimd
CEdit Cdd Ova Limil Chdged by the bank wher lhe amount thai thecustomer spen'15 on &eir crcdit €.d exeeds thecutomd's credit ced acmmr mqimum liDir
' Somc bank have only o.e 'Disionoui F€e ll)al applies 10 cheqE tud el€trcnic traElr dishonom, qhileods bok nrle difleEnl 16 for chequ€. direcr debil ed/d p€riodic paFoi dhhotroN.
Tle fe in Table I ffi all payable upd a default of some son by the cstomer This distinguishesFnalty fs from oiier f6 sh as trmsetion fees, morthly asount sewice fees. rhe m@i 6dfe or a ctEdit card &coml or the plovision ola r€placedenl cdd or duplicdle aeout sratcmDrThese o$er fes arc imposed d a fee for a ptuduct o. scryice provided by rhe bd c Penty fe€s, otthe othe. bod re oaly inposed if a customor "defaults" o! their agrcdent with ihe bant.
For exdple, NAB'S,4 Cti.le to Fea and ChdtEes: PeBaaal Ba"kine Fe6 srates thar a fec isp.yeble for a pqiodic parmenl nor mde dle to l&k ol iiDds" or for a cheque dishonoured due tolack of tuDds." St Geor€e's Ba* llccornts: lleq ahd Chary* and HN ta Mirinise Then s61cslhal a Pa)ment Honou Fee is ! fee lirr eeh lnnsaction lhal overdF s a cusbmeis accout orincrcd.s rte ano@t dlr€ady overd€wnsr (wlM there is no prwiosty agred ovsdFfi facilily).wrstpac's Producl Disclosur. Sralement for its pesotul deposit accounts slares 1hat the culomq..1.'; mi rake a althdawal t lnsaction which takes their accom! into negalive/debir balance dd:"..',,i.! iirr a L^.coNl Ov.rdawr Fee to be payable ifthis does occ*.J3 ANZ'S ANZ PqsotulBqnkine Account Fet dnd ChatEat states tha! a Late PaFdt Fe€ is chargcd on a stomer's creditcffd accoEt ifire _Moalhly Paymenf plN any "AnoMl De lrmedialely' show on rhe statemeniofaccout is nolpaid witlin 28 days oflhe slatement date.:'
The anouls cidged by vanous ,\stralie banks for tle fes det iled i. Tablo I ec set out in
2.4 The us ofcheqles and direct debits in Audtralia
Below, we exmine chequ sd dir@t debil disbonod fees a5 D exmple of peralty fe cldged byAstraliu bdli. Befm halysine thc fees chdeed upon the dishonod of cneques and di.ect debitpayments, it is ueff b pl&e th€ disclssion within context. Imely by seling oul crdl GageIevels for rhse Dawent mcthods i. AutFlia.
,i',{halian cosmen Eadilionally have been keen uses oI cheques for non{sh payoenrs.However,lhe number of cheques Millen bnu]ly in Adshalia has fallo by 29./d over the lat fiverri$. eom 3.1 million cheques per businos day in 2000 10 only 2.2 million cheques per b6ine$i :: .!! l{.r-''! - fh. !ah,e of these cheques nas fallen by 27%, fron S9.7 billion per brsines day in2000 10 onlv S?. I billion in 2004."'
t3 NAB. A G',id. t" Fe6 ad Charyes: Pe^Dtul AankinA Fees. lJ Scpre'nb€r 2004 ar I8.
:i Srdc,ryq Ban* A.a'ans: Fees ud (:htry.! tu l HN to Mi, rde Zr.n. 30 Aue6t 2d:r4 d 29." Wetp&, Deposit Acran"a: For P*sa.al A6bhcts: Plodt.t Dtclasure Statemnt incoryaruf|rS Teuond Condino6 Jt 6in{ !o!r d.dhr, ,1 Octobd 2004 dt 48 49.-
\1/,A^Z P{.-rc| Amhne r, iLh t .e, a..t t hdA.\- \o\ehdo 2OM J o- APCA,Annuol Repoa 2A04 Opentng Dnrr at 20
23
Giv€o the mtuE of ihe rclationrhip betw€€n banks md then ccton6, rnd th€ uruF of @ffE tsbetua rhqq a t€m in such a cmt act stipulating thal ihe rutomq pay a lege f@ io th€ b€rk fo. adefault utrdd lh€ conttact cl@ly hs the potenti.l ho be a penalty. Chapier 2 explc this in dehil.
TLis doe3 not m@ tbrl a bdk is not mtid€d io r@v{ $e acr,z1 /o$ suffe@d by it s a Gulr ofac6tl)tM's defaull [{owqer, if the tem iDposing tne fee is a p@lty, rhe bdk cdet rcly or rh€|€m 10 r€cove. its etual 16 B6ed by tle cutomer's default.
Austmlian lry bolds tbar whelhd a contactual tem fd the p&,rent of noney is a penalty is aqBtion of ilege whiclt tus otr aU tle circm€tdc€s of the cN. In panidld, a rerd I lftely to
t. Th€ su ro be paid uder the lern by the parry in b{each is oul of all propo.tioD or qtnv€d!aoib{dt or uoNcidrble in co'rp&ison with the lo$ s!fid€d by rhe 1d@6r pdry:
2, The reLtimhip betw@ the onttuling pdtie, including fetoB ssh a rhe relative barSainirgpositiotr oflhe larti* dd whetbq tbse ws dy opporrdiry io regotiat€ the te.B. is seh lhar i1eorld be u.oDdoeble for the "iD()@f'pa.ty ,o edorce rhe ten_
lD additio!, it is irnportant 10 tuober tbat th€ qu$tiotr is one '!or of words or of fods of sp@h,hrt of ehslaM dd of &ings'.- h othd worils, althoush buks desaibe vdioc paFars 6''fees", fq e@ple chequ€ or djr€st debit dishomu f6 or late paymq. fe, thjs dG notdendslhte that lhey e no! in fa.1 lenalti$.
If shfse,iaftct,F allies at law, dEy m benforceable by rhe balks agaiGl rhen ctrsbfrqs.
- C4&rat, lhoE n 5 .t 15 pd Ind D.!ey
20
