Insights | High Court ANZ penalties case

We have summarised the High Court’s recent judgment in the ANZ penalties case in a single page for your easy digestion below (legal boffins will get more benefit from trawling through 129 pages).  We note that our comments do not address the alternative statutory claims also dismissed by the High Court.

Is a late payment a penalty?

Decided “No” in separate 4:1 decisions (of which French CJ agreed with Kiefel J) with Nettle J in dissent).  Since the Chief Justice followed Kiefel J, Her Honour’s reasoning should be given more weight than either Gageler J or Keane J.

The ratio to draw from the ANZ case is that unrealised losses incurred (or even provisioned) are factors which may be drawn upon in support of an argument that default payments are not penal in nature as they are directed towards protecting the commercial interest of the lender rather than terrorising or punishing the debtor.

Kiefel J (with whom French CJ agreed) held that the appellants’ evidence was not sufficient to demonstrate the Late Payment Fee was out of all proportion to the ANZ’s interest in receiving timeous payment of the minimum Monthly Payment.

Justice Keane’s decision reads more like a “freedom of contracts” treatise and is in our view less compelling than the reasoning of Kiefel J and Gageler J.

However, what is remarkable is that only Justice Nettle delved into the mathematical particulars of how each expert assessed the quantum of ANZ’s “greatest conceivable loss”.

Conclusions and insights

  1. Chief Justice French was correct to state that we would all benefit more from Parliament initiating statutory reform than undertaking yet another jurisprudential study of English and Australian legal history.
  2. The case might have turned out differently had the appellants quantified ANZ’s theoretical losses and established that such provisioned losses were “out of all proportion”.
  3. Late payment fees are here to stay in the short to medium term.
  4. There may be scope to introduce similar default payment clauses into many contracts  going forward (i.e. not just credit arrangements).


This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular circumstances or on matters of interest arising from this article.

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