ANZ wins 'fees or penalties' class action

Yesterday the Full Court of the Federal Court reversed last year's ruling by Federal Court judge Michelle Gordon that late payment charges on ANZ's credit cards were penalties, rather than fees, and that the rate imposed by ANZ was too high.

If the ruling had been left in place, thousands of customers would have been in line to receive compensation for amounts unfairly charged, with no time limit.

ANZ challenged last year's decision while, at the same time, litigation law firm Maurice Blackburn, on behalf of the plaintiffs, challenged other parts of Justice Gordon's ruling that "exception fees", such as those imposed for dishonoured cheques, were not considered penalties.

In its ruling, drawing on the hearing of both sides' appeals in mid-August 2014, the Full Court - consisting of three experienced commercial judges - rejected the plaintiffs' appeal on exception fees, and upheld ANZ's appeal on late fees as being reasonable.

Further, Chief Justice James Allsop, delivering the judgment in Sydney on behalf of his fellow Federal Court judges, John Middleton and Anthony Besanko, said that in assessing the reasonableness of any charges such as late payment fees, the court was inclined to follow the approach of the bank's expert witness, rather than the plaintiffs' expert.

In another section of his judgment that will no doubt get a wide airing by bank fee supporters, Justice Alsop said:

"There was no dishonesty; there was no 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."

"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, not irrationally, in the manner contained in Mr Inglis' reports. It was not demonstrated that customers could not go to financial institutions that did not charge these fees," the judgment said.

National head of class actions at Maurice Blackburn, Andrew Watson, said the plaintiff's legal advisors would be reviewing the judgment with a view to making application for special leave to appeal to the High Court of Australia.

"It is perhaps appropriate that Australia's largest class action will be determined by Australia's highest court," Watson told reporters, speaking outside the Federal Court after the decision was handed down.

"[This decision] runs the risk of turning the doctrine of penalties and the statutory provisions on which we rely into empty vessels, devoid of any practical or meaningful content, and reducing the protection for all consumers in Australia."

He said that the class actions underway against other banks and telcos were on hold pending this decision and he expected this freeze to stay until the High Court application and appeal were decided.  

The class actions are being funded by IMF Bentham on a "no-win no-fee" basis.

The ASX-listed litigation funder said it was likely that its team will seek special leave to appeal to the High Court, and if so, IMF Bentham would fund the law firm Maurice Blackburn to make the application and on the appeal if the application is successful.

Accordingly it is likely that IMF will, pending the outcome of the special leave application and the appeal, write off approximately A$4 million from its intangible assets as at 30 June 2015 and create a provision for adverse costs of approximately $1.5 million.

Much of this judgment also applies to historical fees as ANZ announced that it had abolished some 27 types of fees before the class action started. A spokesman for the bank said ANZ had no plans to reintroduce any new fees, despite the decision.