Penalties, banks and such-like Down Under

Contract law enthusiasts might take heart from today’s long-awaited decision of the High Court of Australia on penalties, Paciocco v ANZ Group Ltd [2016] HCA 28. Essentially four of their Honours (French CJ, Kiefel, Keane and Nettle JJ) say things consistent with Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67, decided last November in the UKSC and noted here on this blog: namely, that the test for a penalty is now whether the agreed sum fulfils some legitimate interest in the victim in obtaining performance.  There is agreement to differ on another point (ie whether the penalties doctrine goes beyond breach of contract — the Aussies say it does, we say it doesn’t): but that issue wasn’t raised in Paciocco, and in mentioning it French CJ was merely pointing out that the common law isn’t necessarily one-size-fits-all. This point aside, London and Canberra are singing from a broadly similar hymn-sheet.

The question at stake was late payment fees on credit card accounts — in this case a straight charge of $20. By a majority (Nettle J dissenting) it was held not penal. Advantage banks.

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Professor Andrew Tettenborn

Professor Andrew Tettenborn joined Swansea Law School and the Institute of International Shipping and Trade Law in 2010 having previously taught at the universities of Exeter (Bracton Professor of Law 1996-2010), Nottingham and Cambridge. Professor Tettenborn is a well-known scholar both in common law and continental jurisdictions. He has held visiting positions at Melbourne University, the University of Connecticut and at Case Law School, Cheveland, Ohio. He is author and co-author of books on torts, damages and maritime law, and of numerous articles and chapters on aspects of common law, commercial law and restitution.

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