Andrews v ANZ: Do All Contracts Need To Be Rethought?

Like an iceberg hiding its mass beneath the waves, the true magnitude of last week's High Court decision in Andrews v ANZ is yet to be realised.

On the surface, the iceberg's tip is apparent. In its rejection of the long accepted position that the penalty doctrine is only activated on a breach of contract, the High Court paved the way for a wider range of bank fees, including dishonour fees on overdrawn accounts, to be potentially categorised as 'penalties' and therefore be refundable.

More than 170,000 Australian bank customers are now lining up to fight for the return of some $220 million in bank fees.

The obvious lesson from Andrews is that it is the substance of the clause which matters, not the form. A bank fee (or indeed any stipulation) may be found to be penal if it is out of all proportion to the obligation that the stipulation sought to secure.