Some Significant Banking
Cases of 2016
Tim D. Castle
Barrister, 6 St James Hall Chambers
10 March 2017
Focus Areas
• Bank Fees, Charges and Penalties
• LIBOR, BBSW and Pricing Issues
• Providing loan terms to customers
• Staff Disputes
Bank Fees, Charges and Penalties - I
• Paciocco v ANZ Banking Group [2016] HCA 28
• $35 then $20 late payment fee on a credit card
• High Court found (4-1) that it was not a penalty and not unconscionable
• Arab Bank Australia v Sayde Developments [2016] NSWCA 328
• 2% default interest margin applied from the date of default
• Court of Appeal found (3-0) that it was not a penalty
• High Court refused special leave
Bank Fees, Charges and Penalties - II
• Penalty must have the predominant purpose of being a punishment –
ie. out of all proportion to the maximum amount of damage that may
arise from the breach – McDougall J in Arab Bank at [74];
• Must be judged ex ante at the time of contract, not ex post
• Courts are mindful of the commercial choices made by borrowers,
who choose not to pay on time
• Costs and losses to the Bank of complying with APRA regulations,
such as provisioning under APS 220, can be taken into account
• No need for actual pre-estimates of loss to be made
Bank Fees, Charges and Penalties - III
• Lordsvale v Bank of Zambia [1996] QB 752 and subsequent
cases – there is a range of allowable margin increases (<4%,
4-10% and >10%)
• Sackville JA in Arab Bank – context of the suite of other
remedies available to borrowers
• Proving that the purpose of punishing will be difficult
• Unresolved issue of the rule in Astley v Weldon (eg 10%
reducible to 6% for prompt payment)
LIBOR, BBSW and Pricing - I
• LIBOR – Gelboim v Bank of America (23 May 2016)
• Appeal to the 2nd Circuit re a motion to dismiss an anti-trust action for
breach of the “per se” provision of the Sherman Act
• Allegation of collusion, cartel behaviour by banks involved in setting
LIBOR was plausible – even though it was only a benchmark
• Anti-trust injury was held plausible – risk that markets were tainted
• “Efficient enforcer” standing was remanded to the District Court –
was the plaintiff the proper party to bring the suit for treble damages
LIBOR, BBSW and Pricing - II
• ASIC v ANZ – pecuniary penalties action in relation to the setting of
another benchmark - BBSW
• Media reports of the argument is that ANZ “stockpiled bank bills and
short term deposits selling them into the market to force up the bank
bill rate during the five minute window in which the daily rate was
set” (SMH 03.03.16)
• Claim is for unconscionable conduct and market manipulation –
seeking pecuniary penalties (ASIC release 4 March 2016)
• Enforceable undertakings from other banks – UBS, BNP, RBS
LIBOR, BBSW and Pricing - III
• Common element is the importance of benchmarks to the banking
system – fine differences can involve large profits or losses
• Issue is the undermining of the assumption that the markets are
operating freely and competitively
• Both cases rely upon actual communications between individuals, as
well as statistical analysis of trading data
• First Difference – competition law or corporations law
• Second Difference – regulator or private plaintiff/class action
• Part of wide-ranging actions in UK, US and Europe
Providing Loan Terms to Customers
• NAB v Dionys [2016] NSWCA 242
• The customer opened an account to receive a divorce payment, three
days later her nephew withdrew the money and used it for a deposit
on unrelated property purchase
• Court held that NAB did not take the steps reasonably necessary to
bring the customer booklet terms to her attention (at [88]) – handing
her the booklet was not enough
• Bank bears a heavy onus of proving ratification where a third party
makes a withdrawal without authority – the acts of ratification must
be “unequivocal”(at [132])
Staff Disputes
• Bartlett v ANZ [2016] NSWCA 30
• Internal email leaked to a journalist on 20 June 2012 that ANZ would
not do any more property lending that year
• An internal bank enquiry found that Bartlett was the cause of the leak
and he was dismissed, despite his protestations
• Immediate dismissal available on the basis of “serious misconduct”,
but this requires the bank to act in good faith and reasonably (at [38])
• Damages awarded for 4 months pay, being the period of notice
required for ordinary dismissal (without reasons)
Some Significant Banking
Cases of 2016
Tim D. Castle
Barrister, 6 St James Hall Chambers
10 March 2017