In February the High Court commenced hearing the case of Paciocco v ANZ, the latest in a long saga concerning ANZ’s bank fees. These fees included honour, dishonour and non-payment fees with respect to deposit accounts, and late payment and over limit fees with respect to credit card accounts. The litigation dates back to the 2011 case of Andrews v ANZ, when a representative action was brought against ANZ over these fees. Here we set out the history of this complex matter and what the current argument is before the High Court.
The decision at first instance was heard by Justice Gordon in the Federal Court. The core issue was whether the fees were in effect ‘penalties’. Contracts frequently contain a ‘liquidated damages’ clause which stipulates the amount that one party agrees to pay the other if a particular event occurs, such as a breach of the contract. These provisions are unenforceable if they are found to be a penalty. They will be a penalty if the amount of money to be paid is extravagant and unconscionable when compared with the greatest loss that could have resulted from the event. The plaintiffs argued that ANZ’s fees were penalties, and therefore they were entitled to a refund of them.
Justice Gordon found that only the late payment fees on the credit cards were a penalty. All of the remaining fees were not. This was because, traditionally, only a provision concerned with a breach of contract could be characterised as a penalty. This point had recently been upheld by the NSW Court of Appeal in Interstar Wholesale Finance v Integral Home Loans. The late payment fee on ANZ credit cards did arise out of a breach of contract, as there is a contractual obligation to repay the money by a specific date. On the other hand, an over withdrawal limit fee, for example, does not arise from a breach of contract between the back and the customer. It is an additional option the bank offers to withdraw more money than is in the account in exchange for the fee.
The plaintiff appealed to the High Court in the case of Andrews v ANZ (2012) 247 CLR 205. The Court unanimously overturned Interstar, holding that the law on penalties could be engaged by clauses that are not necessarily a breach of contract. The Court set out when the law on penalties will be engaged. The law on penalties will apply if the provision is collateral to a primary stipulation in the contract. The law on penalties will not apply if the provision is an alternative option that carries an additional cost.
To demonstrate the distinction between these two categories, the Court referred to the case of Metro-Goldwyn-Mayer v Greenham. The case concerned a contract that conferred the right to public showings of films for one screening only. If an additional screening of a film occurred then the exhibitor was obliged to pay a sum equivalent to four times the original fee. The NSW Court of Appeal held that the law on penalties was not engaged as the term was an additional option to exhibit the films again for a higher fee. After setting out this distinction, the High Court in Andrews remitted the matter back to the Federal Court for determination.
Justice Gordon heard the matter again in the case of Paciocco v ANZ (2014) 309 ALR 249. Despite the High Court’s expansion of the doctrine of penalties, Her Honour reached the same decision she did in Andrews: only the late payment fees were penalties. The law on penalties was engaged for the late payment fees because they were collateral to the primary stipulation of paying the bill on time. They were penalties because they were extravagant and unconscionable, in that they did not reflect the loss the bank suffered upon late payment.
The other fees did not engage the law on penalties as they were alternative options. This is because they were not collateral to a primary obligation under the contract, and instead granted the customer an additional service option. For example, a customer has the option to overdraw their account in exchange for an additional fee. The plaintiff appealed this decision to the Full Court of the Federal Court.
The matter was heard in the case of Paciocco v ANZ (2015) 321 ALR 548. The Full Court held that none of the fees were penalties. The Full Court agreed that the late payment fees were collateral and therefore the law of penalties was engaged. However, they disagreed with the conclusion that they were extravagant and unconscionable. In reaching this conclusion, the Full Court found that Justice Gordon incorrectly determined at what point the analysis of the bank’s loss is to occur. Her Honour conducted her analysis by looking at the actual loss the bank suffered. The Full Court held that the correct approach was to look at the predictable loss the bank possibly could have suffered from the failure to pay on time.
The Full Court of the Federal Court’s decision is the subject of the present appeal before the High Court. The appellants are arguing that the Full Court has misapplied the law in determining if a penalty is extravagant or unconscionable. The traditional formulation of the test comes from the iconic case of Dunlop Pneumatic Tyre v New Garage & Motor  AC 79.
In that case, Lord Dunedin described two relevant principles for determining if a clause is a penalty. The first is whether the sum stipulated is extravagant and unconscionable when compared to the greatest loss that could have possibly followed the breach. The second is whether the sum stipulated is a greater amount than the sum which ought to have been paid. This second principle is described as a ‘corollary’ to the first. It is this second principle that the appellants rely upon. They argue that because the bank fees for late payment were higher in some instances than the actual amount charged on the credit card, then they are penalties. However, this may not be as simple as it appears.
The High Court has unanimously accepted the Dunlop formulation of penalties in Ringrow v BP Australia (2005) 224 CLR 656. However, the Court did hint that the test may be due for reconsideration, in order to determine whether ‘any element in the contemporary market-place suggests the need for a new formulation’. The Court may ultimately find that, in modern society, the second principle is no longer a corollary to the first. A clause stipulating a sum greater than the sum which ought to be paid may not necessarily be ‘extravagant and unconscionable’ when considered with reference to modern commercial and financial reality. If the High Court is willing to modernise Lord Dunedin’s formulation, then it may create difficulty for the appellant’s case.
The appellants also argue that even if the second principle is not applicable, the Full Court of the Federal Court misapplied the first with respect to the late payment fees. The Full Court focused on what losses might be possible or predictable, which was substantially higher than what actually eventuated. The appellant’s argue that just because a large loss can be hypothesised, it should not mean the clause can never be a penalty. Rather, they argue that the likely loss, considered with respect to what actual loss occurred, is the correct method.
Therefore, the High Court will have to determine two issues that will likely have, regardless of the outcome, a significant impact on the future of the doctrine of penalties. The first is the modern status of the traditional Dunlop formulations. The second is whether analysis of the loss the relevant clause seeks to prevent can have reference to the actual loss that was suffered. Regardless of the outcome, Paciocco will likely have significant impact on the future of the doctrine of penalties. The High Court has reserved its decision. At the time of writing we eagerly await the judgment so we may finally know how this saga will conclude.
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.