For the second time in four years the High Court has considered penalties, but the law remains somewhat fragmented and challenges remain for practitioners seeking to apply it in practice.
Category: Banking and Finance
Divergence in summary disposal of cases shown by contrasting recent decisions by the Courts of Appeal in Victoria and New South Wales
The decision of the New South Wales Court of Appeal demonstrates how a strict approach to granting summary judgment still prevails in that jurisdiction. There is in pronounced contrast to the post – Civil Procedure Act landscape in Victoria, where novel claims (unknown to Australian law in its current state) need to be supported by compelling submissions in order to survive the ‘no real prospects of success test’.
While courts have long wrestled with the proper characterisation of parties’ interests in money paid into court, the journey of judicial interpretation of the PPSA has only just begun. In Dura the Victorian Court of Appeal considered whether payments into court gave rise to security interests for the purposes of the Personal Property Securities Act 2009 (Cth) (PPSA).
The decision of the Victorian Court of Appeal confirms that the Banking Code obligation to exercise care skill and diligence in assessing credit can (and will often) be incorporated as a contractual term into guarantees. This finding is likely to affect lenders’ risk assessments when considering ‘riskier’ loans
Final decisions of the Financial Ombudsman Service (FOS) made on the basis of its opinion as to what is fair in all the circumstances are rarely reviewable by the courts, even if it makes errors in the decision-making process.
The Victorian Court of Appeal has considered the test applicable to applications for leave to appeal in respect of civil appeals. Leave to appeal will be granted if an appeal has a ‘real’ as opposed to a ‘fanciful’ prospect of success.
The revelations in the case around FOS staffing, expertise and decision-making make for interesting reading for those involved in banking enforcement litigation and the reasons in the case provide helpful guidance on construing the TOR.
Case Note by Kieran Hickie and Andrew Kirby. The Full Court of the Federal Court of Australia has overturned the decision of Gordon J that late payment fees charged by the ANZ bank on credit cards against its customers constituted penalties and were unenforceable.
Guarantees and the Code of Banking Practice – compliance with the Banking Code required to enforce a guarantee
Case Note by Kieran Hickie and Andrew Kirby. The recent decision of the Supreme Court of Victoria in National Australia Bank Ltd v Rice  VSC 10 highlights that care and attention must be taken by banks and lenders to ensure compliance with the Banking Code is taken in order for guarantors to understand their rights and liabilities under a guarantee. Non-compliance with the requirements of the Banking Code can result in guarantees not being enforceable.
Article by Kieran Hickie and Andrew Kirby. Reforms to the summary judgment procedure in the Supreme Court of Victoria and the County Court of Victoria now provide for one streamlined test in respect of summary judgment applications.
High Court finds settlement between one co-surety and lender does not affect other co-surety’s right to claim contribution in equity where contribution disproportionate
The decision of the High Court of Australia confirms and explains the application of the equitable doctrine of contribution between co-sureties. It provides a helpful summary of the law in respect of co-ordinate liabilities and the nature of covenants not to sue, all of which should be kept in mind by co-sureties when settling recovery proceedings brought against them by a lender.
Justice Hargrave has declined to follow the earlier decision of Justice Pagone in Solak v Bank of Western Australia Ltd  VSC 82. The cases involved the construction of a registered “all monies” mortgage which included a forged mortgage document and a forged loan agreement. Justice Hargrave followed New South Wales Court of Appeal decisions in holding that the mortgage effectively secures nothing because the underlying loan documents had been forged.
Attempted challenge by a financial services provider to a determination by the Financial Ombudsman Service under its terms of reference
The decision of the Victorian Court of Appeal in favour of the Financial Ombudsman Service Ltd (FOS) highlights the difficulties for financial services providers in trying to challenge decisions of FOS and the dispute resolution process under the terms of reference (TOR). The TOR operate as a binding contract with a finality clause in favour of FOS’ decisions and determinations.
Non compliance of terms of settlement by a borrower in relation to repossession proceedings commenced by a lender
Co-authored by Kieran Hickie and Andrew Kirby. The decision of the Victorian Court of Appeal in favour of the NAB highlights some difficulties that might arise between lenders and recalcitrant borrowers in relation to terms of settlement for the compromise of repossession proceedings. The Court of Appeal’s decision demonstrates that borrowers who enter terms of settlement must comply with the conditions of the terms of settlement.