Australian Courts maintain keen oversight of retail banking practices

With the year now underway, it is useful to review and highlight a number of judgments in the retail banking sector delivered by Australian courts last year. 

The 6 decisions we have selected involve a range of issues arising in banks’ engagement with their clients, contractual arrangements and the application of standard terms and conditions. The cases provide a number of cautions for banks seeking to navigate through various traps.

1. In National Australia Bank v Rose, the Victorian Court of Appeal held that the Code of Banking Practice requires notice for guarantees to be ‘markedly noticeable’.
2. In National Australia Bank v Dionys as Trustee for the Angel Family Trust, the Court restricted the bank’s ‘limiting’ clause (which required a customer to ‘promptly’ review her bank statements and inform the bank if she suspected unauthorised transactions, otherwise she could not make a claim against the bank) and held that the terms and conditions were not validly incorporated into the parties’ contract.
3. In Australia and New Zealand Banking Group Limited v Manasseh, the Western Australian Court of Appeal dismissed the bank’s claim that it could enforce a guarantee over subsequent financial arrangements, in circumstances where the guarantor had not specifically consented to new arrangements to the existing guarantee.
4. In Simic v NSW Land and Housing Corporation, the High Court resorted to the equitable remedy of rectification to find that a misdescription of the principal in two performance bonds was not fatal to fulfilment of the bonds.
5. In Paccioco & Anor v Australia and New Zealand Banking Group Limited, the High Court held that provisions for various fees were not unenforceable as penalties.
6. In Kojic v Commonwealth Bank of Australia, the Full Federal Court found that the bank had not engaged in unconscionable conduct in taking a security interest in property where its clients were involved as a third party to the deal. The Court overturned the finding that the knowledge of employees can be aggregated to determine a bank’s knowledge in the absence of improper conduct by the employees themselves. 

This article is part of a series highlighting a six judgments in the retail banking sector delivered by Australian courts last year covering a range of issues arising in banks’ engagement with their clients, contractual arrangements and the application of standard terms and conditions. The cases provide a number of cautions for banks seeking to navigate through various traps. Click the links above to view full articles.