LAWS11030 Foundations of Business Law: Case Study on Paciocco v ANZ

This assignment presents a detailed case study analysis focusing on Paciocco v Australia and New Zealand Banking Group Limited, examining the legal issues surrounding late payment fees and penalty clauses in consumer contracts. It also delves into a scenario involving the Retail Leases Act, analyzing the rights and obligations of landlords and tenants in lease agreements, specifically concerning termination and arrears. Furthermore, the assignment addresses a consumer law issue, evaluating potential remedies under the Australian Consumer Law for misleading or unconscionable conduct. The analysis incorporates relevant legal principles, case precedents like Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd, and statutory provisions to provide a comprehensive understanding of the legal implications and potential outcomes.

Running Head: BUSINESS LAW ASSIGNEMENT
Business Law Assignment
Name
Institution

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Business Law Assignment
Part A
1. The Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 case
was heard in the High Court of Australia. The proceedings of the case originally started
in the Federal Court before Gordon J who established that the provisions for late payment
were penalties founded on common law along with equity. The court case commenced
before Gordon J in the Federal Court in 2011, which constituted proceedings against
Australia and New Zealand Group Ltd (ANZ) on penalties. The decision held by Gordon
J was appealed to the Full Court of the Federal Court; nonetheless, the High Court
discarded the issues that surfaced in the appeal concerning the penalties of principle
(Lima & Wei, 2017).
2. The case is a civil case that involves civil proceedings. The appellant (Mr Paciocco) who
led the class-action appellants, was not successful in a claim for the recovery of the late-
payment fees he paid pursuant to the conditions and terms of contracts between him and
ANZ in line with two consumer credit card accounts. Therefore, Mr Paciocco bears the
onus of proof in this particular case (Barnett, 2012). The appellant contendeds that a sum
is a penalty bears the onus of proving that the sum is in reality a penalty and is faced with
an “elevated hurdle”. On the facts of Paciocco it seemed that the mainstream anticipated
the consumers to anticipate the bank’s interests and to adduce proof of the bank’s “costs”
of provisioning and regulatory capital as part of the discharge of the onus on the clients to
prove that the late payment fees were penal (Turner & Trone, 2013).

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3. The main legal issue in the proceedings was if the late payment fee provisions based on
the ANZ’s credit card accounts of the consumers constituted penalties. The only
challenged payment fee was a late payment fee of $35 or $20 charged when the client
made the minimum monthly payment after the due date. The clients claimed that the
payment fee was unenforceable as a penalty, as well as its imposition, was forbidden by
diverse statutes (comprising prohibitions against unconscionable behaviour along with
unfair terms).
4. The appellant supported the primary instance decision that the late payment fees were
exaggerated when contrasted with the biggest loss ANZ would recover by means of
damages at law that was unenforceable as penalties. The appellant too challenged the fees
reasons rather than that they were penalties. In this regard, the appellant claimed that the
fees charged by the bank were not genuine or unfair or unconscionable pursuant to the
statute (McCouat & CCH Australia Limited, 2010).
5. In the case, the doctrine of the precedent and the hierarchy is evident in the manner the
case proceeded from the federal courts to the High Court. Thus, the High Court in the
case considered an appeal by a client of the ANZ against the verdict of the Full Court of
the Federal Court that the late payment fee by the bank was not penalty. Consequently,
the High Court’s verdict helpfully investigates the law against penalties and the way it is
applied in Australia (Cranston, Avgouleas& Zwieten, 2017).
6. Construction contracts classically comprise “liquidated damages” provisions offering for
payment of a particular sum to one party by other if it fails to fulfil certain obligations.

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The case was a comparatively traditional penalty in the sense that it emanated in the
background of a contract that responded to the violation of a primary stipulation through
imposing a collateral obligation to pay the sum of money. Therefore, the reasoning in
Paciocco was probable to have application past bank fees, as well as apply to other
liquidated damages. Therefore, the position of penalty clauses in contracts founded on a
judgment that is currently over a century old. In Dunlop Pneumatic Tyre Co Ltd v New
Garage and Motor Co Ltd (1915) AC 79, the United Kingdom (UK) House of Lords
maintained a clause that offers for a liquidated sum to be paid for the violation of the
contract cannot amount to be a penalty. A liquidated sum is the specified, as well as
certain sum that is payable by a party who has violated a term of a contract to the other
party who has encountered a loss. The liquidated sum should be genuine pre-estimate of
the loss or damage incurred because of the breach of the contract. Thus, it will amount to
a penalty provided the sum needed to be paid is extravagant, as well as unconscionable in
contrast to the highest damage, which can believably be proved to have trailed from the
violation of the contract. In addition, if the clause is deemed a penalty, then it would be
invalid, as well as unenforceable based on the contract law. This precedent was the
foundation of the litigation against the bank (Lewison, 2015).
7. The decisions by the court were not fair because the judgment is probable to have
extensive consequences on the contract law, specifically in line with the liquidated
damages or losses clauses in contracts. This makes it harder to challenge liquidated
damages clauses due to the broad range of issues taken into consideration in ascertaining
the non-breaching party’s damage along with the degree, which may be warranted.

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The primary lesson that arises from the case is that where a contract responds to the
violation of a primary stipulation through imposing a collateral obligation to pay the sum.
This implies that the practitioners should first consider the “interests” that should be
protected by the primary stipulation. Significantly, this can generate a wide range of
answers, which are wider than the answer to the question “what damages could be
recoverable for the violation of the primary stipulation? Subsequently, practitioners
would require comparing pertinent “interests” to the money sum. Prominently, this can
comprise a quantitative comparison, other than attempting to “price” the pertinent
“interests” or change them into dollar terms to carry out a quantitative comparison
(Hudson, 2016). Therefore, only if the money sum is exaggerated, inflated, as well as
unconscionable in amount or out of all amounts as contrasted to the pertinent “interests”
could be capable of characterization as a penalty.
Part B
Question # 1
Issue
Is Wendy likely to succeed in terminating the lease before the agreed period elapse and
will Allan likely to succeed in recovering $10,000 in arrears for the 20 weeks?
Law/Rules
A lease is a contract, which establishes the rights and obligations of the owner of the
property (landlord) and the individual who uses the premises (tenant or lessee). In the case of

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Wendy and Allan, Wendy is the tenant or lessee while Allan is the landlord. Under the Retail
Leases Act (NSW), a retail lease starts when the individuals enter into the possession of the retail
shop or starts to pay rent as a tenant under the lease. The landlord has the right to end the lease,
as well as sue for losses if the lessee or lessee violates any of the contract terms in the rental
contract. A tenant is bound by the terms of the contract or lease, which includes the duration of
the lease (Hunt, 2009). In the case of Wendy and Allan, the duration that was agreed was for 5
years where the lease will end. The law demands that the landlord should be served with
termination notice 14 days earlier to allow the facilitation of the termination and vacation of the
tenant. Consequently, the landlord may seek payment of rent from the tenant through providing a
non-payment termination notice. In addition, the landlord can tender termination days if rent has
not been paid for 14 days from the day of scheduled payment. Section 129 of the Conveyancing
Act, 1919 asserts that before a right of re-entry or penalty under any stipulation of a lease is
enforceable, the landlord should originally serve the tenant with a notice regarding the violation
and when the landlord wants compensation (Duncan & Christensen, 2014).
Application of the Law
At common law, the proprietor has the right to impose a forfeiture of a lease in which the
lessee breaches a term of the contract, which is expressed as a provision of the rent contract. In
this case, Wendy has breached to pay rent for a period of 20 months, which implies that Allan
has the right to initiate forfeiture against Wendy for breach the lease agreement regarding the
payment. Allan can commence a non-payment case against Wendy because of the arrears that
are due and sue Wendy for damages (losses) incurred due to non-payment of rent in the rental
premises. Since Wendy has not served the tenant with the termination letter indicating that she is

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leaving the premises, then this amounts to the breach of the contract and consequently, the
termination of the lease is illegal and the court will find Wendy liable to the breach of the
agreement. If the tenant or lessee has not paid the rent for a specific period of time, then the
landlord may declare the tenant’s rights, along with the lease, forfeited by the lessee’s breach.
Therefore, the tenant will be liable for the landlord’s damages, which include unpaid rent,
forfeiture costs. Allan will succeed in this case because he will initiate a forfeiture case against
Wendy for non-payment of rent and seek compensation for the damages caused because of the
breach of the contract on the lease of the retail property. Therefore, Allan can seek payment of
arrears of $10,000 from Wendy by providing a non-payment termination notice (Bradbrook,
Croft, Hay & Bradbrook, 2009).
Remedies/Conclusion
The court will find Wendy liable for the breach of the lease agreement for forfeiture
because of the non-payment of rent arrears amounting to $10,000 and will likely to be ordered to
pay the amount due. The court will base its verdict on the fact that Wendy basically violated the
lease agreement that required her to pay rent as agreed (Cockburn, 2010).
Question #2a
Issue
Will Fred obtain a remedy under the Australian Consumer Law because of his inability to
pay the high interests rates because he never understood terms and conditions?
Law/Rules

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Under the Australian Consumer Law (ACL), products purchased from an Australian
business are classically covered by consumer guarantees not considering any other warranty.
Thus, the law aims to safeguard consumers and make sure a fair business in Australia. It is unfair
or unlawful under this law for a business to undertake statements in commerce, which are false
or deceptive, as well as those that are probable to misinform or mislead the consumer. Thus,
failing to reveal pertinent data, as well as predictions may be too deceptive (Parker & De Costa,
2016). Business conduct is probable to violate the law under the ACL if it fashions a deceptive
general impression amongst the audience regarding the price, quality or value of consumer
products. Under the ACL) misleading or deceptive conduct by the business can lead to court-
ordered civil remedies, which include the imposition of financial penalties, declarations,
compensation orders, as well as non-punitive orders (Svantesson & Clarke, 2013).
Application of Law
The case of Fred is a typical breach of the ACL because he was misled because of his
inability to read and write where he did not read the contract provisions sufficiently. The
misleading in the case of Fred amounted to price manipulations and violated the consumer rights
because he was not taken through the contract terms even the company understood the Fred was
illiterate (Nottage, 2009).. Trust Tractors Pty Ltd failed to provide accurate information to Fred
that resulted in misleading the customer into believing that the interest rate was fair, yet the
interest rate was high. This constituted unconscionable behaviour under the provisions of section
21 of the ACL (Sise, 2017).
Remedies/Conclusion

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The court will order that the Trust Tractors Pty Ltd mislead the consumer by failing to
explain to the customer the financial terms of the interest rate. This violated the provisions of the
ACL under section 21 of ACL where the company took advantage of a low-income customer
through making deceptive statements regarding the actual cost of a loan.
Question #2b
Issue
What are Linda’s rights and possible remedies under the ACL regarding refund on the
purchase of an electric exercise bike from the Big Z Inc store?
Law/Rules
Under the Australian Consumer Law, it is illegal for a business to make deceptive
representations regarding goods or services while supplying, supplying or even whilst
advertising the products. Whether a representation is misleading or false will rely on the
situations of the specific case. Thus, making misleading or false representations is an offence.
Therefore, the business should not make a false representation regarding the standard, quality or
grade of products. The ACL prohibits business not to engage in behaviour that is probable to
mislead the consumers regarding the nature, production procedure, features, or appropriateness
use regarding the product. Therefore, the company that is found liable for misleading the
consumer will be liable for the refund because this behaviour is punishable under the provisions
of the ACL (Sise, 2017).
Application of Law

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Under the Australia Consumer Law (ACL), Linda has the right to refund the electric
exercise bike to Big z Inc. The company violated the provisions of the ACL needs the company
to avoid misleading the consumer in the name of selling the product. Linda was misled into
believing that the electric exercise bike has strong power, but found that the bike had small
motor. Therefore, Linda under the ACL has the right to return the electric exercise bike and be
refunded or get a replacement (Svantesson & Clarke, 2013).
Remedies/Conclusion
The court will order that Linda should get a refund because Big Z Inc breached the ACL
law and that she has the right to return the bike. This implies that the court will base its judgment
upon invoking the provisions of ACL towards protecting the consumer because the information
advertised by the company was inaccurate and misleading (McNaughton, 2010).

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References
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Hart Publishing.
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Cockburn, D. W. (2010). Commercial leases. Haywards Heath: Bloomsbury Professional.
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University Press.
Hudson, A. (2016). Principles of equity and trusts. New York, NY : Routledge.
Hunt, M. W. (2009). Mining law in Western Australia. Sydney: Federation Press.
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