When a Bank Can Charge You Even When You Did Nothing Wrong
The High Court’s Penalty Fees Warning for Every Australian
Home › Case Studies › Case Law Library › Commercial / Business Cases › Contract Interpretation › Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30
Published: 7 November 2025 | Reviewed: 4 December 2025
(3-minute read)
Most Australians believe you only get charged a penalty when you’ve done something wrong.
In Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, the High Court found the opposite: your bank could impose a fee even when there was no breach at all.
That single structural fact, fees without fault, is the wake-up call.
This could happen to anyone.
And if this can happen in banking, it can happen in law too, whenever the structure lets costs drift away from the client’s control.
What the High Court actually said
The case challenged ANZ’s “exception fees”: honour fees, dishonour fees, over-limit fees, and late payment fees. The High Court held that even where customers had no contractual obligation to prevent an event, and therefore did not breach anything, the fees might still amount to penalties, and therefore be unlawful.
The Court made two things clear:
A fee can be a penalty even without a breach
A fee can be unlawful if it is out of all proportion to the bank’s actual costs
This is not just a banking problem.
This is a structural problem:
when the incentives sit on one side, the cost consequences fall on the other.
Why this matters for anyone in a legal dispute
The High Court’s logic exposes a broader truth that applies far beyond banks:
When one party controls the steps, and also benefits financially from taking more steps, the other party pays the price.
In traditional legal models, the same invisible forces can appear:
work can begin “in the background”
trial preparation and settlement work can blur
costs can expand before you decide which path you want
incentives may reward more steps, not better outcomes
That is what the High Court warned against in a different context:
structures that let costs run ahead of client choice.
If this can happen with bank fees, it can happen in legal billing, often in ways clients cannot see.
See: Hidden Risks in the Traditional Model
The unseen risk: misaligned incentives
The Court’s penalty doctrine analysis highlights a structural imbalance:
ANZ could charge fees even when the customer didn’t breach anything
Customers had no meaningful ability to stop the triggering event
The fee bore no relation to actual cost
The structure incentivised the bank, not the customer’s wellbeing
In law, similar misalignment can occur when:
time-based billing rewards delay
blended roles reward “doing more”
the client bears cost risk without controlling timing
lawyers benefit when a dispute escalates, not resolves
The risk is not misconduct.
It is structure, exactly what the High Court examined.
How Clean Law fixes the structural problem: aligned incentives
Clean Law was built to remove precisely this risk:
If YOU save, WE win.
If your case DRAGS, we lose.
This reverses the problem seen in Andrews.
With Clean Law’s model:
we only earn a results-based reward when early, efficient resolution succeeds
we do not benefit from taking extra steps
we do not benefit from prolonging the dispute
trial advocacy is separated out to an independent courtroom lawyer
you fund one path, not both
every step must fit what reduces cost, not what inflates it
Clients get predictability, safety, and structural fairness, things the High Court’s reasoning shows Australians deserve across all professional services.
The Core Principle: Cost Safety First
The High Court’s penalty doctrine is ultimately about proportionality, visibility, and fairness.
Those same three values sit at the heart of Clean Law’s Aligned Incentives model.
If the structure keeps incentives clean, costs stay clean.
If incentives drift, costs drift.
And it happens faster than clients realise.
That is why Clean Law builds cost-safety into the architecture, not into promises.
Structural Fix: Aligned Incentives & Cost Safety
Learn how Clean Law’s aligned-incentive model protects Australians from hidden cost escalation and restores the client’s control at every stage:
see Aligned Incentives & Cost Safety
read Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30
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request a confidential call
By Nicky Wang
Principal Solicitor
Legal Liaison Ltd (trading as Clean Law)
Prepared in accordance with public-interest governance,
annual Law Society trust-account audits, and ACNC-reported standards.
Disclaimer: This page is intended to provide general information only and is not legal advice. The contents may not reflect the most current legal developments and do not take into account your individual circumstances. You should not act or refrain from acting on the basis of this information without obtaining legal advice tailored to your situation.
