This case
15 With these principles in mind, five broad considerations call for attention in the present case.
16 First, the declarations record very large numbers of individual contraventions of provisions of the Code. Each of these involved a small amount of money. However, each also involved an individual consumer; and, in view of the nature of Ferratum's business, the great majority of those customers can be taken to have been persons of very limited means who were vulnerable to exploitation. The amounts involved could well have been significant for some customers. The evidence revealed that the large numbers of individual contraventions of the Code were attributable to a failure by Ferratum to implement and maintain adequate systems for calculating the amounts payable by customers. The failure persisted over a period of years despite the attention of ASIC and promises to do better. These circumstances led to a significant failure by Ferratum to meet the standard required of it by s 47(1)(a) of the Act: to conduct its business efficiently, honestly and fairly.
17 It is appropriate, as ASIC's submissions proposed, to take the individual contraventions of s 24(1A)(a) and (b) of the Code in each of the identified periods as a single course of conduct. The individual contraventions, though not necessarily factually linked to each other, were similar and flowed from the same failure to maintain proper systems. In addition, the large numbers of small scale contraventions make it infeasible to deal with each one individually. As noted above, however, it is not appropriate or permissible to treat each course of conduct as a single contravention: weight must be given to the persistence of behaviour over significant periods and the large numbers of individuals affected. Indeed, while each individual contravention of the Code can be attributed to negligence or carelessness, when viewed as a course of conduct they appear systematic and deliberate (or at least reckless) (cf Westpac No 3 at [49(a)-(b)]) because they are a function of Ferratum having, over a long period, failed to deal with obvious and persistent deficiencies in its system. These points suggest that the penalty for each category (or course of conduct) should be substantial.
18 Secondly, one of the relevant factors proposed by French J in CSR (reflected in several of the factors listed by Beach J in Westpac No 3) was whether the contravener has a corporate culture conducive to compliance with the statute, as evidenced by educational programs and disciplinary or other corrective measures. Ferratum's shortcomings in this regard are a significant aggravating feature of the case.
19 Ferratum's operations were the subject of external compliance reports by Dr O'Shea in December 2016 and August 2017, which made recommendations relating to matters such as calculation of monthly payments and the lawfulness (or at least appropriateness) of some of the fees Ferratum was charging. Ferratum's responses were generally slow and often inadequate. On the question of monthly charges it said in February 2017 that it was in the process of building a system that could automatically calculate fees. This was never done. Fees that Dr O'Shea had highlighted as potentially unlawful continued to be charged.
20 In large part, these problems appear to have persisted because Ferratum's parent company (Multitude SE), which is based in Finland, paid little or no attention to Australian regulatory requirements and chose not to allocate adequate resources to compliance in this country. For example, Ferratum's response to Dr O'Shea's report said that it was unlikely to rebuild its accounting system "specifically for the Australian market" because its parent company put a greater value on uniform reporting and accounting across the 24 countries in which it operated. On another occasion, when Australian staff raised issues concerning manual calculations and sought the development of a "tool" that would calculate fees and charges correctly, the response they received was that "there are no resources available to implement this".
21 The indifference of Ferratum's parent company to local regulatory requirements appears not to be limited to Australia. A subsidiary of Multitude SE was held in Commerce Commission v Ferratum New Zealand Limited [2020] NZHC 1607 to have breached "lender responsibility principles" under New Zealand law in several respects.
22 Thirdly, and relatedly, both French J in CSR and Beach J in Westpac No 3 (at [49(i)]) instanced the degree of cooperation with the authorities as a relevant factor. In this connection Ferratum has been found wanting in three respects.
(a) In response to Dr O'Shea's reports, Ferratum said in 2017 that it would build a system to calculate fees automatically. However, there is no indication that this had been attempted before Ferratum went into liquidation. Ferratum also asserted incorrectly to ASIC in July 2020 that the practice of overcharging borrowers had been rectified in 2018.
(b) Between June 2020 and October 2021 Ferratum was issued by ASIC with a total of 11 statutory notices requiring it to provide information or produce documents. One of these was complied with by the due date. Others received partial responses on or slightly after the due date, with further material provided up to a month later. Nothing at all was produced in response to notices issued on 20 September and 29 October 2021.
(c) Ferratum received advice from senior counsel in August 2022 to the effect that it might have no realistic prospect of defending some or all of ASIC's claims unless deficiencies in its processes were addressed. It received further advice in December 2022 to the effect that its position had in some respects deteriorated since the earlier advice. Yet it continued to defend the proceeding until it went into liquidation on 4 April 2023.
23 Fourthly, as to deterrence, specific deterrence of Ferratum is not an issue given that it is in liquidation and no longer trading. However, it is appropriate that the orders made should seek to deter Multitude SE against taking a similar approach to doing business in Australia in future in the event that it seeks to re-enter the market (eg, by establishing a new Australian subsidiary). The orders should also seek to send an appropriate message to other providers of SACCs in Australia and to other foreign entities participating in, or considering entering, that market through subsidiaries.
24 For both of these reasons, it is appropriate to take into account the extent to which Multitude SE was exercising control over Ferratum during the periods in which contraventions were occurring and was on notice of those contraventions. It is also appropriate to take into account the place of Ferratum within the corporate group and the size and profitability of that group.
25 As to the first of these points, I have noted earlier that Ferratum's management and accounting systems were to a significant extent dictated by the corporate group to which it belonged. In addition, a number of responses by Ferratum to communications from ASIC and affidavits deposed by its solicitors and officers (as well as by employees of Multitude SE or other entities in the group) made it clear that Ferratum itself was a small operation and many matters needed to be referred to, or had decisions imposed by, staff of Multitude SE or its other subsidiaries in Europe. Matters referred to staff in Europe included instructions in relation to responses to notices from ASIC and the conduct of this proceeding. I am satisfied that Ferratum's parent company exercised a significant degree of control over both the implementation of the systems that led to contraventions occurring and Ferratum's responses to the actions taken by ASIC to investigate and remedy those contraventions. In considering what level of penalty is appropriate for the purposes of deterrence, the case should be approached on the footing that the contravener is the corporate group to which Ferratum belonged.
26 Ferratum's financial statements for 2017 to 2019 showed it earning revenues between around $9.7m and $12.5m each year. It reported losses in each year, but it is difficult to know what to make of this because it was controlled by Multitude SE and had large related party loans. An affidavit affirmed by Mr John Warton of ASIC analysed data obtained from providers of small and medium sized credit contracts in Australia (the detail of which is subject to confidentiality orders) and showed that, by reference to total credit provided, Ferratum ranked between 10th and 17th out of around 200 providers in the 2017-18 to 2021-22 financial years. It was thus a significant business in the market in which it operated.
27 Consolidated financial reports are available for Multitude SE for the years ending 31 December 2017 to 31 December 2022. Multitude SE earned revenue of between €212.366m and €293.104m in each of those years. It made a loss of €2.562m in 2021 but otherwise made profits of between €485,000 and €23.648m in each year. Its net assets at the end of 2022 were €181.960m. It is a large and (usually) profitable multinational organisation.
28 Fifthly, in a case where there are multiple contraventions, the "totality" principle (referred to, eg, in Australian Securities and Investments Commission v Westpac Banking Corporation [2019] FCA 2147 at [270]-[272], [308] (Wigney J)) calls for attention to whether the total of the penalties imposed for those contraventions is in proportion to the contravening conduct considered as a whole.