Australian Securities and Investments Commission v General Commercial Group Pty Ltd - [2023] FCA 24 - FCA 2023 case summary — Zoe

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Australian Securities and Investments Commission v General Commercial Group Pty Ltd

[2023] FCA 24

Federal Court of Australia|2023-01-24|Before: Mr J, Downes J

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At a glance

Source facts

Court

Federal Court of Australia

Decision date

2023-01-24

Before

Mr J, Downes J

Source

Original judgment source is linked above.

Judgment (31 paragraphs)

[1]

THE COURT DECLARES THAT:

The first respondent contravened: (a) section 47(1)(m) of the National Consumer Credit Protection Act 2009 (Cth) (the Credit Act) by reason of a contravention of its obligation under reg 11A(2) of the National Consumer Credit Protection Regulations 2010 (Cth) (the Credit Regulations) from 6 April 2019 to take reasonable steps to cooperate with the Australian Financial Complaints Authority (AFCA) with respect to AFCA complaint number 673708, being the complaint to AFCA by Mr Michael and Mrs Renee Ashton of 14 October 2019; (b) section 47(1)(m) of the Credit Act by reason of a contravention of its obligation under reg 11A(2) of the Credit Regulations from 6 April 2019 to take reasonable steps to cooperate with AFCA with respect to AFCA complaint number 627350, being the complaint to AFCA by Ms Aroha Webby and Mr Curtis Pokai on or around 13 March 2019; (c) section 47(1)(a) of the Credit Act by breaching its obligation to do all things necessary to ensure that the credit activities authorised by its Australian Credit Licence were engaged in efficiently, honestly and fairly, through its conduct in: (i) attempting to rely on the settlement agreement dated 29 July 2019 between the second respondent and Mr and Mrs Ashton in order to claim to AFCA that AFCA complaint number 673708 had been resolved and was therefore outside of AFCA's jurisdiction; (ii) threatening Mr and Mrs Ashton with legal proceedings unless they withdrew AFCA complaint number 673708; and (iii) commencing proceedings in the Queensland Civil and Administrative Tribunal, through its agent Miravo Pty Ltd, against Mr and Mrs Ashton, seeking damages alleged to have occurred as a consequence of AFCA complaint number 673708.
The second respondent contravened: (a) section 47(1)(m) of the Credit Act by reason of a contravention of its obligation under reg 11A(2) of the Credit Regulations from 6 April 2019 to take reasonable steps to cooperate with AFCA with respect to AFCA complaint number 613517, being the complaint to AFCA by Mr and Mrs Ashton of 9 January 2019; (b) section 47(1)(m) of the Credit Act by reason of a contravention of its obligation under reg 11A(2) of the Credit Regulations from 6 April 2019 to take reasonable steps to cooperate with AFCA with respect to AFCA complaint number 626243, being the complaint by Ms Webby and Mr Pokai initially made to the Credit and Investments Ombudsman (reference number 18/4337) and then transferred to AFCA in or around December 2018; (c) section 47(1)(a) of the Credit Act by breaching its obligation to do all things necessary to ensure that the credit activities authorised by its Australian Credit Licence were engaged in efficiently, honestly and fairly, through its conduct in: (i) entering into the settlement agreement with Mr and Mrs Ashton on 29 July 2019 in order to resolve AFCA complaint number 613517; and (ii) notwithstanding that settlement agreement, subsequently commencing proceedings against Mr and Mrs Ashton in the Queensland Civil and Administrative Tribunal, through its agent Miravo Pty Ltd, seeking damages alleged to have occurred as a consequence of AFCA complaint number 613517.

[2]

THE COURT ORDERS THAT:

Pursuant to s 167 of the Credit Act, the first respondent pay a pecuniary penalty in respect of the contraventions in declaration 1 in the amount of $50,000.
Pursuant to s 167 of the Credit Act, the second respondent pay a pecuniary penalty in respect of the contraventions in declaration 2 in the amount of $50,000.
Pursuant to s 167 of the Credit Act, the third respondent pay a pecuniary penalty in respect of the contravention in declaration 3 in the amount of $30,000.
Pursuant to s 167 of the Credit Act, the fourth respondent pay a pecuniary penalty in respect of the contravention in declaration 4 in the amount of $20,000.
Pursuant to s 177 of the Credit Act, the first respondent is restrained from engaging in credit activity (within the meaning of s 6 Credit Act) (credit activity) for a period of 12 months from the date of this Order.
Pursuant to s 177 of the Credit Act, the second respondent is restrained from engaging in credit activity for a period of 12 months from the date of this Order, other than: (a) collecting payments on loans currently outstanding; and (b) engaging an independent third party to undertake collection activity in relation to any currently outstanding loan that falls into default.
Pursuant to s 177 of the Credit Act, the third respondent is restrained from carrying on any business engaging in credit activity, or being involved in the carrying on by another person of any business engaging in credit activity, for a period of 12 months from the date of this Order.
Pursuant to s 177 of the Credit Act, the fourth respondent is restrained from carrying on any business engaging in credit activity, or being involved in the carrying on by another person of any business engaging in credit activity, for a period of 12 months from the date of this Order other than continuing to act as responsible manager of the second respondent in connection with any credit activities undertaken by the second respondent pursuant to orders 6(a) and 6(b).
The respondents pay the applicant's costs of the proceeding, to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[4]

Overview 8 Urban and Eden each held an Australian Credit Licence issued pursuant to Part 2.2 of the Credit Act and were members of the Australian Financial Complaints Authority (AFCA) external dispute resolution scheme (AFCA Scheme). 9 Mr Dale Heremaia was an employee of Urban. He was also the sole director and shareholder of Urban until early January 2020. 10 Urban's business included providing advice to consumers about obtaining home financing in circumstances where those consumers may not have had sufficient funds for a deposit. This advice typically involved recommending a loan to be arranged by Urban. 11 Eden's business included providing the initial loans arranged by Urban on behalf of consumers. 12 Mr Benjamin Heremaia was an employee and the sole director of Eden. He was also the sole shareholder of Eden until early January 2020. 13 From around January 2020, both Urban and Eden became wholly owned subsidiaries of Miravo Pty Ltd. 14 From January 2020, Mr Benjamin Heremaia was the sole director and shareholder of Miravo. Miravo did not carry on any business in its own right. 15 This proceeding concerns the actions taken by Urban and Eden with respect to complaints which were made to AFCA about them by certain consumers, namely Mr Michael Ashton and Mrs Renee Ashton, and Ms Aroha Webby and Mr Curtis Pokai. 16 Based on the facts in the Statement of Agreed Facts, the respondents admit that Urban and Eden contravened s 47(1)(m) of the Credit Act, by reason of a contravention of the obligation under reg 11A(2) of the National Consumer Credit Protection Regulations 2010 (Cth) (Credit Regulations) to take reasonable steps to cooperate with AFCA in respect of the complaints. Among other matters, this involved failing to provide documents sought by AFCA with respect to the complaints, commencing proceedings in the Queensland Civil and Administrative Tribunal (QCAT) against Mr and Mrs Ashton and an AFCA staff member, and uncooperative communications with AFCA. 17 Urban and Eden further admit that they contravened the obligation imposed by s 47(1)(a) of the Credit Act to do all things necessary to ensure that the credit activities authorised by their respective Australian Credit Licences were engaged in efficiently, honestly and fairly. This included Urban wrongly attempting to rely upon a settlement agreement to which it was not a party. 18 Finally, Mr Dale Heremaia and Mr Benjamin Heremaia admit that they contravened ss 47(1)(a) and 47(1)(m) of the Credit Act by reason of their involvement in the contravention of those sections by Urban and Eden respectively.

[6]

Ashtons 24 In around April and May 2018, Urban provided advice to Mr and Mrs Ashton which resulted in them signing a loan agreement with Eden. 25 On 8 January 2019, Mr Ashton lodged an online complaint with AFCA in relation to the loan agreement with Eden (Ashton Eden Complaint). The Ashton Eden Complaint was ultimately resolved in July 2019 by a settlement agreement between Mr and Mrs Ashton and Eden which effectively waived the remaining balance of the loan. 26 On 11 October 2019, Mr and Mrs Ashton made a complaint to AFCA about the broking services provided to them by Urban (Ashton Urban Complaint). 27 On 4 November 2019, Mr Dale Heremaia sent an email to AFCA in relation to the Ashton Urban Complaint claiming that the complaint had been resolved by the settlement agreement, notwithstanding that Urban was not party to that agreement. 28 On 15 November 2019, Mr Dale Heremaia sent an email to Mr Ashton on behalf of Urban: Dear Mr Michael Ashton and Mrs Renee Ashton We have been advised by AFCA that you wish to continue with your complaint against this company despite signing a complaint resolution agreement to the contrary. Please be advised that as a company we will not be renewing our membership of AFCA and will therefore no longer be bound by it's [sic] rules or decisions. We will then be free to proceed with legal action to recover the costs we have incurred as well as the damages we have suffered as a result of your actions and breach of agreement. This amount currently stands at approximately $9,750. If you wish to withdraw your complaint we will honour our current commitment to AFCA and take no further action. If not, we will commence legal proceedings to recover the debt. … 29 On 31 December 2019, 14 January 2020, 12 February 2020, 17 February 2020 and 21 February 2020, AFCA requested documents and information from Urban in relation to the Ashton Urban Complaint. Urban did not provide the documents and information requested by AFCA. Rather, by correspondence on 20 January 2020, 12 February 2020, 17 February 2020, 21 February 2020 and 25 February 2020, Urban refused to provide the requested documents and information. The failure to provide documents and information requested by AFCA amounts to a failure to take reasonable steps to cooperate with AFCA in resolving this complaint. 30 On 25 May 2020, AFCA made a recommendation with respect to the Ashton Urban Complaint, which was communicated to Urban on 27 May 2020. The recommendation was that Urban pay to Mr and Mrs Ashton the amount of $10,737.71. 31 On 3 June 2020, Miravo commenced proceedings in the QCAT seeking $25,000 in damages against Mr and Mrs Ashton purportedly based, in part, on the AFCA recommendation amount (Ashton proceedings). On 15 June 2020, AFCA sent correspondence to both Urban and Eden reminding each of them that commencement of the Ashton proceedings was prohibited under the AFCA Rules (being the AFCA Complaint Resolution Scheme Rules) and requiring confirmation that the proceedings had been withdrawn. 32 On 31 July 2020, AFCA issued a determination in relation to the Ashton Urban Complaint requiring Urban to pay $11,492.71 to Mr and Mrs Ashton (Ashton Determination). Following numerous attempts to obtain payment pursuant to the Ashton Determination, the sum was only paid on 25 May 2022, being approximately 10 months after these proceedings were commenced on 22 July 2021. 33 The failure by Urban to pay the Ashton Determination amount constituted a failure to take reasonable steps to cooperate with AFCA in resolving that complaint, such failure being aggravated by the length of time it took Urban to pay. 34 Whilst the Ashton Urban Complaint was progressing, AFCA was also communicating with Urban in respect of an AFCA investigation which concerned matters arising from the Ashton Urban Complaint, such as the attempt to rely on the settlement agreement and the failure to respond to information requests. Urban was informed about these matters on 28 April 2020. The AFCA case manager for this investigation was Ms Dalia Ismaiel. 35 Urban's response to these matters was sent by Mr Dale Heremaia to AFCA on 25 May 2020, which included the statement that: Ms Ismaiel's efforts to impune [sic] our reputation and to commence action threatening our business and the livelihood of its stakeholders is inappropriate and unacceptable. We will be commencing legal proceedings against Ms Dalia Ismaiel. She may think she has immunity, we will be seeking to test that in Court. 36 On 1 June 2020, Urban brought proceedings in the QCAT against Ms Ismaiel personally seeking $25,000 in damages (Ismaiel proceedings). 37 On 18 August 2020, AFCA's legal representatives wrote to Mr Dale Heremaia on behalf of Urban noting that commencement of the Ismaiel proceedings was contrary to the AFCA Rules and requiring that these proceedings be withdrawn. On 3 November 2020, Urban submitted a notice of withdrawal of the application in the Ismaiel proceedings and, on 27 August 2021, the Ismaiel proceedings were dismissed by the QCAT.

[10]

Webby and Pokai 51 On or around 3 August 2018, Ms Webby submitted a complaint to the Credit and Investments Ombudsman in relation to Eden (Webby and Pokai Eden Complaint). In November 2018, AFCA took over the handling of this complaint. AFCA informed Eden about the complaint by a letter of 4 December 2018. 52 On 12 December 2018, 9 January 2019 and 11 April 2019, AFCA requested documents and information from Eden in relation to the Webby and Pokai Eden Complaint. Eden did not provide the documents and information requested by AFCA. Rather, by letters of 17 December 2018 and 15 January 2019, Eden refused to provide the requested documents and information. 53 By a letter of 17 April 2019, Eden provided some but not all of the requested documents. In particular, Eden refused to provide statements showing transactions for the loan account which were the subject of the complaint. 54 On 27 May 2019, AFCA made a further request for documents from Eden. On 30 May 2019, Eden refused to provide those documents. 55 Eden's failure to provide documents and information requested by AFCA as set out above amounts to a failure to take reasonable steps to cooperate with AFCA in resolving this complaint. 56 On 4 September 2019, AFCA issued a recommendation in relation to the Webby and Pokai Eden Complaint that Eden pay to Ms Webby and Mr Pokai the amount of $2,097.28 plus any other repayments made since 31 July 2018. 57 By an email of 4 September 2019, Eden stated that it did not accept the recommendation, and that it planned to refer the matter to their solicitor and the "Honourable Josh Frydenberg's Office". By emails of 9 September 2019 and 23 September 2019, Eden then stated that it had made the recommended payment. However, as the result of an incorrect bank account number being provided by AFCA, it was unclear whether payment had been made. 58 On 17 January 2020, AFCA issued a determination that Eden pay to Ms Webby and Mr Pokai the amount of $2,097.28 plus any other repayments made since 31 July 2018 (Webby and Pokai Determination). 59 Following the Webby and Pokai Determination, AFCA then spent several months trying to obtain information from Eden to confirm that payment had been made. On 6 February 2020, 27 February 2020, 4 March 2020, 11 March 2020 and 1 April 2020, AFCA requested documents and information from Eden concerning payment of the Webby and Pokai Determination. By an email of 4 March 2020 and a telephone call of 12 March 2020, Eden refused to provide the requested documents. 60 On 17 April 2020, the Webby and Pokai Determination amount was paid. 61 Eden's conduct with respect to the Webby and Pokai Determination, including the failure to provide documents and information requested by AFCA as set out above, amounts to a failure to take reasonable steps to cooperate with AFCA in resolving this complaint.

[19]

Relevant principles 78 The scope of the power to impose civil pecuniary penalties was considered by the High Court in Australian Building and Construction Commissioner v Pattinson (2022) 399 ALR 599; [2022] HCA 13. While the High Court was considering s 546 of the Fair Work Act 2009 (Cth) in that case, that provision has similar wording to s 167(2) of the Credit Act. The following statements of the High Court are pertinent to this case: (1) subject to the particular statutory scheme, "the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the [relevant legislation] by the deterrence of further contraventions of the Act": [9], [15], [42], [47]-[48]; (2) civil penalties must be fixed with a view to ensuring that the penalty is not such as to be regarded by the offender or others as an acceptable cost of doing business: [17]; (3) the factors identified by French J (as his Honour then was) in Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152-52,153 (as set out below) are possible relevant considerations which inform the assessment of a penalty of appropriate deterrent value; however, these should not be considered as a "legal checklist": [18]-[19], [54]. 79 The factors identified by French J in CSR which informed the assessment of a penalty for contravention of the Trade Practices Act 1974 (Cth) were: 1. The nature and extent of the contravening conduct. 2. The amount of loss or damage caused. 3. The circumstances in which the conduct took place. 4. The size of the contravening company. 5. The degree of power it has, as evidenced by its market share and ease of entry into the market. 6. The deliberateness of the contravention and the period over which it extended. 7. Whether the contravention arose out of the conduct of senior management or at a lower level. 8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention. 9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention. 80 Section 167(3) of the Credit Act (as in force from 13 March 2019) identifies mandatory considerations (which overlap with the CSR factors) as follows: Determining amount of pecuniary penalty (3) In determining the pecuniary penalty, the court must take into account all relevant matters, including: (a) the nature and extent of the contravention; and (b) the nature and extent of any loss or damage suffered because of the contravention; and (c) the circumstances in which the contravention took place; and (d) whether the person has previously been found by a court (including a court in foreign country) to have engaged in similar conduct.

[20]

Maximum penalty 81 Section 167A Credit Act (as in force from 13 March 2019) provides that the pecuniary penalty must not be more than the pecuniary penalty applicable to the contravention of the civil penalty provision. 82 Section 167B Credit Act relevantly provides: Pecuniary penalty applicable to the contravention of a civil penalty provision - by an individual (1) The pecuniary penalty applicable to the contravention of a civil penalty provision by an individual is the greater of: (a) the penalty specified for the civil penalty provision; and (b) if the court can determine the benefit derived and detriment avoided because of the contravention - that amount multiplied by 3. Pecuniary penalty applicable to the contravention of a civil penalty provision - by a body corporate (2) The pecuniary penalty applicable to the contravention of a civil penalty provision by a body corporate is the greatest of: (a) the penalty specified for the civil penalty provision, multiplied by 10; and (b) if the court can determine the benefit derived and detriment avoided because of the contravention - that amount multiplied by 3; and (c) either: (i) 10% of the annual turnover of the body corporate for the 12-month period ending at the end of the month in which the body corporate contravened, or began to contravene, the civil penalty provision; or (ii) if the amount worked out under subparagraph (i) is greater than an amount equal to 2.5 million penalty units - 2.5 million penalty units. 83 Based on the evidence, I am unable to determine the benefit derived and detriment avoided by any of the respondents, and it is common ground that the annual turnover of each of Urban and Eden is substantially less than 50,000 penalty units. 84 Therefore, applying a penalty unit of $210 (which was applicable for the majority of the relevant period until 1 July 2020), the maximum penalty for an individual is $1.05 million and for a body corporate is $10.5 million. The proposed penalties do not exceed these amounts.

Australian Securities and Investments Commission v General Commercial Group Pty Ltd

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