AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MAKE IT MINE FINANCE PTY LTD

Solicitors for Make It Mine Finance Pty Ltd: Atzmon & Co Solicitors

Counsel for Australian Securities and Investments Commission: Ms E A Bennett

Solicitors for Australian Securities and Investments Commission: Australian Securities and Investments Commission

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 686 of 2014

IN THE MATTER OF MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411) MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411)

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 699 of 2014

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

AND: MAKE IT MINE FINANCE PTY LTD (ACN 130 102 411)

JUDGE: BEACH J DATE OF ORDER: 18 November 2015 WHERE MADE: MELBOURNE

1. Make It Mine Finance Pty Ltd (MIM) pay a pecuniary penalty to the Commonwealth of Australia fixed in the amount of $1,250,000.
2. Payment by MIM of the said sum to the Australian Securities and Investments Commission (ASIC) shall be treated as receipt by the Commonwealth of Australia and as discharging the obligation and liability in order 1.
3. MIM pay ASIC's costs of both proceedings, including reserved costs.
4. There be a stay on the operation of order 1 for a period of 30 days. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 686 of 2014

IN THE MATTER OF MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411) MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411)

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 699 of 2014

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

AND: MAKE IT MINE FINANCE PTY LTD (ACN 130 102 411)

JUDGE: BEACH J DATE: 18 november 2015 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 On 28 April 2015 I handed down judgment in this matter on the question of liability ([2015] FCA 393). These reasons should be read with those reasons. 2 The judgment arose out of two proceedings before the Court. 3 The first proceeding, VID 686 of 2014, was an application by Make It Mine Finance Pty Ltd (MIM) for: (a) a declaration that it had contravened various key requirements under the National Credit Code (the Code) (Sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (the National Credit Act)) as given effect by s 3 of that Act); (b) if it was so declared, a declaration "clarifying" whether one or more of those contraventions had occurred merely because of another contravention of a key requirement of a similar kind; and (c) orders fixing a pecuniary penalty in relation to such conduct (ss 112 and 116 of the Code entitled MIM to apply for such an order). 4 In the period 1 July 2010 to 1 March 2013 MIM entered into 24,377 credit contracts with customers. MIM was obliged to include all information required by s 17 of the Code in each credit contract (the "key requirements"). It was not in dispute that the required information was not provided by MIM to debtor consumers. I granted leave to the Australian Securities and Investments Commission (ASIC) to intervene in this proceeding, although it could have intervened as of right (see s 209(1) of the National Credit Act and s 120 of the Code). 5 The second proceeding was commenced by ASIC against MIM (VID 699 of 2014). ASIC sought declarations (see ss 166, 167, 187 and 202 of the National Credit Act) that: (a) MIM had contravened items 4(1) and 6(1) of Pt 2 of Sch 2 of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth) (Transitional Act); Ch 4 of the National Credit Act applies thereto (see item 37 of Pt 4 of Sch 2 to the Transitional Act) including ss 166, 167, 187 and 202; (b) MIM had contravened ss 128(c) and (d) of the National Credit Act in relation to each of 20,763 credit contracts; (c) MIM had contravened ss 130(1)(b) and (c) of the National Credit Act in relation to each such credit contract; (d) MIM was liable under s 167 of the National Credit Act to pay a pecuniary penalty in respect of each contravention. 6 ASIC alleged that MIM had engaged in conduct as a credit provider without holding an appropriate registration or licence. Further, as a credit provider, MIM was bound to take certain steps to evaluate the capacity of its customers to repay the relevant debts. ASIC alleged that between 21 April 2011 and 1 March 2013, MIM failed to: (a) make reasonable inquiries regarding each customer's financial situation; (b) verify each customer's financial situation; and (c) make the assessment required by the National Credit Act. 7 There were 20,763 credit contracts entered into in the period between 21 April 2011 to 1 March 2013 where the responsible lending provisions of the National Credit Act had been contravened. 8 I found that MIM had engaged in the following contraventions, each of which were, strictly, separate contraventions. 9 First, in terms of contraventions of the Code, MIM engaged in four strictly separate contraventions, in that in respect of 24,377 credit contracts entered into in the period 1 July 2010 to 1 March 2013 MIM: (a) contravened the key requirement (as defined in s 111(1)(a)) identified in terms of s 17(3); (b) contravened the key requirement (as defined in s 111(1)(b)) identified in terms of s 17(4); (c) contravened the key requirement (as defined in s 111(1)(c)) identified in terms of s 17(5); and (d) contravened the key requirement (as defined in s 111(1)(d)) identified in terms of s 17(6). 10 Second, MIM contravened item 4(1) of Pt 2 of Sch 2 to the Transitional Act during the period 1 July 2010 to 31 December 2010 in respect of 1,830 credit contracts. 11 Third, MIM contravened item 6(1) of Pt 2 of Sch 2 to the Transitional Act during the period 1 January 2011 to 20 April 2011 in respect of 1,784 credit contracts. 12 Fourth, MIM in the period 21 April 2011 to 1 March 2013 in respect of each of 20,763 credit contracts engaged in four separate contraventions of: (a) s 128(c) of the National Credit Act; (b) s 128(d) of the National Credit Act; (c) s 130(1)(b) of the National Credit Act; and (d) s 130(1)(c) of the National Credit Act. 13 On 15 May 2015, I made the following declarations: 1. Between 1 July 2010 and 31 December 2010 MIM has contravened item 4(1) of the Transitional Act by engaging in a credit activity, namely entering into 1,830 credit contracts, without either being registered, or holding a licence, to engage in that activity. 2. Between 1 January 2011 and 20 April 2011 MIM has contravened item 6(1) of the Transitional Act by engaging in a credit activity, namely entering into 1,784 credit contracts, without either being registered and having applied for a licence, or holding a licence, to engage in that activity. 3. Between 21 April 2011 and 1 March 2013, in respect of 20,763 credit contracts: 3.1 MIM has contravened s 128(c) of the National Credit Act by entering into a credit contract without first making an assessment in accordance with s 129 of that Act. 3.2 MIM has contravened s 128(d) of the National Credit Act by entering into a credit contract without first making reasonable inquiries of the consumer and taking reasonable steps to verify information about the consumer in accordance with s 130 of that Act. 3.3 MIM has contravened s 130(1)(b) of the National Credit Act by entering into a credit contract without first making reasonable inquiries about the consumer's financial situation. 3.4 MIM has contravened s 130(1)(c) of the National Credit Act by entering into a credit contract without first taking reasonable steps to verify the consumer's financial situation. 4. Between 1 July 2010 and 1 March 2013, in respect of 24,377 credit contracts: 4.1 MIM has contravened s 17(3)(c) of the National Credit Code by failing to disclose to the consumer the cash price of the goods the subject of the credit contract. 4.2 MIM has contravened s 17(4)(a) of the National Credit Code by failing to disclose to the consumer the annual percentage interest rate applicable to the credit contract. 4.3 MIM has contravened s 17(5) of the National Credit Code by failing to disclose to the consumer the method of calculation of the interest charges payable and the frequency of payment of interest under the credit contract. 4.4 MIM has contravened s 17(6) of the National Credit Code by failing to disclose to the consumer the total amount of interest payable under the credit contract. 14 I fixed a further hearing of both proceedings to address the question of a pecuniary penalty. No injunctive relief has been sought by ASIC. Moreover, no compensatory order has been sought. 15 The parties have not sought to put an agreed position on either a stipulated sum or the relevant range for the pecuniary penalty. Moreover, ASIC has refrained from separately expressing a view as to the appropriate sum or the relevant range. I do not need to explain how such a situation has been brought about. Accordingly, a contested hearing has been held. Various affidavits were filed by MIM and ASIC. Moreover, Mr Andre Lang, the sole director and shareholder of MIM, was closely cross-examined by Ms Elizabeth Bennett, counsel for ASIC. 16 In my view, and for the reasons that follow, MIM should pay a pecuniary penalty fixed in the sum of $1.25 million. 17 Before proceeding further, there are two preliminary observations that should be made. 18 First, one of the themes resonating through ASIC's submissions at both stages has involved the concept of "truth in lending" as the guiding paradigm. It has been asserted that this is an important contextual matter to consider in assessing MIM's conduct. ASIC has drawn my attention to Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2006) 16 VR 131 where predecessor legislation, the Consumer Credit (Victoria) Code, was considered. Reference was made to the manifest purpose of that Code being to ensure "truth in lending" (Neave JA at [166] to [168] and [188] to [189]). See also, on appeal, Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2007) 234 CLR 96 at [19] per Gleeson CJ, Gummow, Hayne and Crennan JJ where it was said, in the context of construing that Code, that "[w]ider considerations of 'truth in lending' are not to be disregarded, but they tend to divert the argument into unproductive speculation about the importance, or possible importance, to the debtors of knowledge of the holdback". I have not disregarded "truth in lending", but the vernacular of social philosophy is not useful to my task. Such phraseology does not answer the question as to the potential relevance and importance of the information said to be omitted to the potential debtor class, given their assumed level of financial sophistication, education and comprehension, and whether disclosure to such a class meaningfully provides "truth" or non-disclosure its converse. Indeed, putting to one side the context of the falsity of a proposition or its informational content, which is not a context relevant to the contraventions in question in the present case, the significance of either the absence of information or its level of generality or specificity is not appropriately analysed through an epistemological concept or by interlarding the statutory framework with a catch-phrase. 19 Second, there is nothing wrong with a commercial operator identifying a commercial opportunity in providing a service to a vulnerable class of consumers and pursuing that opportunity for profit. Such a vulnerable class may then have access to a valuable service that they would not otherwise have. Who can gainsay the direct and indirect potential benefits of such access? But legislation that is protective of such a class who are not able to protect their own interests, or where that is reasonably assumed because of the characteristics of that class, must be complied with by the operator. Such legislation in its dimensions relevant to the present case is designed to address the exogenous conduct and context of pre-contractual disclosure and contract formation, rather than endogenous conduct in the performance of obligations and the exercise of rights under the contract as formed requiring honesty and fair dealing. In the present case, prior to October 2012 Mr Lang paid lip service to MIM's statutory obligations. He kept lawyers' involvement to a minimum. And when MIM's lawyers gave prudent and correct advice, he either ignored it or implemented a variation thereof that conformed to his own convenient apparent misconceptions. Moreover, when MIM's contravening conduct had been exposed, he pursued the theme, which continued before me, that somehow MIM's lawyers should take some measure of the blame. Moreover, he sought to rely upon his relative youth and inexperience to explain the contraventions; at one stage he even referred to being "mentored" in relation to some of the conduct that I have found to be contravening. His excuses carry little weight. They had a veneer of respectability and were asserted with an air of earnestness when giving his oral evidence, but they lacked substance. His pride was to his prejudice. Nevertheless, it would appear that adequate procedures have now been put in place by MIM to remedy any systemic deficiencies. Moreover, no orders have been sought by ASIC as to any compliance program and nor has ASIC identified any deficiencies in MIM's current procedures.

RELEVANT FACTS 20 On the penalty phase MIM relied upon various affidavits of Mr Lang and Mr Neil Busacca, accountant. 21 ASIC relied upon various affidavits of Ms Thomas, Ms Adamopoulos and Ms Curtis of ASIC, Ms Maree Kennedy of the Department of Human Services and Mr Joseph Rose of Rose Lawyers. 22 There is broad agreement between the parties about the key facts relevant to the question of penalty. In addition, I made relevant findings at the liability stage of this proceeding, with my earlier reasons to be read with these reasons. 23 In summary, from around October 2009, MIM engaged in the business of providing credit to consumers for personal, domestic or household purposes to enable them to purchase goods. MIM financed the provision of computers and associated computer equipment exclusively to customers whose main source of income was Centrelink benefits. From around 26 August 2011, MIM started financing the supply of household whitegoods to such customers. But customers without access to Centrepay (a direct debit payment system operated by Centrelink) were not able to access the service offered by MIM. The business model permitted a customer to "lease" goods, and pay a "hire fee" for 12 months. At the end of that time, title to the goods transferred to the customer. But MIM did not disclose to customers the true cost of the item, the proportion of the amount that represented interest, or the total cost of the item over 12 months. However, by emphasising the low weekly cost of the goods for "hire", MIM created the impression that the goods represented good value to the consumer, although there was a substantial gap between the "cash price" of the goods and the cost price of those goods. The business model was successful. This is unsurprising given that the pricing model applied by MIM was based on a mark up of 100% on the delivered cost excluding GST of the product financed and provided to the customer. The gross margin (gross profit divided by the sale price excluding GST) and the net margin (net profit being gross profit less storage and postage costs divided by the sale price excluding GST) were in the range of 50 to 70%. 24 The principal issues on the penalty phase have been: (a) whether and to what extent MIM sought to ensure compliance with its legal obligations prior to or at the time of its contraventions; (b) whether and to what extent MIM was aware, or ought to have been aware, that it was not complying with its legal obligations in relation to the various categories of breach; (c) whether MIM could rely upon the absence of legal advice concerning the regulatory framework as an excuse for its conduct; (d) the scope of the benefit MIM derived from its non-compliance, and the detriment, if any, suffered by consumers; and (e) MIM's capacity to pay an appropriate pecuniary penalty.

ASSESSING PENALTY - GENERAL 25 As I have said, I declared that there had been: (a) Four contraventions of the Code in respect of each of 24,377 credit contracts, being disclosure breaches connected with the key requirements in s 17 of the Code. (b) A contravention of item 4(1) of Pt 2 of Sch 2 to the Transitional Act in relation to 1,830 credit contracts where MIM was unlicensed whilst entering into credit contracts between 1 July 2010 and 31 December 2010. (c) A contravention of item 6(1) of Pt 2 of Sch 2 to the Transitional Act in relation to 1,784 credit contracts where MIM was unlicensed whilst entering into credit contracts between 1 January 2011 and 20 April 2011. (d) Four contraventions of the responsible lending obligations under the National Credit Act in respect of 20,763 credit contracts. 26 Penalties should be fixed by reference to the categories of contraventions that have been identified (see Australian Securities and Investments Commission v The Cash Store Pty Ltd (in liquidation) (No 2) [2015] FCA 93 at [24] and [25] per Davies J).

(a) The licensing breaches 27 Sections 166 and 167 of the National Credit Act apply to the two licensing breaches notwithstanding that they involved contraventions of the Transitional Act (see item 37 of Pt 4 of Sch 2 to the Transitional Act). Section 167(2) empowers the Court, if it has declared under s 166 that a person has contravened a civil penalty provision, to order the person to pay to the Commonwealth "a pecuniary penalty that the court considers is appropriate". The maximum for a natural person is 2,000 penalty units. But where the contravention is committed by a body corporate, s 167(3)(b) empowers the Court to order a pecuniary penalty in respect of that contravention which is up to five times the maximum number of penalty units referred to in the civil penalty provision. As a result, for each single civil penalty contravention committed by MIM, the Court may order the payment of a pecuniary penalty of up to $1.1 million. 28 Theoretically there are two separate periods of time, each attracting a penalty of 10,000 penalty units for MIM. But in my view, and to avoid duplication, it is appropriate to treat the maximum penalty as $1.1 million in total for breaches of both items 4(1) and 6(1).

(b) The responsible lending breaches 29 There were four contraventions of the responsible lending provisions in respect of each of 20,763 credit contracts. As noted above, the maximum penalty where the breach has been committed by a body corporate is 10,000 penalty units. 30 I indicated in my earlier reasons that I would be inclined to treat there in substance to be: (a) one contravention of s 128(c) in relation to such credit contracts; and (b) one contravention of s 128(d) in relation to such credit contracts (as illuminated by the deficiencies referred to in s 130). 31 But I accept that the contravention of s 128(d) involved two sub-categories. In The Cash Store, Davies J considered analogous provisions, where s 115(1)(d) was broadly analogous with s 128(d), and the sub-paragraphs of s 117(1) were broadly analogous with the sub-paragraphs of s 130(1). Her Honour said at [13]: In setting the penalties to be imposed, it is necessary to take into account the extent to which the same wrongful conduct involved a breach of more than one civil penalty provision: s 175 of the Credit Act. In the present case, applying that principle, the failure to make inquiries about a customer's objectives and requirements in relation to a particular contract, which was a breach by TCS of both s 115(1)(d) and s 117(1)(a) in relation to that contract, is to be treated as a single contravention. Similarly, the failure to make reasonable inquiries about a customer's financial situation in relation to a particular contract, which was a breach by TCS of both s 115(1)(d) and s 117(1)(b) in relation to that contract, is to be treated as a single contravention. The failure to verify a customer's financial situation in relation to a particular contract, which was a breach by TCS of both s 115(1)(d) and s 117(1)(c) in relation to that contract, is to be treated as a single contravention. Finally, the failure to make a preliminary assessment in relation to a particular contract, which was a breach by TCS of both s 115(1)(c) and s 116(1) in relation to that contract, is to be treated as a single contravention. A similar approach is to be taken with respect to TCS's and AFA's contraventions of Part 3-2 of the Credit Act. 32 In the context of s 128(c) there was one category of breach, namely, the failure to comply with s 129 which required the assessment for unsuitability of each credit contract, having regard to the period the assessment covered and the potential for any increase of the credit limit over the period of each credit contract. There have been 20,763 breaches of this category. 33 In the context of s 128(d), there have been the following two sub-categories of contravention: (a) First, there was a failure to make reasonable inquiries about the consumer's financial situation as required by s 130(1)(b). (b) Second, there was a failure to take reasonable steps to verify the consumer's financial situation as required by s 130(1)(c). This was a factually distinct although related inquiry. 34 Accordingly, s 128(d) involved two sub-categories of breach. But the obligation in s 130(1)(b) to make inquiries about a consumer's financial position was a precondition to or at least closely connected with the obligation in s 130(1)(c) to verify that consumer's financial position. 35 ASIC has submitted that if I applied the approach of The Cash Store, that would result in the following analysis, grouping classes of contraventions as subject to one maximum penalty per class: Breach No of Breaches Maximum Penalty ss 128(c) and 129: 20,763 $1,100,000 The failure to make an assessment in relation to a particular contract. ss 128(d) and 130(1)(b): 20,763 $1,100,000 The failure to make reasonable inquiries about a consumer's financial situation in relation to a particular contract. ss 128(d) and 130(1)(c): 20,763 $1,100,000 The failure to verify a consumer's financial situation in relation to a particular contract.

36 I should also note that during the majority of the relevant period (21 April 2011 to 28 December 2012), s 4AA of the Crimes Act 1914 (Cth) provided that a penalty unit was $110. The Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Act 2012 (Cth) amended the "penalty unit" to increase the value of the "penalty unit" effective from 28 December 2012 to $170. It is open to me to apply this rate for conduct which occurred between 28 December 2012 and 1 March 2013, but given the aggregation approach that I am proposing to take, this is of theoretical interest only. It is convenient for present purposes to proceed to use the tabulated maximums indicated notwithstanding that change. 37 Notwithstanding ASIC's analysis, it seems to me to be appropriate to treat the realistic maximum as being $2.2 million rather than $3.3 million. Whilst I accept that ASIC's analysis has some force, it seems to me that there is a very substantial overlap in the contraventions concerning s 128(d) in its two dimensions of s 130(1)(b) and s 130(1)(c). In any event, even if I were to use $3.3 million, there would be no different result in the ultimate penalty that I propose to fix once I have considered questions such as proportionality, totality and capacity to pay. Finally, both parties accepted that I should treat each class of contravention under the one maximum penalty rather than addressing the matter on a "per contract" basis.

(c) The disclosure breaches 38 Sections 17(3) to (6) of the Code each impose separate key requirements. Each serves a distinct purpose in enabling a consumer to assess the value of the credit contract compared with other credit contracts or to decide not to undertake the transaction at all. For example: (a) Section 17(3) requires disclosure of the amount of credit. This ensures that a consumer is aware that they are taking out a credit contract and the proportion in absolute terms of the cost of that credit. This provision also requires, in the case of sales by instalments, disclosure of the cash price of the goods. This ensures that a consumer is aware of what the goods would cost if he or she were to buy them outright from a retailer. (b) Section 17(4) requires disclosure of the annual percentage rate(s) of interest. This ensures that consumers can easily compare different rates of interest available to them in the marketplace. (c) Section 17(5) requires disclosure of the method of the calculation of interest and the frequency with which interest charges are to be debited. This permits consumers to easily compare offerings in the marketplace and to be fully informed of the consequences of the decision to enter the credit contract. (d) Section 17(6) requires disclosure of the total interest charges payable. This requirement permits consumers to consider the impact of the credit contract on them and to allow comparisons with other options. 39 It is a breach of the Code to fail to include any single key requirement. 40 The disclosure breaches have a separate regime for the determination of an appropriate penalty to that applying to the licensing breaches and the responsible lending breaches. The maximum penalty that can be imposed, where an application is made by either ASIC or a credit provider, for a contravention of a key requirement is an amount calculated so that the total penalty for all contraventions of that key requirement in Australia (as disclosed by the credit provider) does not exceed $500,000 (s 116 of the Code). 41 I have declared that four contraventions occurred in respect of 24,377 credit contracts in the period 1 July 2010 to 1 March 2013. Section 116 of the Code operates to provide a cap on the penalty available in respect of those four classes of breaches to $500,000 per class of breach. Accordingly, the maximum penalty is $2,000,000 for the disclosure breaches.

General principles 42 Before dealing with the specific classes of contraventions, it is useful to set out the guiding principles that I propose to apply to all classes, subject to any statutory provisions that override any of these principles, diminish their force, or reduce or alter the prioritisation that would otherwise be given to them.

(a) The principal object - deterrence 43 The principal object of imposing a pecuniary penalty is deterrence, both to deter repetition of the contravening conduct by the contravener and to deter others who might be tempted to engage in similar contraventions. 44 In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (NW Frozen Foods) (1996) 71 FCR 285 at 294 to 295, the Court stated: The Court should not leave room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think that contravention would pay … 45 Penalties should be imposed of a sufficient quantum to deter commercial operators from merely weighing up and then accepting the risk of a penalty being ordered as a strategic business cost. The penalty must be proportionate to achieving such a deterrent objective. But it must be no greater than to achieve such an objective. It must not be oppressive. And it must not punish a person twice for in substance the same wrongdoing.

(b) The methodology 46 The process to be applied in arriving at a particular penalty figure was considered in the context of criminal sentencing in Markarian v The Queen (2005) 228 CLR 357. This process provides guidance in the present context. In this regard: (a) Assessment of the appropriate penalty is a discretionary judgment based on all relevant factors (at [27]). (b) It will rarely be appropriate to start with the maximum penalty and to proceed by making a proportional deduction from that maximum (at [31]). (c) The Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors (at [37] citing Wong v The Queen (2001) 207 CLR 584 at 611 and 612 per Gaudron, Gummow and Hayne JJ). It is not appropriate to determine an "objective" penalty and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities (at [37] citing Wong at 611 and 612 per Gaudron, Gummow and Hayne JJ). The Court "may not add and subtract item by item from some apparently subliminally derived figure" to determine the penalty to be imposed (at [39]).

(c) Course of conduct 47 In order to take a proportionate and pragmatic approach, including an approach that avoids duplication, it is necessary to consider the particular course of conduct involved and to fix a penalty appropriate to that course of conduct. Trite arithmetic of calculating a maximum penalty by reference to theoretical numbers of strictly separate contraventions multiplied by the applicable statutory maximums should be avoided. Such theoretical calculations are arid and unnecessary. One should group contraventions by reference to the course of conduct and align the maximum penalty accordingly. The "course of conduct" principle was explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 at [39] and [41] by Middleton and Gordon JJ in the following terms: The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is "the same criminality" and that is necessarily a factual specific enquiry. … In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a Court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. It is a tool of analysis which a Court is not compelled to utilise. [omitting citations] 48 I should say that the separate principle addressing the "same conduct" question, where identical conduct can give rise to two or more contraventions, can be put to one side. I should also note that in my earlier reasons I dealt with s 113(5) of the Code. Nothing further needs to be said in the present context.

(d) Parity principle 49 The parity principle requires that when penalties are imposed "[t]here should not be such an inequality as would suggest that the treatment meted out has not been even-handed" (NW Frozen Foods Pty Ltd at 295). This principle usually has application where there are multiple respondents, which is not the present case. But it can be applied in inter-case comparisons as well as intra-case comparisons. But it need hardly be said that if you are going to analyse and compare other cases involving analogous contraventions, they need to be looked at carefully. Relatedly, numerical tables, bar charts and graphs are to be avoided for reasons of the type discussed in R v Pham [2015] HCA 39 at [32] to [38] per French CJ, Keane and Nettle JJ and also because such "statistical presentations" are usually shorn of the necessary techniques, testing and controls that would otherwise render the data meaningful. 50 In the present case the parties did not put before me any analogous cases where penalties were fixed which would have required me to apply this principle, save that some reference was made to The Cash Store and Re Esanda Finance Corporation Ltd [2004] QSC 257. It should be noted that the facts of Esanda are substantially different. Esanda concerned credit code breaches which related to only part of Esanda's credit business, and substantially related to the non-complying conduct of a single dealer. Although Esanda lacked the rigorous risk assessment program necessary to detect the breach, there was no suggestion that it otherwise did not have appropriate structures in place to prepare its staff and outside dealers for the commencement of the consumer legislation ([28]). In addition, that case concerned 107 contracts. It was distinguishable from cases where larger numbers of contracts were involved ([36]).

(e) Size of contravener and its financial position 51 It is important to have regard to the contravener's balance sheet size and strength, turnover, cash flow and profitability. As Goldberg J observed in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 at [39]: The penalty imposed must be substantial enough that the party realises the seriousness of its conduct and is not inclined to repeat such conduct. Obviously the sum required to achieve this object will be larger where the court is setting a penalty for a company with vast resources.

(f) Totality principle 52 In determining the appropriate penalty, the total penalty for the offences ought not to exceed what is proper for the entire contravening conduct. The totality principle operates as a final check to ensure that the penalties to be imposed, considered as a whole, are just and appropriate. Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 explained: The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved. But that does not mean that a court should commence by determining an overall penalty and then dividing it among the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined.

code contraventions - disclosure breaches 53 It is appropriate to consider the Code contraventions first. At the outset I should indicate that I have applied s 113 of the Code in the setting of the general principles set out earlier, but only to the extent that s 113 has not expressly or by necessary implication modified or excluded the same. Primacy must necessarily be given to the statutory text.

(a) The penalty factors - section 113 of the Code 54 Section 113(2) of the Code provides that the Court may make an order that MIM pay an amount as a penalty, if it is of the opinion that it has contravened a key requirement. The Court is directed to have regard primarily to the prudential standing of the credit provider (s 113(3)). In addition, regard must be had (s 113(4)) to the following: (a) the conduct of the credit provider and debtor before and after the credit contract was entered into; (b) whether the contravention was deliberate or otherwise; (c) the loss or other detriment (if any) suffered by the debtor as a result of the contravention; (d) when the credit provider first became aware, or ought reasonably to have become aware, of the contravention; (e) any systems or procedures of the credit provider to prevent or identify contraventions; (f) whether the contravention could have been prevented by the credit provider; (g) any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions; (h) the time taken to make the application and the nature of the application; (i) any other matter that the Court considers relevant.

(b) The prudential standing of the credit provider 55 Section 113(3) requires that the Court consider the prudential standing of MIM if it requests that the Court take this factor into account. MIM has so requested and on one view satisfies one of the criteria specified in s 113(3). 56 The apparent purpose of s 113(3) is to ensure that the provisions of the Code are not responsible for the financial failure of the credit provider. But as MIM is not a deposit-taking institution, there is no risk to the deposit funds of consumers. Nonetheless, the financial penalty imposed on MIM should not be crushing. I will deal with MIM's financial capacity to pay later. But I should say at this point that the penalty that I intend to impose for the Code contraventions together with the other contraventions will be in an amount that MIM has the capacity to pay and will not in any way significantly affect its prudential standing.

(c) The conduct of the credit provider and debtor before and after the credit contract was entered into 57 It is necessary to consider the conduct of both MIM and the relevant debtors. Little further needs to be said concerning each debtor beyond generally what I have said in my earlier reasons. I also repeat what has been said earlier concerning MIM. But it is necessary to elaborate on the position of MIM. In my view, MIM did not take its obligations under the Code seriously until October 2012. 58 Mr Lang said that in late 2008 he engaged Rose Lawyers to draft an agreement between MIM and its customers and to provide advice in relation to the proposed contractual framework. Further, it was asserted that the retainer was sufficiently broad to encompass advice as to the regulatory framework. But the correspondence from Rose Lawyers makes clear that MIM initially engaged Rose Lawyers for only two hours of professional time. MIM provided a draft rental agreement for Rose Lawyers to review. The amount of time required by Rose Lawyers increased to 3 to 3.5 hours. In essence, MIM gave significant priority to obtaining a short and simple contractual document. It sought to keep legal costs and the input of lawyers to the bare minimum. 59 Notwithstanding suggestions to the contrary by MIM, in my view Rose Lawyers was not engaged to advise upon broader issues of regulatory compliance. The firm was engaged for a limited purpose in relation to the consideration of a specific draft agreement. MIM could not reasonably have expected Rose Lawyers to provide comprehensive regulatory advice in the several hours it instructed its lawyers to spend on the matter relating to the draft agreement. In my view MIM did not seek compliance advice. This is confirmed by the affidavit of Joseph Rose, the principal lawyer of Rose Lawyers at the relevant time (see in particular at [5]). His evidence was not the subject of any cross-examination. To the extent that MIM has suggested that it was the advice of Rose Lawyers that led MIM to believe that there were no compliance problems with its business model, that argument is untenable. It is not supported by the evidence. 60 Further, to the extent that Mr Lang said that he believed that he was operating a consumer leasing business, that position is also problematic. On 22 March 2011, Cash for Computers (as MIM was then known) applied for an Australian Credit Licence. In the application for the Australian Credit Licence, the key contact person was identified as Andre Lang. The application involved a number of relevant questions: Q. What activities best describe the applicant's intended business under this Australian credit licence? A. seller of goods by instalments. … Q. Does the applicant intend to provide credit as an original credit provider? A. Yes. … Q. Does the applicant have, or will it have from the date of commencement of its credit licence, arrangements and systems to ensure compliance with the obligations under the Australian credit licence? A. Yes. Q. Does the applicant have, or will it have from the date of commencement of its credit licence, a written plan that documents those arrangements and systems? A. Yes. … Q. Is there a person(s) internal to the business who will be responsible for ongoing monitoring and reporting in relation to the applicant's level of compliance and for maintaining the adequacy of the applicant's compliance arrangements from the date of commencement of its credit licence? A. Yes. 61 The application was made by Andre Lang in his capacity as director of MIM. I would note also at this point that many of the answers given by Mr Lang on behalf of MIM incorrectly stated or overstated the existence or qualities of systems in place to meet ongoing licence and regulatory requirements. 62 As part of the application, MIM also submitted a document of 50 pages to ASIC described as "Documentary Evidence" prepared for MIM and approved by Mr Lang. A number of features may be noted concerning this document: (a) First, it clearly indicated an appreciation by MIM that it was providing credit. (b) Second, it sought to represent to ASIC that it had substantial written and other procedures in place to ensure compliance with the licence, the Code and more generally the National Credit Act. The document had an air of unreality to it. It referred to procedures that were non-existent. It made empty promises. It made statements describing Mr Lang as "our Nominated Responsible Manager", a title which had no substance and in respect of responsibilities he never performed, at least in the sense represented to ASIC. (c) Third, it made statements of the "good corporate citizen" variety that were vacuous. For example, it was said: We have therefore implemented a stringent ethical and company-wide governance model, processes, systems and resources capable of ensuring access to fair and equitable treatment particularly focused on ensuring that all people, particularly low income and vulnerable consumers, have access to fair treatment as consumers in the retail marketplace and that we endeavour to redress all obstacles relating to fair treatment in a prompt and professional manner. 63 Following MIM's application and the grant of the credit licence, it received written advice from Wainwright Ryan Eid. That advice given on 5 April 2011 by Ms Jeannette Eid, a partner of the firm, included the following: (a) MIM was advised to read its Credit Licence "very carefully to understand the conditions imposed" by the Credit Licence; (b) Mr Lang was advised to undertake a formal qualification relevant to providing credit by 30 June 2011 (apparently he later obtained a qualification of some sort); (c) MIM was instructed to provide a Credit Guide (a draft of which was attached) and Information Statement (a draft of which was attached) to clients of MIM; (d) MIM was told to include certain matters in the contract. These matters were described as "very specific". They were listed as including the amount of credit, the cash price of the goods, the annual percentage rate, the calculation of interest charges, the total amount of interest payable, the repayments, and credit fees and charges. Ms Eid of that firm made clear that the above information "will be set out in a schedule for you to tailor make each contract to suit each transaction". The email of 5 April 2011 included a draft credit contract which included provision for the key requirement disclosures, and other disclosures that identified the contract as a credit contract. 64 The draft Credit Guide opened with the statement: Cash for Computers Pty Ltd must as soon as practicable after it becomes apparent to us that we are likely to enter a credit contract with you who will be the debtor under the contract, give you our credit guide in accordance with s 126 of the National Consumer Credit Protection Act 2009 (Cth). 65 The draft Information Statement included as its first heading: "Things you should know about your proposed credit contract" followed closely by "How can I get details of my proposed credit contract?". 66 In an email dated 7 April 2011, Mr Lang responded to the correspondence of Wainwright Ryan Eid: (a) stating that Mr Lang was "working on the Cert 4 as we speak", an apparent reference to the Certificate IV in Financial Services - Credit Management which Mr Lang was told was required by ASIC and was relevant to providing credit; (b) stating that MIM would make the credit guide and information statement available to customers; and (c) asking if it were possible to reduce the length of the contract to make it simpler for consumers. 67 Subsequently, Wainwright Ryan Eid sent a letter to MIM. The first heading was "Your Credit Contract", followed by the words "We enclose your Credit Contract for your approval". While the solicitors had condensed the terms of the contract, they advised that: It is, however, not possible to fit the schedule, precontractual disclosure and execution clauses into one page. The legislation has very specific requirements regarding the font and layout of the credit contract. It must be, amongst other things, easily legible and not less than 10 point. Further, the precontractual disclosure and execution clauses must be on the same page. 68 Notwithstanding the clear and succinct advice given by Ms Eid, Mr Lang deliberately made changes to the form of contract provided by Wainwright Ryan Eid, including: (a) omitting references to cash price, interest, annual percentage rate, and total credit provided; (b) changing the formula in relation to the early payout figure; and (c) deleting the disclosure statement headed "Important", and which referred to the contract as a credit contract. 69 Moreover, despite the clear advice that he had been given, Mr Lang did not retain Wainwright Ryan Eid to provide a final review of the contract, including the amendments that he made. At no stage did he provide to customers the Credit Guide or Information Statement. 70 Mr Lang has deposed that despite the explicit references to the provision of credit in this correspondence and attached documents, he did not understand that he was providing a credit contract. Mr Lang has asserted that he considered that MIM's contractual position with each customer was in the nature of a consumer lease rather than a sale of goods by instalments and that this misunderstanding explains: (a) why he did not follow the advice given in early 2011; (b) the non-disclosures otherwise required by s 17 of the Code. I note though that such an assertion was inconsistent with the credit licence application. Mr Lang's explanation for that discrepancy given in cross-examination was less than convincing. I did not find his evidence reliable on this aspect. At the least, it seems to me that Mr Lang was recklessly indifferent to MIM's obligations and chose to disregard the substance of the true nature of the contracts, namely, that they were credit contracts in the form of sales of goods by instalments. 71 More generally, MIM has suggested that the various contraventions resulted from Mr Lang's "complete dependency on advice he received", but such an excuse is untenable. It should be viewed in the context of Mr Lang: (a) failing to take proper steps to fully inform himself of the statutory regime under which MIM was operating; (b) failing to follow advice, or seek comprehensive advice; and (c) acting inconsistently with advice that he received. 72 In summary, MIM's approach to compliance prior to and during the contravening conduct suggests that it did not take its obligations under the Code seriously. 73 However, MIM has contended that it moved "swiftly" to remedy compliance breaches upon becoming aware of them. It became aware of compliance breaches in October 2012. Nevertheless the non-complying contracts continued to be used until 1 March 2013. MIM has sought to excuse its delay between October 2012 and March 2013 on the basis that time was needed to change documents, procedures and systems. I accept this excuse to some extent although in my view MIM could have acted in a more timely fashion.

(d) Whether the contraventions were deliberate 74 ASIC has sought to contend that MIM's conduct was deliberate in the sense that MIM intended to contravene the Code. I do not agree, although I do consider that MIM's conduct was unsatisfactory and Mr Lang's evidence and excuses not that credible. I do accept though that until October 2012, MIM and Mr Lang acted with reckless indifference to MIM's statutory obligations. After October 2012, I also agree that until March 2013, MIM persisted with conduct that it knew was likely to be in breach of the Code.

(e) The loss or other detriment suffered by the debtor as a result of the contraventions 75 There is no evidence of specific loss by any particular debtor. Nevertheless, I infer that: (a) MIM's conduct deprived consumers of statutory protections to which they were entitled; the exclusive clientele of MIM were recipients of Centrelink payments, paying directly through Centrepay, and were therefore vulnerable and disadvantaged; and (b) the use of Centrepay may have had the effect of diverting consumers from lower cost options, such as lay-by. 76 Generally, breaches of the key requirements involved a degree of detriment to debtors insofar as it did not permit proper consideration of the cost of the credit contract or allow a genuine comparison between the offerings of MIM and other credit providers including retailers. 77 But in my view it is unlikely that consumers have suffered any specific losses. 78 MIM has asserted in its defence that it was providing a benefit and that it was exposed to high risk as a result of delinquency rates. But even if customers in receipt of Centrelink benefits would have had a higher than usual delinquency rate, the operation of the Centrepay system was such that it diverted funds to a creditor before money was paid to the debtor. Effectively, MIM was paid before the Centrelink recipients received their benefit, thus reducing the risk of delinquency. But nevertheless, I do accept that there was some credit risk. Between 2010 to 2013 there were 4,038 defaulting/delinquent accounts that MIM wrote off. The financial statements of MIM also record that for the years ending 30 June 2013 and 30 June 2014 the bad debts and write offs were $962,682 and $1,868,739 respectively. The estimate for 30 June 2015 is $1,377,056.

(f) When the contravener first became aware, or ought reasonably to have become aware, of the contraventions 79 MIM became aware of its breaches by no later than October 2012. Despite that, it appears uncontroversial that MIM continued to use non-compliant contracts through until March 2013. As to when MIM ought first to have become aware, in my view one can date that time frame to when Wainwright Ryan Eid first gave advice.

(g) Any systems or procedures of the credit provider to prevent or identify contraventions 80 There were no adequate systems or procedures put in place by MIM to prevent or identify contraventions in the period of the contravening conduct. But new compliance measures have now been put in place by MIM. Moreover, ASIC has not pointed to any inadequacy or deficiency therein. 81 I accept that on and from October 2012, and following advice from Langes Lawyers, MIM has taken many positive steps to ensure compliance of its documents, procedures and systems with the regulatory framework including: (a) new and compliant credit contracts; (b) a new credit checking and risk management tool to view a customer's credit history and risk profile; (c) a new system integrating the cross-referencing of information provided by prospective customers against a "poverty index" and other parameters testing a customer's financial situation; (d) a new system for compliance audits, with a specialist audit firm QED engaged; and (e) further proposed projects.

(h) Whether the contraventions could have been prevented by the credit provider 82 The contraventions of the key requirements could have been prevented by MIM by taking the following steps: (a) In the period prior to April 2011, MIM could have undertaken or commissioned more or proper compliance work. (b) In the period April 2011 to October 2012, MIM could have: (i) properly implemented the legal advice provided; and (ii) sought further clarification in respect of any changes to the credit contract made by MIM to ensure compliance with the Code. (c) In the period October 2012 to March 2013, MIM could have ceased to use non-compliant credit contracts.

(i) Any action taken by the credit provider to remedy the contraventions or compensate the debtor or to prevent further contraventions 83 MIM has taken no steps to compensate any debtors or previous customers, but as I have indicated, it is not likely that they have suffered specific loss. In any event it may still be open to individuals to seek compensation pursuant to s 118 of the Code. Further, as I have said earlier, MIM has now put in place systems to prevent future contraventions.

(j) The time taken to make the application and the nature of the application 84 MIM was aware of a compliance breach in October 2012, but continued to use non-compliant contracts until March 2013. ASIC issued a notice to MIM to produce books and records on 10 April 2013. A further notice seeking information from MIM was issued by ASIC on 17 September 2013. ASIC commenced a formal investigation on 13 February 2014. In March 2014 MIM commenced discussions concerning making the present application (VID 686 of 2014). Although MIM should be given some allowance for its general level of co-operation with ASIC in relation to the disclosure breaches, it cannot be said that its application was unprompted by potential regulatory action. Moreover, it could hardly be said that its application was made in a timely fashion given that it was aware of the relevant breaches since October 2012 at the latest.

(k) Other matters 85 Section 113(4)(i) of the Code requires me to have regard to any other matter that I consider to be relevant. In addition to the general principles that I have set out from [42] above, other considerations which have been of assistance in determining penalties under s 224 of the Australian Consumer Law (ACL) (Sch 2 of the Competition and Consumer Act 2010 (Cth)) (and s 76 (and its predecessor s 76E) of the Competition and Consumer Act 2010) may also usefully be applied to the present context. 86 Those considerations include: (a) the nature and extent of the act or omission and the circumstances in which the act or omission took place; (b) whether the contravener has previously been found by the Court in analogous proceedings to have engaged in any similar conduct; (c) the size of the contravening company; (d) the deliberateness of the contravention and the period over which it extended, including whether it was systematic or covert; (e) whether the contravention arose out of the conduct of senior management; (f) whether the contravener had a corporate culture conducive to compliance with the relevant legislative requirements; (g) whether the contravener has shown a disposition to co-operate with ASIC in relation to its investigation and prosecution of the relevant contraventions; and (h) the contravener's financial position. 87 I have addressed some of these matters earlier and I propose to discuss some of these aspects in the next section when dealing with the licensing breaches and responsible lending breaches. The later discussion should be treated as being incorporated by reference in this section dealing with the disclosure breaches.

(l) Summary 88 Taking into account all the above considerations and applying the required synthesis and giving primacy to deterrence, in my view the penalty for the disclosure breaches should be fixed in the amount of $500,000. As I have indicated, the maximum penalty is $2 million with four contraventions, although to some extent MIM's position that the contraventions could be grouped in two classes, s 17(3)(c) on the one hand and s 17(4)(a), 17(5) and 17(6) on the other hand, is not without merit. But even accepting such a characterisation, in my view MIM's conduct was sufficiently serious to warrant a substantial penalty, particularly given its conduct prior to October 2012 which involved a failure to implement the advice of its lawyers. Moreover, it propounded non-complying contracts even after October 2012. 89 I have little doubt that MIM has the capacity to pay such a penalty together with the other penalties I propose to impose for the licensing breaches and the responsible lending breaches. Moreover, such a penalty conforms to an appropriate application of the totality principle, whether the disclosure breaches are looked at in isolation or together with the other breaches.

national credit act contraventions - licensing and responsible lending breaches 90 It is appropriate to consider: (a) the licensing breaches; and (b) the responsible lending breaches. 91 As I have indicated earlier, I propose to treat the licensing breaches as one course of conduct with the realistic maximum being $1.1 million. In respect of the responsible lending breaches, I propose to treat the realistic maximum as being $2.2 million with in substance two classes of contravention. But even if I had adopted ASIC's approach with the realistic maximum being $3.3 million, in my view looking at the substance of the matter, applying the totality principle in its various guises and taking into account MIM's capacity to pay, I would have fixed no different pecuniary penalty for the responsible lending breaches even if I had used ASIC's realistic maximum. 92 At the outset it is appropriate to say that I have determined the following penalties: (a) For the licensing breaches, the sum of $250,000; (b) For the responsible lending breaches, the sum of $500,000. 93 I have fixed the same penalty in total for the responsible lending breaches as I have for the disclosure breaches as I consider them to warrant, in the special circumstances of this case, similar treatment, even though the responsible lending breaches attract a higher overall maximum penalty. Although on the one hand the responsible lending breaches might be considered to be more fundamental, on the other hand the disclosure breaches were the subject of detailed legal advice that was in substance ignored. On balance I have decided to fix equal penalties for both classes. 94 Generally, s 167 of the National Credit Act does not prescribe the factors that should be taken into account in fixing penalty. In my view the factors set out earlier (including the general principles previously referred to) should be applied by analogy. I do not propose to repeat the earlier discussion or my first set of reasons. They are to be taken as incorporated by reference into this section. It is appropriate to make only the following additional observations.

(a) The nature and extent of the conduct 95 The breaches were extensive and demonstrate a systemic failure of MIM's regulatory compliance between 1 July 2010 and 1 March 2013. I have declared that: (a) There were a total of 3,614 credit contracts entered into while MIM was unlicensed (1,830 contracts for 1 July 2010 to 31 December 2010 and 1,784 contracts between 1 January 2011 and 20 April 2011). (b) There were 20,763 credit contracts entered into between 21 April 2011 and 1 March 2013 in breach of the responsible lending obligations. 96 In relation to the licensing breaches, it is relevant to note that the responsible lending obligations only applied to holders of an Australian Credit Licence. Accordingly, during the time that MIM was not licensed, MIM was not liable for breaches of the responsible lending obligations for the period 1 July 2010 and 20 April 2011. Its wrongdoing thereby deprived consumers of statutory protections for that period.

(b) The circumstances in which the conduct took place 97 This has been described earlier in these reasons and in my first judgment. Nothing further need be said.

(c) The deliberateness of the contraventions 98 ASIC has asserted that the licensing breaches arose from a reckless disregard of the statutory requirements. I disagree. In my view, the licensing breaches (1 July 2010 to 20 April 2011) arose through inadvertence. This is one reason why I have fixed a substantially lower penalty for these breaches. 99 ASIC has asserted that the responsible lending breaches were knowing and deliberate. In relation to MIM's "state of mind", I take a similar position to the view I have reached in relation to the disclosure breaches.

(d) The size and financial position of MIM 100 MIM's accounts disclose substantial profits. The MIM accounts for the year ending 30 June 2014 reveal the following: (a) Net profit of $8,733,484.07 (compared to $5,229,307.49 for FY2013); (b) Retained profits of $15,339,387.97 (compared to $9,507,427.09 for FY2013); (c) Receivables of $5,175,099.11; (d) Net assets of $15,339,387.97 with cash on hand of $577,458.44. 101 I should say that MIM filed an affidavit from Mr Busacca stating that applying various accounting changes suggested by the auditors of MIM, the reported net profits for FY2013 and FY2014 should be adjusted down to $4,754,883 and $5,206,180 respectively to account for further depreciation charges. 102 MIM has filed little evidence regarding its financial position as at 30 June 2015. ASIC has put forward an affidavit of Ms Maree Kennedy of DHS which states that: (a) MIM presently has 17,493 customers with a current Centrepay deduction authority for payments to MIM; and (b) in the financial year 2014/15, MIM received a total of $30,145,539.04 in deductions made via the Centrepay system. 103 At the time of the hearing before me the accounts for 30 June 2015 had not been finalised or audited. But nothing has been put before me to suggest that there has been any deterioration on the 30 June 2014 position, save for the incurring of legal expenses. The relevant income figure shown on the 30 June 2014 financial statements is $20,642,269.97 (being the figure for rental charges). This is approximately $1.72 million per month for the year 2013/2014. Current indications are that this amount has increased to $2.51 million per month for the year 2014/2015. 104 Generally, MIM's operations have been very profitable. But MIM submitted that rather than looking at profitability, cash flow should be considered. It also submitted that if I was to fix a substantial penalty that I should provide that it be paid by instalments over 12 months. 105 First, on the question of cash flow, MIM submitted the following: (a) It needed cash flow to meet its obligations both in relation to paying for goods purchased, but also other costs such as the wages of 50 full time employees, rent and the cost of information systems. (b) Relevant to cash flow was the fact that it was required to pay for products either by cash on delivery or within 30 days, which it then provided and financed to consumers. Contrastingly, the payments that it received for the goods from consumers were over a 12 month period. In summary, MIM contended that there is a mismatch in the timing of revenues and expenditures. But in my view MIM has been adequately compensated to cover the cost of the time/value of money to financially alleviate the mismatch. Moreover, it would be expected that for a maturer business, any timing issue would have been addressed and ameliorated to some extent. (c) MIM also put before me Commonwealth Bank accounts details of monthly balances from April 2012 to August 2015 to demonstrate its fluctuating cash balances which it asserted was symptomatic of its cash flow challenges. (d) Generally, it was said by Mr Lang that although profit was significant, there was not a lot of available cash. It is said that not only is this caused by the timing difficulties referred to above, but that liquid funds have to also be put aside for tax purposes. 106 I am prepared to accept to some extent that there are these cash flow difficulties and that not just the metric of profit should be looked at. Nevertheless, over a 12 month period and with a maturing business, I would have expected these difficulties to have been smoothed out to some extent. Moreover, I cannot ignore the fact that MIM's business is substantial and that its profit has been and is expected to be significant. 107 I do not consider that cash flow difficulties provide any reason not to fix the pecuniary penalties in the amounts that I have set. The scale of MIM's business is such that these penalties will not have a crippling effect upon it. 108 Second, and moreover, any real issue concerning the ability to pay a substantial penalty flowing from a cash flow problem can be dealt with by an order permitting instalment payments over 12 months. But if this is to be sought by MIM, and I have not heard ASIC on this question, I would require a proper application supported by: (a) Audited accounts for the financial year ending 30 June 2015; (b) The management budget for the current financial year; (c) Management accounts for the financial year to date; (d) A cash flow forecast for the next 12 months; (e) Material which would enable me to assess forecast EBIT and EBITDA over the next 12 months.

(e) Whether the contraventions arose out of the conduct of senior management or at a lower level 109 The contraventions arose out of the conduct of senior management, Mr Lang. It was his errors of judgment and understanding that led to the ongoing breaches of the various obligations.

(f) Whether MIM had a corporate culture that was conducive to compliance with the National Credit Act 110 The corporate culture of MIM at the time of the breaches appears to have been motivated by commercial expediency and entrepreneurialism, without proper regard for its compliance obligations.

(g) Co-operation with ASIC 111 MIM has co-operated with ASIC in these proceedings. Accordingly, a discount for such co-operation and admissions of liability is appropriate.

(h) General 112 First, there is a strong public interest in imposing a penalty that will deter other prospective contraveners of the National Credit Act. The consumer lease industry is growing. The broad numerical data for the home appliance rental industry in Australia set out in the IBIS World report titled "Plugged in: Appliance rental demand is strong as prices fall" dated September 2014 showed annual revenue of $569.9 million, profit of $125.9 million, the number of businesses involved being 496, and an annual growth rate of 3.6%. 113 The undesirable practices of operators in consumer leasing and, by analogy, credit contracts for purchase by instalments, are a matter of significant public interest and importance, and are capable of serious adverse impacts on the most vulnerable members of the Australian community. General deterrence is of primary importance. 114 Second, in terms of specific deterrence, there has been a substantial change within MIM to ensure future compliance. This reduces but does not eliminate the need for specific deterrence.

other matters 115 First, I raised with the parties whether I had the power to impose and should impose a compliance program on MIM. As ASIC submitted, there is no specific statutory power to do so (cf s 12GLA of the Australian Securities and Investments Commission Act 2001 (Cth) and s 246(2)(b) of the ACL). There should be such a specific power. Although I could conceivably use more generally expressed statutory powers to make mandatory orders (see for example s 177(6) of the National Credit Act), that is hardly a satisfactory mechanism. 116 I will not impose any compliance program. In part, this is due to an absence of express statutory power. But in part, I also consider that ASIC has adequate power to deal with this through the mechanism of imposing conditions on MIM's credit licence (s 45 of the National Credit Act). 117 In this regard, I note that after the hearing before me, MIM accepted a compliance review licence condition on its credit licence. The compliance review licence condition provides a regime where MIM must engage a consultant to prepare a compliance report arising from a review of a sample of 100 of MIM's client files relating to consumer leases, selected at random for the periods 1 November to 30 November 2015 and 1 March to 31 March 2016. The consultant is to complete, and provide to MIM and ASIC, a report within 30 days of the end of each review period. In my view the compliance review licence condition together with the rectifying conduct undertaken to date by MIM, shows that MIM is genuine in its endeavours to remedy the defects in its systems to ensure that there will be no infringements in the future. I do not need to take the matter further. 118 Second and for completeness, I have previously raised with the parties the necessity or desirability of any s 119(2) notification under the Code. But both parties have indicated that in the circumstances this has not been necessary. I have acquiesced to that position.

CONCLUSION 119 In summary, I have fixed the following penalties: (a) $500,000 for the disclosure breaches; (b) $500,000 for the responsible lending breaches; (c) $250,000 for the licensing breaches. 120 Accordingly, the total penalty to be paid is $1.25 million. 121 It is appropriate to make a few final observations. 122 First, the penalties fixed, separately and collectively, adequately satisfy the primary objective of deterrence. I have weighted general deterrence more than specific deterrence to reflect the importance of conveying the message that corporate operators dealing with a vulnerable class of consumers have to take considerable care in complying with and implementing the statutory safeguards designed for the protection of that class. Commercial behaviour leveraged off the vulnerability of others will be closely scrutinised and disciplined where it departs from the normative standards enshrined in legislation. 123 Second, in my view the penalties that I have imposed are proportionate to the seriousness of the infringing conduct. 124 Third, whether each class of contravention is looked at separately or collectively, the penalties fixed accord with the totality principle. 125 Fourth, I have made appropriate discounts in favour of MIM to reflect: (a) its co-operation with ASIC; (b) the fact that it instituted one of the proceedings; (c) the fact that it has made substantial changes to its systems designed to ensure that similar contraventions do not occur; (d) its level of contrition. 126 Fifth, I am satisfied that MIM has the appropriate capacity to pay the penalties that I have imposed, although I will hear further from counsel if MIM desires to make an application for payment by instalments. I certify that the preceding one hundred and twenty-six (126) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.