Australian Securities and Investments Commission v SunshineLoans Pty Ltd

Introduction 1 By an interlocutory application filed on 18 May 2023, the respondent in these proceedings, SunshineLoans Pty Ltd (Sunshine Loans), sought orders pursuant to r 30.01(1) of the Federal Court Rules 2011 (Cth) (Federal Court Rules) and s 26 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) that certain questions be heard separately by the Full Court. Those questions concern the interpretation of the National Consumer Credit Protection Act 2009 (Cth) (Credit Act) and its schedule, the National Credit Code (Credit Code), in certain respects. Sunshine Loans submitted that the answers of the Full Court to the questions that it seeks to pose will potentially dispose of a substantial part of the current proceedings. In particular, it says that those answers will establish that the Australian Securities and Investments Commission (ASIC) has no standing to bring the current proceedings because it has no power to seek the relief set out in its Amended Originating Application filed on 4 April 2023. 2 The questions the subject of the present application are as follows: 1. Does s 5 of the Credit Act define the term "civil penalty provision" in ss 166 and 167 of the Credit Act? 2. Is s 24(1A) of the Credit Code, a "civil penalty provision" within s 5 of the Act? 3. Does s 166 of the Credit Act confer standing on ASIC to apply to the Court for a declaration that Sunshine Loans contravened s 24(1A) of the Credit Code? 4. Does s 167 of the Credit Act confer standing on ASIC to apply to the Court for an order that Sunshine Loans pay the Commonwealth a pecuniary penalty if Sunshine Loans has contravened s 24(1A) of the Credit Code. 3 Before proceeding further, it is necessary to identify that, by its Amended Originating Application, ASIC's case in these proceedings is advanced in several ways. 4 In the first instance, it seeks declarations, an injunction, and the payment of pecuniary penalties, as follows (the underlining appearing in the original): 1. This amended application is made by the Applicant under sections 166, 167 and 177 of the Credit Act and section 21 of the Federal Court Act to obtain the declarations, injunction and the payment of pecuniary penalties set out below, arising from the contraventions by the Respondent of: (a) sections 23A(1), 24(1A), 31A(1) and s31B of the Credit Code, and (b) section 47(1)(d) of the Credit Act. 5 It is most relevant, for the present purposes, to take from this part of the Amended Originating Application that reliance is placed by ASIC specifically on ss 166, 167 and 177 of the Credit Act and s 21 of the Federal Court Act. 6 The Amended Originating Application proceeds, in more detail, to seek specific orders on the grounds stated in ASIC's amended concise statement. Those orders include, amongst other things, declarations that Sunshine Loans has contravened certain provisions of the Credit Code, and s 47(1)(d) of the Credit Act, by engaging in particular conduct on a specified number of occasions.

Nature of the separate questions 7 In general terms, the point sought to be raised by Sunshine Loans, by way of the questions stated in its application, is that ASIC has no standing to bring proceedings to enforce the provisions of the Credit Code that have allegedly been contravened. Specifically, it is said that ASIC cannot commence proceedings seeking declaratory relief pursuant to s 166 of the Credit Act, or pecuniary penalties pursuant to s 167 of the Credit Act, in relation to the alleged contraventions of s 24(1A) of the Credit Code. That section of the Credit Code prohibits a credit provider from entering into a "small amount credit contract" on terms imposing a monetary liability prohibited by subsection 23A(1), and from requiring or accepting payment of an amount in respect of a monetary liability that cannot be imposed consistently with the Credit Code. At the foot of s 24(1A) are the words "Civil penalty: 5,000 penalty units". 8 The substantive argument advanced by Sunshine Loans in relation to s 24(1A) is that ASIC has, impermissibly, sought orders in respect of alleged contraventions of that provision in reliance upon ss 166 and 167 of the Credit Act. Those sections permit the Court, upon the application of ASIC, to make declarations and to impose pecuniary penalties in relation to a contravention of a "civil penalty provision". The argument advanced by Sunshine Loans is essentially that ASIC does not have standing to bring an application under those sections in circumstances where the putative "civil penalty provision" is a provision of the Credit Code. This argument directs particular attention to the definition of a "civil penalty provision" in s 5(1) of the Credit Act. That section relevantly provides as follows: 5 The Dictionary (1) In this Act (other than the National Credit Code): … civil penalty provision: a subsection of this Act (or a section of this Act that is not divided into subsections) is a civil penalty provision if: (a) the words "civil penalty" and one or more amounts in penalty units are set out at the foot of the subsection (or section); or (b) another provision of this Act specifies that the subsection (or section) is a civil penalty provision. 9 The crux of Sunshine Loans' position is that s 5 defines a "civil penalty provision" for the purposes of the Credit Act and, by reason of the words in parentheses in the chapeau to s 5(1), "other than the National Credit Code", that definition does not extend to or encompass provisions of the Credit Code. It is said to follow that ss 166(1) and 167(1) of the Credit Act, which empower ASIC to apply for particular orders in respect of contraventions of civil penalty provisions, do not permit it to seek such orders in respect of alleged contraventions of s 24(1A) of the Credit Code. There may be some force in that argument, as advanced, but I do not propose to delve into it too deeply on this application. It is sufficient to say that the argument is not untenable. 10 Mr Wyles KC for Sunshine Loans, in further support of this argument, took the Court to s 47 of the Credit Act. He contended that this provision might provide a different avenue by which an errant licensee under the legislation could be pursued for contraventions of the Credit Code. However, as he rightly pointed out, the provision has not been relied upon by ASIC in these proceedings. 11 ASIC's primary position is that s 5(1) of the Credit Act does not have the effect that Sunshine Loans asserts that it does. It contended, on this application, that the words in the chapeau to that provision merely define the reach of the s 5 dictionary (noting that the Credit Code has its own separate dictionary), and do not expressly or impliedly impose a substantive limit on the actual definitions appearing in that s 5 dictionary. It was submitted that, if the chapeau is understood as having this narrower effect, the definition of a "civil penalty provision" would extend to provisions of the Credit Code, since that definition expressly encompasses "a subsection of this Act" within which "the words 'civil penalty' and one or more amounts in penalty units are set out at the foot of the subsection". ASIC further contended, in this connection, that s 24(1A) is "a subsection of this Act", since "this Act" includes the Credit Code, in accordance with s 13(1) of the Acts Interpretation Act 1901 (Cth) and the definition of "this Act" in the s 5 dictionary. On that basis, so it was submitted, ASIC had power under ss 166 and 167 to apply for orders in respect of contraventions of s 24(1A). There are further textual, contextual and purposive arguments in relation to this point, though there is no need to reach any conclusion as to them at this time.

Whether a trial would be required if the questions were heard separately 12 Importantly, Mr Brady KC for ASIC submitted, not without some force, that the proceedings presently can continue, and should continue, to trial because ASIC undoubtedly has power under other provisions of the Credit Act to seek at least some of the relief set out in its Amended Originating Application. In particular, attention was drawn to ASIC's claim for injunctive relief, which relies on s 177 of the Credit Act. That section grants it the power to make an application to the Court for the grant of an injunction in respect of a contravention of, amongst other things, "this Act". As explained above, "this Act" was said to include the Credit Code. So the submission went, the trial should go ahead because the evidence on which ASIC relies for the grant of injunctive relief under that section is the same as that on which it relies to seek declarations and the imposition of pecuniary penalties pursuant to ss 166 and 167 of the Credit Act in relation to the alleged contraventions of s 24(1A) of the Credit Code. 13 That submission was advanced despite Sunshine Loans offering to the Court, on the day of the hearing, an undertaking not to engage in any conduct of which ASIC complains in the current proceedings. It would appear that this undertaking was offered so that it might be argued by Sunshine Loans that no trial would be necessary even if, in the event that the separate questions were decided in its favour, ASIC would maintain standing to pursue injunctive relief against it under s 177. However, whilst that undertaking might be relevant to whether or not any injunction would be granted, it certainly would not be conclusive. Indeed, s 177(5) provides expressly that the Court may still grant an injunction against a person even if it appears that the person does not intend to engage again, or to continue to engage, in the relevant conduct. On that basis, there is force in ASIC's submission that there would remain some value in the holding of a trial even if, hypothetically, the questions posed by Sunshine Loans were ordered to be determined separately. 14 Mr Wyles KC observed that there might not be any need to hold a trial if ASIC was to articulate and put to Sunshine Loans an appropriate form of injunction, which, without making any admission whatsoever, Sunshine Loans might agree to. Whilst that possibility exists, there is no evidence that events will unfold in the manner contended for. If ASIC and Sunshine Loans did agree to a form of injunction in advance of the trial, it may be that the trial would not need to proceed. However, that is by no means certain. 15 In relation to the issue as to whether ASIC has standing to seek the declaratory relief set out in its Amended Originating Application, reliance was placed by Mr Brady KC on the general power of this Court to grant declarations in civil proceedings under s 21 of the Federal Court Act. He submitted that ASIC is permitted to rely upon that section, in the alternative to s 166 of the Credit Act, for the purpose of seeking the declarations of contraventions of, inter alia, s 24(1A) of the Credit Code. 16 The contrary proposition is that, whilst s 21 might give this Court the power to make such orders, it does not follow that ASIC has standing to invoke the section. Whether ASIC has such standing is a difficult question, one which cannot properly be answered on an application of this nature. 17 Ultimately, it suffices to observe that there are reasonable arguments that ASIC does have standing pursuant to ss 166 and 167 of the Credit Act to pursue certain of the orders set out in the Amended Originating Application. That question of standing can be determined finally at trial.

Effect of r 30.01(2) of the Federal Court Rules 18 It can be accepted that the resolution by a Full Court of the difficult issues arising from the present application would be useful, and that such a decision might put to rest such issues in this case and perhaps in other cases. 19 Nevertheless, one difficulty here is that an application pursuant to r 30.01(1) of the Federal Court Rules for an order that a question arising in the proceeding be heard separately from any other question must be made "before a date is fixed for trial of the proceeding": see r 30.01(2). 20 In this case, on 6 February 2023, this Court set the matter down for trial over five days, commencing on 17 July 2023, and made accompanying timetabling orders. It is relevant to observe, accordingly, that dates were fixed for trial of these proceedings more than three months and three weeks before the present application was made. The trial is now less than seven weeks away and preparations for it are well advanced. 21 In A Child (by his next friend, Arthur) v Secretary, Department of Immigration and Citizenship (Cth) (No 3) (2012) 125 ALD 69, at 70 [2], Besanko J observed that the requirement in r 30.01(2) is "designed to ensure that applications for the hearing of a separate question are made promptly and before significant resources are expended on the preparation for trial on all issues". It is true that the Court has power to dispense with the requirement in r 30.01(2), pursuant to r 1.34, and it is also true that from time to time Sunshine Loans has raised the possibility of having a separate question determined, and has raised the issue of ASIC's standing. On the other hand, it should be acknowledged that those issues have been alive in these proceedings since at least 17 August 2022, when Sunshine Loans filed its response to ASIC's original concise statement. That was approximately six months prior to the making of the orders setting the matter down for trial. It is worthy of remark that no adequate explanation has been given for the omission to make this application in a timely fashion, or as required by r 30.01(2) of the Federal Court Rules. 22 ASIC relied on the fact that it has duly performed its obligations flowing from the timetabling orders made on 6 February 2023. The concise statements have been finalised and both parties have put on not insubstantial evidence, although there is some suggestion that further evidence may be required. ASIC has notified Sunshine Loans, in accordance with the orders of 6 February 2023, of its objections to Sunshine Loans' affidavit material. It has also sent to Sunshine Loans its proposed list of issues in dispute. It appears, on the other hand, that Sunshine Loans has not taken any objection to ASIC's affidavit material and has not notified ASIC that it requires any of its deponents for cross-examination. The Court was informed that, although it has not complied with the orders of the Court to take such steps before particular dates in the lead up to the trial, it intends to take those steps in the future. 23 Another of the directions that was made on 6 February 2023 was that the parties, by their Counsel, confer in relation to any objections to the evidence, and prepare and file a schedule of objections. It is apparent that this has not occurred. 24 The parties were also directed to confer with a view to preparing a joint list of issues in dispute. The material shows that ASIC sought to progress that process, but Sunshine Loans has failed to respond. 25 It is unfortunate that, of its own volition, Sunshine Loans has decided to pursue a course different to that set out in the timetabling orders made on 6 February 2023. It is also regrettable that there was no particular explanation for that decision. This is particularly so in circumstances where the consequence of Sunshine Loans' omission to comply with the orders is potentially to slow down the progression of the proceedings. That leaves it in a rather difficult position when it seeks the indulgence of the Court to waive compliance with r 30.01(2) in order to have certain questions determined separately. 26 The point to be emphasised is that, even leaving aside the non-compliance, the matter appears to be too far advanced for an order now to be made that certain questions be heard separately by the Full Court. The matter is set down for hearing across five days in seven weeks' time. It is largely prepared. The Court's time will have been, and may stand to be, wasted if these proceedings do not progress on the dates fixed in the orders made on 6 February 2023. At this relatively late stage, it is not in the interests of efficient case management for the questions posed by Sunshine Loans to be determined separately by the Full Court. 27 It is also relevant to note that stating a case to the Full Court has the necessary consequence of depriving one party of a level of appeal on the issues in question. That is not necessarily a significant obstacle to the present application, though it can be observed that, in a matter of this nature, there is potentially some benefit in having the issues crystallised in a factual context that has been established by a trial judge. That would remove any doubt as to whether the questions sought to be stated to the Full Court are "ripe" for determination. 28 ASIC has made submissions on this application to the effect that the questions are not "ripe" in this way because, even if they are answered in favour of Sunshine Loans, there will still be some utility in holding a trial in order to resolve other issues. Specifically, as has been discussed above, it was suggested that ASIC's case, insofar as it seeks an injunction pursuant to s 177 of the Credit Act and declarations pursuant to s 21 of the Federal Court Act, can proceed to trial. ASIC need not rely upon ss 166 and 167 of the Credit Act to seek those orders. Whilst there may be some argument about that, it is not presently possible to conclude that ASIC has no standing to seek at least some of the orders set out in its Amended Originating Application. 29 In those circumstances, the Court should not waive compliance with r 30.01(2) of the Federal Court Rules. As Mortimer J (as her Honour then was) said in Latteria Holdings Pty Ltd v Corcoran Parker Pty Ltd (No 2) (2014) 146 ALD 59, at 72 [55], the condition precedent in that sub-rule is "purposive" in that it is designed "to ensure that, if there is to be a separate question determined, it occurs at a time well before trial". As her Honour noted, were it otherwise, the policy basis behind the determination of separate questions, being the saving of resources and the promotion of settlement, would be lost. 30 It follows that the application for orders that certain questions be heard separately by the Full Court should be dismissed.

Costs 31 ASIC sought an order that Sunshine Loans pay its costs of this application. There is a clear basis for such an order as, in the ordinary course, costs follow the event. The event here was the application for certain questions to be heard separately by the Full Court, which did not succeed. As Mr Brady KC for ASIC rightly pointed out, ASIC has been brought here to deal with an application that, as it turned out, ought not to have been made. 32 On the other hand, in this rather unusual circumstance, where the issues go to the core of ASIC's standing to bring the proceedings (or at least part of them), if Sunshine Loans' argument was ultimately to succeed, there would be some basis to think that it might have been appropriate for ASIC to have sought to crystallise the relevant questions and have them determined separately. In saying that, there is not an ounce of criticism of ASIC, or the way that it has conducted itself. In the circumstances, its conduct has been entirely appropriate. 33 Nevertheless, because the questions go to ASIC's standing, it may be proper to qualify the operation of the usual rule in relation to costs. In these circumstances, the appropriate order should be that ASIC's costs of this application be its costs in the cause. In that way, it is not at risk of having to pay Sunshine Loans' costs of this application and, if it is successful in establishing its standing, it may recover its costs. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.