Australian Securities and Investments Commission v The Cash Store Pty Ltd

introduction 1 On 26 August 2014, I delivered judgment in Australian Securities and Investments Commission v The Cash Store Pty Ltd (in liquidation) [2014] FCA 926 ("the liability judgment") in which I made findings, and declarations, of contravention by the respondents of the National Consumer Credit Protection Act 2009 (Cth) ("the Credit Act") in relation to "payday" lending to customers, and by the first respondent ("TCS") of s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act") in relation to the sale of consumer credit insurance ("CCI"). The contraventions related to a sample of 281 credit contracts that TCS arranged, and the second respondent ("AFA") financed, between 1 July 2010 (when the relevant provisions of the Credit Act became operative) and 24 September 2012 ("the relevant period"). These contracts were randomly selected from the 325,756 credit contracts that TCS arranged, and AFA financed, during the relevant period. Out of the 281 contracts, only four contracts were found not to have involved some contravention. The other contracts all involved multiple contraventions. I found systemic and gross failures by TCS and AFA to comply with legislative requirements and a wholesale failure in process. The question of how the Court can, and should, extrapolate the findings of liability across all 325,756 credit contracts entered into during the relevant period was reserved for the penalty hearing. ASIC has submitted that it is "very likely" that over 300,000 of the 325,756 credit contracts entered into contravened one or more of the responsible lending obligations imposed by the Credit Act. ASIC submits that the Court should impose penalties: (a) on TCS in respect of the contraventions of Parts 3-1 and 3-2 of the Credit Act of between $8.26 million and $12.39 million; (b) on AFA in respect of the contraventions of Part 3-2 of the Credit Act of between $6,385,000 and $9,377,500; and (c) on TCS in respect of the contraventions of s 12CB of the ASIC Act, "at or near" the maximum penalty of $1.1 million. 2 ASIC correctly raised the question of the application of Barbaro v the Queen (2014) 88 ALJR 372; [2014] HCA 2 in the context of civil penalty proceedings. This has been the subject of judicial consideration and the present state of the authority in this Court is that Barbaro does not prevent the Court from taking a regulator's submissions on penalty into account in the civil context: Australian Competition and Consumer Commission v EnergyAustralia Pty Ltd [2014] FCA 336; Australian Competition and Consumer Commission v Safe Breast Imaging Pty Ltd (No 2) [2014] FCA 998 at [47]; Comcare v John Holland Pty Ltd [2014] FCA 1191 at [28]. Accordingly, I propose to take ASIC's submissions into account. 3 Neither respondent attended at the penalty hearing. TCS is in liquidation and the liquidator has not participated in the proceeding. AFA could not be served with the documents because it no longer has a registered office, it does not have any directors as all the directors have resigned and it does not have solicitors acting for it. After several futile attempts at service, ASIC applied for and, on 26 September 2014, was given leave to dispense with service on AFA pursuant to r 1.34 of the Federal Court Rules 2011 (Cth).