BSF Solutions Pty Ltd v Australian Securities and Investments Commission

Background 5 In the trial proceeding, the primary judge found that the first appellant, BSF Solutions Pty Ltd (BSF), and the second appellant, Cigno Australia Pty Ltd (Cigno) contravened ss 29(1) and 32(1) of the National Consumer Credit Protection Act 2009 (Cth) (the Credit Act) by respectively engaging in a credit activity, and demanding, receiving or accepting fees, charges or other amounts for engaging in that activity, without holding an Australian Credit Licence. The primary judge also found that the third appellant, Brenton James Harrison, and the fourth appellant, Mark Swanepoel, were involved in these contraventions. 6 The trial proceeding was conducted on the basis that the question of the pecuniary penalties sought against the appellants, and aspects of the final injunctive relief sought against Mr Harrison and Mr Swanepoel, would be heard as separate questions, subsequently to all other questions in the proceeding. 7 On 24 May 2024, the primary judge made declarations of contravention (including as to Mr Harrison's and Mr Swanepoel's involvement in those contraventions) and granted injunctions. The primary judge also gave directions facilitating the making of adverse publicity orders pursuant to s 182 of the Credit Act. The primary judge then listed the proceeding for a case management hearing on 21 June 2024 in relation to the terms of the adverse publicity orders and the further orders to be made in the proceeding. 8 Later that day, the appellants applied, unsuccessfully, to stay the operation of the injunctions that had been granted. At that time, the appellants made clear that they were not seeking a stay of the whole proceeding. 9 On 7 June 2024, the appellants lodged an application for leave to appeal. The application was accepted for filing on 11 June 2024. 10 On 21 June 2024, before the application for leave to appeal had been determined, the case management hearing appointed on 24 May 2024 proceeded before the primary judge. At that time, the primary judge made adverse publicity orders against BSF and Cigno. His Honour also made orders for discovery by BSF and Cigno and orders for the filing, by 4.00 pm on 16 August 2024, of the evidence on which the Australian Securities and Investments Commission (ASIC), as applicant in the trial proceeding, intended to rely on the question of penalties. His Honour also ordered ASIC to state, by 4.00 pm on 23 August 2024, the pecuniary penalties it was seeking against each appellant, and the basis for those penalties. 11 The primary judge then fixed a date - 24 February 2025 - for the commencement of a three day hearing on penalty. When fixing that date, the appellants expressed their desire that the penalty hearing await the determination of their appeal, which they knew could be listed in the Full Court and Appellate Sittings in November this year. 12 The primary judge was not persuaded by that submission, noting that: (a) the appellants had not sought a stay of the trial proceeding; (b) they could seek such a stay at any time, including before him or before the Full Court convened to hear any appeal; and (c) in the absence of a stay application, his Honour was duty bound to deal with the matter expeditiously. In my respectful view, the primary judge was correct in so proceeding. 13 Nothing further was done in that regard by the appellants until 9 August 2024, when they lodged the present interlocutory application for filing. In the meantime, on 28 June 2024, the presiding National Appeals Coordinating Judge granted leave to the appellants to appeal. 14 The National Appeals Coordinating Judge originally proposed that the application for leave to appeal be heard and determined by a Full Court in the November sitting period, immediately prior to, or concurrently with, the proposed appeal. However, on 27 June 2024, ASIC informed the Court that it did not oppose the appellants' application for leave to appeal. Having been informed of that fact, the National Appeals Coordinating Judge granted leave accordingly. 15 The National Appeals Coordinating Judge was entitled to act on ASIC's statement of non-opposition as containing two important concessions. First, that there were valid grounds for granting leave to appeal on issues of liability. Secondly, from ASIC's perspective, there were no discretionary reasons why an appeal on issues of liability (i.e., a limited appeal) should not proceed even though the question of penalty (including certain final injunctive relief against Mr Harrison and Mr Swanepoel) remained to be determined. 16 On 26 July 2024, a National Registrar, National Operations Registry (Appeals), wrote to the parties confirming that the appeal was being considered for listing in the November sitting period. However, to assist the Court in considering its listing arrangements, the National Registrar inquired whether, in light of the penalty hearing having been timetabled, it would be prudent to hold off listing the appeal until next year (i.e., until after the penalty hearing). 17 The appellants responded 2 August 2024. They submitted that the appeal should be listed for hearing before the penalty hearing and that they intended to file an application to "stay or adjourn" the trial proceeding "shortly". 18 ASIC also responded on 2 August 2024. It submitted that it would be prudent that the present appeal not be listed "until such time that the penalty phase has been heard and determined". This response was inconsistent with ASIC's statement to the Court on 27 June 2024 that it did not oppose the appellants' application for leave to appeal. I shall return to that consideration. 19 On 5 August 2024, the National Judicial Registrar - Appeals, National Operations Team, wrote to the parties informing them that, in general, an appeal on liability is not likely to be listed for hearing when a hearing on penalty has already been set down and the Full Court is not likely to be able to deliver judgment in the appeal at least a few weeks before the time when submissions on penalty are due to be filed. The parties were also informed that the final decision on which matters are to be included in the November sitting period is expected to be made by the Chief Justice on 19 August 2024. 20 This communication moved the appellants to action. The present application for a stay of the trial proceeding is brought in an endeavour to secure the listing of the liability appeal for hearing in the November sitting period. 21 I should record that, if the appeal is not listed in the November sitting period, the parties have been informed that, on present indications, it may not be listed until the August 2025 sitting period.

The appellants 22 The appellants submit that the proceeding below should be stayed because, if it is not, they will suffer substantial prejudice if the judgment under appeal is later shown to be wrong. 23 With regard to BSF and Cigno, the appellants submit that, if pecuniary penalty orders are made, there is a real risk that external administrators will be appointed to them, even if a stay of execution were to be granted in respect of those orders. This concern is expressed on the basis of information provided by: (a) Mr Harrison, who is the sole director of BSF, that BSF would be unable to pay a pecuniary penalty order in any sum greater than $3 million, even if it could recover all debts and other sums due to it; and (b) Mr Swanepoel, who is the sole director of Cigno, that Cigno would be unable to pay a substantial pecuniary penalty order for "many millions of dollars". 24 With regard to Mr Harrison and Mr Swanepoel themselves, the appellants submit that both have suffered reputational damage in light of the findings made against them. Further, the final injunctions sought against them are broad and, if made, would restrain them from being involved in any credit activity whatsoever for such period as the Court might determine. 25 The appellants also submit that the stay they seek is warranted because of the likely costs involved if the penalty hearing were to proceed as fixed. In this regard, they submit that once the appellants have had an opportunity to consider the penalties that ASIC proposes, they will need to consider whether they now require separate representation. The appellants' unstated proposition is that if separate representation were to be obtained for the penalty hearing, the overall costs of that hearing will increase. 26 The appellants submit, further, that the costs of a penalty hearing (whether or not increased by separate representation): (a) will be avoided if the appeal is allowed in its entirety; (b) may be avoided, if the outcome of the appeal is that the matter be remitted for re-hearing on liability; or (c) may be partially avoided, depending on whether the appeal succeeds in respect of some appellants (but not others) or on some issues (but not on others). 27 The appellants also advanced submissions in support of the merits of their appeal. I do not propose to rehearse those submissions or to reflect on them, save to note that the appellants contend that their appeal raises "serious issues with reasonably arguable prospects of success". They submit that this is consistent with the leave that has been granted. 28 As to this submission, I simply observe that the appellants' application for leave to appeal was not determined on a contested basis. Leave was granted on the basis of ASIC's non-opposition, which the National Appeals Coordinating Judge was entitled to treat as carrying the concessions to which I have referred. Other than this, it is not appropriate that I venture any views on the merits of the appeal now that leave to appeal has been granted.

ASIC 29 ASIC opposes the granting of a stay. It contends that it is in the interests of the orderly and efficient administration of justice that the trial proceeding should proceed to a penalty hearing so that all appeal issues (as to both liability and penalty) may then be heard together by a Full Court in a combined appeal. 30 In support of this position, ASIC submits that, prima facie, as the successful plaintiff, it is entitled to have the action tried in the ordinary course and that a stay requires justification on proper grounds. It submits that, although leave to appeal has been granted, that fact does not advance matters significantly. It argues that, even though it did not oppose the application for leave to appeal, the appellants' prospects of appeal are not strong. It contends that it is very unlikely that all four appellants will be successful, in full, on the appeal and that realisation of this fact means that it is very unlikely that a penalty hearing will not be necessary. 31 ASIC submits that the appellants have delayed, unreasonably, in bringing the stay application and that, as a result, it has undertaken significant work in preparing for the penalty hearing pursuant to the orders made by the primary judge on 21 June 2024. It has incurred significant costs in doing so. It submits that the appellants have not offered a satisfactory explanation for their delay. 32 ASIC dismisses the appellants' submissions concerning the reputational harm they contend that Mr Harrison and Mr Swanepoel have suffered as a result of the judgment given in the trial proceeding. It submits that both Mr Harrison and Mr Swanepoel have been the subject of adverse publicity in relation to their involvement in earlier litigation where adverse decisions were given against the predecessor entities to BSF and Cigno (of which Mr Harrison and Mr Swanepoel were also, respectively, sole directors). It submits that, in any event, there is no reason why Mr Harrison and Mr Swanepoel cannot "respond to what they perceive as reputational slights" by indicating publicly that the judgment against them is under appeal: Pirmax Pty Ltd v Kingspan Insulation Pty Ltd (No 2) [2022] FCA 1526 at [25]; NRM Trading Pty Ltd v Australian Competition and Consumer Commission [2015] FCA 595 at [43]. 33 As to the financial consequences for BSF and Cigno of substantial pecuniary penalty orders being made, ASIC confirms that it intends to seek "significant penalties in the millions of dollars" against each of the appellants, although it cannot, at present, be more precise as to the orders it will seek. However, ASIC says that, if a stay is refused and the penalty hearing proceeds as currently listed, it would not oppose a stay on any penalties, and would not seek to enforce any penalties, pending the hearing and determination of the appeal. 34 ASIC submits that, as the financial services regulator, it has an interest in ensuring that the objectives of general and specific deterrence are achieved through enforcement action. It has expressed its concern that a delay in the penalty hearing will mute the deterrent effect of the penalties that might be imposed. 35 ASIC also submits that, because of the quantum of the pecuniary penalty orders it will seek, and which it anticipates will likely be imposed, the hearing of an appeal on penalties is highly likely. It estimates that conducting two appeals will result in unnecessary duplication of work and the likely doubling of costs compared to conducting one combined appeal on liability and penalties. It has provided an estimate of those costs. 36 Relatedly, ASIC submits that granting a stay, and the consequent delay in having a penalty hearing, will carry with it the risk that work currently being undertaken by it in relation to the penalty hearing will need to be revisited or recommenced. ASIC has also expressed its concern that witnesses who are currently in the course of preparing their evidence, and are willing and able to give their evidence at the presently listed hearing, may not be prepared, or able, to provide evidence at a delayed hearing.

Consideration 37 Although: (a) knowing since 21 June 2024 that the penalty hearing was listed to commence on 24 February 2025; (b) knowing that it was likely that their appeal on liability could be listing in the November sitting period; and (c) knowing that a stay application could be brought by them at any time, including before the primary judge, the appellants have delayed in seeking that relief. They have not provided a reasonable excuse for that delay. 38 In the meantime, and despite delays by the appellants in completing discovery, ASIC's preparation for the penalty hearing has progressed to the stage where it expects that, by 28 August 2024, it will have completed filing the evidence on which it proposes to rely at the penalty hearing and have informed the appellants of the pecuniary penalty orders it will seek and the basis for those orders. Therefore, significant costs have already been incurred in relation to the penalty hearing. The appellants' submission that costs can be avoided or minimised by granting the stay they seek must be seen in this light. 39 Further, I have no doubt that conducting two appeals - one on liability and, potentially, one on penalties - will result in significant extra costs being incurred which could be avoided by conducting one appeal on all issues. 40 These matters tell against granting the stay that the appellants seek. However, I have concluded that a stay should be granted. My reasons are as follows. 41 There is a real prospect that the appeal on liability can be listed for hearing in the November sitting period. But that prospect is not likely while a hearing on penalty remains listed to commence on 24 February 2025. If the appeal on liability is not listed for hearing in the November sitting period, it is not likely that an appeal (on liability and, potentially, penalty) will be listed for hearing until the August 2025 Full Court and Appellate sitting period. Given those considerations, it is clearly desirable that the appeal on liability be listed for hearing in the earlier, rather than in the considerably later, sitting period. 42 This is particularly so in circumstances where leave to appeal on liability - a limited appeal - was granted on the basis of ASIC's statement to the Court that it did not oppose leave being granted to bring such an appeal. That notification was given by ASIC on 27 June 2024, after the primary judge had listed the penalty hearing. That was a significant change in circumstances. Moreover, at that time, ASIC knew that the Court was contemplating listing an appeal on liability in the November sitting period. 43 In the present application, ASIC sought to explain the basis for its non-opposition. It says that it did not oppose the application for leave to appeal because the appellants would have had a right of appeal "after the final disposition of the proceeding at the conclusion of the penalty hearing" in any event. It contends that it did not concede that the appellants' intended appeal was arguable. 44 This explanation is difficult to follow. It is axiomatic that, once all the rights of the parties have been finally determined in the trial proceeding, the appellants will have a right to appeal. However, the question which ASIC should have addressed was whether, in circumstances where all the rights of the parties have not been finally determined in the trial proceeding, the appellants should, nevertheless, be granted leave to appeal on the limited question of liability. 45 In any event, ASIC did not proffer this explanation at the time it informed the Court that it did not oppose leave to appeal being granted. As I have said, the National Appeals Coordinating Judge was entitled to take ASIC's non-opposition as containing the concessions to which I have referred. 46 Perhaps more importantly, ASIC's explanation does not address the significance of its non-opposition or the consequences of leave to appeal having been granted. Many of the reasons now advanced by ASIC as to why the Court should refuse a stay are, in fact, reasons why, in a given case, leave to appeal should not be granted. However, paradoxically, rather than expressing its opposition to leave to appeal being granted, ASIC expressed its non-opposition when corresponding with the Court on 27 June 2024. 47 It can be accepted as a general proposition that efficiencies (including as to costs) are likely to be achieved by having one appeal addressing all issues arising from a trial. It can be accepted as a general proposition that, by having an appeal on limited issues, there may be delay in determining the remaining issues for trial, which may also add to the costs of the trial and create practical difficulties in adducing evidence, such as those referred to in ASIC's evidence. But these are the incidents of leave to appeal on limited issues being granted. They must have been - or should have been - in ASIC's contemplation when it expressed its non-opposition to leave to appeal being granted. 48 As matters now stand, an appeal on liability will have the benefit of providing an appellate judgment on which the primary judge can rely in determining the question of the appropriate penalties to be imposed, and may shape that question. The availability of an appellate judgment on liability may also limit the grounds of any future appeal that might be brought from the remaining final orders to be made by the primary judge. 49 If it happens that the appellants' appeal on liability is wholly successful, the costs which ASIC has incurred to date in preparing for the penalty hearing will be wasted. This consequence can be addressed, however, by appropriate orders for costs by the primary judge or by the Full Court. 50 With regard to the form of the stay order, the appellants seek a stay until the hearing and determination of the appeal. In my view, it would be better to provide for the stay to be granted until further order. If for some unforeseen (and presently unexpected) reason the hearing of the appeal is significantly delayed - such as to allow a penalty hearing to proceed - then there would be good reason to lift the stay. 51 With regard to the costs of the stay application, ASIC has been unsuccessful in its opposition. However, the appellants have delayed in bringing the application, with no satisfactory explanation for that delay. Costs should lie where they fall. There will be no order for costs. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Yates.