Cigno Pty Ltd v Australian Securities and Investments Commission

Introduction 1 In April 2019 the Australian Securities and Investments Commission (ASIC) was granted a 'product intervention power' in relation to financial products by way of an amendment to the Corporations Act 2001 (Cth). 2 On 12 September 2019 ASIC utilised that power and issued a legislative instrument, referred to as a 'product intervention order', prohibiting use of a particular short term lending model unless certain conditions were complied with. The product intervention order is more fully described as the ASIC Corporations (Product Intervention Order - Short Term Credit) Instrument 2019/917 (PIO). 3 The short term lending model involves two elements: short term credit provided to consumers by a credit provider, mostly for small amounts up to $1,000, and collateral management services provided to that customer by a separate associate. Both the credit provider and the service provider charge fees to the customer. 4 The model relevant to this appeal involved the credit provider Gold-Silver Standard Finance Pty Ltd (GSSF) and the associate Cigno Pty Ltd (Cigno). Cigno claimed to be prejudiced by the PIO, in that from the time the PIO was issued by ASIC, Cigno was no longer able to charge fees to its customers in the manner it had done so up until then. 5 Cigno sought judicial review in this Court of the decision of the ASIC delegate to issue the PIO, but was unsuccessful before the primary judge: Cigno Pty Ltd v Australian Securities and Investments Commission [2020] FCA 479. It now appeals from that decision. 6 The focus of the judicial review application was the proper construction of s 1023D of the Corporations Act. That remains the focus on the appeal. The provision is set out in full below, but relevantly it provides that if ASIC is satisfied that a class of financial products is, or is likely to be, available for acquisition to persons as retail clients, and the class has resulted in, or will or is likely to result in, significant detriment to retail clients, ASIC may order that a person must not engage in specified conduct in relation to the class of products, either entirely or except in accordance with conditions. 7 Although there were nine grounds of appeal and a notice of contention on ASIC's part, the parties were largely in agreement that determination of the appeal required the consideration of the following questions: (1) Accepting that the short term lending model was made up of the two elements of, first, short term credit provided by GSSF and, second, services provided by Cigno, was the delegate in performance of her statutory task entitled to consider only the terms of the short term credit facility and the detriment that might result from that financial product, or was she entitled to also have regard to the surrounding context, including the costs and other terms of the services provided by Cigno? (2) How is the phrase 'class of financial products' to be understood - does it contemplate that a class may comprise financial products that are used in particular circumstances, and can there be a 'class' of financial products if there is only one financial product within it? (3) Did the ASIC delegate properly reach a state of satisfaction as to significant detriment and class?

Part 7.9A of the Corporations Act 8 Part 7.9A of the Corporations Act, headed 'Product Intervention Orders', was introduced by the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth). 9 Section 1023A provides: Object The object of this Part is to provide ASIC with powers that it can use proactively to reduce the risk of significant detriment to retail clients resulting from financial products. 10 Section 1023B relevantly defines 'financial product' to include an 'ASIC Act financial product', as defined by Division 2 of Part 2 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). That definition is contained in s 12BAA(7) and includes a credit facility. 11 Section 1023D relevantly provides: ASIC may make product intervention orders Making product intervention orders … (3) Subject to subsection (5), if ASIC is satisfied that a class of financial products: (a) is, or is likely to be, available for acquisition by issue, or for regulated sale, to persons as retail clients (whether or not it also is, or is likely to be, available for acquisition by persons as wholesale clients); and (b) has resulted in, or will or is likely to result in, significant detriment to retail clients; ASIC may, in accordance with this Part and by legislative instrument, order that a person must not engage in specified conduct in relation to the class of products, either entirely or except in accordance with conditions specified in the order. Note 1: An example of conditions that may be specified in a product intervention order include that a product in a class of products not be issued to a retail client unless the retail client has received personal advice. Note 2: Section 1023E specifies matters to be taken into account in considering whether a financial product has resulted in, or will or is likely to result in, significant detriment to retail clients. Note 3: Section 1023N also provides that product intervention orders may include requirements for notifying retail clients. Restrictions on product intervention orders … (5) Conduct covered by a product intervention order must be limited to conduct in relation to a retail client. 12 Section 1023D(1) is in similar terms but is directed at a 'financial product', rather than a 'class of financial product'. Further, it provides for an order to be directed to a 'specified person'. By s 1023D(2), an order under s 1023D(1) is not a legislative instrument. 13 ASIC is not obliged under s 1023D to give reasons as to its decision to exercise its powers. 14 The notes to s 1023D are of some relevance and must be considered in interpreting the provision to which they relate: s 13(1) of the Acts Interpretation Act 1901 (Cth); One.Tel Ltd (in liq) v Rich [2005] NSWSC 226 at [54] (Bergin J); and Oreb v Australian Securities and Investments Commission (No 2) [2017] FCAFC 49; (2017) 247 FCR 323 at [46] (Rares, Davies and Gleeson JJ). Notes 1 and 2 are of particular relevance and are referred to further below. 15 Section 1023E provides: Significant detriment to retail clients (1) In considering whether a financial product has resulted in, or will or is likely to result in, significant detriment to retail clients for the purposes of this Part, the following must be taken into account: (a) the nature and extent of the detriment; (b) without limiting paragraph (a), the actual or potential financial loss to retail clients resulting from the product; (c) the impact that the detriment has had, or will or is likely to have, on retail clients; (d) any other matter prescribed by regulations made for the purposes of this paragraph. (2) Subsection (1) does not limit the matters to be taken into account in considering whether a financial product has resulted in, or will or is likely to result in, significant detriment to retail clients for the purposes of this Part. (3) A financial product may result in significant detriment to retail clients even if a person has complied with the disclosure requirements in Chapter 6D or this Chapter, and with the person's obligations under Part 7.8A, in relation to the product. 16 Section 1023F provides that ASIC must not make a product intervention order unless ASIC has consulted with persons who are likely to be affected by the proposed orders. It provides that consultation is taken to be complied with if the proposed order is made available on its website and the public is invited to comment. It is not in issue that there was consultation under s 1023F in this case. 17 Section 1023L requires ASIC to give notice of product intervention orders. It relevantly provides: Product intervention orders (1) ASIC must serve a copy of a product intervention order that is not a legislative instrument on any person to whom ASIC considers the order applies. Failure to comply with this subsection does not invalidate the order. (2) ASIC must publish each product intervention order, as in force for the time being, on its website. Note: The Legislation Act 2003 requires legislative instruments to be registered on the Federal Register of Legislation and provides for compilations of legislative instruments. (3) ASIC must also publish on its website, with the product intervention order, a notice that: (a) describes the significant detriment to retail clients that has resulted from, or will or is likely to result from, the financial product or class of financial products to which the order relates, and sets out why the order is an appropriate way of reducing the detriment; and (b) describes the consultation that ASIC undertook in relation to the order; and (c) if the order comes into force after it is published - specifies the day it comes into force. (4) ASIC must publish on its website, with the product intervention order, each declaration under section 1023H (which relates to extensions of product intervention orders) that relates to the order.

The revised explanatory memorandum 18 The revised explanatory memorandum to the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019 (Cth) (Revised EM), has some relevance. It addressed the nature of the detriment and its causes that were intended to enliven the product intervention powers in s 1023D, and how those powers might be exercised. 19 Relevantly, the Revised EM stated: 2.33 The new law does not define a detriment for the purposes of the new power. The meaning of detriment is intended to take its ordinary meaning in the context of the new provision. However, it is intended to cover a broad range of harm or damage that may flow from a product. The harm or damage may arise from any number of sources associated with the product, including the product's features, defective disclosure, poor design, or inappropriate distribution. … 2.38 The range of orders that ASIC can make under an intervention order is extensive. Some examples of the breadth of possible orders include: • banning a person from issuing a product or class of product to consumers; • directing that a particular product or class of product only be offered by way of issue to particular classes of consumers or in particular circumstances; and • directing that a product or class of product not be distributed unless accompanied by an appropriate warning or label.

The Consultation Paper 20 In July 2019 ASIC published a consultation paper, headed 'Using the product intervention power: Short term credit' (Consultation Paper). 21 In the Consultation Paper, ASIC described what it called the short term lending model: ASIC is aware of a model of lending structured such that it benefits from the exemption in s 6(1) of the National Credit Code (Sch 1 of the National Credit Act), and which involves the provision of short term credit at high cost to consumers, including consumers who may be on low incomes or in financial difficulties and so may not reasonably be able to afford the repayments. 22 ASIC continued: The short term lending model operates in the following way: (a) The short term credit provider offers short term credit to consumers, mostly for small amounts up to $1,000. The application process is advertised as taking about two weeks. (b) An associate of the short term credit provider offers collateral services under a separate services agreement for a 'fast track application' if the consumer wants the money immediately. The fees for the collateral services are very high relative to the amount borrowed - total fees and repayments can amount to up to 990% of the loan amount … (c) The money must be repaid within a maximum term of 62 days and sometimes a shorter period of time, increasing the risk of default as repayments are based on the term of the credit rather than being based on any capacity to repay. 23 ASIC provided a case study in the Consultation Paper based on the short term lending model said to have been utilised by GSSF and Cigno with one of Cigno's clients: Consumer A was on a Centrelink Newstart allowance when she obtained short term credit through Cigno for $120. Under the contract: • Cigno charged a $90 financial supply fee; • Cigno charged $5.95 in weekly account keeping fees; • GSSF charged a credit fee of $6; and • the total amount to be repaid was $263.60, by four fortnightly payments of $66 (with the fourth payment being $65.60). Consumer A could not afford the repayments and immediately defaulted. She was charged various dishonour fees and ongoing weekly account-keeping fees. As a result, Consumer A became liable to repay $1,189 on the original amount of $120 (or 990% more than she borrowed). 24 By way of background to the Consultation Paper, in 2014 ASIC commenced civil proceedings against two entities that operated lending models consistent with the short term lending model and which relied on the short term credit exemption: Australian Securities and Investments Commission v Teleloans Pty Ltd [2015] FCA 648; (2015) 234 FCR 261. ASIC was unsuccessful in those proceedings, but as is apparent from the Consultation Paper, after Part 7.9A was introduced, ASIC sought to again address the use of the short term lending model by utilising the powers granted to it under the new provisions.

The s 6(1) National Credit Code 'short term credit exemption' 25 The National Credit Code (Schedule 1 of the National Consumer Credit Protection Act 2009 (Cth)) provides a number of safeguards aimed at protecting consumers who undertake credit commitments. However, it also exempts certain products from such safeguards. Relevantly, s 6 of the National Credit Code provides: (1) This Code does not apply to the provision of credit if, under the contract: (a) the provision of credit is limited to a total period that does not exceed 62 days; and (b) the maximum amount of credit fees and charges that may be imposed or provided for does not exceed 5% of the amount of credit; and (c) the maximum amount of interest charges that may be imposed or provided for does not exceed an amount (calculated as if the Code applied to the contract) equal to the amount payable if the annual percentage rate were 24% per annum. (2) For the purposes of paragraph (1)(b), credit fees and charges imposed or provided for under the contract are taken to include the following, whether or not payable under the contract: (a) a fee or charge payable by the debtor to any person for an introduction to the credit provider; (b) a fee or charge payable by the debtor to any person for any service if the person has been introduced to the debtor by the credit provider; (c) a fee or charge payable by the debtor to the credit provider for any service related to the provision of credit, other than a service mentioned in paragraph (b). (3) For the purposes of paragraphs (2)(a) and (b), it does not matter whether or not there is an association between the person and the credit provider. 26 The Consultation Paper referred to this exemption as the short term credit exemption, and noted that the short term lending model has the potential to benefit from such exemption.

The PIO is made 27 On 12 September 2019 ASIC made the PIO, banning the use of the short term lending model unless certain limits as to the total fees payable are satisfied. 28 The operative order is in cl 5 which states: Short term credit facilities (1) A short term credit provider must not provide credit to a retail client under a short term credit facility except in accordance with the condition in subsection (5). (2) A director of a short term credit provider must not cause or authorise the provider to provide credit to a retail client under a short term credit facility except in accordance with the condition in subsection (5). (3) A short term credit provider or an associate must not impose or provide for collateral fees and charges under a collateral contract except in accordance with the condition in subsection (5). (4) A director of a short term credit provider or of an associate must not cause or authorise the provider or associate to impose or provide for collateral fees and charges under a collateral contract except in accordance with the condition in subsection (5). Condition (5) The total of: (a) the amount of credit fees and charges that may be imposed or provided for under the short term credit facility; and (b) the amount of collateral fees and charges that may be imposed or provided for under a collateral contract; must not exceed the maximum amount of credit fees and charges permitted under subsection 6(1) of the National Credit Code in relation to the provision of credit under the short term credit facility. 29 The PIO is expressly said to be made under s 1023D(3) of the Corporations Act (cl 3). It has a definition provision (cl 4) that relevantly provides to the effect that a 'short term credit facility' means a financial product covered by s 12BAA(7)(k) of the ASIC Act ('a credit facility (within the meaning of the regulations)') and covered by the exemption provided by s 6(1) of the National Credit Code. 30 The phrase 'collateral fees and charges' is also defined. It means fees and charges imposed or provided for under a collateral contract. The phrase 'collateral contract' is defined to mean, in relation to a short term credit facility, 'a separate contract between a retail client and a short term credit provider or an associate in relation to the short term credit facility'. 31 A 'short term credit provider' is a person who is purporting to rely on s 6(1) of the National Credit Code. 32 An 'associate' in relation to a short term credit provider has the meaning given by s 11 and s 15 of the Corporations Act and so includes a person with whom the short term credit provider is associated, formally or informally: s 15(1)(c).

The PIO Notice 33 The Product Intervention Order Notice issued 12 September 2019 under s 1023L(3) of the Corporations Act (PIO Notice) states that it relates to 'short term lending models which are used to charge consumers excessive fees and charges (collateral fees and charges) for short term credit …'. 34 ASIC recorded in the PIO Notice its satisfaction as to detriment (more precisely that of the delegate) as referred to in s 1023D(1), as follows: 7. ASIC is satisfied that the collateral fees and charges charged through the short term lending model, as described in Consultation Paper 316 Using the product intervention power: Short term credit (CP 316), has resulted in significant consumer detriment to retail clients. The analysis in Table 1 below outlines the basis for ASIC's view, having regard to the factors we are required to consider as set out above. 35 As that extract anticipates, ASIC then addressed the elements of s 1023E(1), stating in Table 1 of the PIO Notice the following: Analysis In considering whether a financial product has resulted, will result or is likely to result in significant consumer detriment, ASIC must take into account the nature and extent of the detriment, including the actual or potential financial loss to consumers resulting from the product: paragraph 1023E(1)(a) and (b) of the Act. Short term lending model ASIC considers the short term lending model results in significant detriment. The short term lending model involves two services or products provided to a retail client: • provision of short term credit (short term credit facility) by the short term credit provider, who charges fees consistent with limits prescribed in the short term credit exemption in subsection 6(1) of the National Credit Code (the short term credit exemption); and • an associate of the short term credit provider, providing collateral services (such as application, management and collection services) in relation to the provision of the short term credit, and who charges significant fees or other charges under a separate collateral contract. ASIC considers the short term lending model results in significant detriment because of the combination of the following factors: • the target market includes vulnerable consumers who are in financial difficulty and require short term loans generally to cover basic living expenses, many of whom have been declined for regulated credit; • the short term nature of the loans provides consumers with limited time to raise funds to make the required repayments; • the overall fees and charges charged under the model are significantly higher than what is permitted under the short term credit exemption; • the short term lending model has a high default rate, which results in large amounts of default related fees being charged to consumers; and • many consumers cannot afford to repay the short term loans or repay them without suffering substantial hardship. ASIC has taken into account the nature and extent of the significant detriment, comprising financial loss and non-financial detriment. 36 ASIC then referred to non-financial detriment, stating: As the contracts provided under the short term lending model are not regulated 'small amount credit contracts', consumers do not have the various consumer protections under the National Credit Act and the National Credit Code, including: • to have a proper responsible lending assessment by the credit provider about whether the credit amount is affordable and meets their requirements and objectives; • for Centrelink recipients who receive at least 50% of their gross income as payments under the Social Security Act 1991, to ensure that repayments do not exceed 20% of their gross income for that payment cycle; • to insist that credit providers have IDR processes and are a member of an EDR scheme, which would make it possible for them to complain (free of charge) to the EDR scheme in the event of a dispute; • to apply for hardship and be given the relevant protections under section 72 of the National Credit Code; • to be provided with a warning statement before they enter the contract. 37 ASIC addressed s 1023E(1)(c), and the impact of detriment on consumers. It referred to the long term financial detriment that may be caused to consumers, debt spirals and a potential cycle of disadvantage. It said that information that it received, including by submissions in response to the Consultation Paper, indicated that the types of consumers affected by the significant detriment include vulnerable consumers and those in financial difficulty requiring credit to pay for basic living expenses. ASIC referred to reports that the combination of financially stressed consumers obtaining short term credit with high fees resulted in a worsening financial position. ASIC also referred to reports of adverse health impacts.

Explanatory Statement 38 On 13 September 2019 ASIC published a replacement 'Explanatory Statement for the Short Term Credit PIO' (Explanatory Statement). It indicated that the PIO is designed to prohibit companies and their directors from using 'a specific short term lending model that ASIC considers has resulted in, will result in, or is likely to result in significant detriment to clients'.

Cigno's role 39 It was not in issue that at the time of the PIO, GSSF was a short term credit provider providing short terms credit facilities and that Cigno was an associate, within the meaning of the legislation. The primary judge described their respective roles as follows: [8] [GSSF] between 2016 and 13 September 2019, provided short term credit to retail clients. The terms of the short term credit were such that GSSF had the benefit of the short term credit exemption. GSSF would therefore be a 'short term credit provider' for the purposes of the PIO if it continued to provide such short term credit facilities. [9] During the same period, Cigno provided services to GSSF's customers in exchange for fees including application, management and collection services. Cigno accepted that it may be assumed for the purposes of the application that if it continued to engage in such transactions it would be an 'associate' of GSSF and would be providing services to retail clients under 'collateral contracts' for the purposes of the PIO.

The decision of the primary judge 40 The arguments before the primary judge were largely the same as those pursued on the appeal. The primary judge considered that the construction issue reduces to that of the narrowness or breadth of the cause of the detriment: whether the financial product itself must directly cause the detriment or whether indirect causation, having regard to the financial product in combination with other matters, must cause the significant consumer detriment (at [37]-[38]). 41 His Honour concluded that the detriment might be caused indirectly by the financial product or a class of financial products, in the sense of there being something in the circumstances of the availability of the product or the class of products to retail clients. The matters to which his Honour had regard in assessing the manner in which s 1023D was to be understood included: (a) its text and the fact that it allows for a prohibition on 'specified conduct' in relation to the product or class, a reference not limited to a feature of the product itself; (b) the breadth suggested by the reference to a prohibition on 'conduct in relation to' a financial product in s 1023D(1); (c) the notes to s 1023D(1) and s 1023D(3) which state that s 1023E specifies the matters to be taken into account in considering whether a financial product has resulted in, or will or is likely to result in, significant detriment to retail clients; (d) the example condition in the notes that a product in a class is not to issue to a retail client unless they have received personal advice; (e) the fact that the Revised EM describes the meaning of detriment to include harm or damage of a type that does not arise only from the product itself, and may relate to a particular class of consumer; and (f) having regard to the remedial and protectionist nature of the legislation, it is to be construed broadly, citing Webb Distributors (Aust) Pty Ltd v State of Victoria (1993) 179 CLR 15 at 41 (McHugh J). 42 The primary judge also determined that it was not necessary for there to be more than one product (or provider of a product) of a particular type for there to be a 'class' of products of that type for the purposes of s 1023D(3). Even so, his Honour found that, in the present case, the delegate was concerned with more than one potential user of the model operated by GSSF and Cigno, having regard to past experience and future potential (at [67]-[74]).

The appeal 43 As already noted, there are nine grounds of appeal from the primary judge's orders. They can sensibly be collected into three groups, although, as will become apparent, there is some overlap between the grounds.

Grounds 1, 2 and 5 44 These grounds provide: 1. The primary judge erred in concluding that the delegate had, for the purposes of s. 1023D(3)(b) of the Corporations Act 2001 (Cth), reached a state of satisfaction that a class of 'financial products' had resulted in, or will or is likely to result in, significant detriment to retail clients. 2. The primary judge erred in reasoning that the answer to the question of whether or not the delegate had formed the requisite state of satisfaction turned on whether or not it was sufficient as a matter of statutory construction for the class of financial products to result 'indirectly' in significant detriment to retail clients and the primary judge further erred in finding (at [56]) that the applicant had made a concession to this effect. … 5. The primary judge erred in finding that it is sufficient, for the purposes of s. 1023D(3), that ASIC be satisfied that there is 'something in the circumstances of the availability of the … class of financial products to retail clients' that causes the detriment (at [42]), or that such detriment arises from 'indirect sources associated with the product' (at [50]). 45 By grounds 1, 2 and 5 Cigno contends that the delegate could not have reached the required state of satisfaction required by s 1023D(3)(b) because she did not distinguish between whether the source of detriment was the financial product or the financial product together with the collateral contract. Cigno contends that the source of detriment must be the financial product itself. 46 As to these grounds, Cigno contends that: (a) the delegate did not turn her mind to any detriment caused by the class of financial products, being short term credit facilities, but turned her mind only to detriment caused by the short term lending model; (b) the delegate did not seek to consider whether the class of financial products provided without any collateral contract caused any consumer detriment; (c) the source of detriment must result from the financial product itself - it is not sufficient to identify a circumstance or source that causes detriment other than the class of financial product; (d) the question is not one of direct or indirect causation of detriment, and the primary judge erred insofar as his Honour proceeded on that basis; and (e) the language of s 1023D(3) supports a narrow view as to the object of the state of satisfaction - ASIC must be satisfied that it is a class of financial product that has resulted in, or is likely to result in significant detriment. That is to be contrasted with the broad power to ban specified conduct that is 'in relation to' the class of products. The change of language as between the state of prerequisite satisfaction and the consequence of that being achieved is significant. 47 For the reasons that follow, we do not consider that ASIC was obliged to look only at the features of the financial product within the class in considering detriment. 48 It is clear that Part 7.9A is intended to provide a beneficial, remedial set of powers. It sets its aim at detriment to retail clients, and, as the objects clause in s 1023A seeks to explain, is preventative in nature. A broad construction should therefore be favoured: Webb Distributors (Aust) Pty Ltd v State of Victoria at 41. 49 While the text may be the starting point for the ascertainment of the meaning of a statutory provision, it is the text of the statute as a whole, and at the first stage of inquiry regard must be had to its context and purpose in the widest sense: SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362 at [14] (Kiefel CJ, Nettle and Gordon JJ); and Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47] (Hayne, Heydon, Crennan and Kiefel JJ). 50 The text of s 1023D(3) uses language that links satisfaction as to actual or anticipated detriment to the class of financial product in question. However, we are not persuaded that the search for detriment must be conducted without regard to the context in which the financial products are made available to clients, including the surrounding circumstances. Having regard to the text, nothing in s 1023D (nor s 1023A) qualifies the manner in which the detriment might result. 51 In our view it is clear that it is the short term credit facility that is the financial product in question. The short term lending model is not a financial product. Nor was it suggested that entry into a short term credit facility is necessarily or always conditional upon entry into a collateral agreement. However, we are not here concerned with short term credit facilities generally, or a short term credit facility that is offered without a relevant collateral agreement. As ASIC has identified by issue of the PIO, the concern is the short term lending model; that is, a short term credit facility when used in a particular context. 52 Where the short term lending model is made available to clients, then the entry into and terms of the collateral agreement are necessarily part of the conduct in which the short term credit facility is provided. The short term credit facility is provided in circumstances where, according to ASIC's PIO Notice, detriment by way of additional fees (at least) may result. To seek to distinguish any detriment under the short term credit facility from any detriment that flows from the collateral agreement is to ignore that such agreement is entered into in conjunction with the short term credit facility. 53 We accept, as senior counsel for ASIC submitted, that it is somewhat artificial to assess detriment that may result from a 'class of financial product' rather than from the product. A client does not buy a class but a product. Further, Notes 1 to s 1023D and to s 1023E direct attention to the consideration of whether detriment results from the financial product, rather than the class. It is therefore appropriate to focus on detriment having regard to the financial product. There may well be particular characteristics of the financial product that cause detriment. However, we do not consider that such prospect limits the source of relevant detriment. Detriment may result from a financial product because of the particular circumstances in which it is supplied. The text of s 1023E(2) is also consistent with this approach: its reference to the matters that are relevant to detriment not being limited counters any suggestion that they are to be narrowly circumscribed. Section 1023E(3) in fact highlights the potential scope of the source of detriment, providing in effect that even if other disclosure requirements and obligations have been met, a financial product may result in significant detriment to a client. 54 Nor have we minimised the relevance of the use of the term 'result' or its corresponding grammatical forms in s 1023A (objects) and s 1023D(3). Cigno focussed on the contrast between the broad connecting term 'in relation to' as used with respect to conduct and (it submitted) the narrower and more direct requirement that detriment 'result' from the financial product. On Cigno's argument, there would be a distinction in scope as between detriment that 'results' from a financial product as against (for example) detriment that may arise 'in relation to' a financial product. 55 But we are not persuaded that the use of the terms 'resulted in' or 'result in', even when compared with the use of the broader (and different) 'in relation to', compels a consequence that the detriment to which ASIC is to have regard is limited to a particular type of outcome that flows directly from a particular feature of the product viewed in isolation. A 'result' may follow from the known circumstances in which a product is utilised or distributed. The natural meaning and use of the word 'result' encompasses such an interpretation, and the text of s 1023D does not limit it. The reference to 'conduct' in the provision is also important. It anticipates that the financial product may be used in a number of different circumstances that constitute conduct. To focus solely on a result that is attributed to a feature of the financial product without regard to the context in which the product is deployed is, in our view, artificially narrow and not required by the language of the section. 56 Note 1 to s 1023D(3) also provides support for the broader approach: An example of conditions that may be specified in a product intervention order include that a product in a class of products not be issued to a retail client unless the retail client has received personal advice. 57 So much was acknowledged by the primary judge (at [45]). The sample condition referred to in the note contemplates that the detriment may arise from the failure to obtain personal advice rather than from the financial product. The detriment is considered not by regard to the product alone but in the circumstances in which it is provided. The primary judge referred to the difference between the informed or uninformed client: the product is the same for both clients, but the uninformed client may suffer detriment if they fail to obtain personal advice. And as senior counsel for ASIC submitted before us, it might be that a complex product is understood by some but not others. The complexity might be considered a feature of the product or it might be considered a surrounding circumstance in that some clients in the market may not understand it. Such difficulties emerge where an unduly narrow approach to the scope of 'resulting' detriment is adopted. 58 The grant of broad powers to ASIC to modify specified conduct by the imposition of nuanced orders and conditions is also consistent with a construction that permits consideration of the circumstances in which a product is used in assessing the source of detriment. 59 Turning to broader issues of context, Cigno also emphasised the objects clause (s 1023A), relying on its reference to detriment 'resulting from financial products', and contending that such phrase circumscribes the operative provisions that follow. That submission must be treated cautiously. Whilst regard may be had to an objects clause to resolve uncertainty or ambiguity, the objects clause does not control clear statutory language, or command a particular outcome: see the principles collected in National Disability Insurance Agency v WRMF [2020] FCAFC 79; (2020) 276 FCR 415 at [145] (Flick, Mortimer and Banks-Smith JJ). However, in this matter the phrase 'resulting from financial products' in the objects clause does not confine the manner in which those similar words are used in s 1023D in any event. The phrase may be interpreted consistently with the manner in which we have construed s 1023D(3). 60 We have also taken into account the Revised EM, having regard to s 15AB of the Acts Interpretation Act and the principles as to resort to explanatory memoranda as recently discussed by the High Court in Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29. 61 The narrow construction promoted by Cigno is not so clear that it is inappropriate to consider the Revised EM. The broad meaning ascribed to 'detriment' in the Revised EM is consistent with and supports the view we have taken that it is open to consider the context in which a financial product is offered for acquisition in the market. To repeat the relevant part: However, [the word detriment] is intended to cover a broad range of harm or damage that may flow from a product. The harm or damage may arise from any number of sources associated with the product, including the product's features, defective disclosure, poor design, or inappropriate distribution. 62 The reference to detriment from 'sources associated' with the product is telling, as is the reference to 'inappropriate distribution'. Those references indicate that the context in which a financial product is deployed is relevant to the question of detriment. The product is not hypothetical, to be considered as if quarantined from any context. It exists to be deployed, and is deployed, in some cases, by way of the short term lending model. When it is deployed or distributed in that manner, with related service fees imposed by way of a collateral agreement, harm may flow. 63 The broader construction we prefer promotes a construction that is more readily and naturally understood and permits, as senior counsel for ASIC described it, 'a practical and real-world assessment'. It is consistent with the objects of Chapter 7 of the Corporations Act (which includes Part 7.9A), as set out in s 760A. Those objects include the promotion of fair, orderly and transparent markets for financial products. 64 It follows that we would dismiss grounds 1, 2 and 5. 65 Having regard to the grounds of appeal, we note that we have not found reference to the concept of direct or indirect loss, as utilised by the primary judge, to be of any particular assistance in construing s 1023D, but that make no difference to the outcome or orders.

Grounds 3 and 4 66 These grounds provide: 3. The primary judge erred in finding that the delegate was satisfied that the lender's fees for the short term credit, in combination with the collateral fees and charges, were causing significant detriment to retail clients. 4. The primary judge erred in failing to find that the delegate was satisfied only that the collateral fees and charges through the 'short term lending model' had resulted in significant consumer detriment and had no such state of satisfaction about the short term credit facility or the lender's fee. 67 It follows from the disposition of grounds 1, 2 and 5 that the delegate's task is to be considered against the backdrop that it was open to her, in forming a state of satisfaction, to view the actual or likely use of the short term credit facility in the context of the short term lending model. If it were to be used in that manner, and the delegate was satisfied that such use would result in, or will or is likely to result in, significant detriment, then the power to make orders was engaged so as to prevent or restrict it being used in that manner. 68 The primary judge found (at [56]-[59]) and having regard to the Consultation Paper, the Notice and the Explanatory Statement, that the ASIC delegate reached the required state of satisfaction. His Honour noted that whilst the class of financial product that the delegate had in mind was short term credit, she identified that it was the provision of credit under a credit contract in combination with a collateral services agreement with an associate which was identified as resulting in significant consumer detriment. Such approach is consistent with our reasons with respect to grounds 1, 2 and 5 and the delegate's task is not otherwise impugned. It follows that grounds 3 and 4 are dismissed.

Grounds 6-9 69 These grounds provide: 6. The primary judge erred in finding (at [63]-[64]) that short term credit provided in a particular way, 'namely as part of a short term lending model which has as an element the provision of … collateral services by an associate of the short term credit provider', is a 'class of financial products' for the purposes of s. 1023D(3). 7. The primary judge erred in finding (at [70]) that a class comprised of a single financial product can be treated by ASIC as a 'class of financial products' for the purposes of s. 1023D(3). 8. The primary judge erred in finding that, in circumstances where the delegate had only identified a particular financial product that was available for acquisition through the short term lending model, the delegate was satisfied of the requisite matters under s. 1023D(3), including that a 'class of financial products' was or was likely to be available for acquisition by issue or for regulated sale to retail clients, for the purposes of s. 1023D(3)(a). 9. The primary judge erred in failing to find that the delegate was not satisfied that a 'class of financial products', rather than a particular financial product, was or was likely to be available for acquisition by issue or for regulated sale to retail clients, for the purposes of s. 1023D(3)(a) of the Corporations Act. 70 The primary judges held: [64] … in my view ASIC's delegate identified the relevant class of financial products as being short term credit or short term credit provided in particular circumstances, namely as part of the short term lending model. It is true that the short term lending model is not itself a financial product or class of financial products, and that the collateral services contract offered by the associate of the short term credit provider is not a financial product. However, short term credit provided in a particular way, namely as part of a short term lending model which has as an element the provision of the collateral services by an associate of the short term credit provider, is a class of financial products. 71 We agree with his Honour's assessment. There are no predetermined classes of financial products to which ASIC must turn its attention. There may be different ways in which a class could be identified for the purpose of s 1023D. For example, the class might be short term credit facilities as a whole (and ASIC's notice of contention foreshadows such potential). Or it might be short term credit facilities that are used in a particular way and so constitute a class within a broader class. In this case the primary judge found that ASIC proceeded on the latter basis, having regard to the content of the Consultation Paper, the Notice and the Explanatory Statement. 72 Cigno contends that the delegate wrongly considered only detriment resulting from the short term lending model, and that even if that model were a financial product, then there was no relevant 'class'. Rather, it asserts, Cigno with GSSF were the entities that were offering the short term lending model and a single member does not make up a class. 73 Cigno also referred to s 1023D(1) and its potential to more properly apply where there is one identified person or product. We do not consider that assists Cigno. There is nothing in the legislation that prevents ASIC electing to act under either s 1023D(1) or (3), depending on the particular circumstances. 74 In our view, it does not follow that a class cannot comprise one member, or one member from time to time. There are no doubt arguments based on taxonomy and linguistic precision that might be made about 'a class of one' in other factual scenarios outside s 1023D, but in the context of this matter the answer is clear. 75 The reference to a 'class' is to be construed having regard to the fact that such class may have a changing membership over time. There may be entities that in the future seek to utilise the short term lending model as described in the Consultation Paper: so much was anticipated by ASIC. It is to be recalled that the short term lending model is described in the PIO Notice, not by reference to GSSF and Cigno, but generically. There had also been a past example (see [24] above). The materials indicated that ASIC was concerned about future businesses adopting the model and wished to discourage that course, consistent with the object set out in s 1023A and its reference to ASIC acting proactively to reduce the risk of detriment. Section 1023D refers to a class 'that is likely to be' available, expressly referencing potential members. 76 There is no reason to construe 'class' in the narrow manner for which Cigno contends in the context of s 1023D(3). 77 The only inference sensibly open having regard to the Consultation Paper was that the delegate considered that the class had at least one member at the time and may well have more in the future. No error in reaching a state of satisfaction as to there being a class was disclosed and the primary judge did not err in failing to make such a finding. His Honour's finding (at [74]) that the delegate was not only concerned with the short term lending model used by GSSF and Cigno is, with respect, correct. 78 We would dismiss grounds 6-9.

Notice of contention 79 In the circumstances, it is not necessary to determine the outcome having regard to the notice of contention.

Orders 80 It follows that the appeal is to be dismissed and there will be orders accordingly. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Yates, Wigney and Banks-Smith.