Australian Securities and Investments Commission v BHF Solutions Pty Ltd
[2022] FCAFC 108
•27 June 2022
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v BHF Solutions Pty Ltd [2022] FCAFC 108
Appeal from: Australian Securities and Investments Commission v BHF Solutions Pty Ltd [2021] FCA 684; (2021) 153 ACSR 469 File number: NSD 716 of 2021 Judgment of: BESANKO, LEE AND O'BRYAN JJ Date of judgment: 27 June 2022 Catchwords: CONSUMER LAW – consumer credit – alleged contraventions of the National Consumer Credit Protection Act 2009 (Cth) (Act) and the National Credit Code in Sch 1 of the Act – prohibition on engaging in credit activity without an Australian credit licence – where second respondent provided loan application services to applicants for credit and first respondent provided loans to successful applicants for credit – whether charges imposed by second respondent for “services” were charges for providing credit for the purposes of the exemption in s 6(5) of the Code – whether second respondent was an agent of the first respondent
STATUTORY INTERPRETATION – interpretation of the phrase “charge … for providing the credit” in ss 5(1)(c) and 6(5) of the National Credit Code – meaning of “credit contract” in s 4 of the Code – extended definition of contract in s 204(1) of the Code
Legislation: Acts Interpretation Act 1901 (Cth) s 15AA
Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth)
Evidence Act 1995 (Cth) s 191
National Consumer Credit Protection Act 2009 (Cth) ss 3, 5, 6, 7, 8, 9, 29, 35, 166, 175D
National Consumer Credit Protection Act 2009 (Cth) Sch 1 (National Credit Code) ss 3, 4, 5, 6, 13, 204
National Consumer Credit Protection Regulations 2010 (Cth) reg 51
Explanatory Memorandum, National Consumer Credit Protection Bill 2009 (Cth)
Revised Explanatory Memorandum, Consumer Credit Legislation Amendment (Enhancements) Bill 2012 (Cth)
Consumer Credit (Queensland) Act 1994 (Qld) (repealed)
Consumer Credit (Queensland) Amendment Act2001 (Qld)
Uniform Consumer Credit Code (repealed) ss 7(1), 7(3)
Cases cited: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
AON Risk Services Australia Ltd v Lumley General Insurance Ltd [2005] FCA 133
Appleyard v Westpac Banking Corporation [2017] QCA 316
Australian Securities and Investments Commission v Fast Access Finance Pty Ltd [2015] FCA 1055
Australian Securities and Investments Commission v Teleloans Pty Ltd (2015) 234 FCR 261
Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44
Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114
Bull v AG for New South Wales (1913) 17 CLR 370
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Construction, Forestry, Mining and Energy Union v Hadgkiss (2007) 169 FCR 151
Doyles Farm Produce Pty Ltd v Murray Darling Basin Authority (No 2) [2021] NSWCA 246
Erikson v Carr (1945) 46 SR (NSW) 9
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503
FV v The Queen [2006] NSWCCA 237
Houssein v Under Secretary, Department of Industrial Relations and Technology (NSW) (1982) 148 CLR 88
International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644
Kelly v The Queen (2004) 218 CLR 216
Kwik Finance (Sydney) Pty Ltd v Walker [2014] NSWCA 73
Lyford v Commonwealth Bank of Australia (1995) 130 ALR 267
Minister for the Environment, Heritage & the Arts v PGP Developments Pty Ltd (2010) 183 FCR 10
O’Sullivan v Farrer (1989) 168 CLR 210
Petersen v Moloney (1951) 84 CLR 91
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
R v Khazaal (2012) 246 CLR 601
Secretary, Department of Health & Ageing v Prime Nature Prize Pty Ltd (in liq) [2010] FCA 597
SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362
Taheri v Vitek (2014) 87 NSWLR 403
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389
Walker v Consumer, Trader and Tenancy Tribunal of New South Wales [2013] NSWSC 1432
Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15
Wentworth v New South Wales Bar Association (1992) 176 CLR 239
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 218 Date of hearing: 23 November 2021 Counsel for the Appellant: Mr G Kennett SC with Ms M Allars SC, Ms C Winnett and Ms C Trahanas Solicitor for the Appellant: Australian Securities and Investments Commission Counsel for the First Respondent: Mr R McHugh SC with Ms D Forrester Solicitor for the First Respondent: Piper Alderman Counsel for the Second Respondent: Mr A Pomerenke QC with Mr P Travis Solicitor for the Second Respondent: Elliott May Lawyers ORDERS
NSD 716 of 2021 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Appellant
AND: BHF SOLUTIONS PTY LTD ACN 631 775 123
First Respondent
CIGNO PTY LTD ACN 612 373 734
Second Respondent
ORDER MADE BY:
BESANKO, LEE AND O'BRYAN JJ
DATE OF ORDER:
27 JUNE 2022
THE COURT ORDERS THAT:
1.The appeal be allowed with costs.
2.The orders made on 23 June 2021 by the trial judge in Federal Court of Australia proceedings NSD 1088 of 2020 be set aside.
3.The matter be remitted to the trial judge for determination of the applicant’s allegations against the second respondent and the determination of relief as against each respondent (including costs).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BESANKO J:
I have had the considerable advantage of reading the reasons for judgment of O’Bryan J. I agree with his Honour’s reasons and the orders which he proposes. There is nothing I wish to add.
I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Besanko. Associate:
Dated: 27 June 2022
REASONS FOR JUDGMENT
LEE J:
I have had the considerable benefit of reading the reasons of O’Bryan J, with which I generally agree and which set out all the relevant facts and issues on the appeal. I adopt the abbreviations used in those reasons.
The determinative issue is whether the primary judge erred in his assessment of the applicability or otherwise of s 6(5) of the NCCP Act in circumstances where it was contended that the only charge for providing the credit under the Loan Agreements is the BHFS fee (and notwithstanding the existence of the Cigno fees). This involves the narrow question of the meaning to be given to the conception identified by the statutory words: “charge that is or may be made for providing the credit” under the continuing credit contract.
It seems to me that a “charge that is or may be made for providing the credit” identifies what it actually is that the consumer pays or promises to pay in order to obtain a provision of credit. Both textually and contextually, ss 5(1)(c) and 6(5) refer to what creates and effectuates the legal obligations governing the deferral of debt under a continuing credit contract. Such an interpretation is consistent with, and also best achieves the purpose or object of, the NCCP Act, as explained by O’Bryan J.
It follows, for the reasons explained in depth by O’Bryan J, that the primary judge, with respect, erred in concluding that “charge … for providing the credit” means a charge imposed solely for the purpose of, or solely in exchange for, the deferment of an existing debt or the creation of a new deferred debt (see J [151], [153]–[157], [159]–[160]).
I agree with orders proposed by O’Bryan J.
I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee. Associate:
Dated: 27 June 2022
REASONS FOR JUDGMENT
O’BRYAN J:
INTRODUCTION
The provision of consumer credit has been regulated in Australia for many years with the object of protecting consumers from unscrupulous and unfair lending practices. The Uniform Consumer Credit Code was enacted by the Consumer Credit (Queensland) Act 1994 (Qld) and was applied in the other States and in the Territories from 1996. By agreements signed in 2008, the Council of Australian Governments agreed to transfer responsibility for regulation of consumer credit to the Commonwealth. This led to the enactment of the National Consumer Credit Protection Act 2009 (Cth) (NCCPAct) and the National Credit Code which forms Sch 1 to the Act (in these reasons, “Code” is used interchangeably with “National Credit Code”). As stated in the Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 (Cth) (Explanatory Memorandum), the new laws replicated the Uniform Consumer Credit Code and also introduced:
(a)a comprehensive licensing regime for those engaging in credit activities via an Australian credit licence to be administered by the Australian Securities and Investments Commission (ASIC) as the sole regulator;
(b)industry-wide responsible lending conduct requirements for licensees;
(c)improved sanctions and enhanced enforcement powers for the regulator; and
(d)enhanced consumer protection through dispute resolution mechanisms, court arrangements and remedies.
Further consumer protections were added to the National Credit Code by the enactment of the Consumer Credit Legislation Amendment (Enhancements) Act 2012 (Cth) (Enhancements Act). Amongst other things, the Enhancements Act introduced caps on the maximum amount that credit providers can charge under credit contracts to which the Code applies, with the level of caps differentiating between small amount credit contracts (defined as a credit contract that is not a continuing credit contract and where the credit limit is $2,000 or less) and other credit contracts. As summarised in the Revised Explanatory Memorandum to the Consumer Credit Legislation Amendment (Enhancements) Bill 2012 (Cth), credit providers under small amount credit contracts can only charge an establishment fee of up to 20% of the credit amount plus monthly fees up to 4% of the credit amount (plus default and government fees and charges) and all other credit contracts are subject to a cap such that the annual cost rate (including credit fees and charges and interest charges) cannot exceed 48%.
The proceeding concerns lending arrangements devised by the respondents, BHF Solutions Pty Ltd (BHFS) and Cigno Pty Ltd (Cigno). The commercial arrangements between Cigno and BHFS were recorded in an agreement titled “Loan Management Facilitation Agreement”. Under that agreement, BHFS is described as being in the business of lending or advancing personal loans to consumers under “Loan Agreements” in respect of which BHFS charges a $15.00 fee with a maximum loan term of 62 days, while Cigno is described as being in the business of marketing, facilitation, management services and collections in relation to loan agreements. The essential structure of the arrangement was that Cigno would market loans to consumers, process loan applications and manage collections while BHFS would advance the loans to the consumers. Ultimately, though, the credit risk associated with loans advanced by BHFS was borne by Cigno. Under the Loan Management Facilitation Agreement, Cigno guaranteed to BHFS that, if a loan was not repaid within eight weeks, Cigno would immediately pay to BHFS the amount of the loan plus the $15.00 fee.
ASIC alleged that, in breach of s 29 of the NCCP Act, each of BHFS and Cigno engaged in credit activities without an Australian credit licence. ASIC’s case was conducted at two levels. At the micro level, ASIC’s allegations concerned three small personal loans advanced by BHFS to Ms Leah Morrow. In respect of those loans, ASIC alleged that BHFS engaged in credit activities by being a credit provider under a credit contract with Ms Morrow and that Cigno engaged in credit activities by exercising the rights of BHFS in relation to the credit contract with Ms Morrow and by providing a credit service to Ms Morrow. At the macro level, ASIC alleged that BHFS engaged in credit activities by carrying on a business of providing credit, being credit the provision of which the Code applies to, and that Cigno engaged in credit activities by exercising the rights of BHFS in relation to credit contracts and by providing a credit service as part of Cigno’s business.
BHFS advanced the following loans to Ms Morrow:
(a)a loan of $200 advanced on 18 October 2019 and repayable in three equal instalments commencing 10 days after the loan was advanced, the last such instalment being due on 25 November 2019 (a term of 38 days);
(b)a loan of $300 advanced on 2 December 2019 and repayable in three equal instalments commencing seven days after the loan was advanced, the last such instalment being due on 6 January 2020 (a term of 35 days); and
(c)a loan of $300 advanced on 11 January 2020 and repayable in three equal instalments commencing nine days after the loan was advanced, the last such instalment being due on 17 February 2020 (a term of 37 days).
The loans were obtained by way of requests made by Ms Morrow to Cigno, but with the loans being provided by BHFS. Through her dealings with Cigno, Ms Morrow agreed to the terms of a standard form Loan Agreement with BHFS in respect of the borrowings. The Loan Agreement was described as a continuing credit facility which permitted further advances after the first advance (and thereby governed all three loans to Ms Morrow). The Loan Agreement stipulated that a $15.00 fee was payable to BHFS for each advance of funds, with a maximum fee of $120 in any 12-month period.
Ms Morrow also agreed, through her dealings with Cigno, to the terms of a standard form Services Agreement with Cigno. Under the Services Agreement, Cigno agreed to “facilitate in (sic) all enquiries, management, payments and all other services related to the loan”. In return, Ms Morrow agreed to pay certain fees to Cigno. The fees were charged only if Ms Morrow obtained a loan from BHFS. The Cigno fees included:
(a)a “Financial Supply Fee” which was calculated as a base amount of $13 plus 60% of the amount of the loan to be arranged by Cigno;
(b)an “Account Keeping Fee” of $5.95 per week during the term of each such loan; and
(c)a “Change of Payment Schedule Fee” of $22 in the event Ms Morrow requested a change to her payment obligations under the loan arranged by Cigno.
On any view, the aggregate fees charged by BHFS and Cigno for Ms Morrow’s small and short term loans were very high. Assuming the loans were repaid on time, the first loan of $200 required Ms Morrow to pay $177.75 in fees (being a total repayment of $377.75) and the second and third loans of $300 required Ms Morrow to pay $231.80 in fees (being a total repayment of $531.80). If the fees were converted into an annualised percentage interest rate, the rate would be approximately 800% (ignoring, for the simplicity of calculation, the earlier repayment of instalments which shorten the loan term in respect of those instalments). As discussed below, Ms Morrow was late in making two of the three scheduled repayments on the third loan and incurred additional default fees, all of which were ultimately paid.
The lending business conducted by BHFS and Cigno was of significant scale. Information provided to ASIC by Cigno in response to notices issued under s 33 of the Australian Securities and Investments Commission Act 2001 (Cth) revealed that, in the five and a half month period from 14 September 2019 to 27 February 2020:
(a)the total dollar amount of credit provided under BHFS loans where Cigno facilitated, managed or distributed payment(s) under a Services Agreement was $46,679,205.00;
(b)the total number of Services Agreements entered into by Cigno in relation to the provision and/or distribution and/or management of a BHFS loan was 166,045;
(c)the total amount of Financial Supply Fees charged by Cigno under those Services Agreements was $31,880,626.25;
(d)the total amount of Account Keeping Fees charged by Cigno under those Services Agreements was $6,795,339.80;
(e)the total amount of Change of Payment Schedule Fees charged by Cigno under those Services Agreements was $4,654,407.15;
(f)the total amount of default fees charged by Cigno under those Services Agreements was $17,758,849.54; and
(g)the total amount of fees charged by Cigno under those Services Agreements (ie, the aggregate of the amounts referred to in paras (c), (d), (e) and (f)) was $61,089,222.74.
The central issue that arises in the proceeding is whether, in respect of the loan to Ms Morrow and BHFS’s business more generally, BHFS provided credit to which the National Credit Code applied. There is no dispute that BHFS provided credit to Ms Morrow and conducted a business of providing credit (the term credit is defined in s 3 of the Code and includes incurring a deferred debt). The relevant question is therefore whether the Code applied to the provision of that credit. Sections 5 and 6 of the Code define the circumstances in which the Code does and does not (respectively) apply to the provision of credit.
The respondents rely on s 6(5) of the Code to contend that BHFS did not provide credit to which the Code applied. Section 6(5) provides as follows:
This Code does not apply to the provision of credit under a continuing credit contract if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided. However, this Code applies if the charge is of a nature prescribed by the regulations for the purposes of this subsection or if the charge exceeds the maximum charge (if any) so prescribed.
Relevantly for present purposes, reg 51 of the National Consumer Credit Protection Regulations 2010 (Cth) (Regulations) stipulates that the maximum charge for the purpose of s 6(5) in the case of a new continuing credit contract is $200.00 for the period of 12 months commencing when the debtor enters into the continuing credit contract.
The respondents contend that the only charge that is or may be made for providing the credit under the BHFS Loan Agreement is the fee of $15.00, capped at $120.00 in any 12 month period, charged by BHFS under that agreement, which is a fixed charge that does not vary according to the amount of credit provided and is below the maximum level prescribed by the Regulations.
ASIC contends that the Financial Supply Fee, Account Keeping Fee and Change of Payment Fee imposed by Cigno under the Services Agreement (Cigno fees) are also charges made for providing the credit under the BHFS Loan Agreement and, accordingly, s 6(5) does not apply. It is common ground that the Financial Supply Fee is a charge that varies according to the amount of credit provided. Accordingly, if it is a charge made for providing credit, s 6(5) is inapplicable.
The trial judge accepted the respondents’ contention, finding that the Cigno fees were in exchange for providing the services pursuant to the Services Agreement and not for the provision of credit. It followed that BHFS did not provide credit to which the Code applied, and the respondents had not contravened s 29 of the NCCP Act by engaging in credit activities without an Australian credit licence.
ASIC appeals from the decision of the trial judge. On the appeal, ASIC does not challenge the findings of primary fact made by the trial judge. Indeed, the majority of primary facts were the subject of agreement between the parties under s 191 of the Evidence Act 1995 (Cth) (Evidence Act) and set out in a Statement of Agreed Facts. ASIC’s appeal concerns the proper construction of the Code and its application to the primary facts.
For the reasons that follow, I would allow ASIC’s appeal.
THE PRIMARY FACTS
Nature of the evidence
As already noted, many of the primary facts were set out in a Statement of Agreed Facts, with supplementary evidence being adduced by ASIC. Section 191 of the Evidence Act provides that evidence is not required to prove the existence of an agreed fact and evidence may not be presented to contradict or qualify an agreed fact unless the Court gives leave. As observed by Stone J in Minister for the Environment, Heritage & the Arts v PGP Developments Pty Ltd (2010) 183 FCR 10 at [35], the effect of s 191 is to admit the agreed facts as evidence but it still remains for the Court to determine whether the facts are to be accepted as true and to determine what weight to attribute to that evidence.
There are obvious efficiencies for the parties to agree facts for the purposes of a proceeding and such an approach to the conduct of a proceeding is usually commendable. However, agreed facts are sometimes stated at a high level of generality and omit matters of detail and nuance that may be important to the resolution of the proceeding. Agreed facts may also contain statements in the nature of factual characterisation or argument. In Secretary, Department of Health & Ageing v Prime Nature Prize Pty Ltd (in liq) [2010] FCA 597, Stone J observed (at [6]) that s 191 only applies to agreed facts and that the Court is not required to accept as evidence statements of argument and conclusion. A further difficulty can arise when matters addressed by agreed facts are also the subject of other evidence, for example documentary evidence. In the present case, for example, certain of the agreed facts relate to underlying agreements where the terms of the agreements were also adduced in evidence (as annexures to the Statement of Agreed Facts); other facts relate to the content of the websites owned and operated by BHFS and Cigno respectively where screenshots of the websites were also adduced in evidence. The documentary evidence may reveal detail that elaborates on or clarifies the agreed fact.
The meaning of the word “qualify” in s 191 has received little judicial attention. There is obiter support for the proposition that evidence which supplements or elaborates upon an agreed fact does not contradict or qualify it: see FV v The Queen [2006] NSWCCA 237 at [42]-[44] per Kirby J (with whom McClellan CJ and Hoeben J agreed). There may be a fine distinction, though, between evidence that elaborates upon an agreed fact and evidence that qualifies an agreed fact.
In the present case, the trial judge made findings of fact in accordance with the Statement of Agreed Facts (at J [5]) and also received into evidence additional affidavits read by ASIC (at J [6]). In those circumstances, the parties should be treated as having accepted that the supplementary evidence did not contradict or qualify any agreed fact, but was an elaboration of the agreed facts.
The trial judge recorded that, at trial, ASIC made no submission that any of the contracts entered into by BHFS and Cigno were shams (at J [64]). Consistently with that position, the appeal was conducted by the parties on the basis that the contracts between BHFS and Cigno and between each of BHFS and Cigno and their customers took effect in accordance with their terms.
The following description of the primary facts is drawn from the trial judgment, with additional detail drawn from the Statement of Agreed Facts and other evidence to which the Court was referred on the appeal.
The business conducted by BHFS
BHFS was incorporated on 20 February 2019 (although the trial judge referred to BHFS being registered on the Australian Securities Exchange at J [10], it is clear from the evidence that BHFS was not a publicly listed company and his Honour must have meant registered under the Corporations Act 2001 (Cth)). During the relevant period, BHFS had one director, Mr Brenton Harrison and one shareholder, B. J. Harrison Investments Pty Ltd. It did not hold an Australian credit licence. Its share capital comprised 100 ordinary shares on which $10.00 was paid.
On 1 July 2019, BHFS entered into the Loan Management Facilitation Agreement with Cigno (J [11]). At the time of its initial entry into that agreement, BHFS commenced offering credit to consumers on terms formulated to fall within s 6(1) of the Code (J [12]). However, BHFS shortly thereafter altered its business model to advance credit to consumers on terms formulated to fall within s 6(5) of the Code. The alteration to its business model was necessary because ASIC made the ASIC Corporations (Product Intervention Order – Short Term Credit) Instrument 2019/917 which came into force on or about 14 September 2019 (J [13]). It was an agreed fact that, by oral agreement, BHFS and Cigno amended the Loan Management Facilitation Agreement to reflect the fact that BHFS was seeking to provide credit within the terms of s 6(5) of the Code.
A copy of the Loan Management Facilitation Agreement was in evidence. In the agreement, BHFS is called the “Lender” and Cigno is called the “Provider”. The agreement recited that, amongst other things (incorporating the agreed amendments):
(a)BHFS is in the business of lending and or advancing personal loans to consumers “secured by” loan agreements. BHFS charges a flat rate of $15.00 on its advances.
(b)Cigno is in the business of marketing, facilitation, management services and collections in relation to loan agreements and can charge a fee for those services at its discretion. The agreement also recited that Cigno “does not charge any fees related to the provision of credit”.
(c)Neither party is entitled to referral fees, commissions or similar for the services provided by either party under the agreement.
The key terms of the Loan Management Facilitation Agreement were set out in cl 2 headed “Operative Provisions” and were as follows (incorporating the agreed amendments):
2.1. The parties hereby agree that the Lender will, for the duration of this agreement, make available and lend funds to the clients of the Provider under a Loan Agreement.
2.2. The Lender may stipulate any conditions and/or provisions (the ‘loan conditions’) under which the funds are to be lent.
2.3. The Provider must follow any required loan conditions stipulated by the lender. The Lender can amend, change or alter the loan conditions at any point in time at the discretion of the Lender.
2.4. The parties agree that the maximum loan amount is never to exceed $2,000.00 on any one loan.
2.5. The Provider will manage the loan agreements on behalf of its clients in accordance with the conditions of this agreement.
2.6. The Provider guarantees to the Lender that, in the event the Lender's funds are not repaid within an 8 week period, the Provider will immediately pay the Lender the principal sum plus the Lender's $15.00 fee.
2.7. The Provider will accept or carry any loss it may suffer in relation to the Guarantee provided for in item 2.6 above.
2.8. If a customer requests not to use the services of the Provider and requests to deal solely with the Lender, the Provider, must immediately refer the customer to the Lender. The Provider must not charge a fee for this referral.
2.9. Notwithstanding item 2.8 above, the loans provided by the Lender under this agreement will:
(a) not exceed a maximum contract term of 62 days and,
(b) have a total cost that does not exceed $15.00 for each request for an advance of funds, up to a maximum of $120.00 in any 12 month period.
2.10. For accounting purposes, all monies collected by the Provider is to be allocated firstly towards the Lender's principal sum, secondly to the Lender's interest and thirdly to the Loan Manager and Guarantors fees and charges.
Clause 5 of the Loan Management Facilitation Agreement stipulated that nothing in the agreement will create an agency relationship, partnership or joint venture between the parties.
Clause 2.8 of the Loan Management Facilitation Agreement, set out above, is of significance in understanding the commercial relationship between BHFS and Cigno. It stipulated that, if the consumer borrower had not repaid the loan plus fee to BHFS within eight weeks, Cigno would do so. As noted earlier, the effect of that clause was that BHFS had the benefit of a guarantee from Cigno for the repayment of all loans and Cigno ultimately bore the credit risk on all loans.
As noted above, the Loan Management Facilitation Agreement contemplated that BHFS would advance consumer loans pursuant to a Loan Agreement. The only Loan Agreement that was in evidence was the Loan Agreement between BHFS and Ms Morrrow dated 18 October 2019. It appeared to be common ground that that Loan Agreement was in the form of the Loan Agreements contemplated by the Loan Management Facilitation Agreement. In the Loan Agreement, BHFS was described as the Lender and Ms Morrow was described as the Borrower. The Loan Agreement contained the following terms:
(a)By cl 1, BHFS agreed to provide Ms Morrow with a “line of credit” of up to $200.00 and Ms Morrow agreed to repay all monies advanced by BHFS plus any fees payable under the agreement.
(b)By cl 3, Ms Morrow was required to pay a fee of $15.00 each time that an advance of funds was requested from BHFS, up to a maximum of $120.00 AUD in any 12 month period.
(c)Clause 5 stipulated that the agreement was a continuing credit contract such that, if the outstanding advances did not exceed the credit limit, Ms Morrow might request a further advance. Clause 6 stipulated that BHFS may refuse to provide a further advance if Ms Morrow had defaulted on a payment obligation and had not remedied the default at the time of the request, or BHFS had reasonable grounds to believe that Ms Morrow would not be able to comply with the obligations to make repayments.
(d)Clause 7 specified the repayment schedule for the initial advance to Ms Morrow (being the loan amount of $200.00 plus the fee of $15.00) which was as follows:
(i)$72.00 by 28 October 2019;
(ii)$72.00 by 11 November 2019; and
(iii)$71.00 by 25 November 2019.
(e)The agreement recorded that, if further advances were made under the agreement, Ms Morrow would be given a new repayment schedule.
(f)By cl 9, the agreement continued until the loan amount was zero for 12 consecutive months or Ms Morrow repaid the entire loan amount and notified BHFS that she wished to terminate the agreement.
It was an agreed fact that, at all relevant times:
(a)BHFS did not advertise loans and provided no loans directly to individual borrowers;
(b)all individual borrowers who obtained loans from BHFS did so through Cigno, by completing an online application on the Cigno website (being the website with domain name individual borrowers chose to deal directly with BHFS, rather than pay for the services offered to customers by Cigno; and
(d)BHFS did not receive from Cigno any referral fees, finder’s fees, commissions or any other bonuses or amounts related to the referral of customers from Cigno to BHFS.
It was also an agreed fact that BHFS owned and operated the website with domain name (the BHFS website) through which, upon enquiry, information about applying for personal and business finance was accessible. That agreed fact is to be understood alongside the documentary evidence concerning the BHFS website in the form of screen shots of the website. The screen shots included a page titled “Enquire Today” which enabled a visitor to the site to make an enquiry of BHFS. The page does not, though, make any reference to applying for personal and business finance. Indeed, none of the pages of the BHFS website that were in evidence suggest that BHFS offered loans of any kind. On a page titled “Who we are”, the website states:
BHF Solutions is Australia's leading expert in business consulting and financial advisory. We provide the fundamental principles and foundations for you and your business to prosper. With online and in person business planning as well as financial advisory, we operate and exist to spread our passion for business.
Our Professional Services:
•Business coaching and consulting
•Finance and Financial Advisory
•Marketing and Planning
•Bookkeeping service and advice
The evidence of the BHFS website is consistent with the agreed fact that BHFS did not advertise loans.
The business conducted by Cigno
During the relevant period, Cigno had one director, Mr Mark Swanepoel, and one shareholder, Swan Group Holdings Pty Ltd. It did not hold an Australian credit licence. Its share capital comprised 10 ordinary shares on which $10.00 was paid.
The following description of Cigno’s business was an agreed fact:
11. During the relevant period, Cigno carried on the business of providing the following services:
11.1assisting its customers with the completion of loan applications for financing with BHFS;
11.2verifying the information provided by its customers in accordance with processes that were satisfactory to BHFS and Cigno as relevantly demonstrated in a document titled “BHFS Assessment Criteria – Helper Company Assisted Application” (Credit Procedure Document) and a document titled “New Assessment Guidelines – Loan Limits – CIGNO” (Cigno Assessment Guidelines). …
11.3 assessing its customers’ eligibility for personal loans against lending criteria that were satisfactory to BHFS and Cigno as relevantly demonstrated in the Credit Procedure Document;
11.4 recommending qualified customers to BHFS for financing;
11.5 facilitating the Cigno’s customers’ acceptance of BHFS’s offer to advance the loan amount;
11.6 obtaining approved loan amounts from BHFS on the same day or soon after BHFS approved the loan amounts;
11.7 assisting its customers to apply for a credit limit increase under their Loan Agreement or to request additional drawdowns on their existing credit limit with BHFS;
11.8 maintaining accounts and records with respect to its customers;
11.9 arranging for collection of payments by its customers, including by:
(a)arranging for the customer’s account to be directly debited by third party direct debit providers and paid to Cigno;
(b) entering into agreements with third party direct debit providers; and
(c) monitoring direct deposit payments by its customers and direct debit payments by third party direct debit providers to it and taking steps to recover debts from a consumer who fails to make repayments;
11.10 assisting customers to change the payment terms of their Loan Agreement or Services Agreement;
11.11 responding to its customers’ inquiries and requests, including enquiries as to the repayment schedule and requests for additional drawdowns; and
11.12 sending account statements, reminders and other communications to the consumer in respect of the loans with BHFS and the Services Agreement; and
11.13 making payments to BHFS.
The Statement of Agreed Facts did not elaborate on the above business activities of Cigno. However, aspects of Cigno’s business activities were the subject of additional evidence.
The “Credit Procedure Document” referred to in the Statement of Agreed Facts was in evidence. It was a short, half-page document. It required Cigno to obtain a bank statement from the customer for the most recent 90 days. The document then stated two assessment criteria based solely on the customer’s income as follows:
(a)the applicant could not be approved for a credit limit where there was no repayment option that would allow the applicant to make repayments that did not exceed 20% of the applicant’s total income for the relevant payment cycle including payments due to BHFS and Cigno; and
(b)if the applicant requested a payment schedule that exceeded the maximum 20% in order to facilitate faster settlement, Cigno was permitted to approve the credit limit provided Cigno had confirmed that the applicant could return to a payment schedule of payments below the 20% maximum on request.
The Cigno Assessment Guidelines referred to in the Statement of Agreed Facts was also in evidence. It was also a short document (of one page) that governed the loan limit to be offered to an applicant. The loan limit assessment was based solely on the applicant’s bank statement. The assessment involved two steps. The first step was to calculate the maximum loan limit based on the applicant’s weekly or fortnightly income as shown on the bank statement. This was done in accordance with the following table (with the maximum loan for a first time applicant being $350.00 and all loans above $500.00 requiring management approval):
Loan Amount
Weekly Income Requirement
Fortnightly Income Requirement
$50.00
$75.00
$150.00
$75.00
$75.00
$150.00
$100.00
$75.00
$150.00
$120.00
$75.00
$150.00
$150.00
$75.00
$150.00
$175.00
$200.00
$400.00
$200.00
$250.00
$500.00
$250.00
$350.00
$700.00
$300.00
$500.00
$1,000.00
$350.00
$600.00
$1,200.00
Existing Client Loan Income Assessment
$400.00
$655.00
$1,310.00
$450.00
$730.00
$1,460.00
$500.00
$805.00
$1,610.00
The second step required the loan amount to be reduced by one row in the above table if the applicant’s bank statement showed that the applicant had two or more short-term loans to other loan companies, or the applicant’s account was overdrawn, or there were dishonours to short-term loan repayments.
As noted above, Cigno owned and operated the website with domain name Screenshots of the website were in evidence. While the webpages altered to some extent over time, the main messages remained constant. In contrast to the BHFS website, the Cigno website only offered loans. One of the webpages displays the questions: “In need of Cash? How much can I borrow?” followed by a link with the words “Apply Now”. Under the heading “Why Choose Cigno?”, the following text appears:
High Approval Rate!
At Cigno we believe in a fair go! Everyone can face financial challenges from time to time and we’re here to help.
All Applications Considered! No ridiculous questions!
If you’re Working or on Centerlink (sic) we consider all applications. We believe in treating each person with trust and respect and only ask what we need to in order to assess suitability.
EMERGENCY cash when you need it
Don’t wait Days or Weeks! Have cash within hours! Cigno offers a 24/7 online platform, so apply anywhere, anytime! Even on weekends! (Applications received after 5.00pm AEST will receive funds by the next morning).
Short application process
Our quick and easy application means you can get back to what really matters
On a webpage titled “How it Works”, the following text appears:
Easy Online Application
Complete our quick and easy 24/7 online application and send us a bank statement
Fast Approval
Once approved we will email you your loan agreement and service agreement. You can review and accept your agreements all online.
Same Day Cash
Once your application has been approved you will receive funds with in (sic) hours. (Applications received after 5.00pm AEST will receive funds by the next morning).
On the webpage headed “FAQs” (which is a standard abbreviation for frequently asked questions), the following question and answer appeared:
Who are Cigno and what do they do?
Cigno are specialists in facilitating and managing short term Cash advances up to $1000. Unexpected Bills? Short on cash this month or in need of a short term financial boost? We’re here to help! Our focus is to provide a quick, easy and quality service of loan management and enable every Australian access to a short term financial service. We believe in giving everyone a fair go and will do our best to assist our customers in every situation by considering all applications. Our quick, easy and non-invasive application process provides customers with a user experience second to none.
We always encourage our customers to only borrow when they need to, and to always borrow what they need and can afford to repay
Before the online application webpage, there was a webpage titled “Welcome to Cigno Loans!”, followed by the words “please choose an option”. Below those words was a large green box with the words “Continue with Cigno Premium Service”. Below that large green box, in much smaller type was the following paragraph and link:
Please note that Cigno is not a lender, but rather, a service provider that enables its customers access to a seamless application and management process where by (sic) a loan is able to be obtained from a third party lender.
If you would prefer to deal directly with the lender, please click here.
If the consumer chose the option of dealing directly with the lender by clicking on the hyperlink “here”, the consumer was taken to a further Cigno webpage with the following text:
Deal with the Lender Directly
You have chosen to deal directly with the lender.
We can direct you to proceed with: BHF Solutions Pty Ltd
Note, this is still optional for you. You can continue to their website in which you will be subject to their normal loan application process. We do wish you all the success in your findings (sic) for a cash solution!
BHF Solutions can be contacted via you would prefer to use the Cigno Premium Services, please click here: New Cigno Loan
The consumer could click on the hyperlinked address for the BHFS website and would presumably be taken to the BHFS website. As discussed above, there is nothing on the BHFS website that indicated that BHFS provided consumer loans.
If the consumer chose to continue with the “Cigno Premium Service”, either by clicking on the original large green box or by clicking on the hyperlink “New Cigno Loans”, the consumer was taken to an online application form headed “Cigno Loans – New Application”. The webpage contained online boxes for the applicant to provide relevant personal information and the amount of the loan being requested. The application process also required the consumer to upload the consumer’s bank statements.
The webpages from the Cigno website emphasise the speed of the loan approval process and receipt of funds (within hours). That is consistent with the evidence concerning the loans made to Ms Morrow, where the loans were approved and funds advanced within a single day, and reflects the limited loan approval procedures adopted by Cigno.
It was an agreed fact that Cigno did not receive from BHFS any referral fees for recommending qualified Cigno customers to BHFS and nor did Cigno receive from BHFS any commissions relating to BHFS’s provision of credit to Cigno customers. Rather, Cigno earned revenue from the fees and charges levied on its customers under the terms of an agreement titled Services Agreement.
A copy of the Services Agreement entered into between Cigno and Ms Morrow on 18 October 2019 was in evidence. In the agreement, Cigno is described as the “Service Provider” and Ms Morrow is described as the “Client”. The agreement recited that “The Client has chosen to engage the Service Provider to assist, rather than dealing directly with a lender or provider”. This appears to be a reference to the option offered through the Cigno website to “Continue with the Cigno Premium Service” or to deal directly with the lender, as described above. The Statement of Agreed Facts included a statement that, when Ms Morrow applied through the Cigno website for her first loan on 18 October 2019 and her second loan on 2 December 2019, she was provided with the option of continuing with the “Cigno Premium Service” or dealing directly with “the lender” and she chose the former.
The Services Agreement stipulated as follows:
The Service Provider will facilitate in all enquiries, management, payments and all other services related to the loan or financial product.
In return for the Service Provider providing these services, the Client agrees to remunerate the Service Provider in the following manner:
Services and Fees
Financial Supply Fee: $133.00
Total Account Keeping Fees ($5.95 charged weekly): $29.75
Additional Costs
Change of Payment Schedule Fee: $22.00
Drawdown Fee: To be advised prior to processing
the drawdown
In the event, and only on request, you wish to change your payment obligations under the loan arranged for you, a Change of Payment fee will be added. Note, you may incur additional weekly Account Keeping Fees if the duration of your agreement is extended.
Each time that you request a drawdown, we will calculate and communicate the Drawdown Fee to you for your acceptance prior to processing the drawdown. We will determine the amount of the Drawdown Fee based on our reasonable estimate of the cost of arranging and managing the additional credit obtained through the drawdown of funds. This Drawdown Fee will be added to the total amount owing to the Service Provider.
Payment Schedule
The Service Provider will facilitate all payments due to the lender as well as the Service Provider in accordance with both agreements. The Service Provider will collect payments from you by direct debit (see below). Upon collection and on your behalf, repayments will be allocated proportionately between the amount owing to the lender and the amount owing to the Service Provider, in accordance with the relative amounts owed by you under this Service Agreement and your loan contract with the lender. If there is a shortfall in amounts owing, payments will be applied between the respective obligations at the discretion of the Service Provider.
All payments will be collected in intervals and amounts as set out in the loan contract that you enter into with the lender. The Service Provider will retain a copy of that loan contract to enable it to calculate and collect repayments from you to forward to the lender. The amount of each repayment will depend on transactions that you make on the loan account. We will make reasonable attempts to notify you any time there is a change to the amount of each periodic payment that we collect from you.
The table below sets out your repayments under this agreement and your agreement with the lender, as at the commencement date of both agreements, assuming no further advances of credit in the period covered by the table. Your payment obligations will change if you receive any further advance of credit from the lender.
Repayment 1 28/10/2019 $126.00
Repayment 2 11/11/2019 $126.00Repayment 3 25/11/2019 $125.75
In the event your repayments are at a deficit to the lender, you agree to make payments to the Service Provider until the deficit and your obligations under this agreement are discharged.
The Services Agreement also contained provisions addressing events of default and fees payable upon default. Those provisions are not directly relevant to the issues to be determined on this appeal.
It was an agreed fact that the Services Agreement specified the fees and charges for the “Cigno Services” (which were defined by reference to para 11 of the Statement of Agreed Facts reproduced above). The Statement of Agreed Facts did not otherwise specify the services for which the individual Cigno fees were charged. In respect of most of the fees, that was answered expressly or by implication by the terms of the Services Agreement. In particular:
(a)the Account Keeping Fees were charged on a weekly basis and, on the terms of the Services Agreement, would be applied if the duration of the agreement was extended – implicitly the fee was for keeping an account for the Client once a loan was advanced;
(b)the Change of Payment Schedule Fee was payable if the Client requested a change to the payment obligations under the loan that had been arranged – implicitly the fee was for administering that change and, again, was a fee that might arise after a loan had been advanced; and
(c)the Default Fee was payable upon a “Default Event” which was defined as “being unable to meet your obligations under your agreement (which, for the avoidance of doubt, includes a direct debit request being dishonoured by your bank)”.
The Services Agreement also referred to a Drawdown Fee, but there was no evidence concerning the imposition of that fee.
The Services Agreement was otherwise silent about the Financial Supply Fee; it did not include any terms governing the imposition of that fee or explaining the circumstances in which it would be charged or the services for which it was charged (other than being part of the remuneration of Cigno for facilitating all enquiries, management, payments and all other services related to the loan). Nevertheless, it was an agreed fact that the Financial Supply Fee was calculated by Cigno as the sum of a base fee of $13.00 and 60% of the loan amount. Thus, the quantum of the fee was directly referable to the amount of credit being sought by the client. It was also an agreed fact that Cigno only charged its customers for its services if the customer obtained a loan from BHFS. Thus, the Financial Supply Fee would only be charged by Cigno if there was a financial supply (in the form of credit provided by BHFS). It is reasonable to infer from the above facts that the Financial Supply Fee was charged upon the provision of credit and for the services of Cigno that resulted in the provision of credit. Having regard to the agreed fact concerning the range of “Cigno Services”, that would include Cigno:
(a)assisting its customers with the completion of loan applications for financing with BHFS;
(b)verifying the information provided by its customers;
(c)assessing its customers’ eligibility for personal loans against lending criteria that were satisfactory to BHFS and Cigno;
(d)recommending qualified customers to BHFS for financing;
(e)facilitating customers’ acceptance of BHFS’s offer to advance the loan amount; and
(f)obtaining approved loan amounts from BHFS on the same day or soon after BHFS approved the loan amounts.
As stated on Cigno’s website and supported by the evidence concerning Ms Morrow set out below, the above services were provided over a short period of time as the time between credit application and the provision of credit was a matter of hours only.
There appears to be an implicit assumption in the Statement of Agreed Facts that Cigno was contractually entitled to charge the Financial Supply Fee on each occasion that a customer, such as Ms Morrow, applied for a further advance of funds under a Loan Agreement, notwithstanding that the Loan Agreement was a continuing credit contract. That contractual entitlement is not made express in the Services Agreement, but the Statement of Agreed Facts records that, in respect of the second and third advances of monies obtained by Ms Morrow under the Loan Agreement, Ms Morrow was charged a further Financial Supply Fee calculated by reference to the amount of the further advances. One available interpretation of the Services Agreement is that the Financial Supply Fee was a fee for Cigno procuring the Loan Agreement for Ms Morrow which entitled Ms Morrow to a continuing credit facility of (at the outset) $200.00. On that interpretation, Cigno was not contractually entitled to charge the Financial Supply Fee on each occasion that Ms Morrow made a further drawing of funds under the Loan Agreement. However, as set out below, Cigno did impose that charge on each such occasion, issuing a document titled “Drawdown Summary Request” which showed those charges. The Drawdown Summary Request was styled in a similar manner to the Services Agreement, but with less detail. In particular, the Drawdown Summary Request did not specify the services being supplied by Cigno other than that Cigno would use the document for the purpose of requesting an advance of funds from BHFS. Given the manner in which the Statement of Agreed Facts was framed by the parties, the trial judge proceeded on the basis that Cigno was entitled to charge the Financial Supply Fee in respect of each advance of funds under BHFS’s Loan Agreement.
As is apparent from the foregoing, under the Loan Management Facilitation Agreement and as implemented through the Cigno website and pursuant to the Services Agreement, Cigno carried out all functions associated with the provision of credit to consumers including receiving and assessing applications (in the limited manner recorded in the Credit Procedure Document and the Cigno Assessment Guidelines), facilitating the advance of funds to the borrower, keeping the relevant loan account, collecting payments from the borrower and conducting all communications with the borrower. In the event the borrower was in deficit to BHFS, the Services Agreement imposed a contractual obligation on the borrower to make payments to Cigno until all obligations were discharged. As noted earlier, if the borrower had not repaid the loan plus fee to BHFS within eight weeks, Cigno was obligated to do so.
It is important to note that ASIC did not allege that the foregoing arrangements rendered Cigno a credit provider within the meaning of the Code. In that regard, ASIC placed no particular reliance on the provisions of the Services Agreement, reproduced above, which obligated the debtor to make repayments to Cigno and, in the event of default, to continue to pay Cigno until the default was cured. ASIC did not allege that, by virtue of those provisions, the debtor incurred a deferred debt to Cigno, an allegation that may have been open to it. ASIC’s allegation was that BHFS was the credit provider and the proceeding was conducted on that basis.
The loans advanced to Ms Morrow
The balance of the Statement of Agreed Facts concerned the loans advanced to Ms Morrow. Those loans occurred in accordance with the lending arrangements described above. For that reason, it is unnecessary to refer to all details of those loans. The following are the key facts.
On or about 18 October 2019, Ms Morrow visited the Cigno website and completed an online loan application for $200.00. The application was processed by Cigno. Ms Morrow was asked how much she would like to borrow and the reason that she was applying for the funds. Ms Morrow requested an advance of funds of $200.00. She was then provided with the option of continuing with the “Cigno Premium Service” or dealing directly with “the lender”. Ms Morrow continued with the “Cigno Premium Service”. It was an agreed fact that Cigno then recommended the application to BHFS because Cigno was satisfied that Ms Morrow met the criteria in the Credit Procedure Document and the Cigno Assessment Guidelines and BHFS then approved the application and communicated this to Cigno using an API (Application Programming Interface) that communicated between the software systems used by BHFS and Cigno. I infer from the agreed fact that the recommendation to BHFS and the approval by BHFS were automated processes. Cigno then sent Ms Morrow a text message and an email that confirmed that the application had been approved and provided a link for Ms Morrow to finalise the loan. Ms Morrow then clicked on the link and selected a repayment schedule of three instalments (for repayment of the advance of $200.00, and the payment of the BHFS fee and Cigno’s fees under the Services Agreement). She was presented with the Services Agreement with Cigno and the Loan Agreement with BHFS and asked to confirm whether she agreed with these contracts to finalise the loan. After Ms Morrow accepted the Services Agreement and the Loan Agreement, Cigno sent a text message and an email to Ms Morrow, which communicated that her loan had been finalised. BHFS then credited $200.00 to Ms Morrow’s nominated bank account (with the Commonwealth Bank of Australia). All of those steps occurred on 18 October 2019.
From 28 October 2019 to 25 November 2019, three payments totalling $377.75 were automatically debited from Ms Morrow’s nominated account and paid to Cigno in accordance with the terms of the Services Agreement as follows:
(a)$126.00 on 28 October 2019;
(b)$126.00 on 11 November 2019; and
(c)$125.75 on 25 November 2019.
The aggregate payment of $377.75 comprised the loan amount of $200.00, the BHFS fee of $15.00, the Cigno Financial Supply Fee of $133.00 and the Cigno Account Keeping Fees of $29.75. Within eight weeks of 18 October 2019, Cigno transferred $215.00 (being the loan amount of $200.00 and the BHFS fee of $15.00) to BHFS.
Throughout the above process, Ms Morrow did not have any direct contact with BHFS.
On 2 December 2019, Ms Morrow made a further request for funds under the Loan Agreement for $300.00 through the Cigno website. It was an agreed fact that the credit limit made available to Ms Morrow for the December 2019 application was increased to $300.00 by BHFS as BHFS was satisfied further credit could be extended based on Ms Morrow’s positive payment history on the first borrowing. There was no other evidence about the processes involved in that approval.
The process involved in Ms Morrow obtaining the second loan was essentially identical to the first loan, as set out above. Cigno sent a text message and email to Ms Morrow confirming that the application had been approved, and advised Ms Morrow that she would receive the funds by 3pm that day. Cigno also sent Ms Morrow a Drawdown Summary on BHFS letterhead specifying the amounts payable to BHFS in three instalments (which document was generated by Cigno from within its system), and a Drawdown Request Summary on Cigno letterhead specifying repayment amounts and a repayment schedule that combined the amounts due to BHFS and Cigno. BHFS then credited $300.00 to Ms Morrow’s nominated bank account. All of those steps occurred on 2 December 2019.
From 9 December 2019 to 6 January 2020, three payments totalling $531.80 were automatically debited from Ms Morrow’s nominated bank account and paid to Cigno in accordance with the Drawdown Request Summary as follows:
(a)$180.00 on 9 December 2019;
(b)$180.00 on 23 December 2019; and
(c)$171.80 on 6 January 2020.
The aggregate payment of $531.80 comprised the loan amount of $300.00, the BHFS fee of $15.00, the Cigno Financial Supply Fee of $193.00 and the Cigno Account Keeping Fees of $23.80. Within eight weeks of 2 December 2019, Cigno transferred $315.00 (being the loan amount of $300.00 and the BHFS fee of $15.00) to BHFS.
Throughout the above process, Ms Morrow did not have any direct contact with BHFS.
On 11 January 2020, Ms Morrow made a further request for funds under the Loan Agreement for $300.00 using the Cigno website. The process involved in Ms Morrow obtaining the third loan was essentially identical to the first and second loans, as set out above. Cigno sent a text message and email to Ms Morrow confirming that the application had been approved, and advised Ms Morrow that she would receive the funds by 2pm that day. Cigno also sent Ms Morrow a Drawdown Summary on BHFS letterhead specifying the amounts payable to BHFS in three instalments (again, generated by Cigno), and a Drawdown Request Summary on Cigno letterhead specifying repayment amounts and a repayment schedule that combined the amounts due to BHFS and Cigno. BHFS then credited $300.00 to Ms Morrow’s nominated bank account. All of those steps occurred on 11 January 2020.
The repayment schedule in the Drawdown Request Summary was as follows:
(a)$180.00 on 20 January 2020;
(b)$180.00 on 3 February 2020; and
(c)$177.75 on 17 February 2020.
On 20 January 2020, $180.00 was automatically debited from Ms Morrow’s nominated account and paid to Cigno.
On 3 February 2020, Ms Morrow received an email and a text message from Cigno, reminding her that a payment was due that day. However, the direct debit in favour of Cigno was unable to be processed that day and was dishonoured. On 5 February 2020 at 1:20pm, Cigno sent Ms Morrow a notice of default by text message and by email because the payment due on 3 February 2020 was not made. Attached to the email was a document called a “Default Notice” on the letterhead of both Cigno and BHFS. The notice advised that a default fee of $79.00 would be charged. The notice also stated that the amount of $180.00 would be debited on 17 February 2020.
On 17 February 2020, $180.00 was automatically debited from Ms Morrow’s nominated account and paid to Cigno.
On 2 March 2020, Ms Morrow received an email and a text message from Cigno reminding her that a payment was due that day. However, the direct debit in favour of Cigno was unable to be processed that day and was dishonoured. On 4 March 2020, Cigno sent Ms Morrow a notice of default by text message and by email because the payment due on 2 March 2020 was not made. Attached to the email was a further “Default Notice” on the letterhead of both Cigno and BHFS. The notice advised that a further default fee of $79.00 would be charged. The notice also stated that the amount of $180.00 would be debited on 16 March 2020.
On 16 March 2020, $180.00 was automatically debited from Ms Morrow’s account and paid to Cigno.
On 26 March 2020, Ms Morrow received two emails from Cigno, advising that her payment had been changed as requested and that her next payment would be $207.50 on 13 April 2020. The emails attached a document titled “Detailed Account Statement” for the period 11 January 2020 to 26 March 2020. The document listed all transactions in respect of the loan obtained on 11 January 2020, including all fees charged and all repayments made.
On 13 April 2020, Ms Morrow received an email from Cigno advising that her payment was pending and that her next payment of $14.50 was due on 27 April 2020. The email attached a further Detailed Account Statement for the period from 11 January 2020 to 13 April 2020.
On 14 April 2020, $210.85 was automatically debited from Ms Morrow’s nominated account and paid to Cigno. On the same day, Ms Morrow also manually transferred $157.74 from her nominated account to Cigno.
On 15 April 2020, Ms Morrow sent an email to Cigno in relation to her payments of 14 April 2020 requesting a refund of $210.85. There was further correspondence between Ms Morrow and Cigno about the refund request between 15 and 29 April 2020. On 30 April 2020, Cigno refunded $137.29 to Ms Morrow.
The net payments made by Ms Morrow in relation to the third loan totalled $771.30 which comprised the loan amount of $300.00, the BHFS fee of $15.00, the Cigno Financial Supply Fee of $193.00, the Cigno Account Keeping Fees of $83.80, Cigno Change of Payment Schedule Fees of $22.00 and Cigno Default Fees of $158.00. Within eight weeks of 11 January 2020, Cigno transferred $315.00 (being the loan amount of $300.00 and the BHFS fee of $15.00) to BHFS.
Throughout the above process, Ms Morrow did not have any direct contact with BHFS.
LEGISLATIVE FRAMEWORK
Relevant prohibition – unlicensed credit activity
Section 29 (1) of the NCCP Act provides that:
A person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.
The term credit activity is defined in s 5(1) of the NCCP Act by reference to a table in s 6(1) which relevantly provides as follows:
Meaning of credit activity Item Topic A person engages in a credit activity if: 1 credit contracts (a) the person is a credit provider under a credit contract; or
(b) the person carries on a business of providing credit, being credit the provision of which the National Credit Code applies to; or
(c) the person performs the obligations, or exercises the rights, of a credit provider in relation to a credit contract or proposed credit contract (whether the person does so as the
credit provider or on behalf of the credit provider); or
2 credit service the person provides a credit service; or …
As noted earlier, ASIC alleged that BHFS was engaged in a credit activity by reason of being a credit provider under the credit contract with Ms Morrow (as per item 1(a) above) and by carrying on a business of providing credit, being credit the provision of which the Code applies to (as per item 1(b) above). ASIC alleged that Cigno was engaged in a credit activity by reason of exercising the rights of BHFS (being a credit provider) in relation to the credit contract with Ms Morrow and in the course of its business generally (as per item 1(c) above) and by providing a credit service to Ms Morrow and in the course of its business generally (as per item 2 above).
The terms credit, credit provider, credit contract and credit service as used in the above definition of the term credit activity are also defined in the NCCP Act, often by reference to definitions that appear in the Code.
Definitions of credit and credit provider
The term credit is defined in s 5(1) of the NCCP Act by reference to s 3(1) of the Code, which provides as follows:
(1) For the purposes of this Code, credit is provided if under a contract:
(a)payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or
(b) one person (the debtor) incurs a deferred debt to another (the credit provider).
The term credit provider is (relevantly) defined in s 5(1) of the NCCP Act by reference to s 204(1) of the Code to mean a person “that provides credit, and includes a prospective credit provider”.
There is no dispute that, by borrowing funds from BHFS under the Loan Agreement, Ms Morrow incurred a deferred debt to BHFS and that BHFS was a credit provider within the meaning of s 204(1). ASIC did not allege that Ms Morrow also incurred a deferred debt to Cigno, notwithstanding the stipulation in the Services Agreement that, if Ms Morrow’s repayments fell into deficit with BHFS, Ms Morrow promised to make payments to Cigno until the deficit was discharged.
Definition of credit contract
The term credit contract is defined in s 5(1) of the NCCP Act by reference to s 4 of the Code, which provides as follows:
For the purposes of this Code, a credit contract is a contract under which credit is or may be provided, being the provision of credit to which this Code applies.
Section 204(1) of the Code defines contract to include a series or combination of contracts, or contracts and arrangements. At first instance and on appeal, ASIC referred to this definition as the extended definition of contract. As an alternative formulation of its case, ASIC alleges that the Loan Management Facilitation Agreement between BHFS and Cigno, the Loan Agreements entered into between BHFS and consumers and the Services Agreement entered into between Cigno and consumers were a series or combination of contracts, or contracts and arrangements, under which credit was provided by BHFS to consumers.
It can be seen that the definition of credit contract contains the phrase “being the provision of credit to which this Code applies”. A materially identical phrase (although grammatically less elegant) appears in item 1(b) of the definition of credit activity: “being credit the provision of which the National Credit Code applies to”. Thus, each of the definitions of credit activity in item 1 of the table in s 6(1) require, as an element:
(a)the contract under which credit is or may be provided; or
(b)the carrying on of a business of providing credit,
in both cases being the provision of credit to which the Code applies. That latter phrase is defined in ss 5 and 6 of the Code, which are set out below.
Definition of credit service
The definition of credit activity in item 2 of the table in s 6(1) is that the person provides a credit service. Section 7 of the NCCP Act provides that a person provides a credit service if the person provides credit assistance to a consumer or acts as an intermediary. In its case against Cigno, ASIC relies on both limbs of that definition.
Section 8 of the NCCP Act defines credit assistance (relevantly) as follows:
A person provides credit assistance to a consumer if, by dealing directly with the consumer or the consumer’s agent in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person:
(a) suggests that the consumer apply for a particular credit contract with a particular credit provider; or
...
(d) assists the consumer to apply for a particular credit contract with a particular credit provider; or
Section 9 of the NCCP Act defines acts as an intermediary (relevantly) as follows:
A person acts as an intermediary if, in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person:
(a)acts as an intermediary (whether directly or indirectly) between a credit provider and a consumer wholly or partly for the purposes of securing a provision of credit for the consumer under a credit contract for the consumer with the credit provider; or
…
It does not matter whether the person does so on the person’s own behalf or on behalf of another person.
It can be seen that the above definitions require, as an element, conduct that involves a consumer applying for a credit contract or securing the provision of credit under a credit contract. Thus, the definition of credit activity in item 2 of the table in s 6(1) also focusses upon a contract under which credit is or may be provided, being the provision of credit to which the Code applies.
The provision of credit to which the National Credit Code applies
As already noted, ss 5 and 6 of the Code define the circumstances in which the Code applies to the provision of credit. Section 5 is titled “Provision of credit to which this Code applies” and (relevantly) subs (1) provides as follows:
This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:
(a) the debtor is a natural person or a strata corporation; and
(b) the credit is provided or intended to be provided wholly or predominantly:
(i)for personal, domestic or household purposes; or
(ii) to purchase, renovate or improve residential property for investment purposes; or
(iii) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and
(c) a charge is or may be made for providing the credit; and
(d) the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.
On this appeal, there is no dispute that the loans provided to consumers by BHFS as part of its lending arrangements with Cigno satisfied the elements of s 5(1). The loans were provided to natural persons, the loans were for personal, domestic or household purposes, BHFS charged a fee for providing the loan and BHFS provided the loans in the course of a business of doing so.
Section 6 is titled “Provision of credit to which this Code does not apply” and, in many subsections, describes different types of credit arrangements which are excluded from regulation under the Code. This case concerns subs (5), but it is contextually relevant also to have regard to subss (1), (2) and (3). Those subsections are as follows:
Short term credit
(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.
…
Credit for which only account charge payable
(5) This Code does not apply to the provision of credit under a continuing credit contract if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided. However, this Code applies if the charge is of a nature prescribed by the regulations for the purposes of this subsection or if the charge exceeds the maximum charge (if any) so prescribed.
…
Regulation 51 of the Regulations stipulates that the maximum charge for the purpose of s 6(5) is:
(a)for the period of 12 months commencing when the debtor enters into the continuing credit contract – $200; and
(b)for any subsequent period of 12 months during which the continuing credit contract is in effect – $125.
Relevantly to s 6(5), the term continuing credit contract is defined in s 204(1) of the Code to mean a credit contract under which:
(a)multiple advances of credit are contemplated; and
(b)the amount of available credit ordinarily increases as the amount of credit is reduced.
The central dispute between the parties concerns the meaning of s 6(5) and whether it is applicable to the provision of credit under the BHFS Loan Agreements. The respondents contend that s 6(5) is applicable because the only charge that is or may be made for providing the credit under the Loan Agreements is the BHFS fee of $15.00. ASIC contends that s 6(5) is inapplicable because the Cigno fees are also charges that are made for providing the credit under the Loan Agreements. Thus, the dispute concerns the meaning of the words “charge that is or may be made for providing the credit” under the continuing credit contract.
It can be observed that the expression “charge that is or may be made for providing the credit” appears in both s 6(5) and in s 5(1)(c) (with a minor syntactical difference). However, the words serve a different purpose in each provision. For the purposes of s 5(1)(c), the Code applies to the provision of credit if a charge is or may be made for providing the credit. For the Code to apply, it is only necessary to identify a single charge that satisfies that description. In this case, there was no dispute that the BHFS charge was a charge for providing the credit. For the purposes of s 6(5), the Code is excluded from the provision of credit if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided and is not a charge of a nature prescribed by the Regulations and does not exceed the maximum prescribed by the Regulations. Section 6(5) requires the identification of all charges that are or may be made for providing the credit to determine whether all meet the requirements of s 6(5).
Evidentiary burdens
I note for completeness that the NCCP Act and Code specify two evidentiary burdens. First, s 13(1) of the Code provides:
In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.
Second, s 175D of the NCCP Act provides:
(1)If, in proceedings for a declaration of contravention, a pecuniary penalty order, a relinquishment order or any other order against a person for a contravention of a civil penalty provision, the person wishes to rely on any exception, exemption, excuse, qualification or justification provided by the law creating the civil penalty provision, then the person bears an evidential burden in relation to that matter.
(2) In subsection (1), evidential burden, in relation to a matter, means the burden of adducing or pointing to evidence that suggests a reasonable possibility that the matter exists or does not exist.
However, in circumstances where the lending arrangements the subject of the proceeding are the subject of reasonably comprehensive evidence, the respondents have discharged their burden under s 175D and s 13(1) is of limited practical application. The evidentiary burdens were not relied upon in the appeal.
FINDINGS OF THE TRIAL JUDGE
It is convenient to state the findings of the trial judge by reference to ASIC’s pleaded allegations. The findings can be stated relatively briefly.
ASIC’s principal case against BHFS
ASIC’s principal allegation against BHFS was that the loans provided by BHFS, both to Ms Morrow and as part of its lending business conducted with Cigno, constituted the provision of credit under a contract, being credit to which the provisions of the Code applied. In that regard, ASIC alleged that the elements of s 5(1) of the Code were satisfied and that the elements of s 6(5) were not satisfied because the Cigno fees were each a charge that is or may be made for providing the credit.
An aspect of ASIC’s pleaded allegations requires a short comment. ASIC alleged that each of the Cigno fees were a charge that is or may be made for providing credit within the meaning of s 5(1)(c) of the Code. For the reasons explained above, that is an unnecessary allegation. There was no dispute that, in relation to the credit provided by BHFS under the Loan Agreements, BHFS made a charge for providing the credit by charging the $15.00 fee. That charge satisfied the requirements of s 5(1)(c). Therefore, on the facts of this case, it is strictly irrelevant to the application of s 5(1) whether the Cigno fees were also charges for providing the credit. The relevant issue was whether one or more of the Cigno fees was a charge that is or may be made for providing credit within the meaning of s 6(5) and, depending on the fee, whether the requirements of s 6(5) were satisfied in respect of the fee.
As noted earlier, it was only necessary for ASIC to succeed on its allegation that the Financial Supply Fee was a charge that is or may be made for providing the credit, as that charge could not satisfy s 6(5) because it varied according to the amount of credit provided and also exceeded the amount prescribed by reg 51.
The trial judge found that the only charge made in exchange for the provision of the credit to Ms Morrow was the charge payable under the Loan Agreement, namely the $15.00 fee and that, in contrast, the Cigno fees were paid in exchange for the provision by Cigno of application, management and collection services (at J [160]). In reaching that conclusion, his Honour construed the word “for” as meaning “in exchange for” or its Latin equivalent “quid pro quo” in a contractual sense (at J [143]-[144]). His Honour also rejected a submission by ASIC that the Cigno fees could be characterised as both a charge for services relating to the provision of credit and a charge for the provision of credit. In that respect, his Honour concluded as follows (at J [153] – [162]):
153 In theory, it is certainly conceivable that a charge might be imposed for multiple purposes. However, ss 5(1)(c) and 6(5) of the Code are confined to “charges for the provision of credit”. Unlike the text employed in ss 5(1)(b) and 5(1)(b)(iii), the familiar drafting language of “wholly or predominately” is not used to address a situation in which there may be multiple purposes.
154 It is important to pay careful attention to the precise statutory language to be construed. Here it is s 6(5) that exempts credit provided under a continuing credit contract with specified attributes from the provisions of the Code. The exemption is only engaged “if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided” (emphasis added). The provision of credit is not the advance of funds, but rather the deferment of an existing debt or the creation of a new, deferred debt: Fast Access Finance at [261].
155 Unlike s 6(2) of the Code, charges for the purpose of s 6(5) do not extend to any charge “for any service related to the provision of credit”. Nor, unlike the definition of “credit fees and charges” in s 204(1), is s 6(5) directed at “fees and charges payable in connection with a credit contract”.
156 Further, in contrast to ss 6(1) to (3) of the Code, s 6(5) is not limited to charges under a credit contract; it focuses only on a charge for the provision of credit. Charges may be made other than under a credit contract for the provision of credit. It also follows, however, that charges may be made under a credit contract that might constitute a service that is “related to the provision of credit” but not be charges for the provision of credit.
157 Finally, as observed above, unlike ss 5(1)(b) and 5(1)(b)(iii) of the Code, s 6(5), does not employ the familiar drafting language of “wholly or predominately”.
158 It is logical that s 6(5) picks up the language in s 5(1)(c) in stating a rule providing for the inapplicability of the Code, and it should be given the same meaning, consistent with the principle that provisions of the Code should be construed to give effect to harmonious goals: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [70].
159 The respondents submit, and I accept, that:
(a) the fees charged by Cigno were in exchange for, or the quid pro quo for, providing the services pursuant to the Morrow Services Agreement, not for the provision of credit; and
(b) it is not possible to ignore the terms of the Morrow Services Agreement and “the reality that Cigno provided services pursuant to that agreement, and the reality that the fees paid to Cigno were fees for providing those services”.
160 If follows that the only charges made in exchange for the provision of the credit to Ms Morrow were the charges payable under the Morrow Loan Agreement, namely the $15 BHFS Fee. The Cigno Services fees and charges were paid in exchange for the provision by Cigno of application, management and collection services. In reaching those conclusions, I am satisfied that the respondents have satisfied the evidentiary burden otherwise imposed by s 175D of the Act and s 13(1) of the Code.
161 On one view, given the beneficial and protective purpose and object of the Code, it might be thought that this produces a result that could not have been intended, but as the High Court stated in Cooper Brookes (Wollongong) Proprietary Limited v The Commissioner of Taxation of the Commonwealth of Australia (1981) 147 CLR 297; [1981] HCA 26 at 305 (Gibbs CJ), when construing a provision “it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient or unjust”.
162 Unlike in other related provisions of the Code, the phrases “provided wholly or predominately”, “any service related to the provision of credit” and “fees and charges in connection with a credit contract” are starkly absent from the text of ss 5(1)(c) and 6(5).
The respondents’ proposed construction of the phrase “charge … made for providing the credit” is narrow. It adopts an approach derived from the law of contract, asking whether the charge is the legal consideration for the provision of credit. While the respondents’ construction is an available meaning on the text, the respondents did not advance a compelling reason why the legislature would have had that narrow construction in mind. When applied in the context of s 5(1)(c), the effect of the respondents’ construction is that the operation of the Code can be readily avoided, as illustrated by the facts of this case. If the s 5(1)(c) criterion is confined in its operation to a charge that is the contractual consideration for the provision of credit, the Code can be avoided by structuring the credit arrangements such that no charge is made for the provision of credit and all charges are made for other services such as the processing of credit applications, the keeping of accounts, the variation of repayment schedules and for events of default. There is no apparent reason why the legislature would consider that credit arrangements structured in that manner should be outside the remedial framework established by the Code.
A broader construction of the phrase “charge … made for providing the credit” is to be preferred. Giving the statutory language its full ordinary meaning, the Code would apply if a charge is made in exchange for, on account of or by reason of the provision of credit, applied in a commercially practical manner. There is nothing strained in construing the preposition “for” in s 5(1)(c) in that manner. The construction requires a direct relationship between the charge and the provision of credit by looking to the circumstances in which, or conditions on which, the charge is made or imposed and the reason for the charge. It looks to the substance of the credit arrangements rather than their contractual form and ensures that the remedial provisions of the Code are not easily avoided by carefully structured credit arrangements.
Previous cases
The meaning of the phrase “charge … made for providing the credit” has been considered in two previous cases in the context of s 5(1)(c) of the Code (and its predecessor, s 6(1)(c) of the Uniform Consumer Credit Code). Those decisions are consistent with the broader construction of the phrase explained above.
In Walker, Hall J concluded that the preposition “for” denoted a causal connection in the sense that the charge was imposed as a consequence of or on account of the fact that credit was provided (at [143]‑[148] and [190]). In reaching that conclusion, his Honour considered it significant that s 6(1)(c) of the Uniform Consumer Credit Code did not expressly require that the charge be made under the credit contract (contrasting the definition of credit in s 4(1) of that Code) and that the preposition “for” should not be read down by unexpressed limitations (at [190]). Leave to appeal from that decision was refused by the NSW Court of Appeal in Kwik Finance (Sydney) Pty Ltd v Walker [2014] NSWCA 73. Relevantly, the Court of Appeal also expressed the view that s 6(1)(c) of the Uniform Consumer Credit Code did not “in terms say or require that the charge which is or may be made must be made by the credit provider” and that it would not “be consistent with the purpose and object of that provision to read it down in that way so as to permit the operation of the Act to be avoided by an arrangement under which the credit charge was to be made by an entity other than the credit provider” (at [13]).
In Fast Access Finance, Dowsett J considered the reasoning of Hall J in Walker. While not challenging the correctness of Hall J’s approach in so far as it concerned the circumstances of that case, Dowsett J found it difficult to accept that the word “for” in s 5(1)(c) of the Code necessarily means that there must be a causal connection between the charge and the provision of credit (at [255]). After considering the dictionary definitions, his Honour expressed the view that s 5(1) involves the notion of exchange, the charge being made in exchange for the provision of credit (at [257]). However, when applying that meaning to the facts of the case, it is apparent that his Honour did not conceive of “exchange” in a narrow contractual consideration sense but rather looked to the commercial substance of the relevant transactions (at [261]).
In each of Walker and Fast Access Finance, the court concluded that a charge had been made for the provision of credit in the circumstances of each case. There is no substantive inconsistency in the approach taken in each case. Although Hall J expressed the required relationship between the charge and the provision of credit as one of causation, his Honour explained the meaning of the relationship by the phrases “as a consequence of” or “on account of”. Those phrases are consistent with Dowsett J’s practical application of the phrase “in exchange for”.
It would be wrong to treat the reasoning in either Walker or Fast Access Finance as providing an exhaustive definition or explanation of the meaning of the phrase “charge …made for providing the credit” in either ss 5(1)(c) or 6(5). In each case, the court gave meaning to the phrase for the purpose of resolving the case before the court. The reasoning in each case is expositional, not definitional. As French CJ explained in Khazaal in a similar context (construing the relational term “connected with”) (at [31], citations omitted):
Relational terms such as “connected with” appear in a variety of statutory settings. Other examples are: “in relation to”; “in respect of”; “in connection with”; and “in”. They may refer to a relationship between two subjects which may be the same or different and may encompass activities, events, persons or things. They may denote relationships which are causal or temporal or relationships of similarity or difference. The task of construing such terms does not involve the resolution of ambiguity. They are ambulatory words and may be designed to cover a variety of subjects and a variety of relationships between those subjects. The nature and breadth of the relationships they cover will depend upon their statutory context and purpose. Generally speaking it is not desirable, in construing relational terms, to go further than is necessary to determine their application in a particular case or class of cases. A more comprehensive approach may be confounded by subsequent cases.
Nevertheless, the reasoning in each of Walker and Fast Access Finance is consistent with an approach that gives the statutory language its full ordinary meaning, looking to the commercial substance of the credit arrangements and not restricted by the doctrine of consideration drawn from the law of contract.
Conclusion as to proper construction
For the foregoing reasons, I consider that the expression “charge … made for providing the credit” in s 5(1)(c) should be construed as a charge that is made in exchange for, on account of or by reason of the provision of credit. The same phrase used in s 6(5) should be construed in the same manner. Ultimately, the application of the statutory criterion in both ss 5(1)(c) and 6(5) requires an assessment of all relevant facts. It is an evaluative task that requires the relevant charge to be characterised by reference to the statutory criterion.
Application to facts
The relevant question is whether the Cigno fees, and particularly the Financial Supply Fee, is a “charge … made for providing the credit” within the meaning of s 6(5). On the facts of the case as set out earlier, the answer to the question is relatively straightforward.
It is an agreed fact that Cigno provided a range of services to its customers (including Ms Morrow) pursuant to the terms of the Services Agreement. It is also an agreed fact that Cigno charged its customers, and was paid by its customers, for those services under the terms of the Services Agreement. One of those charges was the Financial Supply Fee. It was calculated as the sum of a base amount of $13 and 60% of the loan amount. The fee was only charged if the customer obtained credit from BHFS. As discussed earlier, the services supplied by Cigno in return for the fee included: assisting customers with the completion of loan applications; verifying the information provided by customers; assessing customers’ eligibility for loans; recommending qualified customers for financing; facilitating customers’ acceptance of loan offers; and obtaining approved loan amounts.
The respondents contend that the Financial Supply Fee was charged by Cigno for the services it supplied, none of which constituted the provision of credit. While the contention is not inaccurate as far as it goes, it does not take into account all of the relevant facts. Critically, it ignores the following facts:
(a)First, the services supplied by Cigno in return for the Financial Supply Fee – receiving, verifying, assessing and processing loan applications – were all anterior to and directed to the provision of credit (by BHFS).
(b)Second, from the perspective of a credit applicant, those services were not an end in themselves. The services only have value to the credit applicant if the application is approved and credit is provided.
(c)Third, the Financial Supply Fee, as the title of the fee implies, was not charged unless credit was provided (by BHFS). It was the provision of credit that triggered the imposition of the fee.
(d)Fourth, the Financial Supply Fee was calculated as a percentage of the loan amount and therefore varied according to the amount of credit provided (by BHFS).
Those facts provide a sufficient basis on which to conclude that the Financial Supply Fee was a charge that was made for providing the BHFS credit. Having regard to the commercial substance of the arrangements, the Financial Supply Fee was imposed on account of or by reason of the provision of BHFS credit and, in a practical commercial sense, was imposed in exchange for that credit.
The contractual arrangements between Cigno and BHFS, documented in the Loan Management Facilitation Agreement, provide the commercial background to the credit arrangements offered to consumers. The contractual arrangements explain why Cigno advertised the provision of credit on its website whereas BHFS did not (because, as recited in the agreement, Cigno was in the business of marketing, facilitation, management and collections in relation to loans). The contractual arrangements also explain why the majority of credit charges are imposed by Cigno and not by BHFS (because, by guaranteeing the repayment of the credit under the agreement, Cigno ultimately bears the credit risk on the loans provided). It was no part of ASIC’s case that those contractual arrangements were a sham. The case was conducted on the basis that the arrangements took effect in accordance with their terms. The conclusions I have reached with respect to the application of s 6(5) to the Financial Supply Fee charged by Cigno do not depend on any finding that, in substance, Cigno was a credit provider and the Financial Supply Fee was, in substance, a charge made for the provision of credit by Cigno. In another case, such findings may be open to be made. But it was not an argument advanced by ASIC in this case and forms no part of the conclusion. Rather, s 6(5) is applicable to the Financial Supply Fee because of the circumstances in which, and the conditions on which, the fee was charged, as set out above. It is appropriate to characterise the Fee as being made for the provision of credit (by BHFS).
Given my findings with respect to the Financial Supply Fee, it is unnecessary to decide whether the Account Keeping Fee or the Change of Payment Schedule Fee are charges that are made for providing credit within the meaning of s 6(5). Like the Financial Supply Fee, those fees were only payable if credit was provided by BHFS. However, the Account Keeping Fee and the Change of Payment Schedule Fee were payable for administrative services following the provision of credit, being account keeping and changing payment schedules respectively. On the facts of this case, it seems more difficult to characterise those fees as charges made for providing credit.
Conclusion
For the reasons given above, grounds 1 and 4 of the appeal should be upheld.
GROUND 5
By ground 5 of the appeal, ASIC contends that the trial judge erred in failing to find that, in collecting repayments and the BHFS fee from Ms Morrow, Cigno was acting as the agent of BHFS.
As noted earlier, it was common ground that ASIC’s case against Cigno did not depend upon a finding that Cigno was acting as an agent of BHFS. Neither item 1(c) nor item 2 of s 6(1) of the NCCP Act refers to agency and ASIC’s pleading does not allege that Cigno was acting as the agent of BHFS. Rather, ASIC alleged that Cigno engaged in a credit activity by:
(a)exercising the rights of BHFS in relation to the Loan Agreements within the meaning of item 1(c) of s 6(1) of the NCCP Act (by assessing applications for loans and managing and collecting payments from the borrower);
(b)providing credit assistance to consumers within the meaning of s 8 of the NCCP Act, being a credit service within the meaning of item 2 of s 6(1) and s 7(a) of the NCCP Act (by suggesting that consumers apply for a credit contract with BHFS and assisting consumers to apply for a credit contract with BHFS); and
(c)by acting as an intermediary within the meaning of s 9 of the NCCP Act, being a credit service within the meaning of item 2 of s 6(1) and s 7(b) of the NCCP Act (by, in the course of Cigno’s business, acting as an intermediary between BHFS and consumers for the purpose of securing the provision of credit for the consumer under a credit contract with BHFS).
It will be necessary to return to those allegations in the context of appeal ground 6.
ASIC’s submissions
ASIC submitted that although the Loan Management Facilitation Agreement stated that there was no agency relationship between BHFS and Cigno, it did not follow that Cigno was not acting as the agent of BHFS in collecting repayments and the BHFS fee from Ms Morrow. ASIC argued that, in determining whether there is a principal-agent relationship, including the scope of that relationship, contractual labels are to be given proper weight but are not determinative. The true character of the parties’ relationship is to be gathered from an examination of all surrounding circumstances. That Cigno was Ms Morrow’s agent in dealing with BHFS, including in making repayments to BHFS and negotiating new arrangements, or that “dual agency” is rare, does not preclude the existence of a principal-agent relationship. In the present case, Cigno undertook debt recovery actions against borrowers, which actions were to Cigno’s own benefit given that, for all practical purposes, it took over the debts from BHFS.
Respondents’ submissions
The submissions of the respondents were materially the same. They submitted that no error is demonstrated in the analysis of the trial judge regarding agency, placing reliance on the same facts identified by the trial judge (that the Loan Management Facilitation Agreement contained an express acknowledgement that there was no agency arrangement between BHFS and Cigno; that the Services Agreement supports the existence of an agency relationship between Cigno and Ms Morrow as it refers to Cigno making repayments on behalf of Ms Morrow; and the agreed fact that Ms Morrow did not have any direct contact with BHFS because she chose to use the Cigno Services, which included Cigno dealing with BHFS on her behalf). The respondents submitted that the trial judge’s finding that Cigno was acting as the agent of Ms Morrow supports a conclusion that Cigno was not acting as the agent of BHFS, as the circumstances of dual agency are rare (referring to the observation of Conti J to that effect in AON Risk Services Australia Ltd v Lumley General Insurance Ltd [2005] FCA 133 at [60]).
Consideration
At common law, the core conception of agency is “an authority or capacity in one person to create legal relations between the person occupying the position of principal and third parties”: International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 at 652 per Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ. That core conception has also been stated in broader terms as encompassing the authority to affect legal rights as between the principal and third parties (Petersen v Moloney (1951) 84 CLR 91 at 94 per Dixon, Fullagar and Kitto JJ) and the authority to act on behalf of a principal either generally or in respect of some particular act or matter (Erikson v Carr (1945) 46 SR (NSW) 9 at 12 per Jordan CJ). As explained in G E Dal Pont, Law of Agency (4th Ed, LexisNexis, 2020) at [1.4]:
… agency relationships necessarily involve an agent acting in a representative capacity for the principal, whether for the purpose of creating contractual relations for the principal or to represent the principal in a more restricted ambit. Put another way, if the right by virtue of which the alleged agent acts is an independent right he or she already possessed, then he or she is not an agent; if it is, conversely, by virtue of some authority from another, then he or she is an agent.
In Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 (Tonto), Allsop P (with whom Bathurst CJ and Campbell JA agreed) explained (at [177], references omitted):
… Not every independent contractor performing a task for, or for the benefit of, a party will be an agent, and so identified as it, or as representing it, and its interests. Agency is a consensual relationship, generally (if not always) bearing a fiduciary character, in which by its terms A acts on behalf of (and in the interests of) P and with a necessary degree of control requisite for the purpose of the role. Central is the conception of identity or representation of the principal … Examples and contexts may be infinite, and any arrangement must be understood and characterised by reference to its legal terms in context. …
Clause 5.1 of the Loan Management Facilitation Agreement states that nothing in that agreement creates an agency relationship between BHFS and Cigno. It is uncontroversial that such a term is not determinative of the relationship between the parties but will be given due weight (unless characterised as a sham); the true character of the parties’ relationship is determined from an examination of all the surrounding circumstances, including relevant contractual provisions: Tonto at [182]. ASIC did not suggest that any of the relevant contractual arrangements were a sham.
The terms of the relevant contractual arrangements, and the manner in which BHFS and Cigno conducted business, have been set out earlier. There are features of the Loan Management Facilitation Agreement that are suggestive of an agency relationship. In particular, under cl 2.1, BHFS agrees to make available and lend funds to the clients of Cigno under the Loan Agreements. Under cl 2.2, BHFS may stipulate the conditions on which funds are to be lent and, under cl 2.3, Cigno must comply with the loan conditions stipulated by BHFS. Under cl 2.5, Cigno agrees to manage the Loan Agreements on behalf of its clients in accordance with the conditions of the Loan Management Facilitation Agreement. Each of those clauses is suggestive of an arrangement by which Cigno was authorised to enter into Loan Agreements on behalf of BHFS and where BHFS controlled the terms of the Loan Agreements to be entered into. Further, the evidence indicates that Cigno only marketed and facilitated loans with BHFS and not with any other lender.
However, there are a number of other features of the contractual arrangements, and the manner in which Cigno and BHFS conducted business, that suggest that Cigno was not an agent of BHFS but, rather, party to a joint commercial arrangement or enterprise. The following matters can be noted:
(a)First, under the Loan Management Facilitation Agreement, BHFS does not expressly appoint Cigno as its agent to enter into Loan Agreements with consumers. Further, as noted above, cl 5.1 states that the relationship is not one of agency.
(b)Second, it is an agreed fact that Cigno recommended loan applications to BHFS (para 11.4 of the Statement of Agreed Facts) and, in respect of each of the advances made to Ms Morrow, BHFS approved the advance (paras 25.7, 44.7 and 55.1 of the Statement of Agreed Facts). Those facts indicate that Cigno did not have authority to create legal relations on behalf of BHFS.
(c)Third, it is an agreed fact that BHFS did not pay to Cigno any referral fees, finder’s fees, commissions or any other bonuses or amounts related to the referral of customers from Cigno to BHFS (para 9.3 of the Statement of Agreed Facts).
(d)Fourth, the Loan Management and Facilitation Agreement recites that BHFS is in the business of lending and/or advancing personal loans to consumers secured by the Loan Agreements, and that Cigno is in the business of marketing, facilitation, management services and collections in relation to the Loan Agreements. The recitals indicate that BHFS and Cigno have undertaken a joint commercial arrangement or enterprise whereby each undertakes an aspect of the enterprise – BHFS lends funds (at least in the first instance) while Cigno engages in the marketing, facilitation, management and collection of the loans.
(e)Fifth, the nature of the joint commercial arrangement or enterprise is reflected in the terms of the Loan Agreements entered into by BHFS with consumers and the Services Agreements entered into by Cigno with consumers. Under the Loan Agreements, BHFS lends funds to consumers. Under the Services Agreements, Cigno provides a range of services to “Clients” in return for fees. As far as the evidence reveals, the fees were determined by Cigno and BHFS had no control over the level of fees.
(f)Sixth, under cl 2.6, Cigno guaranteed repayment of the loans to BHFS and ultimately bore the financial risk of the loans.
Having regard to the above matters, I am not persuaded that the trial judge erred in concluding that Cigno did not act in the capacity as agent of BHFS. Accordingly, I would dismiss appeal ground 5.
For completeness, I note that, in determining appeal ground 5, I have not placed any weight on the respondents’ argument based on the trial judge’s finding that Cigno was acting as the agent of Ms Morrow. The respondents’ argument overstates the trial judge’s finding which was that, at all relevant times, Cigno was acting as the agent of Ms Morrow or on its own behalf (at J [127], emphasis added). It is not clear from the trial judge’s reasons whether this finding was in the alternative, or whether his Honour envisaged that some aspects of the services provided by Cigno involved Cigno acting as the agent of Ms Morrow and other aspects involved Cigno acting on its own behalf. The latter understanding of the finding might be supported by his Honour’s further statement that the Services Agreement supported the existence of an agency relationship between Cigno and Ms Morrow (rather than between Cigno and BHFS) (at J [129]), referring to a provision by which Cigno agreed, on behalf of Ms Morrow, to disburse Ms Morrow’s repayments proportionately between amounts owing to BHFS and amounts owing to Cigno (at J [131]). His Honour also referred to the agreed fact that Cigno dealt with BHFS on behalf of Ms Morrow (at J [134]). Despite those findings, there are many aspects of the Services Agreement which strongly suggest that Cigno did not undertake to act as an agent of consumers who accepted the terms of the Services Agreement, with the associated fiduciary duties, but rather as an independent contractor able to exercise contractual rights against the consumer’s interests in circumstances of default. I note in particular that:
(a)the agreement described itself as a “services agreement”;
(b)the agreement referred to the provision of services to the Client for which the Client pays fees to Cigno;
(c)Cigno had the right to collect payments due from the Client to BHFS and due to Cigno by way of direct debit;
(d)while Cigno undertook to allocate collected payments proportionately between the amounts owing to BHFS and Cigno, in the event of a shortfall the collected payments could be applied between BHFS and Cigno at the discretion of Cigno;
(e)if the Client’s repayments were at a deficit to BHFS, the Client agreed to make payments to Cigno until the deficit and the Clients’ obligations under the agreement were discharged;
(f)in the event of default, Cigno had the right to change the timing of direct debits to reduce the likelihood of payments being dishonoured and that, if the direct debit was dishonoured, Cigno was entitled to process the direct debit on subsequent days;
(g)in the event of default, it was the Client’s responsibility to contact Cigno and negotiate an alternative payment arrangement; and
(h)by entering into the agreement, the Client acknowledged that he or she understood that he or she had the right to get independent legal and financial advice before entering into the agreement.
ASIC did not appeal the finding that, at all relevant times, Cigno was acting as the agent of Ms Morrow. Accordingly, it is unnecessary to reach any conclusions about that finding on this appeal. It is sufficient to record that that finding does not affect my conclusion that Cigno did not act as an agent of BHFS in respect of the credit arrangements.
GROUNDS 2 AND 3
Grounds 2 and 3 of the appeal concern ASIC’s alternative case against BHFS and Cigno based on the alleged Composite Contract. By those grounds, ASIC contends that the trial judge erred in his interpretation of the expression “credit contract” in s 4 of the Code, read in light of the extended definition of “contract” in s 204(1), and thereby erred in holding that the “Composite Contract” did not constitute a “credit contract” within s 4 and a “continuing credit contract” within s 6(5) of the Code.
As observed above, ASIC advanced an alternative case against BHFS and Cigno alleging that the Loan Management Facilitation Agreement, the Loan Agreement and the Services Agreement constituted a series or combination of contracts, or contracts and arrangements, and were therefore a “contract” within the meaning of that term in s 204 of the Code (which ASIC described as the “Composite Contract”). ASIC alleged that the Cigno fees were charges made for the provision of credit under the Composite Contract.
The conclusions reached in respect of grounds 1 and 4 largely render moot the alternative allegations the subject of grounds 2 and 3. It is therefore strictly unnecessary to determine those grounds of appeal. Nevertheless, in case the matter goes further, I will briefly express my reasons for concluding that ASIC’s alternative allegations concerning the Composite Contract do not assist its case against either BHFS or Cigno.
In s 204(1), the word “contract” is defined as including “a series or combination of contracts, or contracts and arrangements”. In s 4, the expression “credit contract” is defined as “a contract under which credit is or may be provided, being the provision of credit to which this Code applies”. ASIC’s alternative allegation, as pleaded and maintained on the appeal, was that the Composite Contract was a credit contract within the meaning of s 4 of the Code because it was a series or combination of contracts, or contracts and arrangements, under which the BHFS credit is or may be provided.
It is important to observe that ASIC’s alternative allegation, as for its primary allegation, was that BHFS was the credit provider under the Composite Contract. No allegation was advanced that, by reason of the combined operation of the Loan Management Facilitation Agreement, the Loan Agreement and the Services Agreement, Cigno was a credit provider. The relevant credit was the loan advanced by BHFS which, by the terms of the Loan Agreement with debtors, created a deferred debt.
In those circumstances, ASIC’s allegation that the Cigno fees (and particularly the Financial Supply Fee) were charges made for the provision of credit within the meaning of s 6(5) is not affected by whether the credit arrangements are viewed as a combined contract, applying the extended definition in s 204, or simply as a series of commercially related contracts. Precisely the same issues arise on either approach. The application of s 6(5) requires the characterisation of the charge in question to determine whether it is made for the provision of credit being, on ASIC’s case, the credit provided by BHFS. Importantly, s 6(5) does not require that the charge be made under the credit contract.
In characterising the Cigno fees for the purposes of s 6(5), it is of course relevant to consider the totality of the commercial arrangements governing the imposition of the fees and the provision of credit. In the present case, that included the terms of the Services Agreement under which the fees were charged by Cigno, the terms of the Loan Agreement under which the credit was provided by BHFS and the terms of the Loan Facilitation Management Agreement which governed the commercial arrangements between Cigno and BHFS. However, the factual analysis of those commercial arrangements for the purpose of characterising the Cigno fees is not affected by the statutory definition of “contract” in s 204. To put it simply, the statutory definition does not alter the facts. The definition merely enables the Loan Management Facilitation Agreement, the Loan Agreement and the Services Agreement to be treated as a single contract (when they are not) when applying other provisions of the Code that depend upon the identification of a contract.
While each of ss 5(1) and 6(5) require the existence of a credit contract (and, in the case of s 6(5), a continuing credit contract), neither the existence of a credit contract, nor the identity of the credit provider, is disputed in this case. It is common ground that credit was provided by BHFS and, with respect to the existence of a credit contract, the statutory requirement is satisfied either by the Loan Agreement or, if the extended definition of contract in s 204 is applied, by the Composite Contract. The disputed issue is whether the Cigno fees were made for providing the credit. In the circumstances of this case, the determination of that issue cannot be affected by the extended definition of contract in s 204. Whether the provision of credit is treated, for the purposes of the Code, as having been effected under the Loan Agreement or the Composite Contract, the same question of characterisation of the Cigno fees arises.
It should be acknowledged that ASIC’s case against Cigno raised a separate issue that had the potential to be affected by the extended definition of contract in s 204. ASIC alleged that Cigno engaged in a credit activity by exercising the rights of BHFS in relation to a credit contract, which ASIC alleged was either the Loan Agreement or the Composite Contract, within the meaning of item 1(c) of s 6(1) of the NCCP Act. The rights of BHFS allegedly exercised by Cigno were the assessment of applications for loans and managing and collecting payments from the borrower. Those activities were governed by the terms of the Services Agreement. ASIC’s allegation was that, when analysed as part of the Composite Contract, those activities should be characterised as the rights of BHFS. Again, though, the factual analysis of the rights and obligations under the relevant documents is not affected by the statutory definition of “contract” in s 204. Merely because the Services Agreement can be treated as part of a combined set of arrangements constituting a credit contract does not convert a right held by Cigno into a right held by BHFS. As discussed below, the question whether Cigno engaged in a credit activity by exercising the rights of BHFS was not determined by the trial judge, and the preceding observations should not be understood as a determination of that question. My conclusion is only that the extended definition of contract in s 204 does not assist ASIC’s case on that issue.
In the circumstances, it is unnecessary, and therefore inappropriate, to express any view on the conclusion reached by the trial judge that the application of the extended definition of “contract” in s 204 of the Code is confined to circumstances in which none of the contracts to be combined effected a provision of credit and the provision of credit is only effected through the combination (J at [89]-[97] and [123]). On the basis of the facts and allegations made in the present case, the application of the extended definition cannot advance ASIC’s principal case against either BHFS or Cigno.
GROUND 6 AND RELIEF
By ground 6 of its appeal, ASIC contends that the trial judge erred in failing to find that:
(a)BHFS engaged in a credit activity within the meaning of item 1(a) and/or item 1(b) of s 6(1) of the NCCP Act (ground 6(a)); and
(b)Cigno engaged in a credit activity within the meaning of item 1(c) and/or item 2 of s 6(1) of the NCCP Act (ground 6(b)).
With respect to ground 6(a), it follows from the conclusions reached in respect of grounds 1 and 4 that the Code applied to the provision of credit by BHFS. It further follows that BHFS was a credit provider under a credit contract within the meaning of item 1(a) of s 6(1). Further, there was no appeal against the trial judge’s finding that BHFS was carrying on a business of providing credit (at J [82]) and it follows that BHFS carried on a business of providing credit, being credit the provision of which the Code applied to, within the meaning of item 1(b) of s 6(1). Appeal ground 6 should therefore be upheld.
With respect to ground 6(b), and as discussed above, the trial judge addressed the question whether Cigno acted as an agent of BHFS, but did not otherwise address or make findings as to ASIC’s allegations that Cigno engaged in a credit activity within the meaning of items 1(c) and 2 of s 6(1). As ASIC submitted, his Honour most likely considered it unnecessary in circumstances where he had found that credit provided by BHFS was not credit to which the Code applied. Given my conclusion that the credit provided by BHFS was credit to which the Code applied, appeal ground 6(b) should be upheld on the basis that his Honour failed to make findings with respect to ASIC’s allegations concerning Cigno.
As set out above, ASIC alleged that Cigno engaged in a credit activity by:
(a)assessing applications for loans and managing and collecting payments from the borrower and thereby exercised the rights of BHFS in relation to a credit contract within the meaning of item 1(c) of s 6(1) of the NCCP Act;
(b)suggesting that consumers apply for a credit contract with BHFS and assisting consumers to apply for a credit contract with BHFS and thereby provided a credit service within the meaning of item 2 of s 6(1) and s 7(a) of the NCCP Act; and
(c)by, in the course of Cigno’s business, acting as an intermediary between BHFS and consumers for the purpose of securing the provision of credit for the consumer under a credit contract with BHFS and thereby provided a credit service within the meaning of item 2 of s 6(1) and s 7(b) of the NCCP Act.
The determination of those allegations requires the Court to consider the meaning of the statutory language and apply it to the facts as found at trial. On the appeal, neither ASIC nor Cigno advanced submissions with respect to the meaning of the statutory language nor the determination of those allegations. The language of item 1(c) of s 6(1), and its application to the facts of this case, may raise issues for determination. In particular, while rights may be exercised on behalf of another by an agent, rights may also be exercised on behalf of another by a range of powers and authorities which do not necessarily involve the creation of an agency relationship. ASIC’s allegation requires the Court to determine whether Cigno exercised the rights of BHFS in relation to the Loan Agreements when Cigno assessed applications for loans and managed and collected payments from the borrower. The answer to that question requires an assessment of whether the rights exercised by Cigno were the rights of BHFS as opposed to the rights of Cigno. The language of item 2 of s 6(1), as further defined by ss 7, 8 and 9, is perhaps more straightforward in asking whether Cigno suggested that consumers apply for a credit contract with BHFS and assisted consumers to apply for a credit contract with BHFS or whether Cigno acted as an intermediary between BHFS and consumers for the purpose of securing the provision of credit.
In circumstances where the foregoing issues were not addressed by the trial judge and no submissions were advanced on the appeal as to the determination of those issues, the appropriate course is for the matter to be remitted to the trial judge for determination.
The relief sought by ASIC on the appeal included: an order setting aside the orders of the trial judge; declaratory and injunctive relief against BHFS and Cigno; and costs of the appeal. Perhaps by oversight, ASIC did not expressly seek its costs of the hearing before the trial judge.
Given the conclusions reached on the appeal, the appropriate orders to be made are to allow the appeal with costs; to set aside the orders of the trial judge; and to remit the proceeding to the trial judge for determination of ASIC’s allegations against Cigno and the form of relief. Although it might be possible for this Court to make orders for relief in respect of ASIC’s case against BHFS, it is not appropriate to do so for two reasons. First, on the hearing of the appeal it became apparent that the form of declaratory and injunctive relief sought by ASIC raised a number of issues that required further submissions from the parties which were not advanced in the course of the hearing of the appeal. Second, given the interrelationship of ASIC’s case against BHFS and Cigno, it is appropriate that the trial judge consider the appropriate form of relief against BHFS after a determination has been made in respect of ASIC’s case against Cigno. With respect to the costs of the trial, in the circumstances it is also appropriate that that issue be determined by the trial judge after the determination of ASIC’s case against Cigno.
CONCLUSION
In conclusion, I would uphold the appeal on grounds 1, 4 and 6. The appropriate orders are:
(a)The appeal be allowed with costs.
(b)The orders made on 23 June 2021 by the trial judge in Federal Court of Australia proceeding NSD 1088 of 2020 be set aside.
(c)The proceeding be remitted to the trial judge for determination of ASIC’s allegations against Cigno and relief.
I certify that the preceding two hundred and twelve (212) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O’Bryan. Associate:
Dated: 27 June 2022
35
12
11