Cigno Pty Ltd v Australian Securities & Investments Commission & Anor; BHF Solutions Pty Ltd v Australian Securities & Investments Commission & Anor

[2022] HCATrans 224

[2022] HCATrans 224

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S105 of 2022

B e t w e e n -

CIGNO PTY LTD ACN 612 373 734

Applicant

and

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

First Respondent

BHF SOLUTIONS PTY LTD ACN 631 775 123

Second Respondent

Office of the Registry
  Sydney  No S106 of 2022

B e t w e e n -

BHF SOLUTIONS PTY LTD ACN 631 775 123

Applicant

and

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

First Respondent

CIGNO PTY LTD ACN 612 373 734

Second Respondent

Applications for special leave to appeal

KIEFEL CJ
GORDON J
JAGOT J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON THURSDAY, 15 DECEMBER 2022, AT 11.29 AM

Copyright in the High Court of Australia

____________________

MR J.C. SHEAHAN, KC:   May it please the Court, I appear with my learned friend MR R.J. MAY in each matter for Cigno Pty Ltd.  (instructed by Elliott May Lawyers)

MR R.G. McHUGH, SC:   May it please the Court, I appear with my learned friend MR J. ENTWISLE for the second respondent in the first of the matters and the applicant in the S106 matter.  (instructed by Morris Mennilli Pty Ltd)

MR J.T. GLEESON, SC:   May it please the Court, I appear with MS M.N. ALLARS, SC, and MS C.G. WINNETT – they are remote – for ASIC in each matter (instructed by Australian Securities & Investments Commission)

KIEFEL CJ:   Yes, Mr Sheahan.

MR SHEAHAN:   Your Honours, the debates about the construction of subsection (5) of section 6 in this matter took us slightly off course.  Both at first instance and on appeal, ASIC’s argument was that the expression “charge for providing credit” meant a charge in exchange for credit or a charge being a quid pro quo for credit.  And that was common ground up to that point, with our side.  ASIC, however, said that “in exchange for” could be satisfied if the charge was for services that were a necessary condition of the provision of credit or, as they put it in the Full Court, in a formulation adopted by Justice Lee in his separate reasons, the charges were part of the architecture that creates and effectuates the giving of credit. 

So, in short, the idea was, as elaborated, that the charge would be in exchange for providing credit if it was a charge for services necessary for the provision of credit.  Now, for two reasons, both identified by the primary judge, that reasoning fails.  It fails at a factual level in this case because Cigno Services were not, in any sense, a precondition to the providing of credit.  It was an agreed fact ‑ ‑ ‑

GORDON J:   Does the precondition element of that matter?

MR SHEAHAN:   I put it that way, because it is the way that ASIC had argued it at trial and it seems to be the way it was argued on appeal as well, when they talk about this being an element of the architecture for creating and effectuating.  So, it was common ground, and an agreed fact that the borrowers could sidestep Cigno completely and deal with Mr McHugh’s client directly.  One sees that dealt with by the primary judge at paragraphs 146 and 147.  So, in other words, my client’s services were neither unnecessary nor a sufficient condition for the providing of credit.

The second problem with ASIC’s reformulation of “in exchange for” was one of principle and it was that in reformulating the concept as it did, ASIC redirected the inquiry to the wrong stage of the process.  A charge for a service provided by a third party to facilitate the provision of credit is not, in ordinary parlance, a charge for providing credit or in exchange for credit.  And that problem obtains whether or not you treat the expression “in exchange for” as having a more legal sense or having, as the plurality in the Full Court said, a practical commercial sense.  To take the example given by the primary judge, in ordinary commercial practical parlance, you would not say that fees for the provision of an accountant’s verifying certificate for a statement of position were fees in exchange for providing credit.

Now, things took a different course in the reasoning of the plurality on appeal.  Their reasoning had four steps.  The first was to identify two available meanings from the dictionary of the expression “for”.  The focus was on the expression “for”, and we see this in paragraphs 156 and 158 of their reasons at pages 105 and 106 of the book.  The two formulations that they said were open were “in exchange for”, which had been adopted by both parties below, although with a nuance on the part of ASIC, or, alternatively, “by reason of”.

GORDON J:   There was a third, “on account of”, was there not?

MR SHEAHAN:   “By reason of” or “account of” – they come from the same line of the definition from the dictionary, and if you look at the examples they have exactly the same sense.  It is essentially pointing to a causal link – you know, famed for beauty; it is a causal link between the fame and the beauty, is one of the examples given.  So, it is essentially a causal concept.  That was the first step.  And it is important to note, we think, that that second alternative – “by reason of” or “account of” – had not been contended for, so far as we recall, by either side.

The second step in the reasoning was that there was no textual reason to prefer one over the other.  The third step in the reasoning was that contextual considerations that had been relied upon heavily by the trial judge were neutral on proper analysis, and that led to the fourth and perhaps decisive consideration, which was that considerations of statutory purpose supported the adoption of a broader construction of “for” so as to give a narrower operation to this carve‑out from the operation of the statute. 

The result, which one can see at paragraph 179 of their Honours’ reasons at application book 112, was that the Court adopted both of two different meanings of the expression “for”:

in exchange for, on account of or by reason of the provision of credit.

I say both because I am treating “on account of or by reason of” as being substantially synonymous.  There are ‑ ‑ ‑

GORDON J:   Do you propose to critique what seem to be from paragraphs 169 through to 172, to contend that they are wrong in the sense that the considerations are irrelevant or they do not have the weight that are attributed to them?

MR SHEAHAN:   The statutory purpose considerations?

GORDON J:   Yes.

MR SHEAHAN:   I will get to them, and I will critique them.  Our submission is that at every one of those four steps – save perhaps the first one, identifying alternative meanings – the Full Court’s reasoning erred for the following reasons. 

The first problem arises from the fact that – it is not sufficient to focus on the word “for” as the court did.  The expression is “charge . . . for providing”.  At least as the majority deployed their definition, the two meanings that they chose – “in exchange for” and “by reason of” – are not equally open.  “By reason of” was consistently used by the court with reference to the expression, “the provision of credit” or “credit being provided”.  Your Honours can see that in their conclusory paragraph at 179:

a charge . . . in exchange for, on account of or by reason of the provision of credit –

and, similarly, at 158, where they speak of it being “provided”.  This simple change looks like a simple change from providing the present participle to a noun provision or the passive voice being provided has significance because it makes the subject of the providing disappear – that is, the lender.  It is common ground in this case that the person providing the credit was BHFS – Mr McHugh’s client, not mine.

The second problem is that the plurality was, with respect, wrong to dismiss the contextual considerations that have been relied upon by the trial judge.  We support his reasoning as being correct, but I just want to highlight one aspect of this.  It is striking – not neutral, striking, that section 6(2) – which we can see at page 90 of the book – addresses precisely and with care the concern the plurality identified as warranting a broad construction of the word “for”.  They saw it as warranted to ensure that the remedial provisions of the Code are not easily avoided by carefully structured credit arrangements. 

That is exactly what subsection (2) does, but it only operates in relation to subsection (1).  Your Honours will see that subsection (2) operates in the chapeau, whether or not the charges are payable under the contract.  It extends to, in (a), charges:

payable by the debtor to any person for an introduction –

in (b), charges:

payable by the debtor to any person for any service –

if there has been an introduction, and, under (c):

to the credit provider for any service –

The Court, at 167, diminished the significant of this because this provision, subsection (2), was inserted after subsection (5).  But, that emphasises, rather than detracts from, its significance because no similar change was made at the same time to subsection (5) which attracts the exactly the same issue of the possibility of structuring to avoid; the issue that the Court relied upon to support a broad construction – as they call it – of the word “for”.

The third problem – and this is getting to your Honour Justice Gordon’s question was that the court misunderstood the role and significance of statutory purpose in this context.  There are these problems:  first, the Court identified the relevant statutory purpose at too high a level of generality.  They said it was to protect consumers from unscrupulous and unfair lending practices.  But, focusing on statutory purpose at that level leads one naturally – as it did here – simply into a bland discussion about broad as opposed to narrow constructions.

KIEFEL CJ:   It is clearly correct in relation to the act as a whole though, is it not?

MR SHEAHAN:   It is not an untrue statement.  Our next point is that it is an incomplete statement in a material sense.  But, the fact that it is correct does not mean that it identifies purpose that is useful for statutory interpretation when you get to a particular provision.

GORDON J:   Is that right in this context, where one is looking at – if one puts to one side your complaint about 6(2) and its operation – when we are dealing with what is a structured arrangement?

MR SHEAHAN:  

Your Honour, it is, in our respectful submission, because – and this is our third point, really, and perhaps the most important of the three – 6(5) is a boundary provision.  The purpose that the Full Court has identified is a purpose that you could describe accurately overall to the whole statute.  Section 6(5) is saying, in effect:  this far, and no more.

KIEFEL CJ:   Quite so.  On one side of the line, there is the overall, general purpose of consumer protection, and I think what the Full Court was referring to was on the other side of the line as avoidance; and you give a broader construction to avoid the line being taken into the avoidance area.

MR SHEAHAN:   Your Honour, what you would certainly do when you have one of these boundary provisions is say if one construction substantially undermines the statute because it gives it a much narrower scope than can have been intended, yes, the statutory purpose may be of some guidance.  But here, our learned friends rely on the fact that this activity of the applicants was a niche.  No one else was doing it.

KIEFEL CJ:   That goes to the question of whether leave should be granted even if you are right about the construction.

MR SHEAHAN:   This particular activity was niche.  The potential significance of the construction adopted by the Full Court is not niche.  I will come back to that.  We say it is a boundary‑drawing provision, and merely to point to the general purposes does not tell you much about how far Parliament has said its objects are to go.  I said that the description of the intent of the statute was incomplete.  We have quoted in our submissions at 21 on page 136 from the statement of the objects of the Act that appears right up the front of the explanatory memorandum, and it is:

ensuring “strong consumer protection through ‘truth in lending’, while recognising that competition and product innovation must be enhanced and encouraged by the development of non‑prescriptive flexible laws.”

So you have there an explicit statement of the statutory objects that, in effect, point in divergent directions.  If you take that as what this legislation is about, it does not drive you to a conclusion one way or the other about the scope of the expression “for” in section 6(5).

There is a potential real world consequence for this because the buy now pay later structures often rely on section 6(5) as an exemption and they are typically structured on the basis that the merchant pays a fee by reason of the provision of credit, and there is no reason – just looking at the words of the section – to say that the fee has to be paid by the borrower, the recipient of the credit, as opposed to someone else.  There is potentially enormous significance to that and that might have underlain the fact that when the product intervention order was made, which operates for about 18 months, it specifically excluded buy now pay later arrangements – specifically excluded it.

The final problem with the way the Full Court approached the question of construction was that in requiring an evaluative assessment of all the circumstances and then adopting two different constructions, the court encouraged uncertainty, ambiguity and doubt in a criminal provision for which clarity is required.

Unless your Honours have any further questions about those matters, I was going to turn over to Mr McHugh to deal to deal with the balance.

KIEFEL CJ:   Yes, thank you, Mr Sheahan.

MR McHUGH:   Your Honours, I adopt my friend’s submissions on the questions of construction and the use of the statutory purpose.  What I was going to develop was a discrete point, which I do not think will take me very long, dealing with the use that can be made of agreed facts under the Evidence Act in a case such as the present where a regulator brings forward a case that has potential civil penalty consequences.  The form that this case took was for declarations and injunctions, but under section 167 of the Credit Act, as soon as there is a declaration ASIC can seek a civil penalty; that is, the court may order that a civil penalty be paid off the back of the declaration.

So, that is the context that my client was facing when the application was brought.  The question is, what can a Full Court do where the parties – as is very common these days – agree facts in a complex regulator case, which has a number of advantages from the point of view of the regulator and the court – that there is a huge advantage of efficiency and not having to lead a lot of evidence.  From the point of the defendant in the case, there is the great certainty, or the great advantage of the certainty, of knowing exactly what the facts are.

What happened in this case was there was a very carefully negotiated and extremely precise statement of agreed facts.  Justice Halley made findings in accordance with those agreed facts and his Honour did not qualify them in any way.  He made findings that accepted all of the agreed facts.  On appeal, ASIC made no challenge to any of the primary facts at all.  It was only the ultimate conclusion about the application of the law to the facts, but no challenge to any primary fact, and it did not seek any additional finding of facts of any kind at all.

This becomes very important because, in the crucial part of the reasoning that I will come to, Justice O’Bryan, giving the reasons of the plurality, emphasised one fact which his Honour found – for the first time on the Full Court – which, as I will endeavour to show, was not reasonably open in any event, was not sought by ASIC, and was crucial to his Honour’s reason.

So, where we should pick it up – if we might – is in, most conveniently, Justice Halley’s judgment.  That is in the application book page 14 where his Honour sets out at paragraph 15 what Cigno’s business was – because one of the agreed facts concerned the services that Cigno was providing.  He said there is a list on paragraph 15 quoting paragraph 11 of the agreed facts and, as one goes down the list, we see 11.1 to 11.6.  Those are all things that Justice O’Bryan fastens on in the crucial passage of his reasoning later on.  But you see after 11.6, 11.7, Cigno:

assisting its customers to apply for a credit limit increase –

that would clearly be something that happened after they had already been given the loan.  At 11.8:

maintaining accounts –

happens after they have been given the loan.  At 11.9:

arranging for collection of payments –

is after the loan has been provided.  At 11.10:

change the payment terms –

in 11.11:

customers’ inquiries –

and 11.12:

sending account statements –

These are all things that would happen after the credit was provided.  And after 11.13, we see there defined as:

(the Cigno Services).

Then, importantly in 14 – that is agreed fact 14:

Cigno charged its customers for the Cigno Services and was paid by its customers for those services under terms of an agreement . . . (Services Agreement).

So, just stopping there, the agreed fact is undifferentiated as to which services are attributable to which fees and as to the time at which the particular fee for the particular service arises.

Against that background, if we can go into the Full Court’s judgment – and we pick it up at paragraph 56, which is in the book at page 79.  There, Justice O’Bryan quotes from the services agreement between Ms Morrow and Cigno.  As you see at the start of paragraph 56:

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 –

which I interpolate are undifferentiated:

the Client agrees to remunerate the Service Provider in the following manner –

and then you see that there are some fees, one of which is the financial supply fee, which was the key to this case.  So, coming over to paragraph 60, Justice O’Bryan correctly says that:

The Services Agreement was otherwise silent about the Financial Supply Fee; it did not 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 so on.  Then his Honour refers to:

an agreed fact that the Financial Supply Fee was calculated by Cigno as the sum of a base fee $13.00 and 60% of the loan amount.

I will need to come back to that later, because his Honour does not refer to the other part of the agreed fact, which was that it was calculated by reference to the number of repayments.

KIEFEL CJ:   Mr McHugh, I know I am interrupting you, but where does this point that you are making – where does it arise in relation to any of the grounds of appeal which relate to construction?

MR McHUGH:   It is not.  It is the third ground of appeal in the BHFS application and it is the finding that I am coming to via paragraph 60 that his Honour makes at paragraph 182(a), which is that – this is application book 113.  Paragraph 182, his Honour says:

Critically, it ignores the following facts:

(a)First, the services supplied by Cigno in return for the Financial Supply Fee . . . were all anterior to and directed to the provision of credit –

The reason why that is so important in his Honour’s reasoning is, as your Honours see at paragraph 185, his Honour says:

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 . . . 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.

So, crucial to his Honour’s reasoning – his Honour’s word is “critically” – is this finding that his Honour makes for the first time that all of the services for which the financial supply fee were payable were all anterior.

KIEFEL CJ:   So, Mr McHugh, ground 3 is not really about construction at all.  It is about the application of the construction to the facts of the case.

MR McHUGH:   It is, your Honour, but the way I am coming into it is ground 3 refers to that finding ‑ ‑ ‑

KIEFEL CJ:   But what it really points out, ground 3, once we understand what it is actually about, is that it points up that it is about the particular business model of the respondent – of the applicant and the respondent, particularly Cigno and BHF.

MR McHUGH:   On the facts, it is about what was happening on the business model, I accept that.  But the complaint relevant to section 191 is this.  What I was coming to, and I will have to go back ‑ ‑ ‑

GORDON J:   Can I ask you two questions.  Is your complaint that he drew an inference, or made a finding – is it that he cannot do that?  Or is it the nature of what you say he drew?

MR McHUGH:   It is both.  It is – first of all, he cannot draw any ‑ ‑ ‑

GORDON J:   I do not quite understand the first submission, Mr McHugh.  I had always understood that even with agreed facts, inferences could be drawn.

MR McHUGH:   There are limits to the inferences that can be drawn, and I need to take up the text of 191.  Your Honours will find that ‑ ‑ ‑

KIEFEL CJ:   It is not looking a very attractive point for a hearing in the Full Court.

MR McHUGH:   I need to explain the limits on what the point is.

KIEFEL CJ:   We are going to parse agreed facts and have a look at other facts, are we?

MR McHUGH:   The section specifically says – section 191 – that one cannot contradict or qualify agreed facts without leave.  That is not saying one cannot draw an inference ever, but one cannot do it without a particular process being followed that grants natural justice to persons – to litigants.

KIEFEL CJ:   Are you saying that it was no part of the parties’ case and his Honour did this?

MR McHUGH:   Exactly.  There was no part of the parties’ case; ASIC never asked for it ‑ ‑ ‑

KIEFEL CJ:   So it is a procedural fairness point?

MR McHUGH:   But it is wrapped up in what one can do with agreed facts.  The procedural fairness point emerges out of the fact that one cannot qualify or contradict an agreed fact without leave being given to the parties, and the submission is that what his Honour did here in making that finding was one that was made very much to qualify the agreed facts.  The agreed facts were undifferentiated as to the services for which the financial supply fee was being paid.  His Honour made a finding – not at anybody’s behest, and without any notice to us – that qualified that finding in a way that was highly material to the decision that his Honour made on the facts, and if we had been given any notice that that was going on, we could have pointed to other evidence that showed that that is not the conclusion that should be drawn.

Part of that evidence is that there is an agreed fact that his Honour did not refer to – which is that the element I referred to a moment ago – that in calculating the financial supply fee, the number of payments was taken into account.  There was a document in the court book – to which my friend Mr Gleeson refers in his submissions – that showed the basis upon which that fee was calculated, and the percentage increased if there were more repayments.  The reason for that is obviously because there is more work to be done by Cigno in managing multiple payments; the more payments there are, the more accounts they have to send out, the more collections they have to do.  That clearly, in my submission, means that the fee is referable to things that are happening after the credit is provided.  I understand what your Honour the Chief Justice puts to me about whether the point is in appealing one, about limiting what can be done ‑ ‑ ‑

KIEFEL CJ:   Putting it in more technical terms, it might not – if there is a point of construction, or there is a point about what may be done with agreed facts, I am not sure that this is a great vehicle for it to be done.

MR McHUGH:   My submission is that it is a smashing vehicle in which to do it.

KIEFEL CJ:   Of course that is your submission.

MR McHUGH:   For this reason, it is clear on the facts of what happened here that that is precisely what Justice O’Bryan did.

GORDON J:   That is the question, is it not?  What, would you have us sit there and somehow work out whether or not it is a qualification or contradiction as distinct from an additional finding of an additional fact, which is not prohibited or an inference drawn which is not prohibited.

MR McHUGH:   But the exercise, your Honour Justice Gordon ‑ ‑ ‑

GORDON J:   Sorry, I just missed all that.

MR McHUGH:   I am sorry.  The exercise, your Honour Justice Gordon, just described is a straightforward one on the judgment with which we are dealing, on the agreed facts, and on the judgment ‑ ‑ ‑

KIEFEL CJ:   But, as I said before, what this really highlights is that we would be getting into what is the business model and how it all works.

MR McHUGH:   On the basis of the very carefully and precisely agreed facts, which are in short compass, but, your Honours, there is not much more I can say about that point.  That is the nature of the point.  It is one that does, in my submission, involve a question of construction.

KIEFEL CJ:   I am sure the point was not obvious to those who referred the matter in for oral argument.

MR McHUGH:   Well, I cannot say anything on that, your Honour.

May it please the Court.

KIEFEL CJ:   Thank you.  Yes, Mr Gleeson.

MR GLEESON:   Thank you, your Honours.  The first reason to refuse special leave is the lack of general importance.  The affidavit put on by ASIC demonstrates that Mr Sheahan says it is a niche model, yet they are the only ones doing it.  They stopped doing it 18 months ago.  They may be doing other things, but they have stopped doing this 18 months ago before the judgment.  It has been banned by ASIC under a product order, and buy now pay later arrangements are different and have nothing to do with the case.  So, that is the first answer.

Secondly, I just want to deal with Mr McHugh’s suggestion, which has gone from an argument about the construction and application of section 191 of the Evidence Act to a complaint about the drawing of inferences, and finally to a complaint about denial of procedural fairness.  Your Honours would not entertain that as a suitable appeal, even just given that description I provided of the shift, but these are the short answers to it.  If your Honours have page 10 of the book, the primary judge carefully noted that the statement of agreed facts provided:

much of the relevant factual foundation –

but clearly not all, and it annexed the documents, and there were supporting affidavits, and all of that left for both the primary judge and the Full Court the question of drawing the appropriate evaluative inferences as to what these contractual arrangements meant and how the law applied to them.

ASIC fully, before the primary judge, put the arguments which, if ultimately succeeded on on the appeal, the suggestion to the contrary is wrong.  For example, at page 44 between paragraphs 145, and page 45, particularly paragraphs 151 to 152, ASIC was squarely contending for a characterisation of the agreements such that the financial supply fee was being charged both for Cigno services and for the provision of credit by BHF.

That argument was then, again, pressed on appeal, contrary to what was put by the applicants today.  That is found in the Full Court at paragraphs 136 to 137, page 100, and particularly 136, there is an argument about construction of the statute, and 137 was a ground of appeal squarely directed to the primary judge’s characterisation of what the agreement was for.  You can see the argument put over on page 101, and that is the argument upon which ASIC succeeded before all judges in the Full Court.  So, there is nothing in the complaint of procedural fairness, nothing in the complaint of inferences wrongly being drawn.

If your Honours look at those inferences – it is on page 80.  It is particularly paragraph 60 that Mr McHugh complains about.  Justice O’Bryan says, I have something called a financial supply fee – based on its name – without further description of precisely what it is for.  It looks like I am charging you for supplying finance to you through BHF.  That looks a little like a supply – a charge for the provision of credit.  He refers to the agreed fact that it is $13 plus 60 per cent of the loan amount.  So, the ad valorem nature of it – 60 per cent of the loan amount – clearly tends to suggest it is a charge for providing the credit.  Then, his Honour refers to the agreed fact that it is only payable if you get the loan.  So, it is only payable on success of achieving the loan – that seems to make it a charge for the supply of credit.  The inference that, perhaps, Mr McHugh really is trying to discharge – as in, remove – is the statement:

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.

GORDON J:   I asked Mr McHugh two questions.  One was whether or not it was permissible to draw that inference and he said, no ‑ ‑ ‑

MR GLEESON:   Yes.

GORDON J:    ‑ ‑ ‑ which I think was premised on it being inconsistent, or contradictory, of an agreed fact.  Do you accept that submission?

MR GLEESON:   No.  It is not inconsistent with any agreed fact.  The agreed fact is that the charge was made under the agreement set out at paragraph 56, where it is described as a financial supply fee and it is contrasted with an account‑keeping fee – which is, obviously, for maintenance – and it is contrasted with other fees which are, obviously, for things happening under the contract.  So, it is not inconsistent with that to say, looking at the whole of these agreed facts, what is it for?  I do not think your Honours have heard in writing – or even orally – today, what the applicants say the fee was for if it was not for what it is that sentence on page 81.

Mr McHugh mentioned that he wants to argue that the ad valorem nature of the fee might vary depending upon how many repayments there were.  That would only confirm that it is for the provision of this credit.  It would not produce any inconsistency with that.  So, that conclusion, on page 81, then identifies quite precisely six services of Cigno.  They are six of the services which had been identified in the agreed fact at paragraph 41 – they are the first six services.  The conclusion is that is what it is for.  The other paragraph of which he complained – which is 182 – which is accepting the argument that ASIC put; it is not Justice O’Bryan on some frolic – paragraph 182, page 113.  It is the factual finding this is what it is for. 

So, there is little prospect the Court would engage in an exercise of examining whether this inference should be, in any way, qualified.  There is no real suggestion of what would be the serious alternative inference.  Once that is the finding of fact, the rest of the case, as a matter of law, is straightforward.

Your Honours, could I turn to the law in Mr Sheahan’s submissions.  Those submissions, at least orally, do not grapple with the provision – this is on page 165 – in section 5(1)(c).  Critical to Justice O’Bryan’s decision was that one of the four criteria for the imposition of the Code is that:

a charge is or may be made for providing the credit –

If you do not have that criteria, along with the other three, the Code does not apply.  That is the identical language, observed Justice O’Bryan, that is used in the exception in section 6(5).  So, it is not simply a case, as Mr Sheahan says, of what is the purpose of a boundary provision.  It is to understand what did it mean to say that the charge is may be made for the providing of credit to bring you within the Code in the first place.  As Justice O’Bryan correctly observed, it is not limited to a charge made by the credit provider, it is not limited to a charge made under the credit contract, and it is not limited to any particular form of charge; anything which in a proper, real‑world commercial analysis is something I have to pay in order to get the credit satisfies that condition and brings me within the Code.

So, an example would be, if the applicants change their business model and BHF did not charge the $15, but Cigno charged a $500 introduction fee to obtain the BHF loan, we would say that would be a charge for providing the credit, because I have to pay $500 to get the credit.  The argument of the applicants is, no, you would escape the Code altogether because there is no direct contractual consideration for the credit.

That type of reasoning about section 5(1)(c), which we submit is impeccable, is what Justice O’Bryan was dealing with at paragraph 171 on page 110.  Your Honour the Chief Justice asked about the role of avoidance in the proper purposive construction.  It has a very clear role, as his Honour indicated, that if you take their submissions, a lender can escape the Code altogether by simply structuring the whole of the fees as referrable to an activity essential to obtaining the credit, but not charged in terms under the contract for the credit.  So the construction is not only textually and contextually sound, but purposively it must be right in terms of section 5(1)(c).

Your Honours, the only other point of construction I wanted to mention was Mr Sheahan relied heavily on a different exception which is section 6(2), and this was the approach the primary judge relied upon.  Section 6(2) is a different type of exception.  It says you have to look at all the credit fees and charges imposed or provided by the contract; that is, under the contract.  I am sorry, I am going to start with 6(1) – that it does not apply if you meet three conditions.  So it is short term, less than 62‑day contract.  There is a maximum on the credit fees of 5 per cent and there is a maximum interest which turns into 24 per cent per annum.  So, that is identifying one type of short‑term lending where, because of those caps, the

Parliament has considered the general provisions of the Act do not need to apply.

In that context, under 6(2), as a further anti‑avoidance provision, charges made outside the contract would be deemed to be made under the contract if they are, for instance, introduction fees.  So, what that is trying to tell us is that an introduction fee is something which could be a charge for the provision of credit under section 5(1)(c) and it is regulated in this fashion.

What that leaves, your Honours, is a very straightforward purpose for section 6(5) – it is a very narrow exception.  If the only charge – whatever be its nature, whoever it be paid to – which has to be paid to get the credit is fixed and not greater than the small limit, then the Code does not descend – but not otherwise.

If your Honours please, they are our submissions.

KIEFEL CJ:   Yes, thank you.  Is there anything in reply, Mr Sheahan?

MR SHEAHAN:   Just briefly, your Honours.  In relation to the proposition that buy now pay later arrangements are completely different, which our learned friend put, can I just draw your Honours’ attention to the application book at page 292, paragraph 21(c).  This an ASIC discussion paper in relation to the buy now pay later industry.

GORDON J:   What page did you say, Mr Sheahan?

MR SHEAHAN:   Page 292.

GORDON J:   Thank you.

MR SHEAHAN:   Your Honours will see in paragraph 21 – it says two entities, 21(a):

do not charge consumers for providing the credit –

but then in (c), it says:

The remaining four . . . offer continuing credit contracts not regulated . . . because –

and the note indicates that what is relied upon by those BNPL providers is section 6(5).  If you go back to the previous page, you will see a diagram that sets out the structure for these transactions – a typical structure.  In the

middle of the diagram, between “Merchant” and “Buy now pay later provider”, it says:

Provider pays the merchant for the purchase (minus merchant fees) –

and paragraph 19 says:

Each provider in our review charges merchants when consumers use a buy now pay later arrangement.

Now, our learned friends’ construction, which says – or the Full Court’s construction of the loan, if there is a charge by reason of the loan, it is a charge for the loan on the face of it, seem to apply.  That will be part of the explanation, we think, for the exclusion, as we see it, of by now pay later arrangements from the product intervention order, which currently obtains, which your Honours can see at the application book commencing at page 236.  The definition of by now pay later arrangements is on 238, and the exclusion of them from the product intervention order is in clause 6 on page 241 – clause 6(3)(a).  So, the significance is potentially very wide, your Honours.

KIEFEL CJ:   Thank you, Mr Sheahan.  Mr McHugh?

MR McHUGH:   Your Honours, the only point that I would be making would be to repeat myself, that my friend did not explain in any way why it was that the finding at 182(a) – that is, that all of those services were anterior – why it was that that is not a qualification of the undifferentiated agreed fact.  My submission point is very fairly open on the way in which the Full Court decided the case

KIEFEL CJ:   Thank you.  The Court will adjourn briefly to discuss the course that it will take.

AT 12.15 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.19 PM:

KIEFEL CJ:   In our view, these applications raise no question of general importance.  They involve the application of a statutory provision to a particular business model used by Cigno Pty Ltd and BHF Solutions Pty Ltd.  The proposed ground based on denial of procedural fairness has insufficient prospects of success.  Special leave in each application is refused with costs.

The Court will now adjourn until 12.30 pm.

AT 12.19 PM THE MATTERS WERE CONCLUDED