COMMISSIONER FOR CONSUMER PROTECTION and CHEQUECASH PTY LTD
[2009] WASAT 244
•11 DECEMBER 2009
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: CONSUMER CREDIT (WESTERN AUSTRALIA) ACT 1996 (WA)
CITATION: COMMISSIONER FOR CONSUMER PROTECTION and CHEQUECASH PTY LTD [2009] WASAT 244
MEMBER: MR T CAREY (MEMBER)
HEARD: 2 OCTOBER 2009
DELIVERED : 11 DECEMBER 2009
FILE NO/S: CC 1726 of 2007
BETWEEN: COMMISSIONER FOR CONSUMER PROTECTION
Applicant
AND
CHEQUECASH PTY LTD
Respondent
Catchwords:
Consumer credit - Misstatements of total interest charges payable - Civil penalty - Factors prescribed by s 102(4) of Consumer Credit (Western Australia) Code - Costs
Legislation:
Consumer Credit (Western Australia) Act 1996, s 7(1)
Consumer Credit (Western Australia) Code, s 15, s 15(E), s 15(G), s 100(1), s 102, Sch 1 s 1(1)
State Administrative Tribunal Act 2004 (WA), s 3
Result:
Contraventions of Consumer Credit (Western Australia) Code found
Civil penalty of $10,000 imposed
Costs awarded to applicant
Category: B
Representation:
Counsel:
Applicant: Ms L Black
Respondent: Self-represented
Solicitors:
Applicant: Department of Commerce
Respondent: Self-represented
Case(s) referred to in decision(s):
Associated Premium Funding Pty Ltd v Director Consumer Affairs Victoria [2003] VCAT 1492
Avco Financial Services Ltd v Various Debtors & DirectorGeneral, Office of Fair Trading (Commercial) [2003] NSWCTTT 776
Commissioner for Consumer Protection and Hawaii Pty Ltd [2008] WASAT 22 (S)
Department for Consumer and Employment Protection and Chequecash Pty Ltd [2008] WASAT 168
Department for Consumer and Employment Protection and Chequecash Pty Ltd [2009] WASAT 168(S)
Department of Consumer and Employment Protection and Chequecash Pty Ltd [2009] WASC 18
Qantas Staff Credit Union Limited v Director-General, Department of Fair Trading (as it then was) (Commercial) [2003] NSWCTTT 823
Qantas Staff Credit Union Ltd and Various Debtors [2007] WASAT 162
Qantas Staff Credit Union v Various Debtors (Commercial) [2006] NSWCTTT 578
Westpac Banking Corporation Ltd v Various Respondents (No 4) (1992) ASC 56187
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicant sought a civil penalty against the respondent in relation to admitted contraventions of a 'key requirement' of the consumer credit legislation that credit contracts specify the total amount of interest charges payable under them. Its principal complaint was that the respondent had in its credit contracts specified an inflated amount for the interest charges payable, which was explained by a failure of the respondent's computer program to recognise reductions in interest in cases where repayments were to be made over the life of the loan. Some 989 cases of overcharging were identified.
The parties were in disagreement as to the appropriate amount of the penalty. The applicant relied upon the respondent's systemic failures which allowed the contraventions to occur and continue without detection for some seven years, the losses which were incurred in the first instance which, although not great in absolute terms, were of significance to the borrowers concerned, and the need for deterrence for both the respondent and other credit providers. The respondent pointed to the swift action taken upon being notified of the contraventions to reimburse the borrowers and rectify its computer system to prevent recurrence, the inadvertent nature of its breaches, and its complete cooperation with the applicant in relation to its requirements.
The Tribunal set out its considerations against the framework of a set of relevant factors which the legislation prescribed. It made reference to some decided cases which the parties sought to rely upon or distinguish, whilst noting that the benefit to be derived from other cases was limited. Taking all matters considered into account, it determined that a civil penalty of $10,000 was appropriate.
The Tribunal also upheld the applicant's application for costs, against the respondent's opposition, on the basis that the application was sufficiently analogous to disciplinary proceedings of professional regulatory bodies, where an exception to the general presumption in the Tribunal against costs orders operates.
Application and chronology
The applicant seeks a civil penalty pursuant to s 102(2) of the Consumer Credit (Western Australia) Code (Code) in respect of admitted contraventions by the respondent of s 15(E) of the Code, which is a prescribed 'key requirement' in accordance with s 100(1) of the Code, in respect of a number of credit contracts entered into by the respondent.
On 28 July 2008, the Tribunal declared that the respondent had not contravened the key requirement as alleged and dismissed the application: Department for Consumer and Employment Protection and Chequecash Pty Ltd [2008] WASAT 168 (original decision). On an appeal from this decision by the applicant to a single judge of the Supreme Court, the Tribunal's decision in this respect was set aside and the matter was remitted to the Tribunal for reconsideration: Department of Consumer and Employment Protection and Chequecash Pty Ltd [2009] WASC 18 (appeal decision).
To complete the chronology of decisions relating to the matter, on 21 July 2009, the Tribunal determined as a preliminary issue that evidence obtained by the applicant unlawfully, upon which the application depended, should not be excluded: Department for Consumer and Employment Protection and Chequecash Pty Ltd [2009] WASAT 168 (S) (unlawful evidence decision).
Factual Background
As I said in the original decision, many of the facts pertinent to the matter were set out in the parties' statement of agreed facts, and that statement is reproduced here.
1. At all material times, the respondent was the holder of a credit provider's licence pursuant to the Credit (Administration) Act 1984 [WA] and carried on business as a credit provider trading as Financial Express Highgate, Financial Express Morley and Financial Express Victoria Park.
2.Between the period approximately 1 August 2002 and 8 December 2007 the respondent entered into 13,525 written credit contracts from its Highgate, Morley and East Victoria Park offices with various individual consumers of which 3,443 were contracts which charged interest (the credit contracts).
3.The credit contracts each included the following clauses:
1.1Balance means the difference between all amounts credited and all amounts debited to the Customer under this Contract.
…
1.5Daily Balance means the Balance at the end of a day.
…
5.Interest Charges
5.1 The annual percentage rate that applies to this Contract is set out in Item 4 of the Loan Summary …
5.2The daily percentage rate is the Annual Percentage Rate Divided by 365.
5.3Interest charges, including default interest charges, will be calculated on a daily basis by applying the daily percentage rate to the Daily Balance.
4.As part of its proactive compliance activities in 2007, the applicant identified that the respondent had incorrectly calculated interest under a number of the credit contracts. This included calculations where the amount of interest specified as payable under the credit contract was greater than the actual interest when calculated in accordance with cl 5 of the credit contracts. This resulted in borrowers being charged interest which was greater than the interest due under the credit contracts and which also breached the provisions of the Consumer Credit (Western Australia) Code (the Code).
5.Of the 3,443 credit contracts which charged interest, 989 had overcharged interest affecting 320 individual consumers in total.
6.There were also a number of credit contracts where interest was undercharged. The applicant initially obtained a sample of 25 contracts from the respondent. Of these, 5 credit contracts were for business purposes and therefore not subject to the Code, 4 did not charge interest, 10 overcharged interest by $153.80 and 6 undercharged interest by $3,344.92.
7.On 23 August 2007, the applicant wrote to the respondent demanding a written undertaking by no later than 6 September 2007 that the respondent would, from 6 September 2007, at the latest, ensure that interest was calculated and correctly disclosed in accordance with the Code.
8.On 27 August 2007, the respondent wrote to the applicant advising that the interest component had been deleted from all credit contracts subject to the Code pending development of a program which complied with the Code. The letter also stated there was no intention to contravene the Code.
9.On 5 September 2007[,] the applicant wrote to the respondent seeking details of the respondents' [sic] proposal to compensate borrowers and requesting the respondent provide written advice by 13 September 2007 of the timeframe in which it would carry out the activities necessary to identify and compensate affected borrowers.
10.On 10 September 2007[,] the respondent wrote to the applicant advising it hoped to develop a program to identify interest overcharged within four to six weeks and that in the meantime manual calculations on less complicated accounts would commence.
11.The applicant filed this application on or about 29 October 2007.
12.The respondent wrote to the affected consumers in or about December 2007, advising of the error and that the consumers would be refunded the overcharged interest.
13.The total amount of interest overcharged by the respondent was $23,384.51. Most of this amount has now been refunded by the respondent to its customers.
14.The respondent's software technicians have now rectified the programming defect which led to the overcharging so that this does not occur again.
15.The respondent admits that it has contravened s 15(E) of the Code.
The following 'further facts and observations' appear in the original decision:
According to the respondent's Managing Director, Mr Gorman, the admitted excess interest charges occurred by reason of the fact that the computer program used to process loans did not discriminate between those loans which were repaid in full at the end of the loan period and loans where the customer made one or more repayments of the principal amount during the loan period. Therefore, the amount of interest charged continued to reflect the total principal amount in such cases of 'divided payments'. He said that of the 934 contracts with interest errors, only 246 contracts had an interest error of more than $20.
Mr Gorman also explained that the respondent's computer program was set up originally to process loans on the basis of repayment in full being made at the end of the loan period. According to Mr Gorman, the computer program was examined by the company's solicitors and accountants who advised that it was suitable for processing loan transactions 'inside the (Code)' - a reference to credit contracts subject to the provisions of the Code. What is not explained is why when part repayments of the principal commenced it was not readily appreciated that it would be necessary for there to be a recalculation of interest charges in accordance with cl 5.3 of the credit contract, and to the extent that this was not something the computer program could itself do, that the recalculation would need to be done manually. Having said that, no allegation is made that the error was wilful. Rather, the applicant put the respondent's failure in terms that:
'The respondent did not have systems in place to monitor and ensure that interest under the credit contracts was calculated correctly'.
With regard to the total number of cases where interest was overcharged, the respondent accepted, on the basis of a summary prepared by the applicant's department providing contract numbers for each of the respondent's three Perth offices, that 989 was the correct number.
The crux of the Tribunal's error resulting in the original decision being overturned was its failure to appreciate upon which clause in the credit contracts the allegation of a breach of a key requirement was based. That reliance is to be found in a particular of paragraph 1(c) of the application to the Tribunal, which is in the following terms:
The respondent disclosed in each of the Affected Contracts an incorrect statement of the total amount of interest charges payable under the contract. Each of those total amounts was incorrect as the Respondent applied a daily interest rate on the principal amount of the loan instead of on the unpaid daily balances as required by s26(1)(a) of the Code. This was despite the fact that there was an express clause in each credit contract which provided that interest charges were to be calculated on a daily basis by applying the daily percentage rate to the daily balance.
In the appeal decision, Simmonds J described the documents forming the credit contract in each case in the following terms. At the hearing, I ascertained from each party that they were content with his Honour's description in this regard, including the matters in relation to which Simmonds J made attributions of common ground:
10I now need to refer to some material to which the SAT made no express reference in its decision, but which it is common ground was before the Tribunal. The material contained further content of the 'contract document' in this case for the purposes of the Credit Code s 15.
11For that material I have drawn on the documents contained in the 'Agreed Bundle of Documents' before the SAT and described as 'a sample credit contract' (the credit contract). I took it to be common ground that each credit contract for which a declaration of contravention had been sought was in the same form as the credit contract.
…
13The credit contract included a document headed 'You Have Made an Offer to Borrow' which, under the heading 'Express Advantage Loan - Conditions' (the loan conditions), contained among other provisions cl 1.1, cl 1.5, cl 5.1, cl 5.2 and cl 5.3, clauses referred to above as agreed fact numbered '3' [5] in Chequecash. This document in which the loan conditions appeared is the first document under the section heading 'Accompanying documents for 'Express Advantage Loan''.
14The second document under the section heading 'Accompanying documents for 'Express Advantage Loan' is entitled 'Information Statement' (the information statement). It appears that the respondent intended the information statement to form part of the loan conditions but to be treated differently from the rest of the loan conditions. This is evident from the legend at the beginning of the information statement - 'The following information does not form part of the loan contract' - and from a further document I now reach.
15This further document also formed part of the credit contract, as will be explained shortly. The further document was headed 'Offer of Contract' (the offer of contract). Immediately under that heading the following appears:
Completion of this document does not constitute a contract until the Credit Provider accepts the offer by endorsing it's [sic] acceptance on the offer. Provided the Credit Provider accepts this offer, a contract will come into existence on the terms and conditions contained in the 'Offer of Contract' and 'the Conditions'.
I, the person named as the Customer in item 1.3 of the 'Offer of Contract', offer to borrow the amount of credit from the Credit Provider and enter into an 'Express Advantage Loan' with the Credit [P]rovider on the terms and conditions set out in this document.
16The offer of contract, unlike the loan conditions, provided for a signature by each of the parties, and indeed bore one by the 'Customer' (the debtor under the credit contract) and the 'Credit Provider' (the respondent).
17The offer of contract also contained under the heading 'Borrower's Declaration' the following:
My RIGHTS and OBLIGATIONS
2.5.I understand that, prior to signing, this Offer is to be considered only as a Pre-Contractual Statement.
2.6.Financial Express (the Credit Provider) has provided me with the documents:
a.'Express Advantage Loan - Offer of Contract' which contains a section called 'Loan Summary' and
b.'Express Advantage Loan - Conditions' which contains a section called; 'Information Statement - Things You Should Know About Your Proposed Credit Contract'
2.7.I have read the documents referred to in paragraph (2.6) above and I understand my rights and obligations under those documents.
2.8.I understand that the amount of the Loan advanced includes the principal, interest, fees, charges and costs applicable to the Loan at that time.
2.9.I understand that the loan is a Fixed Rate Loan and in the event of an early payout the interest rebate will be as a percentage relative to the time the Loan has been in effect.
2.10.I understand that the Setup Fees and all Charges associated with the Loan are Not Refundable.
2.11.I am aware of my obligation to immediately inform Financial Express of any change in my financial position.
18I conclude then that the credit contract was made up of the offer of contract, and at least so much of the loan conditions as did not include the matter in the information statement. In any event, my inspection of the information statement revealed nothing relevant to this appeal, nor was anything relevant drawn to my attention.
19In relation to one credit contract, I note that in the offer of contract under the heading 'Loan Summary' four items numbered 1.1 - 1.4 appeared. Item 1.4 was entitled 'Financial Table' (Item 1.4). Under that heading in the field labelled 'Number of Payments Reqd' appeared the number '3'. Also under that heading in the field labelled 'Interest Applicable' appeared '$202.47'. It is common ground that that amount was greater than the amount calculated in accordance with cl 5.3 of the credit contract, and thus greater than the amount permitted under the Credit Code s 26(1). It also appears to be common ground that a similar misstatement occurred in the other credit contracts for which a declaration of contravention was sought, all of which provided, as the above offer of contract did, for more than one repayment. …
Relevant statutory framework
Section 102 of the Code provides relevantly:
(1)Declaration as to key requirement. The Court must, on an application being made, by order declare whether or not the credit provider has contravened a key requirement in connection with the credit contract or contracts concerned.
(2)Penalty orders. The Court may make an order, in accordance with this Division, requiring the credit provider to pay an amount as a civil penalty, if it is of the opinion that the credit provider has contravened a key requirement.
…
(4)Other matters to be considered. The Court, in considering the imposition of a civil penalty, must have regard to the following
(a)the conduct of the credit provider and debtor before and after the credit contract was entered into;
(b)whether the contravention was deliberate or otherwise;
(c)the loss or other detriment (if any) suffered by the debtor as a result of the contravention;
(d)when the credit provider first became aware, or ought reasonably to have become aware, of the contravention;
(e)any systems or procedures of the credit provider to prevent or identify contraventions;
(f)whether the contravention could have been prevented by the credit provider;
(g)any action taken by the credit provider to remedy the contravention or compensate the debtor or to prevent further contraventions;
(h)the time taken to make the application and the nature of the application; [and]
(i)any other matter the Court considers relevant.
The admitted contraventions, which are the subject of the application, were breaches of s 15(E) of the Code, which provides:
15.Matters that must be in contract document
The contract document must contain the following matters
…
(E)Total amount of interest charges payable.
The total amount of interest charges payable under the contract, if ascertainable (but only if the contract would, on the assumptions under sections 158 and 160, be paid out within 7 years of the date on which credit is first provided under the contract).
The references to 'The Court' in s 102 of the Code are to be interpreted in accordance with the following definition of 'Court' which appears in s 1(1) of Sch 1 to the Code:
Court, in relation to a provision of this Code, means the court or tribunal which has by law jurisdiction under that provision.
Jurisdiction under s 102 of the Code is conferred on the Tribunal by reason of s 7(1) of the Consumer Credit (Western Australia) Act 1996 (CC Act).
Consideration
I will structure my findings in accordance with the factors prescribed by s 102(4) of the Code as those to which the Tribunal must have regard in considering the penalty to be imposed.
Conduct of credit provider and debtor before and after credit contract was entered into
The applicant accepts that the respondent did not deliberately overcharge its clients, but is highly critical of its failure to have in place a system which would have prevented the contraventions in the first place, and systems to continually monitor compliance with the key requirements, relevant to this matter, relating to interest charges. The systemic failure persisted for a period of approximately five years, until the applicant brought it to the respondent's attention. Further, although it was open to the respondent to bring an application under s 102 of the Code, on 30 October 2007 the applicant filed this application. The applicant submitted that the decided cases were consistently in favour of a lesser penalty being imposed where the credit provider uncovers its own breaches.
The respondent relies upon the fact that immediately on being informed of the contraventions, it took the action referred to in the statement of agreed facts at [8]. It also relies upon its full cooperation with the applicant's department in complying with its requirements, including formulating a process for compensation of borrowers affected and to implement the necessary changes to its software programming to ensure against any repetition.
In my view, both parties' submissions raise valid points which are to be taken into account under the first of the s 102(4) factors.
Whether the contravention was deliberate or otherwise
As indicated under the first s 102(4) factor, the applicant does not contend that the contraventions were deliberate. She does, however, regard them as the consequence of the respondent's reckless disregard of the need for monitoring processes to be in place in order to ensure continuing compliance with the Code.
The respondent describes the contraventions as being caused by 'inadvertent error' at a time when incremental repayments were allowed for contracts with extended loan repayment periods. In response to my suggestion that it should have been obvious that it was inappropriate to calculate interest on the full amount of the loan for the full loan period where the contract provided for down payments during that period, Mr Morgan attributed the oversight to what he referred to as the 'operational level' between loan officers and programmers for the contracts, the potential for which was removed when he assumed the role of manager in late 2006.
It is clear that the contraventions were not deliberate. I will defer until later in these reasons an assessment of the seriousness of the culpability with which this factor is concerned.
The loss or other detriment suffered by the debtor as a result of the contravention
The applicant points to the relatively small amounts of most of the loan contracts as indicative that the clientele of the respondent's business are primarily low income earners. That being so, it submits that the average interest overstatement of $70 per contract, in respect of an average loan of about $500 repayable over four to eight months, represented a relatively significant amount for the borrowers. The applicant accepts that the repayment of all overpaid monies is a mitigatory factor.
The respondent challenges the 'averaging analysis' upon which the applicant relies. It submits that of the 989 cases, some 740 had an error of less than $20. The greatest impact occurred in the cases concerning higher loan amounts in the range of $5,000 to $10,000, numbering 48. The impact in that range, however, was lessened by the fact that the error was easily corrected, and the low impact is evidenced by the fact that 45 of the same borrowers remain as clients. The respondent relies upon the action taken to ensure compensation of all clients affected.
In light of the clear consumer protection objective of the Code, and the focus upon the compulsory requirements for credit providers by means of the key requirements regime, any breach of a key requirement is to be viewed seriously. Given that these contraventions were the result of a systemic failure which resulted in a large number of individual breaches, I accept the respondent's submission as to the class of contract most affected. I also agree that it is significant that following the action taken by the respondent after it became aware of the contraventions, the clients within the most affected class were prepared to continue their relationship with the respondent.
When the credit provider first became aware, or ought reasonably to have become aware, of the contravention
The applicant relies upon the failure of the respondent to have a system in place for five years, thereby permitting them to continue for the whole of that period.
I accept that this is a relevant consideration for the amount of the penalty, along with the other considerations already identified that the contraventions were of a non-deliberate and systemic nature.
Any systems or procedures of the credit provider to prevent or identify contraventions
I refer to and repeat both the applicant's submission and my response to it for the previous factor.
Whether the contravention could have been prevented by the credit provider
The applicant says that these contraventions could have been prevented initially, had appropriate attention been given to compliance in the first place, and by selfauditing processes to identify later contraventions as they occurred.
I accept that this is a factor relevant to the amount of the civil penalty.
Any action taken by the credit provider to remedy the contravention, compensate the debtor or to prevent further contraventions
Although the contraventions, once they had occurred, could not themselves be remedied, it is clear that the steps taken to compensate the borrowers and to prevent further contraventions had the effect that the losses caused were remedied and the underlying cause was eliminated. Both of these aspects of the respondent's response to notice of the contraventions are properly to be taken into account by way of mitigation in assessing the civil penalty.
Time taken to make the application and the nature of the application
The applicant regards the fact that it, and not the respondent, made the application is a relevant factor, in the sense that the respondent is not entitled to the benefit by way of mitigation that would have flowed had the respondent applied under s 102 of the Code.
The respondent does not regard the Code provisions as placing any onus on a noncompliant credit provider to issue an application under s 102, particularly where, as here, it was in regular communication with the applicant regarding the contraventions and complying with its requirements.
I have read the entire course of correspondence between the parties, from the applicant's bringing the contraventions to the attention of the respondent until the filing of the application. In my view, the respondent should not be criticised, over and above the criticism naturally flowing from its contraventions, for its lack of proactivity in filing its own application in the nature of the application brought by the applicant, in circumstances where, by all appearances, its chief concern was to make amends to its customers affected by the contraventions and to rectify the past systemic failures. The respondent is a relatively small operation, and it is, in my view, too much to expect that it operate as one might expect a larger, more sophisticated corporation to act. Nor is it reasonable to expect a response which a working knowledge of the case law in this area might have suggested. The fact is that the respondent considered that by cooperating with the applicant's department to ensure a satisfactory outcome in terms of the two pressing matters referred to above, no further consequences of its failings would ensue. I must say that I have some degree of sympathy for that position.
Acknowledging that the highest that the applicant put this factor was to deny the respondent a discount, the matters referred to in the previous paragraph are such as to render as minimal any discount which is to be divined from comparable decided cases concerned with larger and more sophisticated credit providers on account of their issuing the proceedings.
Any other matter considered relevant
The applicant referred to two authorities - Avco Financial Services Ltd v Various Debtors& DirectorGeneral, Office of Fair Trading (Commercial) [2003] NSWCTTT 776 and Westpac Banking Corporation Ltd v Various Respondents (No 4) (1992) ASC 56187 (Westpac v Various Respondents) - in which recognition was given to the requirement that penalties for a systemic breach of key requirements of the Code or non-compliance of similar statutory obligations should act as a deterrent, both to the credit provider involved and to other credit providers.
I accept that any civil penalty for such a breach should incorporate the specific and general deterrent element for which the applicant contends.
I turn finally to some of the case law upon which the parties relied. In doing so, I bear in mind the caveat given, in the slightly different context with which it was concerned, Westpac v Various Respondents that the penalty amount is not to be assessed by reference to a range to be decided from decided cases. It is the facts and circumstances of the case to be determined which are critical. I will therefore refer to or deal with only some of the points of comparison or difference urged upon the Tribunal by the parties arising from the cases referred to, and things said in those cases which have resonance for the current matter, rather than going into the cases in any detail.
The Qantas Staff Credit Union cases (Qantas Staff Credit Union Limited v Director-General, Department of Fair Trading (as it then was) (Commercial) [2003] NSWCTTT 823 the first New South Wales Qantas Staff Credit Union case/decision, Qantas Staff Credit Union v Various Debtors (Commercial) [2006] NSWCTTT 578 the second New South Wales Qantas Staff Credit Union case/decision, and Qantas Staff Credit Union Ltd and Various Debtors [2007] WASAT 162 the Western Australian Qantas Staff Credit Union case/decision) concerned a number of different contraventions of key requirements under the Code arising from the credit union's documentation of increases in the amount of credit being provided. In the main, the contraventions were in the nature of a failure to disclose required information, rather than the inaccuracy in the information disclosed as in the present case. In the Western Australian Qantas Staff Credit Union case, it was accepted that contravention of the key requirement that loan contracts contain a statement of the credit fees and charges payable and prescribed particulars of such fees and charges (s 15(G) of the Code) was the most significant of the contraventions. There were 817 contracts affected by the credit fees and charges contravention, and the former President of this Tribunal was prepared to make an order by consent of a civil penalty of $7,300.39, calculated on the assumption that each contract bear a penalty of a little under $10 per contract (being the same assumption founding the penalty imposed, in respect of a much higher number of affected contracts, in the New South Wales Qantas Staff Credit Union case).
The respondent submitted that the contraventions which were the subject of the Qantas Staff Credit Union cases were more serious than the respondent's, primarily because some six classes of contravention were involved, and the cause of the breaches was not mere inadvertence as in the respondent's case. The Qantas Staff Credit Union contraventions, or at least some of them, involved the failure of an officer to act in accordance with legal advice received, which was described in both the second New South Wales Qantas Staff Credit Union decision and the Western Australian Qantas Staff Credit Union decision as 'inexplicable'.
In my view, there is a danger of applying too rigorous an approach to any comparative analysis between different cases. Suffice to say that in my view, the seriousness of respective culpabilities of the credit union in the Qantas Staff Credit Union cases and the applicant are, in general terms, on a par.
The applicant submitted that the respondent's contraventions were more serious than those in the Qantas Staff Credit Union cases, because in those cases, consumers were not disadvantaged, and the credit provider detected its errors and made the application to the Tribunal. Dealing with the two nominated factors in reverse, the parties were in dispute regarding who first identified a problem. The New South Wales Consumer, Trader and Tenancy Tribunal appeared to accept that the problem with which the first New South Wales Qantas Staff Credit Union case was concerned was identified in a report of the NSW Financial Institutions Commission. The applicant submitted that the report of the NSW regulator disclosed only a small part of the breaches and that the credit union identified the balance. This is supported by the reference in the second New South Wales Qantas Staff Credit Union decision, although the identification of the other breaches occurred in the course of preparing for the first New South Wales Qantas Staff Credit Union case. This, in my view, severely limits the credit which might have flowed to the credit provider for volunteering the existence of the further breaches. For the reasons alluded to earlier, I am prepared to ascribe only a minimal discount in the result of the Qantas Staff Credit Union cases to the fact that the credit union made the application for civil penalty.
Although it is true that in the second Qantas Staff Credit Union decision the absence of any monetary or other loss or damage arising from the contraventions found to have occurred in that case was found to be a relevant consideration in the assessment of penalty, this circumstance might in one sense be attributable to the accident of the different consequences which might flow from the differences between the key requirements found in s 15 of the Code. In Associated Premium Funding Pty Ltd v Director Consumer Affairs Victoria [2003] VCAT 1492 (Associated Premium Funding), a case upon which the applicant relied as being comparable to the present case, the general manager of the applicant chose to use a form of contract which he knew breached the Code. In fact, the 105 affected contracts were in breach of eight of the key requirements, including the s 15(E) requirement. In imposing a penalty of $54,000, the Tribunal considered that the applicant should have more closely monitored the activities of the general manager. Significantly for the current matter, it noted the disclosure breaches were of a serious nature as they deprived consumers of key information on which they could make informed decisions about the nature of the arrangement they were entering into. Also of significance for current purposes is the fact that the Tribunal considered that the refund of interest charges under the affected contracts meant that the debtors had suffered no direct financial loss as far as those interest charges were concerned.
The applicant accepted that the element of dishonesty present in the Associated Premium Funding case was lacking here, but noted that the sum advanced and interest overcharged in this case were both approximately 50% greater than in Associated Premium Funding. On my reading of Associated Premium Funding, and bearing in mind that the Tribunal was in that case being asked to impose a penalty agreed by the parties, it was the 'fraudulent conduct and forgery' of the applicant's general manager and business development manager, combined with the 'totally inadequate' level of supervision by the applicant, which enabled the breaches to occur with impunity, which elevated the seriousness of the contraventions to such a level that a penalty of approximately $500 per contract was found appropriate. A variety of other factors for example, the breaches came to the attention of the applicant's directors only after a complaint from borrowers, and then there was a delay of some two and a half years subsequently before the application to the Tribunal was made exacerbated the applicant's culpability. In my opinion, the circumstances of the contraventions in the present case are a fair distance from those pertaining in Associated Premium Funding.
I resist the temptation to deal with the parties' other submissions based upon other decided cases, on the basis that this would not add to the benefit in formulating my decision which I have derived from the cases to which I have already referred.
Conclusion on penalty
In my view, taking into account all of the circumstances to which I have referred, the appropriate civil penalty for the contraventions which have been admitted is $10,000. There will be a declaration in accordance with s 102(1) of the Code as to the contravention of a key requirement and an order for payment of $10,000 as a civil penalty.
Costs
The applicant seeks an order for payment of costs in the sum of $4,867.50. This amount was referred to as the total of the costs items claimed in a schedule prepared by the applicant in respect of attendances (mainly appearances) in respect of the Tribunal proceedings, with the deduction of an item for preparing submissions on the preliminary issue the subject of the unlawful evidence decision. The concession on that item was well founded, any consequences in terms of costs flowing from the applicant's oversight which culminated in the obtaining of evidence against the respondent unlawfully properly being at the applicant's cost. Having regard to the applicant's schedule, I am satisfied that the amount sought by way of costs is easily justifiable, provided that an entitlement to costs can be established.
There is a number of decisions of the Tribunal which stand for the proposition that the costs of a professional regulatory body in disciplinary proceedings are to be regarded as an exception to the general presumption operating in the Tribunal against awarding costs to the successful party. Although, for the purposes of this matter, the applicant does not fall within the definition in s 3 of the State Administrative Tribunal Act 2004 (WA) of 'vocational regulatory body', and neither the Code, nor the CC Act which applies the Code in Western Australia, is a 'vocational Act' under that definition, the provision of the Code which was breached is part of a regulatory regime governing the provision of consumer credit. Similar considerations favouring the award of costs to professional bodies in disciplinary proceedings apply. A recent decision in a disciplinary matter brought by the same applicant as here is Commissioner for Consumer Protection and Hawaii Pty Ltd [2008] WASAT 22 (S), in which the Tribunal, consisting of the President and two other members, said (at [8] and [9]):
8.The Tribunal's approach to the award of costs in successful disciplinary proceedings was explained by the Tribunal in Medical Board of Western Australia and Roberman [2005] WASAT 118 at [30] where the Tribunal said:
'Where a regulatory authority successfully brings a complaint of conduct which if proved justifies disciplinary action by the Tribunal, there will usually be a strong case for the exercise of that discretion in favour of the regulatory body. That is because such bodies perform a function which promotes the public interest, and usually with limited resources. The financial burden of bringing disciplinary action if the body had no capacity to recover some or all of its costs may be such as to provide a disincentive to bring disciplinary action, or when brought, to ensure that the allegations against the practitioner concerned are properly and thoroughly presented. It is in the public interest that such bodies have an expectation that, if the allegations are made out, the offending professional will meet or at least contribute to the costs incurred in bringing the application'.
9Although the Commissioner for Consumer Protection may not have the same limitation on resources as many vocational regulatory bodies, the considerations explained in Roberman remain applicable. In this case, the proceedings were successful in the sense that the Tribunal agreed that the disqualification was appropriate and rejected Ms Burling's contention that a lesser penalty was appropriate. There is no reason to depart from the approach explained in the Roberman decision.
I note that in each of the Qantas Credit Staff Union cases, the respective tribunal had no difficulty in acceding to an order for the costs of the regulatory body, even as intervener, and in Associated Premium Funding, the nature of the proceeding, and the fact that the Director Consumer Affairs Victoria represented the public interest and interests of debtors as a whole, were given as reasons for awarding the Director's costs.
The respondent opposed any costs order on the basis that the applicant denied it the opportunity to bring the application itself, and had that occurred, the applicant would not have been involved. But it is not correct to say that the applicant would not have been involved had the application been issued by the respondent. It can be safely assumed that the applicant would have sought leave to intervene, and the extent of its involvement would then have depended upon the negotiations, if any, between the parties. Negotiations, or lack thereof, were not dependent upon which party commenced the proceedings in the Tribunal. Presumably, the same negotiations (if any) which occurred between the parties in parallel to the applicant's application would also have occurred in parallel to the application if it were brought by the respondent.
There will be an order for the applicant's costs as sought.
Order
The Tribunal orders that:
1.There is a declaration pursuant to s 102(1) of the Consumer Credit (Western Australia) Code (Code) that the respondent contravened the key requirement referred to in s 15(E) of the Code in respect of 989 credit contracts entered into between 2002 and 2007.
2.The respondent shall pay the applicant as a civil penalty, pursuant to s 102(2) of the Code, the sum of $10,000 within 28 days.
3.The respondent shall pay the applicant's costs fixed at $4,867.50 within 28 days.
I certify that this and the preceding [53] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR T CAREY, MEMBER
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