FEDERAL COURT OF AUSTRALIA Make It Mine Finance Pty Ltd, in the matter of Make It Mine Finance Pty Ltd [2015] FCA 393 Citation: Make It Mine Finance Pty Ltd, in the matter of Make It Mine Finance Pty Ltd [2015] FCA 393 Parties: MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411) AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MAKE IT MINE FINANCE PTY LTD (ACN 130 102 411) File numbers: VID 686 of 2014 VID 699 of 2014 Judge: BEACH J Date of judgment: 28 April 2015 Catchwords: CONSUMER LAW – consumer credit – purported "lease" of consumer goods to Centrelink recipients – conduct as a credit provider – application of the National Credit Code (Sch 1 to the National Consumer Credit Protection Act 2009 (Cth)) – engaging in credit activity without appropriate registration or licence – non-disclosure of key requirements in credit contracts – interpretation of s 113(5) of the Code – breach of responsible lending requirements Legislation: National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth) s 4(1), items 4(1), 6(1) of Pt 2 of Sch 2, item 37 of Pt 4 of Sch 2 National Consumer Credit Protection Act 2009 (Cth) ss 3, 6 (item 1), 28, 36, 128, 129, 130, 131, 166, 167, 187, 202, 209(1), Sch 1 (National Credit Code) ss 4, 5, 9, 11, 17, 111, 112, 113, 116, 120, 169, 204(1) Cases cited: Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2006) 16 VR 131 Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2007) 234 CLR 96 Carr v Western Australia (2007) 232 CLR 138 Date of hearing: 17 April 2015 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 73 Counsel for Make it Mine Finance Pty Ltd: Mr G Moffatt Solicitors for Make it Mine Finance Pty Ltd: Atzmon & Co Solicitors Counsel for Australian Securities and Investments Commission: Ms E A Bennett Solicitors for Australian Securities and Investments Commission: Australian Securities and Investments Commission IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 686 of 2014 IN THE MATTER OF MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411) Make It Mine Finance Pty Ltd (ABN 39 130 102 411) Applicant AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Intervener JUDGE: BEACH J DATE OF ORDER: 28 April 2015 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Within 14 days of the date hereof, each party file and serve short minutes of orders setting out: (a) proposed declarations of contraventions to accord with these reasons; (b) a suggested time-table for the filing of further evidence and submissions on the penalty phase. 2. Within 14 days of the date hereof, each party file and serve short written submissions (limited to 3 pages only) in support of their minutes of orders and also addressing whether any notice should be given of the type contemplated by s 119(2) of the National Credit Code in respect of the orders to be made. 3. The further hearing of this proceeding on the question of penalty be adjourned to a date to be fixed. 4. Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 699 of 2014 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: MAKE IT MINE FINANCE PTY LTD (ACN 130 102 411) Respondent JUDGE: BEACH J DATE OF ORDER: 28 April 2015 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Within 14 days of the date hereof, each party file and serve short minutes of orders setting out: (a) proposed declarations of contraventions to accord with these reasons; (b) a suggested time-table for the filing of further evidence and submissions on the penalty phase. 2. Within 14 days of the date hereof, each party file and serve short written submissions (limited to 3 pages only) in support of their minutes of orders and also addressing whether any notice should be given of the type contemplated by s 119(2) of the National Credit Code in respect of the orders to be made. 3. The further hearing of this proceeding on the question of penalty be adjourned to a date to be fixed. 4. Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 686 of 2014 IN THE MATTER OF MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411) MAKE IT MINE FINANCE PTY LTD (ABN 39 130 102 411) Applicant AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Intervener IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 699 of 2014 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: MAKE IT MINE FINANCE PTY LTD (ACN 130 102 411) Respondent JUDGE: BEACH J DATE: 28 April 2015 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 There are two proceedings before the Court. The first proceeding, VID 686 of 2014 (the MIM Proceeding), is an application by Make it Mine Finance Pty Ltd (MIM) of its own volition for: (a) a declaration that it has contravened various key requirements under the National Credit Code (the Code) (Sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (the National Credit Act)) as given effect by s 3 of that Act); (b) if it is so declared, a declaration "clarifying" whether one or more of such contraventions have occurred merely because of another contravention of a key requirement of a similar kind; and (c) orders seeking the fixing of an appropriate pecuniary penalty in relation to such conduct (ss 112 and 116 of the Code entitle MIM to apply for such an order). 2 Generally, in the period 1 July 2010 to 1 March 2013 MIM entered into 24,377 contracts with customers. MIM was obliged to include all of the information required by s 17 of the Code in each contract. These requirements are "key requirements". It is not in dispute that the information required was not provided by MIM to its customers. While MIM admits that it breached such disclosure requirements, it disputes the number of breaches. I granted leave to the Australian Securities and Investments Commission (ASIC) to intervene in this proceeding, although it could intervene as of right (see s 209(1) of the National Credit Act and see also s 120 of the Code). 3 The second proceeding has been commenced by ASIC (VID 699 of 2014) (the ASIC Proceeding). In the ASIC Proceeding, ASIC seeks declarations (see ss 166, 167, 187 and 202 of the National Credit Act) that: (a) MIM has contravened items 4(1) and 6(1) of Pt 2 of Sch 2 of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth) (Transitional Act); Ch 4 of the National Credit Act applies thereto (see item 37 of Pt 4 of Sch 2 to the Transitional Act) including ss 166, 167, 187 and 202; (b) MIM has contravened ss 128(c) and (d) of the National Credit Act in relation to each of 20,763 credit contracts; (c) MIM has contravened ss 130(1)(b) and (c) of the National Credit Act in relation to each such credit contract; (d) MIM is liable under s 167 of the National Credit Act to pay a pecuniary penalty in respect of each such contravention. 4 MIM engaged in conduct as a credit provider without holding an appropriate registration or licence. Further, as a credit provider, MIM was bound to take certain steps to evaluate the capacity of its customers to repay the debt. Between 21 April 2011 and 1 March 2013, MIM failed to: (a) make reasonable enquiries regarding each customer's financial situation; (b) verify each customer's financial situation; and (c) make the assessment required by the National Credit Act. 5 There were a total of 20,763 credit contracts entered into in the period between 21 April 2011 to 1 March 2013 where the responsible lending provisions of the National Credit Act had been contravened. 6 Many of the key facts have not been disputed before me. The parties have filed a statement of agreed facts. Moreover, MIM has made relevant admissions. Before proceeding to the penalty phase, the parties have requested that I first rule upon the precise number and nature of the contraventions engaged in by MIM based upon such an agreed factual foundation. The parties have put forward differing views as to the number of the various contraventions, in part based upon their differing interpretations of some of the relevant statutory provisions and in part based upon differences in some of the factual conclusions to be drawn from the primary facts which have been agreed. Uncontroversial facts 7 MIM has engaged in the business of providing credit to consumers in Australia for personal, domestic or household purposes. Between March 2008 and 18 May 2011, MIM was known as Cash for Computers Pty Ltd. Since 19 May 2011, MIM has operated under its present name. The chief executive officer and sole shareholder of MIM has been Mr Andre Lang. (a) The non-disclosure conduct 8 From March 2008, MIM refurbished and recycled second-hand computers and on-sold those computers to wholesalers who in turn sold them to consumers for domestic or household purposes. 9 In around October 2009, Mr Lang commenced a division of MIM called "Computers For All". This business supplied computers and associated computer equipment exclusively to customers whose main source of income was Centrelink benefits (i.e. a parenting payment, family tax benefit, disability support pension, aged pension, carer's allowance and the like). From around 26 August 2011, in addition to computer equipment, MIM commenced supplying household whitegoods to such customers. 10 Customers who wished to purchase a product from MIM either applied online or over the phone. Approved customers entered into a contract with MIM in one of three different forms. Customers provided authorisation for fortnightly payments to be made to MIM through Centrepay, the direct debit payment system operated by Centrelink. Customers without access to Centrepay were not able to access the service offered. Customers made fortnightly payments for twelve months. 11 The structure of the arrangements was via a "lease" of goods. A customer "leased" the goods and paid a "hire fee". The "hire fee" was paid over a 12 month period as described. Ownership of the goods would transfer to the customer at the end of 12 months upon all payments being made. 12 MIM marketed its "program" as unique and emphasised in its advertisements the total cost of the "rental" without disclosing: (a) the true cost of the item; (b) the proportion of the amount paid that represented interest; (c) the total cost of the item over the course of the 12 months. 13 Moreover, by emphasising the low weekly cost of the goods for "hire", MIM created the impression that the goods represented value to the consumer. Nevertheless, there was a substantial gap between the "cash price" of goods, and the cost price of those same goods. For example: Item Instalment ($) Term Contract Price ($) Cash Price Wholesale Price ($) 20" all-in one desktop computer 50 12 months 1300 799 511.50 20" all in one desktop computer with speakers/printer 74 12 months 1924 948 574.50 20" all in one desktop computer with USB hard drive 56 12 months 1456 848 596.2 23" all in one desktop 66 12 months 1716 999 787 23" all in one desktop with speakers and software 82 12 months 2132 1049 812 39" LED full HD TV 72 12 months 1872 1048 783 14 The business model was successful and resulted in substantial sales. 15 Until 1 March 2013, the arrangement entered into between each customer and MIM was structured and represented in form to be a "lease" arrangement. Nevertheless, in substance it was a contract of sale by instalments and therefore, because credit was in substance given and charged for, a credit contract (see ss 9 and 11 of the Code; it was not a "consumer lease" (cf s 169 of the Code)). 16 MIM became aware of a compliance breach in October 2012. The contracts of sale by instalments entered into between October 2009 and March 2013 did not disclose: (a) the cash price of the goods; (b) the annual percentage rate charged under the contract; (c) the method of calculation of interest charged under the contract; and (d) the total amount of interest charged under the contract. 17 I should say for completeness that the statutory tolerance provisions of ss 180 to 182 of the Code have no operative relevance in the present context. 18 The number of customers affected by such breaches from October 2009 to March 2013 was 25,692. In March 2013, MIM changed the contractual arrangement with each customer to a "consumer lease" (see s 169 of the Code). (b) The unlicensed conduct 19 Between 1 July 2010 and 31 December 2010, MIM provided credit under 1,830 individual contracts. But MIM was not registered or licensed to engage in credit activity during this time. 20 Further, between 1 January 2011 and 20 April 2011, MIM provided credit under 1,784 individual contracts. Again, MIM was not registered or licensed to engage in credit activity during this time. 21 On 22 March 2011, MIM applied for an Australian Credit Licence (ACL). On 21 April 2011, ASIC granted an ACL to MIM (in the name of Cash for Computers). On 25 May 2011, ASIC issued an ACL in the name of Make It Mine Finance Pty Ltd. (c) The responsible lending conduct 22 Between 21 April 2011 and 1 March 2013, MIM provided credit under 20,763 individual contracts. 23 In the period 21 April 2011 to 1 March 2013, the procedure for applying for and obtaining products from MIM was as follows: (a) The customer applied either online or in a telephone call for the product they wished to purchase. (b) MIM required the customer to confirm that he or she: (i) was in ongoing receipt of Centrelink payments; and (ii) agreed to making payments by a deduction through Centrepay. (c) The customer was then approved to receive the product and the customer signed and returned to MIM a hard copy of the "hire" agreement. (d) MIM then sent the product to the customer. 24 Apart from such information referred to in [23(b)], MIM did not seek or collect any other information about the customer's financial situation. MIM did not take any steps to verify any information obtained from the customer other than that the customer was in receipt of Centrelink payments. MIM did not undertake any assessment as to whether the contract would be unsuitable for the customer. National Credit Code – omission of key requirements 25 The Code applies to "credit contracts" (ss 4 and 204(1)) and to the "provision of credit" (s 5(1)) and related matters, where: (a) the debtor is a natural person (s 5(1)(a)); (b) the credit is provided or intended to be provided wholly or predominantly for inter-alia personal, domestic or household purposes (s 5(1)(b)(i)); (c) a charge is made for providing the credit (s 5(1)(c)); and (d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider (s 5(1)(d)). 26 The Code prescribes various matters that must be disclosed in a credit contract. 27 Section 17 sets out various "key requirements" of information which must be included in a credit contract (s 111). A failure to set out a "key requirement" is a contravention. 28 The MIM application seeks a declaration that MIM breached such disclosure requirements. It is not disputed that s 17 of the Code required MIM to make the disclosures set out in that provision, being: (a) Section 17(3)(c) – failing to disclose the cash price of goods; (b) Section 17(4)(a) – failing to disclose the annual percentage rate under the contract; (c) Section 17(5) – failing to disclose the method of calculation of interest charged under the contract; and (d) Section 17(6) – failing to disclose the total amount of interest charged under the contract. 29 It is also not in dispute that the relevant contracts failed to contain any disclosure of such matters. 30 Section 111 relevantly states: 111 Key Requirements For the purposes of this Division, a key requirement in connection with a credit contract (other than a continuing credit contract) is any one of the requirements of this Code contained in the following provisions: (a) subsection 17(3); (b) subsection 17(4); (c) subsection 17(5); (d) subsection 17(6); (e) paragraphs 17(8)(a) and (b) – but only in respect of retained credit fees and charges; (f) subsection 17(9); (g) subsection 17(11); (h) paragraphs 17(15)(a) and (b); (ha) subsection 17(15A); (i) subsection 23(1) – but only at the time the credit contract is entered into; (j) subsection 32A(1); (k) subsection 32AA(2). … 31 Section 112 then sets out the standing requirements for making an application to this Court. 32 Section 113 concerns the penalty that may be imposed for contravention of a key requirement. It provides: 113 Penalty may be imposed for contravention of key requirement Declaration as to key requirement (1) 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. Penalty orders (2) The court may make an order, in accordance with this Division, requiring the credit provider to pay an amount as a penalty, if it is of the opinion that the credit provider has contravened a key requirement. … Other matters to be considered (4) The court, in considering the imposition of a 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; (i) any other matter the court considers relevant. Related contraventions (5) The court must, for the purposes of determining an application for an order under this Division or the amount of a penalty, treat a contravention of a key requirement that occurs merely because of another contravention of a key requirement as being a contravention of the same kind. If a provision referred to in section 111 contains several requirements, the court must treat contraventions of more than one of those requirements as a single contravention of the one key requirement for the purposes of determining the amount of a penalty. 33 Sections 114 and 115 are not relevant in the present context. Section 116 sets out the maximum penalty that may be imposed. It provides: 116 Penalty if application made by a credit provider or ASIC On application being made by a credit provider or ASIC for an order, the maximum penalty that may be imposed by the court for a contravention of a key requirement relating to a contract affected by the application is an amount calculated so that the total penalty for all contraventions of the requirement in Australia (as disclosed by the credit provider) does not exceed $500,000. The penalty cannot exceed $500,000 "for all contraventions of the requirement in Australia" (s 116). The effect of s 116 is to impose a limit on the penalty to $500,000 for all contraventions of a key requirement provision, even though each contravention may have been committed multiple times throughout Australia. But if multiple key requirement provisions have been contravened, the $500,000 maximum penalty applies to each class of contracts manifesting each such separate key requirement contravention. 34 There is no dispute that MIM failed to disclose various "key requirements" in respect of relevant contracts entered into between July 2010 and March 2013. The question for present purposes is how many contraventions were engaged in. 35 MIM contends that the Court should treat all of its breaches as one, or at most, two, contraventions of the key requirement provisions, based upon its interpretation of s 113(5). ASIC contends that s 113(5) permits the Court to treat some of the contraventions as if they were contraventions "of the same kind" for the purpose of imposing a penalty, but it says that the aggregation contended for by MIM is not maintainable. I will elaborate on the detail of these arguments later, but it is appropriate to first deal with some general themes. (a) General principles – "truth in lending" 36 ASIC has contended that the purpose of the relevant provisions is to protect consumers and that they should be interpreted in that light. It says that the Code's predecessor legislation was the Consumer Credit (Queensland) Act 1994 (Qld), which was re-enacted in various jurisdictions. It asserts that the predecessor legislation was based on the principle of "truth in lending". Accordingly, it says that a similar foundation applies in the present case because of the similarity between the Code and the predecessor legislation. 37 ASIC's submissions suggested that I should take a modern purposive approach to interpretation. And it emphasised non-textual material. 38 It need hardly be said that "it is the text, construed according to such principles of interpretation as provide rational assistance in the circumstances of the particular case, that is controlling" (Carr v Western Australia (2007) 232 CLR 138 (Carr) at [6] per Gleeson CJ). 39 Now there is no bright line between a textual approach and the modern purposive approach to interpretation; to suggest otherwise is to assert a false dichotomy. Rather, to begin with the text is necessary to ascertaining purpose. Indeed, there is no clearer manifestation of legislative purpose. A top down approach of starting with non-textual material has little to commend it. Starting with the text is self-evidently advantageous, so long as the broader context and extrinsic material are always considered, rather than being artificially filtered out if textual ambiguity or uncertainty is not shown; sometimes only the extra textual will reveal the latent textual equivocacy. Moreover, the textual approach is not sensibly described using epithets such as "black letter", "semantic", "strict" or "literal". Rather, what is being identified is the starting point, rather than the finishing point to determine purpose. 40 The extrinsic material put before me (Ch 8 of the explanatory memorandum to the National Consumer Credit Protection Bill 2009 (Cth)) was underwhelming, except on one aspect. Moreover, this is not a case where there is any lack of clarity as to the objectives sought to be achieved or the vice sought to be addressed. 41 ASIC drew my attention to Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2006) 16 VR 131 where predecessor legislation, the Consumer Credit (Victoria) Code, was considered. Reference was made to the manifest purpose of that Code being to ensure "truth in lending" (Neave JA at [166] to [168] and [188] to [189]). See also, on appeal, Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (2007) 234 CLR 96 at [19] per Gleeson CJ, Gummow, Hayne and Crennan JJ where it was said, in the context of construing that Code, that "[w]ider considerations of 'truth in lending' are not to be disregarded, but they tend to divert the argument into unproductive speculation about the importance or possible importance to debtors of knowledge of the holdback". I have not disregarded "truth in lending", but it does not assist my task. The various competing views of the meaning of the text debated before me are all consistent with that goal and none is a better fit than any other. Moreover, such phraseology does not answer the question as to the potential relevance and importance of the information said to be omitted to the potential debtor class (and their assumed level of sophistication, education and comprehension) and whether disclosure to such a class meaningfully provides "truth" or non-disclosure its converse. Indeed, putting to one side the context of the falsity of a proposition, which is not a context relevant for present purposes, the significance of the absence of information or the level of generality or specificity of information is not appropriately analysed through an epistemological concept or by interlarding an analysis of the statutory text with a catch-phrase; the vernacular of social philosophy ought not distort the task identified by Gleeson CJ in Carr. Let me then turn to the more meaningful textual analysis. (b) Section 113(5) - construction 42 MIM has admitted that it contravened various "key requirements". The dispute between the parties has concerned the number of such contraventions. This turns upon the proper construction of s 113(5). 43 Section 111(1) elucidates what is considered to be a key requirement. It refers to "any one of the requirements of this Code contained in the following provisions…" with a reference then to various subsections of s 17, including ss 17(3), 17(4), 17(5) and 17(6). So, the "key requirement" encompasses the entirety of each matter raised in each such identified subsection, and notwithstanding that each subsection may have a number of sub-elements (for example ss 17(3) and 17(4)). 44 Section 113(5) has a dual function being: (a) to treat a contravention of a key requirement that occurs "merely" because of another contravention of that or another key requirement as being a contravention "of the same kind"; and (b) when dealing with a provision referred to in s 111 which contains several sub-elements, to treat the contraventions of more than one of those sub-elements as a single contravention of the one key requirement. 45 The first dimension of s 113(5) provides that where one contravention occurs merely because of another contravention, they must be treated as a contravention of the "same kind". The operative words are "occurs merely because of another convention". The language of the provision does not stipulate "occurs for the same reason as another contravention". For the provision to apply, one breach must lead to another without more. So, as ASIC has posited, an arithmetical error that occurs in respect of the annual interest rate (s 17(4)(a)) may be carried through in the method of calculation (s 17(5)) and again in failing to disclose the total amount of interest charged (s 17(6)). In those circumstances, all three breaches are to be treated as being "of the same kind". 46 The fact that several breaches may have all occurred due to some common external and other factor or error which caused all breaches does not trigger this first dimension. 47 MIM originally sought to argue that each of the contraventions of the key requirements referred to in ss 17(3), 17(4), 17(5) and 17(6) had been brought about by the same external factor (i.e. its misconception based upon the advice that it had received), which it asserted was the common causative factor for all such contraventions (see [92] and [93] of the affidavit of Andre Lang sworn 13 November 2014). Putting to one side for the moment whether such advice was a relevant causative factor, to assert a common external causative factor did not address the stipulation in the first part of s 113(5). That required considering whether a contravention of one key requirement had occurred merely because of another contravention of a key requirement. The word "merely" in context meant without any other quality, reason or causative element. 48 Separately, MIM also contended that the contravention of s 17(5), the failure of each contract to contain a method of calculation of interest charged under the contract, occurred merely because of a contravention of s 17(4)(a), the failure to contain the annual percentage rate charged under each contract. Now "method" is a broader concept than just an annual rate. If there is an annual rate, is it to be paid monthly, quarterly etc? Is it to be paid in advance or in arrears? Is it simple interest or compounding interest? One can appreciate, given the breadth of the concept of "method", that a failure to stipulate the matter referred to in s 17(4)(a) would not in and of itself cause the contravention of s 17(5). Further, there is a more general problem with MIM's argument. Because of MIM's mischaracterisation and misconception of the nature of the contracts, it did not disclose any concepts referring to interest rates, annual percentage rates or total interest charged. This was not a case of one omission leading to another omission, but a complete absence of disclosure of all such matters. On the evidence, it is not possible for me to identify the general method and process of charging for the cost of credit so that I could then say that one omission was brought about merely because of another. 49 MIM also contended that the contravention of s 17(6), the failure of each contract to contain the total amount of interest charges payable, occurred merely because of: (a) a contravention of s 17(4)(a), the failure to contain the annual percentage rate charged under the contract; or (b) a contravention of s 17(5), the failure to contain the method of calculation of interest. 50 The observation that I last made in [48] is of equal force in this context. But in any event, the stipulation of the total amount of interest charges required more than the annual rate and the method. Such a rate and method had to be applied to the term of the provision of credit and the relevant principal (or quantum of credit given) before one could work out the total amount of interest charges. And even if such latter variables were disclosed, the arithmetic may have been neither transparent nor simple. Again, I cannot be so satisfied of MIM's contention. 51 In summary, MIM has not satisfied me that the first dimension of s 113(5) has any work to do in the present case. 52 The second dimension of s 113(5) deals with a different form of aggregation. The condition "[i]f a provision referred to in section 111 contains several requirements…" contains two concepts. First, there is reference to "a provision referred to in section 111". This can only be a reference to each item of s 111(1) (s 111(2) can be put to one side for present purposes) and accordingly is a reference to s 17(3), s 17(4) and so on. Second, there is a reference to such a provision "contain[ing] several requirements". So, the text distinguishes between a particular provision (s 17(3), s 17(4) and so on) and its several requirements or sub-elements. And when one considers s 17(3) or s 17(4), which each contain various sub-elements, it can be appreciated that the reference to requirements in s 113(5) aligns with the several sub-elements of such provisions. By way of example, if a credit contract omits several sub-elements of s 17(3) (a key requirement within the meaning of s 111(1)), then the effect of s 113(5) is to treat that as one contravention rather than multiple contraventions reflecting the omission of each such sub-element of s 17(3). Such an interpretation accords with the text and context. Moreover, if it is necessary to say so, it accords with the example given in [8.202] of the explanatory memorandum. 53 On this analysis, four separate classes of contravention have arisen in relation to the absence of key requirements in the various credit contracts written by MIM. 54 Finally on this aspect, "the requirement" referred to in s 116 is a reference to the key requirement, with the identified contraventions being aggregated in the manner just discussed. Accordingly, in terms of the MIM Proceeding, there are four separate contraventions to which the maximum prescribed penalty is to be applied to each, namely: (a) a contravention of a key requirement for the entire class of contracts under discussion as identified in s 111(1)(a) (s 17(3)); (b) a contravention of a key requirement for the entire class of contracts under discussion as identified in s 111(1)(b) (s 17(4)); (c) a contravention of a key requirement for the entire class of contracts under discussion as identified in s 111(1)(c) (s 17(5)); and (d) a contravention of a key requirement for the entire class of contracts under discussion as identified in s 111(1)(d) (s 17(6)). Unlicensed and unregistered activities 55 The present position is that entities which engage in "credit activity" (s 6, item 1 of the National Credit Act) must be licensed to do so. An application for a credit licence is made under s 36 of the National Credit Act. The present prohibition under the National Credit Act on unlicensed activities has operated from 1 July 2011 (see s 28). But prior to the operation of that prohibition, the Transitional Act applied. It is the Transitional Act which is said to have been contravened by MIM. 56 The Transitional Act included a prohibition on unlicensed credit activity. MIM engaged in "credit activity" because it carried on the business of providing credit. Item 4(1) of Pt 2 of Sch 2 to the Transitional Act (a civil penalty provision (s 4(1)) provided that for the period 1 July 2010 to 31 December 2010: (1) A person must not engage in a credit activity unless: (a) the person is registered to engage in the credit activity; or (b) the person holds a licence authorising the person to engage in the credit activity. Civil penalty: 2,000 penalty units. 57 From 1 January 2011 to 30 June 2011 the relevant provision was item 6(1) of Pt 2 of Sch 2 to the Transitional Act (also a civil penalty provision (s 4(1)), which provided: (1) A person must not engage in a credit activity unless: (a) the person: (i) is registered to engage in the credit activity; and (ii) has applied for a licence authorising the person to engage in the credit activity in accordance with section 36 of the National Credit Act; or (b) the person holds a licence authorising the person to engage in the credit activity. Civil penalty: 2,000 penalty units. 58 Between 1 July 2010 and 31 December 2010, MIM entered into 1,830 contracts with consumers. Between 1 January 2011 and 20 April 2011 (it received its ACL on 21 April 2011), MIM entered into 1,784 such contracts. The contracts were each with individuals, and were for items such as computers, iPads, refrigerators and other household or personal goods. As I have said, although they were expressed as a rental arrangement, nevertheless, title to the goods passed at the time that the final payment was made under each contract. Accordingly, the contracts were not lease agreements. The amount of each repayment involved a payment for the cost of the item, and interest, and other costs (such as delivery). Accordingly, the contracts entered into by MIM were instalment contracts and were relevantly credit contracts. It was therefore necessary for MIM to be registered with ASIC as a credit provider during each relevant period. 59 It is not disputed that: (a) contrary to item 4(1) of Pt 2 of Sch 2 of the Transitional Act, MIM entered into 1,830 credit contracts in the period 1 July 2010 to 31 December 2010 without being registered; and (b) contrary to item 6(1) of Pt 2 of Sch 2 to the Transitional Act, MIM entered into 1,784 credit contracts without being registered. Responsible lending obligations 60 As I have said, MIM applied for an ACL on 22 March 2011 and was granted it on 21 April 2011. From that time, MIM was required, when entering into a credit contract with a consumer, to comply with the responsible lending obligations under ss 128 to 130 of the National Credit Act. 61 Section 128 (a civil penalty provision) provides that a licensee must not enter into a credit contract unless it has, within 90 days prior: (a) made an assessment that is in accordance with s 129 and covers the period in which the credit day occurs (s 128(c)); and (b) made the enquiries and verifications required by s 130 (s 128(d)). 62 The assessment mandated by s 129 must assess whether the credit contract will be unsuitable for the consumer if the contract is entered into or the credit limit is increased in that period (s 129(b)). The enquiries and verifications that are required by s 128(d) are set out in s 130 (also a civil penalty provision) and include: (a) enquiring about the consumer's requirements and objectives in relation to the credit contract (s 130(1)(a)); (b) reasonable enquiries about the consumer's financial situation (s 130(1)(b)); (c) taking reasonable steps to verify the consumer's financial situation (s 130(1)(c)); and (d) making any enquiries or taking any steps required by the regulations. 63 From the time that it received an ACL (21 April 2011) until 1 March 2013, MIM entered into 20,763 individual credit contracts (the expression "credit contract" in the National Credit Act is given the same meaning as in s 4 of the Code (see s 5(1) of the National Credit Act)). A similar pre-contractual process was undertaken in respect of each credit contract in the sense that: (a) each customer applied online via MIM's website or via a telephone call with a representative of MIM. (b) MIM required the customer to confirm that he or she was in ongoing receipt of a Centrelink payment, and agreed to make payment by deduction through the Centrepay system. (c) the person was then approved to receive the product, and signed a "rental agreement" with MIM. 64 There is no dispute that in relation to each application for a contract, MIM did not: (a) seek or collect any information from the customer about his or her financial situation or make reasonable enquiries within the meaning of the National Credit Act (s 130(1)(b)); (b) take any steps to verify the information provided by the customer apart from the fact that the customer was in receipt of Centrelink payments; or (c) make an assessment of whether the contract would be unsuitable for the customer. 65 It must be said that the relevant statutory provisions are shrouded in conceptual imprecision. First, one would have thought that, in sequence, ss 128(c) and (d) and their counterparts in ss 129 and 130 respectively should have been reversed. Second, the concept of unsuitability in s 129 is not defined. Its ambit is unclear. True it is that s 131 stipulates sufficient conditions (rather than necessary conditions) under which it is mandated that there must be an assessment of unsuitability. But that still leaves unsuitability under s 129 conceptually unbounded. Section 131 is not expressed in the language of "if and only if". I do not need to delve further into these issues given the admitted facts. 66 In my view, MIM has contravened s 128(c) (as illuminated in s 129) in relation to the identified 20,763 credit contracts. 67 Further, MIM has contravened s 128(d) (as illuminated by s 130) in relation to the identified 20,763 credit contracts. ASIC has sought to separate out the s 128(d) contravention from the s 130 contraventions and has also sought to separate out individual elements of s 130 (i.e. s 130(1)(b) and s 130(1)(c)) as giving rise to separate contraventions from each other as well as from the "umbrella" provision of s 128(d). Now the text of these provisions may support such an approach, but in my view ASIC's approach is infected with duplicity. On the penalty phase I will treat there in substance to be: (a) one contravention of s 128(c) in relation to such credit contracts; and (b) one contravention of s 128(d) in relation to such credit contracts (as illuminated by the deficiencies referred to in s 130). Nevertheless, strictly there are 4 contraventions involved. Conclusion 68 In my opinion, MIM committed the following contraventions, each of which are, strictly, separate contraventions. The question of how they are to be treated in the penalty phase in terms of applying concepts such as the totality principle can be put to one side for present purposes. 69 First, in terms of contraventions of the Code, MIM committed 4 strictly separate contraventions in that in respect of 24,377 credit contracts entered into in the period 1 July 2010 to 1 March 2013 MIM: (a) contravened the key requirement (as defined in s 111(1)(a)) identified in terms of s 17(3); (b) contravened the key requirement (as defined in s 111(1)(b)) identified in terms of s 17(4); (c) contravened the key requirement (as defined in s 111(1)(c)) identified in terms of s 17(5); and (d) contravened the key requirement (as defined in s 111(1)(d)) identified in terms of s 17(6). 70 Second, MIM contravened item 4(1) of Pt 2 of Sch 2 to the Transitional Act during the period 1 July 2010 to 31 December 2010 in respect of 1,830 credit contracts. 71 Third, MIM contravened item 6(1) of Pt 2 of Sch 2 to the Transitional Act during the period 1 January 2011 to 20 April 2011 in respect of 1,784 credit contracts. 72 Fourth, MIM in the period 21 April 2011 to 1 March 2013 in respect of each of 20,763 credit contracts committed 4 strictly separate contraventions of: (a) s 128(c) of the National Credit Act; (b) s 128(d) of the National Credit Act; (c) s 130(1)(b) of the National Credit Act; and (d) s 130(1)(c) of the National Credit Act. 73 I will hear further from counsel in relation to the precise form of declarations to be made to accord with these reasons and for programming the penalty phase. I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach. Associate: Dated: 28 April 2015