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Sunshine Loans has lost an appeal in the High Court, with judges unanimously siding with the Australian Securities and Investments Commission (ASIC) in a procedural dispute linked to the regulator’s long-running case against the lender.
The financial regulator launched civil proceedings against Sunshine Loans in the Federal Court in 2022, alleging the non-bank lender charged prohibited fees on small amount credit contracts (SACCs).
The lender previously offered SACCs but now provides medium amount credit contracts of between $2,050 and $2,500.
The latest High Court ruling relates to Sunshine Loans’ appeal from a decision of the Full Federal Court concerning whether the original liability judge should have stepped aside from determining the appropriate penalty in the case.
Following the liability decision, Sunshine Loans applied for Justice Derrington to step aside from hearing the matter on penalty, arguing there was apprehended bias based on credibility findings and the language used in the judgment about the lender and its witnesses.
In the liability ruling, his Honour had described the evidence of Sunshine Loans director and witness Shane Powe as “not credible” and said he was not a witness “who tried to give his evidence in an honest manner”, as reported by Broker Daily's sister publication The Adviser.
Sunshine Loans argued these findings meant there could be an apprehension of bias if his Honour went on to decide the penalty. In July 2024, his Honour agreed to recuse himself from the penalty phase of the proceedings.
In a unanimous 7–0 decision, the High Court found in favour of ASIC, confirming that the judge should not have recused himself from hearing the penalty phase of the proceedings.
ASIC deputy chair Sarah Court said the regulator was pleased with the ruling.
“We are pleased that the High Court ruling means that Justice Derrington, who made the original ruling that Sunshine Loans had imposed unlawful fees under small amount credit contracts (SACCs), may determine the appropriate penalties in this case,” she said.
“Today’s decision provides greater certainty around recusal in two-stage civil penalty proceedings and ensures that enforcement actions are not derailed by unfounded claims of apprehended bias. This will assist in the efficient resolution of civil penalty proceedings.”
What was the case about?
In the original case, the court found that Sunshine Loans received nearly $300,000 from customers after charging fees that were prohibited under the National Credit Code.
The court ruled the lender had broken credit laws by making borrowers pay these fees on small amount credit contracts (SACCs).
ASIC’s action against Sunshine Loans is part of a wider crackdown that has also targeted Ferratum Australia.
Last year, the regulator also extended its product intervention orders on short-term and continuing credit contracts until 2032.
[Related: ASIC issues DDO stop order against lender]