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The former deputy chair of the Australian Securities & Investments Commission (ASIC), Daniel Crennan QC, has revealed that the financial services regulator decided not to appeal the Full Federal Court’s 2-1 decision to uphold Justice Nye Perram’s dismissal of its responsible lending case against Westpac Group (which has since been dubbed the “Wagyu and Shiraz” case), due to the COVID-19 pandemic.
While speaking at Finsure’s 2022 Commercial & Diversified Finance Summit in Sydney on Wednesday (25 May), the former deputy chair was asked by broker delegates why many lenders still require brokers to forensically go through living expenses, if benchmarks were deemed to be permissible (as per the Westpac case).
Mr Crennan responded that he believed lenders still require this “voluntary imposition” on brokers as it may be “what might have been perceived [to be] the obligations” – despite the courts stating otherwise.
“How the banks reacted to that case and whether or not they maintain practices that they’re not obliged to, is a matter for the banks… It is really just a matter of the banks being, I suppose, prudentially cautious, rather than any legal obligation,” he said.
While discussing the famous case, the principal consultant at Credi Consulting suggested that while the regulator lost the case and its subsequent Federal Court appeal, the emergence of the coronavirus pandemic in Australia fed into the regulator’s decision not to appeal to the High Court.
The former ASIC deputy chair said: “The full federal court only won 2-1. [Justice] John Middleton (and this is determinative, if anything) was in the minority. And that was the only time he’d been in the minority after being a judge for 15 years. So he felt very strongly that we were right and they were wrong…
“[However], I want to add one thing to that: we didn’t appeal because there was an economic and health crisis occurring. That was the real reason...
“The High Court might have taken a very different view but how could we possibly justify appealing in those circumstances?”
The case, which cost taxpayers at least $1.83 million, led the regulator to review its updated regulatory guidance (RG 209) and consider the implications of the Federal Court’s decision on compliance practices.
The principles-based guidance was designed to provide lenders with greater clarity and flexibility amid uncertainty off the back of scrutiny from the banking royal commission.
However, ASIC has previously stressed that prospective reforms of the National Consumer Credit Protection Act to further clarify the enforcement of responsible lending obligations are “ultimately a matter for the federal government and Parliament”.
Mr Crennan told Finsure brokers: “I think, the whole Responsible Lending part of that statute (which reads as if it was fairly rushed, and not very well thought out, frankly), should be revisited.
“And maybe the Labor government will [do so].... I’m just not sure; I don’t know enough about their intentions about lending.”
[Related: ASIC mulls further action amid responsible lending loss]
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